Document:

cpss431.htm

  

  

  

 

 

SALE AND SERVICING

 

AGREEMENT

 

among

 

CPS AUTO RECEIVABLES TRUST 2011-A, as

 

Issuer,

 

CPS RECEIVABLES FIVE LLC, as

 

Seller,

 

CONSUMER PORTFOLIO SERVICES, INC.,

 

Individually and as Servicer

 

and

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, as

 

Backup Servicer and Trustee

 

 

Dated as of April 1, 2011

 

 

  

  

  

SALE AND SERVICING AGREEMENT dated as of April 1, 2011, among CPS AUTO RECEIVABLES TRUST 2011-A, a Delaware statutory trust, as Issuer, CPS RECEIVABLES FIVE LLC, a Delaware limited liability company, as Seller, CONSUMER PORTFOLIO SERVICES, INC., a California corporation, individually and as Servicer, WELLS FARGO BANK, NATIONAL ASSOCIATION, a national banking association, as Backup Servicer and Trustee.

 

WHEREAS the Issuer desires to purchase a portfolio of receivables arising in connection with motor vehicle retail installment sale contracts and promissory notes and security agreements initially acquired by Consumer Portfolio Services, Inc. through motor vehicle dealers and independent finance companies;

 

WHEREAS the Seller has purchased such receivables from Consumer Portfolio Services, Inc. and is willing to sell such receivables to the Issuer; and

 

WHEREAS the Servicer is willing to service all such receivables.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

SECTION 1.1 Definitions. (a) Whenever used in this Agreement, the following words and phrases shall have the following meanings:

 

“Accountants’ Report” means the report of a firm of nationally recognized independent accountants described in Section 4.11.

 

“Additional Servicing Compensation” shall mean, with respect to a Receivable, any late fees, prepayment charges and other administrative fees or similar charges allowed by applicable law with respect to the Receivables collected (from whatever source) on the Receivables.

 

“Affiliate” of any Person means any Person who directly or indirectly controls, is controlled by, or is under direct or indirect common control with such Person.  For purposes of this definition, the term “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling,” “controlled by” and “under common control with” have meanings correlative to the foregoing.

 

“Aggregate Extension Limitation” has the meaning assigned to such term in Section 4.2.

 

“Aggregate Note Balance” means, as of any date of determination, the sum of the Class A Note Balance, the Class B Note Balance, the Class C Note Balance and the Class D Note Balance.

 

“Aggregate Noteholders’ Principal Distributable Amount” means, with respect to any Payment Date, the sum of the Class A Noteholders’ Principal Distributable Amount, the Class B Noteholders’ Principal Distributable Amount, the Class C Noteholders’ Principal Distributable Amount and the Class D Noteholders’ Principal Distributable Amount.

 

“Agreement” means this Sale and Servicing Agreement, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms hereof.

 

“Amount Financed” means, with respect to a Receivable, the aggregate amount advanced under such Receivable toward the purchase price of the Financed Vehicle and any related costs, including amounts advanced in respect of accessories, insurance premiums, service and warranty contracts, other items customarily financed as part of retail automobile installment sale contracts or promissory notes, and related costs.

 

“Annual Percentage Rate” or “APR” of a Receivable means the annual percentage rate of finance charges or service charges, as stated in the related Contract.

 

“Assignment” has the meaning assigned to such term in the Receivables Purchase Agreement.

 

“Assumption Date” has the meaning specified in Section 10.3(a).

 

“Backup Servicer” means Wells Fargo Bank, National Association, in its capacity as Backup Servicer under this Agreement.

 

“Backup Servicing Fee” means, so long as the Backup Servicer is not then acting as Servicer, the “Monthly Backup Servicing Fee,” as reflected on Exhibit H, due and payable on each Payment Date in respect of the immediately preceding Collection Period; provided, however, that on the first Payment Date the Backup Servicer will be entitled to receive an amount equal to Backup Servicing Fee multiplied by a fraction, the numerator of which is the number of days from and including the Closing Date to and including April 30, 2011, and the denominator of which is 360.

 

“Basic Documents” means this Agreement, the Certificate of Trust, the Trust Agreement, the Indenture, the Receivables Purchase Agreement, the Assignment, the Lockbox Agreement, the Placement Agency Agreement, the Notes, the Residual Pass-through Certificates and any and all other documents and certificates delivered in connection with the foregoing.

 

“Business Day” means any day other than a Saturday, a Sunday or a day on which banking institutions in the City of New York, the State of Minnesota, the State of Delaware or the State in which the executive offices of the Servicer are located shall be authorized or obligated by law, executive order, or governmental decree to be closed.

 

“Casualty” means, with respect to a Financed Vehicle, the total loss or destruction of such Financed Vehicle.

 

“Certificate Distribution Account” has the meaning assigned to such term in the Trust Agreement.

 

“Certificate Register” has the meaning assigned to such term in the Trust Agreement.

 

“Certificate Registrar” has the meaning assigned to such term in the Trust Agreement.

 

“Class” means the Class A Notes, the Class B Notes, the Class C Notes or the Class D Notes as the context requires.

 

“Class A Interest Rate” means 2.82% per annum.

 

“Class A Note Balance” on the Closing Date will equal the Original Class A Note Balance and on any date thereafter will equal the Original Class A Note Balance reduced by all distributions of principal previously made in respect of the Class A Notes.

 

“Class A Notes” has the meaning assigned to such term in the Indenture.

 

“Class A Noteholders’ Principal Distributable Amount” means, with respect to any Payment Date (other than the Final Scheduled Payment Date and any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of the Indenture), the sum of (a) any Class A Parity Deficit Amount and (b) the amount by which (i) the Class A Note Balance (after giving effect to any required payment of any Class A Parity Deficit Amount on such Payment Date) exceeds (ii) the Class A Target Balance. On the Final Scheduled Payment Date and on any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of the Indenture, the Class A Noteholders’ Principal Distributable Amount shall be the Class A Note Balance.

 

“Class A Parity Deficit Amount” means, with respect to any Payment Date, the excess, if any, of (x) the Class A Note Balance on such Payment Date over (y) the Pool Balance at the end of the related Collection Period.

 

“Class A Target Balance” means the positive difference, if any, of the Pool Balance over the Class A Target Overcollateralization Amount.

 

“Class A Target Overcollateralization Amount” means (a) as of any Payment Date prior to the occurrence of a Trigger Event, the greater of (i) 32.00% of the Pool Balance as of the end of the related Collection Period and (ii) 5.00% of the Original Pool Balance; (b) as of any Payment Date on or after the occurrence of a Level 1 Trigger Event, the greater of (i) 37.00% of the Pool Balance as of the end of the related Collection Period and (ii) 10.00% of the Original Pool Balance; (c) as of any Payment Date on or after the occurrence of a Level 2 Trigger Event, the greater of (i) 42.00% of the Pool Balance as of the end of the related Collection Period and (ii) 15.00% of the Original Pool Balance; and (d) as of any Payment Date on or after the occurrence of a Level 3 Trigger Event, the greater of (i) 47.00% of the Pool Balance as of the end of the related Collection Period and (ii) 20.00% of the Original Pool Balance.

 

“Class B Interest Rate” means 4.94% per annum.

 

“Class B Note Balance” on the Closing Date will equal the Original Class B Note Balance and on any date thereafter will equal the Original Class B Note Balance reduced by all distributions of principal previously made in respect of the Class B Notes.

 

“Class B Noteholders’ Principal Distributable Amount” means, with respect to any Payment Date (other than the Final Scheduled Payment Date and any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of the Indenture), the sum of (a) any Class B Parity Deficit Amount and (b) the amount by which (i) the sum of (A) the Class A Note Balance (after giving effect to any payment of the Class A Noteholders’ Principal Distributable Amount on such Payment Date) and (B) the Class B Note Balance (after giving effect to any required payment of any Class B Parity Deficit Amount on such Payment Date) exceeds (ii) the Class B Target Balance.  On the Final Scheduled Payment Date and on any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of the Indenture, the Class B Noteholders’ Principal Distributable Amount shall be the Class B Note Balance.

 

“Class B Notes” has the meaning assigned to such term in the Indenture.

 

“Class B Parity Deficit Amount” means, with respect to any Payment Date, the excess, if any, of (x) the sum of the Class A Note Balance (after giving effect to any payments of Class A Parity Deficit Amounts on such Payment Date) and the Class B Note Balance on such Payment Date over (y) the Pool Balance at the end of the related Collection Period.

 

“Class B Target Balance” means the positive difference, if any, of the Pool Balance over the Class B Target Overcollateralization Amount.

 

“Class B Target Overcollateralization Amount” means (a) as of any Payment Date prior to the occurrence of a Trigger Event, the greater of (i) 25.00% of the Pool Balance as of the end of the related Collection Period and (ii) 5.00% of the Original Pool Balance; (b) as of any Payment Date on or after the occurrence of a Level 1 Trigger Event, the greater of (i) 30.00% of the Pool Balance as of the end of the related Collection Period and (ii) 10.00% of the Original Pool Balance; (c) as of any Payment Date on or after the occurrence of a Level 2 Trigger Event, the greater of (i) 35.00% of the Pool Balance as of the end of the related Collection Period and (ii) 15.00% of the Original Pool Balance; and (d) as of any Payment Date on or after the occurrence of a Level 3 Trigger Event, the greater of (i) 40.00% of the Pool Balance as of the end of the related Collection Period and (ii) 20.00% of the Original Pool Balance.

 

“Class C Interest Rate” means 7.50% per annum.

 

“Class C Note Balance” on the Closing Date will equal the Original Class C Note Balance and on any date thereafter will equal the Original Class C Note Balance reduced by all distributions of principal previously made in respect of the Class C Notes.

 

“Class C Noteholders’ Principal Distributable Amount” means, with respect to any Payment Date (other than the Final Scheduled Payment Date and any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of the Indenture), the sum of (a) any Class C Parity Deficit Amount and (b) the amount by which (i) the sum of (A) the Class A Note Balance (after giving effect to any payment of the Class A Noteholders’ Principal Distributable Amount on such Payment Date) plus (B) the Class B Note Balance (after giving effect to any payment of the Class B Noteholders’ Principal Distributable Amount on such Payment Date) plus (C) the Class C Note Balance (after giving effect to any required payment of any Class C Parity Deficit Amount on such Payment Date) exceeds (ii) the Class C Target Balance. On the Final Scheduled Payment Date and on any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of the Indenture, the Class C Noteholders’ Principal Distributable Amount shall be the Class C Note Balance.

 

“Class C Notes” has the meaning assigned to such term in the Indenture.

 

“Class C Parity Deficit Amount” means, with respect to any Payment Date, the excess, if any, of (x) the sum of the Class A Note Balance, the Class B Note Balance (after giving effect to any payments of Class A Parity Deficit Amounts and Class B Parity Deficit Amounts on such Payment Date) and the Class C Note Balance on such Payment Date over (y) the Pool Balance at the end of the related Collection Period.

 

“Class C Target Balance” means the positive difference, if any, of the Pool Balance over the Class C Target Overcollateralization Amount.”

 

“Class C Target Overcollateralization Amount” means (a) as of any Payment Date prior to the occurrence of a Trigger Event, the greater of (i) 15.00% of the Pool Balance as of the end of the related Collection Period and (ii) 5.00% of the Original Pool Balance; (b) as of any Payment Date on or after the occurrence of a Level 1 Trigger Event, the greater of (i) 20.00% of the Pool Balance as of the end of the related Collection Period and (ii) 10.00% of the Original Pool Balance; (c) as of any Payment Date on or after the occurrence of a Level 2 Trigger Event, the greater of (i) 25.00% of the Pool Balance as of the end of the related Collection Period and (ii) 15.00% of the Original Pool Balance; and (d) as of any Payment Date on or after the occurrence of a Level 3 Trigger Event, the greater of (i) 30.00% of the Pool Balance as of the end of the related Collection Period and (ii) 20.00% of the Original Pool Balance.

 

“Class D Interest Rate” means 10.00% per annum.

 

“Class D Noteholders’ Principal Distributable Amount” means, with respect to any Payment Date (other than the Final Scheduled Payment Date and any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of the Indenture), the sum of (a) any Class D Parity Deficit Amount and (b) the amount by which (i) the sum of (A) the Class A Note Balance (after giving effect to any payment of the Class A Noteholders’ Principal Distributable Amount on such Payment Date) plus (B) the Class B Note Balance (after giving effect to any payment of the Class B Noteholders’ Principal Distributable Amount on such Payment Date) plus (C) the Class C Note Balance (after giving effect to any payment of the Class C Noteholders’ Principal Distributable Amount on such Payment Date) plus (D) the Class D Note Balance (after giving effect to any required payment of any Class D Parity Deficit Amount on such Payment Date) exceeds (ii) the Class D Target Balance. On the Final Scheduled Payment Date and on any Payment Date after the acceleration of the Notes pursuant to Section 5.2 of the Indenture, the Class D Noteholders’ Principal Distributable Amount shall be the Class D Note Balance.

 

“Class D Notes” has the meaning assigned to such term in the Indenture.

 

“Class D Parity Deficit Amount” means, with respect to any Payment Date, the excess, if any, of (x) the sum of the Class A Note Balance, the Class B Note Balance and the Class C Note Balance (after giving effect to any payments of Class A Parity Deficit Amounts, Class B Parity Deficit Amounts and Class C Parity Deficit Amounts on such Payment Date) and the Class D Note Balance on such Payment Date over (y) the Pool Balance at the end of the related Collection Period.

 

“Class D Target Balance” means the positive difference, if any, of the Pool Balance over the Class D Target Overcollateralization Amount.

 

“Class D Target Overcollateralization Amount” means (a) as of any Payment Date prior to the occurrence of a Trigger Event, the greater of (i) 6.00% of the Pool Balance as of the end of the related Collection Period and (ii) 5.00% of the Original Pool Balance; (b) as of any Payment Date on or after the occurrence of a Level 1 Trigger Event, the greater of (i) 11.00% of the Pool Balance as of the end of the related Collection Period and (ii) 10.00% of the Original Pool Balance; (c) as of any Payment Date on or after the occurrence of a Level 2 Trigger Event, the greater of (i) 16.00% of the Pool Balance as of the end of the related Collection Period and (ii) 15.00% of the Original Pool Balance; and (d) as of any Payment Date on or after the occurrence of a Level 3 Trigger Event, the greater of (i) 21.00% of the Pool Balance as of the end of the related Collection Period and (ii) 20.00% of the Original Pool Balance.

 

“Closing Date” means April 27, 2011.

 

“Code” has the meaning specified in Section 3.2(b).

 

“Collateral” has the meaning assigned to such term in the Indenture.

 

“Collection Account” means the account designated as such, established and maintained pursuant to Section 5.1(a).

 

“Collection Period” means, with respect to each Payment Date, the calendar month preceding the calendar month in which such Payment Date occurs.  Any amount stated “as of the close of business on the last day of a Collection Period” shall give effect to the following calculations as determined as of the end of the day on such last day: (i) all applications of collections, and (ii) all distributions.

 

“Collection Policy” means the collection policies of the Seller/Servicer, which are the practices and procedures employed in the servicing of Receivables as of the Closing Date, as described in Exhibit A hereto.

 

“Consumer Lender” means a Person that is licensed under applicable law to originate loans to natural persons resident in one or more of the United States of America and authorized by CPS to participate in its direct lending program, but shall not include CPS or any of its Affiliates.

 

“Contract” means a motor vehicle retail installment sale contract or an installment promissory note and security agreement, in each case relating to the sale or refinancing of new or used automobiles, light duty trucks, vans or minivans, and any other documents related thereto from time to time.

 

“Controlling Class” means (i) so long as any Class A Notes are Outstanding, the Class A Notes, (ii) after payment in full of the Class A Notes, so long as any Class B Notes are Outstanding, the Class B Notes, (iii) after payment in full of the Class A Notes and the Class B Notes, so long as any Class C Notes are Outstanding, the Class C Notes, and (iv) after payment in full of the Class A Notes, the Class B Notes and the Class C Notes, so long as any Class D Notes are Outstanding, the Class D Notes.

 

“Corporate Trust Office” means (i) with respect to the Owner Trustee, the principal corporate trust office of the Owner Trustee, which at the time of execution of this agreement is Rodney Square North, 1100 N. Market Street, Wilmington, Delaware  19890-0001, and (ii) with respect to the Trustee, the principal corporate trust office of the Trustee, which at the time of execution of this agreement is Sixth Street and Marquette Avenue,  MAC N9311-161, Minneapolis, Minnesota, 55479, Attention: Corporate Trust Services/Asset Backed Administration – CPS 2011-A.

 

“CPS” means Consumer Portfolio Services, Inc., a California corporation and its successors.

 

“Cram Down Loss” means, with respect to a Receivable (other than a Liquidated Receivable), if a court of appropriate jurisdiction in an insolvency proceeding issues a ruling that reduces the amount owed on a Receivable or otherwise modifies or restructures the Scheduled Receivable Payments to be made thereon, an amount equal to the sum of (a) the Principal Balance of the Receivable immediately prior to such order minus the Principal Balance of such Receivable as so reduced, modified or restructured, plus (b) if such court shall have issued an order reducing the effective rate of interest on such Receivable, an amount equal to the excess of (i) the net present value (using as a discount rate a rate equal to the adjusted APR on such Receivable) of the Scheduled Receivable Payments as so modified or restructured over (ii) the net present value (using as a discount rate a rate equal to the original APR on such Receivable) of the Scheduled Receivable Payments as so modified or restructured.  A Cram Down Loss will be deemed to have occurred on the date of issuance of such order.

 

“Cumulative Net Losses” means, as of any date of determination, the aggregate cumulative principal amount of all Receivables that have become Liquidated Receivables since the Cutoff Date, net of all Net Liquidation Proceeds and Recoveries with respect to such Receivables as of last day of the most recently ended Collection Period.

 

“Cumulative Net Loss Rate” means, as of any date of determination, a rate expressed as a percentage equal to a fraction (I) the numerator of which is the Cumulative Net Losses with respect to all Receivables and (II) the denominator of which is the Original Pool Balance.

 

“Cutoff Date” means the close of business on March 31, 2011.

 

“Dealer” means, with respect to a Receivable, the seller of the related Financed Vehicle, who originated and assigned such Receivable to CPS.

 

“Defaulted Texas Receivables” means Receivables the related Obligors of which reside in the State of Texas or the related Financed Vehicles of which are located in the State of Texas and as to which more than 10% of a Scheduled Receivable Payment of more than ten dollars shall have become 90 or more days delinquent as of the end of a Collection Period, and which are subject to repurchase pursuant to Section 4.16.

 

“Deficiency Claim Amount” has the meaning set forth in Section 5.5(a).

 

“Deficiency Notice” has the meaning set forth in Section 5.5(a).

 

“Delinquency Ratio” means, as of any date of determination, a rate expressed as a percentage equal to a fraction (I) the numerator of which is the aggregate Principal Balance of all Receivables that are Delinquent Receivables as of the last day of the most recently ended Collection Period and (II) the denominator of which is the aggregate Principal Balance of all Receivables as of the last day of the most recently ended Collection Period.

 

“Delinquent Receivable” means any Contract as to which more than ten percent (10%) of the Scheduled Receivable Payment is more than 30 days contractually delinquent as of the last day of the most recently ended Collection Period, including any Contract for which the related Financed Vehicle has been repossessed and the proceeds thereof have not yet been realized by the Servicer.

 

“Delivery” means, when used with respect to Trust Account Property  (terms used in the following provisions that are not otherwise defined are used as defined in Articles 8 and 9 of the UCC):

 

(i) in the case of such Trust Account Property consisting of security entitlements not covered by the following paragraphs in this definition of Delivery, by (1) causing the Trustee or related securities intermediary to indicate by book-entry that a financial asset related to such securities entitlement has been credited to the related Trust Account and (2) causing the Trustee or related securities intermediary to indicate that the Trustee is the sole entitlement holder of each such securities entitlement and causing the Trustee or related securities intermediary to agree that it will comply with entitlement orders originated by the Trustee with respect to each such security entitlement without further consent by the Issuer;

 

(ii) in the case of each certificated security (other than a clearing corporation security (as defined below)) or instrument by: (1) the delivery of such certificated security or  instrument to the Trustee or related securities intermediary registered in the name of the Trustee or related securities intermediary or its respective affiliated nominee or endorsed to the Trustee or related securities intermediary in blank; (2) causing the Trustee or related securities intermediary to continuously indicate by book-entry that such certificated security or instrument is credited to the related Trust Account; and (3) the Trustee or related securities intermediary maintaining continuous possession of such certificated security or instrument;

 

(iii)  in the case of each uncertificated security (other than a clearing corporation security (as defined below)), by causing: (1) such uncertificated security to be continuously registered in the books of the issuer thereof to the Trustee or related securities intermediary; and (2) the Trustee or related securities intermediary to continuously indicate by book-entry that such uncertificated security is credited to the related Trust Account;

 

(iv) in the case of each security in the custody of or maintained on the books of a clearing corporation (a “clearing corporation security”), by causing: (1) the relevant clearing corporation to credit such clearing corporation security to the securities account of the Trustee or related securities intermediary at such clearing corporation; and (2) the Trustee or related securities intermediary to continuously indicate by book-entry that such clearing corporation security is credited to the related Trust Account;

 

(v) in the case of each security issued or guaranteed by the United States of America or agency or instrumentality thereof (other than a security issued by the Government National Mortgage Association) representing a full faith and credit obligation of the United States of America and that is maintained in book-entry records of the Federal Reserve Bank of New York (“FRBNY”) (each such security, a “government security”), by causing: (1) the creation of a security entitlement to such government security by the credit of such government security to the securities account of the Trustee or related securities intermediary at the FRBNY; and (2) the Trustee or related securities intermediary to continuously indicate by book-entry that such government security is credited to the related Trust Account.

 

(vi) in each case of delivery contemplated pursuant to clauses (ii) through (v) hereof, the Trustee shall make appropriate notations on its records, and shall cause the same to be made on the records of its nominees, indicating that such Trust Property which constitutes a security is held in trust pursuant to and as provided in this Agreement.

 

“Determination Date” means the earlier of (i) the seventh Business Day of each calendar month and (ii) the fifth Business Day preceding the related Payment Date.

 

“Eligible Account” means a segregated trust or demand deposit account maintained with a depository institution or trust company organized under the laws of the United States of America, or any of the States thereof, or the District of Columbia (or any domestic branch of a foreign bank), having corporate trust powers and acting as trustee for funds deposited in such account, whose deposits are insured by the FDIC, and having a certificate of deposit, short-term deposit or commercial paper rating of at least “A-1+” by Standard & Poor’s and “Prime-1” by Moody’s.

 

“Eligible Investments” mean book-entry securities, negotiable instruments or securities represented by instruments in registered form which evidence:

 

(i)           direct obligations of, and obligations fully guaranteed as to the full and timely payment by, the United States of America;

 

(ii)           demand deposits, time deposits or certificates of deposit of any depository institution or trust company incorporated under the laws of the United States of America or any State thereof (or any domestic branch of a foreign bank) and subject to supervision and examination by Federal or State banking or depository institution authorities; provided, however, that at the time of the investment or contractual commitment to invest therein, the commercial paper or other short-term unsecured debt obligations (other than such obligations the rating of which is based on the credit of a Person other than such depository institution or trust company) thereof shall be rated “A-1+” by Standard & Poor’s and “Prime-1” by Moody’s;

 

(iii)           commercial paper that, at the time of the investment or contractual commitment to invest therein, is rated “A-1+” by Standard & Poor’s and “Prime-1” by Moody’s;

 

(iv)           bankers’ acceptances issued by any depository institution or trust company referred to in clause (ii) above;

 

(v)           repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed as to the full and timely payment by, the United States of America or any agency or instrumentality thereof the obligations of which are backed by the full faith and credit of the United States of America, in either case entered into with (a) a depository institution or trust company (acting as principal) described in clause (ii) or (b) a depository institution or trust company whose commercial paper or other short term unsecured debt obligations are rated “A-1+” by Standard & Poor’s and “Prime-1” by Moody’s and long term unsecured debt obligations are rated “AAA” by Standard & Poor’s and “Aaa” by Moody’s;

 

(vi)           money market mutual funds registered under the Investment Company Act of 1940, as amended, having a rating, at the time of such investment, from each of Standard & Poor’s and Moody’s in the highest investment category granted thereby; and

 

(vii)           any other investment as to which the Rating Agency Condition is satisfied;

 

provided that, an Eligible Investment must have a fixed principal amount due at maturity and, if rated by S&P, must not have an “r” suffix attached to the rating.

 

Any of the foregoing Eligible Investments may be purchased by or through the Owner Trustee or the Trustee or any of their respective Affiliates.

 

“Eligible Servicer” means a Person that, at the time of its appointment as Servicer, (i) has a net worth of not less than $50,000,000, (ii) is servicing a portfolio of motor vehicle retail installment sale contracts and/or motor vehicle loans, (iii) is legally qualified, and has the capacity, to service the Receivables, (iv) has demonstrated the ability to service a portfolio of motor vehicle retail installment sale contracts and/or motor vehicle loans similar to the Receivables professionally and competently in accordance with standards of skill and care that are consistent with prudent industry standards and (v) is qualified and entitled to use pursuant to a license or other written agreement, and agrees to maintain the confidentiality of, the software which the Servicer uses in connection with performing its duties and responsibilities under this Agreement or obtains rights to use, or develops at its own expense, software which is adequate to perform its duties and responsibilities under this Agreement.

 

“ERISA” has the meaning specified in Section 3.2(b).

 

“Event of Default” has the meaning specified in the Indenture.

 

“FDIC” means the Federal Deposit Insurance Corporation.

 

“Final Scheduled Payment Date” means the Payment Date occurring in April 2018.

 

“Financed Vehicle” means a new or used automobile, light truck, van or minivan, together with all accessions thereto, securing an Obligor’s indebtedness under a Receivable.

 

“Indenture” means the Indenture dated as of April 1, 2011, between the Issuer and Wells Fargo Bank, National Association, as trustee, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.

 

“Initial Spread Account Deposit” means $2,090,926.16.

 

“Insolvency Event” means, with respect to a specified Person, (a) the institution of a proceeding or the filing of a petition against such Person seeking the entry of a decree or order for relief by a court having jurisdiction in the premises in respect of such Person or any substantial part of its property in an involuntary case under any applicable Federal or State bankruptcy, insolvency or other similar law now or hereafter in effect, or the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such Person or for any substantial part of its property, or ordering the winding-up or liquidation of such Person’s affairs, and such petition, decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such Person of a voluntary case under any applicable Federal or State bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by such Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such Person to the appointment of or taking possession by, a receiver, liquidator, assignee, custodian, trustee, sequestrator, or similar official for such Person or for any substantial part of its property, or the making by such Person of any general assignment for the benefit of creditors, or the failure by such Person generally to pay its debts as such debts become due, or the taking of action by such Person in furtherance of any of the foregoing.

 

“Insurance Policy” means, with respect to a Receivable, any insurance policy (including the insurance policies described in Section 4.4 hereof) benefiting the holder of the Receivable providing loss or physical damage, credit life, credit disability, theft, mechanical breakdown or similar coverage with respect to the Financed Vehicle or the Obligor.

 

“Interest Rate” means the Class A Interest Rate, the Class B Interest Rate, the Class C Interest Rate or the Class D Interest Rate, as applicable.

 

“Investment Earnings” means, with respect to any Payment Date and any Trust Account, the investment earnings on amounts on deposit in such Trust Account during the related Collection Period and deposited into the Collection Account on such Payment Date pursuant to Section 5.1(b).

 

“Issuer” means CPS Auto Receivables Trust 2011-A.

 

“Level 1 Trigger Event” means, for each Payment Date, the Cumulative Net Loss Rate calculated as of the end of the related Collection Period exceeds the percentage set forth on Exhibit D hereto under the heading “Level 1” for such Payment Date.

 

“Level 2 Trigger Event” means, for each Payment Date, the Cumulative Net Loss Rate calculated as of the end of the related Collection Period exceeds the percentage set forth on Exhibit D hereto under the heading “Level 2” for such Payment Date.

 

“Level 3 Trigger Event” means, for each Payment Date, the Cumulative Net Loss Rate calculated as of the end of the related Collection Period exceeds the percentage set forth on Exhibit D hereto under the heading “Level 3” for such Payment Date.

 

“Lien” means a security interest, lien, charge, pledge, equity, or encumbrance of any kind, other than tax liens, storage liens, mechanics’ liens and any liens that attach to the respective Receivable by operation of law.

 

“Lien Certificate” means, with respect to a Financed Vehicle, an original certificate of title, certificate of lien or other notification issued by the Registrar of Titles of the applicable state to a secured party which indicates that the lien of the secured party on the Financed Vehicle is recorded on the original certificate of title.  In any jurisdiction in which the original certificate of title is required to be given to the obligor, the term “Lien Certificate” shall mean only a certificate or notification issued to a secured party.

 

“Liquidated Receivable” means, as of any date of determination, any Receivable as to which any of the following first occurs:  (i)  the related Financed Vehicle has been sold by the Servicer; (ii) the related Financed Vehicle has been repossessed and 90 days have elapsed since the date of such repossession, (iii) more than 10% of a Scheduled Receivable Payment of more than ten dollars shall have become 120 (or, if the related Financed Vehicle has been repossessed, 180) or more days delinquent as of the end of a Collection Period, (iv) with respect to which proceeds have been received which, in the Servicer’s judgment, constitute the final amounts recoverable in respect of such Receivable; (v) the related Obligor has filed for bankruptcy under Federal or state law and the Servicer has determined that its loss is known; or (vi) such Receivable becomes a Sold Receivable.

 

“Lockbox Account” means a direct deposit account maintained on behalf of the Trustee by the Lockbox Bank pursuant to Section 4.2(b).

 

“Lockbox Agreement” means the Deposit Account Agreement, dated as of April 27, 2011, by and among the Lockbox Processor, the Lockbox Bank, the Servicer, the Issuer and the Trustee, as such agreement may be amended, supplemented or otherwise modified from time to time, unless the Trustee shall cease to be a party thereunder, or such agreement shall be terminated in accordance with its terms, in which event “Lockbox Agreement” shall mean such other replacement agreement therefor among the Servicer, the Trustee, the Lockbox Bank and the Lockbox Processor.

 

“Lockbox Bank” means, as of any date, Wells Fargo Bank, National Association or another depository institution named by the Servicer and acceptable to the Trustee at which the Lockbox Account is established and maintained as of such date.

 

“Lockbox Processor” means Wells Fargo Bank, National Association and its successors and assigns.

 

“Majority Certificateholders” has the meaning assigned to such term in the Trust Agreement.

 

“MFN” means MFN Financial Corporation, a Delaware Corporation.

 

“Minimum Sale Price” means (i) with respect to a Receivable (x) that has become 120 to 210 days delinquent or (y) that has become greater than 210 days delinquent and with respect to which the related Financed Vehicle has been repossessed by the Servicer and has not yet been sold at auction, the greater of (A) 55% multiplied by the Principal Balance of such Receivable and (B) the product of the three month rolling average recovery rate (expressed as a percentage) for the Servicer in its liquidation of all receivables for which it acts as servicer, either pursuant to this Agreement or otherwise, multiplied by the Principal Balance of such Receivable or (ii) with respect to a Receivable (x) the related Financed Vehicle of which has been repossessed by the Servicer and has been sold at auction and the Net Liquidation Proceeds for which have been deposited in the Collection Account, or (y) that has become greater than 210 days delinquent and the related Financed Vehicle of which has not been repossessed by the Servicer despite the Servicer’s diligent efforts, consistent with its servicing obligations, to repossess the Financed Vehicle, $1.

 

	  

“Moody’s” means Moody’s Investors Service, Inc., or its successor.

 

“Net Liquidation Proceeds” means, with respect to a Liquidated Receivable, all amounts realized with respect to such Receivable during the Collection Period in which such Receivable became a Liquidated Receivable, including any Sale Amounts, net of (i) reasonable expenses incurred by the Servicer in connection with the collection of such Receivable and any repossession and disposition of the Financed Vehicle and (ii) amounts that are required to be refunded to the Obligor on such Receivable; provided, however, that the Net Liquidation Proceeds with respect to any Receivable shall in no event be less than zero.

 

“Non-Certificated Title States” means the States of Arizona, Kansas, Kentucky, Maine, Maryland, Michigan, Minnesota, Montana, New York, Oklahoma, Wisconsin and such other States in which the applicable Department of Motor Vehicles or similar authority issues evidence of title to a Financed Vehicle in a non-certificated form.

 

“Non-United States Investor” has the meaning assigned to such term in the Trust Agreement.

 

“Note Balance” means, with respect to the Class A Notes, the Class A Note Balance, with respect to the Class B Notes, the Class B Note Balance, with respect to the Class C Notes, the Class C Note Balance, and with respect to the Class D Notes, the Class D Note Balance.

 

“Note Majority” means the Holders collectively evidencing more than 50% of the aggregate outstanding Note Balance for each Class of Notes.

 

“Note Paying Agent” has the meaning assigned to such term in the Indenture.

 

“Note Register” has the meaning assigned to such term in the Indenture.

 

“Note Registrar” has the meaning assigned to such term in the Indenture.

 

“Noteholder” or “Holder” has the meaning assigned to such term in the Indenture.

 

“Noteholders’ Interest Carryover Shortfall” means, with respect to any Payment Date, for each Class of Notes, the excess of the Noteholders’ Interest Distributable Amount for such Class of Notes for the preceding Payment Date over the amount that was actually deposited in the Collection Account on such preceding Payment Date on account of the Noteholders’ Interest Distributable Amount for such Class of Notes.

 

“Noteholders’ Interest Distributable Amount” means, with respect to any Payment Date and any Class of Notes, the sum of (i) the Noteholders’ Monthly Interest Distributable Amount for such Class of Notes for such Payment Date, (ii) the Noteholders’ Interest Carryover Shortfall for such Classes of Notes for such Payment Date and (iii) interest on such Noteholders’ Interest Carryover Shortfall for such Class of Notes, to the extent permitted by law, at the applicable Interest Rate from and including the preceding Payment Date to but excluding the current Payment Date.

 

“Noteholders’ Monthly Interest Distributable Amount” means for each Class of Notes (i) for the first Payment Date, an amount equal to the product of (1) the Interest Rate for such Class of Notes, (2) the Original Class Note Balance for such Class of Notes, and (3) a fraction, the numerator of which is the number of days from and including the Closing Date to and including May 15, 2011, and the denominator of which is 360; and (ii) for any Payment Date after the first Payment Date, an amount equal to the product of (1) one-twelfth of the Interest Rate for such Class of Notes and (2) the Note Balance for such Class of Notes as of the close of the preceding Payment Date (after giving effect to all distributions on account of principal on such preceding Payment Date).

 

“Notes” means the Class A Notes, the Class B Notes, the Class C Notes and the Class D Notes, collectively.

 

“Obligor” on a Receivable means the purchaser or co-purchasers of the Financed Vehicle and any other Person who owes payments under the Receivable.

 

“Officer’s Certificate” means a certificate signed by the chairman of the board, the president, any vice chairman of the board, any vice president, the treasurer, the controller or assistant treasurer or any assistant controller, secretary or assistant secretary of CPS, the Seller or the Servicer, as appropriate.

 

“Opinion of Counsel” means a written opinion of counsel who may but need not be counsel to the Seller or the Servicer, which counsel shall be reasonably acceptable to the Trustee and which opinion shall be acceptable in form and substance to the Trustee.

 

“Original Class A Note Balance” means $82,592,000.

 

“Original Class B Note Balance” means $6,534,000.

 

“Original Class C Note Balance” means $5,488,000.

 

“Original Class D Note Balance” means $5,750,000.

 

“Original Pool Balance” means $104,546,308.18.

 

“Other Conveyed Property” means all property conveyed by the Seller to the Trust pursuant to Sections 2.1(b) through (k) of this Agreement.

 

“Outstanding” has the meaning assigned to such term in the Indenture.

 

 “Owner Trust Estate” has the meaning assigned to such term in the Trust Agreement.

 

“Owner Trustee” means Wilmington Trust Company, not in its individual capacity but solely as Owner Trustee under the Trust Agreement, its successors in interest or any successor Owner Trustee under the Trust Agreement.

 

“Payment Date” means, with respect to each Collection Period, the 15th day of the following calendar month, or if such day is not a Business Day, the immediately following Business Day, commencing on May 16, 2011.

 

“Pending Litigation” means the litigation matters that are described under “CPS – Recent Developments” in the Confidential Private Placement Memorandum dated as of April 21, 2011.

 

“Percentage Interest” has the meaning assigned to such term in the Trust Agreement.

 

“Person” means any individual, corporation, estate, partnership, limited liability company, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or government or any agency or political subdivision thereof.

 

“Placement Agency Agreement” means the Placement Agency Agreement relating to the Notes dated April 21, 2011, among the Placement Agent, CPS and the Seller.

 

“Placement Agent” means UBS Securities LLC and its successors and assigns.

 

“Pool Balance” as of any date of determination, means the aggregate Principal Balance of the Receivables (excluding Purchased Receivables and Liquidated Receivables) as of such date.

 

“Post Office Box” means the separate post office box in the name of the Trust established and maintained pursuant to Section 4.2.

 

 “Principal Balance” of a Receivable, as of any date of determination, means the Amount Financed minus the sum of the following amounts without duplication:  (i) that portion of all Scheduled Receivable Payments actually received on or prior to such day allocable to principal using the Simple Interest Method; (ii) any payment of the Purchase Amount with respect to the Receivable allocable to principal; (iii) any Cram Down Loss in respect of such Receivable; and (iv) any prepayment in full or any partial prepayment applied to reduce the principal balance of the Receivable; provided, however that the Principal Balance of a Receivable that has become a Liquidated Receivable shall equal zero.

 

“Principal Distribution Account” means the account designated as such, established and maintained pursuant to Section 5.1(b).

 

“Program” has the meaning specified in Section 4.11.

 

“Purchase Amount” means, with respect to a Receivable, the amount, as of the close of business on the last day of a Collection Period, required to prepay in full such Receivable under the terms thereof, as reduced by the amount of any Cram Down Loss, plus all accrued and unpaid interest thereon to the end of the month of such purchase.

 

“Purchased Receivable” means a Receivable purchased as of the close of business on the last day of a Collection Period by the Servicer or CPS pursuant to Section 4.7 or Section 4.16, or repurchased by the Seller or CPS pursuant to Section 3.2, Section 3.4 or Section 11.1(a).

 

“Rating Agency” means Standard & Poor’s and any successor thereof.  If neither Standard & Poor’s nor any successor maintains a rating on the Notes, “Rating Agency” shall be a nationally recognized statistical rating organization or other comparable Person designated by the Seller, notice of which designation shall be given to the Trustee, the Owner Trustee and the Servicer.

 

“Rating Agency Condition” means, with respect to any action, that the Rating Agency shall have been given 10 days’ (or such shorter period as shall be acceptable to the Rating Agency) prior notice thereof and that the Rating Agency shall have notified the Seller, the Servicer, the Owner Trustee and the Trustee in writing that such action will not result in a reduction or withdrawal of the then current rating of any of the Notes.

 

“Realized Losses” means, with respect to any Receivable that becomes a Liquidated Receivable, the excess of the Principal Balance of such Liquidated Receivable over Net Liquidation Proceeds allocable to principal.

 

“Receivable” means each Contract related to a Financed Vehicle transferred to the Issuer pursuant to Section 2.1, which, as of the Closing Date, is listed on Schedule A (which Schedule A may be in the form of microfiche), and all rights and obligations thereunder, except for Receivables that shall have become Purchased Receivables or Sold Receivables.

 

“Receivable Files” means the documents specified in Section 3.3(a).

 

“Receivables Purchase Agreement” means the Receivables Purchase Agreement dated as of April 1, 2011, by and between the Seller and CPS, as such agreement may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof, relating to the purchase of the Receivables by the Seller from CPS.

 

“Record Date” means, with respect to any Note, (i) with respect to the first Payment Date, the Closing Date and (ii) with respect to any subsequent Payment Date, the last day of the calendar month preceding the calendar month in which such Payment Date occurs.

 

“Recoveries” means with respect to a Liquidated Receivable, the monies collected from whatever source, during any Collection Period following the Collection Period in which such Receivable first became a Liquidated Receivable, net of the reasonable costs of liquidation plus any amounts required by law to be remitted to the Obligor (without duplication of amounts netted against the amounts realized in calculating the Net Liquidation Proceeds).

 

“Registrar of Titles” means, with respect to any State, the governmental agency or body responsible for the registration of, and the issuance of certificates of title relating to, motor vehicles and liens thereon.

 

“Repurchase Request” means, with respect to any Receivable, any request or demand from any Person whether oral or written that such Receivable be repurchased or replaced because of a breach of any of CPS’s or the Seller’s representations and warranties concerning the Receivables.

 

“Repurchase Request Recipient” has the meaning assigned to such term in Section 13.15.

 

“Repurchase Rules and Regulations” has the meaning assigned to such term in Section 13.15.

 

“Residual Certificateholder” means each person in whose name a Residual Pass-through Certificate is registered on the Certificate Register.

 

“Residual Pass-through Certificate” has the meaning assigned to such term in the Trust Agreement.

 

“Responsible Officer” has the meaning specified in the Trust Agreement.

 

“Rule 15Ga-1” means Rule 15Ga-1 under the Exchange Act.

 

“Rule 15Ga-1 Notice” has the meaning assigned to such term in Section 13.15.

 

“Sale Amount” means, with respect to any Sold Receivable, the amount received from the related third-party purchaser as payment for such Sold Receivable.

 

“Schedule of Receivables” means the schedule of Receivables attached hereto as Schedule A (which may be in the form of microfiche), as such schedule may be amended or supplemented from time to time in accordance with the terms of this Agreement.

 

“Scheduled Receivable Payment” means, with respect to any Collection Period for any Receivable, the amount set forth in such Receivable as required to be paid by the Obligor in such Collection Period.  If after the Closing Date, the Obligor’s obligation under a Receivable with respect to a Collection Period has been modified so as to differ from the amount specified in such Receivable (i) as a result of the order of a court in an insolvency proceeding involving the Obligor, (ii) pursuant to the Servicemembers Civil Relief Act, or (iii) as a result of modifications or extensions of the Receivable permitted by Section 4.2(a), the Scheduled Receivable Payment with respect to such Collection Period shall refer to the Obligor’s payment obligation with respect to such Collection Period as so modified.

 

“SeaWest” means SeaWest Financial Corporation, a California corporation.

 

“Section 341 Meeting” means a meeting held pursuant to Section 341(a) of the United States Bankruptcy Code (as the same may be amended from time to time).

 

“Section 341 Receivable” means a Receivable, the Obligor of which has completed a Section 341 Meeting as of the Cutoff Date.

 

“Securities” means the Notes and the Residual Pass-through Certificates, collectively.

 

“Securityholders” means the Noteholders and the Residual Certificateholders, collectively.

 

“Seller” means CPS Receivables Five LLC, a Delaware limited liability company, and its successors in interest to the extent permitted hereunder.

 

“Series 2011-A Spread Account” means the account designated as such,  established and maintained pursuant to Section 5.1(a)(iii).

 

“Servicer” means CPS, as the servicer of the Receivables, and each successor Servicer pursuant to Section 10.3.

 

“Servicer Termination Event” means an event specified in Section 10.1.

 

“Servicer’s Certificate” means a certificate completed and executed by a Servicing Officer and delivered pursuant to Section 4.9, substantially in the form of Exhibit B.

 

“Servicing Fee” has the meaning specified in Section 4.8.

 

“Servicing Officer” means any Person whose name appears on a list of Servicing Officers delivered to the Trustee, as the same may be amended from time to time.

 

“Simple Interest Method” means the method of allocating a fixed level payment between principal and interest, pursuant to which the portion of such payment that is allocated to interest is equal to the product of the APR multiplied by the unpaid balance multiplied by the period of time (expressed as a fraction of a year, based on the actual number of days in the calendar month and the actual number of days in the calendar year) elapsed since the preceding payment of interest was made and the remainder of such payment is allocable to principal.

 

“Simple Interest Receivable” means a Receivable under which the portion of the payment allocable to interest and the portion allocable to principal is determined in accordance with the Simple Interest Method.

 

“Skip Receivable” means a Receivable (i) that is delinquent as of the Closing Date; and (ii) with respect to which CPS (a) has concluded that the address or telephone number of the related Obligor maintained by CPS as of the Closing Date is incorrect and CPS has not been able to obtain revised contact information for such Obligor and (b) has designated the status of the Receivable as “A07” or “F07” in accordance with its servicing procedures.

 

“Sold Receivable” means a Receivable that was more than 120 days delinquent and was sold to an unaffiliated third party by the Issuer, at the Servicer’s direction, as of the close of business on the last day of a Collection Period and in accordance with the provisions of Section 4.3(b) hereof.

 

“Specified Spread Account Requisite Amount” means, as of any date of determination, the lesser of (i) two percent (2%) of the Original Pool Balance and (ii) the Aggregate Note Balance; provided, however, that on and after the Aggregate Note Balance has been reduced to zero and all Classes of Notes have been distributed all amounts to which the Holders thereof are entitled under the Basic Documents, the Specified Spread Account Requisite Amount shall be $0.

 

“Standard & Poor’s” means Standard & Poor’s Ratings Services, a Standard & Poor’s Financial Services LLC business, or its successor.

 

“State” means any one of the 50 states of the United States of America or the District of Columbia.

 

“Successor Servicing Fee Schedule” means that certain Schedule of Successor Servicing Fees, Expenses and Distributions attached hereto as Exhibit G.

 

“Texas Franchise Tax” means any tax imposed by the State of Texas pursuant to Tex. Tax Code Ann. § 171.001 (Vernon 2005), as amended by Tex. H.B. 3, 79th Leg., 3d C.S. (2006).

 

“TFC” means The Finance Company, a Virginia corporation.

 

“Three-Month Rolling Average Delinquency Ratio” means, for any date of determination, the average of the Delinquency Ratios for each of the three immediately preceding Collection Periods.

 

“Three-Month Rolling Average Extension Ratio” means, for any date of determination, a rolling three month average of the ratio for each of the three immediately preceding Collection Periods, expressed as a percentage, of (i) the aggregate Principal Balance of the Receivables whose payments are extended during the related Collection Period to (ii) the Pool Balance as of the first day of the related Collection Period prior to giving effect to any payment activity on such date.

 

“Total Distribution Amount” means, for each Payment Date, the sum of the following amounts with respect to the related Collection Period:  (i) all collections on the Receivables; (ii) Net Liquidation Proceeds received during the Collection Period with respect to Liquidated Receivables; (iii) all proceeds from Recoveries with respect to Liquidated Receivables; (iv) all proceeds received during the Collection Period from Insurance Policies (other than funds used for the repair of the related Financed Vehicle or otherwise released by CPS to the related Obligor in accordance with normal servicing procedures); (v) Investment Earnings for the related Payment Date; (vi) all Purchase Amounts deposited in the Collection Account during the related Collection Period, plus the amount of any payments made by CPS to the Trust pursuant to its indemnification obligations under the Basic Documents; (vii) following the acceleration of the Notes pursuant to Section 5.2 of the Indenture, the amount of money or property collected pursuant to Section 5.3 of the Indenture since the preceding Payment Date by the Trustee for distribution pursuant to Section 5.7 hereof; (viii) any amounts released from the Series 2011-A Spread Account in accordance with the terms of Section 5.5(b) for payment pursuant to priorities (xviii) through (xxi) of Section 5.7(a) hereof; (ix) the proceeds of any purchase or sale of the assets of the Trust described in Sections 4.16 or 11.1 hereof; and (x) any Sale Amounts realized by the Servicer in connection with the sale of Sold Receivables pursuant to Section 4.3(b).

 

“Transferred Property” has the meaning assigned thereto in the Receivables Purchase Agreement.

 

“Trigger Event” means a Level 1 Trigger Event, Level 2 Trigger Event or Level 3 Trigger Event, as applicable.

 

“Trust” means the Issuer.

 

“Trust Account Property” means the Trust Accounts, all amounts and investments held from time to time in any Trust Account (whether in the form of deposit accounts, physical property, book-entry securities, uncertificated securities or otherwise), and all proceeds of the foregoing.

 

“Trust Accounts” means, collectively, the Collection Account, the Series 2011-A Spread Account and the Principal Distribution Account.

 

“Trust Agreement” means the Trust Agreement dated as of February 25, 2011, by and between CPS Receivables Five LLC, as depositor, and the Owner Trustee, as amended and restated by the Amended and Restated Trust Agreement dated as of April 1, 2011, by and between the Seller, as depositor, and the Owner Trustee, as the same may be further amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.

 

“Trust Officer” means, (i) in the case of the Trustee, any vice president, any assistant vice president, any assistant secretary, any assistant treasurer, any trust officer, or any other officer of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject, and (ii) in the case of the Owner Trustee, any officer in the Corporate Trust Office of the Owner Trustee or any agent of the Owner Trustee under a power of attorney with direct responsibility for the administration of this Agreement or any of the Basic Documents on behalf of the Owner Trustee.

 

“Trust Paying Agent” means the “Paying Agent” appointed and acting in such capacity pursuant to the Trust Agreement.

 

“Trust Property” means the property and proceeds conveyed pursuant to Section 2.1.

 

“Trustee” means the Person acting as trustee under the Indenture, its successors in interest and any successor trustee under the Indenture.

 

“Trustee Fee Schedule” means the schedule attached hereto as Exhibit H.

 

“Trustee Fees” means the sum of (A) means the “Monthly Trustee Fee,” “Collateral Custody Fees” and “Account Acceptance Fee” as reflected on the Trustee Fee Schedule; and (B) any amounts payable to the Owner Trustee pursuant to Article VIII of the Trust Agreement, in each case, due and payable on each Payment Date in respect of the immediately preceding Collection Period; provided, however, with respect to the initial Payment Date, the “Monthly Trustee Fee” shall be pro-rated based on the number of days in the period beginning on the Closing Date and ending on the last day of the first Collection Period.

 

“UCC” means the Uniform Commercial Code as in effect in the relevant jurisdiction on the date of the Agreement.

 

(b) Capitalized terms used herein and not otherwise defined herein have the meanings assigned to them in the Indenture or, if not defined therein, in the Trust Agreement.

 

(c) All terms defined in this Agreement shall have the defined meanings when used in any instrument governed hereby and in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

 

(d) Accounting terms used but not defined or partly defined in this Agreement, in any instrument governed hereby or in any certificate or other document made or delivered pursuant hereto, to the extent not defined, shall have the respective meanings given to them under generally accepted accounting principles as in effect on from time to time or any such instrument, certificate or other document, as applicable.  To the extent that the definitions of accounting terms in this Agreement or in any such instrument, certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the definitions contained in this Agreement or in any such instrument, certificate or other document shall control.

 

(e) (i) The words “hereof,” “herein,” “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 and (ii) the word “or” is not exclusive.

 

(f) Section, Schedule and Exhibit references contained in this Agreement are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and the term “including” shall mean “including without limitation.”

 

(g) 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 terms.

 

(h) Any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as the same may from time to time be amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments and instruments associated therewith; all references to a Person include its permitted successors and assigns.

 

ARTICLE II                      

CONVEYANCE OF RECEIVABLES

SECTION 2.1 Conveyance of Receivables.  In consideration of the Issuer’s delivery to or upon the order of the Seller on the Closing Date of the Securities, the Seller does hereby sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse (subject to the obligations set forth herein) all right, title and interest of the Seller, whether now existing or hereafter arising, in, to and under:

 

(a) the Receivables listed in Schedule A hereto and all monies received thereunder after the Cutoff Date and all Net Liquidation Proceeds and Recoveries received with respect to such Receivables after the Cutoff Date;

 

(b) the security interests in the Financed Vehicles granted by the related Obligors pursuant to the Receivables and any other interest of the Seller in such Financed Vehicles, including, without limitation, the certificates of title or, with respect to such Financed Vehicles in the Non-Certificated Title States, all other evidence of ownership with respect to such Financed Vehicles issued by the applicable Department of Motor Vehicles or similar authority;

 

(c) any proceeds from claims on any physical damage, credit life and credit accident and health insurance policies or certificates relating to the Financed Vehicles securing the Receivables or the Obligors thereunder;

 

(d) all proceeds from recourse against Dealers or Consumer Lenders with respect to the Receivables;

 

(e) all of the Seller’s rights and benefits, but none of its obligations or burdens, under the Receivables Purchase Agreement, including a direct right to cause CPS to purchase Receivables from the Issuer and to indemnify the Issuer pursuant to the Receivables Purchase Agreement under the circumstances specified therein;

 

(f) refunds for the costs of extended service contracts with respect to Financed Vehicles securing the Receivables, refunds of unearned premiums with respect to credit life and credit accident and health insurance policies or certificates covering an Obligor or Financed Vehicle or an Obligor’s obligations with respect to a Receivable or a Financed Vehicle and any recourse to Dealers or Consumer Lenders for any of the foregoing;

 

(g) the Receivable File related to each Receivable;

 

(h) all amounts and property from time to time held in or credited to the Collection Account, the Lockbox Account, the Series 2011-A Spread Account and the Principal Distribution Account;

 

(i) all property (including the right to receive future Net Liquidation Proceeds) that secures a Receivable that has been acquired by or on behalf of CPS or the Seller, pursuant to a liquidation of such Receivable; and

 

(j) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing.

 

SECTION 2.2 [Reserved].

 

 

 

 

SECTION 2.3 Transfer Intended as a Sale.  It is the intention of the Seller that the transfer and assignment contemplated by Section 2.1 of this Agreement shall constitute a sale of the Trust Property from the Seller to the Trust and the beneficial interest in and title to the Trust Property shall not be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law.  In the event that, notwithstanding the intent of the Seller as set forth in this Section 2.3 and in Section 13.17, the transfer and assignment contemplated hereby is held not to be a sale, this Agreement shall constitute a grant of (and the Seller does hereby grant) a security interest in all of the Seller’s right, title and interest in, to and under the Trust Property to the Trust for the benefit of the Securityholders and this Agreement shall constitute a security agreement under New York law.  The Seller shall take such actions as are necessary from time to time in order to maintain the perfection and priority of the Trust’s security interest in the Trust Property.

 

SECTION 2.4 Further Encumbrance of Trust Property.

 

(a) Immediately upon the conveyance to the Trust by the Seller of any item of the Trust Property pursuant to Section 2.1, all right, title and interest of the Seller in and to such item of Trust Property shall terminate, and all such right, title and interest shall vest in the Trust, in accordance with the Trust Agreement and Sections 3802 and 3805 of the Statutory Trust Statute (as defined in the Trust Agreement).

 

(b) Immediately upon the vesting of the Trust Property in the Trust, the Trust shall have the sole right to pledge or otherwise encumber, such Trust Property.  Pursuant to the Indenture, the Trust shall grant a security interest in the Trust Property to secure the repayment of the Notes.  The Residual Pass-through Certificates shall represent beneficial ownership interests in the Trust Property, and the Residual Certificateholders shall be entitled to receive distributions with respect thereto as set forth in Section 5.7(a)(xxi).

 

ARTICLE III

THE RECEIVABLES

 

SECTION 3.1 Representations and Warranties of Seller.  The Seller makes the following representations and warranties as to the Receivables to the Issuer and to the Trustee for the benefit of the Noteholders on which the Issuer relies in acquiring the Receivables, and on which the Trustee is deemed to have relied in executing and performing pursuant to this Agreement, the Indenture and the other Basic Documents to which it is a party.  Such representations and warranties speak as of the execution and delivery of this Agreement and as of the Closing Date, but shall survive the sale, transfer and assignment of the Receivables to the Issuer and the pledge thereof to the Trustee for the benefit of the Noteholders pursuant to the Indenture.

 

(i) Characteristics of Receivables.  (A)  Each Receivable (1) has been originated in the United States of America by a Dealer or Consumer Lender without any fraud or misrepresentation on the part of such Dealer or Consumer Lender for the retail sale of a Financed Vehicle in the ordinary course of such Dealer’s or Consumer Lender’s business, such Dealer or Consumer Lender had all necessary licenses and permits to originate such Receivable in the State where such Dealer or Consumer Lender was located, has been fully and properly executed by the parties thereto, has been purchased by CPS in connection with the related Obligor’s purchase of the related Financed Vehicle and has been validly assigned by such Dealer or Consumer Lender to CPS, by CPS to the Seller and by the Seller to the Issuer, (2) has created a valid, subsisting, and enforceable first priority perfected security interest in favor of CPS in the Financed Vehicle, which security interest has been assigned by CPS to the Seller, which in turn has assigned such security interest to the Trust which in turn has pledged such security interest to the Trustee, (3) contains customary and enforceable provisions such that the rights and remedies of the holder or assignee thereof shall be adequate for realization against the collateral of the benefits of the security including, without limitation, a right of repossession following a default, (4) provides for level monthly scheduled payments that fully amortize the Amount Financed over the original term (except for the last scheduled payment, which may be different from the level monthly payment) and yield interest at the Annual Percentage Rate, (5) has an Annual Percentage Rate of not less than 10.00% and not greater than 28.00%, (6) is a Simple Interest Receivable, (7) was originated by a Dealer or Consumer Lender and was sold by such Dealer or Consumer Lender without any fraud or misrepresentation on the part of such Dealer or Consumer Lender, (8) is denominated in U.S. dollars and (9) provides, in the case of a prepayment, for the full payment of the Principal Balance thereof plus accrued interest through the date of prepayment based on the Annual Percentage Rate of the Receivable.

 

(B)  Approximately 86.09% of the aggregate Principal Balance of the Receivables as of the Cutoff Date represents financing of used automobiles, light trucks, vans or minivans; the remainder of the Receivables represent financing of new vehicles; approximately 3.26% of the aggregate Principal Balance of the Receivables as of the Cutoff Date were originated under the CPS Preferred Program; approximately 42.35% of the aggregate Principal Balance of the Receivables as of the Cutoff Date were originated under the CPS Alpha Program; approximately 6.06% of the aggregate Principal Balance of the Receivables as of the Cutoff Date were originated under the CPS Delta Program; approximately 6.90% of the Receivables as of the Cutoff Date were originated under the CPS First-Time Buyer Program; approximately 12.29% of the aggregate Principal Balance of the Receivables as of the Cutoff Date were originated under the CPS Standard Program; approximately 13.92% of the aggregate Principal Balance of the Receivables as of the Cutoff Date were originated under the CPS Super Alpha Program; approximately 15.22% of the aggregate Principal Balance of the Receivables as of the Cutoff Date were originated under the CPS Alpha Plus Program; all of the Receivables were acquired by CPS; approximately 2.94% of the aggregate Principal Balance of the Receivables as of the Cut-off Date, were Section 341 Receivables; each Receivable has a final scheduled payment due no later than April 5, 2017; and each Receivable was originated on or before the Cutoff Date.

 

(ii) Additional Receivables Characteristics. (A) As of the Cutoff Date, no Receivable is more than 30 days past due with respect to more than 10% of any Scheduled Receivable Payment; and (B) as of the Closing Date, (I) no Receivable is a Skip Receivable and (II) no Receivable is more than 60 days past due with respect to more than 10% of any Scheduled Receivable Payment.

 

(iii) Schedule of Receivables; Selection Procedures.  The information with respect to the Receivables set forth in Schedule A to this Agreement is true and correct in all material respects as of the close of business on the Cutoff Date. No selection procedures adverse to the Securityholders have been utilized in selecting the Receivables.

 

(iv) Compliance with Law.  Each Receivable, the sale of the Financed Vehicle and the sale of any physical damage, credit life and credit accident and health insurance and any extended warranties or service contracts (A) complied at the time the related Receivable was originated or made and at the execution of this Agreement complies in all material respects with all requirements of applicable Federal, State, and local laws, and regulations thereunder including, without limitation, usury laws, the Federal Truth-in-Lending Act, the Equal Credit Opportunity Act, the Fair Credit Reporting Act, the Fair Debt Collection Practices Act, the Federal Trade Commission Act, the Magnuson-Moss Warranty Act, the Federal Reserve Board’s Regulations B and Z, the Servicemembers Civil Relief Act, the Military Reservist Relief Act, the Texas Consumer Credit Code, the California Automobile Sales Finance Act and State adaptations of the National Consumer Act and of the Uniform Consumer Credit Code, and all other applicable consumer credit laws and equal credit opportunity and disclosure laws, and (B) without limiting the generality of the foregoing, is not subject to liabilities or is not rendered unenforceable based on general theories of contract limitation or relief including, without limitation, theories based on unconscionable, deceptive, unfair, or predatory sales or financing practices.

 

(v) No Government Obligor.  None of the Receivables are due from the United States of America or any State or from any agency, department, or instrumentality of the United States of America or any State.

 

(vi) Security Interest in Financed Vehicle. Immediately subsequent to the sale, assignment and transfer thereof to the Trust, each Receivable shall be secured by a validly perfected first priority security interest in the Financed Vehicle in favor of CPS as secured party which security interest has been validly assigned by CPS to the Seller and by the Seller to the Trust, and validly pledged by the Trust to the Trustee, and such assigned security interest is prior to all other liens upon and security interests in such Financed Vehicle that now exist or may hereafter arise or be created, except, as to priority, for any tax, storage or mechanics’ Liens that may arise after the Closing Date.

 

(vii) Receivables in Force.  No Receivable has been satisfied, subordinated or rescinded, nor has any Financed Vehicle been released from the lien granted by the related Receivable in whole or in part.

 

(viii) No Waiver.  Except as permitted under Section 4.2 and clause (ix) below, no provision of a Receivable has been waived.

 

(ix) No Amendments.  The terms of the related Contract have not been waived, altered, amended or modified (including, without limitation, by way of extension) in any respect, except by instruments or documents identified in the Receivable File with respect thereto, and no such waiver, alteration, amendment or modification has caused such Receivable to fail to meet all of the representations, warranties, and conditions set forth herein with respect thereto.  Such Contract constitutes the entire agreement between the Seller and the related Obligor.

 

(x) No Defenses.  No right of rescission, setoff, counterclaim or defense exists or has been asserted or threatened with respect to any Receivable. The operation of the terms of any Receivable or the exercise of any right thereunder will not render such Receivable unenforceable in whole or in part and such Receivable is not subject to any such right of rescission, setoff, counterclaim, or defense.

 

(xi) No Liens.  As of the Cutoff Date, (a) there are no liens or claims existing or that have been filed for work, labor, storage or materials relating to a Financed Vehicle that are prior to, or equal or coordinate with, the security interest in the Financed Vehicle granted by the Receivable and (b) there is no lien against the related Financed Vehicle for delinquent taxes.

 

(xii) No Default; Repossession.  Except for payment delinquencies continuing for a period of not more than thirty days as of the Cutoff Date, no default, breach, violation or event permitting acceleration under the terms of any Receivable has occurred; and no continuing condition that with notice or the lapse of time, or both, would constitute a default, breach, violation or event permitting acceleration under the terms of any Receivable has arisen; and the Seller shall not waive and has not waived any of the foregoing (except in a manner consistent with Section 4.2); and no Financed Vehicle shall have been repossessed or assigned for repossession as of the Closing Date.

 

(xiii) Insurance; Other.  (A) Each Obligor has obtained insurance covering the Financed Vehicle as of the execution of the Receivable insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage, and each Receivable requires the Obligor to obtain and maintain such insurance naming CPS and its successors and assigns as loss payee or an additional insured, (B) each Receivable that finances the cost of premiums for credit life and credit accident and health insurance is covered by an insurance policy or certificate of insurance naming CPS as policyholder (creditor) under each such insurance policy and certificate of insurance and (C) as to each Receivable that finances the cost of an extended service contract, the respective Financed Vehicle which secures the Receivable is covered by an extended service contract.

 

(xiv) Title.  It is the intention of the Seller that the transfer and assignment herein contemplated constitute a sale of the Receivables and the Other Conveyed Property from the Seller to the Trust and that the beneficial interest in and title to such Receivables and the Other Conveyed Property not be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy law.  No Receivable or Other Conveyed Property has been sold, transferred, assigned, or pledged by the Seller to any Person other than the Trust.  Immediately prior to the transfer and assignment herein contemplated, the Seller had good and marketable title to each Receivable and the Other Conveyed Property and was the sole owner thereof, free and clear of all liens, claims, encumbrances, security interests, and rights of others, and, immediately upon the transfer thereof, the Trust for the benefit of the Securityholders shall have good and marketable title to each such Receivable and will be the sole owner thereof, free and clear of all liens, encumbrances, security interests, and rights of others, and the transfer has been perfected under the UCC.

 

(xv) Lawful Assignment.  No Receivable has been originated in, or is subject to the laws of, any jurisdiction under which the sale, transfer, and assignment of such Receivable under this Agreement or pursuant to transfers of the Securities shall be unlawful, void, or voidable. Neither CPS nor the Seller has entered into any agreement with any account debtor that prohibits, restricts or conditions the assignment of any portion of the Receivables.

 

(xvi) All Filings Made.  All filings (including, without limitation, UCC filings) necessary in any jurisdiction to give (i) the Seller a first priority perfected security interest in the Receivables and the other Transferred Property, (ii) the Issuer a first priority perfected security interest in the Receivables and the Other Conveyed Property, and (iii) the Trustee a first priority perfected security interest in the Collateral have been made, taken or performed.

 

(xvii) Receivable File; One Original.  CPS has delivered to the Trustee a complete Receivable File with respect to each Receivable.  There is only one original executed copy of each Receivable.

 

(xviii) Chattel Paper.  Each Contract constitutes “tangible chattel paper” under the UCC.

 

(xix) Title Documents.  (A) If the Receivable was originated in a State in which notation of a security interest on the title document of the related Financed Vehicle is required or permitted to perfect such security interest, the title document of the related Financed Vehicle for such Receivable shows, or if a new or replacement title document is being applied for with respect to such Financed Vehicle the title document (or, with respect to Receivables originated in the Non-Certificated Title States, other evidence of title issued by the applicable Department of Motor Vehicles or similar authority) will be received within 180 days and will show CPS named as the original secured party under the related Receivable as the holder of a first priority security interest in such Financed Vehicle, and (B) if the Receivable was originated in a State in which the filing of a financing statement under the UCC is required to perfect a security interest in motor vehicles, such filings or recordings have been duly made and show CPS named as the original secured party under the related Receivable, and in either case, the Trust has the same rights as such secured party has or would have (if such secured party were still the owner of the Receivable) against all parties claiming an interest in such Financed Vehicle, and such rights have been validly pledged to the Trustee pursuant to the Indenture.  With respect to each Receivable for which the title document has not yet been returned from the Registrar of Titles, CPS has received written evidence from the related Dealer or Consumer Lender that such title document showing CPS, as first lienholder has been applied for.

 

(xx) Valid and Binding Obligation of Obligor.  Each Receivable is the legal, valid and binding obligation in writing of the Obligor thereunder and is enforceable in accordance with its terms, except only as such enforcement may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally, and all parties to such contract had full legal capacity to execute and deliver such contract and all other documents related thereto and to grant the security interest purported to be granted thereby.

 

(xxi) Characteristics of Obligors.  As of the date of each Obligor’s application for financing of the vehicle purchase from which the related Receivable arises, such Obligor (a) was not the subject of any Federal, State or other bankruptcy, insolvency or similar proceeding pending on the date of application that has not completed a Section 341 Meeting or been discharged, (b) had not been the subject of more than one Federal, State or other bankruptcy, insolvency or similar proceeding, and (c) was domiciled in the United States.  During the period from the date of each Obligor’s application for financing of the vehicle purchase from which the related Receivable arises to the Closing Date, no Obligor is or has been the subject of any Federal, State or other bankruptcy, insolvency or similar proceeding other than an Obligor related to a Section 341 Receivable.

 

(xxii) Origination Date.  Each Receivable has an origination date on or after July 1, 2005.

 

(xxiii) Maturity of Receivables.  Each Receivable has an original term to maturity of not more than 72 months; the weighted average original term to maturity of the Receivables was 62.76 months as of the Cutoff Date; the remaining term to maturity of each Receivable was 72 months or less as of the Cutoff Date; the weighted average remaining term to maturity of the Receivables was 55.92 months as of the Cutoff Date.

 

(xxiv) Scheduled Receivable Payments.  Each Receivable has an original principal balance of not more than $34,000.

 

(xxv) Origination of Receivables.  Based on the billing address of the Obligors and the Principal Balances as of the Cutoff Date, approximately 16.60%, 9.40%, 7.08%, 6.01% and 5.52% of the Receivables (by principal balance) had Obligors residing in the States of California, Texas, Pennsylvania, Florida and Georgia, respectively. As of the Cutoff Date, no other state represented more than 5.00% of the Receivables (by principal balance).

 

(xxvi) Post Office Box.  On or prior to the next billing period after the Cutoff Date, CPS will notify each Obligor to make payments with respect to its respective Receivables after the Cutoff Date directly to the Post Office Box, and will provide each Obligor with a monthly statement in order to enable such Obligors to make payments directly to the Post Office Box.

 

(xxvii) Location of Receivable Files.  A complete Receivable File with respect to each Receivable has been or prior to the Closing Date will be delivered to the Trustee at the location listed in Schedule B hereto.

 

(xxviii)  Casualty and Impounding.  No Financed Vehicle has suffered a Casualty and CPS has not received notice that any Financed Vehicle has been impounded.

 

(xxix) Principal Balance/Number of Contracts.  As of the Cutoff Date, the aggregate principal balance of the Receivables was $104,546,308.18.  As of the Cutoff Date, the Receivables are evidenced by 7,374 Contracts.

 

(xxx) Full Amount Advanced.  The full amount of each Receivable has been advanced to each Obligor, and there are no requirements for future advances thereunder.  The Obligor with respect to each Receivable does not have any option under the terms of the related Contract to borrow from any person additional funds secured by the Financed Vehicle.

 

(xxxi) No Impairment.  Neither CPS nor the Seller has done anything to convey any right to any Person that would result in such Person having a right to payments due under any Receivables or otherwise to impair the rights of the Purchaser, the Issuer or the Securityholders in any Receivable or the proceeds hereof.

 

(xxxii) Receivables Not Assumable.  No Receivable is assumable by another Person in a manner that would release the Obligor thereof from such Obligor’s obligations to CPS or the Seller with respect to such Receivable.

 

(xxxiii) Servicing.  The servicing of each Receivable and the collection practices relating thereto have been lawful and in accordance with the standards set forth in this Agreement;  other than the Servicer and the Backup Servicer, no other Person has the right to service the Receivables.

 

(xxxiv) Illinois Receivables.  (a) The Seller does not own a substantial interest in the business of a Dealer within the meaning of Illinois Sales Finance Agency Act Rules and Regulations, Section 160.230(1) and (b) with respect to each Receivable originated in the State of Illinois, (i) the printed or typed portion of the related Form of Receivable complies with the requirements of 815 ILCS 375/3(b) and (ii) the Seller has not, and for so long as such Receivable is outstanding shall not, place or cause to be placed on the related Financed Vehicle any collateral protection insurance in violation of 815 ILCS 180/10.

 

(xxxv) California Receivables.  Each Receivable originated in the State of California has been, and at all times during the term of the Sale and Servicing Agreement will be, serviced by the Servicer in compliance with Cal. Civil Code § 2981, et seq.

 

(xxxvi)   Creation of Security Interest.  This Agreement creates a valid and continuing security interest (as defined in the UCC) in the Trust Property in favor of the Issuer for the benefit of the Securityholders, which security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Seller.

 

(xxxvii) Perfection of Security Interest in Financed Vehicles.  CPS has taken all steps necessary to perfect its security interest against the Obligors in the Financed Vehicles securing the Contracts.

 

(xxxviii) Perfection of Security Interest in Trust Property.  The Seller has caused, 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 in the Trust Property granted to the Issuer for the benefit of the Securityholders hereunder pursuant to Section 2.3.

 

(xxxix)    No Other Security Interests.  Other than the security interest granted to the Issuer for the benefit of the Securityholders pursuant to Section 2.3, the Seller has not pledged, assigned, sold, granted a security interest in, or otherwise conveyed any of the Trust Property.  The Seller has not authorized the filing of and is not aware of any financing statements filed against the Seller that include a description of collateral covering the Trust Property other than any financing statement relating to the security interest granted to the Issuer for the benefit of the Securityholders hereunder or that has been terminated.  The Seller is not aware of any judgment or tax lien filings against the Seller.

 

(xl) Notations on Contracts; Financing Statement Disclosure.  The Servicer has in its possession copies of all Contracts that constitute or evidence the Receivables.  The Contracts that constitute or evidence the Receivables do not have any marks or notations indicating that they have been pledged, assigned or otherwise conveyed to any Person other than the Issuer and/or the Trustee for the benefit of the Noteholders.  All financing statements filed or to be filed against the Seller in favor of the Issuer in connection herewith describing the Trust Property contain a statement to the following effect:  “A purchase of or security interest in any collateral described in this financing statement will violate the rights of the secured party.”

 

(xli) TFC, MFN, SeaWest Receivables.  None of the Receivables were originated by TFC, MFN or SeaWest or any of their respective subsidiaries.

 

(xlii) Consumer Lenders.  Each Consumer Lender has obtained all necessary licenses and approvals in all jurisdictions in which the origination and purchase of installment promissory notes and security agreements and the sale thereof requires or shall require such licenses or approvals, except where the failure to obtain such licenses or approvals would not result in a material adverse effect on the value or marketability of any Receivable (including, without limitation, the enforceability or collectibility of any Receivable).

 

The representations and warranties set forth above in paragraphs (xiv), (xvi), (xviii) and paragraphs (xxxvi) through (xlii) shall survive the termination of this Agreement and may not be waived in whole or in part.

 

SECTION 3.2 Repurchase upon Breach.

 

(a) The Seller, the Servicer, the Trustee or (upon actual knowledge of a Responsible Officer thereof) the Owner Trustee, as the case may be, shall inform the other parties to this Agreement promptly, in writing, upon the discovery of any breach of the Seller’s representations and warranties made pursuant to Section 3.1 (without regard to any limitations therein as to the Seller’s knowledge).  Unless the breach shall have been cured by the last day of the second Collection Period following the discovery thereof by CPS or receipt by CPS of notice of such breach, CPS (pursuant to the Receivables Purchase Agreement) shall repurchase any Receivable if the value of such Receivable is materially and adversely affected by the breach as of the last day of such second Collection Period (or, at CPS’s option, the last day of the first Collection Period following the discovery) and, in the event that the breach relates to a characteristic of the Receivables in the aggregate, and if the interests of the Trust or the Securityholders are materially and adversely affected by such breach, unless the breach shall have been cured by the last day of such second Collection Period, CPS shall purchase the aggregate Principal Balance of affected Receivables, such that following such purchase such representation shall be true and correct with respect to the remainder of the Receivables in the aggregate.  In consideration of the purchase of any Receivable, CPS shall remit the Purchase Amount, in the manner specified in Section 5.6.  For purposes of this Section, the Purchase Amount of a Receivable that is not consistent with the warranty pursuant to Section 3.1(i)(A)(5) or (A)(6) shall include such additional amount as shall be necessary to provide the full amount of interest as contemplated therein.  The sole remedy of the Issuer, the Owner Trustee, the Trustee and the Securityholders with respect to a breach of representations and warranties pursuant to Section 3.1 shall be to enforce CPS’s obligation to purchase such Receivables pursuant to the Receivables Purchase Agreement; provided, however, that CPS shall indemnify the Trustee, the Owner Trustee, the Backup Servicer, the Trust and the Securityholders against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, that may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach.  Upon receipt of the Purchase Amount and written instructions from the Servicer, the Trustee shall release to CPS or its designee the related Receivables File and shall execute and deliver all reasonable instruments of transfer or assignment, without recourse, as are prepared by the Seller and delivered to the Trustee and necessary to vest in CPS or such designee title to the Receivable including a Trustee’s Certificate in the form of Exhibit F-1.

 

(b) If it is determined that consummation of the transactions contemplated by this Agreement and the other transaction documents referenced in this Agreement, the servicing and operation of the Trust pursuant to this Agreement and such other documents, or the ownership of a Note or a Residual Pass-through Certificate by a Holder constitutes a violation of the prohibited transaction rules of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or the Internal Revenue Code of 1986, as amended (the “Code”) or any successor statutes of similar impact, together with the regulations thereunder, to which no statutory exception or administrative exemption applies, such violation shall not be treated as a breach of the Seller’s representations and warranties made pursuant to Section 3.1 if not otherwise such a breach.

 

(c) Pursuant to Sections 2.1 and 2.2 of this Agreement, the Seller has conveyed to the Trust all of the Seller’s right, title and interest in its rights and benefits, but none of its obligations or burdens, under the Receivables Purchase Agreement, including the Seller’s rights under the Receivables Purchase Agreement and the delivery requirements, representations and warranties and the cure, repurchase and indemnity obligations of CPS under the Receivables Purchase Agreement.  The Seller hereby represents and warrants to the Trust and the Trustee for the benefit of the Noteholders that such assignment is valid, enforceable and effective to permit the Trust to enforce such obligations of CPS under the Receivables Purchase Agreement.

 

(d) If the Insolvency Event related to a Section 341 Meeting has not been discharged pursuant to Section 727 of the United States Bankruptcy Code by the bankruptcy court presiding over such Insolvency Event within 120 days of the conveyance of the related Receivable by the Seller to the Issuer pursuant to Section 2.1(a), the Seller shall repurchase such Receivable as of and by no later than the last day of the next occurring Collection Period at the Purchase Amount.

 

SECTION 3.3 Custody of Receivables Files.

 

(a) In connection with the sale, transfer and assignment of the Receivables and the Other Conveyed Property to the Trust pursuant to this Agreement the Trustee shall act as custodian of the following documents or instruments in its possession which shall be delivered to the Trustee by CPS on or before the Closing Date:

 

(i) The fully executed original of the Receivable (together with any agreements modifying the Receivable, including without limitation any extension agreements);

 

(ii) The original certificate of title in the name of CPS or such documents that CPS shall keep on file, in accordance with its customary procedures, evidencing the security interest of CPS in the Financed Vehicle or, if not yet received, a copy of the application therefor showing CPS as secured party, or a dealer guarantee of title.

 

(b) Upon payment in full of any Receivable, the Servicer will notify the Trustee pursuant to a certificate of an officer of the Servicer (which certificate shall include a statement to the effect that all amounts received in connection with such payments which are required to be deposited in the Collection Account pursuant to Section 4.2 have been so deposited) and shall request delivery of the Receivable and Receivable File to the Servicer.

 

SECTION 3.4 Acceptance of Receivable Files by Trustee.  The Trustee acknowledges receipt of files that the Seller has represented are the Receivable Files for the Receivables.  The Trustee has reviewed such Receivable Files and has determined that it has received a file for each Receivable identified in Schedule A to this Agreement.  The Trustee declares that it holds and will continue to hold such files and any amendments, replacements or supplements thereto and all other assets comprising the Owner Trust Estate as Trustee in trust for the use and benefit of all present and future Securityholders.  The Trustee agrees to review each file delivered to it prior to the Closing Date to determine whether such Receivable Files contain the documents referred to in  Sections 3.3(a)(i) and (ii).  If the Trustee has found or finds that a file for a Receivable has not been received, or that a file is unrelated to the Receivables identified in Schedule A to this Agreement or that any of the documents referred to in Section 3.3(a)(i) or (ii) are not contained in a Receivable File, the Trustee shall inform CPS, the Seller and the Owner Trustee promptly, in writing, of the failure to receive a file with respect to such Receivable (or of the failure of any of the aforementioned documents to be included in the Receivable File) or shall return to CPS as the Seller’s designee any file unrelated to a Receivable identified in Schedule A to this Agreement, it being understood that the Trustee’s obligation to review the contents of any Receivable File shall be limited as set forth in the preceding sentence.  Unless such defect with respect to such Receivable File shall have been cured by the last day of the second Collection Period following discovery thereof by the Trustee, the Trustee shall cause CPS to repurchase any such Receivable as of and by no later than such last day pursuant to the Receivables Purchase Agreement.  In consideration of the purchase of the Receivable, CPS shall remit the Purchase Amount, in the manner specified in Section 5.6.  The sole remedy of the Trustee, the Trust and the Securityholders with respect to a breach pursuant to this Section 3.4 shall be to require CPS to purchase the applicable Receivables pursuant to this Section 3.4; provided, however, that CPS shall indemnify the Trustee, the Owner Trustee, the Backup Servicer,  the Trust and the Securityholders against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach.  Upon receipt of the Purchase Amount and written instructions from the Servicer, the Trustee shall release to CPS or its designee the related Receivable File and shall execute and deliver all reasonable instruments of transfer or assignment, without recourse, as are prepared by CPS and delivered to the Trustee and are necessary to vest in CPS or such designee title to the Receivable including a Trustee’s Certificate in the form of Exhibit F-1.  The Trustee shall make a list of Receivables for which an application for a certificate of title but not an original certificate of title or, with respect to Receivables originated in the Non-Certificated Title States, another evidence of title issued by the applicable Department of Motor Vehicles or similar authority in such States, is included in the Receivable File as of the date of its review of the Receivable Files and deliver a copy of such list to the Servicer and the Owner Trustee.  On the date which is 180 days following the Closing Date or, if such day is not a Business Day, the next succeeding Business Day, the Trustee shall inform CPS and the other parties to this Agreement of any Receivable for which the related Receivable File on such date does not include an original certificate of title or, with respect to Financed Vehicles in the Non-Certificated Title States, for which the related Receivable File on such date does not include evidence of title issued by the applicable Department of Motor Vehicles or similar authority, and CPS shall repurchase any such Receivable as of and by no later than the last day of the current Collection Period.

 

SECTION 3.5 Access to Receivable Files.  The Trustee shall permit the Servicer access to the Receivable Files at all reasonable times during the Trustee’s normal business hours.  The Trustee shall, within two Business Days of the request of the Servicer or the Owner Trustee, execute such documents and instruments as are prepared by the Servicer or the Owner Trustee and delivered to the Trustee, as the Servicer, the Owner Trustee deems necessary to permit the Servicer, in accordance with its customary servicing procedures, to enforce the Receivable on behalf of the Trust and any related insurance policies covering the Obligor, the Receivable or Financed Vehicle so long as such execution in the Trustee’s sole discretion does not conflict with this Agreement and will not cause it undue risk or liability.  The Trustee shall not be obligated to release any document from any Receivable File unless it receives a release request signed by a Servicing Officer in the form of Exhibit C hereto (the “Release Request”).  Such Release Request shall obligate the Servicer to return such document(s) to the Trustee when the need therefor no longer exists unless the Receivable shall be liquidated, in which case, the Servicer shall certify in the Release Request that all amounts required to be deposited in the Collection Account with respect to such Receivable have been so deposited.

 

SECTION 3.6 Trustee to Deliver Monthly Receivable File Report»

 

.  Within three Business Days after the end of a month in which the Trustee releases any Receivable Files to the Servicer or after any subsequent month in which such Receivable Files remain outstanding pursuant to Section 3.5, the Trustee shall deliver to the Servicer a monthly report that identifies all Receivable Files released to the Servicer and not yet returned to the Trustee.

 

SECTION 3.7 Trustee to Maintain Secure Facilities»

 

.  The Trustee shall maintain or cause to be maintained continuous custody of the Receivable Files in secure and fire resistant facilities in accordance with customary standards for such custody.

 

ARTICLE IV

ADMINISTRATION AND SERVICING OF RECEIVABLES

SECTION 4.1 Duties of the Servicer»

 

.  The Servicer, as agent for the Trust and the Securityholders (to the extent provided herein) shall manage, service, administer and make collections on the Receivables with reasonable care, using that degree of skill and attention customary and usual for institutions which service motor vehicle retail installment contracts or promissory notes and security agreements, in each case, similar to the Receivables and, to the extent more exacting, that the Servicer exercises with respect to all comparable automotive receivables that it services for itself or others.  The Servicer’s duties shall include collection and posting of all payments, responding to inquiries of Obligors on such Receivables, investigating delinquencies, sending payment statements to Obligors, reporting tax information to Obligors, accounting for collections, furnishing monthly and annual statements to the Trustee and the Owner Trustee with respect to distributions.  Without limiting the generality of the foregoing, and subject to the servicing standards set forth in this Agreement, the Servicer is authorized and empowered by the Trust to execute and deliver, on behalf of itself, the Trust or the Securityholders, any and all instruments of satisfaction or cancellation, or partial or full release or discharge, and all other comparable instruments, with respect to such Receivables or to the Financed Vehicles securing such Receivables and/or the certificates of title or, with respect to Financed Vehicles in the Non-Certificated Title States, other evidence of ownership with respect to such Financed Vehicles issued by the applicable Department of Motor Vehicles or similar authority.  If the Servicer shall commence a legal proceeding to enforce a Receivable, the Trust shall thereupon be deemed to have automatically assigned, solely for the purpose of collection, such Receivable to the Servicer.  If in any enforcement suit or legal proceeding it shall be held that the Servicer may not enforce a Receivable on the ground that it shall not be a real party in interest or a holder entitled to enforce such Receivable, the Trust shall, at the Servicer’s expense and direction, take steps to enforce such Receivable, including bringing suit in its name or the name of the Securityholders. The Servicer shall prepare and furnish, and the Trustee and the Owner Trustee shall execute, any powers of attorney and other documents reasonably necessary or appropriate to enable the Servicer to carry out its servicing and administrative duties hereunder.

 

SECTION 4.2 Collection of Receivable Payments; Modifications of Receivables; Lockbox Agreement»

 

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(a) Consistent with the standards, policies and procedures required by this Agreement, the Servicer shall make reasonable efforts to collect all payments called for under the terms and provisions of the Receivables as and when the same shall become due and shall follow such collection procedures as it follows with respect to all comparable automotive receivables that it services for itself or others; provided, however, that promptly after the Closing Date the Servicer shall notify each Obligor to make all payments with respect to the Receivables to the Post Office Box.  The Servicer will provide each Obligor with a monthly statement in order to notify such Obligors to make payments directly to the Post Office Box.  The Servicer shall allocate collections between principal and interest in accordance with the customary servicing procedures it follows with respect to all comparable automotive receivables that it services for itself or others and in accordance with the terms of this Agreement.  Except as provided below, the Servicer may grant extensions on Receivables; provided, however, that the Servicer may not grant more than two extensions per calendar year with respect to a Receivable or grant an extension with respect to a Receivable for more than one calendar month or grant more than six extensions in the aggregate with respect to a Receivable (the “Aggregate Extension Limitation”); provided, further, however, that if the Servicer extends the date for final payment by the Obligor of any Receivable beyond the last day of the penultimate Collection Period preceding the Final Scheduled Payment Date, it shall promptly purchase the Receivable from the Trust in accordance with the terms of Section 4.7 (and for purposes thereof, the Receivable shall be deemed to be materially and adversely affected by such breach).   In addition, if the Servicer grants extensions with respect to any Receivables in excess of the Aggregate Extension Limitation, the Servicer will promptly purchase such Receivables from the Trust in accordance with the terms of Section 4.7 (and for purposes thereof, such Receivables shall be deemed to be materially and adversely affected by such breach).    The Servicer may in its discretion waive any late payment charge or any other fees that may be collected in the ordinary course of servicing a Receivable.  Notwithstanding anything to the contrary contained herein, the Servicer shall not agree to any alteration of the interest rate on any Receivable or of the amount of any Scheduled Receivable Payment on Receivables, other than to the extent that such alteration is required by applicable law or, with respect to Liquidated Receivables, if the Servicer reasonably and in good faith determines that a settlement of the outstanding Principal Balance can be expected to increase the total amount to be received by the Issuer with respect to such Receivable, then the Servicer may accept less than the full unpaid balance with respect to such Receivable.

 

(b) The Servicer shall establish the Lockbox Account in the name of the Trust for the benefit of the Trustee for the further benefit of the Securityholders.  Pursuant to the Lockbox Agreement, the Trustee has authorized the Servicer to direct dispositions of funds on deposit in the Lockbox Account to the Collection Account (but not to any other account), and no other Person, except the Lockbox Processor and the Trustee, has authority to direct the disposition of funds on deposit in the Lockbox Account.  The Lockbox Agreement shall provide that Lockbox Banks will comply with the instructions originated by the Trustee relating to the disposition of funds on deposit in the Lockbox Account.  The Trustee shall have no liability or responsibility with respect to the Lockbox Processor’s directions or activities as set forth in the preceding sentence.  The Lockbox Account shall be established pursuant to and maintained in accordance with the Lockbox Agreement and shall be a demand deposit account established and maintained with the Lockbox Bank; provided, however, that the Trustee shall give the Servicer prior written notice of any change made in the location of the Lockbox Account.  The Trustee shall establish and maintain the Post Office Box at a United States Post Office Branch in the name of the Trust for the benefit of the Securityholders.

 

(c) Notwithstanding any Lockbox Agreement, or any of the provisions of this Agreement relating to the Lockbox Agreement, the Servicer shall remain obligated and liable to the Trust, the Trustee and Securityholders for servicing and administering the Receivables and the Other Conveyed Property in accordance with the provisions of this Agreement without diminution of such obligation or liability by virtue thereof.

 

(d) In the event CPS shall for any reason no longer be acting as the Servicer hereunder, the Backup Servicer or a successor Servicer shall thereupon assume all of the rights and obligations of the outgoing Servicer under the Lockbox Agreement arising from and after such assumption.  In such event, the successor Servicer shall be deemed to have assumed all of the outgoing Servicer’s interest therein and to have replaced the outgoing Servicer as a party to the Lockbox Agreement to the same extent as if such Lockbox Agreement had been assigned to the successor Servicer, except that the outgoing Servicer shall not thereby be relieved of any liability or obligations on the part of the outgoing Servicer to the Lockbox Bank under such Lockbox Agreement.  The outgoing Servicer shall, upon request of the Trustee, but at the expense of the outgoing Servicer, deliver to the successor Servicer all documents and records relating to the Lockbox Agreement and an accounting of amounts collected and held by the Lockbox Bank and otherwise use its best efforts to effect the orderly and efficient termination of any Lockbox Agreement and transition of Obligor payments to the successor Servicer or to a lockbox established by the successor Servicer for the receipt of payments made in respect of the Receivables.  The outgoing Servicer, at its expense, shall cause the Lockbox Bank to deliver to the successor Servicer or a successor Lockbox Bank, all documents and records relating to the Receivables and all amounts held (or thereafter received) by the Lockbox Bank (together with an accounting of such amounts).  The outgoing Servicer shall deliver prompt written notice to the Rating Agency of any change or transfer of the Lockbox arrangements.

 

(e) On each Business Day, pursuant to the Lockbox Agreement, the Lockbox Processor will transfer any payments from Obligors received in the Post Office Box to the Lockbox Account.  Within two Business Days of receipt of funds into the Lockbox Account, the Servicer shall cause the Lockbox Bank to transfer funds from the Lockbox Account to the Collection Account.  In addition, the Servicer shall remit all payments by or on behalf of the Obligors received by the Servicer with respect to the Receivables (other than Purchased Receivables and Sold Receivables), and all Liquidation Proceeds no later than the Business Day following receipt directly (without deposit into any intervening account) into the Lockbox Account or the Collection Account.  The Servicer shall not commingle its assets and funds with those on deposit in the Lockbox Account.

 

SECTION 4.3 Realization Upon Receivables»

 

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(a) On behalf of the Trust and the Securityholders, the Servicer shall use its best efforts, consistent with the servicing procedures set forth herein, to repossess or otherwise convert the ownership of the Financed Vehicle securing any Receivable as to which the Servicer shall have determined eventual payment in full is unlikely.  The Servicer shall commence efforts to repossess or otherwise convert the ownership of a Financed Vehicle or sell the related Receivable to an unaffiliated third-party on or prior to the date that an Obligor has failed to make more than 90% of a Scheduled Receivable Payment thereon in excess of $10 for 120 days or more; provided, however, that the Servicer may elect not to commence such efforts within such time period if in its good faith judgment it determines either that it would be impracticable to do so or that the proceeds ultimately recoverable with respect to such Receivable would be increased by forbearance.  The Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of automotive receivables, consistent with the standards of care set forth in Section 4.2, which may include reasonable efforts to realize upon any recourse to Dealers or Consumer Lenders and selling the Financed Vehicle at public or private sale.  The foregoing shall be subject to the provision that, in any case in which the Financed Vehicle shall have suffered damage, the Servicer shall not expend funds in connection with the repair or the repossession of such Financed Vehicle unless it shall determine in its discretion that such repair and/or repossession will increase the proceeds ultimately recoverable with respect to such Receivable by an amount greater than the amount of such expenses.

 

(b) Consistent with the standards, policies and procedures required by this Agreement, the Servicer may use its best efforts to locate a third party purchaser that is not affiliated with the Servicer, the Seller or the Issuer to purchase from the Issuer any Receivable that has become more than 120 days delinquent, and shall have the right to direct the Issuer to sell any such Receivable to such third-party purchaser; provided, that no more than 20% of the number of Receivables in the pool as of the Cutoff Date may be sold by the Issuer pursuant to this Section 4.3(b) in the aggregate; provided further, that the Servicer may elect to not direct the Issuer to sell a Receivable that has become more than 120 days delinquent if in its good faith judgment the Servicer determines that the proceeds ultimately recoverable with respect to such Receivable would be increased by forbearance. In selecting Receivables to be sold to a third party purchaser pursuant to this Section 4.3(b), the Servicer shall use commercially reasonable efforts to locate purchasers for the most delinquent Receivables first.  In any event, the Servicer shall not use any procedure in selecting Receivables to be sold to third party purchasers that is materially adverse to the interest of the Securityholders. The Issuer shall sell each Sold Receivable for the greatest market price possible; provided, however, that aggregate Sale Amounts received by the Issuer for all Receivables sold to a single third-party purchaser on a single date must be at least equal to the sum of the Minimum Sale Prices for all such Receivables. The Servicer shall remit or cause the third-party purchaser to remit all sale proceeds from the sale of Receivables to the Collection Account without deposit into any intervening account as soon as practicable, but in no event later than the Business Day after receipt thereof.

 

SECTION 4.4 Insurance»

 

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(a) The Servicer, in accordance with the servicing procedures and standards set forth herein, shall require that (i) each Obligor shall have obtained insurance covering the Financed Vehicle, as of the date of the execution of the Receivable, insuring against loss and damage due to fire, theft, transportation, collision and other risks generally covered by comprehensive and collision coverage and each Receivable requires the Obligor to maintain such physical loss and damage insurance naming CPS and its successors and assigns as an additional insured, (ii) each Receivable that finances the cost of premiums for credit life and credit accident and health insurance is covered by an insurance policy or certificate naming CPS as policyholder (creditor) and (iii) as to each Receivable that finances the cost of an extended service contract, the respective Financed Vehicle which secures the Receivable is covered by an extended service contract.

 

(b)  To the extent applicable, the Servicer shall not take any action which would result in noncoverage under any of the insurance policies referred to in Section 4.4(a) which, but for the actions of the Servicer, would have been covered thereunder. The Servicer, on behalf of the Trust, shall take such reasonable action as shall be necessary to permit recovery under any of the foregoing insurance policies.  Any amounts collected by the Servicer under any of the foregoing insurance policies shall be deposited in the Collection Account.

 

SECTION 4.5 Maintenance of Security Interests in Vehicles»

 

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(a) Consistent with the policies and procedures required by this Agreement, the Servicer shall take such steps on behalf of the Trust as are necessary to maintain perfection of the security interest created by each Receivable in the related Financed Vehicle, including but not limited to obtaining the authorization of the Obligors and the recording, registering, filing, re-recording, re-registering and refiling of all security agreements, financing statements and continuation statements or instruments as are necessary to maintain the security interest granted by the Obligors under the respective Receivables.  The Trustee hereby authorizes the Servicer, and the Servicer agrees, to take any and all steps necessary to re-perfect or continue the perfection of such security interest on behalf of the Trust as necessary because of the relocation of a Financed Vehicle or for any other reason. In the event that the assignment of a Receivable to the Trust is insufficient, without a notation on the related Financed Vehicle’s certificate of title, or without fulfilling any additional administrative requirements under the laws of the State in which the Financed Vehicle is located, to perfect a security interest in the related Financed Vehicle in favor of the Trust, the Servicer hereby agrees that CPS’s designation as the secured party on the certificate of title is in its capacity as Servicer as agent of the Trust.

 

(b) Upon the occurrence of a Servicer Termination Event, the Trustee and the Servicer shall take or cause to be taken, such action as may, in the opinion of counsel to the Trustee, which opinion shall not be an expense of the Trustee, be necessary to perfect or re-perfect the security interests in the Financed Vehicles securing the Receivables in the name of the Trust by amending the title documents of such Financed Vehicles or by such other reasonable means as may, in the opinion of counsel to the Trustee, which opinion shall not be an expense of the Trustee, be necessary or prudent.  The Servicer hereby agrees to pay all expenses related to such perfection or re-perfection and to take all action necessary therefor.

 

SECTION 4.6 Additional Covenants of Servicer»

 

.  The Servicer shall not release the Financed Vehicle securing each Receivable from the security interest granted by such Receivable in whole or in part except in the event of payment in full by the Obligor thereunder upon a sale of Sold Receivables or repossession, nor shall the Servicer impair the rights of the Securityholders in such Receivables, nor shall the Servicer amend a Receivable, except that extensions and waivers may be granted in accordance with Section 4.2.  The Servicer shall not create, incur or suffer to exist any Lien or restriction on transferability of the Receivables nor, except as contemplated by the Basic Documents, sign or file under the UCC of any jurisdiction any financing statement that names CPS or the Servicer as debtor, nor sign any security agreement authorizing any secured party thereunder to file such financing statement, with respect to the Receivables.  The Servicer shall take such actions as are necessary from time to time in order to maintain the perfection and priority of the Issuer’s security interest in the Trust Property.

 

SECTION 4.7 Purchase of Receivables Upon Breach of Covenant»

 

(a) .  Upon discovery by any of the Servicer, the Owner Trustee or the Trustee of a breach of any of the covenants set forth in Section 4.2(a), 4.4, 4.5 or 4.6, the party discovering such breach shall give prompt written notice to the others; provided, however, that the failure to give any such notice shall not affect any obligation of the Servicer under this Section 4.7.  Unless the breach shall have been cured by the last day of the second Collection Period following such discovery (or, at the Servicer’s election, the last day of the first following Collection Period), the Servicer shall purchase any Receivable with respect to which the Securityholders’ interest therein or in the related Financed Vehicle is materially and adversely affected by such breach.  In consideration of the purchase of such Receivable, the Servicer shall remit the Purchase Amount in the manner specified in Section 5.6.  The sole remedy of the Trustee, the Trust, the Owner Trustee and the Securityholders with respect to a breach of Section 4.2(a), 4.4, 4.5 or 4.6 shall be to require the Servicer to repurchase Receivables pursuant to this Section 4.7; provided, however, that the Servicer shall indemnify the Trustee, the Backup Servicer, the Owner Trustee, the Trust and the Securityholders against all costs, expenses, losses, damages, claims and liabilities, including reasonable fees and expenses of counsel, which may be asserted against or incurred by any of them as a result of third party claims arising out of the events or facts giving rise to such breach.  If it is determined that the management, administration and servicing of the Receivables and operation of the Trust pursuant to this Agreement constitutes a violation of the prohibited transaction rules of ERISA or the Code to which no statutory exception or administrative exemption applies, such violation shall not be treated as a breach of Section 4.2(a), 4.4, 4.5 or 4.6 if not otherwise such a breach.  Upon receipt of the Purchase Amount and written instructions from the Servicer, the Trustee shall release to CPS or its designee the related Receivables File and shall execute and deliver all reasonable instruments of transfer or assignment, without recourse, as are prepared by the Seller and delivered to the Trustee and necessary to vest in CPS or such designee title to the Receivable including a Trustee’s Certificate in the form of Exhibit F-2.

 

SECTION 4.8 Servicing Fee 

 

.  The Servicer shall be entitled to the “Servicing Fee” for each Payment Date, which shall be equal to the greater of (i) the result of one twelfth times 2.50% of the Pool Balance as of the first day of the related Collection Period and (ii) the product of the number of Receivables serviced by the successor Servicer during the related Collection Period and $15; provided, however, that with respect to the first Payment Date the Servicing Fee will be equal to the product of one-twelfth and 2.50% of the Original Pool Balance. In addition the Servicing Fee shall also include the Additional Servicing Compensation.

 

SECTION 4.9 Servicer’s Certificate.

 

.  By 9:00 a.m., Minneapolis time, on each Determination Date, the Servicer shall deliver to the Trustee, the Owner Trustee, the Rating Agency and the Seller a Servicer’s Certificate containing all information necessary to make the distributions pursuant to Sections 5.7 and 5.8 (including, if required, withdrawals from the Series 2011-A Spread Account) for the Collection Period preceding the date of such Servicer’s Certificate and all information necessary for the Trustee to send statements to the Securityholders pursuant to Section 5.8(b) and all information necessary to enable the Backup Servicer to verify the information specified in Section 4.13(b).  Receivables to be purchased by the Servicer or to be purchased by CPS shall be identified by the Servicer by account number with respect to such Receivable (as specified in Schedule A).

 

SECTION 4.10 Annual Statement as to Compliance, Notice of Servicer Termination Event.

 

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(a) The Servicer shall deliver to the Owner Trustee, the Trustee, the Backup Servicer and the Rating Agency, on or before March 31 of each year beginning March 31, 2012, an Officer’s Certificate, dated as of December 31 of the preceding year, stating that (i) a review of the activities of the Servicer during the preceding 12-month period (or, in the case of the first such Officer’s Certificate, from the Closing Date to December 31, 2011) and of its performance under this Agreement has been made under such officer’s supervision and (ii) to the best of such officer’s knowledge, based on such review, the Servicer has fulfilled all its obligations under this Agreement throughout such year (or, in the case of the first such Officer’s Certificate, from the Closing Date to December 31, 2011), or, if there has been a default in the fulfillment of any such obligation, specifying each such default known to such officer and the nature and status thereof.  The Trustee shall forward a copy of such certificate as well as the report referred to in Section 4.11 to each Noteholder and the Owner Trustee shall forward a copy to each Residual Certificateholder.

 

(b) The Servicer shall deliver to the Owner Trustee, the Trustee, the Backup Servicer and the Rating Agency, promptly after having obtained knowledge thereof, but in no event later than two (2) Business Days thereafter, written notice in an Officer’s Certificate of any event which with the giving of notice or lapse of time, or both, would become a Servicer Termination Event under Section 10.1.

 

SECTION 4.11 Annual Independent Accountants’ Report.

 

.  The Servicer shall cause a firm of nationally recognized independent certified public accountants (the “Independent Accountants”), who may also render other services to the Servicer or to the Seller, to deliver to the Trustee, the Owner Trustee, the Backup Servicer and the Rating Agency, on or before March 31 of each year beginning March 31, 2012, a report dated as of December 31 of the previous year (the “Accountants’ Report”) and reviewing the Servicer’s activities during the preceding 12-month period, addressed to the Board of Directors of the Servicer, to the Owner Trustee, the Trustee and the Backup Servicer, to the effect that such firm has examined the financial statements of the Servicer and issued its report therefor and that such examination (1) was made in accordance with generally accepted auditing standards, and accordingly included such tests of the accounting records and such other auditing procedures as such firm considered necessary in the circumstances; (2) included tests relating to auto loans serviced for others in accordance with the requirements of the Uniform Single Attestation Program for Mortgage Bankers (the “Program”), to the extent the procedures in the Program are applicable to the servicing obligations set forth in this Agreement; (3) included an examination of the delinquency and loss statistics relating to the Servicer’s portfolio of automobile and light truck installment sales contracts; and (4) except as described in the report, disclosed no exceptions or errors in the records relating to automobile and light truck loans serviced for others that, in the firm’s opinion, paragraph four of the Program requires such firm to report.  The accountant’s report shall further state that (A) a review in accordance with agreed upon procedures was made of two randomly selected Servicer Certificates; (B) except as disclosed in the report, no exceptions or errors in the Servicer Certificates were found; and (C) the delinquency and loss information relating to the Receivables and the stated amount of Liquidated Receivables, if any, contained in the Servicer Certificates were found to be accurate.  In the event such firm requires the Trustee, the Owner Trustee and/or the Backup Servicer to agree to the procedures performed by such firm, the Servicer shall direct the Trustee, the Owner Trustee and/or the Backup Servicer, as applicable, in writing to so agree; it being understood and agreed that the Trustee, the Owner Trustee and/or the Backup Servicer will deliver such letter of agreement in conclusive reliance upon the direction of the Servicer, and neither the Trustee, the Owner Trustee nor the Backup Servicer makes any independent inquiry or investigation as to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures.

 

The Report will also indicate that the firm is independent of the Servicer within the meaning of the Code of Professional Ethics of the American Institute of Certified Public Accountants.

 

SECTION 4.12 Access to Certain Documentation and Information Regarding Receivables.

 

.  The Servicer shall provide to representatives of the Trustee, the Owner Trustee, the Backup Servicer and the Rating Agency reasonable access to the documentation regarding the Receivables.  In each case, such access shall be afforded without charge but only upon reasonable request and during normal business hours.  Nothing in this Section shall derogate from the obligation of the Servicer to observe any applicable law prohibiting disclosure of information regarding the Obligors, and the failure of the Servicer to provide access as provided in this Section as a result of such obligation shall not constitute a breach of this Section.

 

SECTION 4.13 Verification of Servicer’s Certificate.

 

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(a) On or before the fifth calendar day of each month, the Servicer will deliver to the Trustee and the Backup Servicer a computer diskette (or other electronic transmission) in a format acceptable to the Trustee and the Backup Servicer containing information with respect to the Receivables as of the close of business on the last day of the related Collection Period which information is necessary for preparation of the Servicer’s Certificate.  The Backup Servicer shall use such computer diskette (or other electronic transmission) to verify certain information specified in Section 4.13(b) contained in the Servicer’s Certificate delivered by the Servicer, and the Backup Servicer shall notify the Servicer of any discrepancies on or before the second Business Day following the Determination Date.  In the event that the Backup Servicer reports any discrepancies, the Servicer and the Backup Servicer shall attempt to reconcile such discrepancies prior to the second Business Day prior to the related Payment Date, but in the absence of a reconciliation, the Servicer’s Certificate shall control for the purpose of calculations and distributions with respect to the related Payment Date.  In the event that the Backup Servicer and the Servicer are unable to reconcile discrepancies with respect to a Servicer’s Certificate by the related Payment Date, the Servicer shall cause a firm of independent certified public accountants, at the Servicer’s expense, to audit the Servicer’s Certificate and, prior to the fifth calendar day of the following month, reconcile the discrepancies.  The effect, if any, of such reconciliation shall be reflected in the Servicer’s Certificate for such next succeeding Determination Date.  Other than the duties specifically set forth in this Agreement, the Backup Servicer shall have no obligations hereunder, including, without limitation, to supervise, verify, monitor or administer the performance of the Servicer.  The Backup Servicer shall have no liability for any actions taken or omitted by the Servicer.  The duties and obligations of the Backup Servicer shall be determined solely by the express provisions of this Agreement and no implied covenants or obligations shall be read into this Agreement against the Backup Servicer.

 

(b) The Backup Servicer shall review each Servicer’s Certificate delivered pursuant to Section 4.13(a) and shall:

 

(i) confirm that such Servicer’s Certificate is complete on its face;

 

(ii) load the computer diskette (which shall be in a format acceptable to the Backup Servicer) received from the Servicer pursuant to Section 4.13(a) hereof, confirm that such computer diskette is in a readable form and calculate and confirm the Pool Balance for the most recent Payment Date;

 

(iii) confirm, based solely on the information shown on the Servicer’s Certificate, that the Total Distribution Amount, the Class A Noteholders’ Principal Distributable Amount, the Class B Noteholders’ Principal Distributable Amount, the Class C Noteholders’ Principal Distributable Amount, the Class D Noteholders’ Principal Distributable Amount, the Aggregate Noteholders’ Principal Distributable Amount, the Class A Parity Deficit Amount, the Class B Parity Deficit Amount, the Class C Parity Deficit Amount, the Class D Parity Deficit Amount, the Noteholders’ Interest Distributable Amount for each Class of Notes, the amount, if any, to be distributed to the Residual Certificateholders on such Payment Date, the Backup Servicing Fee, the Servicing Fee, the Trustee Fees, the amount on deposit in the Series 2011-A Spread Account, the Cumulative Net Loss Rate in the Servicer’s Certificate are accurate based solely on the recalculation of the Servicer’s Certificate and without further investigation;

 

(iv) confirm the calculation of the Trigger Events based solely upon the information contained on the applicable computer diskette;  and

 

(v) by the third Business Day following the Backup Servicer’s receipt of the Servicer’s Certificate and following the Backup Servicer’s review of such Servicer’s Certificate and the related monthly tape, the Backup Servicer shall provide the Trustee with a certificate (i) describing those activities it performed in its review of the monthly tape and the Servicer’s Certificate, (ii) listing those parts of the Servicer’s Certificate that it confirmed were correct, (iii) listing those parts of the Servicer’s Certificate that it found to be incorrect, and (iv) describing any discrepancies, inconsistencies, incorrect information or incorrect calculations that were revealed by its review of the Servicer’s Certificate and the related monthly tape.

 

(c) On or prior to the Closing Date, the Backup Servicer will cause an affiliate of the Back-up Servicer to data map to their servicing system all servicing/loan file information, including all relevant borrower contact information such as address and phone numbers as well as loan balance and payment information, including comment histories and collection notes. On or before the fifth calendar day of each month, the Servicer will provide to an affiliate of the Backup Servicer an electronic transmission of all servicing/loan information,  including all relevant borrower contact information such as address and phone numbers as well as loan balance and payment information, including comment histories and collection notes, and the Backup Servicer will cause such affiliate to review each file to ensure that it is in readable form and verify that the data balances conform to the trial balance reports received from the Servicer.  Additionally, the Backup Servicer shall cause such affiliate to store each such file.

 

SECTION 4.14 [Reserved].

 

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SECTION 4.15 Fidelity Bond.

 

.  The Servicer shall maintain a fidelity bond in such form and amount as is customary for entities acting as custodian of funds and documents in respect of consumer contracts on behalf of institutional investors.

 

SECTION 4.16 Optional Purchase of Certain Receivables.

 

.  CPS shall have the right, which right may be assigned by CPS to an Affiliate, but not the obligation, to repurchase on the last day of any Collection Period any Defaulted Texas Receivables at a price equal to at least the fair market value of such Defaulted Texas Receivables, so long as the fair market value is not less than the related aggregate Purchase Amount, plus the costs and expenses of the Servicer and the Trust (including any outstanding reimbursements) in connection with such optional purchase.  To exercise such option, CPS shall (subject to the proviso below) deposit in the Collection Account pursuant to Section 5.6 (or remit to the Servicer, if CPS is not then Servicer) an amount equal to the related aggregate Purchase Amount for such Defaulted Texas Receivables and thereafter shall succeed to all interests of the Trust in and to such Defaulted Texas Receivables.  Upon notice of receipt of the related aggregate Purchase Amount for such Defaulted Texas Receivables and written instructions from the Servicer, the Trustee shall release to CPS or its designee the related Receivables Files and shall execute and deliver all reasonable instruments of transfer or assignment, without recourse, as are prepared by CPS and delivered to the Trustee and necessary to vest in CPS or such designee title to such Defaulted Texas Receivables including a Trustee’s Certificate in the form of Exhibit F-2.

 

ARTICLE V                      

TRUST ACCOUNTS; DISTRIBUTIONS; STATEMENTS TO SECURITYHOLDERS

SECTION 5.1 Establishment of Trust Accounts.

 

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(a) The Trustee, on behalf of the Securityholders, shall establish and maintain in its own name an Eligible Account (the “Collection Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Trustee on behalf of the Securityholders. On the Closing Date, the Servicer will deposit, on behalf of the Seller, in the Collection Account, an amount equal to $[_________], such amount representing collections on the Receivables received from and including the day after the Cutoff Date through the Business Day immediately preceding the Closing Date, but not previously deposited into the Collection Account.

 

(b) The Trustee, on behalf of the Noteholders, shall establish and maintain in its own name an Eligible Account (the “Principal Distribution Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Trustee on behalf of the Noteholders.  The Principal Distribution Account shall initially be established with the Trustee.

 

(c) The Trustee, on behalf of the Noteholders, shall establish and maintain in its own name an Eligible Account (the “Series 2011-A Spread Account”), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Trustee on behalf of the Noteholders.  The Series 2011-A Spread Account shall initially be established with the Trustee.  On the Closing Date, the Seller shall deposit the Initial Spread Account Deposit in the Series 2011-A Spread Account from the proceeds of the sale of the Notes.

 

(d) Funds on deposit in the Collection Account and the Series 2011-A Spread Account shall be invested by the Trustee (or any custodian with respect to funds on deposit in any such account) in Eligible Investments selected in writing by the Servicer (pursuant to standing instructions or otherwise).  Funds on deposit in the Principal Distribution Account shall not be invested. All such Eligible Investments shall be held by or on behalf of the Trustee for the benefit of the Securityholders.  Other than as permitted by the Rating Agency, funds on deposit in any Trust Account shall be invested in Eligible Investments that will mature so that such funds will be available at the close of business on the Business Day immediately preceding the following Payment Date.  Funds deposited in a Trust Account on the day immediately preceding a Payment Date upon the maturity of any Eligible Investments are not required to be invested overnight.  All Eligible Investments will be held to maturity.

 

(e) All investment earnings of moneys deposited in the Trust Accounts shall be deposited (or caused to be deposited) by the Trustee in the Collection Account for distribution pursuant to Section 5.7(a) and any loss resulting from such investments shall be charged to such account.  The Servicer will not direct the Trustee to make any investment of any funds held in any of the Trust Accounts unless the security interest granted and perfected in such account will continue to be perfected in such investment, in either case without any further action by any Person, and, in connection with any direction to the Trustee to make any such investment, if requested by the Trustee, the Servicer shall deliver to the Trustee an Opinion of Counsel, acceptable to the Trustee, to such effect.

 

(f) The Trustee shall not in any way be held liable by reason of any insufficiency in any of the Trust Accounts resulting from any loss on any Eligible Investment included therein except for losses attributable to the Trustee’s negligence or bad faith or its failure to make payments on such Eligible Investments issued by the Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms.

 

(g) If (i) the Servicer shall have failed to give investment directions for any funds on deposit in the Trust Accounts to the Trustee by 1:00 p.m. Eastern Time (or such other time as may be agreed by the Issuer and Trustee) on any Business Day; or (ii) an Event of Default shall have occurred and be continuing but the Notes shall not have been declared due and payable, or, if such Notes shall have been declared due and payable following an Event of Default, amounts collected or receivable from the Trust Property are being applied as if there had not been such a declaration; then the Trustee shall, to the fullest extent practicable, invest and reinvest funds in the Trust Accounts in one or more Eligible Investments described in clause (ii) of the definition thereof.

 

(h) The Trustee shall possess all right, title and interest in all funds on deposit from time to time in the Trust Accounts and in all proceeds thereof (including all Investment Earnings on the Trust Accounts) and all such funds, investments, proceeds and income shall be part of the Trust Property.  Except as otherwise provided herein, the Trust Accounts shall be under the sole dominion and control of the Trustee.  If at any time any of the Trust Accounts ceases to be an Eligible Account, the Servicer shall within five Business Days establish a new Trust Account as an Eligible Account and shall transfer any cash and/or any investments to such new Trust Account.  The Servicer shall promptly notify the Rating Agency and the Owner Trustee of any change in the location of any of the aforementioned accounts.  In connection with the foregoing, the Servicer agrees that, in the event that any of the Trust Accounts are not accounts with the Trustee, the Servicer shall notify the Trustee in writing promptly upon any of such Trust Accounts ceasing to be an Eligible Account.

 

(i) Notwithstanding anything to the contrary herein or in any other document relating to a Trust Account, the “securities intermediary’s jurisdiction” (within  the meaning of Section 8-110 of the UCC) or the “bank’s jurisdiction” (with the meaning of 9-304 of the UCC), as applicable, with respect to each Trust Account shall be the State of New York.

 

(j) With respect to the Trust Account Property, the Trustee agrees that:

 

	
  

	
(A)  any Trust Account Property that is held in deposit accounts shall be held solely in an Eligible Account; and, each such Eligible Account shall be subject to the exclusive custody and control of the Trustee and the Trustee shall have sole signature authority with respect thereto; and

 

	
  

	
(B)  any other Trust Account Property shall be delivered to the Trustee in accordance with the definition of “Delivery”.

 

SECTION 5.2 [Reserved].

 

.

 

SECTION 5.3 Certain Reimbursements to the Servicer.

 

.  The Servicer will be entitled to be reimbursed from amounts on deposit in the Collection Account with respect to a Collection Period for amounts previously deposited in the Collection Account but later determined by the Servicer to have resulted from mistaken deposits or postings or checks returned for insufficient funds.  The amount to be reimbursed hereunder shall be paid to the Servicer on the related Payment Date pursuant to Section 5.7(a)(ii) upon certification by the Servicer of such amounts and the provision of such information to the Trustee; provided, however, that the Servicer must provide such certification within three months of its becoming aware of such mistaken deposit, posting or returned check.

 

SECTION 5.4 Application of Collections.

 

.  All collections for each Collection Period shall be applied by the Servicer as follows:

 

With respect to each Receivable (other than a Purchased Receivable or a Sold Receivable), payments by or on behalf of the Obligor shall be applied to interest and principal in accordance with the Simple Interest Method.

 

SECTION 5.5 Withdrawals from Series 2011-A Spread Account.

 

.

 

(a) In the event that the Servicer’s Certificate with respect to any Determination Date shall state that the Total Distribution Amount with respect to such Determination Date is insufficient to make the payments required to be made on the related Payment Date pursuant to Sections 5.7(a)(i) through (xvi) (such deficiency being a “Deficiency Claim Amount”), then on or prior to the Business Day immediately preceding the related Payment Date, the Trustee shall deliver to the Owner Trustee and the Servicer, by hand delivery, telex or facsimile transmission, a written notice (a “Deficiency Notice”) specifying the Deficiency Claim Amount for such Payment Date.  On the related Payment Date, the Trustee shall transfer an amount equal to such Deficiency Claim Amount from the Series 2011-A Spread Account (to the extent of funds on deposit therein) to the Collection Account for distribution pursuant to Sections 5.7(a)(i) through (xvi).

 

(b) On each Payment Date, to the extent that there are amounts on deposit in the Series 2011-A Spread Account (after the distribution of amounts from the Collection Account in accordance with Sections 5.7(a)(i) through (xvi) on such Payment Date) in excess of the Specified Spread Account Requisite Amount, the Trustee shall transfer such amounts to the Collection Account for distribution on such Payment Date pursuant to Sections 5.7(xviii) through (xxi).

 

SECTION 5.6 Additional Deposits.

 

.  The Servicer or CPS, as the case may be, shall deposit or cause to be deposited in the Collection Account the aggregate Purchase Amount with respect to Purchased Receivables, the aggregate Sale Amount with respect to Sold Receivables and all amounts to be paid by CPS pursuant to its indemnification obligations under the Basic Documents and the Servicer shall deposit or cause to be deposited therein all amounts to be paid under Sections 4.16 and 11.1.  All such deposits made pursuant to Section 4.16 shall be made, in immediately available funds, on the Business Day preceding the related Determination Date.  All such deposits made pursuant to Section 11.1 shall be made, in immediately available funds, on the Business Day preceding the related Payment Date.  On each Payment Date, the Trustee shall remit to the Collection Account any amounts withdrawn from the Series 2011-A Spread Account pursuant to Section 5.5.

 

SECTION 5.7 Distributions.

 

.

 

(a) On each Payment Date, the Trustee (based on the information contained in the Servicer’s Certificate delivered on the related Determination Date) shall make the following distributions in the following order of priority:

 

(i) to the Backup Servicer so long as the Backup Servicer is not acting as the successor Servicer, from the Total Distribution Amount and any amount deposited in the Collection Account pursuant to Section 5.5(a), the Backup Servicing Fee and all unpaid Backup Servicing Fees from prior Collection Periods;

 

(ii) to the Servicer, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clause (i) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), the Servicing Fee and all unpaid Servicing Fees from prior Collection Periods and all reimbursements to which the Servicer is entitled pursuant to Section 5.3;

 

(iii) to the Backup Servicer or such other Person appointed successor Servicer pursuant to Section 10.3(b), from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) and (ii) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), to the extent not previously paid by the predecessor Servicer pursuant to this Agreement, reasonable transition expenses (up to a maximum of $150,000 for all such expenses incurred over the term of this Agreement) incurred by such Person in becoming the successor Servicer;

 

(iv) concurrently, to the Trustee and the Owner Trustee, pro rata, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (iii) above) and any amount deposited in the Collection Account pursuant to Section 5.5(a), the Trustee Fees and reasonable out-of-pocket expenses thereof (including reasonable counsel fees and expenses), and all unpaid Trustee Fees and unpaid reasonable out-of-pocket expenses (including reasonable counsel fees and expenses) from prior Collection Periods; provided, however, that expenses and other amounts payable to the Trustee and the Owner Trustee pursuant to this clause (iv) shall be limited to a total of $50,000 per annum; provided further, however, that if an Event of Default specified under Section 5.1(a)(i) or (ii) of the Indenture has occurred and is continuing then such expenses payable pursuant to this priority (iv) shall not be so limited;

 

(v) to the holders of the Class A Notes, pro rata, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (iv) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), the Noteholders’ Interest Distributable Amount for the Class A Notes for such Payment Date;

 

(vi) to the Principal Distribution Account, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (v) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Class A Parity Deficit Amount;

 

(vii) if such Payment Date is the Final Scheduled Payment Date, to the Principal Distribution Account, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (vi) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Class A Note Balance;

 

(viii) to the Holders of the Class B Notes, pro rata, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (vii) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Noteholders’ Interest Distributable Amount for the Class B Notes for such Payment Date;

 

(ix) to the Principal Distribution Account, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (viii) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Class B Parity Deficit Amount;

 

(x) if such Payment Date is the Final Scheduled Payment Date, to the Principal Distribution Account, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (ix) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Class B Note Balance;

 

(xi) to the Holders of the Class C Notes, pro rata, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (x) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Noteholders’ Interest Distributable Amount for the Class C Notes for such Payment Date;

 

(xii) to the Principal Distribution Account, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (xi) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Class C Parity Deficit Amount;

 

(xiii) if such Payment Date is the Final Scheduled Payment Date, to the Principal Distribution Account, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (xii) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Class C Note Balance;

 

(xiv) to the Holders of the Class D Notes, pro rata, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (xiii) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Noteholders’ Interest Distributable Amount for the Class D Notes for such Payment Date;

 

(xv) to the Principal Distribution Account, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (xiv) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Class D Parity Deficit Amount;

 

(xvi) if such Payment Date is the Final Scheduled Payment Date, to the Principal Distribution Account, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments pursuant to clauses (i) through (xv) above), and any amount deposited in the Collection Account pursuant to Section 5.5(a), an amount equal to the Class D Note Balance;

 

(xvii) to the Trustee, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments made pursuant to clauses (i) through (xvi) above) for deposit into the Series 2011-A Spread Account, the remaining Total Distribution Amount until the amount in the Series 2011-A Spread Account equals the Specified Spread Account Requisite Amount;

 

(xviii) to the Servicer, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments made pursuant to clauses (i) through (xvii) above), an amount equal to the Additional Servicing Compensation due for the related Payment Date, together with any past due amounts for any prior Payment Date, will be paid to the Servicer;

 

(xix) to the extent not previously paid, to the Principal Distribution Account, from the Total Distribution Amount (as such Total Distribution Amount has been reduced by payments made pursuant to clauses (i) through (xviii) above), the Aggregate  Noteholders’ Principal Distributable Amount, if any, for such Payment Date;

 

(xx) to the Backup Servicer, the Trustee and the Owner Trustee, as applicable, from the Total Distribution Amount (as such Total Distribution has been reduced by payments made pursuant to clauses (i) through (xix) above), any amounts owing to the Backup Servicer, the Trustee and Owner Trustee under the Basic Documents, to the extent not previously paid, and

 

(xxi) to the Certificate Distribution Account, for distribution by the Trust Paying Agent in accordance with the provisions of the Trust Agreement, any remaining Total Distribution Amount;

 

provided, however, that, following an acceleration of the Notes pursuant to Section 5.2(a) of the Indenture, the Total Distribution Amount shall be paid pursuant to Section 5.6(a) of the Indenture.

 

(b) In the event that the Collection Account is maintained with an institution other than the Trustee, the Servicer shall instruct and cause such institution to make all deposits and distributions pursuant to Section 5.7(a) on the related Payment Date.

 

SECTION 5.8 Principal Distribution Account.

 

.

 

(a) On each Payment Date, the Trustee shall distribute all amounts on deposit in the Principal Distribution Account to the Noteholders in respect of the Notes to the extent of amounts due and unpaid on the Notes for principal in the following amounts and in the following order of priority:

 

(i)  to the Holders of the Class A Notes in reduction of the Class A Note Balance, the Class A Noteholders’ Principal Distributable Amount, if any, for such Payment Date;

 

(ii) to the Holders of the Class B Notes, in reduction of the Class B Note Balance, the Class B Noteholders’ Principal Distributable Amount, if any, for such Payment Date;

 

(iii) to the Holders of the Class C Notes, in reduction of the Class C Note Balance, the Class C Noteholders’ Principal Distributable Amount, if any, for such Payment Date; and

 

(iv) to the Holders of the Class D Notes, in reduction of the Class D Note Balance, the Class D Noteholders’ Principal Distributable Amount, if any, for such Payment Date.

 

(b) On each Payment Date, the Trustee shall provide or make available electronically (or, upon written request, by first class mail or facsimile) to each Noteholder the statement or statements provided to the Trustee by the Servicer pursuant to Section 5.11 hereof on such Payment Date; provided, however, the Trustee shall have no obligation to provide such information described in this Section 5.8(b) until it has received the requisite information from the Servicer.

 

(c) In the event that any withholding tax is imposed on the Trust’s payment (or allocations of income) to a Noteholder, such tax shall reduce the amount otherwise distributable to the Noteholder in accordance with this Section 5.8.  The Trustee is hereby authorized and directed to retain from amounts otherwise distributable to the Noteholders sufficient funds for the payment of any tax that is legally owed by the Trust (but such authorization shall not prevent the Trustee from contesting any such tax in appropriate proceedings, and withholding payment of such tax, if permitted by law, pending the outcome of such proceedings).  The amount of any withholding tax imposed with respect to a Noteholder shall be treated as cash distributed to such Noteholder at the time it is withheld by the Trust and remitted to the appropriate taxing authority.  If, after consultations with experienced counsel, the Trustee determines that there is a reasonable likelihood that withholding tax is payable with respect to a distribution (such as a distribution to a Non-United States Investor), the Trustee may in its sole discretion withhold such amounts in accordance with this clause (c).  In the event that a Noteholder wishes to apply for a refund of any such withholding tax, the Trustee shall reasonably cooperate with such Noteholder in making such claim so long as such Noteholder agrees to reimburse the Trustee for any out-of-pocket expenses incurred.

 

(d) Distributions required to be made to Noteholders on any Payment Date shall be made to each Noteholder of record on the preceding Record Date either by wire transfer, in immediately available funds, to the account of such Noteholder at a bank or other entity having appropriate facilities therefor, if (i) such Holder shall have provided to the Note Registrar appropriate written instructions at least five Business Days prior to such Payment Date and such Holder’s Notes in the aggregate evidence a denomination of not less than $1,000,000 or (ii) such Noteholder is the Seller, or an Affiliate thereof, or, if not, by check mailed to such Noteholder at the address of such holder appearing in the Note Register; provided, however, that, unless Definitive Notes have been issued pursuant to Section 2.12 of the Indenture, with respect to Notes registered on the Record Date in the name of the nominee of the Clearing Agency (initially, such nominee to be Cede & Co.), distributions will be made by wire transfer in immediately available funds to the account designated by such nominee.  Notwithstanding the foregoing, the final distribution in respect of any Note (whether on the Final Scheduled Payment Date or otherwise) will be payable only upon presentation and surrender of such Note at the office or agency maintained for that purpose by the Note Registrar pursuant to Section 2.4 of the Indenture.

 

Each Noteholder, by its acceptance of its Note, will be deemed to have consented to the provisions of Sections 5.7 and 5.8 relating to the priority of payments, and will be further deemed to have acknowledged that no property rights in any amount or the proceeds of any such amount shall vest in such Noteholder until such amounts have been distributed to such Noteholder pursuant to such provisions; provided, that the foregoing shall not restrict the right of any Noteholder, upon compliance with the provisions hereof from seeking to compel the performance of the provisions hereof by the parties hereto.

 

SECTION 5.9 [Reserved]

 

..

 

.

 

SECTION 5.10 [Reserved].

 

SECTION 5.11 Statements to Securityholders.

 

.

 

(a) On or prior to each Payment Date, the Servicer shall provide to the Trustee and the Owner Trustee (with a copy to the Rating Agency) for the Trustee and the Owner Trustee to forward to each Securityholder of record (in the case of the Trustee, pursuant to Section 5.8(b)) the statement or statements provided by the Servicer in substantially the form attached hereto as Exhibit E setting forth at least the following information:

 

(i) the amount of any distributions allocable to principal of each Class of Notes;

 

(ii) the amount of such distribution allocable to interest on or with respect to each Class of Notes;

 

(iii) the Pool Balance as of the close of business on the last day of the related Collection Period;

 

(iv) the Note Balance for each Class of Notes after giving effect to payments allocated to principal reported under clause (i) above;

 

(v) the amount of the Servicing Fee paid to the Servicer with respect to the related Collection Period, and the amount of any unpaid Servicing Fees and the change in such amount from the prior Payment Date;

 

(vi) the amount of the Backup Servicing Fee and the Trustee Fees paid to the Backup Servicer, the Trustee and the Owner Trustee, as applicable, with respect to the related Collection Period, and the amount of any unpaid Backup Servicing Fees and Trustee Fees and the change in all such amounts from the prior Payment Date;

 

(vii) the Noteholders’ Interest Carryover Shortfall for each Class of Notes for such Payment Date;

 

(viii) the amount, if any, paid to the Noteholders from the Series 2011-A Spread Account for such Payment Date;

 

(ix) the aggregate amount in the Series 2011-A Spread Account and the change in such amount from the previous Payment Date and the Specified Spread Account Requisite Amount for such Payment Date;

 

(x) the number of Receivables and the aggregate net balance thereon for which the related Obligors are delinquent in making Scheduled Receivable Payments for (a) 31 to 60 days, (b) 61 to 90 days, and (c) 91 days or more;

 

(xi) the number and the aggregate Purchase Amounts for Receivables purchased by CPS or purchased by the Servicer during the related Collection Period and summary information as to losses and delinquencies with respect to such Receivables;

 

(xii) the Principal Balance of all Receivables that have become Liquidated Receivables, net of Recoveries, during the related Collection Period;

 

(xiii) the cumulative Principal Balance of all Receivables that have become Liquidated Receivables, net of Recoveries, during the period from the Cutoff Date to the last day of the related Collection Period;

 

(xiv) the amount of any Texas Franchise Tax due and owing by CPS under the Receivables Purchase Agreement to the taxing authority of the State of Texas on or prior to the related Payment Date or paid by CPS since the prior Payment Date;

 

(xv) the Three-Month Rolling Average Extension Ratio, the Cumulative Net Loss Rate, the Delinquency Ratio and the Three-Month Rolling Average Delinquency Ratio; and

 

(xvi) the aggregate Sale Amount with respect to Sold Receivables, if any, during the related Collection Period.

 

(b) Within 60 days after the end of each calendar year, the Servicer shall deliver to the Trustee a statement setting forth the amounts paid during such preceding calendar year in respect of paragraphs (i), (ii), (v) and (vi) above.  The Trustee shall mail a copy of such statement to each person who at any time during such preceding calendar year shall have been a Securityholder of record and received any payment in respect of the Securities.

 

(c) The Trustee may make available to the Securityholders, via the Trustee’s Internet Website, all statements described herein and, with the consent or at the direction of the Seller, such other information regarding the Notes and/or the Receivables as the Trustee may have in its possession, but only with the use of a password provided by the Trustee.  The Trustee will make no representation or warranties as to the accuracy or completeness of such documents and will assume no responsibility therefor.

 

The Trustee’s Internet Website shall be initially located at “www.CTSLink.com” or at such other address as shall be specified by the Trustee from time to time in writing to the Securityholders.  In connection with providing access to the Trustee’s Internet Website, the Trustee may require registration and the acceptance of a disclaimer.  The Trustee shall not be liable for the dissemination of information in accordance with this Agreement.

 

(d) The Servicer will supply to the Trustee, at the time and in the manner required by applicable Treasury Regulations, for further distribution to such Persons, and to the extent, required by applicable Treasury Regulations information with respect to any “original issue discount” accruing on the Class C Notes and the Class D Notes.

 

ARTICLE VI                                

[RESERVED].

ARTICLE VII                                

[RESERVED]

ARTICLE VIII                                

THE SELLER

SECTION 8.1 Representations of the Seller.

 

.  The Seller makes the following representations for the benefit of the Securityholders and on which the Issuer is deemed to have relied in acquiring the Receivables and on which the Trustee is deemed to have relied in executing and performing pursuant to this Agreement, the Indenture and the other Basic Documents to which it is a party.  The representations speak as of the execution and delivery of this Agreement, as of the Closing Date and shall survive the sale of the Receivables to the Issuer and the pledge thereof to the Trustee pursuant to the Indenture and the issuance of the Notes and the Residual Pass-through Certificates.

 

(a) Organization and Good Standing.  The Seller has been duly formed and is validly existing as a limited liability company solely under the laws of the State of Delaware and is in good standing under the laws of the State of Delaware, with power and authority to own its properties and to conduct its business as such properties are currently owned and such business is currently conducted, and had at all relevant times, and now has, power, authority and legal right to acquire, own and sell the Receivables and the Other Conveyed Property transferred to the Trust.

 

(b) Due Qualification.  The Seller is duly qualified to do business as a foreign limited liability company in good standing, and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business or the consummation of the transactions contemplated by the Basic Documents shall require such qualifications.

 

(c) Power and Authority.  The Seller has the power and authority to execute and deliver this Agreement and the Basic Documents to which it is a party and to carry out its terms and their terms, respectively; the Seller has full power and authority to sell and assign the Receivables and the Other Conveyed Property to be sold and assigned to and deposited with the Trust by it and has duly authorized such sale and assignment to the Trust by all necessary corporate action; and the execution, delivery and performance of this Agreement and the Basic Documents to which the Seller is a party have been duly authorized by the Seller by all necessary corporate action.

 

(d) Valid Sale, Binding Obligations.  This Agreement effects a valid sale, transfer and assignment of the Receivables and the Other Conveyed Property, enforceable against the Seller and creditors of and purchasers from the Seller; and this Agreement and the Basic Documents to which the Seller is a party, when duly executed and delivered, shall constitute legal, valid and binding obligations of the Seller enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization or other similar laws affecting the enforcement of creditors’ rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law.

 

(e) No Violation.  The consummation of the transactions contemplated by this Agreement and the Basic Documents and the fulfillment of the terms of this Agreement and the Basic Documents shall not conflict with, result in any breach of any of the terms and provisions of or constitute (with or without notice, lapse of time or both) a default under the certificate of formation or the limited liability company agreement of the Seller, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Seller is a party or by which it is bound, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than the Basic Documents, or violate any law, order, rule or regulation applicable to the Seller of any court or of any Federal or State regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Seller or any of its properties.

 

(f) No Proceedings.  There are no proceedings or investigations pending or, to the Seller’s knowledge, threatened against the Seller, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Seller or its properties (A) asserting the invalidity of this Agreement, the Securities or any of the Basic Documents, (B) seeking to prevent the issuance of the Securities or the consummation of any of the transactions contemplated by this Agreement or any of the Basic Documents, (C) seeking any determination or ruling that might materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, this Agreement or any of the Basic Documents, or (D) relating to the Seller and which might adversely affect the Federal or State income, excise, franchise or similar tax attributes of the Securities.

 

(g) No Consents. No consent, approval, authorization or order of or declaration or filing with any governmental authority is required for the issuance or sale of the Securities or the consummation of the other transactions contemplated by this Agreement, except such as have been duly made or obtained.

 

(h) Financial Condition.  The Seller has a positive net worth and is able to and does pay its liabilities as they mature.  The Seller is not in default under any obligation to pay money to any Person except for matters being disputed in good faith which do not involve an obligation of the Seller on a promissory note.  The Seller will not use the proceeds from the transactions contemplated by the Basic Documents to give any preference to any creditor or class of creditors, and such transaction will not leave the Seller with remaining assets which are unreasonably small compared to its ongoing operations.

 

(i) Fraudulent Conveyance.  The Seller is not selling the Receivables to the Trust with any intent to hinder, delay or defraud any of its creditors; the Seller will not be rendered insolvent as a result of the sale of the Receivables to the Trust.

 

(j) Tax Returns.  The Seller has filed on a timely basis all tax returns which are required to be filed by it and paid all taxes, including any assessments received by it, to the extent that such taxes have become due (other than taxes, the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided by the books of the Seller).

 

(k) Certificates, Statements and Reports.  Neither this Agreement nor any officer’s certificates, statements, reports or other documents prepared by Seller and furnished by Seller to the Trustee pursuant to this Agreement or any other Basic Document to which it is a party, and in connection with the transactions contemplated hereby or thereby (including but not limited to information regarding loan loss, foreclosure and delinquency experience), when taken as a whole, do not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements contained herein or therein not misleading.

 

(l) Legal Counsel, etc.  Seller consulted with its own legal counsel and independent accountants to the extent it deems necessary regarding the tax, accounting and regulatory consequences of the transactions contemplated hereby, Seller is not participating in such transactions in reliance on any representations of any other party, their affiliates, or their counsel with respect to tax, accounting and regulatory matters.

 

(m) Chief Executive Office.  The chief executive office of the Seller is at  19500 Jamboree Road, Irvine, California 92612.

 

(n) Separateness Covenants.  The Seller is in compliance in all material respects with Section 9(b) of its limited liability company agreement relating to the separateness of the Seller from any other Person.

 

SECTION 8.2 Sale Treatment .

 

.  The Seller agrees to treat the conveyances hereunder as secured financings for tax and accounting purposes and as a sale for all other purposes (including without limitation legal and bankruptcy purposes), on all relevant books, records, tax returns, financial statements and other applicable documents.

 

SECTION 8.3 [Reserved].

 

.

 

SECTION 8.4 Liability of Seller; Indemnities.

 

.  The Seller shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Seller under this Agreement.

 

(a) The Seller shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Securityholders, the Backup Servicer and the Trustee from and against any taxes that may at any time be asserted against any such Person with respect to the transactions contemplated in this Agreement and any of the Basic Documents (except any income taxes arising out of fees paid to the Owner Trustee, the Trustee and the Backup Servicer and except any taxes to which the Owner Trustee, or the Trustee may otherwise be subject), including without limitation any sales, gross receipts, general corporation, tangible personal property, privilege or license taxes (but, in the case of the Issuer and the Securityholders, not including any taxes asserted with respect to federal or other income taxes arising out of distributions on the Notes and the Residual Pass-through Certificates) and costs and expenses in defending against the same.

 

(b) The Seller shall indemnify, defend and hold harmless the Issuer, the Owner Trustee, the Trustee and the Securityholders from and against any loss, liability or expense incurred by reason of (i) the Seller’s willful misfeasance, bad faith or negligence in the performance of its duties under this Agreement, or by reason of reckless disregard of its obligations and duties under this Agreement and (ii) the Seller’s or the Issuer’s violation of Federal or State securities laws in connection with the offering and sale of the Notes or the Residual Pass-through Certificates.

 

(c) The Seller shall indemnify, defend and hold harmless each of the Owner Trustee, the Trustee and the Backup Servicer and its respective officers, directors, employees and agents from and against any and all costs, expenses, losses, claims, damages and liabilities arising out of, or incurred in connection with the acceptance or performance of the trusts and duties set forth herein and in the Basic Documents (other than overhead and expenses incurred in the normal course of business) except to the extent that such cost, expense, loss, claim, damage or liability shall be due to such entity’s (or its officers’, directors’, employees’ or agents’) willful misfeasance, bad faith or negligence (except for errors in judgment).

 

Indemnification under this Section shall survive the resignation or removal of the Owner Trustee, the Trustee or the Backup Servicer and the termination of this Agreement or the Indenture or the Trust Agreement, as applicable, and shall include reasonable fees and expenses of counsel and other expenses of litigation.  If the Seller shall have made any indemnity payments pursuant to this Section and the Person to or on behalf of whom such payments are made thereafter shall collect any of such amounts from others, such Person shall promptly repay such amounts to the Seller, without interest.

 

SECTION 8.5 Merger or Consolidation of, or Assumption of the Obligations of, Seller.

 

.  Any Person (a) into which the Seller may be merged or consolidated, (b) which may result from any merger or consolidation to which the Seller shall be a party or (c) which may succeed to the properties and assets of the Seller substantially as a whole, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Seller under this Agreement, shall be the successor to the Seller hereunder without the execution or filing of any document or any further act by any of the parties to this Agreement; provided, however, that (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 3.1 shall have been breached and no Servicer Termination Event, and no event which, after notice or lapse of time, or both, would become a Servicer Termination Event shall have occurred and be continuing, (ii) the Seller shall have delivered to the Owner Trustee and the Trustee an Officers’ Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, (iii) the Rating Agency Condition shall have been satisfied with respect to such transaction and (iv) the Seller shall have delivered to the Owner Trustee and the Trustee an Opinion of Counsel stating that, in the opinion of such counsel, either (A) all financing statements and continuation statements and amendments thereto have been authorized and filed that are necessary fully to preserve and protect the interest of the Owner Trustee and the Trustee, respectively, in the Receivables and the Other Conveyed Property and reciting the details of such filings or (B) no such action shall be necessary to preserve and protect such interest.  Notwithstanding anything herein to the contrary, the execution of the foregoing agreement of assumption and compliance with clauses (i), (ii), (iii) and (iv) above shall be conditions to the consummation of the transactions referred to in  clauses (a), (b) or (c) above.

 

SECTION 8.6 Limitation on Liability of Seller and Others.

 

.  The Seller and any director or officer or employee or agent of the Seller may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person respecting any matters arising under any Basic Document.  The Seller shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability.

 

SECTION 8.7 Seller May Own Residual Pass-through Certificates or Notes.

 

.  The Seller and any Affiliate thereof may in its individual or any other capacity become the owner or pledgee of Securities with the same rights as it would have if it were not the Seller or an Affiliate thereof, except as expressly provided herein or in any Basic Document.  Securities so owned by the Seller or such Affiliate shall have an equal and proportionate benefit under the provisions of the Basic Documents, without preference, priority or distinction as among all of the Securities; provided, however, that any Notes owned by the Seller or any Affiliate thereof, during the time such Securities are so owned by them, shall be without voting rights for any purpose set forth in the Basic Documents.  The Seller shall notify the Owner Trustee and the Trustee promptly after it or any of its Affiliates become the owner of a Security.

 

ARTICLE IX                                

THE SERVICER

SECTION 9.1 Representations of Servicer.

 

.  The Servicer makes the following representations for the benefit of the Securityholders, on which the Issuer is deemed to have relied in acquiring the Receivables and on which the Trustee is deemed to have relied in executing and performing pursuant to this Agreement, the Indenture and the other Basic Documents to which it is a party.  The representations speak as of the execution and delivery of this Agreement and as of the Closing Date and shall survive the sale of the Receivables to the Issuer and the pledge thereof to the Trustee pursuant to the Indenture.

 

(a) Organization and Good Standing.  The Servicer has been duly incorporated and is validly existing as a corporation solely under the laws of the State of California, in good standing thereunder, with power, authority and legal right to own its properties and to conduct its business as such properties are currently owned and such business is presently conducted, and had at all relevant times, and shall have, power, authority and legal right to acquire, own and service the Receivables.

 

(b) Due Qualification.  Subject to the following sentence, the Servicer is duly qualified to do business as a foreign corporation in good standing and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Receivables as required by this Agreement) or the consummation of the transactions contemplated by the Basic Documents requires or shall require such qualification.  The Servicer’s qualification to do business in the State of North Carolina has been suspended due to the failure to file a required tax return for 2003.  The Servicer will make the necessary filings and payments to cure such suspension by no later than May 27, 2011 and will present the Trustee with satisfactory evidence that such suspension has been cured by no later than July 26, 2011.

 

(c) Power and Authority.  The Servicer has the power and authority to execute and deliver this Agreement and the Basic Documents to which it is a party and to carry out its terms and their terms, respectively, and the execution, delivery and performance of this Agreement and the Basic Documents to which it is a party have been duly authorized by the Servicer by all necessary corporate action.

 

(d) Binding Obligation.  This Agreement and the Basic Documents to which the Servicer is a party shall constitute legal, valid and binding obligations of the Servicer enforceable in accordance with their respective terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar laws affecting the enforcement of creditors’ rights generally and by equitable limitations on the availability of specific remedies, regardless of whether such enforceability is considered in a proceeding in equity or at law.

 

(e) No Violation.  The consummation of the transactions contemplated by this Agreement and the Basic Documents to which to the Servicer is a party, and the fulfillment of the terms of this Agreement and the Basic Documents to which the Servicer is a party, shall not conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse of time) a default under, the articles of incorporation or bylaws of the Servicer, or any indenture, agreement, mortgage, deed of trust or other instrument to which the Servicer is a party or by which it is bound or any of its properties are subject, or result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust or other instrument, other than the Basic Documents, or violate any law, order, rule or regulation applicable to the Servicer of any court or of any Federal or State regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Servicer or any of its properties.

 

(f) No Proceedings.  There are no proceedings or investigations pending or, to the Servicer’s knowledge, threatened against the Servicer, before any court, regulatory body, administrative agency or other tribunal or governmental instrumentality having jurisdiction over the Servicer or its properties (A) asserting the invalidity of this Agreement or any of the Basic Documents, (B) seeking to prevent the issuance of the Securities or the consummation of any of the transactions contemplated by this Agreement or any of the Basic Documents, or (C) except for the Pending Litigation, seeking any determination or ruling that might materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability of, this Agreement, the Securities or any of the Basic Documents or (D) relating to the Servicer and which might adversely affect the Federal or State income, excise, franchise or similar tax attributes of the Securities.

 

(g) No Consents.  No consent, approval, authorization or order of or declaration or filing with any governmental authority is required for the issuance or sale of the Securities or the consummation of the other transactions contemplated by this Agreement, except such as have been duly made or obtained.

 

(h) Taxes.  The Servicer has filed on a timely basis all tax returns which are required to be filed by it and paid all taxes, including any assessments received by it, to the extent that such taxes have become due (other than taxes, the amount or validity of which are currently being contested in good faith by appropriate proceedings and with respect to which reserves in conformity with GAAP have been provided on the books of the Servicer).

 

(i) Chief Executive Office.  The Servicer hereby represents and warrants to the Trustee that the Servicer’s principal place of business and chief executive office is, and for the four months preceding the date of this Agreement has been, located at: 19500 Jamboree Road, Irvine, California 92612.

 

SECTION 9.2 Liability of Servicer; Indemnities.

 

.

 

(a) The Servicer (in its capacity as such) shall be liable hereunder only to the extent of the obligations in this Agreement specifically undertaken by the Servicer and the representations made by the Servicer.

 

(i) The Servicer shall indemnify, defend and hold harmless the Trust, the Trustee, the Owner Trustee, the Backup Servicer and the Securityholders from and against any and all costs, expenses, losses, damages, claims and liabilities, arising out of or resulting from the use, ownership, repossession or operation by the Servicer or any Affiliate or agent or sub-contractor thereof of any Financed Vehicle;

 

(ii) The Servicer (unless the Backup Servicer is the Servicer) shall indemnify, defend and hold harmless the Trust, the Trustee, the Owner Trustee, the Backup Servicer and the Securityholders from and against any taxes that may at any time be asserted against any of such parties with respect to the transactions contemplated in this Agreement, including, without limitation, any sales, gross receipts, general corporation, tangible personal property, privilege or license taxes (but not including federal or other income taxes, including franchise taxes (other than Texas Franchise Tax, if CPS is the Servicer) asserted with respect to, and as of the date of, the sale of the Receivables and the Other Conveyed Property to the Trust or the issuance and original sale of the Securities and, in the case of the Issuer and the Securityholders, not including any taxes asserted with respect to federal or other income taxes arising out of distributions on the Notes and Residual Pass-through Certificates) and costs and expenses in defending against the same;

 

(iii) The Servicer shall indemnify, defend and hold harmless the Trust, the Trustee, the Owner Trustee, the Backup Servicer, the Placement Agent, their respective officers, directors, agents and employees and the Securityholders from and against any and all costs, expenses, losses, claims, damages, and liabilities to the extent that such cost, expense, loss, claim, damage, or liability arose out of, or was imposed upon the Trust, the Trustee, the Owner Trustee, the Backup Servicer, the Placement Agent or the Securityholders or such officers, directors, agents or employees through the negligence, willful misfeasance or bad faith of the Servicer in the performance of its duties under this Agreement, by reason of reckless disregard of its obligations and duties under this Agreement or as a result of a breach of any representation or warranty made by the Servicer in this Agreement (without regard to any exception relating to the Pending Litigation).

 

(iv) The Servicer shall indemnify, defend, and hold harmless the Trustee, the Owner Trustee and the Backup Servicer from and against all costs, expenses, losses, claims, damages, and liabilities arising out of or incurred in connection with the acceptance or performance of the trusts and duties herein contained or in the Trust Agreement, if any, except to the extent that such cost, expense, loss, claim, damage or liability:  (A) shall be due to the willful misfeasance, bad faith, or negligence (except for errors in judgment) of the Trustee, the Owner Trustee or the Backup Servicer, as applicable or (B) relates to any tax other than the taxes with respect to which the Servicer shall be required to indemnify the Trustee, the Owner Trustee or the Backup Servicer.

 

(v) CPS shall indemnify, defend and hold harmless the Trust, the Trustee, the Owner Trustee, the Backup Servicer and the Securityholders against any and all costs, expenses, losses, damages, claims and liabilities arising out of or resulting from CPS’s involvement in, or the effect on any Receivable as a result of, the Pending Litigation.

 

(b) Notwithstanding the foregoing, the Servicer shall not be obligated to defend, indemnify, and hold harmless any Noteholders for any losses, claims, damages or liabilities incurred by any Securityholders arising out of claims, complaints, actions and allegations relating to Section 406 of ERISA or Section 4975 of the Code as a result of the purchase or holding of a Security by such Noteholder with the assets of a plan subject to such provisions of ERISA or the Code or the servicing, management and operation of the Trust.

 

(c) For purposes of this Section 9.2, in the event of the termination of the rights and obligations of the Servicer (or any successor thereto pursuant to Section 9.3) as Servicer pursuant to Section 10.1, or a resignation by such Servicer pursuant to this Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a successor Servicer pursuant to Section 10.2.  The provisions of this Section 9.2(c) shall in no way affect the survival pursuant to Section 9.2(d) of the indemnification by the Servicer provided by Section 9.2(a).

 

(d) Indemnification under this Section 9.2 shall survive the termination of this Agreement and any resignation or removal of CPS as Servicer and shall include reasonable fees and expenses of counsel and expenses of litigation.  If the Servicer shall have made any indemnity payments pursuant to this Section and the recipient thereafter collects any of such amounts from others, the recipient shall promptly repay such amounts to the Servicer, without interest.

 

SECTION 9.3 Merger or Consolidation of, or Assumption of the Obligations of, the Servicer or Backup Servicer.

 

.

 

(a) CPS shall not merge or consolidate with any other person, convey, transfer or lease substantially all its assets as an entirety to another Person, or permit any other Person to become the successor to CPS’s business unless, after the merger, consolidation, conveyance, transfer, lease or succession, the successor or surviving entity shall be capable of fulfilling the duties of CPS contained in this Agreement.  Any corporation (i) into which CPS may be merged or consolidated, (ii) resulting from any merger or consolidation in which CPS shall be a constituent corporation, (iii) which acquires by conveyance, transfer, or lease substantially all of the assets of CPS, or (iv) succeeding to the business of CPS, in any of the foregoing cases shall execute an agreement of assumption to perform every obligation of CPS under this Agreement and, whether or not such assumption agreement is executed, shall be the successor to CPS under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement, anything in this Agreement to the contrary notwithstanding; provided, however, that nothing contained herein shall be deemed to release CPS from any obligation.  CPS shall provide notice of any merger, consolidation or succession pursuant to this Section to the Owner Trustee, the Trustee, the Securityholders and the Rating Agency.  Notwithstanding the foregoing, CPS shall not merge or consolidate with any other Person or permit any other Person to become a successor to CPS’s business, unless (x) immediately after giving effect to such transaction, no representation, warranty or covenant made pursuant to Sections 9.1 (other than clause (a) with respect to its state of incorporation and clause (i)) or 4.6 shall have been breached (for purposes hereof, such representations and warranties shall be deemed made as of the date of the consummation of such transaction) and no event that, after notice or lapse of time, or both, would become a Servicer Termination Event shall have occurred and be continuing, (y) CPS shall have delivered to the Owner Trustee, the Trustee and the Rating Agency an Officer’s Certificate and an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this Section and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been complied with, and (z) CPS shall have delivered to the Owner Trustee, the Trustee and the Rating Agency an Opinion of Counsel, stating in the opinion of such counsel, either (A) all financing statements and continuation statements and amendments thereto have been authorized and filed that are necessary to preserve and protect the interest of the Owner Trustee and the Trustee, respectively, in the Receivables and the Other Conveyed Property and reciting the details of the filings or (B) no such action shall be necessary to preserve and protect such interest.

 

(b) Any corporation (i) into which the Backup Servicer may be merged or consolidated, (ii) resulting from any merger or consolidation in which the Backup Servicer shall be a constituent corporation, (iii) which acquires by conveyance, transfer or lease substantially all of the assets of the Backup Servicer, or (iv) succeeding to the business of the Backup Servicer, in any of the foregoing cases shall execute an agreement of assumption to perform every obligation of the Backup Servicer under this Agreement and, whether or not such assumption agreement is executed, shall be the successor to the Backup Servicer under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties to this Agreement, anything in this Agreement to the contrary notwithstanding; provided, however, that nothing contained herein shall be deemed to release the Backup Servicer from any obligation.

 

SECTION 9.4 Limitation on Liability of Servicer, Backup Servicer and Others.

 

.  Neither the Servicer, the Backup Servicer nor any of the directors or officers or employees or agents of the Servicer or Backup Servicer shall be under any liability to the Trust or the Securityholders, except as provided in this Agreement, for any action taken or for refraining from the taking of any action pursuant to this Agreement; provided, however, that this provision shall not protect the Servicer, the Backup Servicer or any such person against any liability that would otherwise be imposed by reason of a breach of this Agreement or willful misfeasance, bad faith or negligence in the performance of duties.  CPS, the Backup Servicer and any director, officer, employee or agent of CPS or the Backup Servicer may rely in good faith on the written advice of counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters arising under this Agreement.  In addition, the Backup Servicer shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or liability.

 

SECTION 9.5 Delegation of Duties.

 

.  The Servicer may at any time delegate duties under this Agreement to sub-contractors who are in the business of servicing automotive receivables; provided, however, that no such delegation or sub-contracting of duties by the Servicer shall relieve the Servicer of its responsibility with respect to such duties.

 

SECTION 9.6 Servicer and Backup Servicer Not to Resign.

 

(a) .  Subject to the provisions of Section 9.3, neither the Servicer nor the Backup Servicer shall resign from the obligations and duties imposed on it by this Agreement as Servicer or Backup Servicer except (i) upon a determination that by reason of a change in legal requirements the performance of its duties under this Agreement would cause it to be in violation of such legal requirements in a manner that would have a material adverse effect on the Servicer or the Backup Servicer, as the case may be, or, (ii) in the case of the Backup Servicer, upon the prior written consent of Holders of a majority of the aggregate outstanding Note Balance of the Controlling Class.  Any such determination permitting the resignation of the Servicer or Backup Servicer shall be evidenced by an Opinion of Counsel to such effect delivered and acceptable to the Trustee and the Owner Trustee.  No resignation of the Servicer shall become effective until the Backup Servicer or a successor Servicer that is an Eligible Servicer shall have assumed the responsibilities and obligations of the Servicer pursuant to Section 10.3.  No resignation of the Backup Servicer shall become effective until a Person that is an Eligible Servicer shall have assumed the responsibilities and obligations of the Backup Servicer; provided, however, that in the event a successor Backup Servicer is not appointed within 60 days after the Backup Servicer has given notice of its resignation and has provided the Opinion of Counsel required by this Section 9.6, the Backup Servicer may petition a court for its removal.

 

ARTICLE X                      

DEFAULT

SECTION 10.1 Servicer Termination Event.

 

.  For purposes of this Agreement, each of the following shall constitute a “Servicer Termination Event”:

 

(a) Any failure by the Servicer to deliver to the Trustee for distribution to any Noteholder or to the Trust Paying Agent for distribution to any Residual Certificateholder, or for deposit into the Collection Account or the Series 2011-A Spread Account, any payment required under the terms of this Agreement, which failure continues unremedied for a period of two Business Days (one Business Day with respect to the payment of Purchase Amounts) after the earlier of (i) knowledge thereof by a Responsible Officer of the Servicer and (ii) written notice thereof shall have been given to the Servicer by the Trustee or by Holders of a majority of the aggregate outstanding Note Balance of the Controlling Class; or

 

(b) Failure by the Servicer to deliver to the Trustee the Servicer’s Certificate within three days after the date on which such Servicer’s Certificate is required to be delivered under Section 4.9; or

 

(c) Failure on the part of the Servicer duly to observe or perform any other covenants or agreements of the Servicer set forth in this Agreement or, if the Servicer is CPS, failure of CPS to duly perform any other covenants or agreements of CPS set forth in this Agreement, which failure (i) materially and adversely affects the rights of Noteholders and (ii) continues unremedied for a period of 30 days after the earlier of knowledge thereof by the Servicer or after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer by the Trustee or by Holders of a majority of the aggregate outstanding Note Balance of the Controlling Class; or

 

(d) The occurrence of an Insolvency Event with respect to the Servicer or the Seller; or

 

(e) Failure on the part of the Servicer to observe its covenants and agreements relating to (i) merger or consolidation or (ii) preservation of its ownership (or security interest) in repossessed Financed Vehicles delivered for sale to dealers; or

 

(f) Any representation, warranty or statement of the Servicer made in this Agreement or any certificate, report or other writing delivered pursuant hereto shall prove to be incorrect in any material respect as of the time when the same shall have been made (excluding, however, any representation or warranty set forth in this Agreement relating to the characteristics of the Receivables), and the incorrectness of such representation, warranty or statement has a material adverse effect on the Trust or the Securityholders and, within 30 days after the earlier of (i) knowledge thereof by a Responsible Officer of the Servicer or (ii) after written notice thereof shall have been given to the Servicer by the Trustee or by Holders of a majority of the aggregate outstanding Note Balance of the Controlling Class, the circumstances or condition in respect of which such representation, warranty or statement was incorrect shall not have been eliminated or otherwise cured.

 

SECTION 10.2 Consequences of a Servicer Termination Event.

 

.  If a Servicer Termination Event shall occur and be continuing, either the Trustee (to the extent it has knowledge thereof) or the Holders of Notes evidencing not less than a majority of the aggregate outstanding Note Balance of the Controlling Class by notice given in writing to the Servicer and the Backup Servicer (and to the Trustee if given by the Noteholders) may terminate all of the rights and obligations of the Servicer under this Agreement.  If a Servicer Termination Event shall occur and be continuing on or after the date on which each class of Notes has been repaid in full, either the Trustee (to the extent it has knowledge thereof) or the Majority Certificateholders by notice given in writing to the Servicer and the Backup Servicer (and the Trustee if such notice is given by the Certificateholders) may terminate all of the rights and obligations of the Servicer under this Agreement.  The Servicer shall be entitled to its pro rata share of the Servicing Fee for the number of days in the Collection Period prior to the effective date of its termination.  On or after the receipt by the Servicer of such written notice or upon the date, if any, specified in such notice, all authority, power, obligations and responsibilities of the Servicer under this Agreement, whether with respect to the Notes, the Residual Pass-through Certificates, the Receivables or the Other Conveyed Property or otherwise, automatically shall pass to, be vested in and become obligations and responsibilities of the Backup Servicer (or such other successor Servicer appointed under Section 10.3); provided, however, that the successor Servicer shall have no liability with respect to any obligation that was required to be performed by the terminated Servicer prior to the date that the successor Servicer becomes the Servicer or any claim of a third party based on any alleged action or inaction of the terminated Servicer.  The successor Servicer is authorized and empowered by this Agreement to execute and deliver, on behalf of the terminated Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such notice of termination, whether to complete the transfer and endorsement of the Receivables and the Other Conveyed Property and related documents to show the Trust as lienholder or secured party on the related Lien Certificates, or otherwise.  The terminated Servicer agrees to cooperate with the successor Servicer in effecting the termination of the responsibilities and rights of the terminated Servicer under this Agreement, including, without limitation, the transfer to the successor Servicer for administration by it of all cash amounts that shall at the time be held by the terminated Servicer for deposit, or have been deposited by the terminated Servicer, in the Collection Account or thereafter received with respect to the Receivables and the delivery to the successor Servicer of all Receivable Files that shall at the time be held by the terminated Servicer and a computer tape in readable form as of the most recent Business Day containing all information necessary to enable the successor Servicer to service the Receivables and the Other Conveyed Property.  All reasonable costs and expenses (including reasonable attorneys’ fees and boarding fees) incurred in connection with transferring any Receivable Files to the successor Servicer and amending this Agreement to reflect such succession as Servicer pursuant to this Section 10.2 shall be paid by the terminated Servicer upon presentation of reasonable documentation of such costs and expenses.  In addition, any successor Servicer shall be entitled to payment from the terminated Servicer for reasonable transition expenses incurred in connection with acting as successor Servicer, and to the extent not so paid, such payment shall be made pursuant to Section 5.7(a).  Upon receipt of notice of the occurrence of a Servicer Termination Event, the Trustee shall give notice thereof to the Rating Agency.   The successor Servicer shall terminate the Lockbox Agreement and direct the Obligors to make all payments under the Receivables directly to the successor Servicer (in which event the successor Servicer shall process such payments in accordance with Section 4.2(e)), or to a lockbox established by the successor Servicer at the successor Servicer’s expense, which shall be reimbursable pursuant to the terms of clauses (iii) and (xviii) of Section 5.7(a). The terminated Servicer shall grant the Trustee and the successor Servicer reasonable access to the terminated Servicer’s premises at the terminated Servicer’s expense.

 

SECTION 10.3 Appointment of Successor.

 

.

 

(a) On and after the time the Servicer receives a notice of termination pursuant to Section 10.2 or upon the resignation of the Servicer pursuant to Section 9.6, the predecessor Servicer shall continue to perform its functions as Servicer under this Agreement, in the case of termination, only until the date specified in such termination notice or, if no such date is specified in a notice of termination, until receipt of such notice, and, in the case of resignation, until a successor Servicer has been appointed (the “Assumption Date”).  Subject to prior selection of a successor Servicer in accordance with subsection (b) below, in the event of a termination or resignation of the Servicer, Wells Fargo Bank, National Association, as Backup Servicer, shall automatically assume the obligations of the Servicer hereunder on the Assumption Date, and shall be subject to all the rights, responsibilities, restrictions, duties, liabilities and termination provisions relating thereto in this Agreement except as otherwise indicated herein.  Notwithstanding the foregoing, if the Backup Servicer is the outgoing Servicer or shall be unwilling or legally unable to act as successor Servicer, the Trustee shall appoint, or petition a court of competent jurisdiction to appoint, an Eligible Servicer as the successor Servicer hereunder.  Pending appointment pursuant to the preceding sentence, the Backup Servicer shall act as successor Servicer unless it is legally unable to do so, in which event the outgoing Servicer shall continue to act as Servicer until a successor has been appointed and accepted such appointment. The Trustee and such successor Servicer shall take such action, consistent with this Agreement, as shall be necessary to effectuate any such succession.

 

(b) Unless Holders of Notes evidencing not less than a majority of the aggregate outstanding Note Balance of the Controlling Class have previously confirmed in writing that the Backup Servicer shall become successor Servicer upon the Servicer’s resignation or removal, the Holders of Notes evidencing not less than a majority of the aggregate outstanding Note Balance of the Controlling Class may at any time thirty (30) days (i) prior to the effective date of the resignation of the Servicer or (ii) prior to the Assumption Date, appoint a Person that is an Eligible Servicer other than the Backup Servicer to become the successor Servicer in accordance with Section 10.2 on and after the Assumption Date or the resignation of the Servicer.  Prior to such assumption, such successor Servicer shall execute and deliver a written assumption agreement by such Person to serve as Servicer.  If upon the termination of the Servicer pursuant to Section 10.2 or the resignation of the Servicer pursuant to Section 9.6, the Holders of Notes evidencing not less than a majority of the aggregate outstanding Note Balance of the Controlling Class appoint a successor Servicer other than the Backup Servicer, the Backup Servicer shall not be relieved of its duties as Backup Servicer hereunder, including its obligation to become successor Servicer; provided that pending the assumption of the servicing duties by a successor Servicer appointed by the Holders of Notes evidencing not less than a majority of the aggregate outstanding Note Balance of the Controlling Class, the Backup Servicer shall not be deemed to have assumed any of the obligations of the successor Servicer hereunder.

 

(c) Notwithstanding the Backup Servicer’s assumption of, and its agreement to perform and observe, all duties, responsibilities and obligations of CPS as Servicer under this Agreement arising on and after the Assumption Date, the Backup Servicer shall not be deemed to have assumed or to become liable for, or otherwise have any liability, whether provided for by the terms of this Agreement, arising by operation of law or otherwise, for any duties, responsibilities, obligations or liabilities of CPS or any predecessor Servicer (i) arising under Sections 4.7 and 9.2 of this Agreement, regardless of when the liability, duty, responsibility or obligation of CPS or any predecessor Servicer therefor arose, (ii) required to be performed by CPS or any predecessor Servicer prior to the Assumption Date or any claim of any third party based on any alleged action or inaction of CPS or any predecessor Servicer, or (iii) with respect to the payment of any taxes required to be paid by CPS or any predecessor Servicer.  The indemnification obligations of the Backup Servicer, upon becoming a successor Servicer, are expressly limited to those instances of gross negligence or willful misconduct of the Backup Servicer in its role as successor Servicer that occur after the Assumption Date.

 

(d) Any successor Servicer, including the Backup Servicer, shall be entitled to receive the Servicing Fee as compensation and its reimbursable expenses in accordance with the priority of payments set forth in Section 5.7(a).

 

(e) Notwithstanding anything contained in this Agreement to the contrary, the successor Servicer is authorized to accept and rely on all of the accounting records (including computer records) and work of the predecessor Servicer relating to the Receivables (collectively, the "Predecessor Servicer Work Product") without any audit or other examination thereof, and the successor Servicer shall have no duty, responsibility, obligation or liability for the acts and omissions of the predecessor Servicer.  If any error, inaccuracy, omission or incorrect or non-standard practice or procedure (collectively, "Errors") exists in any Predecessor Servicer Work Product and such Error makes it materially more difficult to service or should cause or materially contribute to the successor Servicer making or continuing any Error (collectively, "Continuing Errors"), the successor Servicer shall have no duty, responsibility, obligation or liability for such Continuing Errors; provided, however, that the successor Servicer agrees to use its best efforts to prevent further Continuing Errors.  If the successor Servicer becomes aware of Errors or Continuing Errors, it shall use its best efforts, at the direction of Holders constituting a majority of the aggregate outstanding Note Balance of the Controlling Class, which shall have been given prior written notice by the Trustee (upon receipt of notice from the successor Servicer) of the nature of such Errors and Continuing Errors, to reconstruct and reconcile such data as is commercially reasonable to correct such Errors and Continuing Errors and to prevent future Continuing Errors.  The successor Servicer shall be entitled to recover its costs expended in connection with such efforts in accordance with Section 5.7(a) of this Agreement.

 

SECTION 10.4 Notification to Securityholders.

 

.  Upon any termination of, or appointment of a successor to, the Servicer, the Trustee shall give prompt written notice thereof to each Securityholder, the Owner Trustee and to the Rating Agency.

 

SECTION 10.5 Waiver of Past Defaults.

 

.  The Holders of Notes evidencing not less than a majority of the aggregate outstanding Note Balance of the Controlling Class may, on behalf of all Noteholders, waive any default by the Servicer in the performance of its obligations under this Agreement and the consequences thereof (except a default in making any required deposits to or payments from any of the Trust Accounts in accordance with the terms of this Agreement).  Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Termination Event arising therefrom shall be deemed to have been remedied for every purpose of this Agreement.  No such waiver shall extend to any subsequent or other default or impair any right consequent thereto.

 

SECTION 10.6 Action Upon Certain Failures of the Servicer.

 

.  In the event that a Responsible Officer of the Trustee shall have actual knowledge of any failure of the Servicer specified in Section 10.1 that would give rise to a right of termination under such Section upon the Servicer’s failure to remedy the same after notice, the Trustee shall give notice thereof to the Servicer.  For all purposes of this Agreement (including, without limitation, this Section 10.6), the Trustee shall not be deemed to have knowledge of any failure of the Servicer as specified in  Sections 10.1(c) through (f) unless notified thereof in writing by the Servicer or by a Securityholder.  The Trustee shall be under no duty or obligation to investigate or inquire as to any potential failure of the Servicer specified in Section 10.1.

 

ARTICLE XI                                

TERMINATION

SECTION 11.1 Optional Purchase of All Receivables.

 

.

 

(a) On any Payment Date on or after the last day of any Collection Period as of which the Pool Balance shall be less than or equal to 10% of the Original Pool Balance, the Servicer shall have the option to purchase the Owner Trust Estate, other than the Trust Accounts.  To exercise such option, the Servicer shall (subject to the proviso below) deposit in the Collection Account pursuant to Section 5.6 an amount equal to the fair market value of the Receivables (including Liquidated Receivables) as of such date, plus the appraised value of any other property held by the Trust, such value to be determined by an appraiser mutually agreed upon by the Servicer and the Trustee, and shall succeed to all interests in and to the Trust; provided, however, that the amount to be paid for such purchase shall be sufficient to pay the (i) the aggregate outstanding Note Balance, (ii) accrued and unpaid interest on the Notes, and (iii) the unpaid expenses of the Trust, including without limitation expenses incurred by the Trust in connection with the exercise of such repurchase option.  Upon receipt of an amount equal to the fair market value of the Receivables and written instructions from the Servicer, the Trustee shall release to the Servicer or its designee the related Receivables Files and shall execute and deliver all reasonable instruments of transfer or assignment, without recourse, as are prepared by the Seller and delivered to the Trustee and necessary to vest in the Servicer or such designee title to the Receivables including a Trustee’s Certificate in the form of Exhibit F-2.  To the extent such option to purchase the Owner Trust Estate is rescinded pursuant to Section 10.1 of the Indenture, the Securityholders shall on the related Payment Date receive the payments of interest and principal that would be due to the Securityholders on such Payment Date as if such option to purchase the Owner Trust Estate had never been exercised.

 

(b) Notice of any termination of the Trust shall be given by the Servicer, which notice shall include, among other things, the items specified in Section 9.1(c) of the Trust Agreement, to the Owner Trustee, the Trustee and the Rating Agency as soon as practicable after the Servicer has received notice thereof.

 

ARTICLE XII                                

ADMINISTRATIVE DUTIES OF THE SERVICER

SECTION 12.1 Administrative Duties.

 

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(a) Duties with Respect to the Indenture.  The Servicer shall perform all its duties and the duties of the Issuer under the Indenture.  In addition, the Servicer shall consult with the Owner Trustee as the Servicer deems appropriate regarding the duties of the Issuer under the Indenture.  The Servicer shall monitor the performance of the Issuer and shall advise the Owner Trustee when action is necessary to comply with the Issuer’s duties under the Indenture.  The Servicer shall prepare for execution by the Issuer or shall cause the preparation by other appropriate Persons of all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Indenture.  In furtherance of the foregoing, the Servicer shall take all necessary action that is the duty of the Issuer to take pursuant to the Indenture, including, without limitation, pursuant to Sections 2.7, 3.5, 3.6, 3.7, 3.9, 3.17, 5.1(b), 8.3, 9.2, 9.3, 11.1 and 11.15 of the Indenture.

 

(b) Duties with Respect to the Issuer.

 

(i) In addition to the duties of the Servicer set forth in this Agreement or any of the Basic Documents, the Servicer shall perform such calculations and shall prepare for execution by the Issuer or the Owner Trustee or shall cause the preparation by other appropriate Persons of all such documents, reports, filings, instruments, certificates and opinions as it shall be the duty of the Issuer or the Owner Trustee to prepare, file or deliver pursuant to this Agreement or any of the Basic Documents or under State and Federal tax and securities laws, and at the request of the Owner Trustee shall take all appropriate action that it is the duty of the Issuer to take pursuant to this Agreement or any of the Basic Documents, including, without limitation, pursuant to Sections 2.6 of the Trust Agreement.  In accordance with the directions of the Issuer or the Owner Trustee, the Servicer shall administer, perform or supervise the performance of such other activities in connection with the Collateral (including the Basic Documents) as are not covered by any of the foregoing provisions and as are expressly requested by the Issuer or the Owner Trustee and are reasonably within the capability of the Servicer.  The Servicer shall perform its administrative duties with respect to the Issuer in accordance with the requirements enumerated in Section 6.7 of the Trust Agreement.  The Servicer shall monitor the activities of the Issuer to assure compliance by the Issuer with the requirements of Section 6.7 of the Trust Agreement.  The Servicer shall promptly take such action as may be required to correct any noncompliance by the Issuer with the requirements of Section 6.7 of the Trust Agreement.

 

(ii) Notwithstanding anything in this Agreement or any of the Basic Documents to the contrary, the Servicer shall be responsible for promptly notifying the Owner Trustee and the Trustee in the event that any withholding tax is imposed on the Issuer’s payments (or allocations of income) to a Noteholder as contemplated by this Agreement.  Any such notice shall be in writing and specify the amount of any withholding tax required to be withheld by the Owner Trustee or the Trustee pursuant to such provision.

 

(iii) Notwithstanding anything in this Agreement or the Basic Documents to the contrary, the Servicer shall be responsible for performance of the duties of the Issuer or the Seller set forth in Section 5.1 of the Trust Agreement with respect to, among other things, accounting and reports to Residual Certificateholders; provided, however, that, once prepared by the Servicer, the Owner Trustee shall retain responsibility for the distribution of any such reports or accounting actually provided to the Owner Trustee and necessary to enable each Residual Certificateholder to prepare its Federal and State income tax returns.

 

(iv) The Servicer shall perform the duties of the Servicer specified in Section 10.2 of the Trust Agreement required to be performed in connection with the resignation or removal of the Owner Trustee, and any other duties expressly required to be performed by the Servicer under this Agreement or any of the Basic Documents.

 

(v) In carrying out the foregoing duties or any of its other obligations under this Agreement, the Servicer may enter into transactions with or otherwise deal with any of its Affiliates; provided, however, that the terms of any such transactions or dealings shall be in accordance with any directions received from the Issuer and shall be, in the Servicer’s opinion, no less favorable to the Issuer in any material respect.

 

(c) Tax Matters.  The Servicer shall prepare and file, on behalf of the Seller, all tax returns, tax elections, financial statements and such annual or other reports of the Issuer as are necessary for preparation of tax reports as provided in Article V of the Trust Agreement, including without limitation, Internal Revenue Service Form 1099.  All tax returns will be signed by the person required or authorized to sign such returns under applicable law.

 

(d) Non-Ministerial Matters.  With respect to matters that in the reasonable judgment of the Servicer are non-ministerial, the Servicer shall not take any action pursuant to this Article XII unless within a reasonable time before the taking of such action, the Servicer shall have notified the Owner Trustee and the Trustee of the proposed action and the Owner Trustee and, with respect to items (i), (ii), (iii) and (iv) below, the Trustee shall not have withheld consent or provided an alternative direction.  For the purpose of the preceding sentence, “non-ministerial matters” shall include:

 

(i) the amendment of or any supplement to the Indenture;

 

(ii) the initiation of any claim or lawsuit by the Issuer and the compromise of any action, claim or lawsuit brought by or against the Issuer (other than in connection with the collection of the Receivables);

 

(iii) the amendment, change or modification of this Agreement or any of the Basic Documents;

 

(iv) the appointment of successor Note Registrars, successor Note Paying Agents and successor Trustees pursuant to the Indenture or the appointment of successor Servicers or the consent to the assignment by the Note Registrar, Note Paying Agent or Trustee of its obligations under the Indenture; and

 

(v) the removal of the Trustee.

 

(e) Exceptions.  Notwithstanding anything to the contrary in this Agreement except as expressly provided herein or in the other Basic Documents, the Servicer, in its capacity as such hereunder, shall not be obligated to, and shall not, (1) make any payments to the Securityholders under the Basic Documents, (2) sell the Owner Trust Estate pursuant to Section 5.3 of the Indenture, (3) take any other action that the Issuer directs the Servicer not to take on its behalf or (4) in connection with its duties hereunder assume any indemnification obligation of any other Person.

 

(f) Limitation of Successor Servicer’s Obligations.  The successor Servicer shall not be responsible for any obligations or duties of the Servicer under this Section 12.1.

 

SECTION 12.2 Records.

 

.  The Servicer shall maintain appropriate books of account and records relating to services performed under this Agreement, which books of account and records shall be accessible for inspection by the Issuer, the Backup Servicer, the Owner Trustee and the Trustee at any time during normal business hours.

 

SECTION 12.3 Additional Information to be Furnished to the Issuer.

 

.  The Servicer shall furnish to the Issuer from time to time such additional information regarding the Collateral as the Issuer shall reasonably request.

 

ARTICLE XIII                                

MISCELLANEOUS PROVISIONS

SECTION 13.1 Amendment.

 

.

 

(a) This Agreement may be amended from time to time by the parties hereto without the consent of any of the Noteholders, to cure any ambiguity, to correct or supplement any provisions in this Agreement, to comply with any changes in the Code, or to make any other provisions with respect to matters or questions arising under this Agreement that shall not be inconsistent with the provisions of this Agreement; provided, however, that such action shall not, as evidenced by an Opinion of Counsel delivered to the Owner Trustee and the Trustee, adversely affect in any material respect the interests of any Noteholder without such Noteholder’s consent.  Any such amendment shall be deemed to not adversely affect in any material respect the interests of a Noteholder if the Rating Agency Condition with respect to the related Class is satisfied (and upon such satisfaction, no Opinion of Counsel shall be necessary with respect to the related Class).

 

This Agreement may also be amended from time to time by the parties hereto, with the consent of Holders of a majority of the aggregate outstanding Note Balance of the Controlling Class, for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Agreement or of modifying in any manner the rights of the Noteholders; provided, however, without the consent of each Noteholder affected thereby, no such amendment shall, (a) increase or reduce in any manner the amount of, or accelerate or delay the timing of, collections of payments on Receivables or distributions that shall be required to be made for the benefit of the Noteholders, (b) change the date of payment of any installment of principal of or interest on any Note, or reduce the principal amount thereof, the interest rate thereon or the redemption price with respect thereto; (c) reduce the percentage of the Note Balance of each Class of Notes, the Holders of which are required to consent to any such amendment; or (d) adversely affect in any material respect the interests of any  Noteholder.  Any such amendment shall be deemed to not adversely affect in any material respect the interests of a Noteholder if the Rating Agency Condition with respect to the related Class is satisfied.

 

Promptly after the execution of any such amendment or consent, the Trustee shall furnish written notification of the substance of such amendment or consent to each Noteholder and the Rating Agency.

 

It shall not be necessary for the consent of Noteholders pursuant to this Section to approve the particular form of any proposed amendment or consent, but it shall be sufficient if such consent shall approve the substance thereof.  The manner of obtaining such consents (and any other consents of Noteholders provided for in this Agreement) and of evidencing the authorization of any action by Noteholders shall be subject to such reasonable requirements as the Trustee or the Owner Trustee, as applicable, may prescribe.

 

Prior to the execution of any amendment to this Agreement, the Owner Trustee and the Trustee shall be entitled to receive and rely upon an Opinion of Counsel stating that the execution of such amendment is authorized or permitted by this Agreement and the Opinion of Counsel referred to in Section 13.2(i)(i) has been delivered.  The Owner Trustee, the Backup Servicer and the Trustee may, but shall not be obligated to, enter into any such amendment which affects the Issuer’s, the Owner Trustee’s, the Backup Servicer’s or the Trustee’s, as applicable, own rights, duties or immunities under this Agreement or otherwise.

 

(b) Notwithstanding the foregoing, no amendment shall be made that would cause the Trust to be classified for United States Federal income tax purposes as an association (or publicly traded partnership) taxable as a corporation.

 

SECTION 13.2 Protection of Title to Trust.

 

.

 

(a) The Seller or Servicer or both shall authorize and file such financing statements and cause to be authorized and filed such continuation statements, all in such manner and in such places as may be required by law fully to preserve, maintain and protect the interest of the Issuer and the interests of the Trustee in the Receivables and in the proceeds thereof.  The Seller shall deliver (or cause to be delivered) to the Owner Trustee and the Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing.

 

(b) Neither the Seller nor the Servicer shall change its name, identity, jurisdiction of organization, form of organization or corporate structure in any manner that would, could or might make any financing statement or continuation statement filed in accordance with paragraph (a) above seriously misleading within the meaning of section 9-506(a) of the UCC, unless it shall have given the Owner Trustee and the Trustee at least five days’ prior written notice thereof and shall have promptly filed appropriate amendments to all previously filed financing statements or continuation statements.  Promptly upon such filing, the Seller or the Servicer, as the case may be, shall deliver an Opinion of Counsel to the Issuer, the Owner Trustee and the Trustee  stating either (A) all financing statements and continuation statements have been authorized and filed that are necessary fully to preserve and protect the interest of the Trust and the Trustee in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) no such action shall be necessary to preserve and protect such interest.

 

(c) Each of the Seller and the Servicer shall have an obligation to give  the Owner Trustee and the Trustee at least 60 days’ prior written notice of any change in its jurisdiction of organization if, as a result of such change, the applicable provisions of the UCC would require the filing of any amendment of any previously filed financing or continuation statement or of any new financing statement and shall promptly file any such amendment or new financing statement.  The Servicer shall at all times maintain its jurisdiction of organization within the United States of America.  Each of the Seller and Servicer shall at all times be organized solely under the laws of one State.

 

(d) The Servicer shall maintain accounts and records as to each Receivable accurately and in sufficient detail to permit (i) the reader thereof to know at any time the status of such Receivable, including payments and recoveries made and payments owing (and the nature of each) and (ii) reconciliation between payments or recoveries on (or with respect to) each Receivable and the amounts from time to time deposited in the Collection Account in respect of such Receivable.

 

(e) The Servicer shall maintain its computer systems so that, from and after the time of sale under this Agreement of the Receivables to the Issuer, the Servicer’s master computer records (including any backup archives) that refer to a Receivable shall indicate clearly the interest of the Trust in such Receivable and that such Receivable is owned by the Trust.  Indication of the Trust’s interest in a Receivable shall be deleted from or modified on the Servicer’s computer systems when, and only when, the related Receivable shall have been paid in full or repurchased.

 

(f) If at any time the Seller or the Servicer shall propose to sell, grant a security interest in or otherwise transfer any interest in automotive receivables to any prospective purchaser, lender or other transferee, the Servicer shall give to such prospective purchaser, lender or other transferee computer tapes, records or printouts (including any restored from backup archives) that, if they shall refer in any manner whatsoever to any Receivable, shall indicate clearly that such Receivable has been sold and is owned by the Trust.

 

(g) The Servicer shall permit the Trustee, the Backup Servicer, the Owner Trustee and their respective agents at any time during normal business hours to inspect, audit, and make copies of and abstracts from the Servicer’s records regarding any Receivable.

 

(h) Upon request, the Servicer shall furnish to the Owner Trustee or to the Trustee, within five Business Days, a list of all Receivables (by contract number and name of Obligor) then held as part of the Owner Trust Estate, together with a reconciliation of such list to the Schedule of Receivables and to each of the Servicer’s Certificates furnished before such request indicating removal of Receivables from the Owner Trust Estate.

 

(i) The Servicer shall deliver to the Owner Trustee and the Trustee:

 

(i) if required pursuant to Section 13.1, promptly after the execution and delivery of each amendment, waiver or consent, an Opinion of Counsel stating that, in the opinion of such counsel, either (A) all financing statements and continuation statements have been authorized and filed that are necessary fully to preserve and protect the interest of the Trust and the Trustee in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) no such action shall be necessary to preserve and protect such interest; and

 

(ii) within 90 days after the beginning of each calendar year beginning with the first calendar year beginning more than three months after the Cutoff Date, an Opinion of Counsel, dated as of a date during such 90-day period, stating that, in the opinion of such counsel, either (A) all financing statements and continuation statements have been authorized and filed that are necessary fully to preserve and protect the interest of the Trust and the Trustee in the Receivables, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) no such action shall be necessary to preserve and protect such interest.

 

Each Opinion of Counsel referred to in clause (i) or (ii) above shall specify any action necessary (as of the date of such opinion) to be taken in the following year to preserve and protect such interest.

 

SECTION 13.3 Notices.

 

.

 

(a) All demands, notices and communications upon or to the Seller, the Servicer, the Owner Trustee, the Trustee or the Rating Agency under this Agreement shall be in writing, personally delivered, electronically delivered, or mailed by certified mail, return receipt requested, and shall be deemed to have been duly given upon receipt (a) in the case of the Seller to CPS Receivables Five LLC, 19500 Jamboree Road, Irvine, CA 92612, (b) in the case of the Servicer to Consumer Portfolio Services, Inc., 19500 Jamboree Road, Irvine, CA 92612, Attention: General Counsel, (c) in the case of the Issuer or the Owner Trustee, at the Corporate Trust Office of the Owner Trustee, (d) in the case of the Trustee or the Backup Servicer, at the Corporate Trust Office, and (e) in the case of Standard & Poor’s, via electronic delivery to Servicer_reports@sandp.com; for any information not available in electronic format, send hard copies to: Standard & Poor’s Ratings Services, 55 Water Street, 41st Floor, New York, New York 10041-0003, Attention: ABS Surveillance Group.  Any notice required or permitted to be mailed to a Securityholder shall be given by first class mail, postage prepaid, at the address of such Securityholder as shown in the Certificate Register or Note Register, as applicable.  Any notice so mailed within the time prescribed in the Agreement shall be conclusively presumed to have been duly given, whether or not the Securityholder shall receive such notice.

 

(b) Any notice delivered to the Noteholders or to the Trustee for distribution to the Noteholders shall also be delivered concurrently to the Residual Certificateholders or to the Owner Trustee for distribution to the Residual Certificateholders by the party responsible for delivering such notice to the Noteholders or to the Trustee for distribution to the Noteholders.

 

SECTION 13.4 Assignment.

 

.  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.  Notwithstanding anything to the contrary contained herein, except as provided in Sections 8.5 and 9.3 and as provided in the provisions of this Agreement concerning the resignation of the Servicer, this Agreement may not be assigned by the Seller or the Servicer without the prior written consent of the Owner Trustee, the Trustee, the Backup Servicer and the Holders of Notes evidencing not less than 66 and 2/3% of the Note Balance of each Class of Notes, and prompt written notice to the Rating Agency.

 

SECTION 13.5 Limitations on Rights of Others.

 

.  The provisions of this Agreement are solely for the benefit of the parties hereto and for the benefit of the Owner Trustee, the Residual Certificateholders and the Noteholders, as third-party beneficiaries.   Nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Owner Trust Estate or under or in respect of this Agreement or any covenants, conditions or provisions contained herein.

 

SECTION 13.6 Severability.

 

.  Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

 

SECTION 13.7 Separate Counterparts.

 

.  This Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

 

SECTION 13.8 Headings.

 

.  The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

 

SECTION 13.9 Governing Law.

 

.  EXCEPT AS PROVIDED OTHERWISE IN SECTION 13.17, THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND THIS AGREEMENT AND ALL MATTERS ARISING OUT OF OR RELATING IN ANY WAY TO THIS AGREEMENT SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

 

SECTION 13.10 Assignment to Trustee.

 

.  The Seller hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Trustee pursuant to the Indenture for the benefit of the Issuer Secured Parties of all right, title and interest of the Issuer in, to and under the Receivables and Other Conveyed Property and/or the assignment of any or all of the Issuer’s rights and obligations hereunder to the Trustee.

 

SECTION 13.11 Nonpetition Covenants.

 

.

 

(a) Notwithstanding any prior termination of this Agreement, none of the Servicer, the Seller or the Backup Servicer shall, prior to the date which is one year and one day after the termination of this Agreement with respect to the Issuer, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer under any Federal or State bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Issuer.

 

(b) Notwithstanding any prior termination of this Agreement, none of the Servicer or the Backup Servicer shall, prior to the date that is one year and one day after the termination of this Agreement in accordance with Article XI, with respect to the Seller, acquiesce to, petition or otherwise invoke or cause the Seller to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Seller under any Federal or State bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator, or other similar official of the Seller or any substantial part of its property, or ordering the winding up or liquidation of the affairs of the Seller.

 

SECTION 13.12 Limitation of Liability of Owner Trustee and Trustee.

 

.

 

(a) Notwithstanding anything contained herein to the contrary, this Agreement has been countersigned by Wilmington Trust Company not in its individual capacity but solely in its capacity as Owner Trustee of the Issuer and in no event shall Wilmington Trust Company in its individual capacity or, except as expressly provided in the Trust Agreement, as Owner Trustee have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer.  For all purposes of this Agreement, in the performance of its duties or obligations hereunder or in the performance of any duties or obligations of the Issuer hereunder, the Owner Trustee shall be subject to, and entitled to the benefits of, the terms and provisions of Articles VI, VII and VIII of the Trust Agreement.

 

(b) Notwithstanding anything contained herein to the contrary, this Agreement has been executed and delivered by Wells Fargo Bank, National Association, not in its individual capacity but solely as Trustee and Backup Servicer and in no event shall Wells Fargo Bank, National Association, have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which recourse shall be had solely to the assets of the Issuer.

 

(c) In no event shall Wells Fargo Bank, National Association, in any of its capacities hereunder, be deemed to have assumed any duties of the Owner Trustee under the Delaware Statutory Trust Statute, common law, or the Trust Agreement.

 

SECTION 13.13 Independence of the Servicer.

 

.  For all purposes of this Agreement, the Servicer shall be an independent contractor and shall not be subject to the supervision of the Issuer, the Trustee and Backup Servicer or the Owner Trustee with respect to the manner in which it accomplishes the performance of its obligations hereunder.  Unless expressly authorized by this Agreement, the Servicer shall have no authority to act for or represent the Issuer or the Owner Trustee in any way and shall not otherwise be deemed an agent of the Issuer or the Owner Trustee.

 

SECTION 13.14 No Joint Venture.

 

.  Nothing contained in this Agreement (i) shall constitute the Servicer and either of the Issuer or the Owner Trustee as members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (ii) shall be construed to impose any liability as such on any of them or (iii) shall be deemed to confer on any of them any express, implied or apparent authority to incur any obligation or liability on behalf of the others.

 

SECTION 13.15 Covenant of Trustee and Servicer Regarding Rule 15Ga-1.

 

If the Seller, CPS, the Servicer or the Trustee (each a “Repurchase Request Recipient”): (1) receives a Repurchase Request; or (2) receives a withdrawal of a Repurchase Request by the Person making such Repurchase Request, then such party shall give written notice thereof to the Seller and CPS promptly but in any case within ten (10) Business Days from the date of receipt thereof.  Each notice required by this Section 13.15 (a “Rule 15Ga-1 Notice”) shall include: (i) the date the Repurchase Request was received by the Repurchase Request Recipient or the date the withdrawal of the Repurchase Request was received by the Repurchase Request Recipient, as the case may be; (ii) the identity of the related Receivable; (iii) the identity of the Person making the Repurchase Request, (iv) the basis for the Repurchase Request asserted by the Person making the Repurchase Request, to the extent known to the Repurchase Request Recipient; (v) a statement from the Repurchase Request Recipient as to whether it currently plans to pursue a repurchase pursuant to Section 3.2(a) with respect to any Receivables related to such Repurchase Request; and (vi) any written correspondence from the Person making the Repurchase Request to the extent related to such Repurchase Request.  Each Rule 15Ga-1 Notice may be delivered by electronic means to the e-mail address of CPS set forth below.

 

None of the Trustee or the Servicer (other than CPS) shall accept any oral Repurchase Request, and each of the Trustee and the Servicer (other than CPS) shall direct any Person making an oral Repurchase Request to submit it in writing (including through email) to CPS.  Such Repurchase Requests must be submitted in writing (including through email) to repurchase@consumerportfolio.com  or such other email address as CPS shall designate from time to time) with a subject line of “Repurchase Request – CPS ART 2011-A”.

 

The parties hereto acknowledge and agree that the purpose of this Section 13.15 is to facilitate compliance by CPS and the Seller with Rule 15Ga-1 and Items 1104(e) and 1121(c) of Regulation AB (the “Repurchase Rules and Regulations”). The parties hereto acknowledge that interpretations of the requirements of the Repurchase Rules and Regulations may change over time, whether due to interpretive guidance provided by the Securities Exchange Commission or its staff, consensus among participants in the asset-backed securities markets, advice of counsel, or otherwise, and agree to comply with reasonable requests made by CPS and the Seller in good faith for delivery of information under these provisions on the basis of such evolving interpretations. The Trustee shall cooperate fully with CPS and the Seller to deliver any and all records and any other information necessary in the good faith determination of CPS and the Seller to permit them to comply with the provisions of the Repurchase Rules and Regulations.

 

SECTION 13.16 Acknowledgment of Roles .

 

The parties expressly acknowledge and consent to Wells Fargo Bank, National Association acting in the multiple capacities of Backup Servicer and Trustee under the Basic Documents.  The parties agree that Wells Fargo Bank, National Association in such multiple capacities shall not be subject to any claim, defense or liability arising from its performance in any such capacity based on conflict of interest principles, duty of loyalty principles or other breach of fiduciary duties to the extent that any such conflict or breach arises from the performance by Wells Fargo Bank, National Association of any other such capacity or capacities in accordance with this Agreement or any other Basic Documents to which it is a party.

 

SECTION 13.17 Intention of Parties Regarding Delaware Securitization Act.

 

.  It is the intention of the Seller and the Issuer that the transfer and assignment of the Trust Property contemplated by Section 2.1 of this Agreement shall constitute a sale of the Trust Property from the Seller to the Issuer, conveying good title thereto free and clear of any liens, and the beneficial interest in and title to the Trust Property shall not be part of the Seller’s estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy or similar law.  In addition, for purposes of complying with the requirements of the Asset-Backed Securities Facilitation Act of the State of Delaware, 6 Del. C. § 2701A, et seq. (the “Securitization Act”), each of the parties hereto hereby agrees that:

 

(a) any property, assets or rights purported to be transferred, in whole or in part, by the Seller to the Issuer pursuant to this Agreement shall be deemed to no longer be the property, assets or rights of the Seller;

 

(b) none of the Seller, its creditors or, in any insolvency proceeding with respect to the Seller or the Seller’s property, a bankruptcy trustee, receiver, debtor, debtor in possession or similar person, to the extent the issue is governed by Delaware law, shall have any rights, legal or equitable, whatsoever to reacquire (except pursuant to a provision of this Agreement), reclaim, recover, repudiate, disaffirm, redeem or recharacterize as property of the Seller any property, assets or rights purported to be transferred, in whole or in part, by the Seller to the Issuer pursuant to this Agreement;

 

(c) in the event of a bankruptcy, receivership or other insolvency proceeding with respect to the Seller or the Seller’s property, to the extent the issue is governed by Delaware law, such property, assets and rights shall not be deemed to be part of the Seller’s property, assets, rights or estate; and

 

(d) the transaction contemplated by this Agreement shall constitute a “securitization transaction” as such term is used in the Securitization Act.

 

DAL:795435.5

 

  

  

  

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their respective duly authorized officers as of the day and the year first above written.

 

CPS AUTO RECEIVABLES TRUST 2011-A

 

By:  WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as Owner Trustee on behalf of the Trust

 

 

By:                                                                    

 

Name:                                                                    

 

Title:                                                                    

 

CPS RECEIVABLES FIVE LLC, as Seller

 

 

By:                                                                    

 

Name:                                                                    

 

Title:                                                                    

 

CONSUMER PORTFOLIO SERVICES, INC., in its individual capacity and in its capacity as Servicer

 

 

By:                                                                    

 

Name:                                                                    

 

Title:                                                                    

 

WELLS FARGO BANK, NATIONAL ASSOCIATION, not in its individual capacity, but solely as Backup Servicer and Trustee

 

 

By:                                                                    

 

Name:                                                                    

 

Title:                                                                    

 

 

DAL:795435.5exh101.htm

Exhibit 10.1

 

EXECUTION COPY

 

CUSIP Number  - 45823QAH5

 

 

THREE YEAR CREDIT AGREEMENT

 

among

 

INTEGRYS ENERGY GROUP, INC.,

as Borrower

 

THE LENDERS IDENTIFIED HEREIN,

 

CITIBANK, N.A.,

as Syndication Agent

THE BANK OF NOVA SCOTIA

and

U.S. BANK NATIONAL ASSOCIATION

as Documentation Agents, Lead Arrangers and Book Managers

WELLS FARGO BANK, NATIONAL ASSOCIATION

as Administrative Agent, Swing Line Lender and L/C Issuer

and

WELLS FARGO SECURITIES, LLC

and

CITIGROUP GLOBAL MARKETS INC.

as Active Lead Arrangers and Book Managers

DATED AS OF MAY 17, 2011

 

  

  

  

 

TABLE OF CONTENTS

 

	Section 1.	DEFINITIONS AND ACCOUNTING TERMS	 1
	 	 	 	 
	 	 1.1	Definitions	 1
	 	 	 	 
	 	 1.2	Computation of Time Periods	 17
	 	 	 	 
	 	 1.3	Accounting Terms	 17
	 	 	 	 
	 	 1.4	Letter of Credit Amounts	 17
	 	 	 	 
	Section 2.	LOANS	 17
	 	 	 	 
	 	 2.1	Revolving Loan Commitment 	 17
	 	 	 	 
	 	 2.2	Method of Borrowing for Revolving Loans	 18
	 	 	 	 
	 	 2.3	Funding of Revolving Loans	 18
	 	 	 	 
	 	 2.4	Continuations and Conversions	 19
	 	 	 	 
	 	 2.5	Minimum Amounts	 19
	 	 	 	 
	 	 2.6	Reductions and Increases of Revolving Loan Commitment	 20
	 	 	 	 
	 	 2.7	
Evidence of Debt 

	 21
	 	 	 	 
	 	 2.8	Swing Line Loans	 22
	 	 	 	 
	 	 2.9	Letters of Credit	 24
	 	 	 	 
	 	 2.10	
Cash Collateral 

	 34
	 	 	 	 
	 	 2.11	Defaulting Lenders	 35
	 	 	 	 
	Section 3.	PAYMENTS	 37
	 	 	 	 
	 	 3.1	Interest	 37
	 	 	 	 
	 	 3.2	Prepayments	 38
	 	 	 	 
	 	 3.3	Payments	 38
	 	 	 	 
	 	 3.4	Fees	 39
	 	 	 	 
	 	 3.5	Place and Manner of Payments	 39
	 	 	 	 
	 	 3.6	
Pro Rata Treatment 

	 39

 

 

i

  

  

 

 

	 	 3.7	 Computations of Interest and Fees	 40
	 	 	 	 
	 	 3.8	 Sharing of Payments	 41
	 	 	 	 
	 	 3.9	 Evidence of Debt 	 41
	 	 	 	 
	 Section 4.	 ADDITIONAL PROVISIONS REGARDING LOANS	 42
	 	 	 	 
	 	 4.1	 Pricing Provisions	 42
	 	 	 	 
	 	 4.2	 Capital Adequacy	 44
	 	 	 	 
	 	 4.3	 Compensation	 44
	 	 	 	 
	 	 4.4	 Taxes	 45
	 	 	 	 
	 	 4.5	 Replacement of Lenders	 48
	 	 	 	 
	 Section 5.	 CONDITIONS PRECEDENT 	 48
	 	 	 	 
	 	 5.1	 Closing Conditions	 48
	 	 	 	 
	 	 5.2	 Conditions to Each Extension of Credit	 50
	 	 	 	 
	 Section 6.	 REPRESENTATIONS AND WARRANTIES	 51
	 	 	 	 
	 	 6.1	 Organization and Good Standing; Assets 	 51
	 	 	 	 
	 	 6.2	 Due Authorization	 51
	 	 	 	 
	 	 6.3	 No Conflicts	 52
	 	 	 	 
	 	 6.4	 Consents	 52
	 	 	 	 
	 	 6.5	
 Enforceable Obligations 

	 52
	 	 	 	 
	 	 6.6	 Financial Condition	 52
	 	 	 	 
	 	 6.7	 No Material Change 	 52
	 	 	 	 
	 	 6.8	 No Default	 53
	 	 	 	 
	 	 6.9	 [Reserved]	 53
	 	 	 	 
	 	 6.10	 Litigation 	 53
	 	 	 	 
	 	 6.11	 Taxes	 53
	 	 	 	 
	 	 6.12	 Compliance with Law	 53

 

 

ii

  

  

 

	 	 6.13	 ERISA	53 
	 	 	 	 
	 	 6.14	 Use of Proceeds; Margin Stock	54 
	 	 	 	 
	 	 6.15	 Government Regulation	55 
	 	 	 	 
	 	 6.16	 Disclosure	55 
	 	 	 	 
	 Section 7.	 AFFIRMATIVE COVENANTS	55 
	 	 	 	 
	 	 7.1	 Information Covenants	55 
	 	 	 	 
	 	 7.2	 Financial Covenant 	57 
	 	 	 	 
	 	 7.3	 Preservation of Existence and Franchises	57 
	 	 	 	 
	 	 7.4	 Books and Records	58 
	 	 	 	 
	 	 7.5	 Compliance with Law	58 
	 	 	 	 
	 	 7.6	 Payment of Taxes and Other Indebtedness	58 
	 	 	 	 
	 	 7.7	 Insurance	58 
	 	 	 	 
	 	 7.8	 Use of Proceeds 	58 
	 	 	 	 
	 	 7.9	 Audits/Inspections	58 
	 	 	 	 
	 	 7.10	 Restrictive Agreements 	59 
	 	 	 	 
	 Section 8.	 NEGATIVE COVENANTS	59 
	 	 	 	 
	 	 8.1	 Nature of Business	59 
	 	 	 	 
	 	 8.2	 Consolidation and Merger	60 
	 	 	 	 
	 	 8.3	 Sale or Lease of Assets	60 
	 	 	 	 
	 	 8.4	 Arm’s-Length Transactions	60 
	 	 	 	 
	 	 8.5	 Fiscal Year	61 
	 	 	 	 
	 	 8.6	 Liens	61 
	 	 	 	 
	 Section 9.	 EVENTS OF DEFAULT 	62 
	 	 	 	 
	 	 9.1	 Events of Default	62 
	 	 	 	 
	 	 9.2	 Acceleration; Remedies	65  

 

iii

  

  

 

 

	 	 9.3	 Allocation of Payments After Event of Default 	65 
	 	 	 	 
	 Section 10.	 AGENCY PROVISIONS 	66 
	 	 	 	 
	 	 10.1 	 Appointment	66 
	 	 	 	 
	 	 10.2	 Delegation of Duties 	67 
	 	 	 	 
	 	 10.3	 Exculpatory Provisions 	67 
	 	 	 	 
	 	 10.4	 Reliance on Communications 	68 
	 	 	 	 
	 	 10.5	 Notice of Default	68 
	 	 	 	 
	 	 10.6	 Non-Reliance on Agent and Other Lenders	69 
	 	 	 	 
	 	 10.7	 Indemnification 	69 
	 	 	 	 
	 	 10.8	 Agent in Its Individual Capacity	70 
	 	 	 	 
	 	 10.9	 Successor Agent 	70 
	 	 	 	 
	 	 10.10	 Other Agents	71 
	 	 	 	 
	 Section 11.	 MISCELLANEOUS	71 
	 	 	 	 
	 	 11.1	 Notices	71 
	 	 	 	 
	 	 11.2	 Right of Set-Off 	72 
	 	 	 	 
	 	 11.3	 Benefit of Agreement	72 
	 	 	 	 
	 	 11.4	 No Waiver; Remedies Cumulative; Enforcement 	75 
	 	 	 	 
	 	 11.5	 Payment of Expenses, etc. 	76 
	 	 	 	 
	 	 11.6	 Amendments, Waivers and Consents	77 
	 	 	 	 
	 	 11.7	 Counterparts/Telecopy	78 
	 	 	 	 
	 	 11.8	 Headings	78 
	 	 	 	 
	 	 11.9	 Survival of Indemnification and Representations and Warranties	78 
	 	 	 	 
	 	 11.10	 Confidentiality	78 
	 	 	 	 
	 	 11.11	 Governing Law; Venue	79 
	 	 	 	 
	 	 11.12	 Waiver of Jury Trial; Waiver of Consequential Damages	79

 

 

iv

  

  

 

	 	 11.13	 Payments Set Aside	80 
	 	 	 	 
	 	 11.14	 Time	80 
	 	 	 	 
	 	 11.15	 Severability	80 
	 	 	 	 
	 	 11.16	 Assurances	80 
	 	 	 	 
	 	 11.17	 USA Patriot Act Notification	80 
	 	 	 	 
	 	 11.18	 Entirety	81 
	 	 	 	 
	 	 11.19	 No Advisory or Fiduciary Responsibility	81  

 

 

SCHEDULES

 

Schedule 1.1                                Commitment Percentages

Schedule 2.9                                Existing Letters of Credit

Schedule 6.1                                Subsidiaries

Schedule 8.3                                Asset Sales

Schedule 8.6                                Existing Liens

Schedule 11.1                              Notices

 

EXHIBITS

 

Exhibit 2.2                                Form of Notice of Borrowing

Exhibit 2.4                                Form of Notice of Continuation/Conversion

Exhibit 2.7                                Form of Revolving Loan Note

Exhibit 2.8                                Form of Swing Line Loan Notice

Exhibit 7.1(c)                           Form of Officer’s Certificate

Exhibit 11.3                             Form of Assignment Agreement

 

v

  

  

 

THREE YEAR CREDIT AGREEMENT

 

THIS THREE YEAR CREDIT AGREEMENT (this “Credit Agreement”), dated as of May 17, 2011, is entered into among INTEGRYS ENERGY GROUP, INC., a Wisconsin corporation (the “Borrower”), the Lenders (as defined herein), WELLS FARGO SECURITIES, LLC and CITIGROUP GLOBAL MARKETS INC., as Active Lead Arrangers and Book Managers, CITIBANK, N.A., as Syndication Agent, THE BANK OF NOVA SCOTIA and U.S. BANK, NATIONAL ASSOCIATION, as Documentation Agents, Lead Arrangers and Book Managers, and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Wells”), as administrative agent for the Lenders (in such capacity, the “Agent”), Swing Line Lender and L/C Issuer.

 

RECITALS

 

WHEREAS, the Borrower has requested that the Lenders provide a $275 million revolving credit facility to the Borrower for the purposes set forth herein; and

 

WHEREAS, the Lenders have agreed to provide such revolving credit facility on the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, IN CONSIDERATION of the premises and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

 

Section 1. DEFINITIONS AND ACCOUNTING TERMS

 

1.1 Definitions.

 

As used herein, the following terms shall have the meanings herein specified unless the context otherwise requires.  Defined terms herein shall include in the singular number the plural and in the plural the singular:

 

“Active Arrangers” means Wells Fargo Securities, LLC and Citigroup Global Markets Inc.

 

“Adjusted Base Rate” means the Base Rate plus the Applicable Percentage.

 

“Adjusted Eurodollar Rate” means the Eurodollar Rate plus the Applicable Percentage.

 

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling (including but not limited to all directors and officers of such Person), controlled by or under direct or indirect common control with such Person.  A Person shall be deemed to control a corporation if such Person possesses, directly or indirectly, the power (a) to vote 10% or more of the securities having ordinary voting power for the election of directors of such corporation or (b) to direct or cause direction of the management and policies of such corporation, whether through the ownership of voting securities, by contract or otherwise.

 

  

  

  

 

“Agent” means Wells Fargo Bank, National Association and any successors and assigns in such capacity.

 

“Aggregate Commitments” means, collectively, the Revolving Loan Commitment of each Lender.

 

“Applicable Percentage” means, at any time, the appropriate applicable percentages corresponding to the Borrower’s Public Debt Ratings in effect as of the most recent Calculation Date, as shown below:

 

	
 

 

 

Pricing

Level

	
 

 

 

Borrower’s Public

 Debt Rating

	
Applicable

Percentage for

Eurodollar Loans and Letter of Credit Fees

	
 

 

Applicable

Percentage for

Base Rate Loans

	
 

 

Applicable

Percentage for

Commitment Fees

	  	  	  	  	  
	
I.

	
A+ or higher from S&P or

A1 or higher from Moody’s

	
1.000%

	
0.000%

	
0.100%

	  	  	  	  	  
	
II.

	
A from S&P or

A2 from Moody’s

	
1.125%

	
0.125%

	
0.125%

	  	  	  	  	  
	
III.

	
A- from S&P or

A3 from Moody’s

	
1.250%

	
0.250%

	
0.150%

	  	  	  	  	  
	
IV.

	
BBB+ from S&P or

Baa1 from Moody’s

	
1.375%

	
0.375%

	
0.200%

	  	  	  	  	  
	
V.

	
BBB from S&P or

Baa2 from Moody’s

	
1.500%

	
0.500%

	
0.250%

	  	  	  	  	  
	
VI.

	
Unrated or BBB- or lower from S&P or

Baa3 or lower from Moody’s

	
1.750%

	
0.750%

	
0.300%

The Applicable Percentage for Eurodollar Loans, Letter of Credit Fees and Base Rate Loans and the Commitment Fees shall, in each case, be determined and adjusted on the date (each a “Calculation Date”) five Business Days after the date there is a change in the Borrower’s Public Debt Rating.  Each determination of the Applicable Percentage shall be effective from one Calculation Date until the next Calculation Date.  Any adjustment in the Applicable

 

  

2

  

 

 Percentage shall be applicable to all existing Revolving Loans as well as any new Revolving Loans made.

 

In the event that the Public Debt Ratings of S&P and Moody’s do not correspond to the same Pricing Level, then the higher of the two ratings shall determine the Pricing Level, except that if the Public Debt Ratings differ by more than one Pricing Level, the Pricing Level that is one Pricing Level lower than the Pricing Level corresponding to the higher of such ratings shall determine the Pricing Level.  If only one of S&P and Moody’s shall have in effect a Public Debt Rating, the Pricing Level shall be determined by reference to the available rating.

 

The Borrower shall promptly deliver to the Agent, at the address set forth on Schedule 11.1, information regarding any change in the Borrower’s Public Debt Rating, as determined by S&P and Moody’s, that would change the existing Pricing Level pursuant to the preceding paragraph.

 

“Bankruptcy Code” means the Bankruptcy Code in Title 11 of the United States Code, as amended, modified, succeeded or replaced from time to time.

 

“Base Rate” means, for any day, the rate per annum equal to the greatest of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1%, (b) the Prime Rate in effect on such day or (c) the Eurodollar Rate plus 1.00%.  If for any reason the Agent shall have determined (which determination shall be conclusive absent demonstrable error) that it is unable after due inquiry to ascertain the rate set forth in clause (a) and/or (c) of the preceding sentence for any reason, including the inability or failure of the Agent to obtain sufficient quotations in accordance with the terms hereof, the Base Rate shall be determined without regard to such clause (a) or (c), as applicable, until the circumstances giving rise to such inability no longer exist.  Any change in the Base Rate due to a change in the Prime Rate, the Federal Funds Rate or the Eurodollar Rate shall be effective on the effective date of such change in the Prime Rate, the Federal Funds Rate or the Eurodollar Rate, respectively.

 

“Base Rate Loan” means a Revolving Loan which bears interest based on the Base Rate or a Swing Line Loan.

 

“Borrower” means Integrys Energy Group, Inc., a Wisconsin corporation.

 

“Borrower Materials” has the meaning specified in Section 7.1.

 

“Borrower Obligations” means, without duplication, all of the obligations of the Borrower to the Lenders and the Agent, whenever arising, under this Credit Agreement, the Notes or any of the other Credit Documents.

 

“Business Day” means any day other than a Saturday, a Sunday, a legal holiday or a day on which banking institutions are authorized or required by law or other governmental action to close in Milwaukee, Wisconsin, Charlotte, North Carolina and New York, New York; provided that in the case of Eurodollar Loans or Base Rate Loans as to which the Base Rate is determined in accordance with clause (c) of the definition of “Base Rate, means any such day that is also a London Banking Day.

 

  

3

  

 

“Capitalization” means the sum of (a) Total Funded Debt plus (b) Net Worth.

 

“Cash Collateralize” means to pledge and deposit with or deliver to the Agent, for the benefit of the Agent, the applicable L/C Issuer or Swing Line Lender (as applicable) and the Lenders, as collateral for Letter of Credit Obligations, obligations in respect of Swing Line Loans, or obligations of Lenders to fund participations in respect of either thereof (as the context may require), cash or deposit account balances or, if the L/C Issuer or Swing Line Lender benefitting from such collateral shall agree in its sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to (a) the Agent and (b) the applicable L/C Issuer or the Swing Line Lender (as applicable) (which documents are hereby consented to by the Lenders). “Cash Collateral” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

 

“Change in Law” means, in respect of any Lender, the occurrence, after the date of this Agreement, of any of the following: (a) the adoption or taking effect of any law, rule, regulation or treaty, (b) any change in any law, rule, regulation or treaty or in the administration, interpretation or application thereof by any Governmental Authority having jurisdiction over such Lender; or (c) the making or issuance of any request, guideline or directive (whether or not having the force of law) by any Governmental Authority having jurisdiction over such Lender; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

 

“Change of Control” means any of the following events: (a) any “person” or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act but excluding any employee benefit plan of the Borrower or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) has become, directly or indirectly, the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person shall be deemed to have “beneficial ownership” of all shares that any such Person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), by way of merger, consolidation or otherwise, of 30% or more of the voting power of the Voting Stock of the Borrower on a fully-diluted basis, after giving effect to the conversion and exercise of all outstanding warrants, options and other securities of the Borrower (whether or not such securities are then currently convertible or exercisable), or (b) during any period of two consecutive calendar years, individuals who at the beginning of such period constituted the board of directors of the Borrower cease for any reason to constitute a majority of the directors of the Borrower then in office unless (i) such new directors were elected or nominated by a majority of the directors of the Borrower who constituted the board of directors of the Borrower at the beginning of such period or (ii) the reason for such directors failing to constitute a majority is a result of retirement by directors due to age, death or disability.

 

“Closing Date” means the date hereof.

 

  

4

  

 

“Code” means the Internal Revenue Code of 1986, as amended from time to time.

 

“Commitment Fee” has the meaning specified in Section 3.4(a).

 

“Commitment Percentage” means, for each Lender, the percentage identified as its Commitment Percentage opposite such Lender’s name on Schedule 1.1 attached hereto, as such percentage may be modified by assignment in accordance with the terms of this Credit Agreement or by reductions or increases in the Revolving Loan Commitment pursuant to Section 2.6 hereof.

 

“Confidential Information” means information furnished by or on behalf of the Borrower to the Agent or any Lender in connection with this Credit Agreement, but does not include any such information that (a) is generally available to the public, (b) was available to the Agent or any Lender on a nonconfidential basis prior to its disclosure to the Agent or such Lender by the Borrower or any of its Subsidiaries or (c) is available to the Agent or such Lender on a nonconfidential basis from a source other than the Borrower or any of its Subsidiaries.

 

“Credit Documents” means this Credit Agreement, the Notes, the LOC Documents and all other related agreements and documents issued or delivered hereunder or thereunder or pursuant hereto or thereto.

 

“Default” means any event, act or condition which with notice or lapse of time, or both, would constitute an Event of Default.

 

        “Defaulting Lender” means, at any time, any Lender that, at such time (a) has failed to perform any of its funding obligations hereunder,  including in respect of its Loans or participations in respect of Letters of Credit or Swing Line Loans, within two Business Days of the date required to be funded by it hereunder, (b) has notified the Borrower or the Agent, in writing, that it does not intend to comply with its funding obligations or has made a public statement to that effect with respect to its funding obligations hereunder or under other agreements in which it commits to extend credit, (c) has failed, within three Business Days after written request by the Agent (based on its reasonable belief that such Lender may not fulfill its funding obligations), to confirm in a manner reasonably satisfactory to the Agent that it will comply with its funding obligations hereunder, provided that any such Lender shall cease to be a Defaulting Lender under this clause (c) upon receipt of such confirmation by the Agent, or (d) has, or has a direct or indirect parent company that has, (i) become the subject of a proceeding under any debtor relief law, (ii) had a receiver, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or a custodian appointed for it, or (iii) taken any action in furtherance of, or indicated its consent to, approval of or acquiescence in any such proceeding or appointment; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a governmental authority.

 

            “Disregarded Entity” means an entity that, pursuant to Treas. Reg. § 301.7701-2(c)(2), is disregarded for U.S. federal income tax purposes as an entity separate from its owner.

 

  

5

  

 

“Dollars” and “$” means dollars in lawful currency of the United States of America.

 

“Effective Date” means the date on which the conditions set forth in Section 5.1 shall have been fulfilled (or waived in the sole discretion of the Lenders).

 

“Eligible Assignee” means (a) a Lender; (b) an Affiliate of a Lender; and (c) any other Person approved by the Agent, each L/C Issuer, the Swing Line Lender and the Borrower (such approvals not to be unreasonably withheld or delayed); provided that (i) the Borrower’s consent is not required during the existence and continuation of an Event of Default and (ii) neither the Borrower nor an Affiliate of the Borrower shall qualify as an Eligible Assignee.

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and any successor statute thereto, as interpreted by the rules and regulations thereunder, all as the same may be in effect from time to time.  References to sections of ERISA shall be construed also to refer to any successor sections.

 

“ERISA Affiliate” means an entity, whether or not incorporated, which is under common control with the Borrower or any of its Subsidiaries within the meaning of Section 4001(a)(14) of ERISA, or is a member of a group which includes the Borrower or any of its Subsidiaries and which is treated as a single employer under Sections 414(b), (c), (m), or (o) of the Code.

 

“Eurodollar Loan” means a Revolving Loan bearing interest at the Adjusted Eurodollar Rate.

 

“Eurodollar Rate” means with respect to any Eurodollar Loan, for the Interest Period applicable thereto, a rate per annum determined pursuant to the following formula:

 

	
  

	
“Eurodollar Rate” =

	
London Interbank Offered Rate

	
  

	
1 - Eurodollar Reserve Percentage

 

“Eurodollar Reserve Percentage” means, for any day, that percentage (expressed as a decimal) which is in effect from time to time under Regulation D of the Board of Governors of the Federal Reserve System (or any successor), as such regulation may be amended from time to time or any successor regulation, as the maximum reserve requirement (including, without limitation, any basic, supplemental, emergency, special, or marginal reserves) applicable with respect to Eurocurrency liabilities, as that term is defined in Regulation D (or against any other category of liabilities that includes deposits by reference to which the interest rate of Eurodollar Loans is determined), whether or not a Lender has any Eurocurrency liabilities subject to such reserve requirement at that time.  Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities and as such shall be deemed subject to reserve requirements without benefit of credits or proration, exceptions or offsets that may be available from time to time to a Lender.  The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurodollar Reserve Percentage.

 

“Event of Default” has the meaning specified in Section 9.1.

 

  

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“Excluded Taxes” means, with respect to the Agent, any Lender (or any participant of a Lender), the L/C Issuer, or any other recipient of any payment to be made by or on account of any obligation of the Borrower hereunder:

 

(i) any Tax imposed on or measured by net income (however denominated), or any franchise Tax (or Tax on capital or net worth), that is: (a) imposed by the jurisdiction in which (or within a political subdivision of which) such recipient is organized or maintains an office; or (b) imposed by any other jurisdiction in which such recipient is subject to Tax as a result of a present, former, or future connection between the jurisdiction and such recipient (or affiliate of such recipient) (other than a connection arising solely as a result of the execution and the delivery of the Credit Documents, the receipt of payments under the Credit Documents, or the exercise of rights or performance of obligations under the Credit Documents);

 

(ii) any branch profits Taxes imposed by the United States or any similar Tax imposed by any other jurisdiction in which the Borrower or an office of such recipient is located;

 

(iii) any backup withholding Tax that is required by the Code to be withheld from amounts payable to a recipient that has failed to comply with Section 4.4(f)(i);

 

(iv) withholding Taxes that would not have been imposed but for a failure by any Lender (or participant of a Lender), or any legal or beneficial holder of an interest in any entity (other than an entity that is a “United States person” within the meaning of Section 7701(a)(30) of the Code) through which payments by or on account of any Borrower Obligations are made, to comply with any applicable reporting or other requirement if such compliance is required by FATCA as a precondition to relief or exemption from such Tax; and

 

(v) in the case of a Foreign Lender (other than an assignee pursuant to a request by the Borrower under Section 4.5), any U.S. withholding Tax that (a) is required to be imposed on amounts payable to such Foreign Lender pursuant to the laws in force at the time such Foreign Lender becomes entitled to any rights under this Agreement (or designates a new lending office), or (b) is attributable to such Foreign Lender’s failure or inability (other than as a result of a Change in Law) to comply with Section 4.4(f)(ii), (iii), or (iv).

 

“Existing Credit Agreements” means (a) the Credit Agreement dated as of June 13, 2006, among Peoples Energy Corporation, the financial institutions identified as lenders therein, and Bank of America, N.A., as agent for the lenders thereunder, and (b) the Credit Agreement dated as of June 9, 2006, among Integrys Energy Group, Inc. (formerly known as WPS Resources Corporation), the financial institutions identified as lenders therein, and Wachovia Bank, National Association, as agent for the lenders thereunder.

 

“Extension of Credit” means, as to any Lender, (i) the making of a Loan by such Lender (or a participation therein by a Lender) and (ii) the issuance of a Letter of Credit by an L/C Issuer (and the participation therein by the Lenders).

 

  

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“FATCA” means Sections 1471 though 1474 of the Code, as in effect on the date hereof.

 

“Fee Letters” means, collectively, (a) that certain letter agreement, dated as of April 18, 2011 among the Agent, Wells Fargo Securities, LLC, Citigroup Global Markets Inc. and the Borrower, (b) that certain letter agreement dated as of April 18, 2011 between the Agent and the Borrower and (c) that certain letter agreement, dated as of April 18, 2011 among the Borrower, The Bank of Nova Scotia and U.S. Bank National Association, in each case as amended, modified, supplemented or replaced from time to time.

 

“Federal Funds Rate” means, for any day, the rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate (rounded upward, if necessary, to a whole multiple of 1/100 of 1%) charged to Wells on such day on such transactions as determined by the Agent.

 

“FIN 46” means FASB Interpretation No. 46 “Consolidation of Variable Interest Entities” published January 2003 by the Financial Accounting Standards Board, as the same may be amended from time to time.

 

“First Mortgage Indentures” means (a) that certain First Mortgage and Deed of Trust dated as of January 1, 1941, from Wisconsin Public Service Corporation to U.S. Bank National Association (successor to First Wisconsin Trust Company), as trustee, as heretofore or hereafter amended, modified and supplemented and any substitute or replacement mortgage indenture, (b) that certain Indenture dated as of December 1, 1998, between Wisconsin Public Service Corporation and U.S. Bank National Association (successor to Firstar Bank Milwaukee, N.A.), as trustee, as heretofore or hereafter amended, modified and supplemented and any substitute or replacement mortgage indenture, (c) that certain Indenture of Mortgage dated May 1, 1947, from Upper Peninsula Power Company to U.S. Bank National Association (successor to City National Bank and Trust Company of Chicago), as trustee, as heretofore or hereafter amended, modified and supplemented and any substitute or replacement mortgage indenture, (d) that certain Indenture dated as of March 1, 1928, and restated as of June 1, 1951, between The Peoples Gas Light and Coke Company and U.S. Bank National Association (successor to Illinois Merchants Trust Company), as trustee, (which, among other things, assumed the First and Refunding Mortgage dated January 2, 1926 from Chicago By-Product Coke Company) as heretofore or hereafter amended, modified and supplemented and any substitute or replacement mortgage indenture and (e) that certain Indenture dated April 1,1955 from North Shore Gas Company to U.S. Bank National Association (successor to Continental Illinois National Bank and Trust Company of Chicago), as trustee, as heretofore or hereafter amended, modified and supplemented and any substitute or replacement mortgage indenture.

 

  

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“Foreign Lender” means (i) a Lender (or a participant of a Lender) that is neither a Disregarded Entity nor a “United States person” (as defined in Section 7701(a)(30) of the Code), and (ii) a Lender (or participant of a Lender) that is a Disregarded Entity and that is treated for U.S. federal income tax purposes as having as its sole member a Person that is itself neither a Disregarded Entity nor a “United States person” (as defined in Section 7701(a)(30) of the Code).

 

“Fronting Exposure” means, at any time there is a Defaulting Lender, (a) with respect to each L/C Issuer, such Defaulting Lender’s Commitment Percentage of the outstanding Letter of Credit Obligations in respect of Letters of Credit issued by such L/C Issuer other than Letter of Credit Obligations as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (b) with respect to the Swing Line Lender, such Defaulting Lender’s Commitment Percentage of Swing Line Loans other than Swing Line Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof.

 

“Funded Debt” of any Person means, without duplication, the sum of (a) all Indebtedness of such Person for borrowed money, except to the extent such Indebtedness is “non-recourse” to such Person or recourse for payment of such Indebtedness is limited to specific assets of such Person (whether or not included on a consolidated balance sheet of such Person), (b) the principal portion of all obligations of such Person under capital lease obligations, (c) all obligations, contingent or otherwise, relative to the face amount of all letters of credit issued to support Indebtedness of the kinds referred to in clauses (a) and (b) above, (d) all Guaranty Obligations of such Person with respect to Indebtedness and obligations of the type described in clauses (a) through (c) hereof of another Person; provided that such Guaranty Obligations are required to be reported as liabilities on a balance sheet of such Person prepared in accordance with GAAP (and without duplication of any liability already appearing as a liability on such balance sheet); and further provided that, in the event a Guaranty Obligation is limited as to dollar amount, such Guaranty Obligation shall not exceed such limitation, and (e) all Indebtedness and obligations of the type described in clauses (a), (b), and (c) hereof of another Person, secured by a Lien on any property of such Person whether or not such Indebtedness or obligations has been assumed by such Person.  Notwithstanding the foregoing, Funded Debt shall not include trust preferred securities, if any, shall not include interest on Indebtedness that is accrued in the ordinary course of business and shall not include intercompany Indebtedness.

 

“GAAP” means generally accepted accounting principles in the United States applied on a consistent basis and subject to Section 1.3; provided, however, that GAAP shall mean IFRS if and to the extent the Borrower elects to or is required to use IFRS in making public filings under the federal securities laws.

 

“Governmental Authority” means any Federal, state, local or foreign court or governmental agency, authority, instrumentality or regulatory body.

 

“Guaranty Obligations” means, with respect to any Person, without duplication, any obligations (other than endorsements in the ordinary course of business of negotiable 

 

  

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instruments for deposit or collection) guaranteeing any Funded Debt of any other Person in any manner, whether direct or indirect, and including without limitation any obligation, whether or not contingent, (a) to purchase any such Funded Debt, or (b) to advance or provide funds or other support for the payment or purchase of such Funded Debt or to maintain working capital, solvency or other balance sheet condition of such other Person.  The amount of any Guaranty Obligation hereunder shall (subject to any limitations set forth therein) be deemed to be an amount equal to the outstanding principal amount (or maximum principal amount, if larger) of the Indebtedness in respect of which such Guaranty Obligation is made; provided that, in the event a Guaranty Obligation is limited as to dollar amount, such Guaranty Obligation shall not exceed such limitation.

 

“Honor Date” has the meaning specified in Section 2.9(g).

 

“IFRS” means International Financial Reporting Standards as in effect from time to time.

 

“Indebtedness” of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or upon which interest payments are customarily made, (c) all obligations of such Person under conditional sale or other title retention agreements relating to property purchased by such Person to the extent of the value of such property (other than customary reservations or retentions of title under agreements with suppliers entered into in the ordinary course of business), (d) all obligations, other than intercompany items, of such Person issued or assumed as the deferred purchase price of property or services purchased by such Person which would appear as liabilities on a balance sheet of such Person (other than trade payables and pension and other deferred compensation obligations to officers, directors and employees), (e) all Indebtedness of others secured by (or for which the holder of such Indebtedness has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, (f) all Guaranty Obligations of such Person, (g) the principal portion of all obligations of such Person under (i) capital lease obligations and (ii) any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product of such Person where such transaction is considered borrowed money indebtedness for tax purposes but is classified as an operating lease in accordance with GAAP, (h) all obligations of such Person to repurchase any securities which repurchase obligation is related to the issuance thereof, including, without limitation, obligations commonly known as residual equity appreciation potential shares, (i) the net obligations of such Person in respect of interest rate protection agreements, foreign currency exchange agreements, Permitted Energy Transactions or other interest or exchange rate hedging arrangements, and (j) the maximum amount of all outstanding performance and standby letters of credit issued or bankers’ acceptance facilities created for the account of such Person and, without duplication, all drafts drawn thereunder (to the extent unreimbursed).  The Indebtedness of any Person shall include the recourse Indebtedness of any partnership or unincorporated joint venture and for which such Person is legally obligated.

 

“Indemnified Taxes” means Taxes other than Excluded Taxes and Other Taxes.

 

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

 

  

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“Interest Payment Date” means (a) as to Base Rate Loans (including Swing Line Loans), monthly in arrears on the first day of each calendar month of the Borrower and the Maturity Date and (b) as to Eurodollar Loans, the last day of each applicable Interest Period, in the case of an Interest Period of longer than three months, the day that is three months after the first day of such Interest Period and the Maturity Date.  If an Interest Payment Date falls on a date which is not a Business Day, such Interest Payment Date shall be deemed to be the next succeeding Business Day, except that in the case of Eurodollar Loans where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding day.

 

“Interest Period” means, as to Eurodollar Loans, a period of one, two, three or six months duration, as the Borrower may elect, commencing, in each case, on the date of the borrowing (including continuations and conversions of Eurodollar Loans); provided, however, (a) if any Interest Period would end on a day which is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day (except that where the next succeeding Business Day falls in the next succeeding calendar month, then on the next preceding Business Day), (b) no Interest Period shall extend beyond the Maturity Date and (c) where an Interest Period begins on a day for which there is no numerically corresponding day in the calendar month in which the Interest Period is to end, such Interest Period shall end on the last Business Day of such calendar month.

 

“L/C Advance” means, with respect to any Lender, such Lender’s funding of its participation in any Extension of Credit with respect to Letters of Credit in accordance with its Commitment Percentage.

 

“L/C Issuer” means Wells Fargo Bank, National Association, Citibank, N.A., The Bank of Nova Scotia, U.S. Bank National Association or any other Lender (so long as such Lender expressly agrees to perform in accordance with their terms all of the obligations that by the terms of this Credit Agreement are required to be performed by it as an L/C Issuer and notifies the Agent and the Borrower of such express agreement).

 

“Lender” means any of the Persons identified as a “Lender” on the signature pages hereto, any Person added as a Lender pursuant to Section 2.6 and any Eligible Assignee which may become a Lender by way of assignment in accordance with the terms hereof, together with their successors and permitted assigns and, unless the context otherwise requires, includes each L/C Issuer and the Swing Line Lender.

 

“L/C Issuer Limit” means, with respect to each L/C Issuer, the maximum amount of Letter of Credit Obligations related to Letters of Credit issued by such L/C Issuer as set forth in the Register maintained by the Agent pursuant to Section 11.3(c).  The respective L/C Issuer Limits of Wells Fargo Bank, National Association, Citibank, N.A., The Bank of Nova Scotia and U.S. Bank National Association shall be 25% of the Letter of Credit Sublimit (unless such L/C Issuer in its sole discretion agrees with the Borrower to a greater amount from time to time), and shall be ratably and automatically reduced by the L/C Issuer Limit of any other Lender that becomes an L/C Issuer.

 

“Letter of Credit Obligations” means the amount available to be drawn on all outstanding Letters of Credit plus, without duplication, any unpaid reimbursement obligations of 

 

  

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the Borrower under the Letters of Credit; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any LOC Document related thereto, provides for one or more automatic increases in the stated amount thereof, the amount available to be drawn on such Letter of Credit shall be deemed to be the maximum amount available to be drawn on such Letter of Credit after giving effect to all such increases, whether or not such maximum stated amount is in effect at such time.

 

“Letter of Credit Sublimit” means $275,000,000 (provided that the foregoing amount shall be increased or decreased automatically on a proportionate basis with the amount of any increase or decrease in the aggregate Revolving Loan Commitment made pursuant to Section 2.6(b), effective as of the date thereof).  The Letter of Credit Sublimit is part of, and not in addition to, the Revolving Loan Commitment.

 

“Letters of Credit” is defined in Section 2.9.

 

“Leverage Ratio” means, with respect to the Borrower and its Subsidiaries at any date of determination, the ratio of (a) Total Funded Debt to, (b) Capitalization, in each case calculated in accordance with GAAP.

 

“Lien” means any mortgage, pledge, hypothecation, assignment for security, deposit arrangement, security interest, encumbrance, lien (statutory or otherwise), priority or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any unterminated financing or similar statement or notice filed under the Uniform Commercial Code as adopted and in effect in the relevant jurisdiction or other similar recording or notice statute, and any lease in the nature thereof).  The term “Lien” shall not include statutory priorities or financing statements filed in connection with operating leases or sales of accounts owed by customers for energy provided or to be provided outside the normal franchise service areas of the utility subsidiaries of the Borrower.

 

“Loans” means the Revolving Loans and the Swing Line Loans.

 

“LOC Documents” means, with respect to any Letter of Credit, such Letter of Credit, any amendments thereto, any documents delivered in connection therewith, any application therefor, and any agreements, instruments, guarantees or other documents (whether general in application or applicable only to such Letter of Credit) governing or providing for (a) the rights and obligations of the parties concerned or at risk or (b) any collateral security for such obligations.

 

“London Banking Day” means any day on which dealings in Dollar deposits are conducted by and between banks in the London interbank eurodollar market.

 

“London Interbank Offered Rate” means

 

(a) For any Interest Period with respect to a Eurodollar Loan, the rate per annum equal to (A) the British Bankers Association LIBOR Rate as published by Reuters (or other commercially available source providing quotations of BBA LIBOR as designated by the Agent from time to time) (“BBA LIBOR”), at approximately 11:00 a.m., London time, two London Banking Days prior to the commencement of such Interest Period, for Dollar deposits (for 

 

  

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delivery on the first day of such Interest Period) with a term equivalent to such Interest Period or (B) if such published rate is not available at such time for any reason, the rate determined by the Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the Eurodollar Loan being made, continued or converted by Wells and with a term equivalent to such Interest Period would be offered by Wells’s London Branch to major banks in the London interbank Eurodollar market at their request at approximately 11:00 a.m. (London time) two London Banking Days prior to the commencement of such Interest Period.

 

(b) For any interest rate calculation with respect to a Base Rate Loan, the rate per annum equal to (i) BBA LIBOR, at approximately 11:00 a.m., London time determined two London Banking Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate determined by the Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Base Rate Loan being made, continued or converted by Wells and with a term equal to one month would be offered by Wells’s London Branch to major banks in the London interbank Eurodollar market at their request at the date and time of determination. 

 

“Material Adverse Effect” means a material adverse effect on (a) the operations, financial condition or business of the Borrower and its Subsidiaries, taken as a whole, (b) the ability of the Borrower to perform its obligations under this Credit Agreement or (c) the validity or enforceability of this Credit Agreement, any of the other Credit Documents, or the rights and remedies of the Lenders hereunder or thereunder; provided that matters disclosed in writing to the Lenders prior to the Closing Date shall not be deemed to cause a Material Adverse Effect.

 

“Maturity Date” means the earlier to occur of (a) May 17, 2014 and (b) the date of termination or reduction in whole of the Commitments pursuant to section 2.6 or 9.2.

 

“Moody’s” means Moody’s Investors Service, Inc., or any successor or assignee of the business of such company in the business of rating securities.

 

“Multiemployer Plan” means a Plan covered by Title IV of ERISA which is a multiemployer plan as defined in Section 3(37) or 4001(a)(3) of ERISA.

 

“Multiple Employer Plan” means a Plan covered by Title IV of ERISA, other than a Multiemployer Plan, which the Borrower or any ERISA Affiliate and at least one employer other than the Borrower or any ERISA Affiliate are contributing sponsors.

 

“Net Worth” means, as of any date, the shareholders’ equity or net worth of the Borrower and its Subsidiaries, on a consolidated basis, as determined in accordance with GAAP, but excluding any other (non-cash) comprehensive income.

 

“Notes” means the promissory notes of the Borrower in favor of each Lender evidencing the Revolving Loans and substantially in the form of Exhibit 2.7, as such promissory notes may be amended, modified, supplemented or replaced from time to time.

 

  

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“Notice of Borrowing” means a request by the Borrower for a Revolving Loan in the form of Exhibit 2.2.

 

“Notice of Continuation/Conversion” means a request by the Borrower for the continuation or conversion of a Revolving Loan in the form of Exhibit 2.4.

 

“Other Taxes” means all present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies arising from any payment made under this Agreement or under any other Credit Document or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Credit Document.

 

“PBGC” means the Pension Benefit Guaranty Corporation established pursuant to Subtitle A of Title IV of ERISA and any successor thereto.

 

“Permitted Energy Transactions” means commodity sale, purchase or option agreements or other commodity transactions or purchase or sale of weather derivatives entered into by the Borrower or any Principal Subsidiary in the ordinary course of the energy or energy related industry for non-speculative purposes relating to the purchase or sale of electric power, electric power transmission capacity, electric generation capacity, natural gas, natural gas transportation capacity, natural gas storage, generation spark spreads, heating oil, crude oil, propane, coal or currency.

 

“Person” means any individual, partnership, joint venture, firm, corporation, association, trust, limited liability company or other enterprise (whether or not incorporated), or any government or political subdivision or any agency, department or instrumentality thereof.

 

“Plan” means any employee benefit plan (as defined in Section 3(3) of ERISA) which is covered by ERISA and with respect to which the Borrower or any ERISA Affiliate is (or, if such plan were terminated at such time, would under Section 4069 of ERISA be deemed to be) an “employer” within the meaning of Section 3(5) of ERISA.

 

“Platform” has the meaning specified in Section 7.1.

 

“Prime Rate” means the rate of interest in effect for such day as publicly announced from time to time by Wells as its “prime rate.”  The “prime rate” is a rate set by Wells based upon various factors including Wells’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate.  Any change in such rate announced by Wells shall take effect at the opening of business on the day specified in the public announcement of such change.

 

“Principal Subsidiary” means any Subsidiary, whether owned directly or indirectly by the Borrower, which, with respect to the Borrower and its Subsidiaries taken as a whole, represents at least twenty percent (20%) of the Borrower’s consolidated assets or the Borrower’s consolidated net income (or loss), as shown on the most recent financial statements delivered to the Agent pursuant to Section 7.1 below.

 

  

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“Public Debt Rating” means, as of any date, the rating that has been most recently announced by either S&P or Moody’s, as the case may be, for any class of non-credit enhanced long-term senior unsecured debt issued by the Borrower.

 

“Related Parties” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees and advisors of such Person and of such Person’s Affiliates.

 

“Reportable Event” means a “reportable event” as defined in Section 4043 of ERISA with respect to which the notice requirements to the PBGC have not been waived.

 

“Required Lenders” means Lenders whose aggregate Credit Exposure (as hereinafter defined) constitutes more than 51% of the aggregate Credit Exposure of all Lenders at such time; provided, however, that if any Lender shall be a Defaulting Lender at such time then there shall be excluded from the determination of Required Lenders the aggregate principal amount of Credit Exposure of such Lender at such time.  For purposes of the preceding sentence, the term “Credit Exposure” as applied to each Lender shall mean (a) at any time prior to the termination of the Revolving Loan Commitment, the Commitment Percentage of such Lender multiplied by the Revolving Loan Commitment and (b) at any time after the termination of the Revolving Loan Commitment, the principal balance of the outstanding Revolving Loans of such Lender plus the Commitment Percentage of such Lender multiplied by the Letter of Credit Obligations plus the Commitment Percentage of such Lender multiplied by the principal balance of outstanding Swing Line Loans.

 

“Responsible Officer” means the chief executive officer, president, chief financial officer, treasurer, assistant treasurer or controller of the Borrower and any other employee of the Borrower so designated by any one of the foregoing officers in a notice to the Agent.  Any document delivered hereunder that is signed by a Responsible Officer of the Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of the Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of the Borrower.

 

“Revolving Loan Commitment” means, collectively, TWO HUNDRED SEVENTY FIVE MILLION DOLLARS ($275,000,000), subject to amendment pursuant to Section 2.6, and with respect to each Lender, shall mean such amount multiplied by such Lender’s Commitment Percentage (which, as of the date hereof, is set forth opposite such Lender’s name on Schedule 1.1 attached hereto).

 

“Revolving Loans” means the loans made by the Lenders to the Borrower pursuant to Section 2.1.

 

“S&P” means Standard & Poor’s, a division of The McGraw Hill Companies, Inc., or any successor or assignee of the business of such division in the business of rating securities.

 

“Single Employer Plan” means any Plan which is covered by Title IV of ERISA, but which is not a Multiemployer Plan.

 

  

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“Subsidiary” means, as to any Person, (a) any corporation more than 50% of whose stock of any class or classes having by the terms thereof ordinary voting power to elect a majority of the directors of such corporation (irrespective of whether or not at the time, any class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time owned by such Person directly or indirectly through Subsidiaries and (b) any partnership, association, joint venture, limited liability company or other entity in which such person directly or indirectly through Subsidiaries has more than 50% equity interest at any time.

 

“Swing Line Lender” means Wells in its capacity as provider of Swing Line Loans, or any successor swing line lender hereunder.

 

“Swing Line Loan” means a loan made by the Swing Line Lender to the Borrower under Section 2.8(a).

 

“Swing Line Loan Notice” means a notice of a Swing Line Borrowing pursuant to Section 2.8(b), which, if in writing, shall be substantially in the form of Exhibit 2.8.

 

“Swing Line Sublimit” means an amount equal to the lesser of (a) $25,000,000 and (b) the aggregate Revolving Loan Commitment.  The Swing Line Sublimit is part of, and not in addition to, the aggregate Revolving Loan Commitment.

 

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

 

“Termination Event” means (a) with respect to any Single Employer Plan, the occurrence of a Reportable Event or the substantial cessation of operations (within the meaning of Section 4062(e) of ERISA), (b) the withdrawal of the Borrower or any ERISA Affiliate from a Multiple Employer Plan during a plan year in which it was a substantial employer (as such term is defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple Employer Plan, (c) the distribution of a notice of intent to terminate or the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of ERISA, (d) the institution of proceedings to terminate or the actual termination of a Plan by the PBGC under Section 4042 of ERISA, (e) any event or condition which might reasonably constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (f) the complete or partial withdrawal of the Borrower or any ERISA Affiliate from a Multiemployer Plan.

 

“Total Assets” means all assets of the Borrower and its Subsidiaries as shown on its most recent quarterly or annual audited consolidated balance sheet, as determined in accordance with GAAP.

 

“Total Funded Debt” means all Funded Debt of the Borrower and its Subsidiaries, without duplication, on a consolidated basis, as determined in accordance with GAAP.

 

“Unreimbursed Amount” has the meaning specified in Section 2.9(g).

 

  

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“Voting Stock” means all classes of the capital stock (or other voting interests) of a Person then outstanding and normally entitled to vote in the election of directors.

 

1.2 Computation of Time Periods.

 

For purposes of computation of periods of time hereunder, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding.”  References in this Credit Agreement to “Articles”, “Sections”, “Schedules” or “Exhibits” shall be to Articles, Sections, Schedules or Exhibits of or to this Credit Agreement unless otherwise specifically provided.

 

1.3 Accounting Terms.

 

Except as otherwise expressly provided herein, all accounting terms used herein shall be interpreted, and all financial statements and certificates and reports as to financial matters required to be delivered to the Lenders hereunder shall be prepared, in accordance with GAAP applied in a manner consistent with those used in preparing the financial statements referred to in Section 5.1(d).  In the event that any changes occur in GAAP after the date of this Credit Agreement and such changes result in a material variation in the method of calculation of financial covenants or other terms of this Credit Agreement, then the Borrower, the Agent and the Lenders agree to amend such provisions of this Credit Agreement so as to equitably reflect such changes in order that the criteria for evaluating the Borrower’s financial condition will be the same after such changes as if such changes had not occurred.  Notwithstanding the foregoing, any entity that is not a Subsidiary but would be required to be consolidated in the financial statements of the Borrower because of FIN 46, (i) shall not be considered a “Subsidiary” for purposes of this Credit Agreement and (ii) shall not be included in any computation of any financial covenant herein.

 

1.4 Letter of Credit Amounts.

 

Unless otherwise specified herein, the amount of a Letter of Credit at any time shall be deemed to be the outstanding stated amount of such Letter of Credit in effect at such time; provided, however, that with respect to any Letter of Credit that, by its terms or the terms of any Issuer Document related thereto, provides for one or more automatic increases in the outstanding stated amount thereof, the amount of such Letter of Credit shall be deemed to be the maximum stated amount of such Letter of Credit after giving effect to all such increases, whether or not such maximum outstanding stated amount is in effect at such time.

 

Section 2. LOANS

 

2.1 Revolving Loan Commitment.

 

Subject to the terms and conditions set forth herein, each Lender severally agrees to make revolving loans to the Borrower in Dollars, at any time and from time to time, during the period from the Effective Date to the Maturity Date (each a “Revolving Loan” and collectively the “Revolving Loans”); provided, however, that (i) the sum of the aggregate amount of Revolving Loans outstanding plus the aggregate amount of Swing Line Loans outstanding shall not exceed the amount of the Revolving Loan Commitment minus the Letter of Credit 

 

  

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Obligations and (ii) with respect to each individual Lender, the Lender's pro rata share of outstanding Revolving Loans plus such Lender's Commitment Percentage of outstanding Swing Line Loans shall not exceed such Lender's Commitment Percentage of the amount of the Revolving Loan Commitment minus such Lender’s Commitment Percentage of the Letter of Credit Obligations.  Subject to the terms of this Credit Agreement, the Borrower may borrow, repay and reborrow Revolving Loans.

 

2.2 Method of Borrowing for Revolving Loans.

 

By no later than 1:00 p.m. (Charlotte, North Carolina time) (a) on the date of the requested borrowing of Revolving Loans that will be Base Rate Loans or (b) three Business Days prior to the date of the requested borrowing of Revolving Loans that will be Eurodollar Loans, the Borrower shall submit a written Notice of Borrowing in the form of Exhibit 2.2 to the Agent setting forth (i) the amount requested, (ii) whether such Revolving Loans shall accrue interest at the Base Rate or the Adjusted Eurodollar Rate, (iii) with respect to Revolving Loans that will be Eurodollar Loans, the Interest Period applicable thereto and (iv) certification that the Borrower has complied in all respects with Section 5.2.

 

2.3 Funding of Revolving Loans.

 

Upon receipt of a Notice of Borrowing, the Agent shall promptly inform the Lenders as to the terms thereof.  Each such Lender shall make its Commitment Percentage of the requested Revolving Loans available to the Agent by 3:00 p.m. (Charlotte, North Carolina time) on the date specified in the Notice of Borrowing by deposit, in Dollars, of immediately available funds at the principal offices of the Agent in Charlotte, North Carolina or at such other address as the Agent may designate in writing.  The amount of the requested Revolving Loans will then be made available to the Borrower by the Agent by crediting the account of the Borrower on the books of such office of the Agent, to the extent the amount of such Revolving Loans are made available to the Agent.

 

No Lender shall be responsible for the failure or delay by any other Lender in its obligation to make Revolving Loans hereunder; provided, however, that the failure of any Lender to fulfill its obligations hereunder shall not relieve any other Lender of its obligations hereunder.  Unless the Agent shall have been notified by any Lender prior to the date of any such Revolving Loan that such Lender does not intend to make available to the Agent its portion of the Revolving Loans to be made on such date, the Agent may assume that such Lender has made such amount available to the Agent on the date of such Revolving Loans, and the Agent in reliance upon such assumption, may (in its sole discretion but without any obligation to do so) make available to the Borrower a corresponding amount.  If such corresponding amount is not in fact made available to the Agent, the Agent shall be able to recover such corresponding amount from such Lender.  If such Lender does not pay such corresponding amount forthwith upon the Agent’s demand therefor, the Agent will promptly notify the Borrower, and the Borrower shall immediately pay such corresponding amount to the Agent.  The Agent shall also be entitled to recover from the Lender or the Borrower, as the case may be, interest on such corresponding amount in respect of each day from the date such corresponding amount was made available by the Agent to the Borrower to the date such corresponding amount is recovered by the Agent at a 

 

  

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per annum rate equal to (i) from the Borrower at the applicable rate for such Revolving Loan pursuant to the Notice of Borrowing and (ii) from a Lender at the Federal Funds Rate.

 

2.4 Continuations and Conversions.

 

The Borrower shall have the option, on any Business Day, to continue existing Eurodollar Loans for a subsequent Interest Period, to convert Base Rate Loans into Eurodollar Loans or to convert Eurodollar Loans into Base Rate Loans; provided, however, that (a) each such continuation or conversion must be requested by the Borrower pursuant to a Notice of Continuation/Conversion, in the form of Exhibit 2.4, in compliance with the terms set forth below, (b) except as provided in Section 4.1, Eurodollar Loans may only be continued or converted into Base Rate Loans on the last day of the Interest Period applicable hereto, (c) Eurodollar Loans may not be continued nor may Base Rate Loans be converted into Eurodollar Loans during the existence and continuation of an Event of Default and (d) any request to extend a Eurodollar Loan that fails to comply with the terms hereof or any failure to request an extension of a Eurodollar Loan at the end of an Interest Period shall constitute a conversion to a Base Rate Loan on the last day of the applicable Interest Period.  Each continuation or conversion must be requested by the Borrower no later than 1:00 p.m. (Charlotte, North Carolina time) (i) on the date for a requested conversion of a Eurodollar Loan to a Base Rate Loan or (ii) three Business Days prior to the date for a requested continuation of a Eurodollar Loan or conversion of a Base Rate Loan to a Eurodollar Loan, in each case pursuant to a written Notice of Continuation/Conversion submitted to the Agent which shall set forth (A) whether the Borrower wishes to continue or convert such Loans and (B) if the request is to continue a Eurodollar Loan or convert a Base Rate Loan to a Eurodollar Loan, the Interest Period applicable thereto.

 

The Borrower hereby authorizes the Lenders and the Agent to extend, convert or continue Eurodollar Loans or Base Rate Loans, effect selection of Eurodollar Loans or Base Rate Loans and to transfer funds based in each case on telephonic notices made by any person or persons the Agent or any Lender reasonably believes to be acting on behalf of the Borrower.  The Borrower agrees to deliver promptly to the Agent a written confirmation of each telephonic notice signed by a Responsible Officer of the Borrower.  If the written confirmation differs in any material respect from the action taken by the Agent and the Lenders, the records of the Agent and the Lenders shall govern absent demonstrable error.

 

2.5 Minimum Amounts.

 

Each request for a Revolving Loan or a conversion or continuation hereunder shall be subject to the following requirements: (a) each Eurodollar Loan shall be in a minimum of $5,000,000 (and in integral multiples of $1,000,000 in excess thereof), (b) each Base Rate Loan shall be in a minimum amount of the lesser of $1,000,000 (and in integral multiples of $250,000 in excess thereof) or the remaining amount available to be borrowed and (c) no more than twelve Eurodollar Loans shall be outstanding hereunder at any one time.  For the purposes of this Section, all Eurodollar Loans with the same Interest Periods that begin and end on the same date shall be considered as one Eurodollar Loan, but Eurodollar Loans with different Interest Periods, even if they begin on the same date, shall be considered separate Eurodollar Loans.

 

  

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2.6 Reductions and Increases of Revolving Loan Commitment.

 

(a) Ratable Reduction.  Upon at least five Business Days’ notice, the Borrower shall have the right to permanently terminate or reduce the aggregate unused amount of the Revolving Loan Commitment at any time and from time to time; provided that (i) each partial reduction shall be in an aggregate amount at least equal to $10,000,000 and in integral multiples of $1,000,000 above such amount and (ii) no reduction shall be made which would reduce the Revolving Loan Commitment to an amount less than the then outstanding Loans plus the Letter of Credit Obligations.  Any reduction in (or termination of) the Revolving Loan Commitment shall reduce the Revolving Loan Commitment of each Lender on a ratable basis and shall be permanent and may not be reinstated.

 

(b) Increase.  The Borrower may request at any time and from time to time that the aggregate amount of the Revolving Loan Commitment be increased up to a maximum amount of $325,000,000; provided that (i) no increase in the Revolving Loan Commitment shall be made at a time when a Default or Event of Default shall have occurred and be continuing or would result from the requested increase, (ii) no increase in the Revolving Loan Commitment shall be made at any time after the Revolving Loan Commitment has been terminated, (iii) each partial increase shall be made in an aggregate amount at least equal to $10,000,000 and in integral multiples of $5,000,000 above such amount, (iv) the Borrower shall have delivered to the Agent certified resolutions of the Board of Directors of the Borrower authorizing such increase and borrowings in connection therewith and (v) all of the representations and warranties set forth in Section 6 (except for those contained in Sections 6.7 and 6.10) shall be true and correct in all material respects as of the date of such request and as of the effective date of such increase.  In the event of such a requested increase in the Revolving Loan Commitment, (i) each of the Lenders shall be given the opportunity to participate in the increased Revolving Loan Commitment (x) initially to the extent of such Lender’s existing Commitment Percentage, (y) to the extent that the requested increase of the Revolving Loan Commitment is not fulfilled pursuant to the preceding clause (x), ratably in the proportion that the respective Commitment Percentages of the Lenders desiring to participate in the requested increase bear to the total of the Commitment Percentages of the increasing Lenders, and (z) to the extent that the requested increase in Revolving Loan Commitment is not fulfilled pursuant to clauses (x) and (y), Lenders may participate regardless of their Commitment Percentages, and (ii) to the extent that the Lenders do not elect so to participate in such increased Revolving Loan Commitment after an opportunity to do so, then the Borrower shall consult with the Agent as to the number, identity and requested Revolving Loan Commitments of additional financial institutions that the Agent may invite to participate in the aggregate Revolving Loan Commitment.  The Agent will not unreasonably refuse to so invite a commercial bank organized under the laws of the United States or of any State thereof, identified and requested by the Borrower, that has capital and surplus reasonably satisfactory to the Agent in light of the Revolving Loan Commitment which such commercial bank would assume hereunder.  The Agent shall promptly notify the Borrower and the Lenders of any increase in the amount of the aggregate Revolving Loan Commitment pursuant to this Section and of the respective adjusted Revolving Loan Commitment and Commitment Percentage of each Lender after giving effect thereto.  The Borrower acknowledges that, in order to maintain Loans in accordance with the Commitment Percentage of each Lender, a non-pro-rata increase in the aggregate Revolving Loan 

 

  

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Commitment may require prepayment or funding of all or portions of certain Revolving Loans on the date of such increase (and any such prepayment or funding shall be subject to the other provisions of this Credit Agreement).

 

(c) Non-Ratable Reduction.  The Borrower shall have the right, at any time, upon at least ten Business Days’ notice to a Defaulting Lender (with a copy to the Agent), to terminate in whole such Lender’s Revolving Loan Commitment.  Such termination shall be effective, (x) with respect to such Lender’s unused Revolving Loan Commitment, on the date set forth in such notice, provided, however, that such date shall be no earlier than ten Business Days after receipt of such notice and (y) with respect to each Revolving Loan outstanding to such Lender, in the case of a Base Rate Loan, on the date set forth in such notice and, in the case of a Eurodollar Loan, on the last day of the then current Interest Period relating to such Loan.  Upon termination of a Lender’s Revolving Loan Commitment under this Section 2.6(c), the Borrower will pay or cause to be paid all principal of, and interest accrued to the date of such payment on, Loans owing to such Lender and pay any accrued Commitment Fees payable to such Lender pursuant to the provisions of Section 3.4, and all other amounts payable to such Lender hereunder (including, but not limited to, any increased costs or other amounts owing under Section 4.1 or 4.2 and any indemnification for Taxes under Section 4.4); and upon such payments, the obligations of such Lender hereunder shall, by the provisions hereof, be released and discharged; provided, however, that such Lender’s rights under Sections 4.1, 4.2, 4.4 and 11.5, and its obligations under Section 10.7 shall survive such release and discharge as to matters occurring prior to such date.  Except in accordance with Section 2.6(b), the aggregate amount of the Revolving Loan Commitment of the Lenders once reduced pursuant to this Section 2.6(c) may not be reinstated.

 

2.7 Evidence of Debt.

 

(a) The Revolving Loans made by each Lender shall be evidenced by one or more accounts or records maintained by such Lender and by the Agent in the ordinary course of business.  The accounts or records maintained by the Agent and each Lender shall be conclusive absent demonstrable error of the amount of the Revolving Loans made by the Lenders to the Borrower and the interest and payments thereon.  Any failure to so record or any error in doing so shall not, however, limit or otherwise affect the obligation of the Borrower hereunder to pay any amount owing with respect to the Obligations.  In the event of any conflict between the accounts and records maintained by any Lender and the accounts and records of the Agent in respect of such matters, the accounts and records of the Agent shall control in the absence of demonstrable error.  Upon the request of any Lender made through the Agent, the Borrower shall execute and deliver to such Lender (through the Agent) a duly executed promissory note of the Borrower payable to each Lender in substantially the form of Exhibit 2.7 (the “Notes”), in a principal amount equal to the amount of such Lender’s Commitment Percentage of the Revolving Loan Commitment as originally in effect.

 

(b) In addition to the accounts and records referred to in subsection (a), each Lender and the Agent shall maintain in accordance with its usual practice accounts or records evidencing the purchases and sales by such Lender of participations in Letters of Credit and Swing Line Loans.  In the event of any conflict between the accounts and records maintained 

 

  

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by the Agent and the accounts and records of any Lender in respect of such matters, the accounts and records of the Agent shall control in the absence of demonstrable error.

 

2.8 Swing Line Loans.

 

(a) The Swing Line.  Subject to the terms and conditions set forth herein, during the period from the Effective Date to the Maturity Date, Swing Line Lender, in reliance upon the agreements of the other Lenders set forth in this Section 2.8 agrees to make Swing Line Loans to the Borrower as the Borrower may from time to time request for the purposes permitted hereby; provided, however, that (i) the aggregate amount of Swing Line Loans outstanding shall not exceed the Swing Line Sublimit, notwithstanding the fact that such Swing Line Loans, when aggregated with the outstanding principal amount of Revolving Loans made by the Lender acting as Swing Line Lender and such Lender’s Commitment Percentage of the outstanding Letter of Credit Obligations may exceed such Lender’s Commitment Percentage of the Revolving Loan Commitment, (ii) the sum of all Loans outstanding shall not exceed the amount of the Revolving Loan Commitment minus the Letter of Credit Obligations and (iii) the Borrower shall not use the proceeds of any Swing Line Loan to refinance any outstanding Swing Line Loan.  This is a revolving credit and, subject to the foregoing and the other terms and conditions hereof, the Borrower may borrow, prepay and reborrow Swing Line Loans as set forth herein without premium or penalty.  Immediately upon the making of a Swing Line Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchased from the Swing Line Lender a risk participation in such Swing Line Loan in an amount equal to the product of such Lender’s Commitment Percentage times the amount of such Swing Line Loan.  Each Swing Line Loan shall bear interest at a rate equal to the rate applicable to Base Rate Loans.

 

(b) Borrowing Procedures.  Each Swing Line Borrowing shall be made upon the Borrower’s irrevocable notice to the Swing Line Lender and the Agent, which may be given by telephone.  Each such notice must be received by the Swing Line Lender and the Agent not later than 4:00 p.m. (Charlotte, North Carolina time) on the requested borrowing date, and shall specify (i) the amount to be borrowed, which shall be a minimum of $1,000,000, and (ii) the requested borrowing date, which shall be a Business Day.  Each such telephonic notice must be confirmed promptly by delivery to the Swing Line Lender and the Agent of a written Swing Line Loan Notice, appropriately completed and signed by a Responsible Officer of the Borrower.  Promptly after receipt by the Swing Line Lender of any telephonic Swing Line Loan Notice, the Swing Line Lender will confirm with the Agent (by telephone or in writing) that the Agent has also received such Swing Line Loan Notice and, if not, the Swing Line Lender will notify the Agent (by telephone or in writing) of the contents thereof.  Unless the Swing Line Lender has received notice (by telephone or in writing) from the Agent (including at the request of any Lender) prior to 4:45 p.m. (Charlotte, North Carolina time) on the date of the proposed Swing Line Borrowing (A) directing the Swing Line Lender not to make such Swing Line Loan as a result of the limitations set forth in the first proviso to the first sentence of Section 2.8(a), or (B) that one or more of the applicable conditions specified in Section 5.2 is not then satisfied, then, subject to the terms and conditions hereof, the Swing Line Lender will, not later than 5:30 p.m. (Charlotte, North Carolina time) on the borrowing date specified in such Swing Line Loan Notice, make the amount of its Swing Line Loan available to the Borrower at its office by crediting the account of the Borrower on the books of the Swing Line Lender in immediately available funds.

 

  

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(c) Refinancing of Swing Line Loans.

 

(i) The Swing Line Lender at any time in its sole discretion may request, on behalf of the Borrower (which hereby irrevocably authorizes the Swing Line Lender to so request on its behalf), that each Lender make a Base Rate Loan in an amount equal to such Lender’s Commitment Percentage of the amount of Swing Line Loans then outstanding.  Such request shall be made in writing (which written request shall be deemed to be a Notice of Borrowing for purposes hereof) and in accordance with the requirements of Section 2.2, without regard to the minimum and multiples specified therein for the principal amount of Base Rate Loans in Section 2.5, but subject to the unutilized portion of the Revolving Loan Commitments and the conditions set forth in Section 5.2.  The Swing Line Lender shall furnish the Borrower with a copy of the applicable Notice of Borrowing promptly after delivering such notice to the Agent.  Each Lender shall make an amount equal to its Commitment Percentage of the amount specified in such Notice of Borrowing available to the Agent in immediately available funds (and the Agent may apply Cash Collateral available with respect to the applicable Swing Line Loan) for the account of the Swing Line Lender at the Agent’s Office not later than 3:00 p.m. (Charlotte, North Carolina time) on the day specified in such Notice of Borrowing (provided such Lender receives the applicable Notice of Borrowing prior to 1:00 p.m. (Charlotte, North Carolina time) on such day, whereupon, subject to Section 2.8(c)(ii), each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount.  The Agent shall remit the funds so received to the Swing Line Lender.

 

(ii) If for any reason any Swing Line Loan cannot be refinanced by such a Committed Borrowing in accordance with Section 2.8(c)(i), the request for Base Rate Loans submitted by the Swing Line Lender as set forth herein shall be deemed to be a request by the Swing Line Lender that each of the Lenders fund its risk participation in the relevant Swing Line Loan and each Lender’s payment to the Agent for the account of the Swing Line Lender pursuant to Section 2.8(c)(i) shall be deemed payment in respect of such participation.

 

(iii) If any Lender fails to make available to the Agent for the account of the Swing Line Lender any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 2.8(c) by the time specified in Section 2.8(c)(i), the Swing Line Lender shall be entitled to recover from such Lender (acting through the Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to the Swing Line Lender at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the Swing Line Lender in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by the Swing Line Lender in connection with the foregoing.  If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Revolving Loan included in the relevant Committed Borrowing or funded participation in the relevant Swing Line Loan, as the case may be.  A certificate of the Swing Line Lender submitted to any Lender (through the Agent) with respect to any amounts owing under this clause (iii) shall be conclusive absent demonstrable error.

 

  

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(iv) Each Lender’s obligation to make Revolving Loans or to purchase and fund risk participations in Swing Line Loans pursuant to this Section 2.8(c) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against the Swing Line Lender, the Borrower or any other Person for any reason whatsoever, (B) the occurrence or continuance of a Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided, however, that each Lender’s obligation to make Revolving Loans pursuant to this Section 2.8(c) is subject to the conditions set forth in Section 5.2.  No such funding of risk participations shall relieve or otherwise impair the obligation of the Borrower to repay Swing Line Loans, together with interest as provided herein.

 

(d) Repayment of Participations.

 

(i) At any time after any Lender has purchased and funded a risk participation in a Swing Line Loan, if the Swing Line Lender receives any payment on account of such Swing Line Loan, the Swing Line Lender will distribute to such Lender its Commitment Percentage thereof in the same funds as those received by the Swing Line Lender.

 

(ii) If any payment received by the Swing Line Lender in respect of principal or interest on any Swing Line Loan is required to be returned by the Swing Line Lender under any of the circumstances described in Section 11.13 (including pursuant to any settlement entered into by the Swing Line Lender in its discretion), each Lender shall pay to the Swing Line Lender its Commitment Percentage thereof on demand of the Agent, plus interest thereon from the date of such demand to the date such amount is returned, at a rate per annum equal to the Federal Funds Rate.  The Agent will make such demand upon the request of the Swing Line Lender.  The obligations of the Lenders under this clause shall survive the payment in full of the Obligations and the termination of this Credit Agreement.

 

(e) Interest for Account of Swing Line Lender.  The Swing Line Lender shall be responsible for invoicing the Borrower for interest on the Swing Line Loans.  Until each Lender funds its Base Rate Loan or risk participation pursuant to this Section 2.8 to refinance such Lender’s Commitment Percentage of any Swing Line Loan, interest in respect of such Commitment Percentage shall be solely for the account of the Swing Line Lender.

 

(f) Payments Directly to Swing Line Lender.  The Borrower shall make all payments of principal and interest in respect of the Swing Line Loans directly to the Swing Line Lender.

 

2.9 Letters of Credit.

 

(a) (i)  Issuance.  Subject to the terms and conditions hereof and of the LOC Documents, if any, and any other terms and conditions which the relevant L/C Issuer may reasonably require, the applicable L/C Issuer shall from time to time upon request by the Borrower issue, and the Lenders shall participate in, letters of credit (the “Letters of Credit”) for the account of the Borrower; provided, however, that (A) the aggregate 

 

  

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amount of Letter of Credit Obligations shall not at any time exceed the Letter of Credit Sublimit, (B) the sum of the aggregate amount of Letter of Credit Obligations outstanding plus the aggregate amount of Loans outstanding shall not exceed the Aggregate Commitment, (C) with respect to each individual Lender, the Lender’s outstanding Revolving Loans plus its Commitment Percentage of Swing Line Loans plus its Commitment Percentage of outstanding Letter of Credit Obligations shall not exceed such Lender’s Revolving Loan Commitment and (D) the aggregate amount of Letter of Credit Obligations in respect of Letters of Credit issued by any L/C Issuer shall not at any time exceed such LC Issuer’s L/C Issuer Limit.  Each request by the Borrower for the issuance of a Letter of Credit shall be deemed to be a representation by the Borrower that the Credit Extension with respect to such requested Letter of Credit complies with the conditions set forth in the proviso to the preceding sentence.  Each Letter of Credit shall be a standby letter of credit issued to support the obligations (including pension or insurance obligations), contingent or otherwise, of the Borrower or any of its Subsidiaries.  Each Letter of Credit shall have a stated term not later than 10 Business Days prior to the Maturity Date unless otherwise agreed by the applicable L/C Issuer, and the participations of the Lenders as set forth in Section 2.9(f) shall in any event terminate on the Maturity Date.  Each Letter of Credit shall comply with the related LOC Documents.

 

(ii) No L/C Issuer shall be under any obligation to issue any Letter of Credit if:

 

(A)           any order, judgment or decree of any Governmental Authority or arbitrator shall by its terms purport to enjoin or restrain such L/C Issuer from issuing such Letter of Credit, or any law applicable to such L/C Issuer or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such L/C Issuer shall prohibit, or request that such L/C Issuer refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such L/C Issuer with respect to such Letter of Credit any restriction, reserve or capital requirement (for which such L/C Issuer is not otherwise compensated hereunder) not in effect on the Closing Date, or shall impose upon such L/C Issuer any unreimbursed loss, cost or expense which was not applicable on the Closing Date and which such L/C Issuer in good faith deems material to it;

 

(B)           the issuance of such Letter of Credit would violate one or more policies of such L/C Issuer applicable to letters of credit generally;

 

(C)           such Letter of Credit is to be denominated in a currency other than Dollars; or

 

(D)           any Lender is at that time a Defaulting Lender, unless the applicable L/C Issuer has entered into arrangements, including the delivery of Cash Collateral, satisfactory to such L/C Issuer (in its sole discretion) with the Borrower or such Lender to eliminate such L/C Issuer’s actual or potential Fronting Exposure (after giving effect to Section 2.11(a)(iv)) with respect to the 

 

  

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Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other Letter of Credit Obligations as to which such L/C Issuer has actual or potential Fronting Exposure, as it may elect in its sole discretion.

 

(b) Issuance of Letters of Credit.  (i)  Each Letter of Credit shall be issued upon the request of the Borrower delivered to the applicable L/C Issuer (with a copy to the Agent) in the form of a Letter of Credit application, appropriately completed and signed by a Responsible Officer of the Borrower.  Such Letter of Credit application must be received by the applicable L/C Issuer and the Agent not later than (i) 4:00 p.m. (Charlotte, North Carolina time) at least one Business Day prior to the proposed issuance date of a letter of credit, (ii) 4:00 p.m. (Charlotte, North Carolina time) at least one Business Day prior to the proposed amendment date for a letter of credit, or (iii) such later date and time as the Agent and such L/C Issuer may agree in a particular instance in their sole discretion.  In the case of a request for an initial issuance of a Letter of Credit, such Letter of Credit application shall specify in form and detail satisfactory to the applicable L/C Issuer:  (A) the proposed issuance date of the requested Letter of Credit (which shall be a Business Day); (B) the amount thereof; (C) the expiry date thereof; (D) the name and address of the beneficiary thereof; (E) the documents to be presented by such beneficiary in case of any drawing thereunder; (F) the full text of any certificate to be presented by such beneficiary in case of any drawing thereunder; (G) the purpose and nature of the requested Letter of Credit; and (H) such other matters as the applicable L/C Issuer may reasonably require.  In the case of a request for an amendment of any outstanding Letter of Credit, such Letter of Credit application shall specify in form and detail satisfactory to the applicable L/C Issuer (1) the Letter of Credit to be amended; (2) the proposed date of amendment thereof (which shall be a Business Day); (3) the nature of the proposed amendment; and (4) such other matters as such L/C Issuer may reasonably require.  Additionally, the Borrower shall furnish to the applicable L/C Issuer and the Agent such other documents and information pertaining to such requested Letter of Credit issuance or amendment, including any LOC Documents, as such L/C Issuer or the Agent may reasonably require.

 

(ii) Promptly after receipt of any Letter of Credit application, the applicable L/C Issuer will confirm with the Agent (by telephone or in writing) that the Agent has received a copy of such Letter of Credit application from the Borrower and, if not, such L/C Issuer will provide the Agent with a copy thereof.  Unless the applicable L/C Issuer has received written notice from any Lender, the Agent or the Borrower, at least one Business Day prior to the requested date of issuance of the applicable Letter of Credit, that one or more applicable conditions contained in Section 5.2 shall not then be satisfied, then, subject to the terms and conditions hereof, such L/C Issuer shall, on the requested date, issue a Letter of Credit for the account of the Borrower, in each case in accordance with such L/C Issuer’s usual and customary business practices.  Immediately upon the issuance of each Letter of Credit, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the applicable L/C Issuer a risk participation in such Letter of Credit in an amount equal to the product of such Lender’s Commitment Percentage times the amount of such Letter of Credit.

 

  

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(c) [Reserved].

 

(d) Letter of Credit Fees.

 

(i) Letter of Credit Fees.  In consideration of the issuance of Letters of Credit hereunder, the Borrower agrees to pay to the Agent for the pro rata benefit of the Lenders (based on each Lender’s Commitment Percentage), a per annum fee (the “Letter of Credit Fees”) equal to the Applicable Percentage on the average daily maximum amount available to be drawn under all Letters of Credit; provided, however, any Letter of Credit Fees otherwise payable for the account of a Defaulting Lender with respect to any Letter of Credit as to which such Defaulting Lender has not provided Cash Collateral satisfactory to the applicable L/C Issuer pursuant to this Section 2.9 or Section 2.11 shall be payable, to the maximum extent permitted by applicable Law, to the other Lenders in accordance with the upward adjustments in their respective Applicable Percentages allocable to such Letter of Credit pursuant to Section 2.11(a)(iv), with the balance of such fee, if any, payable to the applicable L/C Issuer for its own account.  The Letter of Credit Fees will be payable in arrears on the first Business Day after the end of each calendar quarter (as well as on the Maturity Date) for the immediately preceding fiscal quarter (or portion thereof), beginning with the first of such dates to occur after the date of this Credit Agreement.

 

(ii) L/C Issuer Letter of Credit Fees.  In addition to the Letter of Credit Fees payable pursuant to subsection (1) above, the Borrower shall pay to the applicable L/C Issuer for its own account, without sharing by the other Lenders, a fronting fee in an amount agreed by the Borrower and such L/C Issuer as a percentage of the outstanding face amount of each Letter of Credit payable quarterly in arrears at the same time the Letter of Credit Fees are payable plus the customary incidental and/or out of pocket charges from time to time for its services in connection with the issuance, amendment, payment, transfer, administration, cancellation and conversion of, and drawings under, Letters of Credit.

 

(e) Notice and Reports.  Each L/C Issuer, at least weekly and more frequently upon request, shall deliver to the Agent a complete list of all outstanding Letters of Credit issued by such L/C Issuer.  The Agent will, at least monthly and more frequently upon request, provide to the Lenders a detailed report specifying the Letters of Credit which are then issued and outstanding and any activity with respect thereto which may have occurred since the date of the prior report, and including therein, among other things, the account party, the beneficiary, the face amount, and the expiry date as well as any payments or expirations which may have occurred.

 

(f) Participations.  Each Lender, upon issuance of a Letter of Credit, shall be deemed to have purchased without recourse a risk participation from the applicable L/C Issuer in such Letter of Credit and each LOC Document related thereto and the rights and obligations arising thereunder and any collateral relating thereto, in each case in an amount equal to its Commitment Percentage of the obligations under such Letter of Credit, and shall absolutely, unconditionally and irrevocably assume, as primary obligor and not as surety, and be obligated to pay to such L/C Issuer therefor and discharge when due, its Commitment 

 

  

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Percentage of the obligations arising under such Letter of Credit.  Without limiting the scope and nature of each Lender’s participation in any Letter of Credit, to the extent that the applicable L/C Issuer has not been reimbursed as required hereunder or under any such Letter of Credit, each such Lender shall pay to such L/C Issuer its Commitment Percentage of such unreimbursed drawing in same day funds on the day of notification by the Agent of an unreimbursed drawing pursuant to the provisions of subsection (g) hereof.  The obligation of each Lender to so reimburse an L/C Issuer shall be absolute and unconditional and shall not be affected by the occurrence of a Default, an Event of Default or any other occurrence or event.  Any such reimbursement shall not relieve or otherwise impair the obligation of the Borrower to reimburse the applicable L/C Issuer under any Letter of Credit, together with interest as hereinafter provided.

 

(g) Reimbursement.  In the event of any drawing under any Letter of Credit, the applicable L/C Issuer will promptly notify the Borrower and the Agent thereof not later than 12:00 noon (Charlotte, North Carolina time) on the date of any payment by such L/C Issuer under a Letter of Credit (each such date an “Honor Date”).  If the Borrower fails to so reimburse the applicable L/C Issuer by 1:00 p.m. (Charlotte, North Carolina time) on such date, such L/C Issuer shall notify the Agent and the Agent shall promptly notify each Lender of the Honor Date, the amount of the unreimbursed drawing (the “Unreimbursed Amount”) and the amount of such Lenders’ Commitment Percentage thereof.  In such event, the Borrower shall be deemed to have requested a Base Rate Loan to be disbursed on the Honor Date in a amount equal to the Unreimbursed Amount, without regard to minimum and multiples specified in Section 2.5 for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Commitments and the conditions set forth in Section 5.2.  If the Borrower shall fail to reimburse the applicable L/C Issuer as provided hereinabove because the conditions to the Borrower’s obtaining a Revolving Loan have not been satisfied or for any other reason, the Borrower shall be deemed to have incurred from the applicable L/C Issuer an L/C Advance in the amount of the Unreimbursed Amount of such drawing, which L/C Advance shall bear interest at a per annum rate equal to the Adjusted Base Rate plus the Applicable Percentage plus two percent (2%).  The Borrower’s reimbursement obligations hereunder shall be absolute and unconditional under all circumstances (except as expressly set forth below) irrespective of any rights of set-off, counterclaim or defense to payment the applicable account party or the Borrower may claim or have against the applicable L/C Issuer, the Agent, the Lenders, the beneficiary of the Letter of Credit drawn upon or any other Person, including without limitation, any defense based on any failure of the applicable account party or the Borrower to receive consideration or the legality, validity, regularity or unenforceability of the Letter of Credit.  The applicable L/C Issuer, through the Agent, will promptly notify the Lenders of the amount of any unreimbursed drawing and any notice given by such L/C Issuer or the Agent pursuant to this Section 2.9(g) may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.  Upon such notice, each Lender shall promptly pay to the Agent for the account of the applicable L/C Issuer, in immediately available funds, the amount of such Lender’s Commitment Percentage of such unreimbursed drawing.  Such payment shall be made on the day such notice is received by such Lender from the Agent if such notice is received at or before 3:00 p.m. (Charlotte, North Carolina time), otherwise such payment shall be made at or before 1:00 p.m. (Charlotte, North Carolina time) on the Business Day next 

 

  

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succeeding the day such notice is received.  If such Lender does not pay such amount to the Agent in full upon such request, such Lender shall, on demand, pay to the Agent interest on the unpaid amount during the period from the date the Lender received the notice regarding the unreimbursed drawing until the Lender pays such amount to the Agent in full at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by the applicable L/C Issuer in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by such L/C Issuer in connection with the foregoing.  If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lenders’ Revolving Loan included in the relevant Extension of Credit.  A certificate of the applicable L/C Issuer submitted to any Lender (through the Agent) with respect to any amounts owing under this Section 2.9(g) shall be conclusive absent demonstrable error.  Each Lender’s obligation to make such payment to the Agent for the account of the applicable L/C Issuer, and the right of such L/C Issuer to receive the same, shall be absolute and unconditional, shall not be affected by any circumstance whatsoever and without regard to the termination of this Credit Agreement or the Revolving Loan Commitments hereunder, the existence of a Default or Event of Default or the acceleration of the obligations hereunder and shall be made without any offset, abatement, withholding or reduction whatsoever.  Simultaneously with the making of each such payment by a Lender to an L/C Issuer, such Lender shall, automatically and without any further action on the part of such L/C Issuer or such Lender, acquire a participation in an amount equal to such payment (excluding the portion of such payment constituting interest owing to the Agent) in the related unreimbursed drawing portion of the Letter of Credit Obligation and in the interest thereon and in the related LOC Documents, and shall have a claim against the Borrower with respect thereto.

 

(h) Repayment with Revolving Loans.  On any day on which the Borrower shall have requested, or been deemed to have requested, a Revolving Loan to reimburse a drawing under a Letter of Credit, the Agent shall give notice to the Lenders that a Revolving Loan has been requested or deemed requested in connection with a drawing under a Letter of Credit, in which case a Revolving Loan comprised solely of Base Rate Loans (each such borrowing, a “Mandatory Borrowing”) shall be immediately made from all Lenders (without giving effect to any termination of the Revolving Loan Commitments pursuant to Section 9.1) pro rata based on each Lender’s respective Commitment Percentage and the proceeds thereof shall be paid directly to the Agent for application to the respective Letter of Credit Obligations.  Each Lender hereby irrevocably agrees to make such Revolving Loans upon any such request or deemed request on account of each such Mandatory Borrowing in the amount and in the manner specified in the preceding sentence and on the same such date notwithstanding (i) the amount of Mandatory Borrowing may not comply with the minimum amount for borrowings of Revolving Loans otherwise required hereunder, (ii) whether a Default or Event of Default then exists, (iii) failure of any such request or deemed request for Revolving Loans to be made by the time otherwise required hereunder, (iv) the date of such Mandatory Borrowing, or (v) any reduction in or any termination of the Revolving Loan Commitments; provided that each Lender’s obligation to make Revolving Loans pursuant to this Section 2.9(h) is subject to the conditions set forth in Section 5.2 (other than delivery of a Notice of Borrowing).  Such funding of Revolving Loans shall be made on the day notice of such Mandatory Borrowing is received by each Lender from the Agent if such notice is received at or before 3:00 p.m. (Charlotte, North Carolina time), otherwise such payment shall 

 

  

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be made at or before 1:00 p.m. (Charlotte, North Carolina time) on the Business Day next succeeding the day such notice is received.  In the event that any Mandatory Borrowing cannot for any reason be made on the date otherwise required above (including, without limitation, as a result of the commencement of a proceeding under any applicable bankruptcy law with respect to the Borrower), then each Lender hereby agrees that it shall forthwith fund (as of the date the Mandatory Borrowing would otherwise have occurred, but adjusted for any payments received from the Borrower on or after such date and prior to such purchase) its Commitment Percentage in the outstanding Letter of Credit Obligations; provided, further, that in the event any Lender shall fail to fund its Commitment Percentage on the day the Mandatory Borrowing would otherwise have occurred, then the amount of such Lender’s unfunded Commitment Percentage therein shall bear interest payable to the applicable L/C Issuer upon demand, at the rate equal to, if paid within two Business Days of such date, the Federal Funds Rate, and thereafter at a rate equal to the Base Rate.  No such Extension of Credit shall relieve or otherwise impair the obligation of the Borrower to reimburse an L/C Issuer for the amount of any payment made by such L/C Issuer under any Letter of Credit, together with interest as provided herein.  Until each Lender funds its Revolving Loan pursuant to this Section 2.9(g) to reimburse an L/C Issuer for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Commitment Percentage of such amount shall be solely for the account of such L/C Issuer.

 

(i) Repayment of Participations.  At any time after the applicable L/C Issuer has made a payment under any Letter of Credit and has received from any Lender such Lender’s L/C Advance in respect of such payment in accordance with Section 2.9(g), if the Agent receives for the account of such L/C Issuer any payment in respect of the related Unreimbursed Amount or interest thereon (whether directly from the Borrower or otherwise, including proceeds of Cash Collateral applied thereto by the Agent), the Agent will distribute to such Lender its Commitment Percentage thereof in the same funds as those received by the Agent.  If any payment received by the Agent for the account of an L/C Issuer pursuant to Section 2.9(g) is required to be returned under any of the circumstances described in Section 11.13 (including pursuant to any settlement entered into by such L/C Issuer in its discretion), each Lender shall pay to the Agent for the account of such L/C Issuer its Commitment Percentage thereof on demand of the Agent, plus interest thereon from the date of such demand to the date such amount is returned by such Lender, at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders under this clause shall survive the payment in full of the Borrower’s obligations under, and the termination of, this Credit Agreement.

 

(j) Role of L/C Issuer.  Each Lender and the Borrower agree that, in paying any drawing under a Letter of Credit, no L/C Issuer shall have any responsibility to obtain any document (other than any sight draft, certificates and documents expressly required by the Letter of Credit) or to ascertain or inquire as to the validity or accuracy of any such document or the authority of the Person executing or delivering any such document.  None of any L/C Issuer, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of such L/C Issuer shall be liable to any Lender for (i) any action taken or omitted in connection herewith at the request or with the approval of the Lenders or the Required Lenders, as applicable; (ii) any action taken or omitted in the absence of gross negligence or willful misconduct; or (iii) the due execution, effectiveness, validity or enforceability of any 

 

  

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document or instrument related to any Letter of Credit or LOC Documents.  The Borrower hereby assumes all risks of the acts or omissions of any beneficiary or transferee with respect to its use of any Letter of Credit; provided, however, that this assumption is not intended to, and shall not, preclude the Borrower’s pursuing such rights and remedies as it may have against the beneficiary or transferee at law or under any other agreement.  None of any L/C Issuer, the Agent, any of their respective Related Parties nor any correspondent, participant or assignee of any L/C Issuer shall be liable or responsible for any of the matters described in clauses (i) through (v) of Section 2.9(m); provided, however, that anything in such clauses to the contrary notwithstanding, the Borrower may have a claim against an L/C Issuer, and such L/C Issuer may be liable to the Borrower, to the extent, but only to the extent, of any direct, as opposed to consequential or exemplary, damages suffered by the Borrower which the Borrower proves were caused by such L/C Issuer’s willful misconduct or gross negligence or such L/C Issuer’s willful failure to pay under any Letter of Credit after the presentation to it by the beneficiary of a sight draft and certificate(s) strictly complying with the terms and conditions of a Letter of Credit.  In furtherance and not in limitation of the foregoing, an L/C Issuer may accept documents that appear on their face to be in order, without responsibility for further investigation, regardless of any notice or information to the contrary, and such L/C Issuer shall not be responsible for the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign a Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, which may prove to be invalid or ineffective for any reason.

 

(k) Modification and Extension.  The issuance of any supplement, modification, amendment, or extension to any Letter of Credit, for purposes hereof, shall be treated in all respects the same as the issuance of a new Letter of Credit.

 

(l) Applicability of ISP.  The applicable L/C Issuer may have the standby Letters of Credit be subject to International Standby Practices, as published as of the date of issue by the International Chamber of Commerce (Publication No. 590 or the most recent publication, the “ISP 98”), in which case the ISP 98 may be incorporated therein and deemed in all respects to be a part thereof.

 

(m) Obligations Absolute.  The obligation of the Borrower to reimburse the applicable L/C Issuer for each drawing under each Letter of Credit and to repay each Extension of Credit with respect to such Letters of Credit shall be absolute, unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Credit Agreement under all circumstances, including the following:

 

(i) any lack of validity or enforceability of such Letter of Credit or this Credit Agreement;

 

(ii) the existence of any claim, counterclaim, setoff, defense or other right that the Borrower may have at any time against any beneficiary or any transferee of such Letter of Credit (or any Person for whom any such beneficiary or any such transferee may be acting), the applicable L/C Issuer or any other Person, whether in connection with this Credit Agreement, the transactions contemplated hereby or by such Letter of Credit or any agreement or instrument relating thereto, or any unrelated transaction;

 

  

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(iii) any draft, demand, certificate or other document presented under such Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; or any loss or delay in the transmission or otherwise of any document required in order to make a drawing under such Letter of Credit;

 

(iv) any payment by the applicable L/C Issuer under such Letter of Credit against presentation of a draft or certificate that does not strictly comply with the terms of such Letter of Credit, provided that such draft or certificate reasonably appears to comply with the terms of the Letter of Credit; or any payment made by such L/C Issuer under such Letter of Credit to any Person purporting to be a trustee in bankruptcy, debtor-in-possession, assignee for the benefit of creditors, liquidator, receiver or other representative of or successor to any beneficiary or any transferee of such Letter of Credit, including any arising in connection with any proceeding under any bankruptcy or insolvency laws; or

 

(v) any other circumstance or happening whatsoever, whether or not similar to any of the foregoing, including any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower.

 

(vi) The Borrower shall promptly examine a copy of each Letter of Credit that is delivered to it and, in the event of any claim of noncompliance with the Borrower’s instructions or other irregularity, the Borrower will notify the applicable L/C Issuer as promptly as practicable.  The Borrower shall be conclusively deemed to have waived any such claim against such L/C Issuer and its correspondents unless such notice is given as aforesaid.

 

(n) Responsibility of L/C Issuer.  It is expressly understood and agreed as between the Lenders that the obligations of the L/C Issuers hereunder to the Lenders are only those expressly set forth in this Credit Agreement and that each L/C Issuer shall be entitled to assume that the conditions precedent set forth in Section 5 have been satisfied unless it shall have acquired actual knowledge that any such condition precedent has not been satisfied; provided, however, that nothing set forth in this Section 2.9 shall be deemed to prejudice the right of any Lender to recover from any L/C Issuer any amounts made available by such Lender to such L/C Issuer pursuant to this Section 2.9 in the event that it is determined by a court of competent jurisdiction that the issuance of or payment with respect to a Letter of Credit constituted gross negligence or willful misconduct on the part of such L/C Issuer.

 

(o) Conflict with LOC Documents.  In the event of any conflict between this Credit Agreement and any LOC Document, this Credit Agreement shall govern.

 

(p) Indemnification of L/C Issuers.

 

(i) In addition to its other obligations under this Credit Agreement, the Borrower hereby agrees to protect, indemnify, pay and save each L/C Issuer harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges and expenses (including reasonable, documented attorneys’ fees) that such L/C Issuer 

 

  

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may incur or be subject to as a consequence, direct or indirect, of (A) the issuance of any Letter of Credit or (B) the failure of such L/C Issuer to honor a drawing under a Letter of Credit as a result of any act or omission, whether rightful or wrongful, of any present or future de jure or de facto government or governmental authority (all such acts or omissions, herein called “Government Acts”).

 

(ii) As between the Borrower and the L/C Issuers and the Lenders, the Borrower shall assume all risks of the acts, omissions or misuse of any Letter of Credit by the beneficiary thereof.  The L/C Issuers and the Lenders shall not be responsible for (except in the case of (C) below if the applicable L/C Issuer has actual knowledge to the contrary, in which case only such L/C Issuer shall be responsible):  (A) the form, validity, sufficiency, accuracy, genuineness or legal effect of any document submitted by any party in connection with the application for and issuance of any Letter of Credit, even if it should in fact prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; provided that such document(s) reasonably appear to conform on their face to the terms of the Letter of Credit, (B) the validity or sufficiency of any instrument transferring or assigning or purporting to transfer or assign any Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in part, that may prove to be invalid or ineffective for any reason; (C) failure of the beneficiary of a Letter of Credit to comply fully with conditions required in order to draw upon a Letter of Credit; provided that the document(s) submitted reasonably appear to conform on their face to the terms of the Letter of Credit, (D) errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, cable, telex or otherwise, whether or not they be in cipher; (E) errors in interpretation of technical terms; (F) any loss or delay in the transmission or otherwise of any document required in order to make a drawing under a Letter of Credit or of the proceeds thereof; and (G) any consequences arising from causes beyond the control of the applicable L/C Issuer, including, without limitation, any Government Acts.  None of the above shall affect, impair, or prevent the vesting of the L/C Issuers’ rights or powers hereunder.

 

(iii) In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by an L/C Issuer, under or in connection with any Letter of Credit or the related certificates, if taken or omitted in good faith and not deemed to constitute gross negligence or willful misconduct, shall not put such L/C Issuer or any Lender under any resulting liability to the Borrower.  It is the intention of the parties that this Credit Agreement shall be construed and applied to protect and indemnify each L/C Issuer against any and all risks involved in the issuance of the Letters of Credit (other than the risk of gross negligence or willful misconduct on the part of such L/C Issuer), all of which risks are hereby assumed by the Borrower, including, without limitation, any and all risks of the acts or omissions, whether rightful or wrongful, of any present or future Government Acts.  No L/C Issuer shall, in any way, be liable for any failure by such L/C issuer or anyone else to pay any drawing under any Letter of credit as a result of any Government Acts or any other cause beyond the control of such L/C Issuer.

 

(iv) Nothing in this subsection (p) is intended to limit the reimbursement obligation of the Borrower contained in this Section 2.9.  The obligations of the Borrower 

 

  

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under this subsection (p) shall survive the termination of this Credit Agreement.  No act or omission of any current or prior beneficiary of a Letter of Credit shall in any way affect or impair the rights of any L/C Issuer to enforce any right, power or benefit under this Credit Agreement.

 

(v) Notwithstanding anything to the contrary contained in this subsection (p) or in any LOC Document, neither the Borrower nor any Lender shall have any obligation to indemnify any L/C Issuer in respect of any liability incurred by such L/C Issuer arising out of the gross negligence or willful misconduct of such L/C Issuer, as determined by a court of competent jurisdiction.  Nothing in this Credit Agreement shall relieve any L/C Issuer of any liability to the Borrower or any Lender in respect of any action taken by such L/C Issuer which action constitutes gross negligence or willful misconduct of such L/C Issuer or a violation of the UCP or Uniform Commercial Code (as applicable), as determined by a court of competent jurisdiction.

 

(q) Letters of Credit Under the Existing Credit Agreements.  Upon the Effective Date, all letters of credit issued or deemed issued by any L/C Issuer under an Existing Credit Agreement and set forth on Schedule 2.9 shall automatically be deemed Letters of Credit issued by such L/C Issuer under this Credit Agreement subject to all of the terms and conditions hereof including, among other things, that the Lenders will automatically be deemed to have purchased a participation in such letters of credit as of the Effective Date and the Borrower shall have the reimbursement obligations with respect thereto set forth in Section 2.9(g) above.

 

2.10 Cash Collateral.

 

(a) Certain Credit Support Events.  In the event that any Letter of Credit remains outstanding beyond the tenth Business Day prior to the Maturity Date, the Borrower shall upon demand of the Required Lenders (or the Agent acting with the consent of the Required Lenders) either (i) Cash Collateralize the sum of the largest draft which could then or thereafter be drawn under such Letter of Credit, which sum the Agent may hold for the account of the Borrower, with interest, for the purpose of paying any draft presented, with the excess, if any, to be returned to the Borrower upon termination or expiration of such Letter of Credit or (ii) if acceptable to the applicable L/C Issuer, deliver a back-up letter of credit to the Agent securing the Borrower’s reimbursement obligations with respect to such Letter of Credit in form and substance acceptable to the Required Lenders and from a creditworthy financial institution acceptable to the Required Lenders.  Upon the request of the Agent or the applicable L/C Issuer, if such L/C Issuer has honored any full or partial drawing request under any Letter of Credit and such drawing has not been reimbursed or refinanced with Revolving Loans in accordance with Section 2.9(g) or (h), respectively, the Borrower shall immediately Cash Collateralize the then outstanding amount of all Letter of Credit Obligations.  At any time that there shall exist a Defaulting Lender, immediately upon the request of the Agent, any L/C Issuer or the Swing Line Lender, the Borrower shall deliver to the Agent Cash Collateral in an amount sufficient to cover all Fronting Exposure (after giving effect to Section 2.11(a)(iv) and any Cash Collateral provided by the Defaulting Lender).

 

(b) Grant of Security Interest.  All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked deposit accounts at 

 

  

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Wells, which shall bear interest for the account of the Borrower.  The Borrower, and to the extent provided by any Lender, such Lender, hereby grants to (and subjects to the control of) the Agent, for the benefit of the Agent, each L/C Issuer and the Lenders (including the Swing Line Lender), and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.10(c).  If at any time the Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Agent as herein provided, or that the total amount of such Cash Collateral is less than the applicable Fronting Exposure and other obligations secured thereby, the Borrower or the relevant Defaulting Lender will, promptly upon demand by the Agent, pay or provide to the Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency.

 

(c) Application. Notwithstanding anything to the contrary contained in this Credit Agreement, Cash Collateral provided under any of this Section 2.10 or Sections 2.11 or 9.2 in respect of Letters of Credit or Swing Line Loans shall be held and applied to the satisfaction of the specific Letter of Credit Obligations, Swing Line Loans, and obligations to fund participations therein for which the Cash Collateral was provided (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation), it being agreed that Cash Collateral provided in respect of obligations of Defaulting Lenders to L/C Issuers shall be applied on a pro rata basis as set forth in Section 2.11(a)(ii).

 

(d) Release.  Cash Collateral (or the appropriate portion thereof) provided to reduce Fronting Exposure or other obligations and not otherwise applied in accordance with Section 2.10(c) shall be released promptly following (i) the elimination of the applicable Fronting Exposure or other obligations giving rise thereto (including by the termination of Defaulting Lender status of the applicable Lender (or, as appropriate, its assignee following compliance with Section 11.6) or (ii) the Agent’s good faith determination that there exists excess Cash Collateral; provided, however, (x) that Cash Collateral furnished by or on behalf of the Borrower shall not be released during the continuance of a Default or Event of Default (and following application as provided in this Section 2.10 may be otherwise applied in accordance with Section 9.3), and (y) the Person providing Cash Collateral and the applicable L/C Issuer or Swing Line Lender, as applicable, may agree that Cash Collateral shall not be released but instead held to support future anticipated Fronting Exposure or other obligations.

 

2.11 Defaulting Lenders.

 

(a) Adjustments.  Notwithstanding anything to the contrary contained in this Credit Agreement, if any Lender becomes a Defaulting Lender, then, until such time as that Lender is no longer a Defaulting Lender, to the extent permitted by applicable Law:

 

(i) Waivers and Amendments.  That Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Credit Agreement shall be restricted as set forth in Section 11.6.

 

(ii) Reallocation of Payments.  Any payment of principal, interest, fees or other amounts received by the Agent for the account of that Defaulting Lender (whether 

 

  

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voluntary or mandatory, at maturity, pursuant to Section 9 or otherwise, and including any amounts made available to the Agent by that Defaulting Lender pursuant to Section 11.2), shall be applied at such time or times as may be determined by the Agent as follows: first, to the payment of any amounts owing by that Defaulting Lender to the Agent hereunder; second, to the payment on a pro rata basis of any amounts owing by that Defaulting Lender to the L/C Issuers or Swing Line Lender hereunder; third, if so determined by the Agent or requested by any L/C Issuer or Swing Line Lender, to be held as Cash Collateral for future funding obligations of that Defaulting Lender of any participation in any Swing Line Loan or Letter of Credit; fourth, as the Borrower may request (so long as no Default or Event of Default exists), to the funding of any Loan in respect of which that Defaulting Lender has failed to fund its portion thereof as required by this Credit Agreement; fifth, if so determined by the Agent and the Borrower, to be held in an interest bearing deposit account and released in order to satisfy obligations of that Defaulting Lender to fund Loans under this Credit Agreement; sixth, to the payment of any amounts owing to the Lenders, the L/C Issuers or Swing Line Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, any L/C Issuer or Swing Line Lender against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Credit Agreement; seventh, so long as no Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against that Defaulting Lender as a result of that Defaulting Lender’s breach of its obligations under this Credit Agreement; and eighth, to that Defaulting Lender or as otherwise directed by a court of competent jurisdiction; provided that if (x) such payment is a payment of the principal amount of any Loans or L/C Advances in respect of which that Defaulting Lender has not fully funded its appropriate share and (y) such Loans or L/C Advances were made at a time when the conditions set forth in Section 5.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and L/C Advances owed to, all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or L/C Advances owed to, that Defaulting Lender.  Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.11(a)(ii) shall be deemed paid to and redirected by that Defaulting Lender, and each Lender irrevocably consents hereto.  Promptly (x) upon a Lender ceasing to be a Defaulting Lender in accordance with the terms of this Agreement or (y) following termination of this Agreement (including the termination of all Letters of Credit issued hereunder) and the payment of all amounts owed under this Agreement (other than unasserted contingent obligations which by their terms survive the termination of this Agreement), all amounts, if any, held in a deposit account pursuant to this Section 2.11(a) shall be returned to such Lender or Defaulting Lender, as applicable.

 

(iii) Certain Fees.  That Defaulting Lender (x) shall not be entitled to receive any commitment fee pursuant to Section 3.4 for any period during which that Lender is a Defaulting Lender (and the Borrower shall not be required to pay any such fee that otherwise would have been required to have been paid to that Defaulting Lender) and (y) shall be limited in its right to receive Letter of Credit Fees as provided in Section 2.9(d).

 

  

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(iv) Reallocation of Applicable Percentages to Reduce Fronting Exposure.  During any period in which there is a Defaulting Lender, for purposes of computing the amount of the obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit or Swing Line Loans pursuant to Sections 2.8 and 2.9, the Commitment Percentage of each non-Defaulting Lender shall be computed without giving effect to the Revolving Loan Commitment of that Defaulting Lender; provided, that, (i) each such reallocation shall be given effect only if, at the date the applicable Lender becomes a Defaulting Lender, no Default or Event of Default exists; and (ii) the aggregate obligation of each non-Defaulting Lender to acquire, refinance or fund participations in Letters of Credit and Swing Line Loans shall not exceed the positive difference, if any, of (1) the Revolving Loan Commitment of that non-Defaulting Lender minus (2) the aggregate outstanding principal amount of the Revolving Loans of that Lender.

 

(b) Defaulting Lender Cure. If a Defaulting Lender has adequately remedied all matters that caused such Lender to be a Defaulting Lender, as reasonably determined by the Borrower, the Agent, Swing Line Lender and each L/C Issuer, such Defaulting Lender shall no longer be deemed to be a Defaulting Lender and the Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), that Lender will, to the extent applicable, purchase that portion of outstanding Loans of the other Lenders or take such other actions as the Agent may determine to be necessary to cause the Revolving Loans and funded and unfunded participations in Letters of Credit and Swing Line Loans to be held on a pro rata basis by the Lenders in accordance with their Commitment Percentages (without giving effect to Section 2.11(a)(iv)), whereupon that Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while that Lender was a Defaulting Lender; and provided, further, that except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from that Lender’s having been a Defaulting Lender.

 

Section 3. PAYMENTS

 

3.1 Interest.

 

(a) Interest Rate.

 

(i) All Base Rate Loans shall accrue interest at the Adjusted Base Rate.

 

(ii) All Eurodollar Loans shall accrue interest at the Adjusted Eurodollar Rate applicable to such Eurodollar Loan.

 

(b) Default Rate of Interest.  Upon the occurrence, and during the continuance, of an Event of Default, the Agent may, and upon the request of the Required Lenders shall, require the Borrower to pay interest (“Default Interest”) on the principal of and, to the extent 

 

  

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permitted by law, interest on the Loans and any other amounts owing hereunder or under the other Credit Documents, on demand, at a per annum rate equal to two percent (2%) plus the rate which would otherwise be applicable (or if no rate is applicable, then the rate for Revolving Loans that are Base Rate Loans plus two percent (2%) per annum), provided, however, that following acceleration of the Loans pursuant to Section 9.02, Default Interest shall accrue and be payable hereunder whether or not previously required by the Agent.

 

(c) Interest Payments.  Interest on Loans shall be due and payable in arrears on each Interest Payment Date.

 

3.2 Prepayments.

 

(a) Voluntary Prepayments.  The Borrower shall have the right to prepay Loans in whole or in part from time to time without premium or penalty; provided, however, that (i) Eurodollar Loans may only be prepaid on three Business Days’ prior written notice to the Agent and any prepayment of Eurodollar Loans will be subject to Section 4.3; and (ii) each such partial prepayment of Loans shall be in the minimum principal amount of $1,000,000; provided that if less than $1,000,000 would remain outstanding after such prepayment, such prepayment shall be in the amount of the entire outstanding principal amount of the Loans.  Amounts prepaid hereunder shall be applied as the Borrower may elect; provided that if the Borrower fails to specify otherwise, all voluntary prepayments shall be applied first to Swing Line Loans, then to Revolving Loans that are Base Rate Loans, and then to Revolving Loans that are Eurodollar Loans in direct order of Interest Period maturities.

 

(b) Mandatory Prepayments.  If at any time the amount of Loans outstanding plus the Letter of Credit Obligations outstanding exceeds the Aggregate Commitment, the Borrower shall immediately make a principal payment to the Agent in the manner and in an amount such that the sum of Loans outstanding plus the Letter of Credit Obligations outstanding is less than or equal to the Aggregate Commitment.  Any payments made under this Section 3.2(b) shall be subject to Section 4.3 and shall be applied first to Swing Line Loans, then to Revolving Loans that are Base Rate Loans, and then to Revolving Loans that are Eurodollar Loans in direct order of Interest Period maturities.

 

3.3 Payments.

 

(a) On the Maturity Date, the entire outstanding principal balance of all Loans and the Letter of Credit Obligations (to the extent that the Borrower has not provided cash collateral or provided a back-up letter of credit pursuant to Section 2.9(c) above), together with accrued but unpaid interest and all other sums owing under this Credit Agreement, shall be due and payable in full, unless accelerated sooner pursuant to Section 9.2.

 

(b) On the tenth Business Day after the making of each Swing Line Loan, the outstanding principal balance of such Swing Line Loan, together with accrued but unpaid interest and all other sums owing under this Credit Agreement, shall be due and payable in full, unless accelerated sooner pursuant to Section 9.2.

 

  

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3.4 Fees.

 

(a) Commitment Fees.  In consideration of the Revolving Loan Commitment being made available by the Lenders hereunder, the Borrower agrees to pay to the Agent, for the pro rata benefit of each Lender, a fee equal to the Applicable Percentage for Commitment Fees multiplied by the daily average of the excess of the Revolving Loan Commitment over the sum of the aggregate principal amount of the Revolving Loans plus the Letter of Credit Obligations (the “Commitment Fees”).  The accrued Commitment Fees shall be due and payable in arrears on the first Business Day after the end of each calendar quarter (as well as on the final Maturity Date and on any date that the Revolving Loan Commitment is reduced) for the immediately preceding calendar quarter (or portion thereof), beginning with the first of such dates to occur after the Closing Date.

 

(b) Administrative Fees.  The Borrower agrees to pay to the Agent, for its own account, an annual fee as agreed to between the Borrower and the Agent in the applicable Fee Letter.

 

3.5 Place and Manner of Payments.

 

(a)           All payments of principal, interest, fees, expenses and other amounts to be made by the Borrower under this Credit Agreement shall be received without setoff, deduction or counterclaim not later than 3:00 p.m.(Charlotte, North Carolina time) on the date when due in Dollars and in immediately available funds by the Agent at its offices in Charlotte, North Carolina.  Unless the application of a payment is specifically directed by the Borrower or determined pursuant to Section 3.2 (or if such application would be inconsistent with the terms hereof), the Agent shall distribute payments received from the Borrower to the Lenders in such manner as it reasonably determines in its sole discretion.

 

(b)           Unless the Agent shall have received notice from the Borrower prior to the date on which any payment is due to the Agent for the account of the Lenders or an L/C Issuer hereunder that the Borrower will not make such payment, the Agent may assume that the Borrower has made such payment on such date in accordance herewith and may, in reliance upon such assumption, distribute to the Lenders or an L/C Issuer, as the case may be, the amount due.  In such event, if the Borrower has not in fact made such payment, then each of the Lenders or such L/C Issuer, as the case may be, severally agrees to repay to the Agent forthwith on demand the amount so distributed to such Lender or such L/C Issuer, in immediately available funds with interest thereon, for each day from and including the date such amount is distributed to it to but excluding the date of payment to the Agent, at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank compensation.  A notice of the Agent to any Lender or the Borrower with respect to any amount owing under this subsection (b) shall be conclusive, absent demonstrable error.

 

3.6 Pro Rata Treatment.

 

Except to the extent otherwise provided herein, all Revolving Loans, each payment or prepayment of principal of any Revolving Loan, each payment of interest on the Revolving Loans, each payment of Commitment Fees, each reduction of the Revolving Loan 

 

  

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Commitment, and each conversion or continuation of any Revolving Loans, shall be allocated pro rata among the Lenders in accordance with the respective Commitment Percentages; provided that, if any Lender shall have failed to pay its applicable pro rata share of any Revolving Loan, then any amount to which such Lender would otherwise be entitled pursuant to this Section 3.6 shall instead be applied as provided in Section 2.11(a)(ii); and provided, further, that in the event any amount paid to any Lender pursuant to this Section 3.6 is rescinded or must otherwise be returned by the Agent, each Lender shall, upon the request of the Agent, repay to the Agent the amount so paid to such Lender, with interest for the period commencing on the date such payment is returned by the Agent until the date the Agent receives such repayment at a rate per annum equal to, during the period to but excluding the date two Business Days after such request, the Federal Funds Rate, and thereafter, the Base Rate plus two percent (2%) per annum.

 

3.7 Computations of Interest and Fees.

 

(a) Except for Base Rate Loans, on which interest shall be computed on the basis of a 365 or 366 day year as the case may be, all computations of interest and fees hereunder shall be made on the basis of the actual number of days elapsed over a year of 360 days.

 

(b) It is the intent of the Lenders and the Borrower to conform to and contract in strict compliance with applicable usury law from time to time in effect.  All agreements between the Lenders and the Borrower are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising and whether written or oral.  In no way, nor in any event or contingency (including but not limited to prepayment or acceleration of the maturity of any obligation), shall the interest taken, reserved, contracted for, charged, or received under this Credit Agreement, under the Notes or otherwise, exceed the maximum nonusurious amount permissible under applicable law.  If, from any possible construction of any of the Credit Documents or any other document, interest would otherwise be payable in excess of the maximum nonusurious amount, any such construction shall be subject to the provisions of this paragraph and such documents shall be automatically reduced to the maximum nonusurious amount permitted under applicable law, without the necessity of execution of any amendment or new document.  If any Lender shall ever receive anything of value which is characterized as interest on the Loans under applicable law and which would, apart from this provision, be in excess of the maximum lawful amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the Loans and not to the payment of interest, or refunded to the Borrower or the other payor thereof if and to the extent such amount which would have been excessive exceeds such unpaid principal amount of the Loans.  The right to demand payment of the Loans or any other indebtedness evidenced by any of the Credit Documents does not include the right to receive any interest which has not otherwise accrued on the date of such demand, and the Lenders do not intend to charge or receive any unearned interest in the event of such demand.  All interest paid or agreed to be paid to the Lenders with respect to the Loans shall, to the extent permitted by applicable law, be amortized, prorated, allocated, and spread throughout the full stated term (including any renewal or extension) of the Loans so that the amount of interest on account of such indebtedness does not exceed the maximum nonusurious amount permitted by applicable law.

 

  

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3.8 Sharing of Payments.

 

Each Lender agrees that, in the event that any Lender shall obtain payment in respect of any Loan or any other obligation owing to such Lender under this Credit Agreement through the exercise of a right of set-off, banker’s lien, counterclaim or otherwise (including, but not limited to, pursuant to the Bankruptcy Code) in excess of its pro rata share as provided for in this Credit Agreement, such Lender shall promptly purchase from the other Lenders a participation in such Loans and other obligations, in such amounts and with such other adjustments from time to time, as shall be equitable in order that all Lenders share such payment in accordance with their respective ratable shares as provided for in this Credit Agreement.  Each Lender further agrees that if a payment to a Lender (which is obtained by such Lender through the exercise of a right of set-off, banker’s lien, counterclaim or otherwise) shall be rescinded or must otherwise be restored, each Lender which shall have shared the benefit of such payment shall, by repurchase of a participation theretofore sold, return its share of that benefit to each Lender whose payment shall have been rescinded or otherwise restored.  The Borrower agrees that any Lender so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including set-off, banker’s lien or counterclaim, with respect to such participation as fully as if such Lender were a holder of such Loan or other obligation in the amount of such participation.  Except as otherwise expressly provided in this Credit Agreement, if any Lender shall fail to remit to the Agent or any other Lender an amount payable by such Lender to the Agent or such other Lender pursuant to this Credit Agreement on the date when such amount is due, such payments shall accrue interest thereon, for each day from the date such amount is due until the day such amount is paid to the Agent or such other Lender, at a rate per annum equal to the Federal Funds Rate.  If under any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this Section 3.8 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders under this Section 3.8 to share in the benefits of any recovery on such secured claim.

 

3.9 Evidence of Debt.

 

(a) Each Lender shall maintain an account or accounts evidencing each Loan made by such Lender to the Borrower from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time under this Credit Agreement.  Each Lender will make reasonable efforts to maintain the accuracy of its account or accounts and to promptly update its account or accounts from time to time, as necessary.

 

(b) The Agent shall maintain the Register pursuant to Section 11.3(c), and a subaccount for each Lender, in which Register and subaccounts (taken together) shall be recorded (i) the amount, type and Interest Period of each such Loan hereunder, (ii) the amount of any principal or interest due and payable or to become due and payable to each Lender hereunder and (iii) the amount of any sum received by the Agent hereunder from or for the account of the Borrower and each Lender’s share thereof.  The Agent will make reasonable efforts to maintain the accuracy of the subaccounts referred to in the preceding sentence and to promptly update such subaccounts from time to time, as necessary.

 

  

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(c) The entries made in the accounts, Register and subaccounts maintained pursuant to subsection (b) of this Section 3.9 (and, if consistent with the entries of the Agent, subsection (a) and the Notes issued to the Lenders) shall be prima facie evidence of the existence and amounts of the obligations of the Borrower therein recorded; provided, however, that the failure of any Lender or the Agent to maintain any such account, such Register or such subaccount, as applicable, or any error therein, shall not in any manner affect the obligation of the Borrower to repay the Loans made by such Lender in accordance with the terms hereof.

 

Section 4. ADDITIONAL PROVISIONS REGARDING LOANS

 

4.1 Pricing Provisions.

 

(a) Unavailability.  In the event that the Agent shall have determined in good faith (i) that U.S. dollar deposits in the principal amounts requested with respect to a Eurodollar Loan are not generally available in the London interbank Eurodollar market or (ii) that reasonable means do not exist for ascertaining the Eurodollar Rate, the Agent shall, as soon as practicable thereafter, give notice of such determination to the Borrower and the Lenders.  In the event of any such determination under clauses (i) or (ii) above, until the Agent shall have advised the Borrower and the Lenders that the circumstances giving rise to such notice no longer exist, (A) any request by the Borrower for Eurodollar Loans shall be deemed to be a request for Base Rate Loans, (B) any request by the Borrower for conversion into or continuation of Eurodollar Loans shall be deemed to be a request for conversion into or continuation of Base Rate Loans and (C) any Revolving Loans that were to be converted or continued as Eurodollar Loans on the first day of an Interest Period shall be converted to or continued as Base Rate Loans.

 

(b) Change in Legality.  Notwithstanding any other provision herein, if any change, after the date hereof, in any law or regulation (including the introduction of any new law or regulation) or in the interpretation thereof by any Governmental Authority charged with the administration or interpretation thereof shall make it unlawful for any Lender to make or maintain any Eurodollar Loan or to give effect to its obligations as contemplated hereby with respect to any Eurodollar Loan, then, by written notice to the Borrower and to the Agent, such Lender may:

 

(A) declare that Eurodollar Loans, and conversions to or continuations of Eurodollar Loans, will not thereafter be made by such Lender hereunder, whereupon any request by the Borrower for, or for conversion into or continuation of, Eurodollar Loans shall, as to such Lender only, be deemed a request for, or for conversion into or continuation of, Base Rate Loans, unless such declaration shall be subsequently withdrawn; and

 

(B) require that all outstanding Eurodollar Loans made by it be converted to Base Rate Loans in which event all such Eurodollar Loans shall be automatically converted to Base Rate Loans.

 

  

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In the event any Lender shall exercise its rights under clause (A) or (B) above, all payments and prepayments of principal which would otherwise have been applied to repay the Eurodollar Loans that would have been made by such Lender or the converted Eurodollar Loans of such Lender shall instead be applied to repay the Base Rate Loans made by such Lenders in lieu of, or resulting from the conversion of, such Eurodollar Loans.

 

(c) Requirements of Law.  If at any time a Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to the making, the commitment to make or the maintaining of any Eurodollar Loan or to the issuance or participation in Letters of Credit because of (i) any Change in Law, including, without limitation, the imposition, modification or deemed applicability of any reserves, deposits or similar requirements (such as, for example, but not limited to, a change in official reserve requirements, but, in all events, excluding reserves required under Regulation D to the extent included in the computation of the Adjusted Eurodollar Rate) or (ii) other circumstances affecting the London interbank Eurodollar market; then the Borrower shall pay to such Lender promptly upon written demand therefore, accompanied by a statement in reasonable detail showing the calculation of the amount demanded, such additional amounts (in the form of an increased rate of, or a different method of calculating, interest or otherwise as such Lender may determine in its reasonable discretion) as may be required to compensate such Lender for such increased costs or reductions in amounts receivable hereunder.  Each determination and calculation made by a Lender under this Section 4.1 shall, absent demonstrable error, be binding and conclusive on the parties hereto.  This Section shall survive termination of this Credit Agreement and the other Credit Documents and payment of the Loans and all other amounts payable hereunder.

 

(d) Cost of Funds.  If the Lenders having 50% or more of the aggregate Revolving Loan Commitments determine (which determination shall be conclusive and binding upon the Borrower) that the Eurodollar Rate will not adequately and fairly reflect the cost to such Lenders (as conclusively certified by such Lenders) of making or maintaining their affected Eurodollar Loans, the Agent shall give notice thereof to the Borrower and the Lenders as soon as practicable thereafter and, upon delivery of such notice and until the Agent (upon the instruction of the such Lenders) revokes such notice, (A) any request by the Borrower for Eurodollar Loans shall be deemed to be a request for Base Rate Loans, (B) any request by the Borrower for conversion into or continuation of Eurodollar Loans shall be deemed to be a request for conversion into or continuation of Base Rate Loans and (C) any Revolving Loans that were to be converted or continued as Eurodollar Loans on the first day of an Interest Period shall be converted to or continued as Base Rate Loans. 

 

Failure or delay on the part of any Lender to demand compensation pursuant to this Section 4.1 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate such Lender pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender notifies the Borrower of the change in or in the interpretation of law or regulation giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the change in or in the interpretation of law or regulation giving rise to such increased costs or reductions is retroactive, then the 90-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

  

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Notwithstanding the foregoing, and notwithstanding Section 4.3, the Borrower shall be entitled to withdraw any pending request for Eurodollar Loans, to withdraw any pending request for conversion into or continuation of Eurodollar Loans, and to prepay any outstanding Revolving Loans, if such requests or Revolving Loans are or would be affected by this Section 4.1, subject to the provisions of Section 4.3.

 

4.2 Capital Adequacy.

 

If any Lender or Issuing Bank determines that any Change in Law affecting such Lender or Issuing Bank or such Lender’s or Issuing Bank’s holding company, if any, regarding capital requirements, has or would have the effect of reducing the rate of return on such Lender’s (or parent corporation’s) capital or assets as a consequence of its commitments or obligations hereunder to a level below that which such Lender (or its parent corporation) could have achieved but for such adoption, effectiveness, change or compliance (taking into consideration such Lender’s (or parent corporation’s) policies with respect to capital adequacy), then, upon notice from such Lender, accompanied by a statement in reasonable detail showing the calculation of the amount demanded, the Borrower shall pay to such Lender such additional amount or amounts as will compensate such Lender for such reduction.  Each determination by any such Lender of amounts owing under this Section 4.2 shall, absent demonstrable error, be conclusive and binding on the parties hereto.  This Section shall survive termination of this Credit Agreement and the other Credit Documents and payment of the Loans and all other amounts payable hereunder.

 

Failure or delay on the part of any Lender to demand compensation pursuant to this Section 4.2 shall not constitute a waiver of such Lender’s right to demand such compensation; provided that the Borrower shall not be required to compensate such Lender pursuant to this Section for any increased costs or reductions incurred more than 90 days prior to the date that such Lender notifies the Borrower of the change in or in the interpretation of law or regulation giving rise to such increased costs or reductions and of such Lender’s intention to claim compensation therefor; provided further that, if the change in or in the interpretation of law or regulation giving rise to such increased costs or reductions is retroactive, then the 90-day period referred to above shall be extended to include the period of retroactive effect thereof.

 

4.3 Compensation.

 

The Borrower promises to indemnify each Lender and to hold each Lender harmless from any loss or expense which such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice requesting the same in accordance with the provisions of this Credit Agreement, (b) default by the Borrower in making any prepayment of a Eurodollar Loan after the Borrower has given a notice thereof in accordance with the provisions of this Credit Agreement, (c) the making of a prepayment of Eurodollar Loans on a day which is not the last day of an Interest Period with respect thereto and (d) the payment, continuation or conversion of a Eurodollar Loan on a day which is not the last day of the Interest Period applicable thereto or the failure to repay a Eurodollar Loan when required by the terms of this Credit Agreement.  Such indemnification may include an amount equal to (i) an amount of interest calculated at the Eurodollar Rate which would have accrued on the amount in question, 

 

  

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for the period from the date of such prepayment or of such failure to borrow, convert, continue or repay to the last day of the applicable Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Eurodollar Loans provided for herein minus (ii) the amount of interest (as reasonably determined by such Lender) which would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the interbank Eurocurrency market.  The agreements in this Section shall survive the termination of this Credit Agreement and the payment of the Loans and all other amounts payable hereunder.

 

4.4 Taxes.

 

(a) Payments Free of Taxes.  Any and all payments by or on account of any obligation of the Borrower under this Agreement or under any other Credit Document shall, to the extent permitted by applicable law, be made free and clear of, and without reduction or withholding for, any Taxes; provided, however, if applicable law requires the Borrower or the Agent to withhold or deduct any Tax, such Tax shall be withheld or deducted in accordance with such law as determined by the Borrower or the Agent, as the case may be, upon the basis of the information and documentation to be delivered pursuant to Section 4.4(f).

 

(b) Obligation to Withhold.  If the Borrower or the Agent shall be required to withhold or deduct any Taxes from any payment, then (A) the Borrower or the Agent, as the case may be, shall withhold or make such deductions as are determined by the Borrower or the Agent, as the case may be, to be required based upon the information and documentation it has received pursuant to subsection (e) below, (B) the Borrower or the Agent, as the case may be, shall timely pay the full amount withheld or deducted to the relevant Governmental Authority, and (C) to the extent that the withholding or deduction is made on account of Indemnified Taxes or Other Taxes, the sum payable by the Borrower shall be increased as necessary so that after any required withholding or the making of all required deductions (including deductions applicable to additional sums payable under this Section) the Agent, Lender, or L/C Issuer, as the case may be, receives an amount equal to the sum it would have received had no such withholding or deduction been made.

 

(c)           Payment of Other Taxes by the Borrower.  Without limiting the provisions of Sections 4.4(a) and 4.4(b), the Borrower shall timely pay any Other Taxes to the relevant Governmental Authority in accordance with applicable laws.

 

(d)           Tax Indemnification by Borrower.  Without limiting the provisions of Sections 4.4(a)-4.4(c), the Borrower shall, and does hereby, indemnify the Agent, each Lender, and the L/C Issuer, and shall make payment in respect thereof within 10 days after demand therefor, for the full amount of any Indemnified Taxes or Other Taxes paid by the Agent, such Lender, or the L/C Issuer, as the case may be, with respect to any payments made under this Agreement (including any Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this Section), and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of any such payment or liability delivered to the 

 

  

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Borrower by a Lender or the L/C Issuer (with a copy to the Agent), or by the Agent on its own behalf or on behalf of a Lender or the L/C Issuer, shall be conclusive absent demonstrable error.

 

(e)           Evidence of Payments.  Upon request by the Agent or the Borrower, as the case may be, after any payment of Taxes by the Borrower or by the Agent to a Governmental Authority as provided in this Section 4.4, the Borrower shall deliver to the Agent or the Agent shall deliver to the Borrower, as the case may be, the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of any return required by law to report such payment, or other evidence of such payment reasonably satisfactory to the Agent or the Borrower, as the case may be.

 

(f)           Tax Documentation.  Each Lender (and each participant of a Lender) shall deliver to the Borrower and to the Agent, at the time or times prescribed by applicable law or when reasonably requested by the Borrower or the Agent, such properly completed and executed documentation prescribed by applicable law or by the taxing authorities of any jurisdiction and such other reasonably requested information as will permit the Borrower or the Agent, as the case may be, to determine (A) whether or not payments made under this Agreement or under any other Credit Document are subject to Taxes, (B) if applicable, the required rate of withholding or deduction and (C) the entitlement of such Lender (or participant of a Lender) to any available exemption from, or reduction of, applicable Taxes in respect of all payments to be made to such Lender (or participant of a Lender) by the Borrower pursuant to this Agreement or otherwise to establish the status of such Lender (or participant of a Lender) for withholding Tax purposes in the applicable jurisdiction.  Without limiting the generality of the foregoing:

 

(i)           Any Lender (or participant of a Lender) that is not a Foreign Lender shall deliver to the Borrower and the Agent executed originals of IRS Form W-9 or such other documentation or information prescribed by applicable law or reasonably requested by the Borrower or the Agent as will enable the Borrower or the Agent, as the case may be, to determine whether or not such Lender (or participant of a Lender) is subject to backup withholding or information reporting requirements.

 

(ii)           Each Foreign Lender that is entitled under the Code or any applicable treaty to an exemption from, or reduction in, U.S. withholding Tax with respect to payments under this Agreement or under any other Credit Document shall deliver to the Borrower and the Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the request of the Borrower or the Agent, but only if such Foreign Lender is legally entitled to do so), properly completed and executed IRS Forms W-8BEN, W-8ECI, or W-8IMY (including all required attachments) certifying as to the Foreign Lender’s entitlement to an exemption from, or reduction in, U.S. withholding Tax with respect to payments under this Agreement or under any other Credit Document.

 

(iii)           Any Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 871(h) or Section 881(c) of the Code shall deliver to the Borrower and the Agent not only properly completed and executed IRS 

 

  

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Forms W-8BEN pursuant to Section 4.4(f)(ii), but shall at the same time also deliver to the Borrower and the Agent a certificate to the effect that such Foreign Lender (and, in the event that the Foreign Lender is an entity classified for U.S. federal income tax purposes as a Disregarded Entity or as a partnership, each member of such entity) is neither (A) a “bank” within the meaning of Section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder” of the Borrower within the meaning of section 881(c)(3)(B) of the Code, nor (C) a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code.

 

(iv)           Each Lender (and each participant of a Lender) shall promptly (A) notify the Borrower and the Agent of any change in circumstances which would modify or render invalid any claimed exemption or reduction, and (B) take such steps as shall not be disadvantageous to it, in the reasonable judgment of such Lender (or participant of a Lender), and as may be reasonably necessary (including the re-designation of its lending office) to avoid any requirement of applicable law of any jurisdiction that the Borrower or the Agent make any withholding or deduction for Taxes from amounts payable to such Lender (or participant of a Lender).

 

(g)           Treatment of Certain Refunds.  Unless required by applicable law, at no time shall the Agent have any obligation to file for or otherwise pursue on behalf of a Lender or the L/C Issuer, or have any obligation to pay to any Lender or the L/C Issuer, any refund of Taxes withheld or deducted from funds paid for the account of such Lender or the L/C Issuer, as the case may be.  If the Agent, any Lender (or participant of a Lender) or the L/C Issuer determines, in its sole discretion, that it has received a refund of any Taxes or Other Taxes as to which it has been indemnified by the Borrower or with respect to which the Borrower has paid additional amounts pursuant to this Section, or it has received a credit (for purposes of determining its Tax liability in any jurisdiction other than the jurisdiction that imposed such Taxes or Other Taxes) with respect to such Taxes or Other Taxes, it shall pay to the Borrower an amount equal to such refund or credit (but only to the extent of indemnity payments made, or additional amounts paid, by the Borrower under this Section with respect to the Taxes or Other Taxes giving rise to such refund or credit), net of all out-of-pocket expenses incurred by the Agent, such Lender (or participant of a Lender) or the L/C Issuer, as the case may be, and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund or credit), provided that the Borrower, upon the request of the Agent, such Lender (or participant of a Lender) or the L/C Issuer, agrees to repay the amount paid over to the Borrower (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) to the Agent, such Lender (or participant of a Lender) or the L/C Issuer in the event the Agent, such Lender (or participant of a Lender) or the L/C Issuer is required to repay such refund to such Governmental Authority, or in the event that any such credit is determined subsequently not to be available to the Agent, such Lender (or participant of a Lender) or the L/C Issuer.  This Section 4.4(g) shall not be construed to require the Agent, any Lender (or participant of a Lender) or the L/C Issuer to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the Borrower or any other Person.

 

  

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4.5 Replacement of Lenders.

 

The Agent and each Lender shall use reasonable efforts to avoid or mitigate any increased cost or suspension of the availability of an interest rate under Sections 4.1 through 4.4 above to the greatest extent practicable (including transferring the Loans to another lending office of Affiliate of a Lender) unless, in the opinion of the Agent or such Lender, such efforts would be likely to have an adverse effect upon it.  In the event a Lender makes a request to the Borrower for additional payments in accordance with Section 4.1, 4.2 or 4.4, fails or refuses to provide any of the forms required by Section 4.4(g), or if a Lender fails or refuses to agree to a waiver or amendment approved by the Required Lenders, or if such Lender is a Defaulting Lender, then, provided that no Default or Event of Default has occurred and is continuing at such time, the Borrower may, at its own expense (such expense to include any transfer fee payable to the Agent under Section 11.3(b) and any expense pursuant to Section 4) and in its sole discretion, require such Lender to transfer and assign in whole (but not in part), without recourse (in accordance with and subject to the terms and conditions of Section 11.3(b)), all of its interests, rights and obligations under this Credit Agreement to an Eligible Assignee which shall assume such assigned obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that (a) such assignment shall not conflict with any law, rule or regulation or order of any court or other Governmental Authority and (b) the Borrower or such assignee shall have paid to the assigning Lender in immediately available funds the principal of and interest accrued to the date of such payment on the portion of the Loans hereunder held by such assigning Lender and all other amounts owed to such assigning Lender hereunder, including amounts owed pursuant to Sections 4.1 through 4.4.

 

Section 5. CONDITIONS PRECEDENT

 

5.1 Closing Conditions.

 

The obligation of the Lenders to enter into this Credit Agreement and make the initial Extension of Credit is subject to satisfaction (or waiver) of the following conditions:

 

(a) Executed Credit Documents.  Receipt by the Agent of duly executed copies of (i) this Credit Agreement, (ii) the Notes requested by Lenders prior to the date hereof in accordance with Section 2.7 and (iii) all other Credit Documents, each in form and substance acceptable to the Lenders.

 

(b) Corporate Documents.  Receipt by the Agent of the following:

 

(i) Charter Documents.  Copies of the articles of incorporation or other charter documents of the Borrower certified to be true and complete as of a recent date by the appropriate Governmental Authority of the state or other jurisdiction of its incorporation and certified by a secretary or assistant secretary of the Borrower to be true and correct as of the Closing Date, together with any other information required by Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318, or necessary for the Agent or any Lender to verify the identity of Borrower as required by Section 326 of such Act.

 

  

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(ii) Bylaws.  A copy of the bylaws of the Borrower certified by a secretary or assistant secretary of the Borrower to be true and correct as of the Closing Date.

 

(iii) Resolutions.  Copies of resolutions of the Board of Directors of the Borrower approving and adopting the Credit Documents to which it is a party, the transactions contemplated therein and authorizing execution and delivery thereof, certified by a secretary or assistant secretary of the Borrower to be true and correct and in force and effect as of the Closing Date.

 

(iv) Good Standing.  Copies of certificates of good standing, existence or its equivalent with respect to the Borrower certified as of a recent date by the appropriate Governmental Authorities of the state or other jurisdiction of incorporation and each other jurisdiction in which the failure to so qualify and be in good standing would have a Material Adverse Effect.

 

(v) Incumbency.  An incumbency certificate of the Borrower certified by a secretary or assistant secretary of the Borrower to be true and correct as of the Closing Date.

 

(c) Opinion of Counsel.  Receipt by the Agent of an opinion, or opinions, from legal counsel to the Borrower addressed to the Agent and the Lenders and dated as of the Effective Date, in each case satisfactory in form and substance to the Agent.

 

(d) Financial Statements.  Receipt by the Lenders of the audited financial statements of the Borrower and its consolidated subsidiaries, for the fiscal years ended December 31, 2009 and 2010, including balance sheets and income and cash flow statements, in each case audited by Deloitte & Touche and prepared in accordance with GAAP.

 

(e) Fees and Expenses.  Payment by the Borrower of all fees and expenses owed by it to the Lenders, the Agent, the Lead Arrangers, The Bank of Nova Scotia and U.S. Bank National Association, including, without limitation, payment to the Agent, the Lead Arrangers, The Bank of Nova Scotia and U.S. Bank National Association of the fees set forth in the Fee Letters.

 

(f) Litigation.  Except as disclosed in the Borrower’s Annual Report on its Form 10-K for the year ended December 31, 2010 and in subsequent filings under the Securities Exchange Act of 1934 made prior to the Closing Date, there shall not exist any action, suit or investigation, nor shall any action, suit or investigation be pending or threatened before any arbitrator or Governmental Authority that materially adversely affects the Borrower or any transaction contemplated hereby or on the ability of the Borrower to perform its obligations under the Credit Documents.

 

(g) Material Adverse Effect.  No event or condition shall have occurred since the date of the financial statements delivered pursuant to Section 5.1(d) above that has had or would have a Material Adverse Effect.

 

  

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(h) Officer’s Certificates.  The Agent shall have received a certificate or certificates executed by the chief financial officer, treasurer, secretary or assistant treasurer of the Borrower as of the Closing Date stating that (i) the Borrower is in compliance with all existing material financial obligations, (ii) no action, suit, investigation or proceeding is pending or, to his knowledge, threatened in any court or before any arbitrator or governmental instrumentality that purports to affect the Borrower or any transaction contemplated by the Credit Documents, if such action, suit, investigation or proceeding would have or would be reasonably likely to have a Material Adverse Effect and (iii) immediately after giving effect to this Credit Agreement, the other Credit Documents and all the transactions contemplated therein to occur on such date, (A) no Default or Event of Default exists, (B) all representations and warranties contained herein and in the other Credit Documents, are true and correct in all material respects on and as of the date made and (C) the Borrower is in compliance with the financial covenant set forth in Section 7.2.

 

(i) Existing Credit Agreements.  Each of the Existing Credit Agreements shall be terminated prior to or contemporaneously with the Closing Date and all loans and other obligations outstanding under each Existing Credit Agreement shall be paid in full prior to or contemporaneously with Closing Date.  Each of the Lenders that is a party to any Existing Credit Agreement, by execution hereof, hereby waives the requirement of prior notice to the termination of the commitments thereunder.

 

(j) Other.  Receipt by the Lenders of such other documents, instruments, agreements or information as reasonably requested by any Lender.

 

Without limiting the generality of the provisions of the last paragraph of Section 10.3, for purposes of determining compliance with the conditions specified in this Section 5.1, each Lender that has signed this Credit Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Agent shall have received notice from such Lender prior to the proposed Closing Date specifying its objection thereto.

 

5.2 Conditions to Each Extension of Credit.

 

In addition to the conditions precedent stated elsewhere herein (excluding after the Closing Date those contained in Sections 5.1(f) and 5.1(g) hereof), the Lenders shall not be obligated to make any new Extension of Credit unless:

 

(a) Request.  The Borrower shall have timely delivered, (i) in the case of any new Revolving Loan, a duly executed and completed Notice of Borrowing in conformance with all the terms and conditions of this Credit Agreement and (ii) in the case of any Letter of Credit, the necessary application and any other LOC Documents required by the Agent.

 

(b) Representations and Warranties.  The representations and warranties made by the Borrower herein (excluding after the Closing Date those contained in Sections 6.7 and 6.10) are true and correct in all material respects at and as if made as of the date of the making of the Extension of Credit.

 

  

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(c) No Default.  No Default or Event of Default shall exist or be continuing either prior to or after giving effect thereto.

 

(d) Availability.  Immediately after giving effect to the making of an Extension of Credit (and the application of the proceeds thereof), the sum of the principal amount of the Loans and Letter of Credit Obligations outstanding shall not exceed the Aggregate Commitment.

 

The delivery of each Notice of Borrowing, each application for a Letter of Credit and each Swing Line Notice shall constitute a representation and warranty by the Borrower of the correctness of the matters specified in subsections (b), (c) and (d) above.

 

Section 6. REPRESENTATIONS AND WARRANTIES

 

The Borrower hereby represents and warrants to each Lender that:

 

6.1 Organization and Good Standing; Assets.

 

(a) The Borrower and each of its Principal Subsidiaries (i) is a corporation or limited liability company validly existing and in good standing (or equivalent status) under its jurisdiction of organization, (ii) is duly qualified and in good standing as a foreign corporation or limited liability company authorized to do business in every jurisdiction where the failure to so qualify would have a Material Adverse Effect and (iii) has the requisite corporate or limited liability company power and authority to own its properties and to carry on its business as now conducted and as proposed to be conducted.

 

(b) The Borrower and each of its Principal Subsidiaries has good and marketable title (or, in the case of personal property, valid title) or valid leasehold interests in its assets, except for (i) minor defects in title that do not materially interfere with the ability of the Borrower or the relevant Principal Subsidiary to conduct its business as now conducted and (ii) other defects that, either individually or in the aggregate, do not materially adversely affect the financial condition, properties or operations of the Borrower or the relevant Principal Subsidiary.  All such assets and properties are free and clear of any Lien, other than Liens permitted under Section 8.6 hereof.

 

(c) The Borrower’s Principal Subsidiaries and other Subsidiaries as of the Closing Date are set forth on Schedule 6.1 hereto.  All outstanding shares of capital stock having ordinary voting power for the election of directors of each of the Borrower’s Principal Subsidiaries have been validly issued, are fully paid and nonassessable (except as provided by Wisconsin Statutes section 180.0622, as judicially interpreted) and, in the case of each of the Principal Subsidiaries, are owned beneficially by the Borrower or another Subsidiary, free and clear of any Lien.

 

6.2 Due Authorization.

 

The Borrower (a) has the requisite corporate or limited liability company power and authority to execute, deliver and perform this Credit Agreement and the other Credit Documents and to incur the obligations herein and therein provided for and (b) is duly authorized 

 

  

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to, and has been authorized by all necessary corporate or limited liability company action to, execute, deliver and perform this Credit Agreement and the other Credit Documents.

 

6.3 No Conflicts.

 

Neither the execution and delivery of the Credit Documents, nor the consummation of the transactions contemplated therein, nor performance of and compliance with the terms and provisions thereof by the Borrower will (a) violate or conflict with any provision of its organizational documents or bylaws, (b) violate, contravene or materially conflict with any law, regulation (including without limitation, Regulation U, Regulation X and any regulation promulgated by the Federal Energy Regulatory Commission), order, writ, judgment, injunction, decree or permit applicable to it, (c) violate, contravene or materially conflict with contractual provisions of, or cause an event of default under, any indenture, loan agreement, mortgage, deed of trust, contract or other agreement or instrument to which it is a party or by which it may be bound, the violation of which would have a Material Adverse Effect or (d) result in or require the creation of any Lien upon or with respect to its properties.  Not more than 25% of the value of the assets of the Borrower is represented by Margin Stock.

 

6.4 Consents.

 

No consent, approval, authorization or order of, or filing, registration or qualification with, any court or Governmental Authority (including, without limitation, the Public Service Commission of Wisconsin pursuant to Chapter 201 of the Wisconsin Statutes) or third party is required in connection with the execution, delivery or performance of this Credit Agreement or any of the other Credit Documents that has not been obtained.

 

6.5 Enforceable Obligations.

 

This Credit Agreement and the other Credit Documents have been duly executed and delivered and constitute legal, valid and binding obligations of the Borrower enforceable against the Borrower in accordance with their respective terms, except as may be limited by bankruptcy or insolvency laws or similar laws affecting creditors’ rights generally or by general equitable principles.

 

6.6 Financial Condition.

 

The financial statements delivered to the Lenders pursuant to Section 5.1(d) and pursuant to Sections 7.1(a) and (b): (i) have been prepared in accordance with GAAP (subject to the provisions of Section 1.3 and subject to, in the case of the interim financial statements, year end adjustments and the absence of footnotes) and (ii) present fairly the financial condition, results of operations and cash flows of the Borrower and its Subsidiaries as of such date and for such periods.

 

6.7 No Material Change.

 

Since December 31, 2010, there has been no development or event relating to or affecting the Borrower and its Principal Subsidiaries which has had or would be reasonably likely to have a Material Adverse Effect.

 

  

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6.8 No Default.

 

Neither the Borrower nor any Principal Subsidiary is in default in any respect under any contract, lease, loan agreement, indenture, mortgage, security agreement or other agreement or obligation to which it is a party or by which any of its properties is bound which default would have or would be reasonably likely to have a Material Adverse Effect.  No Default or Event of Default presently exists and is continuing.

 

6.9 [Reserved].

 

6.10 Litigation.

 

Except as disclosed to the Lenders in writing prior to the Closing Date, there are no actions, suits or legal, equitable, arbitration or administrative proceedings, pending or, to the knowledge of the Borrower, overtly threatened against the Borrower or any of its Principal Subsidiaries which has had or would be reasonably likely to have a Material Adverse Effect.

 

6.11 Taxes.

 

The Borrower and each of its Principal Subsidiaries has filed, or caused to be filed, all material tax returns (federal, state, local and foreign) required to be filed and paid all amounts of taxes shown thereon to be due (including interest and penalties) and has paid all other material taxes, fees, assessments and other governmental charges (including mortgage recording taxes, documentary stamp taxes and intangibles taxes) owing by it, except for such taxes which are not yet delinquent or that are being contested in good faith and by proper proceedings, and against which adequate reserves are being maintained in accordance with GAAP.  As of the date of this Credit Agreement, the Borrower is not aware of any proposed tax assessments against it which have had or would be reasonably likely to have a Material Adverse Effect.

 

6.12 Compliance with Law.

 

The Borrower and each of its Principal Subsidiaries is in compliance with all laws, rules, regulations, orders and decrees applicable to it or to its properties, the failure to comply with which has had or would be reasonably likely to have a Material Adverse Effect.

 

6.13 ERISA.

 

Except as would not result or be reasonably likely to result in a Material Adverse Effect:

 

(a) During the five-year period prior to the date on which this representation is made or deemed made: (i) no Termination Event has occurred, and, to the best knowledge of the Borrower, no event or condition has occurred or exists as a result of which any Termination Event would be reasonably likely to occur, with respect to any Plan; (ii) no “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, has occurred with respect to any Plan; (iii) each Plan has been maintained, operated, and funded in compliance with its own terms and in material compliance with the provisions of ERISA, the Code, and any other applicable federal 

 

  

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or state laws; and (iv) no Lien in favor or the PBGC or a Plan has arisen or is reasonably likely to arise on account of any Plan.

 

(b) No liability has been or is reasonably expected by the Borrower to be incurred under Sections 4062, 4063 or 4064 of ERISA with respect to any Single Employer Plan by the Borrower or any of its Subsidiaries.

 

(c) Except as disclosed in the Borrower’s financial statements in accordance with FASB 87, the accumulated benefit obligation under each Single Employer Plan (determined utilizing the actuarial assumptions used for purposes of FASB 87), did not, as of the last annual valuation date prior to the date on which this representation is made or deemed made, exceed the current value of the assets of such Plan allocable to such obligation.

 

(d) Neither the Borrower nor any ERISA Affiliate has incurred, or, to the best knowledge of the Borrower, is reasonably likely to incur, any withdrawal liability under ERISA to any Multiemployer Plan or Multiple Employer Plan.  Neither the Borrower nor any ERISA Affiliate has received any notification that any Multiemployer Plan is in reorganization (within the meaning of Section 4241 of ERISA), is insolvent (within the meaning of Section 4245 of ERISA), or has been terminated (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of the Borrower, reasonably likely to be in reorganization, insolvent, or terminated.

 

(e) No prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility has occurred with respect to a Plan which has subjected or would be reasonably likely to subject the Borrower or any ERISA Affiliate to any liability under Sections 406, 409, 502(i), or 502(1) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability.

 

(f) The present value (determined using actuarial and other assumptions which are reasonable with respect to the benefits provided and the employees participating) of the liability of the Borrower and each ERISA Affiliate for post-retirement welfare benefits to be provided to their current and former employees under Plans which are welfare benefit plans (as defined in Section 3(1) of ERISA), net of all assets under all such Plans allocable to such benefits, are reflected on the financial statements referenced in Section 7.1 in accordance with FASB 106.

 

(g) Each Plan which is a welfare plan (as defined in Section 3(1) of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code apply has been administered in compliance in all material respects with such sections.

 

6.14 Use of Proceeds; Margin Stock.

 

The proceeds of the Loans and Letters of Credit hereunder will be used solely for the purposes specified in Section 7.8.  None of such proceeds will be used (a) in violation of Regulation U or Regulation X (i) for the purpose of purchasing or carrying any “margin stock” as defined in Regulation U or Regulation X or (ii) for the purpose of reducing or retiring any 

 

  

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Indebtedness which was originally incurred to purchase or carry “margin stock” or (b) for the acquisition of another Person unless the board of directors (or other comparable governing body) or stockholders, as appropriate, of such Person has approved such acquisition.  After application of the proceeds of any Loan or Letter of Credit, not more than 25% of the value of the assets of the Parent, the Borrower and their respective Subsidiaries will be represented by Margin Stock.

 

6.15 Government Regulation.

 

The Borrower is not an “investment company” registered or required to be registered under the Investment Company Act of 1940, as amended, or controlled by such a company.

 

6.16 Disclosure.

 

Neither this Credit Agreement nor any financial statements delivered to the Lenders nor any other document, certificate or statement furnished to the Lenders by or on behalf of the Borrower in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained therein or herein, taken as a whole, not misleading on the date when made.

 

Section 7. AFFIRMATIVE COVENANTS

 

The Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect and until all Borrower Obligations have been paid in full and the Revolving Loan Commitments hereunder shall have terminated:

 

7.1 Information Covenants.

 

The Borrower will furnish, or cause to be furnished, to the Agent:

 

(a) Annual Financial Statements.  As soon as available, and in any event within 120 days after the close of each fiscal year of the Borrower, a consolidated balance sheet and income statement of the Borrower and its Subsidiaries, as of the end of such fiscal year, together with a common stock equity statement which includes retained earnings and a consolidated statement of cash flows for such fiscal year, setting forth in comparative form figures for the preceding fiscal year, all such financial information described above to be in reasonable form and detail and audited by independent certified public accountants of recognized national standing reasonably acceptable to the Agent and whose opinion shall be to the effect that such financial statements have been prepared in accordance with GAAP (except for changes with which such accountants concur) and shall not be limited as to the scope of the audit or qualified in any respect.  The Lenders agree that delivery of the Borrower’s Form 10-K will meet the financial information requirements of this Section 7.1(a).

 

(b) Quarterly Financial Statements.  As soon as available, and in any event within 60 days after the close of each fiscal quarter of the Borrower (other than the fourth fiscal quarter) a consolidated balance sheet and income statement of the Borrower and its Subsidiaries, as of the end of such fiscal quarter, together with a related consolidated statement of cash flows for such fiscal quarter in each case setting forth in comparative form 

 

  

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figures for the corresponding period of the preceding fiscal year, all such financial information described above to be in reasonable form and detail and reasonably acceptable to the Agent, and accompanied by the review letter required to be filed with the Borrower’s quarterly reports on Form 10-Q pursuant to Section 10-01(d) of Regulation S-X, if any, and a certificate of the chief financial officer, treasurer, secretary or assistant treasurer of the Borrower to the effect that such quarterly financial statements fairly present in all material respects the financial condition of the Borrower and its Subsidiaries and have been prepared in accordance with GAAP, subject to changes resulting from audit and normal year-end audit adjustments and the absence of footnotes.  The Lenders agree that the delivery of the Borrower’s Form 10-Q will meet the financial information requirements of this Section 7.1(b).

 

(c) Officer’s Certificate.  At the time of delivery of the financial statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate of the chief financial officer, treasurer, secretary or assistant treasurer of the Borrower, substantially in the form of Exhibit 7.1(c), (i) demonstrating compliance with the financial covenant contained in Section 7.2 by calculation thereof as of the end of each such fiscal period, including a reconciliation in reasonable detail of excluding entities excluded because of the last sentence of Section 1.3 with respect to FIN 46, on the computation of compliance with the covenant contained in Section 7.2, (ii) stating that no Default or Event of Default exists, or if any Default or Event of Default does exist, specifying the nature and extent thereof and what action the Borrower proposes to take with respect thereto and (iii) confirming the then existing Public Debt Ratings of the Borrower.

 

(d) Notices.  Upon the Borrower obtaining actual knowledge thereof, the Borrower will give prompt written notice to the Agent of (i) the occurrence of an event or condition consisting of a Default or Event of Default, specifying the nature and existence thereof and what action the Borrower proposes to take with respect thereto, and (ii) the occurrence of any of the following with respect to the Borrower or any of its Principal Subsidiaries:  (A) the pendency or commencement of any litigation, arbitral or governmental proceeding against the Borrower or any of its Principal Subsidiaries, the claim of which is in excess of $35,000,000 or which, if adversely determined, would have or be reasonably likely to have a Material Adverse Effect or (B) the institution of any proceedings against the Borrower or any of its Principal Subsidiaries with respect to, or the receipt of notice by such Person of potential liability or responsibility for violation, or alleged violation of any federal, state or local law, rule or regulation, the violation of which would be reasonably likely to have a Material Adverse Effect.

 

(e) ERISA.  Upon the Borrower, its Subsidiaries or any ERISA Affiliate obtaining knowledge thereof, the Borrower will give written notice to the Agent and each of the Lenders promptly (and in any event within five Business Days) of: (i) any event or condition, including, but not limited to, any Reportable Event, that constitutes, or would be reasonably likely to lead to, a Termination Event that would be reasonably likely to have a Material Adverse Effect; (ii) with respect to any Multiemployer Plan, the receipt of notice as prescribed in ERISA or otherwise of any material withdrawal liability assessed against the Borrower, its Subsidiaries or any of their ERISA Affiliates, or of a determination that any Multiemployer Plan is in reorganization or insolvent (both within the meaning of Title IV of ERISA) that would be reasonably likely to lead to a withdrawal liability that would be 

 

  

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reasonably likely to have a Material Adverse Effect; (iii) the failure to make full payment on or before the due date (including extensions) thereof of all amounts which the Borrower or any of its Subsidiaries or ERISA Affiliates is required to contribute to each Plan pursuant to its terms to meet the minimum funding standard set forth in ERISA and the Code with respect thereto if such failure would be reasonably likely to have a Material Adverse Effect; or (iv) any change in the funding status of any Plan that would be reasonably likely to have a Material Adverse Effect; together, with a description of any such event or condition or a copy of any such notice and a statement by an officer of the Borrower briefly setting forth the details regarding such event, condition, or notice, and the action, if any, which has been or is being taken or is proposed to be taken by the Borrower with respect thereto.  Promptly upon request, the Borrower shall furnish the Agent and each of the Lenders with such additional information concerning any Plan as may be reasonably requested, including, but not limited to, copies of each annual report/return (Form 5500 series), as well as all schedules and attachments thereto required to be filed with the Department of Labor and/or the Internal Revenue Service pursuant to ERISA and the Code, respectively, for each “plan-year” (within the meaning of Section 3(39) of ERISA).

 

(f) Other Information.  With reasonable promptness upon any such request, such other information regarding the business, properties or financial condition of the Borrower or any of its Subsidiaries as the Agent or the Required Lenders may reasonably request.

 

Financial reports required to be delivered pursuant to clauses (a) and (b) above shall be deemed to have been delivered on the date on which such report is posted on the SEC’s website at www.sec.gov, and such posting shall be deemed to satisfy the financial reporting requirements of clauses (a) and (b) above, provided that, in each instance the Company shall provide all other reports and certificates required to be delivered under this Section 7.1 in the manner set forth in Section 11.1.

 

The Borrower hereby acknowledges that the Agent and/or the Active Arrangers will make available to the Lenders materials and/or information provided by or on behalf of the Borrower hereunder (collectively, “Borrower Materials”) by posting the Borrower Materials on IntraLinks or another similar electronic system (the “Platform”).

 

7.2 Financial Covenant.

 

The Borrower will maintain a Leverage Ratio as of the last day of each of its fiscal quarters of not greater than .65 to 1.00.

 

7.3 Preservation of Existence and Franchises.

 

Except as expressly permitted by Section 8.2 or Section 8.3 below, the Borrower will, and will cause each of its Principal Subsidiaries to, do all things necessary to preserve and keep in full force and effect its existence, and material rights, franchises and authority.

 

  

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7.4 Books and Records.

 

Subject to Section 1.3, the Borrower will, and will cause its Principal Subsidiaries to, keep complete and accurate books and records of its transactions in accordance with good accounting practices on the basis of GAAP (including the establishment and maintenance of appropriate reserves).

 

7.5 Compliance with Law.

 

The Borrower will, and will cause each of its Principal Subsidiaries to, comply with all laws, rules, regulations and orders, and all applicable restrictions imposed by all Governmental Authorities, applicable to it and its property, if the failure to comply would have or be reasonably likely to have a Material Adverse Effect.

 

7.6 Payment of Taxes and Other Indebtedness.

 

The Borrower will, and will cause each of its Principal Subsidiaries to, pay, settle or discharge (a) all material taxes, assessments and governmental charges or levies imposed upon it, or upon its income or profits, or upon any of its properties, before they shall become delinquent and (b) all lawful claims (including claims for labor, materials and supplies) which, if unpaid, might give rise to a Lien which is not permitted by Section 8.6 upon any of its properties; provided, however, that neither the Borrower nor any Principal Subsidiary shall be required to pay any such tax, assessment, charge, levy, claim or Indebtedness which is being contested in good faith by appropriate proceedings and as to which adequate reserves therefor have been established in accordance with GAAP, unless the failure to make any such payment (i) would give rise to an immediate right to foreclose or collect on a Lien securing such amounts or (ii) would have or reasonably be likely to have a Material Adverse Effect.

 

7.7 Insurance.

 

The Borrower will, and will cause each of its Principal Subsidiaries to, at all times maintain in full force and effect insurance (including worker’s compensation insurance, liability insurance, casualty insurance and business interruption insurance) in such amounts, covering such risks and liabilities and with such deductibles or self-insurance retentions as are in accordance with normal industry practice; provided, however, that the Borrower and its Principal Subsidiaries may self-insure to the same extent as other companies engaged in similar businesses and to the extent consistent with prudent business practice.

 

7.8 Use of Proceeds.

 

The proceeds of the Loans and the Letters of Credit may be used solely (a) to provide working capital and (b) for other general corporate purposes.

 

7.9 Audits/Inspections.

 

Upon reasonable notice and during normal business hours, the Borrower will, and will cause each of its Principal Subsidiaries to, permit representatives appointed by the Agent or any Lender, including, without limitation, independent accountants, agents, attorneys, and 

 

  

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appraisers to visit and inspect the Borrower’s and its Principal Subsidiaries’ property, including its books and records, its accounts receivable and inventory, the Borrower’s and its Principal Subsidiaries’ facilities and their other business assets, and to make photocopies or photographs thereof and to write down and record any information such representative obtains and shall permit the Agent, any Lender or its representatives to investigate and verify the accuracy of information provided to the Lenders and to discuss all such matters with the officers, employees and representatives of the Borrower and its Principal Subsidiaries.  All information so obtained shall be subject to the provisions of Section 11.10 below.

 

7.10 Restrictive Agreements.

 

The Borrower will not, and will not permit any Principal Subsidiary to, enter into any agreement that restricts the ability of any Principal Subsidiary to pay dividends or other distributions with respect to any shares of its capital stock; provided that it is understood and agreed that (a) the foregoing covenant does not prohibit the Borrower or a Principal Subsidiary from entering into agreements that contain financial covenants which require the maintenance of a minimum net worth or compliance with financial ratios without explicitly addressing the ability to pay dividends or make other distributions with respect to shares of its capital stock and (b) the foregoing covenant does not apply to limitations or restrictions imposed by law or in  regulatory proceedings or in the articles of incorporation of Wisconsin Pubic Service Corporation as in effect on the date hereof or restrictions which arise only if dividends on preferred stock issued by such Principal Subsidiary have not been paid.

 

Section 8. NEGATIVE COVENANTS

 

The Borrower hereby covenants and agrees that so long as this Credit Agreement is in effect and until all Borrower Obligations have been paid in full and the Revolving Loan Commitments shall have terminated:

 

8.1 Nature of Business.

 

The Borrower will not, and will not permit any of its Principal Subsidiaries to, alter in any material respect the general nature of the business of the Borrower and its Principal Subsidiaries, taken as a whole, from that conducted as of the Closing Date; provided that the foregoing shall not prevent the Borrower and its Principal Subsidiaries from engaging in any energy or energy-related business; provided that nothing contained in this Section 8.1 shall be deemed or construed to limit the full or partial divestiture by the Borrower of the assets, business or operations of Integrys Energy Services, Inc. and/or any or all of the Subsidiaries of Integrys Energy Services, Inc. or any reduction in the scope and/or scale of the assets, business or operations of Integrys Energy Services, Inc. and/or any or all of its Subsidiaries (in each case, as such assets, business or operations exist as of the date of this Credit Agreement) and any such divestiture, reduction, sale or other disposition shall not be deemed or construed to constitute a change in the general nature of the business in which the Borrower and its Principal Subsidiaries, taken as a whole, are engaged and; provided, further, that the foregoing shall not prevent the disposition of assets, business or operations permitted by Section 8.3 below so long as the Borrower shall have complied with all other terms and conditions of this Credit Agreement.

 

  

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8.2 Consolidation and Merger.

 

The Borrower will not, and will not permit any of its Principal Subsidiaries to, enter into any transaction of merger or consolidation or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution); provided that, a Person may be merged or consolidated with or into the Borrower or a wholly-owned Subsidiary of the Borrower, so long as (a) in any such transaction to which the Borrower is a party (i) the surviving or successor entity (if other than the Borrower) assumes, in form reasonably satisfactory to the Required Lenders, all of the obligations of the Borrower under this Agreement and has long-term senior unsecured debt ratings issued (and confirmed after giving effect to such merger) by S&P and Moody’s of at least BBB and Baa2, respectively (or if no such ratings have been issued, commercial paper ratings issued (and confirmed after giving effect to such merger) by S&P and Moody’s of at least A-2 and P-2, respectively and (ii) the Lenders shall have received such other documents as may reasonably be requested in connection with such merger or consolidation, including, without limitation, information in respect of “know your customer” and similar requirements, an incumbency certificate and an opinion of nationally recognized independent counsel, or other independent counsel reasonably satisfactory to the Required Lenders, to the effect that all agreements or instruments effecting the assumption of the obligations of the Borrower under this Agreement are enforceable in accordance with their terms, (b) if a Principal Subsidiary is involved, such Principal Subsidiary or a wholly owned Subsidiary of the Borrower shall be the continuing or surviving entity; provided that the foregoing shall not prohibit mergers, consolidations or liquidations of a Principal Subsidiary into the Borrower, and (c) immediately before and after such merger or consolidation there does not exist a Default or an Event of Default.

 

8.3 Sale or Lease of Assets.

 

Within any twelve month period, the Borrower will not, and will not permit its Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of assets, business or operations with a book value (net of assumed liabilities associated with the assets that are the subject of such transaction) in excess of twenty-five percent (25%) of Total Assets, as calculated as of the end of the most recent fiscal quarter, provided that the Borrower and its Subsidiaries may convey, sell, lease, transfer or otherwise dispose of assets, business or operations consisting of (a) sales of inventory or other assets acquired for resale in the ordinary course of business, (b) sales of accounts owed by customers for energy provided or to be provided outside the normal franchise service area of the utility subsidiaries of the Borrower, (c) sales, transfers or other dispositions of assets between or among the Borrower and its wholly owned Subsidiaries, (d) sales, transfers or other dispositions of obsolete or worn-out tools, equipment or other property no longer used or useful in business and sales of intellectual property determined to be uneconomical, negligible or obsolete, (e) sales, transfers or other dispositions of the assets listed on Schedule 8.3, (f) non-exclusive licenses of intellectual property and (g) sales, transfers or other dispositions of assets the proceeds of which are invested in other energy related assets.

 

8.4 Arm’s-Length Transactions.

 

The Borrower will not, and will not permit any of its Principal Subsidiaries to, enter into any transaction or series of transactions, whether or not in the ordinary course of 

 

  

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business, with any Affiliate other than on terms and conditions substantially as favorable to the Borrower or the Principal Subsidiary as would be obtainable in a comparable arm’s-length transaction with a Person other than an Affiliate, other than (a) transactions between or among the Borrower and its wholly owned Subsidiaries, (b) customary fees to non-officer directors of the Borrower and its Subsidiaries and (c) employment and severance arrangements with officers and employees of the Borrower in the ordinary course of business.

 

8.5 Fiscal Year.

 

The Borrower will not, and will not permit any of its Principal Subsidiaries to, change its fiscal year (a) without prior written notification to the Lenders and (b) if such change would materially affect the Lenders’ ability to read and interpret the financial statements delivered pursuant to Section 7.1 or calculate the financial covenant in Section 7.2.

 

8.6 Liens.

 

The Borrower will not, and will not permit any of its Principal Subsidiaries to, contract, create, incur, assume or permit to exist any Lien with respect to any of its property or assets of any kind (whether real or personal, tangible or intangible), whether now owned or hereafter acquired, except for (a) Liens securing Borrower Obligations, (b) the Lien of First Mortgage Indentures or any Liens attaching to the property to which the Lien of the First Mortgage Indentures attach; provided that such Liens do not secure Funded Debt (other than Funded Debt secured by the First Mortgage Indentures), (c) Liens for taxes not yet due or Liens for taxes being contested in good faith by appropriate proceedings for which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof), (d) Liens in respect of property imposed by law arising in the ordinary course of business such as materialmen’s, mechanics’, warehousemen’s, carrier’s, landlords’ and other nonconsensual statutory Liens which are not yet due and payable, which have been in existence less than 90 days or which are being contested in good faith by appropriate proceedings and for which adequate reserves determined in accordance with GAAP have been established (and as to which the property subject to any such Lien is not yet subject to foreclosure, sale or loss on account thereof), (e) pledges or deposits made in the ordinary course of business to secure payment of worker’s compensation insurance, unemployment insurance, pensions or social security programs, (f) Liens arising from good faith deposits in connection with or to secure performance of tenders, bids, leases, government contracts, performance and return-of-money bonds and other similar obligations incurred in the ordinary course of business (other than obligations in respect of the payment of borrowed money), (g) Liens arising from good faith deposits in connection with or to secure performance of statutory obligations and surety and appeal bonds, (h) easements, rights-of-way (and liens on easements or rights-of-way or the underlying real estate), restrictions (included zoning restrictions), minor defects or irregularities in title and other similar charges or encumbrances not, in any material respect, impairing the use of the encumbered property for its intended purposes, (i) judgment Liens that would not constitute an Event of Default, (j) Liens arising by virtue of any statutory or common law provision relating to banker’s liens, rights of setoff or similar rights as to deposit accounts or other funds maintained with a creditor depository institution, (k) any Lien created or arising over any property which is acquired, constructed or created by the Borrower or any Principal Subsidiary, but only if (i) such 

 

  

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Lien secures only principal amounts (not exceeding the cost of such acquisition, construction or creation) raised for the purposes of such acquisition, construction or creation together with any costs, expenses, interest and fees incurred in relation thereto or a guarantee given in respect thereof, (ii) such Lien is created or arises on or before 180 days after the completion of such acquisition, construction or creation and (iii) such Lien is confined solely to the property so acquired, constructed or created and any improvements thereto and proceeds and products thereof, (l) any Lien on any property or assets acquired from a Person which is merged with or into the Borrower or any Principal Subsidiary in accordance with Section 8.2, and is not created in anticipation of any such transaction, (m) any Lien on any property or assets existing at the time of acquisition of such property or assets by the Borrower or any Principal Subsidiary and which is not created in anticipation of such acquisition, (n) Liens existing on the Closing Date and described on Schedule 8.6 attached hereto, (o) pledges or deposits made in the ordinary course of business to secure obligations of the Borrower or any Principal Subsidiary under interest rate protection agreements, foreign currency exchange agreements, Permitted Energy Transactions or other interest or exchange rate hedging arrangements, (p) Liens on cash, cash collateral, cash deposits or deposit accounts furnished to or for the benefit of Midwest Independent Transmission System Operator, Inc. (“MISO”) or other transmission providers or energy market administrators to secure the payment and performance of obligations (i) in connection with the purchase of electric transmission service from MISO or such other transmission providers or (ii) related to energy, capacity or ancillary service transactions entered into through markets administered by MISO or such other transmission providers or energy market administrators, (q) Liens, if any, arising in connection with the securitization of environmental retrofit receivables, (r) any extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Liens referred to in the foregoing clauses (a) through (q), for amounts not exceeding the maximum principal amount of the Indebtedness secured by the Lien so extended, renewed or replaced; provided that such extension, renewal or replacement Lien is limited to all or a part of the same property or assets that were covered by the Lien extended, renewed or replaced (plus improvements on such property or assets), and (s) any other Lien or Liens which in the aggregate secure Indebtedness or other obligations at any one time not in excess of an amount equal to 7.5% of Total Assets.

 

Section 9. EVENTS OF DEFAULT

 

9.1 Events of Default.

 

An Event of Default shall exist upon the occurrence of any of the following specified events (each an “Event of Default”):

 

(a) Payment.  The Borrower shall: (i) default in the payment when due of any principal of any of the Loans or Letter of Credit Obligations; or (ii) default, and such default shall continue for three or more Business Days, in the payment when due of any interest on the Loans or Letter of Credit Obligations or of any fees or other amounts owing hereunder, under any of the other Credit Documents or in connection herewith.

 

(b) Representations.  Any representation, warranty or statement made or deemed to be made by the Borrower (or any of its officers or agents) herein, in any of the other Credit Documents, or in any statement or certificate delivered or required to be 

 

  

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delivered pursuant hereto or thereto shall prove untrue in any material respect on the date as of which it was deemed to have been made.

 

(c) Covenants.  The Borrower shall:

 

(i) default in the due performance or observance of any term, covenant or agreement contained in Sections 7.1(d), 7.2, 7.3, 7.9, 8.2, 8.3 or 8.6; or

 

(ii) default in the due performance or observance by it of any term, covenant or agreement (other than those referred to in subsections (a), (b) or (c)(i) of this Section 9.1) contained in this Credit Agreement or any other Credit Document and such default shall continue unremedied for a period of at least 30 days after the earlier of the Borrower becoming aware of such default or notice thereof given by the Agent.

 

(d) Credit Documents.  Any Credit Document shall fail to be in full force and effect or the Borrower shall so assert or any Credit Document shall fail to give the Agent and/or the Lenders the rights, powers and privileges purported to be created thereby.

 

(e) Bankruptcy, etc.  The occurrence of any of the following with respect to the Borrower or any of its Principal Subsidiaries:  (i) a court or governmental agency having jurisdiction in the premises shall enter a decree or order for relief in respect of the Borrower or any of its Principal Subsidiaries in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Borrower or any of its Principal Subsidiaries or for any substantial part of its property or ordering the winding up or liquidation of its affairs; or (ii) an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect is commenced against the Borrower or any of its Principal Subsidiaries and such petition remains unstayed and in effect for a period of 60 consecutive days; or (iii) the Borrower or any of its Principal Subsidiaries shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of such Person or any substantial part of its property or make any general assignment for the benefit of creditors; or (iv) the Borrower or any of its Principal Subsidiaries shall admit in writing its inability to pay its debts generally as they become due or any action shall be taken by such Person in furtherance of any of the aforesaid purposes.

 

(f) Defaults Under Other Agreements.  With respect to any Indebtedness in excess of $35,000,000 (other than Indebtedness outstanding under this Credit Agreement) of the Borrower or any of its Principal Subsidiaries (i) the Borrower or any of its Principal Subsidiaries shall (A) default in any payment (beyond the applicable grace period with respect thereto, if any) with respect to any such Indebtedness, or (B) default (after giving effect to any applicable grace period) in the observance or performance relating to such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any 

 

  

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other event or condition shall occur or condition exist other than non-material defaults under any First Mortgage Indenture, the effect of which default or other event or condition is to cause, or permit, the holder of the holders of such Indebtedness (or trustee or agent on behalf of such holders) to cause (determined without regard to whether any notice or lapse of time is required) any such Indebtedness to become due prior to its stated maturity (unless no holder, or trustee on behalf of any holder, has asserted that such event constitutes a default thereunder); or (ii) any such Indebtedness shall be declared due and payable, or required to be prepaid other than by a regularly scheduled required prepayment prior to the stated maturity thereof; or (iii) any such Indebtedness shall mature and remain unpaid.  The foregoing cross default provision shall not apply to Indebtedness to the extent recourse to the Borrower is limited to specific assets in a project financing; i.e., defaults under agreements governing non-recourse project financing indebtedness are excluded.

 

(g) Judgments.  One or more judgments, orders, or decrees shall be entered against the Borrower or any of its Principal Subsidiaries involving a liability of $35,000,000 or more, in the aggregate (to the extent not paid or covered by insurance provided by a carrier who has been notified of, and has not disputed the claim made for payment of, the amount of such judgment or order), and such judgments, orders or decrees shall continue unsatisfied, undischarged and unstayed for a period ending on the first to occur of (i) the fifth Business Day after last day on which such judgment, order or decree becomes final and unappealable and, where applicable, with the status of a judicial lien or (ii) 60 days; provided that if such judgment, order or decree provides for periodic payments over time then the Borrower shall have a grace period of 30 days with respect to each such periodic payment.

 

(h) ERISA.  The occurrence of any of the following events or conditions if any of the same would be reasonably likely to have a Material Adverse Effect:  (A) any “accumulated funding deficiency,” as such term is defined in Section 302 of ERISA and Section 412 of the Code, whether or not waived, shall exist with respect to any Plan, or any lien shall arise on the assets of the Borrower, any of its Subsidiaries or any ERISA Affiliate in favor of the PBGC or a Plan; (B) a Termination Event shall occur with respect to a Single Employer Plan, which is, in the reasonable opinion of the Agent, likely to result in the termination of such Plan for purposes of Title IV of ERISA; (C) a Termination Event shall occur with respect to a Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable opinion of the Agent, likely to result in (i) the termination of such Plan for purposes of Title IV of ERISA, or (ii) the Borrower, any of its Subsidiaries or any ERISA Affiliate incurring liability in connection with a withdrawal from, reorganization of (within the meaning of Section 4241 of ERISA), or insolvency (within the meaning of Section 4245 of ERISA) of such Plan; or (D) any prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary responsibility shall occur which would be reasonably likely to subject the Borrower, any of Subsidiaries or any ERISA Affiliate to liability under Sections 406, 409, 502(i), or 502(1) of ERISA or Section 4975 of the Code, or under any agreement or other instrument pursuant to which the Borrower, any of Subsidiaries or any ERISA Affiliate has agreed or is required to indemnify any person against any such liability.

 

(i) Change of Control.  The occurrence of any Change of Control.

 

  

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9.2 Acceleration; Remedies.

 

Upon the occurrence and during the continuance of an Event of Default, the Agent may, and shall, upon the request and direction of the Required Lenders, by written notice to the Borrower take any of the following actions without prejudice to the rights of the Agent or any Lender to enforce its claims against the Borrower, except as otherwise specifically provided for herein:

 

(i) Termination of Revolving Loan Commitments.  Declare the Revolving Loan Commitments terminated whereupon the Revolving Loan Commitments shall be immediately terminated.

 

(ii) Acceleration of Borrower Obligations.  Declare the unpaid amount of all Borrower Obligations to be due whereupon the same shall be immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby waived by the Borrower.

 

(iii) Cash Collateral.  Direct the Borrower to pay (and the Borrower agrees that upon receipt of such notice, or upon the occurrence of an Event of Default under Section 9.1(e), it will immediately pay) to the Agent additional cash, to be held by the Agent, for the benefit of the Lenders, in an interest bearing cash collateral account as additional security for the Letter of Credit Obligations in respect of subsequent drawings under all then outstanding Letters of Credit in an amount equal to the maximum aggregate amount which may be drawn under all Letters of Credits then outstanding.

 

(iv) Enforcement of Rights.  Enforce any and all rights and interests created and existing under the Credit Documents, including, without limitation, all rights of set-off.

 

Notwithstanding the foregoing, if an Event of Default specified in Section 9.1(e) shall occur, then the Revolving Loan Commitments shall automatically terminate and all Borrower Obligations, all accrued interest in respect thereof, all accrued and unpaid fees and other indebtedness or obligations owing to the Lenders and the Agent hereunder shall immediately become due and payable without the giving of any notice or other action by the Agent or the Lenders.

 

Notwithstanding the fact that enforcement powers reside primarily with the Agent, each Lender has, to the extent permitted by law, a separate right of payment and shall be considered a separate “creditor” holding a separate “claim” within the meaning of Section 101(5) of the Bankruptcy Code or any other insolvency statute.

 

9.3 Allocation of Payments After Event of Default.

 

Notwithstanding any other provisions of this Credit Agreement, after the occurrence and during the continuance of an Event of Default, all amounts collected or received by the Agent or any Lender on account of amounts outstanding under any of the Credit Documents shall be paid over or delivered as follows:

 

  

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FIRST, to the payment of all reasonable out-of-pocket costs and expenses (including without limitation reasonable attorneys’ fees) of the Agent or-any of the Lenders in connection with enforcing the rights of the Lenders under the Credit Documents, pro rata as set forth below;

 

SECOND, to payment of any fees owed to the Agent or any Lender, pro rata as set forth below;

 

THIRD, to the payment of all accrued interest payable to the Lenders hereunder, pro rata as set forth below;

 

FOURTH, to the payment of the outstanding principal amount of the Loans and unreimbursed drawings under Letters of Credit, and to the payment or cash collateralization of the outstanding Letters of Credit Obligations, pro rata as set forth below;

 

FIFTH, to all other obligations which shall have become due and payable under the Credit Documents and not repaid pursuant to clauses “FIRST” through “FOURTH” above; and

 

SIXTH, to the payment of the surplus, if any, to whoever may be lawfully entitled to receive such surplus.

 

In carrying out the foregoing, (a) amounts received shall be applied in the numerical order provided until exhausted prior to application to the next succeeding category; (b) each of the Lenders shall receive an amount equal to its pro rata share (based on the proportion that the then outstanding Loans, and Letter of Credit Obligations held by such Lender bears to the aggregate then outstanding Loans and Letter of Credit Obligations), of amounts available to be applied; and (c) to the extent that any amounts available for distribution pursuant to clause “FOURTH” above are attributable to the issued but undrawn amount of outstanding Letters of Credit, such amounts shall be held by the Agent in a cash collateral account and applied (x) first, to reimburse the Lenders from time to time for any drawings under such Letters of Credit and (y) then, following the expiration of all Letters of Credit, to all other obligations of the types described in clauses “FOURTH,” and “FIFTH” above in the manner provided in this Section 9.3.

 

Section 10. AGENCY PROVISIONS

 

10.1 Appointment.

 

Each Lender (including in its capacity as an L/C Issuer and Swing Line Lender, if applicable) hereby designates and appoints Wells Fargo Bank, National Association as agent of such Lender to act as specified herein and the other Credit Documents, and each such Lender hereby authorizes the Agent, as the agent for such Lender, to take such action on its behalf under the provisions of this Credit Agreement and the other Credit Documents and to exercise such powers and perform such duties as are expressly delegated by the terms hereof and of the other Credit Documents, together with such other powers as are reasonably incidental thereto.  The provisions of this Section are solely for the benefit of the Agent and the Lenders and the Borrower shall not have any rights as a third party beneficiary of the provisions hereof.  In 

 

  

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performing its functions and duties under this Credit Agreement and the other Credit Documents, the Agent shall act solely as agent of the Lenders and does not assume and shall not be deemed to have assumed any obligation or relationship of agency or trust with or for the Borrower.  The Agent agrees to give each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Credit Agreement.

 

10.2 Delegation of Duties.

 

The Agent may execute any of its duties hereunder or under the other Credit Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties.  The Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care.

 

10.3 Exculpatory Provisions.

 

Notwithstanding any provision to the contrary elsewhere herein and in the other Credit Documents, the Agent shall not have any duties or responsibilities, except those expressly set forth herein and therein, or any fiduciary relationship with any Lender, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Credit Agreement or any of the other Credit Documents, or shall otherwise exist against the Agent.  Without limiting the generality of the foregoing, the Agent:

 

(a)           shall not be subject to any fiduciary or other implied duties, regardless of whether a Default has occurred and is continuing;

 

(b)           shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents), provided that the Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Agent to liability or that is contrary to any Loan Document or applicable law; and

 

(c)           shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Agent or any of its Affiliates in any capacity.

 

Neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates shall be liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection herewith or in connection with any of the other Credit Documents (except for its or such Person’s own gross negligence or willful misconduct), or responsible in any manner to any of the Lenders for any recitals, statements, representations or warranties made by the Borrower contained herein or in any of the other Credit Documents or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection herewith or in connection with the other Credit Documents, or enforceability or sufficiency therefor of any of the other Credit Documents, or for any failure of 

 

  

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the Borrower to perform its obligations hereunder or thereunder.  The Agent shall not be responsible to any Lender for, nor have any duty to inquire into, (i) the effectiveness, genuineness, validity, enforceability, collectibility or sufficiency of this Credit Agreement, or any of the other Credit Documents, (ii) any representations, warranties, recitals or statements made herein or therein or made by the Borrower in any written or oral statement or in any financial or other statements, instruments, reports, certificates or any other documents in connection herewith or therewith furnished or made by the Agent to the Lenders or by or on behalf of the Borrower to the Agent or any Lender, (iii) the performance or observance of any of the terms, conditions, provisions, covenants or agreements contained herein or therein or as to the use of the proceeds of the Loans or Letters of Credit or of the existence or possible existence of any Default or Event of Default or to inspect the properties, books or records of the Borrower or (iv) the satisfaction of any condition set forth in Section 5 or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Agent.  The Agent is not a trustee for the Lenders and owes no fiduciary duty to the Lenders.

 

10.4 Reliance on Communications.

 

The Agent shall be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Borrower, independent accountants and other experts selected by the Agent with reasonable care).  In determining compliance with any condition hereunder to the making of a Loan, or the issuance of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or an L/C Issuer, the Agent may presume that such condition is satisfactory to such Lender or such L/C Issuer unless the Agent shall have received notice to the contrary from such Lender or such L/C Issuer prior to the making of such Loan or the issuance of such Letter of Credit.  The Agent may deem and treat the Lenders as the owner of its interests hereunder for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Agent in accordance with Section 11.3(b).  The Agent shall be fully justified in failing or refusing to take any action under this Credit Agreement or under any of the other Credit Documents unless it shall first receive such advice or concurrence of the Required Lenders as it deems appropriate or it shall first be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action.  The Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder or under any of the other Credit Documents in accordance with a request of the Required Lenders (or to the extent specifically provided in Section 11.6, all the Lenders) and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Lenders (including their successors and assigns).

 

10.5 Notice of Default.

 

The Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default hereunder unless the Agent has received notice from a Lender or the Borrower referring to the Credit Document, describing such Default or Event of Default and stating that such notice is a “notice of default.”  In the event that the Agent receives such a 

 

  

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notice, the Agent shall give prompt notice thereof to the Lenders.  The Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders.

 

10.6 Non-Reliance on Agent and Other Lenders.

 

Each Lender expressly acknowledges that neither the Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Agent or any affiliate thereof hereinafter taken, including any review of the affairs of the Borrower and its Subsidiaries, shall be deemed to constitute any representation or warranty by the Agent to any Lender.  Each Lender represents to the Agent that it has, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower or its Subsidiaries and made its own decision to make its Extensions of Credit hereunder and enter into this Credit Agreement.  Each Lender also represents that it will, independently and without reliance upon the Agent or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Credit Agreement, and to make such investigation as it deems necessary to inform itself as to the business, assets, operations, property, financial and other conditions, prospects and creditworthiness of the Borrower or its Subsidiaries.  Except for notices, reports and other documents expressly required to be furnished to the Lenders by the Agent hereunder, the Agent shall not have any duty or responsibility to provide any Lender with any credit or other information concerning the business, operations, assets, property, financial or other conditions, prospects or creditworthiness of the Borrower or its Subsidiaries which may come into the possession of the Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates.

 

10.7 Indemnification.

 

Each Lender agrees to indemnify the Agent in its capacity as such and each L/C Issuer in its capacity as such (in each case to the extent not reimbursed by the Borrower and without limiting the obligation of the Borrower to do so), ratably according to its Commitment Percentage, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time (including without limitation at any time following the payment in full of the Borrower Obligations) be imposed on, incurred by or asserted against the Agent or such L/C Issuer, as the case may be, in its capacity as such in any way relating to or arising out of this Credit Agreement or the other Credit Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Agent or such L/C Issuer under or in connection with any of the foregoing; provided that no Lender shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the gross negligence or willful misconduct of the Agent or such L/C Issuer, as the case may be, or from any losses suffered by the Agent solely as a result of the Borrower’s failure to make payments as required pursuant to Section 3.4(c).  If any indemnity furnished to the Agent or an L/C Issuer, as 

 

  

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the case may be, for any purpose shall, in the opinion of the Agent or such L/C Issuer, as the case may be,, be insufficient or become impaired, the Agent or such L/C Issuer, as the case may be, may call for additional indemnity and cease, or not commence, to do the acts indemnified against until such additional indemnity is furnished.  The agreements in this Section 10.7 shall survive the payment of the Borrower Obligations and all other amounts payable hereunder and under the other Credit Documents.

 

10.8 Agent in Its Individual Capacity.

 

The Agent in its individual capacity and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Borrower and its Subsidiaries as though the Agent were not Agent hereunder.  With respect to the Loans made and all Borrower Obligations owing to it, the Agent in its individual capacity shall have the same rights and powers under this Credit Agreement as any Lender and may exercise the same as though they were not Agent, and the terms “Lender” and “Lenders” shall include the Agent in its individual capacity.

 

10.9 Successor Agent.

 

(a)           The Agent may resign as the Agent upon 30 days notice to the Lenders.  If the Agent resigns under this Credit Agreement, the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders which successor agent shall be approved by the Borrower.  If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Lenders and the Borrower, a successor agent from among the Lenders.  Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term “Agent” shall mean such successor agent and the retiring Agent’s appointment, powers and duties as Agent shall be terminated.  After any retiring Agent’s resignation hereunder as Agent, the provisions of this Section 10 and Section 11.5 shall inure to its benefit as to any actions taken or omitted to be taken, by it while it was the Agent under this Credit Agreement.  If no successor agent has accepted appointment as the Agent by the date which is 30 days following a retiring Agent’s notice of resignation, the retiring Agent’s resignation shall nevertheless thereupon become effective and the Lenders shall perform all of the duties of the Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent with the Borrower’s approval, as provided for above; provided that the Borrower’s approval shall not be required after and during the continuance of an Event of Default.

 

(b)           Any resignation by Wells as Agent pursuant to this Section shall also constitute its resignation as an L/C Issuer and the Swing Line Lender.  Upon the acceptance of a successor’s appointment as Agent hereunder, (a) such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring L/C Issuer and Swing Line Lender, (b) the retiring L/C Issuer and Swing Line Lender shall be discharged from all of their respective duties and obligations hereunder or under the other Credit Documents, and (c) the successor L/C Issuer shall issue letters of credit in substitution for the Letters of Credit, if any, outstanding at the time of such succession or make other arrangements satisfactory to the 

 

  

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retiring L/C Issuer to effectively assume the obligations of the retiring L/C Issuer with respect to such Letters of Credit.

 

10.10 Other Agents.

 

None of the Book Manager, the Active Arrangers, the Syndication Agent or the Documentation Agents, in their capacity as such, shall have any duties or obligations of any kind under this Credit Agreement.

 

Section 11. MISCELLANEOUS

 

11.1 Notices.

 

(a)           Except as otherwise expressly provided herein, all notices and other communications shall have been duly given and shall be effective (i) when delivered, (ii) when transmitted via telecopy (or other facsimile device) during normal business hours (or if delivered outside of normal business hours, shall be effective at the open of the next Business Day) or (iii) the Business Day following the day on which the same has been delivered prepaid to a reputable national overnight air courier service, in each case to the respective parties at the address or telecopy numbers set forth on Schedule 11.1, or at such other address as such party may specify by written notice to the other parties hereto.

 

(b)           THE PLATFORM IS PROVIDED “AS IS” AND “AS AVAILABLE.”  THE AGENT PARTIES (AS DEFINED BELOW) DO NOT WARRANT THE ACCURACY OR COMPLETENESS OF THE BORROWER MATERIALS OR THE ADEQUACY OF THE PLATFORM, AND EXPRESSLY DISCLAIM LIABILITY FOR ERRORS IN OR OMISSIONS FROM THE BORROWER MATERIALS.  NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR STATUTORY, INCLUDING ANY WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS MADE BY ANY AGENT PARTY IN CONNECTION WITH THE BORROWER MATERIALS OR THE PLATFORM.  In no event shall the Agent or any of its Related Parties (collectively, the “Agent Parties”) have any liability to the Borrower, any Lender or any other Person for losses, claims, damages, liabilities or expenses of any kind (whether in tort, contract or otherwise) arising out of the Borrower’s or the Agent’s transmission of Borrower Materials through the Internet, except to the extent that such losses, claims, damages, liabilities or expenses result from the gross negligence or willful misconduct of such Agent Party; provided, however, that in no event shall any Agent Party have any liability to the Borrower, any Lender or any other Person for indirect, special, incidental, consequential or punitive damages (as opposed to direct or actual damages).

 

(c)           Each Lender agrees to notify the Agent from time to time to ensure that the Agent has on record (i) an effective address, contact name, telephone number, telecopier number and electronic mail address to which notices and other communications may be sent and (ii) accurate wire instructions for such Lender.

 

  

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11.2 Right of Set-Off.

 

In addition to any rights now or hereafter granted under applicable law or otherwise, and not by way of limitation of any such rights, upon the occurrence and during the continuance of an Event of Default and acceleration of all Borrower Obligations pursuant to Section 9.2, each Lender is authorized at any time and from time to time, without presentment, demand, protest or other notice of any kind (all of which rights being hereby expressly waived), to set off and to appropriate and apply any and all deposits (general or special) and any other indebtedness at any time held or owing by such Lender (including, without limitation branches, agencies or Affiliates of such Lender wherever located) to or for the credit or the account of the Borrower against obligations and liabilities of the Borrower to the Lenders hereunder, under the Notes, the other Credit Documents or otherwise, irrespective of whether the Agent or the Lenders shall have made any demand hereunder and although such obligations, liabilities or claims, or any of them, may be contingent or unmatured.  The Borrower hereby agrees that any Person purchasing a participation in the Loans and Revolving Loan Commitments hereunder pursuant to Section 11.3(c) may exercise all rights of set-off with respect to its participation interest as fully as if such Person were a Lender hereunder.

 

11.3 Benefit of Agreement.

 

(a) Generally.  This Credit Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto; provided the Borrower may not assign and transfer any of its interests without the prior written consent of the Lenders; and provided, further, that the rights of each Lender to transfer, assign or grant participations in its rights and/or obligations hereunder shall be limited as set forth below in this Section 11.3.

 

(b) Assignments.  Each Lender may, with the consent of each L/C Issuer and the Swing Line Lender (which consent will not be unreasonably withheld or delayed), assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Credit Agreement (including, without limitation, all or a portion of its Loans, its Notes, and its Revolving Loan Commitment); provided, however, that:

 

(i) each such assignment shall be to an Eligible Assignee;

 

(ii) except in the case of an assignment to another Lender or an assignment of all of a Lender’s rights and obligations under this Credit Agreement, any such partial assignment shall be in an amount at least equal to $5,000,000 (or, if less, the remaining amount of the Revolving Loan Commitment being assigned by such Lender) and an integral multiple of $1,000,000 in excess thereof;

 

(iii) each such assignment by a Lender shall be of a constant and not varying, percentage of all of its rights and obligations under this Credit Agreement and the Notes;

 

(iv) the parties to such assignment shall execute and deliver to the Agent for its acceptance an Assignment Agreement in substantially the form of 

 

  

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Exhibit 11.3(b), together with a processing fee (other than in connection with any assignment to an Affiliate of such Lender) from the assignor of $3,500 (unless waived by the Agent), and, if the assignee thereunder is not an existing Lender, such assignee shall deliver to the Agent such information as the Agent may request for administrative purposes; and

 

(v) no such assignment shall be made to (A) the Borrower or any of the Borrower’s Affiliates, (B) any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause (B), or (C) to a natural person.

 

Upon execution, delivery, and acceptance of such Assignment Agreement, the assignee thereunder shall be a party hereto and, to the extent of such assignment, have the obligations, rights, and benefits of a Lender hereunder and the assigning Lender shall, to the extent of such assignment, relinquish its rights and be released from its obligations under this Credit Agreement.  Upon the consummation of any assignment pursuant to this Section 11.3(b), the assignor, the Agent and the Borrower shall make appropriate arrangements so that, if required, new Notes are issued to the assignor and the assignee.  If the assignee is not incorporated under the laws of the United States of America or a state thereof, it shall deliver to the Borrower and the Agent certification as to exemption from deduction or withholding of taxes in accordance with Section 4.4.

 

By executing and delivering an assignment agreement in accordance with this Section 11.3(b), the assigning Lender thereunder and the assignee thereunder shall be deemed to confirm to and agree with each other and the other parties hereto as follows: (A) such assigning Lender represents and warrants that it is legally authorized to enter into such assignment agreement and it is the legal and beneficial owner of the interest being assigned thereby free and clear of any adverse claim created by such assigning Lender and the assignee warrants that it is an Eligible Assignee; (B) except as set forth in clause (A) above, such assigning Lender makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto or the financial condition of the Borrower or its Subsidiaries  or the performance or observance by the Borrower of any of its obligations under this Credit Agreement, any of the other Credit Documents or any other instrument or document furnished pursuant hereto or thereto; (C) such assignee represents and warrants that it is legally authorized to enter into such assignment agreement; (D) such assignee confirms that it has received a copy of this Credit Agreement, the other Credit Documents and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into such assignment agreement; (E) such assignee will independently and without reliance upon the Agent, such assigning Lender or any other Lender, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Credit Agreement and the other Credit Documents; (F) such assignee appoints and authorizes the Agent to take such action on its behalf and to exercise such powers under this Credit Agreement or any other Credit Document as are delegated to the 

 

  

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Agent by the terms hereof or thereof, together with such powers as are reasonably incidental thereto; and (G) such assignee agrees that it will perform in accordance with their terms all the obligations which by the terms of this Credit Agreement and the other Credit Documents are required to be performed by it as a Lender.

 

(c) Register.  The Agent shall maintain a copy of each Assignment Agreement delivered to and accepted by it and a register for the recordation of the names and addresses of the Lenders and the Revolving Loan Commitment of, and principal amount of the Loans owing to, each Lender and the Letters of Credit issued by each L/C Issuer from time to time (the “Register”).  The entries in the Register shall be conclusive and binding for all purposes, absent demonstrable error, and the Borrower, the Agent and the Lenders may treat each Person whose name is recorded in the Register as a Lender hereunder for all purposes of this Credit Agreement.  The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.

 

(d) Acceptance.  Upon its receipt of an Assignment Agreement executed by the parties thereto, together with any Note subject to such assignment and payment of the processing fee, the Agent shall, if such Assignment Agreement has been completed and is in substantially the form of Exhibit 11.3(b) hereto, (i) accept such Assignment Agreement, (ii) record the information contained therein in the Register and (iii) give prompt notice thereof to the parties thereto.

 

(e) Participations.  Each Lender may sell participations to one or more Persons in all or a portion of its rights, obligations or rights and obligations under this Credit Agreement (including all or a portion of its Revolving Loan Commitment, its Notes and its Loans); provided, however, that (i) such Lender’s obligations under this Credit Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, (iii) the participant shall be entitled to the benefit of the yield protection provisions contained in Sections 4.1 through 4.4, inclusive, but only to the extent that such Lender is entitled to payment or reimbursement under such Sections, and the right of set-off contained in Section 11.2 and (iv) the Borrower shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Credit Agreement, and such Lender shall retain the sole right to enforce the obligations of the Borrower relating to its Loans and its Notes and to approve any amendment, modification, or waiver of any provision of this Credit Agreement (other than amendments, modifications, or waivers decreasing the amount of principal of or the rate at which interest is payable on such Loans or Notes, extending any scheduled principal payment date or date fixed for the payment of interest on such Loans or Notes, or extending its Revolving Loan Commitment).

 

(f) Nonrestricted Assignments.  Notwithstanding any other provision set forth in this Credit Agreement, any Lender may at any time assign and pledge all or any portion of its Loans and its Notes to any Federal Reserve Bank as collateral security pursuant to Regulation A and any Operating Circular issued by such Federal Reserve Bank.  No such assignment shall release the assigning Lender from its obligations hereunder.

 

  

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(g) Information.  Any Lender may furnish any information concerning the Borrower and its Subsidiaries in the possession of such Lender from time to time to assignees and participants (including prospective assignees and participants); provided that the furnishing of such information shall be subject to the provisions of Section 11.10 below.

 

(h) SPC’s.  Notwithstanding anything to the contrary contained herein, any Lender (a “Granting Lender”) may grant to a special purpose funding vehicle (an “SPC”) the option to fund all or any part of any Loan that such Granting Lender would otherwise be obligated to fund pursuant to this Credit Agreement; provided that (i) nothing herein shall constitute a commitment by any SPC to fund any Loan, (ii) if an SPC elects not to exercise such option or otherwise fails to fund all or any part of such Loan, the Granting Lender shall be obligated to fund such Loan pursuant to the terms hereof, (iii) no SPC shall have any voting rights pursuant to Section 11.6 (all such voting rights shall be retained by the Granting Lender), (iv) with respect to notices, payments and other matters hereunder, the Borrower, the Agent and the Lenders shall not be obligated to deal with an SPC, but may limit their communications and other dealings relevant to such SPC to the applicable Granting Lender, and (v) with respect to the funding of any Loan by an SPC, the Borrower shall not have to pay any greater cost, or incur any greater expense, under the provisions of Section 4 of this Credit Agreement or otherwise, than if all Loans were funded by the applicable Granting Lender without the involvement of an SPC.  The funding of a Loan by an SPC hereunder shall utilize the Revolving Loan Commitment of the Granting Lender to the same extent that, and as if, such Loan were funded by such Granting Lender.  Each party hereto hereby agrees that no SPC shall be liable for any indemnity or payment under this Credit Agreement for which a Lender would otherwise be liable for so long as, and to the extent, the Granting Lender provides such indemnity or makes such payment.  In furtherance of the foregoing, each party hereto hereby agrees (which agreements shall survive termination of this Credit Agreement) that, prior to the date that is one year and one day after the payment in full of all outstanding commercial paper or other senior indebtedness of any SPC, it will not institute against, or join any other Person in instituting against, such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings under the laws of the United States or any State thereof.  Notwithstanding anything to the contrary contained in this Credit Agreement, any SPC may disclose on a confidential basis any non-public information relating to its funding of Loans to any rating agency, commercial paper dealer or provider of any surety or guarantee to such SPC.  This clause (h) may not be amended without the prior written consent of each Granting Lender, all or any part of whose Loan is being funded by an SPC at the time of such amendment.

 

11.4 No Waiver; Remedies Cumulative; Enforcement.

 

No failure or delay on the part of the Agent or any Lender in exercising any right, power or privilege hereunder or under any other Credit Document and no course of dealing between the Borrower and the Agent or any Lender shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder or under any other Credit Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or thereunder.  The rights and remedies provided herein are cumulative and not exclusive of any rights or remedies which the Agent or any Lender would otherwise have.  No notice to or demand on the Borrower in any case shall entitle the Borrower to any 

 

  

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other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Agent or the Lenders to any other or further action in any circumstances without notice or demand.

 

Notwithstanding anything to the contrary contained herein or in any other Credit Document, the authority to enforce rights and remedies hereunder and under the other Credit Documents against the Borrower shall be vested exclusively in, and all actions and proceedings at law in connection with such enforcement shall be instituted and maintained exclusively by, the Agent in accordance with Section 9.2 for the benefit of all the Lenders and the L/C Issuers; provided, however, that the foregoing shall not prohibit (a) the Agent from exercising on its own behalf the rights and remedies that inure to its benefit (solely in its capacity as Agent) hereunder and under the other Credit Documents, (b) any L/C Issuer or the Swing Line Lender from exercising the rights and remedies that inure to its benefit (solely in its capacity as L/C Issuer or Swing Line Lender, as the case may be) hereunder and under the other Credit Documents, (c) any Lender from exercising setoff rights in accordance with Section 11.2 (subject to the terms of Section 3.6), or (d) any Lender from filing proofs of claim or appearing and filing pleadings on its own behalf during the pendency of a proceeding relative to the Borrower under any debtor relief law; and provided, further, that if at any time there is no Person acting as Agent hereunder and under the other Credit Documents, then (i) the Required Lenders shall have the rights otherwise ascribed to the Agent pursuant to Section 9.2 and (ii) in addition to the matters set forth in clauses (b), (c) and (d) of the preceding proviso and subject to Section 3.6, any Lender may, with the consent of the Required Lenders, enforce any rights and remedies available to it and as authorized by the Required Lenders.

 

11.5 Payment of Expenses, etc.

 

The Borrower agrees to: (i) pay all reasonable out-of-pocket costs and expenses of the Agent and the Active Arrangers in connection with (A) the negotiation, preparation, execution and delivery and administration of this Credit Agreement and the other Credit Documents and the documents and instruments referred to therein (including, without limitation, legal fees of one counsel for the Agent) and (B) any amendment, waiver or consent relating hereto and thereto including, but not limited to, any such amendments, waivers or consents resulting from or related to any work-out, renegotiation or restructure relating to the performance by the Borrower under this Credit Agreement, (ii) pay all reasonable out-of-pocket costs and expenses of the Agent, each L/C Issuer and the Lenders in connection with (A) enforcement of the Credit Documents and the documents and instruments referred to therein (including, without limitation, in connection with any such enforcement, the reasonable fees and disbursements of counsel for the Agent, each L/C Issuer and each of the Lenders) and (B) any bankruptcy or insolvency proceeding of the Borrower and (iii) indemnify the Agent, the Active Arrangers, each L/C Issuer and each Lender, its officers, directors, employees, representatives, affiliates and agents from and hold each of them harmless against any and all losses, liabilities, claims, damages or expenses incurred by any of them as a result of, or arising out of, or in any way related to, or by reason of, any investigation, litigation or other proceeding (whether or not the Agent, the Active Arrangers, any L/C Issuer or any Lender is a party thereto) related to the entering into and/or performance of any Credit Document or the use of proceeds of any Loans (including other extensions of credit) hereunder or the consummation of any other transactions contemplated in any Credit Document, including, without limitation, the reasonable fees and 

 

  

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disbursements of counsel incurred in connection with any such investigation, litigation or other proceeding (but excluding any such losses, liabilities, claims, damages or expenses to the extent incurred by reason of gross negligence or willful misconduct on the part of the Person to be indemnified or such Person’s employer, employee or co-employee); provided that the foregoing indemnity by the Borrower shall not extend to disputes solely among the Lenders or litigation commenced by the Borrower which (a) seeks enforcement of any of the Borrower’s rights hereunder and (b) is determined in a final judgment adverse to the Agent and the Lenders.  The agreements in this Section 11.5 shall survive the payment of the Borrower Obligations and all other amounts payable hereunder and under the other Credit Documents.

 

11.6 Amendments, Waivers and Consents.

 

Neither this Credit Agreement, nor any other Credit Document nor any of the terms hereof or thereof may be amended, changed, waived, discharged or terminated unless such amendment, change, waiver, discharge or termination is in writing and signed by the Required Lenders and the Borrower, and acknowledged by the Agent; provided that no such amendment, change, waiver, discharge or termination shall without the consent of each Lender:

 

(a) extend the Maturity Date, or postpone or extend the time for any payment or prepayment of principal;

 

(b) reduce the rate or extend the time of payment of interest (other than as a result of waiving the applicability of any post-default increase in interest rates) thereon or fees or other amounts payable hereunder;

 

(c) reduce or waive the principal amount of any Loan;

 

(d) increase or extend the Revolving Loan Commitment of a Lender (it being understood and agreed that a waiver of any Default or Event of Default shall not constitute a change in the terms of any Revolving Loan Commitment of any Lender);

 

(e) release the Borrower from its obligations under the Credit Documents;

 

(f) amend, modify or waive any provision of this Section 11.6 or Section 3.6, 3.8, 4.1, 4.2, 4.3, 4.4, 9.1(a), 11.2, 11.3 or 11.5;

 

(g) reduce any percentage specified in, or otherwise modify, the definition of Required Lenders; or

 

(h) consent to the assignment or transfer by the Borrower of any of its rights and obligations under (or in respect of) the Credit Documents.

 

No provision of Section 2.9 or Section 10 may be amended or modified without the consent of the Agent.

 

No amendment, waiver or consent shall, unless in writing and signed by each L/C Issuer, adversely affect the rights or obligations of the L/C Issuers in their capacities as such under this Credit Agreement.

 

  

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No amendment, waiver or consent shall, unless in writing and signed by the Swing Line Lender, affect the rights or obligations of the Swing Line Lender in its capacity as such under this Credit Agreement.

 

Notwithstanding the fact that the consent of all the Lenders is required in certain circumstances as set forth above, each Lender is entitled to vote as such Lender sees fit on any reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein.

 

Each Lender understands and agrees that if such Lender is a Defaulting Lender then it shall not be entitled to vote on any matter requiring the consent of the Required Lenders or to object to any matter requiring the consent of all the Lenders (except that (x) an increase or extension of the Commitment(s) of such Defaulting Lender, (y) any reduction of the amount of principal or interest owed to such Defaulting Lender and (z) or any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall, in each case, require the consent of such Defaulting Lender); provided, however, that all other benefits and obligations under the Credit Documents shall apply to such Defaulting Lender.

 

11.7 Counterparts/Telecopy.

 

This Credit Agreement may be executed in any number of counterparts, each of which where so executed and delivered shall be an original, but all of which shall constitute one and the same instrument.  Delivery of executed counterparts by telecopy shall be as effective as an original and shall constitute a representation that an original will be delivered.

 

11.8 Headings.

 

The headings of the sections and subsections hereof are provided for convenience only and shall not in any way affect the meaning or construction of any provision of this Credit Agreement.

 

11.9 Survival of Indemnification and Representations and Warranties.

 

All indemnities set forth herein and all representations and warranties made herein shall survive the execution and delivery of this Credit Agreement, the making of the Loans and the repayment of the Loans and other obligations and the termination of the Revolving Loan Commitments hereunder.

 

11.10 Confidentiality.

 

Neither the Agent nor any Lender shall disclose any Confidential Information to any Person, without the prior written consent of the Borrower, other than (a ) (i) to the Agent’s or such Lender’s Affiliates and their officers, directors, employees, agents, attorneys, accountants and advisors (it being understood that the Persons to whom such disclosure is made will be informed of the confidential nature of such Confidential Information and such person shall have agreed to keep such Confidential Information confidential on substantially the same terms as 

 

  

78

  

 

provided herein) and (ii) as contemplated by Section 11.3, to actual or prospective assignees and participants, and to any direct or indirect contractual counterparties (or the professional advisors thereto) to any swap or derivative transaction relating to the Borrower and its obligations (provided, such assignees, participants, counterparties and advisors are advised of and agree to be bound by either the provisions of this Section 11.10 or other provisions at least as restrictive as this Section 11.10), (b) as required by any law, rule or regulation or by judicial process, (c) to any rating agency when required by it to do so; provided that, prior to any such disclosure, such rating agency shall undertake to preserve the confidentiality of any Confidential Information relating to the Borrower received by it from such Lender, (d) as requested or required by any state, federal or foreign authority or examiner of appropriate jurisdiction regulating banks or banking, (e) to protect, preserve, exercise or enforce the Agent’s or such Lender’s rights under or pursuant to this Credit Agreement or any Note, and (f) to perform any of the Agent’s or such Lender’s obligations under or pursuant to this Credit Agreement or any Note.

 

11.11 Governing Law; Venue.

 

(a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  Any legal action or proceeding with respect to this Credit Agreement or any other Credit Document may be brought in the courts of the State of New York, or of the United States for the Southern District of New York, and, by execution and delivery of this Credit Agreement, the Borrower hereby irrevocably accepts for itself and in respect of its property, generally and unconditionally, the exclusive jurisdiction of such courts.

 

(b) The Borrower hereby irrevocably waives any objection which it may now or hereafter have to the laying of venue of any of the aforesaid actions or proceedings arising out of or in connection with this Credit Agreement or any other Credit Document brought in the courts referred to in subsection (a) hereof and hereby further irrevocably waives and agrees not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in an inconvenient forum.

 

11.12 Waiver of Jury Trial; Waiver of Consequential Damages.

 

EACH OF THE PARTIES TO THIS CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY.  THE BORROWER AGREES NOT TO ASSERT ANY CLAIM AGAINST THE AGENT, ANY LENDER, ANY OF THEIR AFFILIATES, OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR AGENTS, ON ANY THEORY OF LIABILITY, FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF OR OTHERWISE RELATING TO ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN.

 

  

79

  

 

11.13 Payments Set Aside.

 

To the extent that any payment by or on behalf of the Borrower is made to the Agent, any L/C Issuer or any Lender, or the Agent, any L/C Issuer or any Lender exercises its right of setoff, and such payment or the proceeds of such setoff or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set aside or required (including pursuant to any settlement entered into by the Agent, such L/C Issuer or such Lender in its discretion) to be repaid to a trustee, receiver or any other party, in connection with any proceeding under any bankruptcy or insolvency laws or otherwise, then (a) to the extent of such recovery, the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such setoff had not occurred, and (b) each Lender and each L/C Issuer severally agrees to pay to the Agent upon demand its applicable share (without duplication) of any amount so recovered from or repaid by the Agent, plus interest thereon from the date of such demand to the date such payment is made at a rate per annum equal to the Federal Funds Rate from time to time in effect.  The obligations of the Lenders and the L/C Issuers under clause (b) of the preceding sentence shall survive the payment in full of the obligations under this Credit Agreement and the termination of this Credit Agreement.

 

11.14 Time.

 

All references to time herein shall be references to Central Standard Time or Central Daylight Time, as the case may be, unless specified otherwise.

 

11.15 Severability.

 

If any provision of any of the Credit Documents is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provisions.

 

11.16 Assurances.

 

The Borrower agrees, upon the request of the Agent, to promptly take such actions, as reasonably requested, as are consistent with and necessary to carry out the intent of this Credit Agreement and the other Credit Documents.

 

11.17 USA Patriot Act Notification.

 

The following notification is provided to the Borrower pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:

 

IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT.  To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product.  What this means for the Borrower: When the Borrower opens an account, if the Borrower is an 

 

  

80

  

 

individual, the Agent and the Lenders will ask for the Borrower’s name, residential address, tax identification number, date of birth, and other information that will allow the Agent and the Lenders to identify the Borrower, and, if the Borrower is not an individual, the Agent and the Lenders will ask for the Borrower’s name, tax identification number, business address, and other information that will allow the Agent and the Lenders to identify the Borrower.  The Agent and the Lenders may also ask, if the Borrower is an individual, to see the Borrower’s driver’s license or other identifying documents, and, if the Borrower is not an individual, to see the Borrower’s legal organizational documents or other identifying documents.

 

11.18 Entirety.

 

This Credit Agreement together with the other Credit Documents represent the entire agreement of the parties hereto and thereto, and supersede all prior agreements and understandings, oral or written, if any, including any commitment letters or correspondence relating to the Credit Documents or the transactions contemplated herein and therein.

 

11.19 No Advisory or Fiduciary Responsibility.

 

In connection with all aspects of each transaction contemplated hereby (including in connection with any amendment, waiver or other modification hereof or of any other Credit Document), the Borrower acknowledges and agrees that: (i) (A) the arranging and other services regarding this Credit Agreement provided by the Agent, the Lenders and the Active Arrangers are arm’s-length commercial transactions between the Borrower and its Affiliates, on the one hand, and the Agent, the Lenders and the Active Arrangers, on the other hand, (B) the Borrower has consulted its own legal, accounting, regulatory and tax advisors to the extent it has deemed appropriate, and (C) the Borrower is capable of evaluating, and understands and accepts, the terms, risks and conditions of the transactions contemplated hereby and by the other Credit Documents; (ii) (A) the Agent, each Lender and each Arranger is and has been acting solely as a principal and, except as expressly agreed in writing by the relevant parties, has not been, is not, and will not be acting as an advisor, agent or fiduciary for the Borrower or any of its Affiliates, or any other Person and (B) neither the Agent nor any Lender nor any Arranger has any obligation to the Borrower or any of its Affiliates with respect to the transactions contemplated hereby except those obligations expressly set forth herein and in the other Credit Documents; and (iii) the Agent, the Lenders and the Active Arrangers and their respective Affiliates may be engaged in a broad range of transactions that involve interests that differ from those of the Borrower and its Affiliates, and neither the Agent nor any Lender nor any Arranger has any obligation to disclose any of such interests to the Borrower or its Affiliates.  To the fullest extent permitted by law, the Borrower hereby waives and releases any claims that it may have against the Agent, the Lenders and the Active Arrangers with respect to any breach or alleged breach of fiduciary duty in connection with any aspect of any transaction contemplated hereby.

 

[Remainder of Page Intentionally Left Blank, Signature Pages Follow]

 

  

81

  

 

Each of the parties hereto has caused a counterpart of this Credit Agreement to be duly executed and delivered as of the date first above written.

 

Borrower:                                                                INTEGRYS ENERGY GROUP, INC.

 

By:          /s/ William J. Guc

Name:    William J. Guc

Title:       Vice President and Treasurer

	
Lenders:

	
WELLS FARGO BANK, NATIONAL ASSOCIATION

	
  

	
individually in its capacity as a Lender and as Agent

 

By:           /s/ Shawn Young

Name:     Shawn Young

Title:        Director

 

  

  

  

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

Citibank, N.A.                                                               

 

By:    /s/ Devin Moore      

Name:    Devin Moore

Title:       Vice President

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

  U.S. Bank National Association                                                             

 

By:    /s/ Michael T. Sagges      

Name:    Michael T. Sagges

Title:       Vice President

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

THE BANK OF NOVA SCOTIA                                                               

 

By:      /s/ Thane Rattew    

Name:    Thane RATTEW

Title:       Managing Director

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

 Bank of America, N.A.                                                              

 

By:     /s/ Kevin P. Bertelsen     

Name:    Kevin P. Bertelsen

Title:       Managing Director

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

  THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.                                                             

 

By:         /s/ Chi-Cheng Chen

Name:   Chi-Cheng Chen 

Title:       Vice President

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

 UNION BANK, N.A.                                                              

 

By:          /s/ Hideyuki Okamole

Name:    Hideyuki Okamote

Title:       Vice President

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

DEUTSCHE BANK AG NEW YORK BRANCH                                                               

 

By:          /s/ Philippe Sandmeier

Name:    Philippe Sandmeier

Title:       Managing Director

 

 

By:   /s/ O. Schwarz

Name:   Oliver Schwarz

Title:       Director

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

 GOLDMAN SACHS BANK USA                                                              

 

By:          /s/ Mark Walton

Name:    Mark Walton

Title:       Authorized Signatory

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

 JPMORGAN CHASE BANK, N.A.                                                              

 

By:          /s/ Helen D. Davis

Name:    Helen D. Davis

Title:       Authorized Officer

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

  KEYBANK NATIONAL ASSOCIATION                                                             

 

By:          /s/ Paul J. Pace

Name:    Paul J. Pace

Title:       Senior Vice President

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

MIZUHO CORPORATE BANK, LTD.                                                               

 

By:          /s/ Raymond Ventura

Name:    Raymond Ventura

Title:       Deputy General Manager

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

 MORGAN STANLEY BANK, NA.                                                              

 

By:          /s/ Sherrese Clarke

Name:    Sherrese Clarke

Title:       Authorized Signatory

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

Associated Bank, N.A.                                                               

 

By:          /s/ Kristin Isleib

Name:    Kristin Isleib

Title:       Senior Vice President

 

  

  

  

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

CoBank, ACB                                                               

 

By:          /s/ John Kemper

Name:    John Kemper

Title:       Vice President

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

Comerica Bank                                                               

 

By:          /s/ Heather A. Whiting

Name:    Heather A. Whiting

Title:       Vice President

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

Fifth Third Bank                                                               

 

By:          /s/ Kim Puszczewicz

Name:    Kim Puszczewicz

Title:       Vice President

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

THE NORTHERN TRUST COMPANY                                                               

 

By:          /s/ Peter J. Hallan

Name:    Peter J. Hallan

Title:       Vice President

 

  

  

  

 

 

Signature Page to Integrys Energy Group Three Year Credit Agreement.

 

 PNC BANK, NATIONAL ASSOCIATION                                                              

 

By:          /s/ Jon Hinard

Name:    Jon Hinard

Title:       Senior Vice President

 

  

  

  

 

 

 

 

 

Schedule 1.1

to

Credit Agreement

 

Commitment Percentages

 

	
Lender

	
Commitment 

Percentage

	
Revolving Loan

Commitment

	
Wells Fargo Bank, National Association

	
7.38%

	
$20,286,885.25

	
Citibank, N.A.

	
7.38%

	
$20,286,885.25

	
U.S. Bank National Association

	
7.38%

	
$20,286,885.25

	
The Bank of Nova Scotia

	
7.38%

	
$20,286,885.25

	
Bank of America, N.A.

	
6.56%

	
$18,032,786.89

	
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

	
3.28%

	
$9,016,393.44

	
Union Bank, N.A.

	
3.28%

	
$9,016,393.44

	
Deutsche Bank AG New York Branch

	
6.56%

	
$18,032,786.89

	
Goldman Sachs Bank USA

	
6.56%

	
$18,032,786.89

	
JPMorgan Chase Bank, N.A.

	
6.56%

	
$18,032,786.89

	
KeyBank National Association

	
6.56%

	
$18,032,786.89

	
Mizuho Corporate Bank, Ltd.

	
6.56%

	
$18,032,786.89

	
Morgan Stanley Bank, N.A.

	
4.92%

	
$13,524,590.16

	
Associated Bank, N.A.

	
3.28%

	
$9,016,393.44

	
CoBank, ACB

	
3.28%

	
$9,016,393.44

	
Comerica Bank

	
3.28%

	
$9,016,393.44

	
Fifth Third Bank

	
3.28%

	
$9,016,393.44

	
The Northern Trust Company

	
3.28%

	
$9,016,393.43

	
PNC Bank, National Association

	
3.28%

	
$9,016,393.43

	  	  	  
	  	
100.00%

	
$275,000,000.00

 

  

  

  

 

Schedule 2.9:  Existing Letters of Credit

 

None

 

  

  

  

Schedule 6.1: Subsidiaries

Borrower’s Principal Subsidiaries and other

Subsidiaries as of the Closing Date

	
Integrys Energy Group, Inc.

	  	  	  	  	  
	  	
Integrys Business Support, LLC

	  	  	  	  	  
	  	
WPS Investments LLC

	  	  	  	  	  
	  	
WPS Visions, Inc.

	  	  	  	  	  
	  	
Wisconsin Public Service Corporation

	  	  	  	  	  
	  	  	
WPS Leasing

	  	  	  	  	  
	  	  	  	  	  
	  	
Upper Peninsula Power Company

	  	  	  	  	  
	  	
Michigan Gas Utilities Corporation

	  	  	  	  	
 

	  	
Minnesota Energy Resources Corporation

	  	  	  	  	  
	  	
Penvest

	  	  
	  	  	  	  	  
	  	
Integrys Energy Services Inc.

	  	  	  	  	  
	  	  	  	
Integrys Energy Services of New York, Inc.

	  	  	  	  	  
	  	  	  	
Integrys Energy Services - Electric, LLC

	  	  	  	  	  
	  	  	  	
Integrys Energy Services - Natural Gas, LLC

	  	  	  	  	  
	  	  	  	
PERC Holdings, LLC

	  	  	  	  	  
	  	  	  	
Quest Energy LLC

	  	  	  	  	  
	  	  	  	
WPS Power Development, LLC

	  	  	  	  	  
	
 

	  	  	  	
Winnebago Energy Center LLC

	  	  	  	  	  
	  	  	  	  	
Combined Locks Energy Center, LLC

	  	  	  	  	  
	  	  	  	  	
ECO Coal Pelletization No. 12 LLC

	  	  	  	  	  
	  	  	  	  	
Solar Hold 2008-1, LLC

	  	  	  	  	  
	  	  	  	  	
     Soltage-MAZ 700 Tinton Falls, LLC

 

  

  

  

 

 

	  	  	  	  	  
	  	  	  	  	
     Soltage-ADC 630 Jamesburg, LLC

	  	  	  	  	  
	  	  	  	  	
     Soltage-PLG 500 Milford, LLC

	  	  	  	  	  
	  	  	  	  	
TEGE Solar, LLC

	  	  	  	  	  
	  	  	  	  	
     Crimson Solar, LLC

	  	  	  	  	  
	  	  	  	  	
     Hemlock Solar, LLC

	  	  	  	  	  
	  	  	  	  	
     Solar Man, LLC

	  	  	  	  	  
	  	  	  	  	
     Sun Devil Solar LLC

	  	  	  	  	  
	  	  	  	  	
     Solar Star California II, LLC

	  	  	  	  	  
	  	  	  	  	
     Solar Star New Jersey I, LLC

	  	  	  	  	  
	  	  	  	  	
     Solar Star New Jersey II, LLC

	  	  	  	  	  
	  	  	  	  	
     Solar Star New Jersey VI, LLC

	  	  	  	  	  
	  	  	  	  	
     Solar Star TM2, LLC

	  	  	  	  	  
	  	  	  	  	
Sunbury Holdings, LLC

	  	  	  	  	  
	  	  	  	  	
     WPS Westwood Generation LLC

	  	  	  	  	  
	  	  	  	  	
PDI Stoneman, Inc.

	  	  	  	  	  
	  	  	  	  	
Wisconsin Woodgas LLC

	  	  	  	  	  
	  	  	  	  	
WPS Empire State Inc.

	  	  	  	  	  
	  	  	  	  	
     WPS Beaver Falls Generation

	  	  	  	  	  
	  	  	  	  	
     WPS Syracuse Generation

	  	  	  	  	  
	  	  	  	  	
LGS Renewables I, LLC

	  	  	  	  	  
	  	  	  	
Integrys Energy Services of Canada Corp

	  	  	  	  	  
	  	  	  	
Peoples Energy, LLC

	  	  	  	  	  
	  	  	  	
The Peoples Gas Light and Coke Company

	  	  	  	  	  
	  	  	  	  	
Peoples Gas Neighborhood Development Corporation

	  	  	  	  	  
	  	  	  	
Peoples Energy Resources Company, LLC

 

  

  

  

 

	  	  	  	  	  
	  	  	  	
North Shore Gas Company

	  	  	  	  	  
	  	  	  	
Peoples Energy Ventures, LLC

	  	  	  	  	  
	  	  	  	  	
Peoples Energy Home Services, LLC

	  	  	  	  	  
	  	  	  	  	
Peoples Energy Neighborhood Development, LLC

	  	  	  	  	  
	  	  	  	  	
Peoples Technology, LLC

  

  

  

 

Schedule 8.3:  Permitted Asset Sales

 

 

	
1.  

	
Sales of accounts receivable in connection with asset securitizations, including securitizations of environmental retrofits.

 

 

  

  

  

 

Schedule 8.6:  Existing Liens

 

(Liens of Borrower or Principal Subsidiaries)

 

	
Secured Party, Filing

Date and Filing Number

 

	
 

Description

 

	
Debtor:  Wisconsin Public Service Corporation

	  	  
	
Wells Fargo Bank Northwest, N.A.

11/05/92

01312991 (Wisconsin DFI)

 

	
Synthetic lease of railcars; probably not a Lien.

	
First Security Bank of Utah

11/11/93

01391037 (Wisconsin DFI)

 

	
Synthetic lease of railcars; probably not a Lien.

	
First Security Bank of Utah

11/29/93

01394204 (Wisconsin DFI)

 

	
Synthetic lease of railcars; probably not a Lien.

	
Wisconsin Lift Truck

08/27/2008

080012075520 (Wisconsin DFI)

	
2007 Power Boss; Model # Admiral 42; S/N # Admiral 4201042

	  	  
	
Debtor:  Integrys Energy Services Inc. (formerly known as WPS Energy Services, Inc.)

	  
	
Mizuho Securities USA Inc., as Collateral Agent

4/17/07

070005420415 (Wisconsin DFI)

 

	
(a) The commodity accounts of the Debtor at Mizuho Securities USA Inc. (the “Commodities Accounts”);

 

(b) all funds, negotiable instruments, commodities, commodities futures contracts, securities, option and other property of the Debtor held in or on behalf of the Commodities Accounts; and

 

(c) all “proceeds”, as such term is defined in Article 9 of the Uniform Commercial Code as in effect from time to time in the State of New York (the “Uniform Commercial Code”), with respect to the foregoing.

 

  

  

  

 

 

	
National Fuel Gas Distribution Corporation

9/15/06

060013722217 (Wisconsin DFI)

	
All Accounts, General Intangibles and Chattel Paper, now or hereafter owed to or acquired by Debtor, which constitute “Purchased Consumer Accounts” as defined in the Billing Services Agreement for Consolidated Billing Service under Service Classification No. 19 between Debtor and Secured Party dated September 5, 2006, as the same may be amended or supplemented from time to time, and all proceeds thereof in any form.

 

	
Midwest Independent Transmission System Operator, Inc.

10/23/09

090012629828 (Wisconsin DFI)

	
All right, title and interest in any and all accounts receivable and other rights of payment of the Debtor for goods and services provided under, or otherwise arising under, pursuant to or in connection with, the Open Access Transmission, Energy and Operating Reserve Markets Tariff on file with the Federal Energy Regulatory Commission (the “Tariff”) and/or any and all agreements entered into, under pursuant to, or in connection with the Tariff (including, without limitation, the Secured Party’s Credit Policy) and any and all other agreements to which Secured Party and the Debtor are parties (collectively, the “Agreements”) and any other similar rights of the Debtor arising under, or in connection with, the Tariff and/or any of the Agreements, however created or evidenced, whether now existing or hereafter owned, acquired, created, used or arising, including all products and proceeds of the foregoing, any and all renewals, extensions, replacements, modifications, additions, and substitutions of the foregoing and all rights, remedies, claims, demands and all rights of setoff under or in connection with each of the foregoing.

 

  

  

  

 

 

	
Debtor:  Peoples Energy, LLC (formerly known as Peoples Energy Corporation)

	  
	
Niagara Mohawk Power Corporation

6/06/2006

011029604 (Illinois SOS)

	
All Debtor’s right, title and interest in Collateral as defined in security agreement for Billing Services and for the Purchase of Gas Accounts Receivable (“Agreement”).

 

Collateral shall include:

 

All Accounts Receivable purchased by Secured Party under the Agreement;

The deposit; and all Unbilled Receivable to be purchased by Secured Party under the Agreement.

	  	  
	
Debtor:  The Peoples Gas Light and Coke Company

	  	  
	
U.S. Bank National Association, as Trustee

10/10/03 (continued 10/9/08)

7675712 (Illinois SOS)

 

	
Collateral covered by Mortgage Indenture

	
United Rentals Northwest, Inc.

03/07/2011

016064343 (Illinois SOS)

	
Certain Equipment

	
United Rentals Northwest, Inc.

03/07/2011

 016064351 (Illinois SOS)

 

	
Certain Equipment

	
Debtor:  North Shore Gas Company

	  	  
	
U.S. Bank National Association, as Trustee

10/16/2003 (continued 10/09/2008.)

7700083 (Illinois SOS)

	
All Debtor’s assets under Indenture

 

  

  

  

 

Schedule 11.1

to

Credit Agreement

Borrower

 

Integrys Energy Group, Inc.

Attn:  William J. Guc

700 North Adams Street

P.O. Box 19001

Green Bay, Wisconsin 54307

Phone:      (920) 433-1662

Fax:           (920) 433-1526

 

With a copy to:

 

David K. Waltz

Integrys Energy Group, Inc.

130 East Randolph Drive, 18th Floor

Chicago, IL  60601

Phone:  (312) 240-4861

DKWaltz@integrysgroup.com

 

Agent

 

Lisa White

Wells Fargo Bank, National Association

1525 West W.T. Harris Blvd, Building 1B1

Charlotte, NC 28262 – 8522

Mail code: D1109 - 019

Phone: (704) 590-2778

Fax: (704) 590-3481

Lenders

 

	
Associated Bank, N.A.

330 E. Kilbourn Ave, Ste. 200

Milwaukee, WI 53202

Phone:  414-278-1981

Fax:  414-278-1849

Attn:  Kristin Isleib

Kristin.Isleib@associatedbank.com

 

 

 

  

  

  

 

	
Bank of America

One Independence Center

100 N. Tryon Street

Charlotte, NC 28255-0001

Phone:  (415) 436-3685 ext. 64675

Fax:  (312) 453-2986

Attn:  Aditya Jha

Email: aditya.jha@bankofamerica.com

 

	
The Bank of Nova Scotia

One Liberty Plaza, 26th Floor

New York, NY 10006

Phone:  (212) 225-5705

Fax:  (212) 225-5709

Attn:  Mellissa McMillan

mellissa_mcmillan@scotiacapital.com

 

	
The Bank of Tokyo-Mitsubishi UFJ, Ltd.

1251 Avenue of the Americas

New York, NY  10020-1104

Phone:  (201) 413-8948

Fax:  (201) 521-2304/2305

Attn:  Janet Persaud

 

	
Citibank, N.A.

399 Park Ave., 16th Floor

New York, NY 10043

Phone:  (302) 894-6194

Fax:  (212) 994-0847

Attn:  Chris Butler

GLOriginationOps@citi.com

 

	
CoBank, ACB

5500 South Quebec St.

Greenwood Village, CO  80111

Phone:  (303) 618-3704

Fax:  (303) 740-4021

Attn:  Betty Marshall

agencybank@cobank.com

 

	
Comerica Bank

3551 Hamlin Rd.

Auburn Hills, MI 48326

Phone:  (248) 371-6573

Fax:  (248) 371-6617

swilliams@comerica.com

 

 

2

  

  

 

 

	
Deutsche Bank AG New York Branch

60 Wall Street

New York, NY 10005

Phone:  (904) 527-6438

Fax:  (866) 240-3622

Attn:  Lee Joyner

lee.joyner@db.com

 

	
Fifth Third Bank

5050 Kingsley Drive

Cincinnati, OH 45227

Phone :  (513) 358-8131

Fax:  (513) 358-3491

Attn:  Stella Plitsyna

Stella.plitsyna@53.com

 

	
Goldman Sachs Bank (USA)

200 West Street

New York, NY 10282

Phone:  (212) 902-1099

Fax:  (917) 977-3966

gs-sbd-admin-contacts@ny.email.gs.com

 

	
JPMorgan Chase Bank, N.A.

10 S. Dearborn, Floor 7

Mailcode:  IL1-0010

Chicago, IL 60603

Phone:  (312) 385-7072

Fax:  (312) 256-2608

Attn:  Non-Agented Servicing Team

Cls.chicago.non.agented.servicing@chase.com

 

	
KeyBank National Association

127 Public Square

Cleveland, Ohio 44114

Phone:  (216) 813-4816

Fax:  (216) 370-6112

Attn:  Donna Boening

Donna_L_Boening@KeyBank.com

 

	
Mizuho Corporate Bank, Ltd.

1251 Avenue of the Americas

New York, NY  10020

Phone:  (201) 626-9134

Fax:  (201) 626-9941

Attn:  Sophia White-Larmond

Sophia.white-larmond@mizuhocbus.com

 

 

3

  

  

 

 

	
Morgan Stanley Bank, N.A.

One Utah Center

201 South Main Street, 5th Floor

Salt Lake City, UT 84111

Phone:  (443) 627-4355

Fax:  (718) 233-2140

msloanservicing@morganstanley.com

 

	
The Northern Trust Company

50 South LaSalle Street, M-27

Chicago, IL  60675

Phone:  (312) 630-1609

Fax:  (312) 630-1566

Attn:  Sharon Jackson

 

	
PNC Bank, National Association

One N. Franklin, 25th Floor

Chicago, IL 60606

Phone: (440) 546-7046

Fax: (877) 735-7312

Attn: Jason Nagy

ParticipationLA2BRV@pnc.com

 

	
Union Bank, N.A.

445 S Figueroa Street, 15th Floor

Los Angeles, CA 90071

Phone:  (323) 720-2870

Fax:  (800) 446-9951

Attn:  Maria Suncin

#closynd@unionbank.com

 

	
U.S. Bank National Association

461 Fifth Avenue

New York, NY 10017

Phone: (920) 237-7370

Fax: (920) 237-7993

Attn: Barb Campbell

Complex_credits_oshkosh@usbank.com

 

 

4

  

  

 

 

Exhibit 2.2

 

FORM OF NOTICE OF BORROWING

 

TO:                  Wells Fargo Bank, National Association

Attention:

[Address]

 

RE:                 Three Year Credit Agreement dated as of May 17, 2011 among

Integrys Energy Group, Inc. (the “Borrower”), Wells Fargo Bank,

National Association, as Agent, the agents party thereto and the

Lenders party thereto (as the same may be amended, modified,

extended or restated from time to time, the “Credit Agreement”)

DATE:                                           , 201__

 

______________________________________________________________________________

 

	
1.  

	
This Notice of Borrowing is made pursuant to the terms of the Credit Agreement.  All capitalized terms used herein unless otherwise defined shall have the meanings set forth in the Credit Agreement.

 

	
2.  

	
Please be advised that the Borrower is requesting a Revolving Loan in the amount of $_____________ to be funded on ___________, 201__ at the interest rate option set forth in paragraph 3 below.

 

	
3.  

	
The interest rate option applicable to the requested Revolving Loan shall be equal to:

 

A.           the Base Rate

 

B.           the Adjusted Eurodollar Rate for an Interest Period of:

__________ one month

__________ two months

__________ three months

 

	
4.  

	
On the date of the requested Revolving Loan, immediately after giving effect to the funding and the application thereof, the aggregate amount of Revolving Loans plus Swing Line Loans plus all Letter of Credit Obligations outstanding will be $__________, which is less than or equal to the Revolving Loan Commitment.

 

	
5.  

	
On and as of the date of the requested Revolving Loan, immediately after giving effect to the funding and the application thereof, the representations and warranties made by the Borrower in any Credit Document (excluding those contained in Sections 6.7 and 6.10 of the Credit Agreement) are true and correct in all material respects except to the extent they expressly relate to an earlier date.

 

	
6.  

	
No Default or Event of Default exists or is continuing or will be caused by giving effect to this Notice of Borrowing.

 

  

  

  

 

INTEGRYS ENERGY GROUP, INC.

By:______________________________________

Name:

Title:

 

  

  

  

 

Exhibit 2.4

 

FORM OF NOTICE OF CONTINUATION/CONVERSION

 

TO:                  Wells Fargo Bank, National Association

Attention:

[Address]

 

RE:                 Three Year Credit Agreement entered into as of May 17, 2011,

among Integrys Energy Group, Inc. (the “Borrower”), Wells Fargo Bank,

National Association, as Agent, the agents party thereto and the

Lenders party thereto (as the same may be amended, modified,

extended or restated from time to time, the “Credit Agreement”)

DATE:  __________, 201__

 

	
1.  

	
This Notice of Continuation/Conversion is made pursuant to the terms of the Credit Agreement.  All capitalized terms used herein unless otherwise defined shall have the meanings set forth in the Credit Agreement.

 

	
2.  

	
Please be advised that the Borrower is requesting that a portion of the current outstanding Revolving Loans, in the amount of $___________, be continued or converted at the interest rate option set forth in paragraph 3 below.

 

	
3.  

	
The interest rate option applicable to the continuation or conversion of all or part of the existing Revolving Loans shall be equal to:

 

A.           the Base Rate

B.           the Adjusted Eurodollar Rate for an Interest Period of

______ one month

______ two months

______ three months

 

	
4.  

	
Subsequent to the continuation or conversion of the Revolving Loans, as requested herein, the aggregate amount of Revolving Loans plus Swing Line Loans plus all Letter of Credit Obligations outstanding will be $_________, which is less than or equal to the Revolving Loan Commitment.

 

	
5.  

	
No Default or Event of Default has occurred and is continuing or would be caused by giving effect to this Notice of Continuation Conversion.

 

INTEGRYS ENERGY GROUP, INC.

 

By:_______________________________________

Name:

Title:

 

  

  

  

 

Exhibit 2.7

to

Three Year Credit Agreement

 

FORM OF NOTE

 

__________, 201_

 

FOR VALUE RECEIVED, INTEGRYS ENERGY GROUP, INC., a Wisconsin corporation (the “Borrower”), hereby promises to pay to the order of ___________ (the “Lender”), at the office of Wells Fargo Bank, National Association (the “Agent”) as set forth in that certain Three Year Credit Agreement dated as of May 17, 2011, among the Borrower, the Lenders named therein and Wells Fargo Bank, National Association, as Agent (as the same may be amended, modified, extended or restated from time to time, the “Credit Agreement”), or at such other place or places as the holder of this Note may designate, the aggregate principal amount of all advances made by the Lender as Loans (and not otherwise repaid), in Dollars and in immediately available funds, on the dates and in the principal amounts provided in the Credit Agreement, and to pay interest on the unpaid principal amount of each Loan made by the Lender, at such office, in like money and funds, for the period commencing on the date of each Loan until each Loan shall be paid in full, at the rates per annum and on the dates provided in the Credit Agreement.

 

This Note is one of the Notes referred to in the Credit Agreement and evidences Loans made by the Lender thereunder.  The Lender shall be entitled to the benefits of the Credit Agreement.  Capitalized terms used in this Note have the respective meanings assigned to them in the Credit Agreement and the terms and conditions of the Credit Agreement are expressly incorporated herein and made a part hereof.

 

The Credit Agreement provides for the acceleration of the maturity of the Loans evidenced by this Note upon the occurrence of certain events (and for payment of collection costs in connection therewith) and for prepayments of Loans upon the terms and conditions specified therein.  In the event this Note is not paid when due at any stated or accelerated maturity, the Borrower agrees to pay, in addition to the principal and interest, all costs of collection, including reasonable attorney fees.

 

Except as permitted by Section 11.3(b) of the Credit Agreement, this Note may not be assigned by the Lender to any other Person.

 

The date, amount, type, interest rate and duration of Interest Period (if applicable) of each Loan made by the Lender to the Borrower, and each payment made on account of the principal thereof, shall be recorded by the Agent and the Lender on its books; provided that the failure of the Agent or the Lender to make any such recordation shall not affect the obligations of the Borrower to make a payment when due of any amount owing hereunder or under this Note in respect of the Loans to be evidenced by this Note, and each such recordation shall be prima facie evidence of the obligations owing under this Note absent demonstrable error.

 

THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

  

  

  

 

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed as of the date first above written.

 

INTEGRYS ENERGY GROUP, INC.

 

By:______________________________________

Name:

Title:

 

  

  

  

 

Exhibit 2.8

to

Three Year Credit Agreement

 

FORM OF SWING LINE LOAN NOTICE

 

Date:  ___________, 201__

TO:                  Wells Fargo Bank, National Association

Attention:

[Address]

 

RE:                  Three Year Credit Agreement dated as of May 17, 2011 among

Integrys Energy Group, Inc. (the “Borrower”), Wells Fargo Bank,

National Association, as Agent, the agents party thereto and the

Lenders party thereto (as the same may be amended, modified,

extended or restated from time to time, the “Credit Agreement”)

DATE:                       , 201__

 

	
1.  

	
This Swing Line Notice is made pursuant to the terms of the Credit Agreement.  All capitalized terms used herein unless otherwise defined shall have the meanings set forth in the Credit Agreement.

 

	
2.  

	
Please be advised that the Borrower is requesting a Swing Line Loan in the amount of $_____________ to be funded on ___________, 201__.

 

	
3.  

	
On the date of the requested Swing Line Loan, immediately after giving effect to the funding and the application thereof, the aggregate amount of Revolving Loans plus Swing Line Loans plus all Letter of Credit Obligations outstanding will be $__________, which is less than or equal to the Revolving Loan Commitment.

 

	
4.  

	
On and as of the date of the requested Revolving Loan, immediately after giving effect to the funding and the application thereof, the representations and warranties made by the Borrower in any Credit Document (excluding those contained in Sections 6.7 and 6.10 of the Credit Agreement) are true and correct in all material respects except to the extent they expressly relate to an earlier date.

 

	
5.  

	
No Default or Event of Default exists or is continuing or will be caused by giving effect to this Notice of Borrowing.

 

INTEGRYS ENERGY GROUP, INC.

 

By:______________________________________

Name:

Title:

 

  

  

  

 

 

Exhibit 7.1(c)

 

FORM OF OFFICER’S CERTIFICATE

 

TO:                  Wells Fargo Bank, National Association

Attention:

[Address]

 

RE:                  Three Year Credit Agreement dated as of May 17, 2011

among Integrys Energy Group, Inc. (the “Borrower”), Wells Fargo Bank,

National Association, as Agent, the agents party thereto and the

Lenders party thereto (as the same may be amended, modified,

extended or restated from time to time, the “Credit Agreement”)

DATE:                      _________, ___

 

Pursuant to the terms of the Credit Agreement, I, _________________________ [Chief Financial Officer/Treasurer/Secretary/Assistant Treasurer] of INTEGRYS ENERGY GROUP hereby certify that, as of the fiscal quarter ending ____________, 201__, the statements below are accurate and complete in all respects (all capitalized terms used below shall have the meanings set forth in the Credit Agreement):

 

A. Attached hereto as Schedule I are (x) calculations (calculated as of the date of the financial statements referred to in paragraph C. below) demonstrating compliance by the Borrower with the financial covenant contained in Section 7.2 of the Credit Agreement and (y) Borrower’s Public Debt Ratings as of the date hereof.

 

B. No Default or Event of Default exists under the Credit Agreement, except as indicated on a separate page attached hereto, together with an explanation of the action taken or proposed to be taken by the Borrower with respect thereto.

 

C. The quarterly/annual financial statements for the fiscal quarter/year ended ___________ which accompany this certificate fairly present in all material respects the financial condition of the Borrower and its Subsidiaries and have been prepared in accordance with GAAP, subject to changes resulting from normal year-end audit adjustments.

 

INTEGRYS ENERGY GROUP, INC.

 

By:_______________________________________

[Chief Financial Officer/Treasurer/Secretary

Assistant Treasurer]

 

  

  

  

 

Schedule 1 to

Exhibit 7.1(c) to

Three Year Credit Agreement

Maximum Leverage Ratio

 

	
1.           Total Funded Debt

	
$______________________

	 	 
	
2.           Net Worth

	
$______________________

	 	 
	
3.           Capitalization (Line 1 + Line 2)

	
$______________________

	 	 
	
4.           Total Funded Debt to Capitalization Ratio:

  (Line 1/Line 3)

	
______: 1.00

	 	 
	
Maximum Permitted Total Funded

Debt to Capitalization Ratio:                                                                .65: 1.0

	  

Borrower’s Public Debt Ratings:

 

S&P_________________________________

 

Moody’s______________________________

 

  

  

  

 

Exhibit 11.3

 

FORM OF ASSIGNMENT AGREEMENT

 

Reference is made to that certain Three Year Credit Agreement, dated as of May 17, 2011, among INTEGRYS ENERGY GROUP, INC. (the “Borrower”), the agents party thereto, the Lenders party thereto and Wells Fargo Bank, National Association, as Agent for the Lenders (as the same may be amended, modified, extended or restated from time to time, the “Credit Agreement”).  Capitalized terms used herein shall have the meanings ascribed thereto in the Credit Agreement.

 

1. The Assignor hereby sells and assigns to the Assignee, without recourse and without representation and warranty except as expressly set forth herein, and the Assignee hereby purchases and assumes from the Assignor, without recourse and without representation and warranty except as expressly set forth herein, the interests set forth below (the “Assigned Interest”) in the Assignor’s rights and obligations under the Credit Agreement, including, without limitation, the interests set forth below in the Commitment Percentage of the Assignor on the Effective Date (as defined below) and the Loans owing to the Assignor in connection with the Assigned Interest which are outstanding on the Effective Date.  The purchase of the Assigned Interest shall be at par (unless otherwise agreed to by the Assignor and the Assignee) and periodic payments made with respect to the Assigned Interest which (a) accrued prior to the Effective Date shall be remitted to the Assignor and (b) accrue from and after the Effective Date shall be remitted to the Assignee.

 

2. The Assignor (a) represents and warrants to the Assignee that it is the legal and beneficial owner of the Assigned Interest and that the Assigned Interest has not previously been transferred or encumbered and is free and clear of any adverse claim created by the Assignor; (b) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Credit Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Credit Documents or any other instrument or document furnished pursuant thereto; (c) makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Borrower or the performance or observance by the Borrower of any of its obligations under the Credit Documents or any other instrument or document furnished pursuant thereto; and (d) attaches the Note held by the Assignor and requests that the Agent exchange such Note for a new Note payable to the order of the Assignee in an amount equal to the Revolving Loan Commitment assumed by the Assignee pursuant hereto and to the Assignor in an amount equal to the Revolving Loan Commitment retained by the Assignor, if any, as specified herein.

 

3. The Assignee (a) confirms that it has received a copy of the Credit Agreement, together with copies of the financial statements referred to in Section 7.1 thereof and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (b) agrees that it will, independently and without reliance upon the Agent, the Assignor or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Credit Agreement; (c) confirms that it is an 

 

  

  

  

 

 

Eligible Assignee; (d) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Credit Agreement as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (e) agrees that it will perform in accordance with their terms all of the obligations that by the terms of the Credit Agreement are required to be performed by it as a Lender, and (f) attaches any U.S. Internal Revenue Service or other forms required under Section 4.4.

 

4. Following the execution of this Assignment, it will be delivered to the Agent, together with the transfer fee required pursuant to Section 11.3(b) of the Credit Agreement, for acceptance and recording by the Agent.  The effective date for this Assignment (the “Effective Date”) shall be the date of acceptance hereof by the Agent and the Borrower, as applicable, unless otherwise specified herein.

 

5. Upon the consent of the Borrower and the Agent, as applicable, as of the Effective Date, (a) the Assignee shall be a party to the Credit Agreement and, to the extent of the Assigned Interest, have the rights and obligations of a Lender thereunder and (b) the Assignor shall, to the extent provided in this Assignment, relinquish its rights and be released from its obligations under the Credit Agreement.

 

6. This Assignment shall be governed by, and construed in accordance with, the laws of the State of New York.

 

7. This Assignment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.

 

8. Terms of Assignment

 

	
(a)  

	
Legal Name of Assignor:                                                                ________________

 

	
(b)  

	
Legal Name of Assignee:                                                                ________________

 

	
(c)  

	
Effective Date of Assignment:                                                         ________________

 

	
(d)  

	
Commitment Percentage Assigned:                                              ________________%

 

	
(e)  

	
Total Revolving Loans outstanding

as of Effective Date                                                                         $_______________

 

	
(f)  

	
Principal Amount of Revolving

Loans assigned on Effective Date

(the amount set forth in (e)

multiplied by the percentage set

forth in (d))                                                                                         $________________

 

	
(g)  

	
Revolving Loan Commitment                                                          $________________

 

2

  

  

 

	
(h)  

	
Principal Amount of Revolving

Loan Commitment assigned on

Effective Date (the amount set

forth in (g) multiplied by the

percentage set forth in (d))                                                                 $_______________

 

 

 

 

The terms set forth above

are hereby agreed to:

 

______________________, as Assignor

 

By:______________________________

Name:

Title:

 

_______________________, as Assignee

 

By:_______________________________

Name:

Title:

 

CONSENTED TO:

 

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Swing Line Lender

 

By:__________________________________

Name:

Title:

 

WELLS FARGO BANK, NATIONAL ASSOCIATION,

as L/C Issuer

 

By:__________________________________

Name:

Title:

 

3

  

  

 

 

CITIBANK, N.A.,

as L/C Issuer

 

By:__________________________________

Name:

Title:

 

 

THE BANK OF NOVA SCOTIA,

as L/C Issuer

 

By:__________________________________

Name:

Title:

 

[INTEGRYS ENERGY GROUP, INC.

 

By:__________________________________

Name:

Title:]1

 

[WELLS FARGO BANK, NATIONAL ASSOCIATION,

as Agent

 

By:__________________________________

Name:

Title:]2

 

  

	
  

	
1  Required if the Assignee is an Eligible Assignee solely by reason of clause (c) of the definition of “Eligible Assignee”.

 

  

	
  

	
2  Required if the Assignee is an Eligible Assignee solely by reason of clause (c) of the definition of “Eligible Assignee”.

 

 

4

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