Download CSS INDUSTRIES INC (Form: 10-K, Received: 05/24

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended March 31, 2002
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________________ to _______________________
Commission File Number 1-2661
CSS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware
------------------------------(State or other jurisdiction of
incorporation or organization)
13-1920657
------------------(I.R.S. Employer
Identification No.)
1845 Walnut Street, Philadelphia, PA
-----------------------------------(Address of principal executive offices)
19103
------------------(Zip Code)
Registrant's telephone number, including area code:
(215) 569-9900
-------------------
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class
-------------------------------Common Stock, $.10 par value
Name of each exchange on which registered
----------------------------------------New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No ____
Securities registered pursuant to Section 12(g) of the Act:
(Page 1 of Cover Page)
None
(Title of class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained to the best of Registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form
10-K or any amendment to this form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the Registrant is approximately $172,046,652. Such aggregate market
value was computed by reference to the closing price of the Common Stock of the Registrant on the New York Stock Exchange on May 16,
2002 ($38.35 per share). Such calculation excludes the shares of Common Stock beneficially owned at such date by certain directors and
officers of the Registrant, by the Farber Foundation and by the Farber Family Foundation, as described under the section entitled "CSS
SECURITY OWNERSHIP" in the Proxy Statement to be filed by the Registrant for its 2002 Annual Meeting of Stockholders. In making such
calculation, Registrant does not determine the affiliate or non-affiliate status of any holders of the shares of Common Stock for any other
purpose.
At May 16, 2002, there were outstanding 8,612,794 shares of Common Stock.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's Proxy Statement for its 2002 Annual Meeting of Stockholders are incorporated by reference in Part III (under Items 10,
11, 12 and 13).
(Page 2 of Cover Page)
Part I
Item 1. Business
General
CSS Industries, Inc. ("CSS" or the "Company") is a consumer products company primarily engaged in the design, manufacture, procurement
and sale to mass market retailers of seasonal, social expression products, including gift wrap, gift bags, boxed greeting cards, gift tags, tissue
paper, paper and vinyl decorations, classroom exchange Valentines, decorative ribbons and bows, Halloween masks, costumes, make-ups and
novelties, Easter egg dyes and novelties and educational products. CSS provides its retail customers the opportunity to use a single vendor for
much of their seasonal product requirements. CSS' product breadth, product innovation, creative design, manufacturing and packaging
flexibility, product quality and customer service are key to sustaining the Company's market leadership position. A substantial portion of CSS'
products are manufactured, packaged and warehoused in twenty-one North American facilities, with the remainder purchased primarily from
Asian manufacturers. The Company's products are sold to its customers by national and regional account managers and by a network of
independent manufacturers' representatives. The Company is comprised of The Paper Magic Group, Inc. ("Paper Magic"), acquired by the
Company in August 1988, Berwick Industries LLC ("Berwick"), acquired in May 1993, and Cleo Inc ("Cleo"), acquired in November 1995.
During March 2002, Berwick completed the acquisition of substantially all of the business and assets of the portion of C. M. Offray & Son, Inc.
("Offray") which manufactures and sells decorative ribbon products, floral accessories and narrow fabrics for apparel, craft and packaging
applications. Subsequent to the acquisition, Berwick changed its name to Berwick Offray LLC ("Berwick Offray").
The Company has experienced growth through a combination of acquisitions and the expansion of existing operations. The Company's goal is
to continue to expand by developing new or complementary products, by entering new markets, by acquiring companies that are
complementary with its existing operating business and by acquiring other businesses with leading market positions.
Principal Products CSS designs, manufactures and distributes a broad range of seasonal consumer products primarily through the mass market
distribution channel. Christmas products include gift wrap, gift bags, boxed greeting cards, gift tags, tissue paper, paper and vinyl decorations,
and decorative ribbons and bows. CSS' Valentine product offerings include classroom exchange Valentine cards and other related Valentine
products, while its Easter product offerings include Dudley's(R) brand of Easter egg dyes and related Easter seasonal products. For Halloween,
CSS offers a full line of Halloween merchandise including make-up, costumes, masks and novelties. In addition to seasonal products, CSS also
designs and markets decorative ribbons and bows to its mass market, retail and wholesale distribution customers and teachers' aids to the
education market through the mass market, school supply distributors and direct-to-retail teachers' stores.
CSS manufactures and warehouses its products in twenty-one facilities located in Pennsylvania, Maryland, South Carolina, Alabama,
Tennessee, Texas, New York and Canada. Boxed greeting cards, gift tags, paper and vinyl decorations and classroom exchange Valentine
products are primarily produced and warehoused in six facilities in central and northeastern Pennsylvania. Manufacturing processes include a
wide range of finishing, assembly and packaging operations. Halloween make-up and Easter egg dye products are manufactured to specific
proprietary formulae by contract manufacturers who meet regulatory requirements for the formularization and packaging of such products and
are distributed from one facility in northeastern Pennsylvania and one facility in New York. Ribbons and bows are manufactured and
warehoused in thirteen facilities located in northeastern Pennsylvania, Maryland, South Carolina, Alabama, Texas and Canada. The
manufacturing process is vertically integrated. Non woven ribbon and bow products are primarily made from polypropylene resin, a
petroleum-based product, which is mixed with color pigment, melted and pressed through an extruder. Large rolls of extruded film go through
various combinations of manufacturing processes before being made into bows or packaged on ribbon spools or reels as required by various
markets and customers. Woven fabric ribbons are manufactured both domestically and in Mexico and sourced from Asia and Latin America.
Domestic woven products are either narrow woven or converted from bulk rolls of wide width textiles. Manufacturing of gift wrap, including
web printing, finishing, rewinding and packaging are performed in one facility in Memphis, Tennessee. Finished goods are warehoused and
shipped from both the production facility and a separate facility in Memphis. Other products, designed to the specifications of CSS, are
imported from Asian manufacturers.
-1-
Sales and Marketing Most of CSS' products are sold in the United States and Canada by national and regional account sales managers, inside
sales representatives, product specialists and by a network of independent manufacturers' representatives. CSS maintains permanent
showrooms in New York City, Memphis, Minneapolis, Dallas, Atlanta and Hong Kong where major retail buyers will typically visit for a
presentation and review of the new lines. Products are also displayed and presented in showrooms maintained by these representatives in major
cities in the United States and Canada. Relationships are developed with key retail customers by CSS sales personnel and the independent
manufacturers' representatives. Customers are generally mass merchandise retailers, warehouse clubs, drug and food chains, independent card
shops and retail teachers' stores. CSS' revenues are primarily seasonal with approximately 68% of sales related to the Christmas season and the
remaining sales relating to the Halloween, Easter and Valentine's Day seasons and all-occasion product sales. Seasonal products are generally
designed and marketed beginning approximately eighteen to twenty months before the event and manufactured during an eight to ten month
production cycle. With such long lead time requirements, timely communication with outsourcing factories, retail customers and independent
manufacturers' representatives is critical to the timely production of seasonal products. Because the products themselves are primarily seasonal,
sales terms do not generally require payment until after the holiday, in accordance with industry practice. In general, CSS products are not sold
under guaranteed or return privilege terms. All-occasion ribbon and bow products are also sold through inside sales representatives or
independent manufacturers representatives to wholesale distributors and independent small retailers who serve the floral, craft and retail
packaging trades. The Company also sells custom products to private label customers, to other social expression companies, and to converters
of the company's bulk gift wrap or ribbon products. Custom products are sold by both independent manufacturers' representatives and CSS
sales managers.
Due to the ever increasing competitive retail environment, CSS plays a crucial role in helping the retailer develop programs to meet revenue
objectives while appealing to consumers' tastes. These objectives are met through the development and manufacture of custom configured and
designed products. CSS' years of experience in program development and product quality are key competitive advantages in helping retailers
meet their objectives.
Competition CSS' principal competitor in Christmas products is Plus Mark, Inc. (a subsidiary of American Greetings Corporation). Image Arts,
a subsidiary of Hallmark Cards, Inc., is also a competitor in the boxed greeting card business. Historically, CSS has not competed directly,
except to a limited extent, with other product offerings of Hallmark Cards, Inc. and American Greetings Corporation. In recent years, these
companies have expanded their promotional offerings to the mass market retail distribution channel. CSS also competes with various
companies in each of its other seasonal product offerings. Certain of these competitors are larger and have greater resources than the Company.
CSS believes its products are positioned adequately for continued growth in their primary markets. Since competition is based primarily on
price, timely delivery, creative design and increasingly, the ability to serve major retail customers with single, combined product shipments for
each holiday event, CSS' product driven focus combined with consistent service levels allows it to compete effectively in its core markets.
-2-
Employees
At May 16, 2002, approximately 3,600 persons were employed by CSS (increasing to approximately 4,870 as seasonal employees are added).
With the exception of the bargaining units at the gift wrap facilities in Memphis, Tennessee and the ribbon manufacturing facilities in
Hagerstown, Maryland, which totaled 725 employees as of May 16, 2002, CSS employees are not represented by labor unions. Because of the
seasonal nature of certain of its businesses, the number of production employees fluctuates during the year.
The Company believes that relationships with its employees are good.
-3-
Item 2. Properties
The following table sets forth the location and approximate square footage of the Company's major manufacturing and distribution facilities:
Location
-------Elysburg, PA
Elysburg, PA
Danville, PA
New Berlin, PA
Troy, PA
Canton, PA
Berwick, PA
Berwick, PA
Berwick, PA
Berwick, PA
Berwick, PA
Memphis, TN
Memphis, TN
Hagerstown, MD
Hagerstown, MD
Hagerstown, MD
Hartwell, SC
Anniston, AL
Anniston, AL
El Paso, TX
Quebec, Canada
Use
--Manufacturing
Manufacturing
Distribution
Manufacturing
Manufacturing
Distribution
Manufacturing
Manufacturing
Distribution
Distribution
Distribution
Manufacturing
Distribution
Manufacturing
Manufacturing
Distribution
Manufacturing
Manufacturing
Distribution
Distribution
Distribution
and distribution
and distribution
and distribution
and distribution
and distribution
and distribution
and distribution
and distribution
Total
Approximate Square Feet
----------------------Owned
Leased
---------253,000
68,000
133,000
31,000
223,000
135,000
216,000
220,000
226,000
521,000
36,000
986,000
366,000
284,000
97,000
31,000
229,000
120,000
28,000
100,000
28,000
----------------2,232,000
2,099,000
=========
=========
The Company also utilizes owned and leased space aggregating 123,000 square feet for various marketing and administrative purposes. The
headquarters and principal executive office of the Company are located in Philadelphia, Pennsylvania.
The Company is also the lessee of approximately 14,000 square feet of retail space (which was related to former operations) which have been
subleased by the Company, as sublessor, to various sublessees.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
-4-
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Principal Market for Common Stock
The Common Stock of the Company is listed for trading on the New York Stock Exchange. The following table sets forth the high and low
sales prices per share of that stock for each of the quarters during fiscal 2002 and fiscal 2001.
2002
2001
----
High
----
Low
---
First Quarter................................................
Second Quarter...............................................
Third Quarter................................................
Fourth Quarter...............................................
$26.35
25.99
31.17
32.51
$21.00
23.55
25.30
24.76
First Quarter................................................
Second Quarter...............................................
Third Quarter................................................
Fourth Quarter...............................................
$20.44
20.94
21.75
24.44
$18.50
19.50
18.63
20.13
(b) Holders of Common Stock
At May 16, 2002, there were approximately 1,630 holders of the Company's Common Stock.
(c) Dividends
The Company has not declared or paid any dividends on its Common Stock for more than the past three fiscal years. The ability of the
Company to pay any cash dividends on its Common Stock is dependent on the Company's earnings and profits and cash requirements and is
further limited by the terms of the Company's revolving line of credit. The Company does not anticipate that it will declare or pay any cash
dividends on its Common Stock for the foreseeable future.
At May 16, 2002, there were no shares of preferred stock outstanding.
-5-
Item 6. Selected Financial Data
(In thousands, except per share amounts)
Year
Ended
March 31,
2002
----------Statement of Operations Data:
Net Sales............................
Three Month
Periods
Ended
March 31,
Years Ended December 31,
------------------------------------------------------------2001
2000
2000
1999
1998(a)
1997
----------------------------(Unaudited)
$424,309
$26,987
Income (loss) from continuing
operations before income taxes.....
33,455
(9,194)
Income (loss) from continuing
operations.........................
21,501
(6,080)
Income from discontinued operations,
net of income taxes................
-
Gain on sale of discontinued operations,
net of income taxes................
-
-
$24,589
$421,084
$408,867
$417,526
$372,733
(9,604)
28,406
28,442
37,926
30,442
(6,147)
18,231
18,061
24,276
18,871
-
-
-
6,348
-
-
-
-
17,871
18,231
18,061
24,276
43,090
Net income (loss)....................
21,501
(6,080)
(6,147)
Income (loss) from continuing
operations per common share
Basic .............................
$2.44
$(.69)
$(.66)
$2.02
$1.85
$2.26
$1.74
Diluted............................
$2.40
$(.69)
$(.66)
$2.02
$1.84
$2.21
$1.67
Balance Sheet Data:
Working capital......................
125,398
124,171
120,402
133,397
130,889
145,165
129,245
Total assets.........................
298,495
267,448
248,784
349,543
349,398
376,590
342,362
Short-term debt......................
200
312
424
62,961
63,488
96,198
52,524
Long-term debt.......................
165
193
434
252
537
2,131
2,580
Stockholders' equity.................
$234,845
$220,945
$209,575
$227,091
$219,477
$220,493
$221,649
(a) Results for 1998 include pre-tax income of $5,309, or net income of $3,398, related to restructuring and other special items.
-6-
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Business Acquisitions and Divestitures
On March 15, 2002, a subsidiary of the Company completed the acquisition of substantially all of the business and assets of the portion of C.
M. Offray & Son, Inc. ("Offray") which manufactures and sells decorative ribbon products, floral accessories and narrow fabrics for apparel,
craft and packaging applications. Berwick acquired substantially all of the business and assets of Offray for approximately $44,800,000 in cash
(paid from cash on hand). The purchase price is subject to a post-closing adjustment depending upon Offray's working capital on the date of the
closing. A portion of the purchase price is being held in escrow to cover purchase price adjustments and indemnification obligations. The
acquisition was accounted for as a purchase and the cost approximated the fair market value of the net assets acquired.
On May 8, 2001, the Company acquired certain assets of Tye-Sil Corporation Ltd. of Montreal, Quebec, Canada. Tye-Sil had been the leading
Canadian provider of gift wrap and accessories. In consideration, the Company paid approximately $7,849,000 in cash, including transaction
costs. The acquisition was accounted for as a purchase and the cost approximated the fair market value of the net assets acquired. Subsequent to
the acquisition, the operations of Tye-Sil were consolidated into existing operations of the Company.
On August 18, 1999, the Company acquired certain assets and the business of Party Professionals, Inc. Party Professionals designed and
marketed highly crafted latex masks, helmets and accessories sold to mass merchandisers, drug chains, party stores and gift shops. In
consideration, the Company paid $6,000,000 in cash and assumed and repaid $1,606,000 of outstanding debt. The acquisition was accounted
for as a purchase and the excess of cost over fair market value of $6,697,000 was recorded as goodwill in the accompanying balance sheet and
until the adoption of Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets," on April 1,
2002 was being amortized over twenty years. Subsequent to the acquisition, the operations of Party Professionals, now known as Don Post
Studios, Inc., were consolidated into existing operations of the Company.
Litigation
In February 1999, CSS was awarded approximately $11,200,000, including interest, in settlement of a dispute primarily related to the valuation
of inventory acquired in the 1995 acquisition of Cleo Inc. The funds were subsequently released from escrow. The award had no impact on
1999 results of operations.
Seasonality and Change in Fiscal Year
On February 21, 2001, CSS' Board of Directors approved a change in the Company's fiscal year end from December 31 to March 31. The
transition period commenced January 1, 2001 and ended March 31, 2001. The Company's new fiscal year began April 1, 2001 and ended
March 31, 2002 ("fiscal 2002"). With this change, the Company's new fiscal year coincides with its natural revenue cycle.
The seasonal nature of CSS' business results in low sales and operating losses in the first and fourth quarters and high shipment levels and
operating profits in the second and third quarters of the Company's new fiscal year, thereby causing significant fluctuations in the quarterly
results of operations of the Company.
-7-
Because of the seasonality and the general industry practice of deferred payment terms, a material portion of the Company's trade receivables
are collected in December and January, thus enabling the Company to repay the short-term debt borrowed to fund the inventory and accounts
receivable build-up during the year.
Results of Operations
Fiscal 2002 Compared to Calendar 2000
Consolidated sales for fiscal 2002 increased 1% to $424,309,000 from $421,084,000 in calendar 2000. The increase was primarily due to
incremental sales from businesses acquired in fiscal 2002. Excluding incremental volume of Tye-Sil and Offray, sales declined 3% as a
cautious retail environment brought on by a weak economy restricted seasonal purchases of large retailers.
As a percentage of sales, cost of sales improved to 73% in fiscal 2002 from 74% in calendar 2000, as improved manufacturing efficiencies and
foreign sourcing combined to improve gross margins. Selling, general and administrative expenses, as a percentage of sales, was 19% in fiscal
2002 and 18% in calendar 2000. The increase was primarily the result of the write-off related to the Kmart Chapter XI bankruptcy filing.
Excluding this event, S,G&A expenses, as a percentage of sales, were in line with the prior year.
Income from operations grew 6% to $35,489,000 in fiscal 2002 from $33,363,000 in calendar 2000. Excluding the impact of the write-off
related to the Kmart Chapter XI bankruptcy filing, operating income increased 17% to $38,969,000.
Interest expense decreased 63% to $1,898,000 from $5,080,000 in calendar 2000. The decrease was due to lower interest rates and reduced
borrowings as a result of operational cash flow and improved balance sheet management.
Income before taxes was $33,455,000, or 8% of sales in fiscal 2002 and $28,406,000, or 7% of sales in calendar 2000. Net income for the year
ended March 31, 2002 increased 18% to $21,501,000 from $18,231,000 in calendar 2000. Net income per diluted share increased 19% to $2.40
from $2.02 in calendar 2000.
Transition Quarter Ended March 31, 2001 Compared to Quarter Ended March 31, 2000
Consolidated sales for the three months ended March 31, 2001 were $26,987,000 or 10% above 2000 sales of $24,589,000. The increase in
sales was primarily attributable to customer requested deferrals of Valentine and Easter shipments from the fourth quarter of 2000 and
increased sales of ribbons and bows to the wholesale distribution channel. These increases were partially offset by lower sales of product lines
discontinued in early 2000 and lower closeout sales.
Cost of sales, as a percentage of sales, was 74% in 2001 and 72% in 2000. The increase in cost of sales, as a percentage of sales, was primarily
due to a charge to markdown excess inventories.
Interest expense, net decreased to $48,000 from $396,000 in 2000. The decrease in interest expense was primarily due to lower borrowing
levels as a result of the cash generated from operations and improved management of working capital.
-8-
Income taxes, as a percentage of income before taxes, were 34% in 2001 and 36% in 2000. The decreased rate for the period ended March 31,
2001 reflects the effective tax rate for the three month transition period compared to an estimated annual effective rate utilized for the three
month period ended March 31, 2000.
The net loss for the three months ended March 31, 2001 was $6,080,000, or $.69 per share compared to a net loss of $6,147,000, or $.66 per
share, in 2000. The decreased loss was due primarily to lower interest expense.
Calendar 2000 Compared to Calendar 1999
Consolidated sales for 2000 increased 3% to $421,084,000 from $408,867,000. The increase in 2000 sales was primarily attributable to 4%
growth in CSS' base seasonal businesses as reduced sales of discontinued products partially offset the overall improvement in volume.
As a percentage of sales, cost of sales was 74% in 2000 and 75% in 1999. The improvement in cost of sales as a percentage of sales in 2000
was due to improved efficiencies in the Company's manufacturing and distribution operations.
Selling, general and administrative expenses, as a percentage of sales, was 18% in 2000 and 17% in 1999. The increase in selling, general and
administrative costs in 2000 was primarily due to costs associated with the decentralization of the Company's management structure.
Interest expense, net was $5,080,000 in 2000 and $4,294,000 in 1999. Interest expense increased in 2000 primarily due to the impact of higher
interest rates as operating cash flow was largely offset by incremental borrowings to repurchase the Company's stock.
Rental and other income, net was $123,000 in 2000 and $959,000 in 1999. The current year decrease was due to the absence in 2000 of income
from the 1999 restructuring of a portion of the Company's deferred compensation liability.
Income before income taxes was $28,406,000, or 7% of sales in 2000 and $28,442,000, or 7% of sales in 1999.
Net income for the year ended December 31, 2000 increased 1% to $18,231,000. Net income per diluted share increased 10% in 2000 to $2.02.
Earnings per share in 2000 and 1999 were benefited by the Company's stock repurchase program. The cumulative buyback of stock added $.18
and $.11, respectively to income from continuing operations per diluted share.
Inflation
The financial statements are presented on a historical cost basis and do not fully reflect the impact of prior years' inflation. The U.S. inflation
rate has been modest the past several years and the Company conducts the majority of its business using U.S. currency. The ability to pass on
inflationary costs is uncertain due to general economic conditions and competitive situations. The Company attempts to alleviate inflationary
material and labor pressures by increasing selling prices to help offset rising costs (subject to competitive conditions), increasing productivity,
and improving design and manufacturing techniques.
-9-
Liquidity and Capital Resources
At March 31, 2002, the Company had working capital of $125,398,000 and stockholders' equity of $234,845,000. The increase in accounts
receivable, net of reserves, from $20,174,000 in 2001 to $30,021,000 in 2002 was a result of additional accounts receivable of $10,230,000
related to the acquisition of Offray. Inventories, net of reserves, increased from $82,140,000 to $98,541,000 due to additional inventory of
$27,269,000 related to the current year acquisition of Offray, partially offset by the decrease in inventory of the Company's base businesses as a
result of improved inventory management. The increase in other current assets is primarily due to the Claims Put Agreement which allowed the
Company to transfer a portion of its pre-petition Kmart receivable to a third party. Capital expenditures were $10,007,000 and $13,877,000 in
fiscal 2002 and calendar 2000, respectively, and consisted primarily of costs related to the implementation of an integrated computer system in
one of the Company's subsidiaries and purchases of machinery and equipment. The increase in accrued restructuring expenses and accrued
expenses relates to the acquisition of Offray.
The Company relies primarily on cash generated from its operations and seasonal borrowings to meet its liquidity requirements. Most CSS
revenues are seasonal with approximately 68% percent of sales being Christmas related. As payment for sales of Christmas related products is
usually not received until after the respective holiday in accordance with general industry practice, short-term borrowing needs increase
throughout the second and third quarters, peaking prior to Christmas and dropping thereafter. Seasonal borrowings are made under a
$75,000,000 unsecured revolving credit facility with five banks and a receivable purchase agreement in an amount up to $100,000,000 with an
issuer of receivables-backed commercial paper. These financial facilities are available to fund the seasonal borrowing needs and to provide the
Company with sources of capital for general corporate purposes. At March 31, 2002, there were no amounts outstanding under these facilities.
For information concerning these credit facilities, see Note 7 of Notes to Consolidated Financial Statements.
On February 19, 1998, the Company announced that its Board of Directors had authorized the buyback of up to 1,000,000 shares of the
Company's Common Stock. Subsequently, the Executive Committee of the Board of Directors authorized additional repurchases of shares on
terms acceptable to management. The cumulative authorized repurchase amount is 3,000,000 shares. Any such buy back is subject to
compliance with regulatory requirements and relevant covenants of the Company's credit facility. The Company repurchased 327,000 shares
for $9,409,000 and 543,200 shares for $10,861,000 in fiscal 2002 and calendar 2000, respectively. There were no stock repurchases during the
transition period of January 1, 2001 through March 31, 2001.
Based on its current operating plan, the Company believes its sources of available capital are adequate to meet its ongoing cash needs for the
foreseeable future.
Accounting Pronouncements
In June 1998 and June 2000, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133." These
statements establish accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an
asset or liability measured at its fair value. SFAS Nos. 133 and 138 also require that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS Nos. 133 and 138 are effective for fiscal years beginning after
June 15, 2000. The Company adopted SFAS No. 133, as amended by SFAS No. 138, on January 1, 2001, as required. The adoption of SFAS
No. 133 was not material to the consolidated statements of operations or financial position of the Company.
- 10 -
In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 141 requires all business combinations be accounted for by the purchase method and adds disclosure requirements related to business
combination transactions. SFAS No. 141 also establishes criteria for the recognition of intangible assets apart from goodwill. SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other intangible assets. The Statement provides that goodwill and some
intangibles will no longer be amortized. SFAS No. 142 provides specific guidance for testing goodwill for impairment. The Statement also
requires new disclosure of information about goodwill and other intangible assets subsequent to their acquisition. The Company will adopt the
provisions of SFAS No. 142 effective with the beginning of its next fiscal year, April 1, 2002, and will discontinue the amortization of
goodwill at that time. As of March 31, 2002, goodwill totaled $39,715,000 and negative goodwill totaled $2,393,000. For the year ended March
31, 2002, net amortization expense was $1,213,000. Based on a preliminary review of the new standard, management believes the Company
will record a goodwill impairment charge upon adoption of approximately $8,000,000, net of taxes, which includes the reversal of negative
goodwill. This non-cash charge will be recorded as the cumulative effect of an accounting change. However, the Company has not completed
its evaluation to determine the exact amount of such a charge. Also, the Company believes this charge will not affect the financial covenant
calculations under the Company's credit agreement.
SFAS No. 143, "Accounting for Asset Retirement Obligations," was issued in June 2001. SFAS No. 143 addresses accounting and reporting
for legal obligations and related costs associated with the retirement of long-lived assets. The Statement requires that the fair value of the
liability for an asset retirement obligation be recognized in the period incurred if a reasonable estimate of fair value can be made. The estimated
retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued
for fiscal years beginning after June 15, 2002. Based on current operations, the Company does not expect the adoption of this statement to have
a material effect on its financial position and results of operations.
SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," was issued in August 2001 and is effective for fiscal years
beginning after December 15, 2001. This statement retains existing requirements to recognize an impairment loss only if the carrying amount
of a long-lived asset is not recoverable from its undiscounted cash flows and measure any impairment loss as the difference between the
carrying amount and the fair value of the asset. SFAS No. 144 a) removes goodwill from its scope, b) allows for probability-weighted cash
flow estimation techniques when measuring for impairment, c) requires that, for any assets to be abandoned, the depreciable life be adjusted
and the cumulative impact of such change treated as an accounting change and d) an impairment loss be recognized at the date a long-lived
asset is exchanged for a similar productive asset or distributed to owners in a spinoff if the carrying value of the asset exceeds its fair value.
Based on current operations, the Company does not expect the adoption of this statement to have a material effect on its financial position and
results of operations.
Significant Accounting Policies
A summary of the Company's significant accounting policies is included in Note 1 to the consolidated financial statements. Management
believes that the application of these policies on a consistent basis enables the Company to provide the users of the financial statements with
useful and reliable information about the Company's operating results and financial condition.
- 11 -
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and
the reported amounts of revenue and expenses. Judgments and assessments of uncertainties are required in applying the Company's accounting
policies in many areas. For example, in determining the valuation of inventory and accounts receivable reserves. Other areas in which
uncertainties exist include, but are not limited to, income tax valuation and resolution of litigation. Actual results will inevitably differ to some
extent from the estimates on which the Company's consolidated financial statements are prepared at any given point in time. Despite these
inherent limitations, management believes that the Company's Management's Discussion and Analysis and audited financial statements provide
a meaningful and fair perspective on the Company.
Forward-Looking and Cautionary Statements
This document contains certain forward-looking statements that are subject to risks and uncertainties. Forward-looking statements include
certain information related to the Company's capital resources and the costs related to operational decisions, as well as information contained
elsewhere in this report where statements are preceded by, followed by, or include the words "believes," "expects," "anticipates" or similar
expressions. For such statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. Actual events or results may differ materially from those discussed in forward-looking statements as
a result of various factors, including without limitation, general market conditions, increased competition, and factors discussed elsewhere in
this report and the documents incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company's primary market risk exposure with regard to financial instruments is to changes in interest rates. Pursuant to the Company's line
of credit, a change in either the lender's base rate or LIBOR would affect the rate at which the Company could borrow funds thereunder. Based
on average borrowings of $32,670,000 for the year ended March 31, 2002, a 1% increase or decrease in current market interest rates would
have increased or decreased interest expense by $326,700.
- 12 -
CSS INDUSTRIES, INC.
AND SUBSIDIARIES
Item 8. Financial Statements
INDEX
Report of Independent Public Accountants.....................................................
Page
---14
Consolidated Balance Sheets - March 31, 2002 and 2001........................................
15-16
Consolidated Statements of Operations and Comprehensive Income - for the year
ended March 31, 2002, for the three month periods ended March 31, 2001 and
2000 and for the years ended December 31, 2000 and 1999................................
17
Consolidated Statements of Cash Flows - for the year ended March 31, 2001, for
the three month periods ended March 31, 2001 and 2000 and for the years
ended December 31, 2000 and 1999........................................................
18
Consolidated Statements of Stockholders' Equity - for the year ended March 31,
2002, for the three month periods ended March 31, 2001 and 2000 and for the
years ended December 31, 2000 and 1999..................................................
19-20
Notes to Consolidated Financial Statements...................................................
21-35
- 13 -
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of CSS Industries, Inc.:
We have audited the accompanying consolidated balance sheets of CSS Industries, Inc. (a Delaware Corporation) and subsidiaries as of March
31, 2002 and 2001 and the related consolidated statements of operations and comprehensive income, cash flows and stockholders' equity for
the years ended March 31, 2002, December 31, 2000 and 1999, and the three month period ended March 31, 2001. These consolidated financial
statements and the schedule referred to below are the responsibility of the Company's management. Our responsibility is to express an opinion
on these consolidated financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CSS
Industries, Inc. and subsidiaries as of March 31, 2002 and 2001 and the results of their operations and their cash flows for the years ended
March 31, 2002, December 31, 2000 and 1999, and the three month period ended March 31, 2001, in conformity with accounting principles
generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The supplemental
schedule listed in Item 14(a) is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the
basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic
consolidated financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Philadelphia, PA
May 14, 2002
- 14 -
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
March 31,
------------------------2002
2001
--------------
ASSETS
CURRENT ASSETS
Cash and temporary investments......................................
Accounts receivable, net of allowances of $13,475 and $9,304 .......
Inventories.........................................................
Income tax receivable...............................................
Deferred income taxes...............................................
Other current assets................................................
Total current assets............................................
$ 20,006
30,021
98,541
2,222
6,408
19,471
-------176,669
--------
$ 41,687
20,174
82,140
3,407
5,714
8,394
-------161,516
--------
1,450
41,087
101,605
-------144,142
(63,716)
-------80,426
--------
524
33,983
85,050
-------119,557
(57,452)
-------62,105
--------
37,656
3,744
-------41,400
-------$298,495
========
38,535
5,292
-------43,827
-------$267,448
========
PROPERTY, PLANT AND EQUIPMENT
Land................................................................
Buildings, leasehold interests and improvements.....................
Machinery, equipment and other......................................
Less - Accumulated depreciation.....................................
Net property, plant and equipment...............................
OTHER ASSETS
Intangible assets, net of accumulated amortization of $9,761
and $10,065.....................................................
Other...............................................................
Total other assets..............................................
- 15 -
March 31,
-------------------------2002
2001
---------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Note payable .......................................................................
Current portion of long-term debt...................................................
Accounts payable....................................................................
Accrued payroll and other compensation..............................................
Accrued restructuring expenses......................................................
Accrued expenses....................................................................
$
200
19,413
5,613
4,541
21,504
-------51,271
--------
$
LONG-TERM DEBT, NET OF CURRENT PORTION...................................................
165
--------
193
--------
OTHER LONG-TERM OBLIGATIONS..............................................................
2,973
--------
2,715
--------
DEFERRED INCOME TAXES....................................................................
9,241
--------
6,250
--------
COMMITMENTS AND CONTINGENCIES............................................................
-
-
-
-
Total current liabilities.......................................................
STOCKHOLDERS' EQUITY
Preferred stock, Class 2, $.01 par, 1,000,000 shares authorized.....................
Common stock, $.10 par, 20,000,000 shares authorized
12,366,566 shares issued and 8,585,469 outstanding at March 31, 2002..............
12,366,566 shares issued and 8,830,520 outstanding at March 31, 2001..............
Additional paid-in capital..........................................................
Retained earnings...................................................................
Accumulated other comprehensive income, net of tax..................................
Common stock in treasury, 3,781,097 and 3,536,046 shares, at cost...................
Total stockholders' equity......................................................
See notes to consolidated financial statements.
- 16 -
1,237
29,725
287,515
(273)
(83,359)
-------234,845
-------$298,495
========
312
16,890
4,580
15,563
-------37,345
--------
1,237
29,538
265,980
(66)
(75,744)
-------220,945
-------$267,448
========
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
For the Year
Ended
March 31,
-----------2002
----NET SALES...............................................
COSTS AND EXPENSES
Cost of sales......................................
Selling, general and administrative expenses.......
Interest expense, net of interest income of
$462, $484, $90, $123 and $175...................
Rental and other expense (income), net.............
$424,309
--------
For the Three Month
Periods Ended
March 31,
------------------2001
2000
----------(Unaudited)
$26,987
$24,589
-------------
For the Years Ended
December 31,
--------------------2000
1999
--------------$421,084
--------
$408,867
--------
309,409
79,411
19,963
16,061
17,639
16,141
312,586
75,135
306,129
70,961
1,898
136
------390,854
------33,455
48
109
------36,181
------(9,194)
396
17
------34,193
------(9,604)
5,080
(123)
-------392,678
-------28,406
4,294
(959)
-------380,425
-------28,442
INCOME TAX PROVISION (BENEFIT)..........................
11,954
-------
(3,114)
-------
(3,457)
-------
10,175
--------
10,381
--------
NET INCOME (LOSS).......................................
$21,501
=======
$(6,080)
=======
$(6,147)
=======
$ 18,231
========
$ 18,061
========
$2.44
=====
$(.69)
======
$(.66)
=====
$2.02
====
$1.85
=====
$2.40
=====
$(.69)
======
$(.66)
=====
$2.02
=====
$1.84
=====
INCOME (LOSS) BEFORE INCOME TAXES.......................
NET INCOME (LOSS) PER COMMON SHARE
Basic............................................
Diluted............................................
-----------------------------------------------------------------------------------------------------------------------------------COMPREHENSIVE INCOME (LOSS)
Net income (loss).................................
Change in fair value of interest rate
swap agreements, net..........................
Foreign currency translation adjustment...........
Comprehensive income (loss).......................
$21,501
$(6,080)
(196)
(11)
----$21,294
=======
(66)
------$(6,146)
=======
See notes to consolidated financial statements.
- 17 -
$(6,147)
$(6,147)
=======
$ 18,231
$ 18,061
-
-
$ 18,231
========
$ 18,061
========
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Year
Ended
March 31,
-----------2002
-------Cash flows from operating activities:
Net income (loss)...........................................
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.............................
Provision for doubtful accounts...........................
Deferred tax provision (benefit)..........................
(Gain) on claims put agreement............................
(Gain) loss on sale or disposal of assets.................
Compensation expense on stock option issuance.............
Changes in assets and liabilities, net of effects of
acquisitions:
(Increase) decrease in accounts receivable..............
Decrease (increase) in inventories......................
(Increase) decrease in other assets.....................
(Decrease) increase in accounts payable.................
Increase (decrease) in accrued taxes....................
Increase (decrease) increase in accrued expenses........
Total adjustments....................................
Net cash provided by operating activities............
Cash flows from investing activities:
Purchases of businesses, net of cash received of $295 in
2002 and $120 in1999......................................
Purchase of property, plant and equipment...................
Proceeds from sale of assets................................
Net cash used for investing activities...............
Cash flows from financing activities:
Payments on long-term obligations...........................
Borrowings on long-term obligations.........................
Borrowings (repayments) on notes payable....................
Purchase of treasury stock..................................
Proceeds from exercise of stock options.....................
Net cash used for financing activities...............
Effect of exchange rate changes on cash........................
Net (decrease) increase in cash and temporary investments......
Cash and temporary investments at beginning of year............
Cash and temporary investments at end of year..................
$ 21,501
For the Three Month
Periods Ended
For the Years Ended
March 31,
December 31,
------------------------------------2001
2000
2000
1999
----------------------------(Unaudited)
$ (6,080)
$ (6,147)
$ 18,231
$ 18,061
11,645
10,936
2,297
(5,436)
(3)
-
2,655
174
(413)
1
-
2,527
133
(51)
(7)
-
10,358
1,323
1,699
35
93
9,484
1,302
710
223
-
(5,052)
13,506
(10,483)
(8,762)
(1,371)
(13,535)
-------(23,554)
-------(45,055)
--------
156,740
(28,140)
(1,199)
5,836
(10,516)
(12,015)
-------113,123
-------107,043
--------
138,940
(40,947)
(332)
33
(11,751)
(14,910)
-------73,635
-------67,488
--------
(13,377)
10,884
1,428
(3,278)
(222)
(2,415)
-------6,528
-------24,759
-------
17,897
17,616
8,617
(135)
(274)
4,820
-------60,260
-------78,321
--------
(52,378)
(10,007)
4,251
-------(58,134)
--------
(3,482)
-------(3,482)
--------
(2,586)
37
-------(2,549)
--------
(13,877)
56
-------(13,821)
--------
(7,486)
(14,858)
70
-------(22,274)
--------
(1,181)
170
(9,409)
1,829
-------(8,591)
-------(11)
-------(21,681)
41,687
-------$20,006
========
(317)
(62,615)
-------(62,932)
--------------40,629
1,058
-------$41,687
========
(1,665)
(62,370)
(3,819)
64
-------(67,790)
--------------(2,851)
3,292
-------$
441
========
(2,706)
86
245
(10,861)
64
-------(13,172)
--------------(2,234)
3,292
-------$ 1,058
========
(2,450)
(32,950)
(21,505)
1,936
-------(54,969)
--------------1,078
2,214
-------$ 3,292
========
See notes to consolidated financial statements.
- 18 -
CSS INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
Preferred Stock
--------------------------Shares
Amount
----------BALANCE, JANUARY 1, 1999 .................................
$
Tax benefit associated with exercise of
stock options....................................
Issuance of common stock upon exercise of
stock options....................................
Increase in treasury shares..........................
Net income
........................................
------------------BALANCE, DECEMBER 31, 1999................................
Issuance of common stock upon exercise of
stock options....................................
Increase in treasury shares..........................
Net income
........................................
BALANCE, MARCH 31, 2000 (unaudited).......................
Tax benefit associated with exercise of
stock options....................................
Compensation expense on stock option issuance........
Increase in treasury shares..........................
Net income
........................................
BALANCE, DECEMBER 31, 2000................................
Change in fair value of interest rate swap
agreements, net..................................
Net income
........................................
BALANCE, MARCH 31, 2001...................................
Tax benefit associated with exercise of
stock options....................................
Issuance of common stock upon exercise of
stock options....................................
Increase in treasury shares..........................
Change in fair value of interest rate swap
agreements, net..................................
Foreign currency translation adjustment..............
Net income
........................................
BALANCE, MARCH 31, 2002...................................
Common Stock
-----------------------------Shares
Amount
----------12,366,566
$1,237
-
-
----------------
---------
-
-
12,366,566
1,237
----------
----------
----------------
----------
-
-
12,366,566
1,237
----------
----------
----------------
----------
-
-
12,366,566
1,237
----------
----------
------------------
----------
-
-
-
-
-
-
-
-
----------
----------
----------------
----------
==========
$
==========
12,366,566
================
$1,237
==========
12,366,566
- 19 -
1,237
Additional
Paid-in
Capital
--------$28,866
492
-------29,358
--------
Retained
Earnings
-------$ 238,432
Accumulated
Other
Comprehensive
Income
------------$
-
-
-
(2,611)
18,061
--------253,882
(53)
(6,147)
---------
Common Stock
in Treasury
---------------------------Shares
Amount
----------(2,234,811)
$(48,042)
-
-
178,881
(942,451)
----------
4,547
(21,505)
--------
1,936
(21,505)
18,061
--------
-
(2,998,381)
(65,000)
219,477
-------------
5,535
(193,000)
----------
117
(3,819)
--------
64
(3,819)
(6,147)
-------209,575
247,682
-
(3,185,846)
(68,702)
87
93
--------
24,378
---------
-------------
(350,200)
----------
(7,042)
--------
29,538
272,060
-
(3,536,046)
(75,744)
(6,080)
---------
492
-------------
29,358
--------
Total
----$220,493
(66)
-------------
29,538
265,980
187
-
-
-
34
-
-
-------$ 29,725
========
21,501
--------$287,515
=========
----------
(66)
(3,536,046)
-
(196)
(11)
------------$
(273)
=============
- 20 -
-------(75,744)
-
87
93
(7,042)
24,378
227,091
(66)
(6,080)
-------220,945
187
81,949
(327,000)
1,794
(9,409)
1,828
(9,409)
---------(3,781,097)
==========
-------$(83,359)
========
(196)
(11)
21,501
-------$234,845
========
CSS INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of CSS Industries, Inc. ("Company") and all subsidiaries. All significant
intercompany transactions and accounts have been eliminated in consolidation. Translation adjustments are charged or credited to a separate
component of stockholders' equity. Gains and losses on foreign currency transactions are not material and are included in rental and other
expense in the consolidated statements of operations.
Nature of Business
CSS Industries, Inc. ("CSS" or the "Company") is a consumer products company primarily engaged in the design, manufacture and sale to mass
market retailers of seasonal, social expression products, including gift wrap, gift bags, boxed greeting cards, gift tags, tissue paper, paper and
vinyl decorations, classroom exchange Valentines, decorative ribbons and bows, Halloween masks, costumes, make-ups and novelties, Easter
egg dyes and novelties and educational products. CSS provides its retail customers the opportunity to use a single vendor for much of their
seasonal product requirements. CSS' product breadth, product innovation, creative design, manufacturing and packaging flexibility, product
quality and customer service are key to sustaining the Company's market leadership position. A substantial portion of CSS' products are
manufactured, packaged and warehoused in twenty-one North American facilities, with the remainder purchased primarily from Asian
manufacturers. The Company's products are sold to its retail customers by national and regional account managers and product specialists and
by a network of independent manufacturers' representatives. The Company is comprised of The Paper Magic Group, Inc. ("Paper Magic"),
acquired by the Company in August 1988, Berwick Industries LLC ("Berwick"), acquired in May 1993, and Cleo Inc ("Cleo"), acquired in
November 1995. During March 2002, Berwick completed the acquisition of substantially all of the business and assets of the portion of C. M.
Offray & Son, Inc. ("Offray") which manufactures and sells decorative ribbon products, floral accessories and narrow fabrics for apparel, craft
and packaging applications. Subsequent to the acquisition, Berwick changed its name to Berwick Offray LLC.
Change in Fiscal Year
On February 21, 2001, CSS' Board of Directors approved a change in the Company's fiscal year end from December 31 to March 31. The
transition period began January 1, 2001 and ended March 31, 2001. The Company's new fiscal year began April 1, 2001 and ended March 31,
2002. With this change, the Company's new fiscal year will coincide with its natural revenue cycle.
Reclassification
Certain prior-period amounts have been reclassified to conform with current-year classification.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates.
- 21 -
Inventories
The Company records inventory at the date of taking title which generally occurs upon receipt or prior to shipment of in-transit inventory of
overseas product. The Company adjusts unsalable and slow-moving inventory to its net realizable value. Substantially all of the Company's
inventories are stated at the lower of first-in, first-out (FIFO) cost or market. The remaining portion of the inventory is valued at the lower of
last-in, first-out cost or market. Had all inventories been valued at the lower of FIFO cost or market, inventories would have been greater by
$1,147,000 and $1,180,000 at March 31, 2002 and 2001, respectively. Inventories consisted of the following:
(in thousands)
2002
-------$25,196
28,612
44,733
-------$98,541
=======
Raw material
Work-in-process
Finished goods
2001
--------$17,795
30,375
33,970
------$82,140
=======
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation and amortization are provided generally on the straight-line method and are
based on estimated useful lives or terms of leases as follows:
Buildings, leasehold interests and improvements.................
Machinery, equipment and other..................................
Lease term to 40 years
3 to 12 years
When property is retired or otherwise disposed of, the related cost and accumulated depreciation and amortization are eliminated from the
accounts. Any gain or loss from the disposition of property, plant and equipment is included in other income. Maintenance and repairs are
expensed as incurred while improvements are capitalized and depreciated over their estimated useful lives.
Intangible Assets
Intangible assets, including goodwill, are amortized over terms from five to forty years.
Long Lived Assets
The Company periodically evaluates the net realizable value of long lived assets, including goodwill and other intangible assets and property,
plant and equipment, relying on a number of factors including operating results, business plans, economic projections and anticipated future
cash flows. An impairment in the carrying value of an asset is assessed when the undiscounted, expected future operating cash flows derived
from the asset are less than its carrying value.
Derivative Financial Instruments
The Company uses certain derivative financial instruments as part of its risk management strategy to reduce interest rate and currency risk.
Derivatives are not used for trading or speculative activities. The Company adopted Statement of Financial Accounting Standards ("SFAS")
No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 138, "Accounting for Certain Derivative Instruments
and Certain Hedging Activities - an amendment of FASB Statement No. 133," on January 1, 2001. The adoption of SFAS No. 133 was not
material to the consolidated statements of operations or financial position of the Company.
- 22 -
The Company recognizes all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, the Company
generally designates the derivative as either (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm
commitment ("fair value hedge"), or (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a
recognized asset or liability ("cash flow hedge"). Changes in the fair value of a derivative that is designated as, and meets all the required
criteria for, a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in
current period earnings. Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a cash flow hedge
are recorded in accumulated other comprehensive income and reclassified into earnings as the underlying hedged item affects earnings. The
portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded
from the assessment of hedge effectiveness is recorded currently in earnings. Also, changes in the entire fair value of a derivative that is not
designated as a hedge are recorded immediately in earnings. The company formally documents all relationships between hedging instruments
and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes
relating all derivatives that are designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific
firm commitments or forecasted transactions.
The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in
offsetting changes in fair values or cash flows of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a
derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively.
The Company enters into foreign currency contracts in order to reduce the impact of certain foreign currency fluctuations. Firmly committed
transactions and the related receivables and payables may be hedged with forward exchange contracts. Gains and losses arising from foreign
currency forward contracts are recognized in income or expense as offsets of gains and losses resulting from the underlying hedged
transactions. The notional amount of open forward exchange contracts as of March 31, 2002 and 2001 was $26,000 and $1,630,000,
respectively, and the related gains and losses were not material.
During 2001, the Company entered into interest rate swap agreements, with maturities through January 2004, to manage its exposure to interest
rate movements by effectively converting a portion of its anticipated working capital debt from variable to fixed rates. The average annual
notional amounts of interest rate swap contracts subject to fixed rates were $32,838,000, $21,890,000 and $10,946,000 for fiscal years 2002,
2003 and 2004, respectively. These agreements involve the exchange of variable rate payments for fixed rate payments without the effect of
leverage and without the exchange of the underlying face amount. Fixed interest rate payments are at a weighted average rate of 4.82%, 4.96%
and 5.09% for fiscal years 2002, 2003 and 2004, respectively. Variable rate payments are based on one month U.S. dollar LIBOR. Interest rate
differentials paid or received under these agreements are recognized as adjustments to interest expense.
The fair value of interest rate swap agreements is included in other current liabilities and totaled $262,000 and $66,000 as of March 31, 2002
and 2001, respectively.
Income Taxes
The Company follows the liability method of accounting for deferred income taxes. Deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and liabilities. Deferred tax assets or liabilities at the end of each period
are determined using the tax rate expected to be in effect when taxes are actually paid or recovered.
- 23 -
Revenue Recognition
The Company recognizes revenue from product sales when the goods are shipped and the title and risk of loss pass to the customer. Provisions
for allowances and rebates to customers, returns and other adjustments are provided in the same period that the related sales are recorded.
Product Development Costs
Product development costs consist of purchases of outside artwork, printing plates and cylinders. The Company classifies these costs as
prepaid. They are amortized monthly over the selling season and recorded in selling, general and administrative expense.
Shipping and Handling Fees and Costs
Shipping and handling fees and costs are reported in cost of sales in the consolidated statements of operations.
Net Income (Loss) Per Common Share
The following table sets forth the computation of basic earnings per share and diluted earnings per share for the year ended March 31, 2002, for
the three month period ended March 31, 2001 and for the years ended December 31, 2000 and 1999:
(in thousands, except per share amounts)
Numerator:
Net income (loss)..................................
For the Year For the Three Month
Ended
Period Ended
March 31,
March 31,
2002
2001
--------------------------$21,501
Denominator:
Weighted average shares outstanding for
basic earnings per share.......................
$(6,080)
For the Years
Ended
December 31
--------------------2000
1999
------------$18,231
$18,061
8,827
8,831
9,037
9,747
145
-------
-------
4
48
8,972
=====
8,831
=====
9,041
=====
9,795
=====
Basic earnings (loss) per share.........................
$2.44
=====
$(.69)
=====
$2.02
=====
$1.85
=====
Diluted earnings (loss) per share.......................
$2.40
=====
$(.69)
=====
$2.02
=====
$1.84
=====
Effect of dilutive stock options...................
Adjusted weighted average shares outstanding
for diluted earnings per share.................
Options on 480,000 shares, 633,000 shares and 1,162,000 shares of common stock were not included in computing diluted earnings per share
for the year ended March 31, 2002 and for the years ended December 31, 2000 and 1999, respectively, because their effects were antidilutive.
Options on 1,589,000 shares were not included in computing diluted earnings per share for the three months ended March 31, 2001because
their effects were antidilutive due to the Company's loss during the period.
- 24 -
Statements of Cash Flows
For purposes of the consolidated statements of cash flows, the Company considers all holdings of highly liquid debt instruments with original
maturity of less than three months to be temporary investments.
Supplemental Schedule of Cash Flow Information
(In thousands)
Cash paid during the year for:
Interest.............................
Income taxes.........................
Details of acquisitions:
Fair value of assets acquired........
Liabilities assumed..................
Cash paid............................
Less cash acquired...................
Net cash paid for acquisitions............
For the Year
Ended
March 31,
2002
--------------
For the Three Month
Period Ended
March 31,
2001
---------
For the Years Ended
December 31,
---------------------2000
1999
-----------
$ 2,139
=======
$ 917
======
$5,290
======
$ 4,533
=======
$10,705
=======
$9,053
======
$9,120
======
$10,258
=======
$64,499
11,826
------52,673
295
------$52,378
=======
----------$
======
----------$
======
$ 9,739
2,133
------7,606
120
------$ 7,486
=======
See Note 2 for supplemental disclosure of non-cash investing activities.
(2) BUSINESS ACQUISITIONS AND DIVESTITURES:
On March 15, 2002, a subsidiary of the Company completed the acquisition of substantially all of the business and assets of the portion of C.
M. Offray & Son, Inc. which manufactures and sells decorative ribbon products, floral accessories and narrow fabrics for apparel, craft and
packaging applications. Berwick acquired substantially all of the business and assets of Offray for approximately $44,800,000 in cash (paid
from cash on hand). The purchase price is subject to a post-closing adjustment depending upon Offray's working capital on the date of the
closing. A portion of the purchase price is being held in escrow to cover purchase price adjustments and indemnification obligations. The
acquisition was accounted for as a purchase and the cost approximated the fair market value of the net assets acquired.
In conjunction with the acquisition of Offray, the Company's management approved a restructuring plan. As part of this plan, the Company
accrued $4,541,000 on the day of acquisition for severance and costs related to the closure of certain facilities.
- 25 -
The unaudited consolidated results of operations of the Company and Offray on a pro forma basis as though the transaction had been
consummated at the beginning of the respective years were as follows:
Sales
Net income
Net income per common share
Basic
Diluted
Year Ended
March 31, 2002
-------------$523,141
21,889
$2.48
$2.44
Year Ended
December 31, 2000
----------------$516,452
18,527
$2.05
$2.05
Pro forma adjustments included in the above reflect the effect of purchase accounting adjustments on interest, depreciation, amortization and
tax expense.
On May 8, 2001, the Company acquired certain assets of Tye-Sil Corporation Ltd. of Montreal, Quebec, Canada. Tye-Sil had been the leading
Canadian provider of gift wrap and accessories. In consideration, the Company paid approximately $7,849,000 in cash, including transaction
costs. The acquisition was accounted for as a purchase and the cost approximated the fair market value of the net assets acquired. Subsequent to
the acquisition, the operations of Tye-Sil were consolidated into existing operations of the Company.
On August 18, 1999, the Company acquired certain assets and the business of Party Professionals, Inc. Party Professionals designed and
marketed highly crafted latex masks, helmets and accessories sold to mass merchandisers, drug chains, party stores and gift shops. In
consideration, the Company paid $6,000,000 in cash and assumed and repaid $1,606,000 of outstanding debt. The acquisition was accounted
for as a purchase and the excess of cost over fair market value of $6,697,000 was recorded as goodwill in the accompanying balance sheet and
until the adoption of SFAS No. 142 on April 1, 2002 was being amortized over twenty years. As of December 31, 1999, the operations of Party
Professionals, now known as Don Post Studios, Inc., were consolidated into existing operations of the Company.
(3) TREASURY STOCK TRANSACTIONS:
On February 19, 1998, the Company announced that its Board of Directors had authorized the buyback of up to 1,000,000 shares of the
Company's Common Stock. Subsequently, the Board of Directors authorized repurchases of an additional 2,000,000 shares on terms acceptable
to management. The Company repurchased 327,000 shares for $9,409,000, in the fiscal year ended March 31, 2002, 543,200 shares for
$10,861,000 in calendar 2000 and 942,451 shares for $21,505,000 in calendar 1999. There were no stock repurchases for the three month
transition period ended March 31, 2001.
(4) STOCK OPTION PLANS:
Under the terms of the CSS Industries, Inc. 2000 Stock Option Plan for Non-Employee Directors ("2000 Plan"), non-qualified stock options to
purchase up to 200,000 shares of common stock are available for grant to non-employee directors at exercise prices of not less than fair market
value on the date of grant. Options to purchase 4,000 shares of the Company's common stock are to be granted automatically to each
non-employee director on the last day that the Company's common stock is traded in November from 2001 to 2005. Each option will expire ten
years after the date the option is granted and options may be exercised at the rate of 25% per year commencing one year after the date of grant.
At March 31, 2002, options to acquire 180,000 shares were available for grant under the 2000 Plan.
- 26 -
Under the terms of the 1994 Equity Compensation Plan ("1994 Plan"), the Human Resources Committee ("Committee") of the Board of
Directors may grant incentive stock options, non-qualified stock options, restricted stock grants, stock appreciation rights or combinations
thereof to officers and other key employees. Grants under the 1994 Plan may be made through November 2004 and are exercisable at the
discretion of the Committee but in no event greater than ten years from the date of grant. Options may be exercised at the rate of 25% per year
commencing one year after the date of grant. At March 31, 2002, options to acquire 5,810 shares were available for grant under the 1994 Plan.
On February 5, 2002, 108,500 shares were approved for grant by the Human Resources Committee, but with the concurrence of the grantees
thereof, these grants are subject to stockholder approval of the Plan Amendment to increase eligible shares.
On May 17, 2000 the Committee authorized the amendment of the option exercise period of each grant that would have otherwise expired on or
before January 31, 2001 to extend such period for two years, and on November 3, 2000 further authorized the amendment of the option
exercise period of each grant (including those option exercise periods extended on May 17, 2000) to ten years from the respective date of each
such grant. The Company recorded compensation expense of $93,000 as a result of these amendments which represented the difference
between the market value of the shares and the exercise price on the date of the amendments.
The CSS Industries, Inc. 1995 Stock Option Plan for Non-Employee Directors ("1995 Plan"), under which non-qualified stock options to
purchase up to 300,000 shares of common stock were available for grant to non-employee directors at exercise prices of not less than fair
market value on the date of grant, expired on December 31, 2000. Options to purchase 4,000 shares of the Company's common stock were to
be granted automatically to each non-employee director on the last day of November through the year 2000. Options may be exercised at the
rate of 25% per year commencing one year after the date of grant. At December 31, 2000, options to acquire 204,000 shares expired under the
1995 Plan.
The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees", and related interpretations in
accounting for its plans. Accordingly, compensation expense is generally not recognized for its stock-based compensation plans. Had
compensation expense for the Company's stock option plans been determined based upon the fair value at the grant date for awards under these
plans consistent with the methodology prescribed under SFAS No. 123, "Accounting for Stock-Based Compensation", the Company's net
income and earnings per share would have been reduced as follows:
(in thousands, except per share values)
For the Year
Ended
March 31, 2002
--------------
For the Three Month
Period Ended
March 31, 2001
--------------------
For the Years Ended
December 31,
------------------2000
1999
-------
Net income (loss) - as reported.......................
Net income (loss) - pro forma.........................
$21,501
19,009
$(6,080)
(6,761)
$18,231
15,863
$18,061
15,705
Basic net income (loss) per share - as reported.......
Basic net income (loss) per share - pro forma.........
$2.44
$2.15
$(.69)
$(.77)
$2.02
$1.76
$1.85
$1.61
Diluted net income (loss) per share - as reported.....
Diluted net income (loss) per share - pro forma.......
$2.40
$2.12
$(.69)
$(.77)
$2.02
$1.75
$1.84
$1.60
- 27 -
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following
assumptions:
Expected dividend yield.........................
Expected stock price volatility.................
Risk-free interest rate.........................
Expected life of option.........................
For the Year
Ended
March 31, 2002
-------------0%
44%
5.28%
9.9 years
For the Years Ended
For the Three Month
December 31,
Period Ended
--------------------March 31, 2001
2000
1999
-------------------------0%
0%
0%
43%
42%
39%
5.50%
5.66%
5.60%
8.5 years
6.7 years
3.6 years
Transactions from January 1, 1999 through March 31, 2002, under the above plans were as follows:
Options outstanding at January 1, 1999..............
Granted........................................
Exercised......................................
Canceled.......................................
Options outstanding at December 31, 1999............
Granted........................................
Exercised......................................
Canceled.......................................
Options outstanding at December 31, 2000............
Granted........................................
Exercised......................................
Canceled.......................................
Options outstanding at March 31, 2001...............
Granted........................................
Exercised......................................
Canceled.......................................
Options outstanding at March 31, 2002...............
Options exercisable at March 31, 2002...............
Number
of Shares
--------1,246,575
423,100
(315,380)
(346,911)
--------1,007,384
373,900
(10,000)
(114,200)
--------1,257,084
348,100
(2,000)
--------1,603,184
353,100
(81,949)
(60,826)
--------1,813,509
=========
Option Price
per Share
-----------$16.00 - $33.94
21.28 - 28.63
16.00 - 25.88
16.00 - 33.94
--------------16.00 - 33.13
19.06 - 21.50
16.00 - 16.00
20.13 - 33.00
--------------17.13 - 33.13
20.38 - 21.50
21.50
--------------17.13 - 33.13
24.41 - 31.70
18.63 - 28.63
20.13 - 28.63
--------------$ 17.13 - 33.13
===============
Weighted
Average
Price
-------$22.90
26.97
18.06
27.83
-----25.26
21.20
16.00
23.77
-----24.26
21.49
21.50
-----23.66
25.58
22.31
23.26
-----$24.11
======
902,574
=========
$ 17.13 - 33.13
===============
$24.43
======
- 28 -
Weighted
Average Life
Remaining
------------2.2 years
2.8 years
7.1 years
7.3 years
7.2 years
The following table summarizes information concerning currently outstanding and exercisable options:
Options Outstanding
-------------------------------------------------------------------Weighted
Average
Weighted
Range of
Remaining
Average
Exercise
Number
Contractual
Exercise
Prices
Outstanding
Life
Price
---------------------------------------$16.97 - $20.36
87,234
5.0
$18.90
$20.36 - $23.76
761,625
7.4
$21.40
$23.76 - $27.15
642,800
7.7
$25.69
$27.15 - $30.54
287,850
6.4
$28.34
$30.54 - $33.94
34,000
4.9
$32.51
---------------1,813,509
7.2
$24.11
=========
===
======
Options Exercisable
------------------------
Number
Exercisable
----------50,734
358,675
257,000
215,165
21,000
------902,574
=======
Weighted
Average
Exercise
Price
-------$18.55
$21.27
$26.09
$28.25
$33.03
-----$24.43
======
(5) PROFIT SHARING PLANS:
The Company maintains defined contribution profit sharing and 401(k) plans covering substantially all of its employees as of March 31, 2002.
Annual contributions under the plans are determined by the Board of Directors of the Company or each subsidiary, as appropriate.
Consolidated expense related to the plans for the year ended March 31, 2002, the three month period ended March 31, 2001 and the years
ended December 31, 2000 and 1999 was $1,997,000, $579,000, $2,145,000 and $2,230,000, respectively.
(6) FEDERAL INCOME TAXES:
The following table summarizes the provision for U.S. federal, state and foreign taxes on income:
(in thousands)
Current:
Federal....................................
State......................................
Foreign....................................
Deferred:
Federal....................................
State......................................
Foreign....................................
For the Year
Ended
March 31, 2002
--------------
For the Three Month
Period Ended
March 31, 2001
--------------------
For the Years Ended
December 31,
--------------------2000
1999
-------
$8,336
38
1,283
------9,657
-------
$(2,847)
28
118
------(2,701)
-------
$ 7,412
130
934
------8,476
-------
$ 8,817
56
798
------9,671
-------
2,220
77
------2,297
------$11,954
=======
(406)
(7)
------(413)
------$(3,114)
=======
1,699
------1,699
------$10,175
=======
723
(13)
------710
------$10,381
=======
- 29 -
The differences between the statutory and effective federal income tax rates on income before income taxes were as follows:
U.S. federal statutory rate.....................
State income taxes, less federal benefit........
Non-deductible goodwill.........................
Other...........................................
For the Year
Ended
March 31, 2002
-------------35.0%
.2
.8
(.3)
---35.7%
====
For the Years Ended
December 31,
-------------------2000
1999
------35.0%
35.0%
.3
.1
1.0
1.0
(.5)
.4
------35.8%
36.5%
====
====
For the Three Month
Period Ended
March 31, 2001
-------------------(35.0)%
.1
.7
.3
----(33.9)%
=====
Deferred taxes are recorded based upon differences between the financial statement and tax bases of assets and liabilities and available tax
credit carryforwards. The following temporary differences gave rise to net deferred income tax (liabilities)/assets as of March 31, 2002 and
2001:
(in thousands)
Deferred income tax assets:
Accounts receivable......................................
Inventories..............................................
Accrued expenses.........................................
State net operating loss carryforward....................
Other....................................................
Valuation allowance
Deferred income tax liabilities:
Property, plant and equipment............................
Unremitted earnings of foreign subsidiaries..............
Other....................................................
Net deferred income tax liability........................
2002
---$
March 31,
2001
----
662
2,632
3,929
6,080
399
------13,702
(6,080)
------7,622
-------
$
848
2,614
2,915
5,895
1,324
------13,596
(5,895)
------7,701
-------
5,181
1,013
4,261
------10,455
------$(2,833)
=======
3,034
1,032
4,171
------8,237
------$ (536)
=======
At March 31, 2002 and 2001, the Company had net operating loss carryforwards for state income tax purposes of $86,966,000 and
$85,919,000, respectively, that expire in various years through 2017. For financial reporting purposes, valuation allowances have been
established to offset these deferred tax assets as it is more likely than not that the net operating loss carryforwards will not be realized prior to
expiration.
- 30 -
(7) LONG-TERM DEBT AND CREDIT ARRANGEMENTS:
Long-term debt consisted of the following:
March 31,
--------------------2002
2001
-------
(in thousands)
Mortgages, payable monthly through 2001, interest at rates
ranging from 6% to 10.5%..........................................
Industrial Development Revenue Bonds, payable periodically
through 2001, interest at rates ranging from 4% to 4.5%...........
Other
.............................................................
Less - current portion................................................
$
365
---365
(200)
----$165
====
$
56
19
430
----505
(312)
-----$193
====
The Company entered into a $300,000,000 unsecured revolving credit facility with thirteen banks and financial institutions on July 21, 1997.
The facility allowed for borrowings up to $300,000,000 and expired on April 30, 2001. On April 30, 2001, the Company replaced its expiring
revolving credit facility with two new financing facilities. The Company entered into a $75,000,000 unsecured revolving credit facility with
five banks. This facility allows for borrowings up to $75,000,000, expires on April 30, 2004 and provides that borrowings are limited during a
consecutive 30 day period in each year of the agreement. The loan agreement contains provisions to increase or reduce the interest pricing
spread based on the achievement of certain benchmarks related to the ratio of earnings to interest expense. At the Company's option, interest on
the facility currently accrues at (1) the greater of the prime rate minus 0.5% or the Federal Funds Rate, or (2) LIBOR plus 1%. The revolving
credit facility provides for commitment fees of 0.25% per annum on the daily average of the unused commitment. The loan agreement also
contains covenants, the most restrictive of which pertain to net worth; the ratio of operating cash flow to fixed charges; the ratio of earnings to
interest expense and the ratio of debt to capitalization. The Company is in compliance with all financial debt covenants.
The Company also entered into a receivables purchase agreement with an issuer of receivables-backed commercial paper. Under this
arrangement, the Company sells, on an ongoing basis and without recourse, its trade accounts receivable to a wholly-owned special purpose
subsidiary (the "SPS"), which in turn has the option to sell, on an ongoing basis and without recourse, to the commercial paper issuer an
undivided percentage interest in the pool of accounts receivable. Under the agreement, new trade receivables are automatically sold to the SPS
and become a part of the receivables pool. The agreement permits the sale (and repurchase) of an undivided interest in the accounts receivable
pool for an amount of up to $100,000,000 through April 30, 2004, subject to an annual renewal. Interest on amounts financed under this facility
is based on a variable commercial paper rate plus 0.375%. The receivables facility provides for commitment fees of 0.225% per annum on the
daily average of the unused commitment. This arrangement has been accounted for as a financing transaction.
The weighted average interest rate under these loan agreements for the year ended March 31, 2002, the three months ended March 31, 2001 and
the years ended December 31, 2000 and 1999 was 4.48%, 3.20%, 7.37% and 6.24%, respectively. The average and peak borrowings were
$32,670,000 and $101,800,000 for the year ended March 31, 2002 and $59,465,000 and $133,090,000 for the year ended March 31, 2001.
Additionally, outstanding letters of credit totaled $4,883,000 and $3,938,000 at March 31, 2002 and 2001, respectively. The Company has
letters of credit that guarantee funding of workers compensation claims as well as obligations to certain vendors.
The Company maintained various notes related to the financing of manufacturing facilities which were paid in full in 2001. The Company also
maintained second mortgages on several facilities financed with Industrial Development Revenue Bonds. All such bonds matured in 2001.
- 31 -
Long-term debt matures as follows:
(in thousands)
2003...................................................
2004...................................................
2005...................................................
Total...............................................
$200
103
62
----$365
====
(8) OPERATING LEASES:
The future minimum rental payments associated with all noncancelable lease obligations are as follows:
(in thousands)
2003...................................................
2004...................................................
2005...................................................
2006...................................................
2007...................................................
Thereafter.............................................
Total..............................................
$ 6,011
4,641
3,293
2,342
651
404
------$17,342
=======
Rent expense was $6,660,000, $1,700,000, $7,368,000 and $6,971,000 in the year ended March 31, 2002, in the three month period ended
March 31, 2001 and in the years ended December 31, 2000 and 1999, respectively.
(9) CLAIMS PUT AGREEMENT:
The Company entered into a Claims Put Agreement (the Put Agreement) on January 16, 2002 with an unrelated financial institution giving
CSS the ability to put Kmart trade receivables, not to exceed $16,000,000, arising from merchandise delivered during the period September 15,
2001 through the date of a bankruptcy event. CSS paid a premium of $480,000 to enter into this agreement. The Kmart put option was
exercisable if Kmart filed for bankruptcy. On January 22, 2002, Kmart filed for bankruptcy under Chapter XI of the U.S. Bankruptcy Code. On
February 21, 2002, the Company exercised the put option giving CSS the right to collect an amount equal to the pre-petition receivables
balance outstanding with Kmart, times the purchase rate, or 70%.
During the fiscal year, the Company adopted a policy for classifying gains on these types of credit risk arrangements in selling, general and
administrative expenses (SG&A). For the year ended March 31, 2002, the Company recognized a pre-tax gain of approximately $5,436,000 for
the change in the Put Agreement's value, less the premium paid. This amount was offset by bad debt expense of approximately $10,352,000
and was recorded in SG&A in the consolidated statement of operations.
As of March 31, 2002, the fair market value of Kmart receivables not yet assigned to the financial institution and the value of the Kmart put
right were approximately $4,436,000 and $5,916,000, respectively, and were classified as other current assets in the consolidated balance sheet.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate
methodologies. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a
current market exchange. Certain of these financial instruments are with major financial institutions and expose the Company to market and
credit risks and may at times be concentrated with certain counterparties or groups of counterparties. The creditworthiness of counterparties is
continually reviewed, and full performance is anticipated.
- 32 -
The methods and assumptions used to estimate the fair value of each class of financial instruments are set forth below:
o Cash and temporary investments, accounts receivable and accounts payable - The carrying amounts of these items are a reasonable estimate
of their fair values at March 31, 2002 and 2001.
o Short-term borrowings - Borrowings under the revolving credit facility have variable rates that reflect currently available terms and
conditions for similar debt. The carrying amount of this debt is a reasonable estimate of its fair value.
o Other long-term obligations - The carrying amounts of these items are a reasonable estimate of their fair value.
o Foreign currency contracts - The fair value is based on quotes obtained from financial institutions. As of March 31, 2002 and 2001, the fair
value of foreign currency contracts was immaterial.
o Interest rate swap agreements - The fair value is based on quotes obtained from financial institutions. The fair value of interest rate swap
agreements at March 31, 2002 and 2001 was $262,000 and $66,000, respectively.
(11) COMMITMENTS AND CONTINGENCIES:
The Company is subject to various lawsuits and claims arising out of the normal course of business. In the opinion of Company counsel and
management, the ultimate liabilities resulting from such lawsuits and claims will not materially affect the consolidated financial position of the
Company.
In February 1999, CSS was awarded and received approximately $11,200,000, including interest, in settlement of a dispute primarily related to
the valuation of inventory acquired in the 1995 acquisition of Cleo Inc. The award had no impact on 1999 results of operations.
(12) SEGMENT DISCLOSURE:
The Company operates in a single segment, the manufacture, distribution and sale of non-durable seasonal consumer goods, primarily to mass
market retailers. CSS conducts substantially all of its business in the United States.
The Company's detail of revenues from its various products is as follows:
(in thousands)
Christmas
Everyday
Halloween/Easter
Other
Total
For the Year
Ended
March 31, 2002
-------------$288,325
50,294
58,864
26,826
-------$424,309
========
For the Three
Month Period
Ended
March 31, 2001
-------------$ 3,157
8,785
12,319
2,726
------$26,987
=======
For the Years Ended
December 31,
----------------------2000
1999
------$280,587
$266,766
51,223
51,598
63,137
61,974
26,137
28,529
--------------$421,084
$408,867
========
========
One customer accounted for sales of $87,975,000, or 20.7% of total sales and one customer accounted for sales of $45,030,000, or 10.6% of
total sales in the year ended March 31, 2002. One customer accounted for sales of $4,021,000, or 15% of total sales in the three month period
ended March 31, 2001, $92,141,000, or 21.9% of total sales in the year ended December 31, 2000 and $85,591,000 or 20.9% in the year ended
December 31, 1999.
- 33 -
(13) QUARTERLY FINANCIAL DATA (UNAUDITED):
(In thousands, except per share amounts)
2002
---Net sales ................................................
Quarters
-------------------------------------------First
Second
Third
Fourth
------------------------------$28,817
$ 134,383
$ 235,944
$ 25,165
-------------------------------
Gross profit .............................................
8,153
-------
35,661
---------
65,745
----------
5,341
--------
Net (loss) income ........................................
$(4,324)
=======
$
8,606
=========
$
23,059
==========
$ (5,840)
========
$ (.49)
=======
$
.97
=========
$
2.60
==========
$
(.67)
========
$ (.49)
=======
$
.96
=========
$
2.54
==========
$
(.67)
========
Net (loss) income per common share:
Basic- ...............................................
Diluted- ............................................
2001
---Net sales ................................................
Quarters
-------------------------------------------First
Second
Third
Fourth
------------------------------$38,194
$ 148,261
$ 208,914
$ 26,987
-------------------------------
Gross profit .............................................
9,837
-------
34,710
---------
57,001
----------
7,024
--------
Net (loss) income ........................................
$(4,057)
=======
$
7,296
=========
$
21,139
==========
$ (6,080)
========
$ (.45)
=======
$
.81
=========
$
2.39
==========
$
(.69)
========
$ (.45)
=======
$
.81
=========
$
2.39
==========
$
(.69)
========
Net (loss) income per common share:
Basic- ...............................................
Diluted- ............................................
The seasonal nature of CSS' business results in low sales and operating losses in the first and fourth quarters and high shipment levels and
operating profits in the second and third quarters of the Company's new fiscal year, thereby causing significant fluctuations in the quarterly
results of operations of the Company.
(14) ACCOUNTING PRONOUNCEMENTS:
In June 1998 and June 2000, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS No.
138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an amendment of FASB Statement No. 133." These
statements establish accounting and reporting standards requiring that every derivative instrument be recorded on the balance sheet as either an
asset or liability measured at its fair value. SFAS Nos. 133 and 138 also require that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS Nos. 133 and 138 are effective for fiscal years beginning after
June 15, 2000. The Company adopted SFAS No. 133, as amended by SFAS No. 138, on January 1, 2001, as required. The adoption of SFAS
No. 133 was not material to the consolidated statements of operations or financial position of the Company.
- 34 -
In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets". SFAS
No. 141 requires all business combinations be accounted for by the purchase method and adds disclosure requirements related to business
combination transactions. SFAS No. 141 also establishes criteria for the recognition of intangible assets apart from goodwill. SFAS No. 142
addresses financial accounting and reporting for acquired goodwill and other intangible assets. The Statement provides that goodwill and some
intangibles will no longer be amortized. SFAS No. 142 provides specific guidance for testing goodwill for impairment. The Statement also
requires new disclosure of information about goodwill and other intangible assets subsequent to their acquisition. The Company will adopt the
provisions of SFAS No. 142 effective with the beginning of its next fiscal year, April 1, 2002, and will discontinue the amortization of
goodwill at that time. As of March 31, 2002, goodwill totaled $39,715,000 and negative goodwill totaled $2,393,000. For the year ended March
31, 2002, net amortization expense was $1,213,000. Based on a preliminary review of the new standard, management believes the Company
will record a goodwill impairment charge upon adoption of approximately $8,000,000, net of taxes, which includes the reversal of negative
goodwill. This non-cash charge will be recorded as the cumulative effect of an accounting change. However, the Company has not completed
its evaluation to determine the exact amount of such a charge. Also, the Company believes this charge will not affect the financial covenant
calculations under the Company's credit agreement.
SFAS No. 143, "Accounting for Asset Retirement Obligations," was issued in June 2001. SFAS No. 143 addresses accounting and reporting
for legal obligations and related costs associated with the retirement of long-lived assets. The Statement requires that the fair value of the
liability for an asset retirement obligation be recognized in the period incurred if a reasonable estimate of fair value can be made. The estimated
retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective for financial statements issued
for fiscal years beginning after June 15, 2002. Based on current operations, the Company does not expect the adoption of this statement to have
a material effect on its financial position and results of operations.
SFAS No. 144, "Accounting for Impairment or Disposal of Long-Lived Assets," was issued in August 2001 and is effective for fiscal years
beginning after December 15, 2001. This statement retains existing requirements to recognize an impairment loss only if the carrying amount
of a long-lived asset is not recoverable from its undiscounted cash flows and measure any impairment loss as the difference between the
carrying amount and the fair value of the asset. SFAS No. 144 a) removes goodwill from its scope, b) allows for probability-weighted cash
flow estimation techniques when measuring for impairment, c) requires that, for any assets to be abandoned, the depreciable life be adjusted
and the cumulative impact of such change treated as an accounting change and d) an impairment loss be recognized at the date a long-lived
asset is exchanged for a similar productive asset or distributed to owners in a spinoff if the carrying value of the asset exceeds its fair value.
Based on current operations, the Company does not expect the adoption of this statement to have a material effect on its financial position and
results of operations.
- 35 -
Part III
Item 10. Directors and Executive Officers of the Registrant
See "ELECTION OF DIRECTORS" and "OUR EXECUTIVE OFFICERS" in the Proxy Statement for the 2002 Annual Meeting of
Stockholders of the Company, which will be incorporated herein by reference.
Item 11. Executive Compensation
See "EXECUTIVE COMPENSATION" in the Proxy Statement for the 2002 Annual Meeting of Stockholders of the Company, which will be
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
See "CSS SECURITY OWNERSHIP" in the Proxy Statement for the 2002 Annual Meeting of Stockholders of the Company, which will be
incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
See "CERTAIN TRANSACTIONS" in the Proxy Statement for the 2002 Annual Meeting of Stockholders of the Company, which will be
incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Attached hereto and filed as part of this report are the financial statement schedules and the exhibits listed below:
1. Financial Statements
Report of Independent Public Accountants
Consolidated Balance Sheets - March 31, 2002 and 2001
Consolidated Statements of Operations - for the year ended March 31, 2002, for the three month periods ended March 31, 2001 and 2000 and
for the years ended December 31, 2000 and 1999
Consolidated Statements of Cash Flows - for the year ended March 31, 2002, for the three month periods ended March 31, 2001 and 2000 and
for the years ended December 31, 2000 and 1999
Consolidated Statements of Stockholders' Equity - for the year ended March 31, 2002, for the three month periods ended March 31, 2001 and
2000 and for the years ended December 31, 2000 and 1999
Notes to Consolidated Financial Statements
2. Financial Statement Schedules
Schedule II - Valuation and Qualifying Accounts
(b) Reports on Form 8-K filed during the last quarter of fiscal 2002
- 36 -
The Company filed a report on Form 8-K dated March 15, 2002 with respect to the acquisition of C. M. Offray & Son, Inc.
(c) Exhibits, Including Those Incorporated by Reference The following is a list of exhibits filed as part of this annual report on Form 10-K.
Where so indicated by footnote, exhibits which were previously filed are incorporated by reference. For exhibits incorporated by reference, the
location of the exhibit in the previous filing is indicated in parentheses.
Articles of Incorporation and By-laws
3.1 Restated Certificate of Incorporation filed December 5, 1990. (1)
(Exhibit 3.1)
3.2 Amendment to Restated Certificate of Incorporation filed May 8, 1992. (2) (Exhibit 3.2)
3.3 Certificate eliminating Class 2, Series A, $1.35 Preferred stock filed September 27, 1991. (3) (Exhibit 3.2)
3.4 Certificate eliminating Class 1, Series B, Convertible Preferred Stock filed January 28, 1993. (2) (Exhibit 3.5)
3.5 By-laws of the Company, as amended to date (as last amended February 21, 2001). (11) (Exhibit 3.6)
Material Contracts
10.1 CSS Industries, Inc. 1995 Stock Option Plan for Non-Employee Directors. (7) (Exhibit 10.2)
10.2 Loan Agreement among CSS Industries, Inc., the Lending Institutions listed therein, CoreStates Bank, N.A. as the Administrative Agent,
and Merrill Lynch & Co. as the Syndication Agent, dated as of July 21, 1997. (8) (Exhibit 10.4)
10.3 Settlement Agreement dated January 1, 2000 between Berwick Industries LLC and Henry T. Doherty (10) (Exhibit 10.6)
10.4 Asset Purchase Agreement, dated February 8, 2002, among Berwick Industries, LLC, Daylight Acquisition Corp., Lion Ribbon Company,
Inc., C. M. Offray & Son, Inc., CVO Corporation (Delaware), C.M. Offray & Son (Hong Kong) Limited, Claude V. Offray, Jr., Claude V.
Offray III, and Denise A. Offray. (12) (Exhibit 2.1)
10.5 Amendment No. 1 to Asset Purchase Agreement dated March 15, 2002.
(12) (Exhibit 2.2)
*10.6 Interest Rate Swap Master Agreement dated as of March 19, 2001 between First Union National Bank and CSS Industries, Inc.
*10.7 Interest Rate Swap Master Agreement dated as of April 2, 2001 between PNC Bank, National Association and CSS Industries, Inc.
*10.8 Loan Agreement among CSS Industries, Inc., the Lending Institutions listed therein, PNC Bank, National Association as the
Administrative Agent, PNC Capital Markets, Inc. as Lead Arranger and Fleet National Bank and First Union National Bank as
Co-Documentation Agents, dated as of April 30, 2001.
*10.9 Receivables Purchase Agreement among CSS Funding LLC, CSS Industries, Inc., Market Street Funding Corporation and PNC Bank,
National Association, dated as of April 30, 2001.
*10.10 Purchase and Sale Agreement between Various Entities Listed on Schedule I, as the Originators, CSS Industries, Inc. and CSS Funding
LLC, dated as of April 30, 200l.
- 37 -
*10.11 Waiver and Amendment to Loan Agreement dated March 11, 2002.
*10.12 First Amendment to Receivables Purchase Agreement dated as of August 24, 2001.
*10.13 First Amendment to Purchase and Sale Agreement dated as of August 24, 2001.
*10.14 CSS Industries, Inc. 2000 Stock Option Plan for Non-Employee Directors.
Management Contracts, Compensatory Plans or Arrangements
*10.15 CSS Industries, Inc. 1994 Equity Compensation Plan (as last amended January 23, 1996). (8) (Exhibit 10.10)
10.16 CSS Industries, Inc. Non-Qualified Supplemental Executive Retirement Agreements, dated March 3, 1993, with certain executive
officers of the Company. (2) (Exhibit 10.15)
10.17 CSS Industries, Inc. Non-Qualified Supplemental Executive Retirement Plan Guidelines, dated January 25, 1994. (4) (Exhibit 10.14)
10.18 CSS Industries, Inc. Annual Incentive Compensation Arrangement, Administrative Guidelines, dated March 15, 1993 (as amended
January 1, 2000). (10) (Exhibit 10.11)
10.19 The Paper Magic Group, Inc. Management Incentive Bonus Program, Administrative Guidelines, dated March 15, 1993. (2) (Exhibit
10.28)
10.20 1994 Amendment to The Paper Magic Group, Inc. Management Incentive Bonus Program, Administrative Guidelines, dated March 2,
1994. (4) (Exhibit 10.26)
10.21 Berwick Industries, Inc. Incentive Bonus Plan, dated January 1, 1994. (4) (Exhibit 10.27)
10.22 Cleo Inc Management Incentive Plan, dated March 7, 1996. (6)
(Exhibit 10.23)
10.23 Berwick Industries, Inc. Non-Qualified Supplemental Executive Retirement Plan, dated November 18, 1996. (7) (Exhibit 10.26)
10.24 The Paper Magic Group, Inc. Non-Qualified Supplemental Executive Retirement Plan, dated December 5, 1996. (7) (Exhibit 10.27)
10.25 Cleo Inc Non-Qualified Supplemental Executive Retirement Plan dated November 26, 1996. (9) (Exhibit 10.18)
10.26 Employment Agreement dated as of June 1, 1999 between CSS Industries, Inc. and David J. M. Erskine. (10) (Exhibit 10.20)
10.27 Employment Offer Letter dated as of June 3, 1999 between The Paper Magic Group, Inc. and Steven A. Cohen. (10) (Exhibit 10.21)
- 38 -
Other
21. List of Significant Subsidiaries of the Registrant. (11)
(Exhibit 21)
*99. Arthur Andersen LLP Representations.
Footnotes to List of Exhibits
*Filed with this Annual Report on Form 10-K.
(1) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1990 and incorporated herein
by reference.
(2) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1992 and incorporated herein
by reference.
(3) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1991 and incorporated herein
by reference.
(4) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1993 and incorporated herein
by reference.
(5) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1994 and incorporated herein
by reference.
(6) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1995 and incorporated herein
by reference.
(7) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1996 and incorporated herein
by reference.
(8) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1997 and incorporated herein
by reference.
(9) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1998 and incorporated herein
by reference.
(10) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 1999 and incorporated herein
by reference.
(11) Filed as an exhibit to the Annual Report on Form 10-K (No. 1-2661) for the fiscal year ended December 31, 2000 and incorporated herein
by reference.
(12) Filed as an exhibit to Form 8-K (No. 1-2661) dated March 15, 2002 and incorporated herein by reference.
- 39 -
The Company agrees to furnish supplementally a copy of omitted Schedules and Exhibits, if any, with respect to Exhibits listed above upon
request.
Stockholders who have been furnished a copy of this Report may obtain copies of any Exhibit listed above on payment of $.50 per page for
reproduction and mailing charges by writing to the Secretary, CSS Industries, Inc., 1845 Walnut Street, Philadelphia, Pennsylvania 19103.
- 40 -
CSS INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Column A
--------
Year ended March 31, 2002
Doubtful accounts receivable-customers.......
Accrued restructuring expenses...............
Column B
-------Balance
at
Beginning
of Period
--------$
923
0
Column C
--------
Column D
-------Additions
------------------------Charged
to Costs
Charged
and
to Other
Expenses
Accounts
--------------$10,936 (c)
-
$
667 (b)
4,541 (b)
Column E
--------
Deductions
---------$
10,977 (c)
-
Balance
at End of
Period
-------$ 1,549
4,541
Three months ended March 31, 2001
Doubtful accounts receivable-customers.......
$1,512
$
174
$
-
$
763
Year ended December 31, 2000
Doubtful accounts receivable-customers.......
$1,647
$ 1,323
$
-
$
1,458
$1,512
Year ended December 31, 1999
Doubtful accounts receivable-customers.......
$1,772
$ 1,302
$
67 (a)
$
1,494
$1,647
Notes: (a) Balance at acquisition of Don Post Studios.
(b) Balance at acquisition of Offray.
(c) Includes gross Kmart bad debt write-off before gain on Put Agreement of $5,436.
- 41 -
$
923
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
Annual Report to be signed on behalf of the undersigned hereunto duly authorized.
CSS INDUSTRIES, INC.
--------------------------------------------------------------------------------------------Registrant
Dated:
May 21, 2002
By /s/ David J. M. Erskine
-----------------------------------------------------------------------------------------David J. M. Erskine, President and Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on
behalf of the Registrant and in the capacities on the date indicated.
Dated:
May 21, 2002
/s/ David J. M. Erskine
-----------------------------------------------------------------------------------------David J. M. Erskine, President and Chief Executive Officer
(principal executive officer and a director)
Dated:
May 21, 2002
/s/ Clifford E. Pietrafitta
-----------------------------------------------------------------------------------------Clifford E. Pietrafitta, Vice President - Finance and Chief Financial Officer
(principal financial and accounting officer)
Dated:
May 21, 2002
/s/ Jack Farber
-----------------------------------------------------------------------------------------Jack Farber, Director
Dated:
May 21, 2002
/s/ James H. Bromley
-----------------------------------------------------------------------------------------James H. Bromley, Director
Dated:
May 21, 2002
/s/ Stephen V. Dubin
-----------------------------------------------------------------------------------------Stephen V. Dubin, Director
Dated:
May 21, 2002
/s/ Richard G. Gilmore
-----------------------------------------------------------------------------------------Richard G. Gilmore, Director
Dated:
May 21, 2002
/s/ Leonard E. Grossman
-----------------------------------------------------------------------------------------Leonard E. Grossman, Director
Dated:
May 21, 2002
/s/ James E. Ksansnak
-----------------------------------------------------------------------------------------James E. Ksansnak, Director
Dated:
May 21, 2002
/s/ Michael L. Sanyour
-----------------------------------------------------------------------------------------Michael L. Sanyour, Director
- 42 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Annual Report
to be signed on behalf of the undersigned hereunto duly authorized.
CSS INDUSTRIES, INC.
-----------------------------------------------------------------------------------------Registrant
Dated: May 21, 2002
By _______________________________________________________________________________________
David J. M. Erskine, President and Chief Executive Officer
(principal executive officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on
behalf of the Registrant and in the capacities on the date indicated.
Dated: May 21, 2002
__________________________________________________________________________________________
David J. M. Erskine, President and Chief Executive Officer
(principal executive officer and a director)
Dated: May 21, 2002
__________________________________________________________________________________________
Clifford E. Pietrafitta, Vice President - Finance and Chief Financial Officer
(principal financial and accounting officer)
Dated: May 21, 2002
__________________________________________________________________________________________
Jack Farber, Director
Dated: May 21, 2002
__________________________________________________________________________________________
James H. Bromley, Director
Dated: May 21, 2002
__________________________________________________________________________________________
Stephen V. Dubin, Director
Dated: May 21, 2002
__________________________________________________________________________________________
Richard G. Gilmore, Director
Dated: May 21, 2002
__________________________________________________________________________________________
Leonard E. Grossman, Director
Dated: May 21, 2002
__________________________________________________________________________________________
James E. Ksansnak, Director
Dated: May 21, 2002
__________________________________________________________________________________________
Michael L. Sanyour, Director
- 43 -
(Local Currency-Single Jurisdiction)
ISDA(R)
International Swap Dealers Association, Inc.
MASTER AGREEMENT
dated as of March 19, 2001
First Union National Bank CSS Industries, Inc.
.................................... and ......................................
have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master
Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation")
exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows:1. Interpretation
(a) Definitions. The terms defined in Section 12 and in the Schedule will have the meanings therein specified for the purpose of this Master
Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement,
the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including
the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction.
(c) Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single
agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions.
(i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required
currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner
customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated
and (3) each other applicable condition precedent specified in this Agreement.
Copyright (C) 1992 by International Swap Dealers Association, Inc.
(b) Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five
Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely
notice of a reasonable objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would
otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have
been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the
same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same
Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the
Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will
cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will
apply-separately to each pairing of branches or offices through which the parties make and receive payments or deliveries.
(d) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section
6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as
such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the
Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the
occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of
any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant
Confirmation or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a
Transaction is entered into) that:(a) Basic Representations.
(i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under
such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its
obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all
necessary action to authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision
of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
2
(iv) Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under
this Agreement or any Credit Support Document to which it is a party.
(c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality,
validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its
obligations under this Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material
respect.
4. Agreements
Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support
Document to which it is a party:(a) Furnish Specified Information. It will deliver to the other party any forms, documents or certificates specified in the Schedule or any
Confirmation by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other
authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will
use all reasonable efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a
party.
5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any
Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:(i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or
2(d) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to
the party;
(ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any
payment under this Agreement or delivery under Section 2(a)(i) or 2(d) or to give notice of a Termination Event) to be complied with or
performed
3
by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given
to the party;
(ii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied
with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has
elapsed;
(2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force
and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such
Credit Support Document;
(iv) Misrepresentation. A representation made or repeated or deemed to have been made or repeated by the party or any Credit Support
Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect
when made or repeated or deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any
applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any
payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no
applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or
such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);
(vi) Cross Default. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of
default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements
or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such
Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than
the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace
period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:(1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or
admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with
or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its
4
winding-up or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A)
results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation
or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a
resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6)
seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other
similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a
distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and
such secured party maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days
thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to
any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:(1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this
Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement
reasonably satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting,
surviving or transferee entity of its obligations under this Agreement.
(b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any
Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, and, if specified to be
applicable, a Credit Event Upon Merger if the event is specified pursuant to (ii) below or an Additional Termination Event if the event is
specified pursuant to (iii) below:(i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable
law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party):(1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such
Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or
(2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit
Support Provider) has under any Credit Support Document relating to such Transaction;
(ii) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any
Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all
or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will
be the Affected Party); or
5
(iii) Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event
in the Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default.
6. Early Termination
(a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the "Defaulting Party") has
occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party
specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in
respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an
Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)( 1), (3), (5),
(6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the
presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to
the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the
other party may reasonably require.
(ii) Two Affected Parties. If an Illegality under Section 5(b)(i)(1) occurs and there are two Affected Parties, each party will use all reasonable
efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event.
(iii) Right to Terminate. If:(1) an agreement under Section 6(b)(ii) has not been effected with respect to all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an Illegality other than that referred to in Section
6(b)(ii), a Credit Event Upon Merger or an Additional Termination Event occurs,
either party in the case of an Illegality, any Affected Party in the case of an Additional Termination Event if there is more than one Affected
Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is
only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then
continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected
Transactions.
(c) Effect of Designation.
(i) if notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
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(ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(d)
in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The
amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of
such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day
that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an
Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent
permitted under applicable law) interest thereon (before as well as after judgment), from (and including) the relevant Early Termination Date to
(but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the
actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in
the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second
Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or
the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined
pursuant to this Section will be subject to any Set-off.
(i) Events of Default. If the Early Termination Date results from an Event of Default:(1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting
Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the
Terminated Transactions and the Unpaid Amounts owing to the Non-defaulting Party over (B) the Unpaid Amounts owing to the Defaulting
Party.
(2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number,
the Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount, will be payable equal to (A) the sum
of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Unpaid Amounts owing
to the Non-defaulting Party less (B) the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting
Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to
the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative
7
number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a Termination Event:(1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section
6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to
the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and,
if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:(A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will
be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount
("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and
(b) the Unpaid Amounts owing to X less (II) the Unpaid Amounts owing to Y; and
(B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated,
in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with
the higher Loss ("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period
from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate
of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses.
7. Transfer
Neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise)
by either party without the prior written consent of the other party, except that:(a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of
all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e).
Any purported transfer that is not in compliance with this Section will be void.
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8. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and
supersedes all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing
evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on
an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally
or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by
facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system,
which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or
through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to
operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further
exercise, of that right, power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken
into consideration in interpreting this Agreement.
9. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses,
including legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit
Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited
to, costs of collection.
10. Notices
(a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a
notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address
or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as
indicated:(i) if in writing and delivered in person or by courier, on the date it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
9
(iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or
its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is
delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall
be deemed given and effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system
details at which notices or other communications are to be given to it.
11. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:(i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City,
if this Agreement is expressed to be governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that
such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to
be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any
modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more
jurisdictions preclude the bringing of Proceedings in any other Jurisdiction.
(c) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit,
(ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might
otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that
it will not claim any such immunity in any Proceedings.
12. Definitions
As used in this Agreement:"Additional Termination Event" has the meaning specified in Section 5(b).
"Affected Party" has the meaning specified in Section 5(b).
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"Affected Transactions" means (a) with respect to any Termination Event consisting of an Illegality, all Transactions affected by the occurrence
of such Termination Event and (b) with respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control"
of any entity or person means ownership of a majority of the voting power of the entity or person.
"Applicable Rate" means:(a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with
Section 6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non-default Rate; and
(d) in all other cases, the Termination Rate.
"consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as such in this Agreement. "Credit Support Provider" has the
meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it)
if it were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
"Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iii).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"law" includes any treaty, law, rule or regulation and "lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign
exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant
Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or
incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located, (c) in
relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be
located and (d) in relation to
Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction.
"Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, an amount that party
reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with
this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of
funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain
11
resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made
(assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to
avoid duplication, if
Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section
9. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date
thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from
one or more leading dealers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined
on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party
(expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party
(taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic
equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each
applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated
Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose,
Unpaid Amounts in respect of the Terminated Transaction or of Terminated Transactions are to be excluded but, without limitation, any
payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable
condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in faith, agree. The party making the determination (or its agent) will request each
Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations
are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so
obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the
quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market
Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has
the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be
deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as
certified by it) if it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Potential Event of Default" means any event which, with the giving, of notice or the lapse of time or both, would constitute an Event of
Default.
"Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good
faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding
whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city.
"Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of
an amount under Section 6 is entitled or subject (whether arising under
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this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of:(a) the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a
Market Quotation is determined; and
(b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the
determination) produce a commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or
surety or otherwise) in respect of borrowed money.
"Specified Transaction" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or
hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of
such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such
other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a
Specified Transaction in this Agreement or the relevant confirmation.
"Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, aLl Affected
Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the
notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination
Date).
"Termination Event" means an Illegality or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each
party (as certified by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated
Transactions, the amounts that became payable (or that would have become payable but for Section
2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination
Date and
(b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section
2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such
Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but
excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding
and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined
13
by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the fair market values
reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified
on the first page of this document.
First Union National Bank
---------------------(Name of Party)
CSS Industries, Inc.
--------------------(Name of Party)
By:/s/ Kim V. Farr
-------------------Name: Daniel J. Thomas
Title:
Vice President
Date:
May 8, 2001
By: /s/ Clifford E. Pietrafitta
-------------------------Name: Clifford E. Pietrafitta
Title: Vice President Finance
Date: May 8, 2001
14
SCHEDULE
to the
MASTER AGREEMENT
dated as of March 19, 2001 between
FIRST UNION NATIONAL BANK ("Party A")
and CSS INDUSTRIES, INC. ("Party B")
Part 1. Termination Provisions
(a) "Specified Entity" means each party's Affiliates for purposes of
Section 5(a)(v).
(b) "Specified Transaction" has its meaning as defined in Section 12.
(c) "Cross Default" applies to both parties. With respect to Party B, "Cross Default" is amended by inserting at the end of Section 5(a)(vi):
"or (3) any default, event of default or other similar condition or event (however described) under any Financial Agreement (as defined in the
Schedule)."
"Specified Indebtedness" means any obligation (whether present, future, contingent or otherwise, as principal or surety or otherwise) in respect
of borrowed money or relating to the payment or delivery of funds, securities or other property (including, without limitation, collateral), other
than indebtedness in respect of any bank deposits received in the ordinary course of business by any foreign branch of a party the repayment of
which is prevented, hindered or delayed by any governmental or regulatory action or law unrelated to the financial condition or solvency of
such party or that foreign branch.
"Threshold Amount" means, with respect to Party A, an amount (including its equivalent in another currency) equal to the higher of
$10,000,000 or 2% of its stockholders' equity as reflected on its most recent financial statements or call reports, and with respect to Party B,
$500,000, provided that for any Specified Indebtedness payable by Party B (or any Credit Support Provider of Party B) to Party A or to any of
Party A's Affiliates, Threshold Amount means any amount of such Specified Indebtedness.
(d) "Credit Event Upon Merger" applies to both parties.
(e) "Automatic Early Termination" does not apply to either party.
(f) Payments on Early Termination. Except as otherwise provided in this Schedule, "Market Quotation" and the "Second Method" apply. In the
case of any Terminated Transaction that is, or is subject to, any unexercised option, the words "economic equivalent of any payment or
delivery" appearing in the definition of "Market Quotation" shall be construed to take into account the economic equivalent of the option.
(g) "Additional Termination Event" does not apply to either party.
(h) Event of Default. An Event of Default shall not occur with respect to a party under Section 5(a)(v)(1) or (2) or Section 5(a)(vi) when the
failure to pay or deliver, or the default, event of default or other similar condition or event, as the case may be, arises solely (i) out of a wire
transfer problem or an operational or administrative error or omission (so long as the required funds or property required to make that payment
or delivery were otherwise available to that party), or
(ii) from the general unavailability of the relevant currency due to exchange controls or other similar governmental action, but in either case
only if the payment or delivery is made within three Local Business Days after the problem has been corrected, the error or omission has been
discovered or the currency becomes generally available.
Part 2. Tax Provisions
(a) Tax Representations.
(i) Party A represents at all times hereunder that (A) it is a national banking association organized or formed under the laws of the United
States, and (B) it is a United States resident for United States federal income tax purposes.
(ii) Party B represents at all times hereunder that (A) it is organized or formed under the laws of the State of Delaware, and (B) it is (or, if Party
B is disregarded for United States federal income tax purposes, its beneficial owner is) a United States resident for United States federal
income tax purposes.
1
(b) Tax Forms.
(i) Each party agrees to deliver to the other party the tax forms specified below with respect to it at the following times: before the first
Payment Date under this Agreement; promptly upon reasonable demand by the other party; and promptly upon learning that any such form
previously provided by the party has become obsolete or incorrect.
(A) Tax Forms to be Delivered by Party A:
None specified.
(B) Tax Forms to be Delivered by Party B:
(I) If Party B is (or, if Party B is disregarded for United States federal income tax purposes, its beneficial owner is) treated as a corporation for
United States federal income tax purposes whose name includes "Incorporated", "Inc.", "Corporation", "P.C.", "Insurance Company",
"Indemnity Company", "Reinsurance Company", or "Assurance Company";
None specified, unless any amount payable to Party B under this Agreement is to be paid to an account outside the United States, in which case
the tax form to be delivered by Party B shall be a correct, complete and duly executed U.S. Internal Revenue Service Form W-9 (or successor
thereto) that eliminates U.S. federal backup withholding tax on payments to Party B under this Agreement.
(II) In all other cases:
A correct, complete and duly executed U.S. Internal Revenue Service Form W-9 (or successor thereto) that eliminates U.S. federal backup
withholding tax on payments to Party B under this Agreement.
(ii) In addition, each party agrees to deliver to the other party, upon reasonable demand by such other party, any other tax form that may be
required or reasonably requested in writing in order to allow such other party to make a payment under this Agreement (or under any Credit
Support Document) without any deduction or withholding for or on account of any tax imposed by any government or other taxing authority in
respect of any such payment (other than a stamp, registration, documentation or similar tax), or with such deduction or withholding at a
reduced rate, which form shall be correct, complete and duly executed.
(c) Withholding Tax Liability. A breach of a representation under paragraph
(a) above, or a failure to deliver a required tax form in accordance with paragraph (b) above, by a party hereunder (the "defaulting payee") may
result in a tax liability on the part of the other party (the "payor"), as required by the United States Internal Revenue Code and regulations
thereunder, for withholding or backup withholding on any payment by the payor to the defaulting payee under this Agreement (or under any
Credit Support Document), including a liability to remit to the U.S. Treasury Department the required amount of withholding and to pay
interest and penalties to the U.S. Treasury Department for amounts not withheld.
Accordingly, if any such breach or failure by the defaulting payee results in any such tax liability, then (i) any amount so withheld and remitted
to the U.S. Treasury Department shall discharge the payor's obligation under this Agreement (or under any Credit Support Document) to pay to
the defaulting payee the portion of any payment so withheld and remitted (with the payor having no obligation to "gross up" any of its
payments for such withheld amounts), and (ii) if any tax liability resulting from the defaulting payee's breach or failure is assessed directly
against the payor in respect of any amounts not withheld, the defaulting payee shall indemnify the payor on demand for the amount of such tax
liability (including interest and penalties). However, any such breach or failureby the defaulting payee shall not be an "Event of Default" or a
"Potential Event of Default" under this Agreement unless the defaulting payee fails to so indemnify the payor.
Part 3. Documents
Delivery of Documents. When it delivers this Agreement, each party shall also deliver its Closing Documents to the other party in form and
substance reasonably satisfactory to the other party. For each Transaction, a party shall deliver, promptly upon request, a duly executed
incumbency certificate for the person(s) executing the Confirmation for that Transaction on behalf of that party.
2
(i) For Party A, "Closing Documents" means a duly executed certificate of the secretary or assistant secretary of Party A certifying the name
and true signature of each person authorized to execute this Agreement and enter into Transactions for Party A.
(ii) For Party B, "Closing Documents" means an opinion of counsel covering Party B's Basic Representations under Section 3(a) as they relate
to this Agreement, or in lieu thereof, (A) a copy, certified by the secretary or assistant secretary of Party B, of the resolutions of Party B's board
of directors authorizing the execution, delivery and performance by Party B of this Agreement and authorizing Party B to enter into
Transactions hereunder and (B) a duly executed certificate of the secretary or assistant secretary of Party B certifying the name, true signature
and authority of each person authorized to execute this Agreement and enter into Transactions for Party B.
Part 4. Miscellaneous
(a) Addresses for Notices. For purposes of Section 10(a) of this Agreement, all notices to a party shall, with respect to any particular
Transaction, be sent to its address, telex number of facsimile number specified in the relevant Confirmation, provided that any notice under
Section 5 or 6 of this Agreement, and any notice under this Agreement not related to a particular Transaction, shall be sent to a party at its
address, telex number or facsimile number specified below.
3
To Party A:
FIRST UNION NATIONAL BANK
301 South College, DC-8
Charlotte, NC 28202-0600
Attention: Bruce M. Young
Senior Vice President, Risk Management
Fax: (704) 383-0575
Phone: (704) 383-8778
To Party B:
CSS INDUSTRIES, INC.
1845 Walnut Street
Suite 800
Philadelphia, PA 19103
Attention: Clifford E. Pietrafitta
Fax: (215) 509-9979
Phone: (215) 569-9900
(b) "Calculation Agent" means Party A.
(c) "Credit Support Document" means each document which by its terms secures, guarantees or otherwise supports Party B's obligations
hereunder from time to time, whether or not this Agreement, any Transaction, or any type of Transaction entered into hereunder is specifically
referenced or described in any such document.
"Credit Support Default" is amended by adding at the end of Section
5(a)(iii)(1):
",any default, event of default or other similar condition or event (however described) exists under any Credit Support Document, any action is
taken to realize upon any collateral provided to secure such party's obligations hereunder or under any Transaction, or the other party fails at
any time to have a valid and perfected first priority security interest in any such collateral;"
(d) "Credit Support Provider" means each party to a Credit Support Document that provides or is obligated to provide security, a guaranty or
other credit support for Party B's obligations hereunder.
(e) Governing Law. This Agreement will be governed by and construed in accordance with the law (and not the law of conflicts) of the State of
New York.
(f) Waiver of Jury Trial. To the extent permitted by applicable law, each party irrevocably waives any and all right to trial by jury in any legal
proceeding in connection with this Agreement, any Credit Support Document to which it is a party, or any Transaction.
(g) Netting of Payments. If payments are due by each party on the same day under two or more Transactions, then Section 2(c)(ii) will not
apply to those payments if a party gives notice to the other party on or before the second New York Business Day before that payment date
stating that those payments will be netted or, if given by the Calculation Agent, stating the net amount due.
(h) "Affiliate" has its meaning as defined in Section 12.
Part 5. Other Provisions
(a) 2000 ISDA Definitions. This Agreement and each Transaction are subject to the 2000 ISDA Definitions (including its Annex and NCU
Supplement) published by the International Swaps and Derivatives Association, Inc. (together, the "2000 ISDA Definitions") and will be
governed by the provisions of the 2000 ISDA Definitions. The provisions of the 2000 ISDA Definitions are incorporated by reference in, and
shall form part of, this Agreement and each Confirmation. Any reference to a "Swap Transaction" in the 2000 ISDA Definitions is deemed to
be a reference to a "Transaction" for purposes of this Agreement or any Confirmation, and any reference to a "Transaction" in this Agreement
or any Confirmation is deemed to be a reference to a
4
"Swap Transaction" for purposes of the 2000 ISDA Definitions. The provisions of this Agreement (exclusive of the 2000 ISDA Definitions)
shall prevail in the event of any conflict between such provisions and the 2000 ISDA Definitions.
(b) Scope of Agreement. Any Specified Transaction now existing or hereafter entered into between the parties (whether or not evidenced by a
Confirmation) which constitutes (i) a swap, cap, collar, floor or option on interest rates in which the transaction is denominated in U.S. Dollars,
(ii) any other interest rate derivatives transaction denominated in U.S. Dollars, (iii) any option on or with respect to any of the foregoing, or (iv)
any combination of any of the foregoing, shall constitute a "Transaction" under this Agreement and shall be subject to, governed by, and
construed in accordance with the terms of this Agreement, unless the confirming document(s) for that Specified Transaction provide(s)
otherwise. In addition, any Specified Transaction between the parties evidenced by a Confirmation that by its terms specifies that it is subject to
or governed by this Agreement (or an ISDA Master Agreement between the parties), whether entered into before, on or after the date of this
Agreement, shall constitute a Transaction under this Agreement and shall be subject to, governed by, and construed in accordance with the
terms of this Agreement.
(c) Additional Representations. Section 3 is amended by adding the following Sections 3(e), (f), and (g):
"(e) Non-Reliance. For any Relevant Agreement: (i) it acts as principal and not as agent, (ii) it acknowledges that the other party acts only arm's
length and is not its agent, broker, advisor or fiduciary in any respect, and any agency, brokerage, advisory or fiduciary services that the other
party (or any of its affiliates) may otherwise provide to the party (or to any of its affiliates) excludes the Relevant Agreement, (iii) it is relying
solely upon its own evaluation of the Relevant Agreement (including the present and future results, consequences, risks, and benefits thereof,
whether financial, accounting, tax, legal, or otherwise) and upon advice from its own professional advisors, (iv) it understands the Relevant
Agreement and those risks, has determined they are appropriate for it, and willingly assumes those risks, and (v) it has not relied and will not be
relying upon any evaluation or advice (including any recommendation, opinion, or representation) from the other party, its affiliates or the
representatives or advisors of the other party or its affiliates (except representations expressly made in the Relevant Agreement or an opinion of
counsel required thereunder).
"Relevant Agreement" means this Agreement, each Transaction, each Confirmation, any Credit Support Document, and any agreement
(including any amendment, modification, transfer or early termination) between the parties relating thereto or to any Transaction.
(f) Eligibility. It is an "eligible contract participant" within the meaning of the Commodity Exchange Act (as amended by the Commodity
Futures Modernization Act of 2000).
(g) ERISA. It is not (i) an employee benefit plan (an "ERISA Plan") as defined in Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), subject to Title 1 of ERISA of Section 4975 of the Internal Revenue Code of 1986, as amended, (ii) a
person or entity acting on behalf of an ERISA Plan, or (iii) a person or entity the assets of which constitute assets of an ERISA Plan.
(d) Set-off. Any amount ("Early Termination Amount") payable to one party ("Payee") by the other party ("Payer") under Section 6(e), in
circumstances where there is a Defaulting Party or one Affected Party in the case where a Termination Event under Section 5(b)(ii) has
occurred, will, at the option of the party ("X") other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting
Party or the Affected Party), be reduced by means of set off against any amount(s) ("Other Agreement Amount") payable (whether at such time
or in the future or upon the occurrence of a contingency) by the Payee to the Payer or to any Affiliate of the Payer (irrespective of the currency,
place of payment or booking office of the obligation) under any other agreement(s) between the Payee and the Payer (or between the Payee and
any Affiliate of the Payer) or instrument(s) or undertaking(s) issued or executed by the Payee to, or in the favor of, the Payer or any Affiliate of
the Payer (and the Other Agreement Amount will be discharged promptly and in all respects to the extent it is so set-off). X will give notice to
the other party of any set-off effected under this paragraph.
For this purpose, either the Early Termination Amount or the Other Agreement Amount (or the relevant portion of such amounts) may be
converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a
reasonable manner and in good faith, to purchase the relevant amount of such currency. The term "rate of exchange" includes, without
limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the relevant currency.
5
Nothing in this paragraph shall be effective to create a charge or other security interest. This paragraph shall be without prejudice and in
addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by
operation of law, contract or otherwise).
(e) Change of Account. Any account designated by a party pursuant to Section 2(b) shall be in the same legal and tax jurisdiction as the original
account.
(f) Recorded Conversations. Each party and any of its Affiliates may electronically record any of its telephone conversations with the other
party or with any of the other party's Affiliates in connection with this Agreement or any Transaction, and any such recordings may be
submitted in evidence in any proceeding to establish any matters pertinent to this Agreement or any Transaction.
(g) Confirmation Procedures. Upon receipt thereof, Party B shall examine the terms of each Confirmation sent by Party A, and unless Party B
objects to the terms within three New York business days after receipt of that Confirmation, those terms shall be deemed accepted and correct
absent manifest error, in which case that Confirmation will be sufficient to form a binding supplement to this Agreement notwithstanding
Section 8(e)(ii) of this Agreement.
(h) Covenants of Financial Agreements.
(i) Party B shall provide Party A at all times hereunder with the same covenant protection as Party A requires of Party B under Financial
Agreements. Therefore, in addition to the Cross Default provisions of this Agreement, and notwithstanding the satisfaction of any obligation or
promise to pay money to Party A under any Financial Agreement, or the termination or cancellation of any Financial Agreement, Party B
hereby agrees to perform, comply with and observe for the benefit of Party A hereunder all affirmative and negative covenants contained in
each Financial Agreement applicable to Party B (excluding any obligation or promise
to pay money under any Financial Agreement) at any time Party B has any obligation (whether absolute or contingent) under this Agreement.
(ii) For purposes hereof: (A) the affirmative and negative covenants of each Financial Agreement applicable to Party B (together with related
definitions and ancillary provisions, but in any event excluding any obligation or promise to pay money under any Financial Agreement) are
incorporated (and upon execution of any future Financial Agreement, shall automatically be incorporated) by reference herein (mutatis
mutandis); (B) if other lenders or creditors are parties to any Financial Agreement, then references therein to the lenders or creditors shall be
deemed references to Party A; and (C) for any such covenant applying only when any loan, other extension of credit, obligation or commitment
under the Financial Agreement is outstanding, that covenant shall be deemed to apply hereunder at any time Party B has any obligation
(whether absolute or contingent) under this Agreement.
(iii) Notwithstanding the foregoing, if the incorporation of any provision by reference from any Financial Agreement would result in the
violation by Party B of the terms of that Financial Agreement, or be in violation of any law, rule or regulation (as interpreted by any court of
competent jurisdiction), then this Agreement shall not incorporate that provision.
"Financial Agreement" means that certain Loan Agreement dated as of July 21, 1997 by and among CSS Industries, Inc., the Lending
Institutions listed therein, First Union National Bank (f/k/a Corestates Bank, N.A.), as the Administrative Agent and Merrill Lynch & Co., as
the Syndication Agent and without regard to (i) any amendment, modification, addition, waiver or consent thereto or thereof (unless consented
to in writing by Party A), or (ii) any termination or cancellation thereof (unless replaced or otherwise succeeded by a Successor Financial
Agreement) ("Existing Financial Agreement"), provided that if at any time the Existing Financial Agreement is replaced or otherwise
succeeded by a Successor Financial Agreement, or if at any time any Successor Financial Agreement is replaced or otherwise succeeded by a
Successor Financial Agreement, then "Financial Agreement" means the Successor Financial Agreement most recently executed and delivered.
"Successor Financial Agreement" means any loan agreement to which Party A and Party B are parties that is entered into after the date of this
Agreement, as the same exists on the date of execution thereof and without regard to (i) any amendment, modification, addition, waiver or
consent thereto or thereof (unless consented to in writing by Party A), or (ii) any termination or cancellation thereof (unless replaced or
otherwise succeeded by a Successor Financial Agreement).
6
(i) Transfer. Notwithstanding anything contained in Section 7 of this Agreement, if Party A's rights in any loan or extension of credit under any
Financial Agreement are sold, assigned or otherwise transferred to any purchaser, assignee or transferee to which Party A may lawfully make
such sale, assignment or transfer, then Party A may transfer without recourse its rights and obligations in or under this Agreement (and any
Credit Support Document) to any such purchaser, assignee or transferee, provided that Party B is provided with written notice of such transfer
and a written acknowledgement of the purchaser, assignee or transferee stating that it has acquired such rights and obligations of Party A and is
bound by the terms of this Agreement (and any Credit Support Document) as Party A's successor hereunder (and thereunder).
IN WITNESS WHEREOF, the parties have executed this Schedule by their duly authorized signatories as of the date hereof.
FIRST UNION NATIONAL BANK
By: . . . . . . . . . . .
..............
Name: Kim V. Farr
Title: Vice President
CSS INDUSTRIES, INC.
By: . . . . . . . . . . .
..............
Name: Clifford E.
Pietrafitta
Title: Vice PresidentFinance
7
(Multicurrency -- Cross Border)
ISDA(R)
International Swap Dealers Association, Inc
MASTER AGREEMENT
dated as of April 2, 2001
PNC Bank, National Association and CSS Industries Inc have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and
other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions.
Accordingly, the parties agree as follows:-1. Interpretation
(a) Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master
Agreement.
(b) Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement,
the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (Including
the Schedule), such Confirmation will prevail for the purpose of the relevant Transactions.
(c) Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single
agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions.
2. Obligations
(a) General Conditions
(i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this
Agreement.
(ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant
Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required
currency, Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner
customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement.
(iii) Each obligation of each party under Section 2(a)(i) is subject to
(1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing,
(2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated
and (3) each other applicable condition precedent specified in this Agreement.
Copyright(C) 1992 by International Swap Dealers Association, Inc
1
(b) Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five
Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely
notice of a reasonable objection to such change.
(c) Netting. If on any date amounts would otherwise be payable:-(i) in the same currency; and
(ii) in respect of the same Transaction,
by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and
discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would
otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have
been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount.
The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the
same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same
Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the
Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will
cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive payments or deliveries.
(d) Deduction or Withholding for Tax.
(i) Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such
deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in
effect. If a party is so required to deduct or withhold, then that party ("X") will:-(1) promptly notify the other party ("Y") of such requirement;
(2) pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or
withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or
withholding is required or receiving notice that such amount has been assessed against Y:
(3) promptly forward to Y an official receipt for a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment
to such authorities; and
(4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such
additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed
against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be
required to pay any additional amount to Y to the extent that it would not be required to be paid but for:-(A) the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or
(B) the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but
for (I) any action taken by taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is
entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law.
2
(ii) Liability. If:-(1) X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or
withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4);
(2) X does not so deduct or withhold; and
(3) a liability resulting from such Tax is assessed directly against X.
then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such
liability (including any related liability for interest but including any related liability for penalties only if Y has failed to comply with or
perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).
(e) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant
Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section
6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as
such overdue amount for the period from (and including) the original due date for payment to (but excluding) the date of actual payment at the
Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the
occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of
any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant
Confirmation or elsewhere in this Agreement.
3. Representations
Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a
Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement that:-(a) Basic Representations
(i) Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under
such laws, in good standing;
(ii) Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver
this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its
obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all
necessary action to authorise such execution, delivery and performance;
(iii) No Violation or Conflict. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision
of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any
contractual restriction binding on or affecting it or any of its assets;
(iv) Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been
complied with; and
(v) Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid
and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency,
moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application
(regardless of whether enforcement is sought in a proceeding in equity or at law)).
(b) Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has
occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under
this Agreement or any Credit Support Document to which it is a party.
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(c) Absence of Litigation. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding
at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality,
validity or enforceability against o of this Agreement or any Credit Support Document to which it is a party or its ability to perform its
obligations under this Agreement or such Credit Support Document.
(d) Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is
identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material
respect.
(e) Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate
and true.
(f) Payee Tax Representations. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate
and true.
4. Agreements
Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support
Document to which it is a party:-(a) Furnish Specified Information. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or
taxing authority as the other party reasonably directs:-(i) any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation;
(ii) any other documents specified in the Schedule or any Confirmation; and
(iii) upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to
allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document
without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the
completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in
receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party
and to be executed and to be delivered with any reasonably required certification,
in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable.
(b) Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other
authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will
use all reasonable efforts to obtain any that may become necessary in the future.
(c) Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to
comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a
party.
(d) Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon
learning of such failure.
(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or
performance of this Agreement by a jurisdiction in which it is incorporated, organised, managed and controlled or considered to have its seat,
or in which a branch or office through which it is acting for the purpose of this Agreement is located ("Stamp Tax Jurisdiction") and will
indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party's execution or
performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party.
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5. Events of Default and Termination Events
(a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any
Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:-(i) Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or
2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to
the party;
(ii) Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any
payment under this Agreement or delivery under
Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be
complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after
notice of such failure is given to the party;
(iii) Credit Support Default.
(1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied
with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has
elapsed;
(2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force
and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of
such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or
(3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such
Credit Support Document;
(iv) Misrepresentation. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made
or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been
incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated;
(v) Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party
(1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a
liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any
applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any
payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no
applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or
such action is taken by any person or entity appointed or empowered to operate it or act on its behalf;
(vi) Cross Default. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of
default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any
applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them
(individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has
resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements
or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such
Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an
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aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable
notice requirement or grace period);
(vii) Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:-(1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or
admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with
or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgement of insolvency or bankruptcy or any
other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up
or liquidation, and, in the case of any such proceeding or petition instituted or presented against it, such proceeding or petition (A) results in a
judgment of insolvency or bankruptcy or the entry of an order for relief or the making of an order for its winding-up or liquidation or (B) is not
dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for
its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes
subject to the appointment or an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or
for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution,
attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party
maintains possession, or any such process is not dismissed, discharged, stayed or restrained, in each case within 30 days thereafter;
(8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the
events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the foregoing acts; or
(viii) Merger Without Assumption. The party or any Credit Support, Provider of such party consolidates or amalgamates with, or merges with
or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:-(1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this
Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement
reasonably satisfactory to the other party to this Agreement; or
(2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting,
surviving or transferee entity of its obligations under this Agreement.
(b) Termination Events. The occurrence at any times with respect to a party or, if applicable, any Credit Support Provider of such party or any
Specified Entity of such party of any event specified below constitutes an illegality if the event is specified in (i) below, a Tax Event if the
event is specified in
(ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event Upon Merger if
the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below:-(i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the
promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable
law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the
Affected Party):-(1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such
Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or
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(2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit
Support Provider) has under any Credit Support Document relating to such Transaction;
(ii) Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a
Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in
Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled
Payment Date (1) be required to pay to the other party an additional amount in respect of an indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required
to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional
amount is required to be paid in respect of such Tax under
Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii) Tax Event Upon Merger. The party (the "Burdened Party") on the next succeeding Scheduled Payment Date will either (1) be required to
pay an additional amount in respect of an Indemnifiable Tax under
Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been
deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount
(other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with
or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not
constitute an event described in Section 5(a)(viii);
(iv) Credit Event Upon Merger. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any
Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all
or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the
creditworthiness of the resulting,, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such
Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will
be the Affected Party); or
(v) Additional Termination Event. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the
occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event
in the Schedule or such Confirmation).
(c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also
constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default.
6. Early Termination
(a) Right to Terminate Following Event of Defaults. If at any time an Event of Default with respect to a party (the "Defaulting Party") has
occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party
specify the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of
all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early
Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event
of Default specified in Section
5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant
proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in
Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).
(b) Right to Terminate Following Termination Event.
(i) Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the
nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the
other party may reasonably require.
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(ii) Transfer to Avoid Termination Event. If either an illegality under
Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is
the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all
reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after
it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its
Offices or Affiliates so that such Termination Event ceases to exist.
If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon
the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i).
Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party,
which consent will not be withheld if such other party's policies in effect at such time would permit it to enter into transactions with the
transferee on the terms proposed.
(iii) Two Affected Parties.If an illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party will use
all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination
Event.
(iv) Right to Terminate. If:-(1) a transfer under Section 6(b)(ii) or an agreement under
Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party
gives notice under Section 6(b)(i); or
(2) an illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger
occurs and the Burdened Party is not the Affected Party,
either party in the case of an illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax
Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a
Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the
other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective
as an Early Termination Date in respect of all Affected Transactions.
(c) Effect of Designation.
(i) If notice designating an Early Termination Date is given under
Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or
Termination Event is then continuing.
(ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(c)
in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The
amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(c).
(d) Calculations.
(i) Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the
calculations on its part, if any, contemplated by Section 6(a) and will provide to the other party a statement (1) showing, in reasonable detail,
such calculations (including all relevant quotations and specifying any amount payable under Section 6(c)) and (2) giving details of the relevant
account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in
determining a Market Quotation, the records of the party obtaining such quotations will be conclusive evidence of the existence and accuracy
of such quotation.
(ii) Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(c) will be payable on the day
that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of
Default) and on the day which is two Local Business Days after the day on which notices of the amount payable is effective (in the
8
case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the
extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the
relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed.
(e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in
the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second
Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotations" or
the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined
pursuant to this Section will be subject any Set-off.
(i) Events of Default. If the Early Termination Date results from an Event of Default:-(1) First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting
Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non- defaulting Party) in respect of the
Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the
Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party.
(2) First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number,
the Non-defaulting Party's Loss in respect of this Agreement.
(3) Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum
of the Settlement Amount (determined by the Non- defaulting Party) in respect of the Terminated Transactions and the Termination Currency
Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts
owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a
negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.
(4) Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party's Loss in
respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non- defaulting Party; if it is a negative
number, the Non- defaulting Party will pay the absolute value of that amount to the Defaulting Party.
(ii) Termination Events. If the Early Termination Date results from a Termination Event-(1) One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section
6(e)(1)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and
to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively,
and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions.
(2) Two Affected Parties. If there are two Affected Parties:-(A) If Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will
be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount
("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Termination Currency Equivalent of the
Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y: and
(B) If Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated,
in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between
9
the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y").
If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y.
(iii) Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in
respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to
reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period
from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii).
(iv) Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre- estimate
of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise
provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses.
7. Transfer
Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by
way of security or otherwise) by either party without the prior written consent of the other party, except that:-(a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of
all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and
(b) a party may make such a transfer of all or any part of its interest in any amount payable to be from a Defaulting Party under Section 6(c).
Any purported transfer that is not in compliance with this Section will be void.
8. Contractual Currency
(a) Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant currency specified in this
Agreement for that payment (the "Contractual Currency"). To the extent permitted by applicable law, any obligation to make payments under
this Agreement in the Contractual Currency will not be discharged or satisfied by any lender in any currency other than the Contractual
Currency, except to the extent such lender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner
and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all
amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in
the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by
applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for
any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of such excess.
(b) Judgments. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency
is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in
respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above,
the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will
be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a
consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received
by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between
the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange as which such party is able, acting in a reasonable manner and in good faith in converting the
currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or
order actually
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received by such party. The term "rate of exchange" includes, without limitation, any premiums and costs of exchange payable in connection
with the purchase of or conversion into the Contractual Currency.
(c) Separate indemnities. To the extent permitted by applicable law, these indemnities constitutes separate and independent obligations from the
other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any
indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being
made for any other sums payable in respect of this Agreement.
(d) Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an
actual exchange or purchase been made.
9. Miscellaneous
(a) Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and
supersedes all oral communication and prior writings with respect thereto.
(b) Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing
evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on
an electronic messaging system.
(c) Survival of Obligations. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction.
(d) Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are
cumulative and not exclusive of any rights, powers, remedies and privileges provided by law.
(e) Counterparts and Confirmations.
(i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including
by facsimile transmission), each of which will be deemed an original.
(ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally
or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by
facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system,
which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or
through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation.
(f) No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to
operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further
exercise, of that right, power or privilege or the exercise of any other right, power or privilege.
(g) Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken
into consideration in interpreting this Agreement.
10. Offices; Multibranch Parties
(a) If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or
home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of
such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This
representation will be deemed to be repeated by such party on each date on which a Transaction is entered into.
(b) Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without
the prior written consent of the other party.
(c) If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under
any Transaction through any Office listed in the Schedule, and the Office
11
through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation.
11. Expenses
A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses,
including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement
or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including,
but not limited to costs of collection.
12. Notices
(a) Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a
notice or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address
or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as
indicated:-(i) if in writing and delivered in person or by courier, on the date it is delivered;
(ii) if sent by telex, on the date the recipient's answerback is received;
(iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it
being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's
facsimile machine);
(iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or
its delivery is attempted; or
(v) if sent by electronic messaging system, on the date that electronic message is received,
unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is
delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall
be deemed given and effective on the first following day that is a Local Business Day.
(b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system
details at which notices or other communications are to be given to it.
13. Governing Law and Jurisdiction
(a) Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule.
(b) Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:-(i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non-exclusive
jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City,
if this Agreement is expressed to be governed by the laws of the State of New York; and
(ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim
that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that
such court does not have any jurisdiction over such party.
Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to
be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any
modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more
jurisdictions preclude the bringing of Proceedings in any other jurisdiction.
12
(c) Service of Process. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it
and on its behalf, service of process in any Proceedings. If for any reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably
consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either
party to serve process in any other manner permitted by law.
(d) Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its
revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit,
(ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its
assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might
otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that
it will not claim any such immunity in any Proceedings.
14. Definitions
As used in this Agreement:-"Additional Termination Event" has the meaning specified in Section 5(b)
"Affected Party" has the meaning specified in Section 5(b)
"Affected Transactions" means (a) with respect to any Termination Event consisting of an illegality, Tax, Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions.
"Affiliate" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that
controls directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, "control"
of any entity or person means ownership of a majority of the voting power of the entity or person.
"Applicable Rate" means:-(a) in respect of obligations payable of deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with
Section 6(d)(ii)) on which that amount is payable, the Default Rate;
(c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the
Non- default Rate; and
(d) in all other cases, the Termination Rate.
"Burdened Party" has the meaning specified in Section 5(b).
"Change in Tax Law" means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the
application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into.
"consent" includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent.
"Credit Event Upon Merger" has the meaning specified in Section 5(b).
"Credit Support Document" means any agreement or instrument that is specified as such in this Agreement.
"Credit Support Provider" has the meaning specified in the Schedule.
"Default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it)
if it were to fund or of funding the relevant amount plus 1% per annum.
"Defaulting Party" has the meaning specified in Section 6(a).
13
"Early Termination Date" means the date determined in accordance with Section 6(a) or 6(b)(iv).
"Event of Default" has the meaning specified in Section 5(a) and, if applicable, in the Schedule.
"Illegality" has the meaning specified in Section 5(b).
"Indemnifiable Tax" means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present
or former connection between the jurisdiction of the government or taxation authority imposing such Tax and the recipient of such payment or
a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been
a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or
having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from
such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement
or a Credit Support Document).
"Law" includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue
authority) and "lawful" and "unlawful" will be construed accordingly.
"Local Business Day" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign
exchange and foreign currency deposits) (a) in relation to any obligation under Section
2(a)(i). In the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined
pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the
relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any
notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by
the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in
relation to Section
5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transactions.
"Loss" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination
Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs for gain, in which case
expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the
case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a
result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them).
Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section
6(c)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under
Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest
date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices
from one or more leading dealers in the relevant markets.
"Market Quotation" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined
on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party
(expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party
(taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic
equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each
applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated
Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose,
Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any
payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable
condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each
Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different
time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations
are to be obtained will be
14
selected in good faith by the party obliged to make a determination under
Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation
will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such
quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this
purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than
three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated
Transactions cannot be determined.
"Non-default Rate" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as
certified by it) if it were to fund the relevant amount.
"Non-defaulting Party" has the meaning specified in Section 6(a).
"Office" means a branch or office of a party, which may be such party's head or home office.
"Potential Event of Defaults" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of
Default.
"Reference Market-makers" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good
faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding
whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city.
"Relevant Jurisdiction" means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and
controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in
which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made.
"Scheduled Payment Date" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction.
"Set-off" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of
an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is
exercised by, or imposed on, such payer.
"Settlement Amount" means, with respect to a party and any Early Termination Date, the sum of:-(a) the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation is determined;
(b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of
Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the
determination) produce a commercially reasonable result.
"Specified Entity" has the meaning specified in the Schedule.
"Specified Indebtedness" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or
surety or otherwise) in respect of borrowed money.
"Specified Transaction" means subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or
hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of
such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such
other party which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index
swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any
option with respect to any of these transactions),
(b) any combination of these transactions and (c) any other transaction identified as a specified Transaction in this Agreement or the relevant
confirmation.
"Stamp Tax" means any stamp, registration, documentation or similar tax.
15
"Tax" means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions
thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp,
registration, documentation or similar tax.
"Tax Event" has the meaning specified in Section 5(b).
"Tax Event Upon Merger" has the meaning specified in Section 5(b).
"Terminated Transactions" means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected
Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the
notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination
Date).
"Termination Currency" has the meaning specified in the Schedule.
"Termination Currency Equivalent" means, in respect of any amount denominated in the Termination Currency, such Termination Currency
amount and, in respect of any amount denominated in a currency other than the Termination Currency (the "Other Currency"), the amount in
the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other
Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a
later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as
provided below) for the purchase of such Other Currency with the Termination Currency at or about 11.00 a.m. (in the city in which such
foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other
Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to
make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties.
"Termination Event" means an illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon
Merger or an Additional Termination Event.
"Termination Rate" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each
party (as certified by such party) if it were to fund or of funding such amounts.
"Unpaid Amounts" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated
Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i)
on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated
Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section
2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such
Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such
amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but
excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding
and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined
by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination
Currency Equivalents of the fair market values reasonably determined by both parties.
IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified
on the first page of this document.
PNC Bank, National Association CSS Industries, Inc.
................................
(Name of Party) (Name of Party)
By: Charlotte B. McLaughlin
----------------------------Name: Charlotte B. McLaughlin
Title: Senior Vice President
By:
C. Pietrefiffa
------------------------------Name: C. Pietrefiffa
Title: Vice President - Finance
Date: Date:
16
SCHEDULE
to the
Master Agreement
dated as of April 2, 2001
between
CSS INDUSTRIES, INC. ("CSS")
and
PNC BANK, NATIONAL ASSOCIATION ("PNC")
Part 1. Termination Provisions.
(a) "Specified Entity" means in relation to PNC for the purpose of:Section 5(a)(v), Not Applicable
Section 5(a)(vi), Not Applicable
Section 5(a)(vii), Not Applicable
Section 5(b)(iv), Not Applicable
and in relation to CSS for the purpose of:Section 5(a)(v), Affiliates
Section 5(a)(vi), Not Applicable
Section 5(a)(vii), Not Applicable
Section 5(b)(iv), Not Applicable
(b) "Specified Transaction" will have the meaning specified in Section 14 of this Agreement.
(c) The "Cross Default" provisions of Section 5(a)(vi) will apply to CSS and PNC.
If such provisions apply:"Specified Indebtedness" will have the meaning specified in Section 14 of this Agreement, except that, with respect to PNC, such term shall not
include obligations in respect of deposits or letters of credit issued to the extent they are not paid when due solely as a result of inadvertence,
administrative error or legal prohibition. In addition, with respect to CSS, "Specified Indebtedness" shall include, without limitation, the
obligations of CSS under a Credit Agreement (as defined in Section (b)(i) of Part 5 of this Schedule).
"Threshold Amount" shall mean:
In the case of PNC, an amount (or its equivalent in other currencies) at any time equal to the greater of (a) 3% of the consolidated stockholders
equity of PNC Bank Corp., a Pennsylvania corporation, as shown in its most recent annual or quarterly financial statements prepared in
accordance with generally accepted accounting principles in the United States, or (b) $25,000,000.
In the case of CSS, an amount (or its equivalent in other currencies) at any time equal to $0,00.
(d) The "Credit Event Upon Merger" provisions of Section 5(b)(iv) will apply to both parties.
(e) The "Automatic Early Termination" provision of Section 6(a) will not apply to either party.
(f) Payments on Early Termination. For the purpose of Section 6(e) of this Agreement:-(i) Market Quotation will apply.
(ii) The Second Method will apply.
19
(g) "Termination Currency" means United States Dollars.
(h) Additional Termination Event will not apply.
Part 2. Tax Representations. Not applicable to either party.
Part 3. Agreement to Deliver Documents.
For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable:-(a) Tax forms, documents or certificates to be delivered are:-- Each party shall, as soon as reasonably practicable after receiving written request
for same, deliver to the other party any form or document reasonably requested by the other party which is required to enable such other party
to make payments hereunder without deduction or withholding for or on account of Taxes or with such withholding or deduction at a reduced
rate.
(b) Other documents to be delivered by PNC to CSS are as follows:-(i) Concurrently with the execution and delivery of this Agreement, PNC shall deliver to CSS the following items, each of which shall be in
form and substance reasonably satisfactory to CSS, and which is covered by the Section 3(d) representation; Evidence of the authority and
incumbency of, and a specimen signature of each person executing this Agreement or any other document in connection with this Agreement
on behalf of PNC (at least one of whom shall be an officer with the rank of Vice President or higher) and of each person authorized to execute
Confirmations on behalf of PNC.
(ii) With respect to any Transaction, PNC shall furnish to CSS the following items (each of which shall be in form and substance reasonably
satisfactory to CSS, and which are covered by the Section 3(d) representation) from time to time at the written request of CSS, as soon as
reasonably practical after receipt of such request; Evidence of the authority and incumbency of, and a specimen signature of, each person
executing the Confirmation with respect to such Transaction on behalf of PNC (at least one of whom shall be an officer with the rank of Vice
President or higher).
(iii) Promptly following request in writing from time to time by CSS, PNC shall furnish to CSS the following items (which are covered by the
Section 3(d) representation): the most recent annual and quarterly consolidated financial statements of PNC Bank Corp.
(c) Other documents to be delivered by CSS to PNC are as follows:-(i) Concurrently with the execution and delivery of this Agreement, CSS shall deliver to PNC the following items, each of which shall be in
form and substance reasonably satisfactory to PNC, and which is covered by the Section 3(d) representation; Evidence of the authority and
incumbency of, and a specimen signature of, each person executing this Agreement or any other document in connection with this Agreement
on behalf of CSS and of each person authorised to execute Confirmations on behalf of CSS.
(ii) With respect to any Transaction, CSS shall furnish to PNC the following items (each of which shall be in form and substance reasonably
satisfactory to PNC, and which are covered by the
Section 3(d) representation) from time to time at the written request of PNC, as soon as reasonably practical after receipt of such request.
Evidence of the authority and incumbency of, and a specimen signature of, each person executing the Confirmation with respect to such
Transaction on behalf of CSS.
(iii) Promptly following request in writing from time to time by PNC, CSS shall furnish to PNC the following items (which are covered by the
Section 3(d) representation) the most recent annual and quarterly consolidated financial statements of CSS.
20
Part 4. Miscellaneous.
(a) Addresses for Notices. For the purpose of Section 12(a) of this Agreement:-Address for notices or communications to PNC:
Address:
One PNC Plaza, 9th Floor
249 Fifth Avenue
Pittsburgh, PA 15222-2707
Attention:
Facsimile No.:
Telephone No.:
Swap Operations
412-762-8667
412-762-1375
Address for notices or communications to CSS:
Address:
1845 Walnut Street, Suite 800
Philadelphia, PA 19103-4755
Attention:
Clifford E. Pietrafitta, VPFinance
215-569-9979
215-569-9900
Facsmile No.:
Telephone No.:
(b)
Process Agent. For the purpose of Section 13(c) of this Agreement:-PNC appoints as its Process Agent:
CSS appoints as its Process Agent:
Not Applicable.
Not Applicable.
(c) Offices. The provisions of Section 10(a) will not apply to this Agreement.
(d) Multibranch Party. For the purpose of Section 10(c) of this Agreement:-PNC is not a Multibranch Party.
CSS is not a Multibranch Party.
(e) Calculation Agent. Unless otherwise specified in a Confirmation in relation to the relevant Transaction, the Calculation Agent is PNC.
(f) Credit Support Document. Details of any Credit Support Document:-"Credit Support Document" means in relation to PNC, none.
"Credit Support Document" means in relation to CSS, each agreement and instrument, now or hereafter existing, of any kind or nature which
secures, guarantees or otherwise provides direct or indirect assurance of payment or performance of any existing or future obligation of CSS
under this Agreement, made by or on behalf of any person or entity (including, without limiting the generality of the foregoing, any agreement
or instrument granting any lien, security interest, assignment, charge or encumbrance to secure any such obligation, any guaranty, suretyship,
letter of credit, put option or subordination agreement relating to any such obligation and any "keep well" or other financial support agreement
relating to CSS).
(g) Credit Support Provider.
"Credit Support Provider" means in relation to PNC, none.
"Credit Support Provider" means in relation to CSS, any person or entity (other than CSS), that now or hereafter secures, guarantees or
otherwise provides direct or indirect assurance of payment or performance of any existing or future obligation of CSS under this Agreement.
(h) Governing Law. This Agreement will be governed by and construed in accordance with the law of the State of New York (without
reference to choice of law doctrine).
(i) Netting of Payments. Subparagraph (ii) of Section 2(c) of this Agreement will not apply to the following Transactions or groups of
Transactions (in each case starting from the date of this Agreement); all Transactions.
(j) "Affiliate" will have the meaning specified in Section 14 of this Agreement.
21
Part 5. Other Provisions.
(a) Conditions Precedent. The condition precedent in Section 2(a)(iii)(1) does not apply to a payment and delivery owing by a party if the other
party shall have satisfied in full all its payment or delivery obligations under Section 2(a)(i) of this Agreement and shall at the relevant time
have no future payment or delivery obligations, whether absolute or contingent, under Section 2(a)(i).
(b) Consent to Recording. Each party (i) consents to the recording, by the other party or its agents, of telephone conversations between officers,
employees or agents of the consenting party or its Affiliates and officers, employees or agents of the other party or its Affiliates who quote on,
agree to or otherwise discuss terms of Transactions or potential Transactions, or other matters relating to this Agreement or any Credit Support
Document, and
(ii) agrees to give notice of such recording to such officers, employees and agents of it and its Affiliates.
(c) Confirmations. As provided in Section 9(e)(ii)of this Agreement, the parties intend that they shall be legally bound by the terms of each
Transaction from the moment they agree to those terms (whether orally or otherwise). The terms of a Transaction subject to this Agreement
orally agreed to shall be deemed to constitute a "Confirmation" as referred to in this Agreement, even if not so specified by the parties. As
promptly as practicable after any such oral agreement, the parties shall enter into a definitive Confirmation with respect to such Transaction in
accordance with the Section 9(e)(ii) of this Agreement, whereupon such definitive Confirmation shall supersede and replace such oral
agreement and such oral agreement shall have no further legal force or effect.
(d) Additional Representations and Warranties. The specified party represents and warrants to the other party (which representations and
warranties will be deemed to be repeated on each date on which a Transaction is entered into) as follows:
(i) In the case of PNC, PNC is a national banking association duly organized under the federal laws of the United States of America.
(ii) In the case of CSS, CSS is a corporation, partnership or limited liability company duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization.
(iii) In the case of each party, such party is entering into this Agreement and each Transaction for its own account as principal (and not as agent
or in any other capacity, fiduciary or otherwise).
(iv) In the case of each party:
(A) Such party intends and acknowledges that this Agreement, including all Transactions hereunder, shall qualify for the exemption from the
provision of the Commodity Exchange Act, as amended, provided by 17 C.F.R. Part 35 as in effect on the date of this Agreement (or any
successor provision of similar import) (the "CFTC Swap Regulations"). Without limiting the generality of the foregoing: (1) such party is an
"eligible swap participant" as defined in the CFTC Swap Regulations, (2) this Agreement, including all Transactions hereunder, constitutes a
"swap agreement" as defined in the CFTC Swap Regulations, (3) neither this Agreement nor any Transaction hereunder is one of a fungible
class of agreements that are standardized as to their material economic terms, and (4) the creditworthiness of the other party is a material
consideration in entering into or determining the terms of this Agreement and each Transaction hereunder, including pricing, cost or credit
enhancement terms.
(B) Such party is entering into this Agreement, including all Transactions hereunder, in connection with a line of its business.
(C) With respect to any Transaction that constitutes, or that has the economic effect of, a commodity option, the party which is the offeree of
such option represents and warrants as to itself that it is a producer, processor or commercial user of, or a merchant handling, the commodity
which is the subject of such Transaction (or by-products of such commodity), and that it is entering into such Transaction solely for purposes
related to its business as such.
22
(v)
(A) In the case of CSS it intends and acknowledges that this Agreement, including all Transactions hereunder, shall constitute a "swap
agreement" as defined in 11 U.S.C. ss.101(53B) as in effect on the date of this Agreement (or any successor provision of similar import).
(B) In the case of PNC: (1) it intends and acknowledges that this Agreement, including all Transactions hereunder, shall constitute a "qualified
financial contract" and a "swap agreement," as those terms are defined in 12 U.S.C. ss.1821(o)(8)(D) as in effect on the date of this Agreement
(or any successor provision of similar import) (2) without limiting the generality of Section 3(a)(i), PNC, by corporate action, is authorised
under applicable non-insolvency law to enter into and perform its obligations under this Agreement, each Credit Support Document (if any) to
which it is party and each Transaction hereunder, (3) it will, at all times during the term of this Agreement, maintain as part of its official books
and records a copy of this Agreement (including all Confirmations from time to time and all other supplements hereto and documents
incorporated by reference herein) and each Credit Support Document (if any) to which it is party, and evidence of its authorization of the
foregoing, and (4) this Agreement, each Confirmation, each Credit Support Document (if any) to which it is party, and any other
documentation relating to this Agreement to which it is a party or that it is required to deliver will be executed and delivered by an officer of
PNC of the level of Vice President or higher.
(vi) In the case of each party:
(A) It is acting for its own account, and it has made its own independent decisions to enter into this Agreement and each Transaction and as to
whether this Agreement and each Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisers
as its has deemed necessary. It is not relying on any communication (written or oral) of the other party as investment advice or as a
recommendation to enter into this Agreement or any Transaction; it being understood that information and explanations related to the terms and
conditions of this Agreement or any Transaction shall not be considered investment advice or a recommendation to enter into this Agreement
or such Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to
the expected results of this Agreement or any Transaction.
(B) It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands
and accepts, the terms, conditions and risks of this Agreement and each Transaction. It is also capable of assuming, and assumes, the risks of
this Agreement and each Transaction.
(C) The other party is not acting as a fiduciary for or an adviser to it in respect of this Agreement or any Transaction.
(vii) In the case of each party, such party intends and acknowledges that this Agreement, including all Transactions hereunder, shall be
commercial transactions and shall not be transactions in "securities" for purposes of any securities law (including without limitation the
Securities Exchange Act of 1934, as amended, and the Securities Act of 1933, as amended).
(viii) In the case of CSS, CSS and its Affiliates have reviewed the areas within their business and operations which could be adversely affected
by, and have developed or are developing a program to address on a timely basis, the risk that certain computer applications used by CSS or its
Affiliates (or any of their respective material suppliers, customers or vendors) may be unable to recognize and perform properly date-sensitive
functions involving dates prior to and after December 31, 1999 (the "Year 2000 Problem"). The Year 2000 Problem will not result, and is not
reasonably expected to result, in any material adverse effect on the business, properties, assets, financial condition, results of operations or
prospects of CSS or any Affiliate, or the ability of CSS or any Affiliate, as applicable, to duly and punctually pay or perform its obligations
hereunder and under any Credit Support Document or Credit Agreement.
(e) Accuracy of Specified Information. Section 3(d) is modified by deleting the period at the end thereof and appending thereto the following;
"or, in the case of audited or unaudited financial statements, a fair presentation
23
of the financial condition, results of operations or cash flows (as applicable) of the relevant person for the dates and periods specified therein in
conformity with generally accepted accounting principles in the United States."
(f) Set-off, Section 6 is modified by adding the following Section 6(f) thereto:
(f) Set-off. Any amount (the "Early Termination Amount") payable to one party (the "Payee") by the other party (the "Payer") under Section
6(e), in circumstances where there is a Defaulting Party or one Affected Party in the case where a Termination Event under Section 5(b)(iv) has
occurred, will, at the option of the party ("X") other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting
Party or the Affected Party), be reduced by its set-off against any amount(s) (the "Other Agreement Amount") payable (whether at such time or
in the future or upon the occurrence of a contingency) by the Payee to the Payer or any Affiliate of the Payer (irrespective of the currency,
place of payment or booking office of the obligation) under any other agreement(s) between the Payee and the Payer or any affiliate of the
Payer or instrument(s) or undertaking(s) issued or executed by one party (or if applicable to the context hereto, any Affiliate thereof) to, or in
favor of, the other party (or if applicable to the context hereto, any Affiliate thereof) (and the Other Agreement Amount will be discharged
promptly and in all respects to the extent it is so set-off). X will give notice to the other party of any set-off effected under this Section 6(f).
For this purpose, either the Early Termination Amount or the other Agreement Amount (or the relevant portion of such amounts) may be
converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a
reasonable manner and in good faith, to purchase the relevant amount of such currency.
If an obligation is unascertained, X may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party
accounting to the other when the obligation is ascertained.
Nothing in this Section 6(f) shall be effective to create a charge or other security interest. This Section 6(f) shall be without prejudice and in
addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by
operation of law, contract or otherwise).
(g) Jurisdiction. Section 13(b)(i) is modified by deleting the words "non- exclusive jurisdiction of the courts of the State of New York, and the
United States District Court located in the Borough of Manhattan in New York City," and replacing them with the words "non-exclusive
jurisdiction of the courts of the State of New York and the Commonwealth of Pennsylvania and the United States District Courts located in the
Borough of Manhattan in New York City and in Allegheny County, Pennsylvania,".
(h) Existing and Future Credit Agreements.
(i) As used in this Agreements, the following terms shall have the following meanings:
"Financing" shall mean any loan, extension of credit or financial accommodation (including, without limiting the generality of the foregoing,
any commitment relating to any of the foregoing).
"Credit Agreement" means that certain Loan Agreement dated as of April 30, 2001 by and among CSS, the Lending Institutions listed therein,
PNC, as Administrative Agent, PNC Capital Markets, Inc., as Lead Arranger, and Fleet National Bank and First Union Bank, as
Co-Documentation Agents (the "Existing Credit Agreement") and without regard to (A) any termination or cancellation thereof, whether by
reason of payment of all obligations of CSS thereunder or otherwise, or (B) unless consented to in writing by PNC or any Affiliate thereof, any
amendment, modification, supplement, waiver or consent thereto or thereof; provided, however, that if at any time the Existing Credit
Agreement is replaced or otherwise succeeded by a Successor Credit Agreement (as hereinafter defined), or if at any time any Successor Credit
Agreement is replaced, or otherwise succeeded by a Successor Credit Agreement, then "Credit Agreement" means the Successor Credit
Agreement most recently executed and delivered. "Successor Credit Agreement" means any loan agreement to which CSS and PNC (or any
Affiliate of PNC) are parties that have entered into after the date of this Agreement, as the same exists on the date of execution thereof and
without regard to (A) any termination or cancellation, thereof, whether by reason of payment of all obligations of CSS thereunder or
24
otherwise, or (B) unless consented to in writing by PNC or any Affiliate thereof, any amendment, modification, supplement, waiver or consent
thereto or thereof.
(ii) Until all obligations of CSS, under this Agreement, now existing or hereafter arising, have been paid in cash and performed in full and all
Transactions under the Master Agreement have terminated, CSS will at all times perform, comply with and observe all covenants and
agreements of each Credit Agreement applicable to it, which covenants and agreements, together with related definitions and ancillary
provisions, are incorporated (and upon execution of any future Credit Agreement shall automatically be deemed incorporated) by reference
herein and, for the avoidance of doubt, shall be construed to apply hereunder for the benefit of PNC as though (A) all references therein to any
party (or parties) extending Financing were to PNC and (B) for any such covenants and agreements that are conditioned on or relate to either
the existence of such Financing or CSS having any obligations arising out of or in connection therewith, all references to such Financing or
obligations were to CSS's obligations under this Agreement.
(iii) Section 5(a)(vi) is amended by deleting the semicolon at the end thereof and replacing it with the following: "or (3) in respect of CSS only,
any default, event of default or similar condition or event (however described) under any Credit Agreement;"
(i) Service of Process. CSS hereby irrevocably consents to service of any summons, complaint or other legal process on it in any suit, action or
proceedings relating to this Agreement, any Credit Support Document or any Transaction by registered or certified U.S. mail, postage prepaid,
to it at its address for notices described herein, and agrees that such service shall constitute in every respect valid and effective service (but
nothing herein shall affect the validity or effectiveness of process served in any other manner permitted by law).
(j) Facsimiles. For purpose of this Agreement, any Credit Support Document or any Transaction, any execution counterparts delivered by
facsimile transmission shall be effective as delivery of an original counterpart thereto and shall be deemed to be an original signature thereto.
(k) WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN
ANY SUIT, ACTION OR PROCEEDINGS RELATING TO THIS AGREEMENT, ANY CREDIT SUPPORT DOCUMENT OR ANY
TRANSACTION.
(l) Limitation of Liability. To the fullest extent permitted by law, no claim may be made by CSS against PNC or any affiliate, director, officer,
employee, attorney or agent of PNC for any special, indirect, consequential or punitive damages in respect of any claim arising from or relating
to this Agreement, any Credit Support Document or any Transaction or any statement, course of conduct, act, omission or event in connection
with any of the foregoing (whether based on breach of contract, tort or any other theory of liability); and CSS hereby waives, releases and
agrees not to sue upon any claim for any such damages, whether or not accrued and whether or not known or suspected to exist.
(m) Incorporation of Protocol Terms. The parties agree that the definitions and provisions contained in Annexes 1 to 5 and Section 6 of the
EMU Protocol published by the International Swaps and Derivatives Association, Inc. on 6th May, 1998 are incorporated into and apply to this
Agreement. References in those definitions and provisions to any "ISDA Master Agreement" will be deemed to be references to this
Agreement.
The parties hereto have executed the Master Agreement referred to in the caption of this Schedule and have agreed to the contents of this
Schedule.
PNC BANK, NATIONAL ASSOCIATION
CSS INDUSTRIES,
INC.
By: . . . . . . . . . . . . . . . . . . . . . . . . . . .
Name: Charlotte B. McLaughlin
Title: Senior Vice President
By: . . . . . .
. . . . . . . .
. . . . . . . .
. . . . .
Name: C.
Pietrafitte
Title: VP FINANCE
25
EXHIBIT 10.8
LOAN AGREEMENT
among
CSS INDUSTRIES, INC.,
as Borrower
THE LENDING INSTITUTIONS LISTED HEREIN,
PNC BANK, NATIONAL ASSOCIATION,
as Administrative Agent,
PNC CAPITAL MARKETS, INC.,
as Lead Arranger
and
FLEET NATIONAL BANK and
FIRST UNION NATIONAL BANK,
as Co-Documentation Agents
DATED AS OF APRIL 30, 2001
Table of Contents
Page
SECTION 1.
1.1
1.2
DEFINITIONS AND INTERPRETATION. ............................
Terms Defined ..............................................
Accounting Principles. .....................................
1
1
16
SECTION 2.
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14
2.15
THE LOAN ...................................................
Revolving Line of Credit....................................
Letters of Credit...........................................
Voluntary Reduction or Increase of Commitment...............
Advances, Conversions, Renewals and Payments................
Interest ...................................................
Fees........................................................
Prepayments.................................................
Use of Proceeds ............................................
Special Provisions Governing LIBOR Based Rate Advances......
Capital Requirements, Etc ..................................
Mandatory Prepayments/Commitment Reductions.................
Net Payments................................................
Maturity Date Extension.....................................
Change of Lending Office ...................................
Replacement of a Lender in Certain Circumstances............
16
16
18
22
24
27
29
30
31
31
34
35
36
38
38
38
SECTION 3.
3.1
3.2
3.3
3.4
3.5
CLOSING AND CONDITIONS PRECEDENT TO ADVANCES................
Conditions Precedent to Closing ............................
Closing.....................................................
Conditions Precedent to all Advances........................
Waiver of Rights............................................
Delivery of Documents.......................................
38
38
41
41
43
43
SECTION 4.
4.1
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
4.10
4.11
4.12
4.13
4.14
REPRESENTATIONS AND WARRANTIES .............................
Corporate Organization and Validity.........................
Places of Business..........................................
Pending Litigation..........................................
Title to Properties ........................................
Governmental Consent .......................................
Taxes.......................................................
Financial Statements........................................
Full Disclosure.............................................
Subsidiaries................................................
Guarantees, Indebtedness, etc. .............................
Government Regulations, etc. ...............................
Business Interruptions .....................................
Names ......................................................
Other Associations..........................................
43
43
44
44
44
44
45
45
45
45
45
46
47
47
48
4.15
4.16
4.17
4.18
4.19
Environmental Matters ......................................
Regulation O................................................
Capital Stock...............................................
Solvency....................................................
Interrelatedness of the Borrower and the Guarantors ........
48
50
50
50
51
SECTION 5.
5.1
5.2
5.3
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13
5.14
5.15
5.16
AFFIRMATIVE COVENANTS.......................................
Payment of Taxes and Claims ................................
Maintenance of Properties and Corporate Existence...........
Litigation..................................................
Taxes.......................................................
Employee Benefit Plans......................................
Financial and Business Information..........................
Officers' Certificates .....................................
Inspection .................................................
Tax Returns and Reports ....................................
Information to Participants and Assignees...................
Material Adverse Developments ..............................
Additional Parties .........................................
Performance of Obligations..................................
Further Assurances .........................................
Evidence of Intercompany Indebtedness.......................
Evidence of Securitization..................................
51
51
51
52
52
52
53
55
55
55
56
56
56
56
57
57
57
SECTION 6.
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
6.10
6.11
6.12
6.13
6.14
NEGATIVE COVENANTS..........................................
Mergers.....................................................
Acquisitions................................................
Liens and Encumbrances......................................
Transactions With Affiliates or Subsidiaries................
Guarantees .................................................
Dividends and Redemptions...................................
Loans and Investments ......................................
Amendment or Waivers of Certain Documents...................
Sale and Lease-Backs .......................................
Business Conducted..........................................
Indebtedness ...............................................
Restrictions on Fundamental Changes; Asset Sales............
Agreements Regarding Dividends..............................
Miscellaneous Covenants ....................................
57
57
58
59
60
60
61
61
61
62
62
62
63
63
64
SECTION 7.
7.1
7.2
7.3
FINANCIAL COVENANTS.........................................
Fixed Charge Coverage Ratio.................................
Minimum Consolidated Net Worth..............................
Ratio of Consolidated Funded Debt to
Consolidated Capitalization.................................
Ratio of Consolidated EBITDA to Consolidated
Interest Expense............................................
64
64
64
7.4
-ii-
64
64
SECTION 8.
8.1
8.2
8.3
8.4
DEFAULT ....................................................
Events of Default...........................................
Rights and Remedies on Default .............................
Nature of Remedies .........................................
Set-Off ....................................................
64
64
67
68
68
SECTION 9.
9.1
9.2
9.3
9.4
9.5
9.6
9.7
9.8
9.9
9.10
9.11
9.12
9.13
9.14
9.15
9.16
THE ADMINISTRATIVE AGENT....................................
Appointment and Authorization...............................
General Immunity............................................
Consultation with Counsel...................................
Documents...................................................
Rights as a Lender .........................................
Responsibility of the Administrative Agent..................
Collections and Disbursements...............................
Indemnification.............................................
Expenses ...................................................
No Reliance ................................................
Reporting...................................................
Resignation of the Administrative Agent.....................
Action on Instructions of Lenders ..........................
Several Obligations.........................................
Amendments..................................................
Notice of Default ..........................................
68
68
69
69
69
69
69
70
72
72
72
73
73
73
73
73
74
SECTION 10.
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
MISCELLANEOUS...............................................
GOVERNING LAW ..............................................
Integrated Agreement .......................................
Omission or Delay Not Waiver ...............................
Time........................................................
Expenses of the Administrative Agent and Lenders............
Brokerage...................................................
Notices; Lending Offices....................................
Headings ...................................................
Survival....................................................
Successors and Assigns .....................................
Counterparts................................................
Modification................................................
Signatories ................................................
Third Parties...............................................
Indemnification.............................................
Discharge of Taxes, The Borrower's Obligations, Etc.........
Withholding and Other Tax Liabilities.......................
Submission To Jurisdiction; Waivers.........................
Waivers.....................................................
Severability................................................
Independence of Representations, Warranties and Covenants...
75
75
75
75
75
75
76
76
78
78
78
81
81
81
81
81
82
83
83
84
85
85
-iii-
10.22
10.23
10.24
Obligations Several; Independent Nature of Lenders' Rights..
Prior Understandings .......................................
Confidentiality.............................................
-iv-
85
85
85
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is dated as of this 30th day of April, 2001 by and among CSS INDUSTRIES, INC., a
Delaware corporation (the "Borrower"), the lending institutions listed in Annex I attached hereto and incorporated herein by reference (each a
"Lender" and collectively, the "Lenders"), and PNC BANK, NATIONAL ASSOCIATION, a national banking association, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent").
BACKGROUND
A. The Borrower has requested that the Lenders establish financing arrangements for the Borrower under which the Lenders agree to make
loans and extensions of credit to the Borrower under the terms and provisions set forth herein.
B. The Lenders are willing, on the terms and provisions set forth herein, to extend such credit and make such loans to the Borrower. The loans
will be used for working capital, the issuance of letters of credit, acquisitions and general corporate purposes.
C. The parties desire to define the terms and conditions of their relationship in writing.
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:
SECTION 1. DEFINITIONS AND INTERPRETATION.
1.1 Terms Defined. As used in this Agreement, the following terms have the following respective meanings:
"Accounts": All of the "accounts" (as that term is defined in the Uniform Commercial Code as in effect from time to time in the
Commonwealth of Pennsylvania) of the Borrower and each of its Subsidiaries, whether now existing or hereafter arising.
"Accounts Receivable Securitization": The trade receivables purchase facility between the Borrower and Market Street Funding Corporation on
terms pursuant to which the Borrower and certain of its Subsidiaries will sell or grant a security interest in its accounts receivable or an
undivided interest therein, provided, that the aggregate Capital (as such term is defined in the Accounts Receivable Securitization Documents)
shall not exceed $100,000,000.
"Accounts Receivable Securitization Documents": The Receivable Purchase Agreement among the Borrower, the Bankruptcy Remote
Subsidiary, Market Street Funding Corporation and PNC and any other documents executed in connection with the Accounts Receivable
Securitization as modified, amended or restated from time to time.
"Acquisition Advances": Advances under the Revolving Credit to fund Permitted Acquisitions excluding the amount of such Advances which
are determined by Administrative Agent, in its reasonable discretion, to be used to fund the working capital needs of the acquired Person.
"Acquisition Amount": As defined in Section 6.2.
"Adjustment Amount": As of each date of determination hereof, the sum of (i) 100% of the outstanding portion of the aggregate amount of
Acquisition Advances, if any, made during the immediately preceding twelve (12) month period plus (ii) 75% of the outstanding portion of the
aggregate amount of Acquisition Advances, if any, made during the twelve month period commencing on the date which occurred 24 months
prior to the determination date and ending one day before the date which occurred 12 months prior to the determination date plus (iii) 50% of
the outstanding portion of the aggregate amount of Acquisition Advances, if any, made during the twelve month period commencing on the
date which occurred 36 months prior to the determination date and ending on the date which occurred one day before the date which occurred
24 months prior to the determination date plus (iv) 25% of the outstanding portion of the aggregate amount of Acquisition Advances, if any,
made during the twelve month period commencing on the date which occurred 48 months prior to the determination date and ending on the
date which occurred one day before the date which occurred 36 months prior to the determination date.
"Adjusted LIBO Rate": As applied to a LIBOR Based Rate Advance, for any LIBOR Interest Period, the rate per annum (rounded upwards, if
necessary to the next 1/100 of 1%) determined pursuant to the following formula:
Adjusted LIBO Rate = LIBO Rate
(1 - Reserve Percentage)
For purposes hereof, "LIBO Rate", with respect to a LIBOR Interest Period, shall mean the interest rate per annum determined by the
Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) to be the London
interbank offered rate of interest per annum appearing on Dow Jones Market Service display page 3750 or such other display page of the Dow
Jones Market Service as may replace such page evidencing quotes by the British Bankers' Association (or appropriate successor or, if the
British Bankers' Association or its successor ceases to provide such quotes, a comparable replacement determined by the Agent) at
approximately 11:00 a.m., London time, two (2) Business Days prior to the first day of such LIBOR Interest Period for an amount comparable
to such Advance and having a borrowing date and a maturity comparable to such LIBOR Interest Period.
The LIBO Rate shall be adjusted with respect to any LIBOR Based Rate Advance in Dollars outstanding on the effective date of any change in
the Reserve Percentage as of such effective date. The Administrative Agent shall give prompt notice to the Borrower of the LIBO Rate as
determined or adjusted in accordance herewith, which determination shall be conclusive absent manifest error.
2
"Advance(s)": Any monies advanced or credit extended to the Borrower by any Lender under the Revolving Credit, including without
limitation, cash Advances, Swing Line Advances and the issuance by Fronting Lender of Letters of Credit.
"Affected Lender": As defined in Section 2.15.
"Affiliate": With respect to any Person (the "Specified Person"), (a) any Person which directly or indirectly controls, or is controlled by, or is
under common control with, the Specified Person, and (b) any director or officer (or, in the case of a Person which is not a corporation, any
individual having analogous powers) of the Specified Person or of a Person who is an Affiliate of the Specified Person within the meaning of
the preceding clause (a); provided, however, that no Lender nor any Affiliate of any Lender shall be deemed to be an Affiliate of the Borrower
or any of its Subsidiaries. For purposes of the preceding sentence, "control" of a Person shall mean (i) the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by
contract or otherwise, and (ii) in any case shall include direct or indirect ownership (beneficially or of record) of, or direct or indirect power to
vote, 25% or more of the outstanding shares of any class of capital stock of such Person (or in the case of a Person that is not a corporation,
25%. or more of any class of equity interest).
"Alternate Base Rate": A rate of interest equal to the greater of (i) the Prime Rate or (ii) one half of one (0.5%) percent per annum in excess of
the Fed Funds Rate. The calculation and determination of the rates described in subsections (i) and (ii) above shall be made daily by the
Administrative Agent and such determination shall, absent manifest error, be final, conclusive and binding upon all parties hereto. Changes in
the Alternate Base Rate shall become effective on the same day as the Administrative Agent changes its Prime Rate or a change occurs in the
Fed Funds Rate, depending upon which rate is applicable on that day to the Alternate Base Rate.
"Alternate Base Rate Advance": Any Advance on which interest accrues at the Alternate Base Rate.
"Applicable Available Commitment Fee Percentage": The Applicable Commitment Fee Percentage determined by reference to the table set
forth on Annex II based upon the Borrower's compliance with the Interest Coverage Ratio at the levels set forth in such table as such Interest
Coverage Ratio is shown on the Quarterly Compliance Certificate delivered in accordance with Section 5.7. The Applicable Commitment Fee
Percentage shall be applied on:
(a) the first day of the calendar month immediately following the calendar month in which the Administrative Agent receives the Quarterly
Compliance Certificate delivered in respect of the first three fiscal quarters in any fiscal year or,
(b) with respect to the Quarterly Compliance Certificate delivered in respect of the last fiscal quarter in any fiscal year, the earlier to occur of (i)
the first day of the calendar month immediately following the calendar month in which the Administrative Agent shall have received from the
Borrower such Quarterly Compliance Certificate or (ii) the first day
3
of the calendar month immediately following the calendar month in which the date 45 days after the end of the fiscal year of the Borrower most
recently ended occurs
provided, however, that no such changes shall occur (x) until the Borrower has delivered its Quarterly Compliance Certificate for the fiscal
quarter ending March 31, 2001 and (y) unless no Default or Event of Default shall have occurred and be continuing. Upon the occurrence and
during the continuance of a Default or an Event of Default, the Applicable Available Commitment Fee Percentage may, in the discretion of the
Administrative Agent or at the direction of the Majority Lenders, be increased (and shall automatically be so increased if the Default or Event
of Default is a payment Default) to the margin described as Level III on Annex II (in addition to institution of the Default Rate, if applicable)
and shall be applied retroactively to the date of the occurrence of such Default or Event of Default (or in the event of a Default in respect of the
obligation to deliver a Quarterly Compliance Certificate for the last fiscal quarter in each fiscal year, the first day of the calendar month
immediately following the calendar month in which the date 45 days after the end of the last fiscal year of the Borrower occurs). The
Administrative Agent, Lenders and Borrower acknowledge that, on the date hereof, the Applicable Available Commitment Fee Percentage is
the margin described as Level I on Annex II, which Level shall remain applicable at all times through the first day of the calendar month
immediately following the calendar month in which the Administrative Agent shall have received from the Borrower the Quarterly Compliance
Certificate for the quarter ended March 31, 2001.
"Applicable Base Rate Margin": As set forth in Annex II.
"Applicable LIBO Rate Margin": As set forth in Annex II.
"Applicable Margins": The respective Applicable Base Rate Margin or Applicable LIBO Rate Margin determined by reference to the table set
forth on Annex II based upon the Borrower's compliance with the Interest Coverage Ratio at the levels set forth in such table as such Interest
Coverage Ratio is shown on the Quarterly Compliance Certificate delivered in accordance with Section 5.7. The Applicable Margin shall be
applied on:
(a) the first day of the calendar month immediately following the calendar month in which the Administrative Agent receives the Quarterly
Compliance Certificate delivered in respect of the first three fiscal quarters in any fiscal year or,
(b) with respect to the Quarterly Compliance Certificate delivered in respect of the last fiscal quarter in any fiscal year, the earlier to occur of (i)
the first day of the calendar month immediately following the calendar month in which the Administrative Agent shall have received from the
Borrower such Quarterly Compliance Certificate or (ii) the first day of the calendar month immediately following the calendar month in which
the date 45 days after the end of the fiscal year of the Borrower most recently ended occurs
provided, however, that no such changes shall occur (x) until the Borrower has delivered its Quarterly Compliance Certificate for the fiscal
quarter ending March 31, 2001 and (y) unless no Default or Event of Default shall have occurred and be continuing. Upon the occurrence and
during the continuance of a Default or an Event of Default, the Applicable Margin may, in the
4
discretion of the Administrative Agent or at the direction of the Majority Lenders, be increased (and shall automatically be so increased if the
Default or Event of Default is a payment default) to the margins described as Level III on Annex II (in addition to institution of the Default
Rate, if applicable) and shall be applied retroactively to the date of the occurrence of such Default or Event of Default (or in the event of a
Default in respect of the obligation to deliver a Quarterly Compliance Certificate for the last fiscal quarter in each fiscal year, the first day of
the calendar month immediately following the calendar month in which the date 45 days after the end of the latest fiscal year of the Borrower
occurs). The Administrative Agent, Lenders and Borrower acknowledge that, on the date hereof, the Applicable Margin is the margin described
as Level I on Annex II above, which Level shall remain applicable at all times through the first day of the calendar month immediately
following the calendar month in which the Administrative Agent shall have received from the Borrower the Quarterly Compliance Certificate
for the quarter ended March 31, 2001 (unless a Default or an Event of Default earlier occurs in which case the Applicable Margin shall be
adjusted as set forth above).
"Asset Sale": The sale, transfer or other disposition by the Borrower to any Person other than a Guarantor or by any Subsidiary of the Borrower
to any Person other than the Borrower or another Guarantor of (a) any of the existing or future capital stock or partnership interests (other than
an original issue of the stock or partnership interests of a Person where the issued shares or partnership interests are issued to Borrower or a
Guarantor) of any Subsidiary of the Borrower or (b) any other Property, now owned or hereafter acquired, of any nature whatsoever in any
transaction or series of related transactions (including any or all assets and business of any division or line of business and further including
intangible assets) of the Borrower or any of its Subsidiaries, excluding sales, transfers or other dispositions of inventory or other Property in the
ordinary course of business of the Borrower or any of its Subsidiaries or the trade-in or replacement of assets in the ordinary course of business
of the Borrower or any of its Subsidiaries.
"Authorized Officer": Any executive officer of the Borrower or the corporate controller of Borrower.
"Available Commitment": $75,000,000, as the same may be increased or reduced pursuant to Section 2.3.
"Available Commitment Fee": As defined in Section 2.6(a).
"Bankruptcy Remote Subsidiary": Means the wholly-owned Subsidiary of the Borrower created in connection with an Accounts Receivable
Securitization whose only material creditors are the purchaser or lender related to such Accounts Receivable Securitization and the Borrower or
any Subsidiary of the Borrower that is the originator and seller or contributor of accounts receivable to such Subsidiary in connection with an
Accounts Receivable Securitization.
"Borrowing": The making, pursuant to a Notice of Borrowing and the terms of this Agreement, of a cash Advance to the Borrower from all of
the Lenders on a pro rata basis on
5
a given date (or resulting from conversions on a given date) having, in the case of LIBOR Based Rate Advances, the same LIBOR Interest
Periods.
"Business Day": A day other than Saturday or Sunday when banks are generally open for business in Philadelphia, Pennsylvania, provided, that
when used in connection with a LIBOR Based Rate Advance, the term "Business Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"Cash Proceeds": With respect to any Equity Offering, the aggregate cash payments received by the Borrower and/or any of its Subsidiaries
from such Equity Offering.
"Change of Control": If (a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act), excluding Jack
Farber and/or any member(s) of his immediately family, and/or any trust under which Jack Farber and/or any member(s) of his immediate
family hold the legal and equitable interests, is or becomes 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 securities that such person has the right to acquire, whether such
right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 50% of the total voting power of the
issued and outstanding voting stock of the Borrower normally entitled to vote in the election of directors of the Borrower or (b) during any
consecutive two-year period, individuals who at the beginning of such period constituted the Board of Directors of Borrower (together with any
new directors whose election to the Board of Directors or whose nomination for election by the stockholders of the Borrower was approved by
a vote of a majority of the directors then still in office who were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office.
"Closing": As defined in Section 3.2.
"Closing Date": As defined in Section 3.2.
"Code": As defined in Section 2.12(b).
"Commitment and Acceptance": A Commitment and Acceptance among a Lender, the Administrative Agent and the Borrower substantially in
the form of Exhibit G, as amended, supplemented or otherwise modified from time to time.
"Consolidated Amortization Expense": For any Person, for any period, the consolidated amortization expense of such Person for such period,
determined on a consolidated basis for such Person and its consolidated Subsidiaries.
"Consolidated Capital Expenditures": For any Person, for any period, the aggregate gross increase during that period in the property, plant or
equipment reflected in the consolidated balance sheet of such Person and its consolidated Subsidiaries, but excluding expenditures made in
connection with the replacement, substitution or restoration of assets (a) to the extent financed from insurance proceeds paid on account of the
loss of or damage to the assets being replaced or restored or (b) with awards of compensation arising from the taking by
6
eminent domain or condemnation of the assets being replaced; provided, however, that "Consolidated Capital Expenditures" shall in any event
exclude the purchase price paid in connection with the acquisition of any other Person (including through the purchase of all of the capital
stock or other ownership interests of such Person or through merger or consolidation) to the extent allocable to property, plant and equipment.
"Consolidated Capitalization": For any Person, at any time, the sum of such Person's (a) Consolidated Funded Debt plus (b) Consolidated Net
Worth, determined on a consolidated basis for such Person and its consolidated Subsidiaries.
"Consolidated Depreciation Expense": For any Person, for any period, the consolidated depreciation expense of such Person for such period,
determined on a consolidated basis for such Person and its consolidated Subsidiaries.
"Consolidated EBITDA": For any Person, for any period, the difference between (a) the sum of the amounts for such period of (i) Consolidated
Net Income, (ii) Consolidated Tax Expense, (iii) Consolidated Interest Expense, (iv) Consolidated Amortization Expense and (v) Consolidated
Depreciation Expense (with respect to clauses (ii) through (v) of this definition, to the extent such amounts were deducted in computing
Consolidated Net Income) and (b) the amounts for such period of after-tax net gains on sales of fixed assets and other after-tax extraordinary
gains to the extent included in Consolidated Net Income, excluding sales in the ordinary course of business not to exceed $300,000 in the
aggregate for any fiscal year, all as determined on a consolidated basis for such Person and its consolidated Subsidiaries.
"Consolidated Funded Debt": For any Person, on any date, without duplication, the aggregate outstanding principal amount of (i) Indebtedness
recorded on a balance sheet of such Person prepared in accordance with GAAP, (ii) the items described in clause (c) of the definition of
"Indebtedness" whether or not recorded on a balance sheet of such Person and
(iii) all Capital (as that term is defined in the Accounts Receivable Securitization Documents) under the Accounts Receivable Securitization; in
each case of such Person and its consolidated Subsidiaries, all determined on a consolidated basis after elimination of all intercompany items.
"Consolidated Interest Expense": For any Person, for any period, the total interest expense of such Person and its consolidated Subsidiaries, as
would be shown on an income statement prepared in accordance with GAAP, and in any event including interest in respect of the Revolving
Credit and Discount (as that term is defined in the Accounts Receivable Securitization Documents) payable in respect of the Accounts
Receivable Securitization whether or not such interest is shown on such income statement.
"Consolidated Net Income": For any Person, for any period, the net income (or loss) of such Person and its Subsidiaries on a consolidated basis
for such period taken as a single accounting period determined on a consolidated basis for such Person and its consolidated Subsidiaries;
provided, however, that there shall be excluded (a) the income (or loss) of any other Person (other than Subsidiaries of such Person) in which
any third Person (other than such Person or any of its Subsidiaries) has a joint interest, except to the extent of the amount of cash dividends or
other cash distributions actually paid to such Person or any of its Subsidiaries by
7
such other Person during such period (subject to clause (c) below), (b) the income (or loss) of any other Person accrued prior to the date it
becomes a consolidated Subsidiary of such Person or is merged into or consolidated with such Person or any of its consolidated Subsidiaries or
such other Person's assets are acquired by such Person or any of its consolidated Subsidiaries, except (with respect to a Subsidiary previously
accounted for on the equity basis of accounting) to the extent of the income (or loss) actually paid to such Person or any of its Subsidiaries by
such other Person relating to such period in cash, and (c) the income of any consolidated Subsidiary of such Person to the extent that the
declaration or payment of dividends or similar distributions by that consolidated Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument, judgment, decree, order, statute, rule or governmental regulation applicable
to that consolidated Subsidiary, except to the extent of the cash dividends or cash distributions actually paid to such Person or any of its
Subsidiaries by such other Person during such period; provided, however, that income generated in connection with a waiver of any of the
provisions hereof shall not be included for any purposes hereof.
"Consolidated Net Worth": As of the date of determination, all items which in conformity with GAAP would be included under shareholders'
equity on a consolidated balance sheet of the Borrower and its Subsidiaries at such date.
"Consolidated Rental Payments": For any period, the aggregate amount of all rents paid or to be incurred under all operating leases of the
Borrower and the Subsidiaries of the Borrower as lessees (net of sublease income) during such period.
"Consolidated Tax Expense": For any Person, for any period, the consolidated income tax expense and/or benefit of such Person for such
period, determined on a consolidated basis for such Person and its consolidated Subsidiaries less any tax expense associated with gains on sales
(excluding sales in the ordinary course of business) of fixed assets and other extraordinary gains to the extent such gains are included in
Consolidated Net Income.
"Consolidated Total Assets": For any Person, all of the assets of such Person as would be shown on such Person's balance sheet prepared in
accordance with GAAP, determined on a consolidated basis for such Person and its consolidated Subsidiaries.
"Default": Any event, act, condition or occurrence, which with notice, or lapse of time or both, would constitute an Event of Default hereunder.
"EBITDA": Shall have the meaning ascribed to the term "Consolidated EBITDA" as set forth herein except the calculation of EBITDA
(including the calculation of each of its components) shall be done on an unconsolidated basis.
"Employee Benefit Plan": As defined in Section 4.11(c).
"Engagement Letter": As defined in Section 10.23.
"Environmental Authorizations": As defined in Section 4.15(a).
8
"Environmental Laws" The common law and all applicable Federal, state, local and foreign laws or regulations, codes, orders, decrees,
judgments or injunctions issued, promulgated, approved or entered thereunder, now or hereafter in effect, relating to pollution or protection of
the environment or to health or safety as either relates to any Hazardous Materials, including, without limitation, laws relating to (a) emissions,
discharges, releases or threatened releases of Hazardous Materials into the environment (including ambient air, indoor air, surface water,
ground water, land surface or subsurface strata), (b) the manufacture, processing, distribution, use, generation, treatment, storage, disposal,
transport, shipping or handling of Hazardous Materials, and (c) underground and above-ground storage tanks, and related piping, and
emissions, discharges, releases or threatened releases therefrom.
"Equity Offering" The sale by the Borrower or any of its Subsidiaries of any of its capital stock in any public or private transaction, except (a)
any nonredeemable capital stock of the Borrower issued in exchange for or upon conversion of any Indebtedness of the Borrower or any of its
Subsidiaries, (b) any issuance in connection with the exercise of any stock options, (c) the issuance of nonredeemable capital stock in
connection with a Permitted Acquisition or (d) any capital stock issued in connection with employee incentive plans or dividend reinvestment
plans.
"ERISA": The Employee Retirement Income Security Act of 1972, as the same may be amended, from time to time.
"Event of Default": As defined in Section 8.1.
"Exchange Act": The Securities Exchange Act of 1934, as amended, together with all rules and regulations promulgated in connection
therewith.
"Existing Loan Agreement": That certain Amended and Restated Loan Agreement dated as of July 21, 1997 among the Borrower, First Union
National Bank (as successor to CoreStates Bank, N.A.), as Administrative Agent, Merrill Lynch & Co., as Syndication Agent and the lenders
party thereto.
"Existing Debt of the Borrower": The Indebtedness of the Borrower and its Subsidiaries as set forth on Schedule 4.10 attached hereto.
"Expenses": As defined in Section 10.5.
"Fed Funds Rate": On any day, the effective rate of interest charged by the Federal Reserve Bank of New York for overnight federal funds in
New York as reported by the Federal Reserve Bank in New York for such day.
"Financial Statements": The financial statements of Borrower previously furnished to the Administrative Agent, as more fully described on
Schedule 1.1 attached hereto and incorporated herein by reference.
"Fixed Charge Coverage Ratio": For any period, the ratio of
(a) the sum of the Borrower's (i) Consolidated EBITDA for such period less (ii) Consolidated Capital Expenditures
9
for such period plus (iii) Consolidated Rental Payments for such period to (b) the sum of the (i) current portion of principal on all long-term
Indebtedness (excluding the Revolving Credit), plus (ii) Consolidated Interest Expense (including interest in respect of the Revolving Credit
and discount payable in respect of the Accounts Receivable Securitization), plus (iii) Consolidated Tax Expense, plus (iv) Consolidated Rental
Payments for such period.
"Fronting Fee": As defined in Section 2.6(b)(ii).
"Fronting Lender": PNC (or an Affiliate of PNC, if applicable), as the issuer of Letters of Credit under this Agreement.
"GAAP": Generally accepted accounting principles applied in a manner consistent with the most recent audited financial statements of the
Borrower prepared as of December 31, 2000 and furnished to the Administrative Agent.
"Governmental Authority": Any government or political subdivision or any agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator (to the extent binding on the Borrower or any of its Subsidiaries), in
each case whether foreign or domestic.
"Guarantee(s)" Guarantees substantially in the form of Exhibit A attached hereto and incorporated herein by reference.
"Guarantors": Each of The Paper Magic Group, Inc., a Pennsylvania corporation, Berwick Delaware, Inc., a Delaware corporation, Berwick
Industries LLC, a Pennsylvania limited liability company, Cleo Inc, a Tennessee corporation, Cleo Delaware, Inc., a Delaware corporation,
Philadelphia Industries, Inc., a Delaware corporation, LLM Holdings, Inc., a Delaware corporation, The Paper Magic Group, Inc., a Delaware
corporation, Don Post Studios, Inc., a Delaware corporation, Paper Magic Group (Hong Kong) Limited, a Hong Kong limited company and
each Person which executes a Guarantee after the Closing Date.
"Hazardous Materials": Any pollutant, contaminant, hazardous or toxic substance, hazardous material, hazardous waste, hazardous constituent,
asbestos or asbestos-containing material, petroleum, including crude oil and any fraction thereof, or other chemicals, substances or materials
subject to regulation under any Environmental Law.
"Hedge Agreement": Any contract or agreement providing for any rate swap transaction, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange
transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap, currency swap or any
other similar transaction entered into to protect against the risk of fluctuation in interest rates or foreign exchange rates.
"Indebtedness": With respect to any Person, without duplication, (a) all indebtedness of such Person for borrowed money, (b) the deferred
purchase price of assets or services which in accordance with GAAP would be shown as a liability on the balance sheet of such Person, (c) the
face amount of all outstanding letters of credit issued for the account of such
10
Person and, without duplication, all drafts drawn thereunder, (d) all Indebtedness of a second Person secured by any Lien on any Property
owned by such first Person, whether or not such Indebtedness has been assumed by such first Person, limited to the fair market value of the
Property subject to such Lien, (e) all capitalized lease obligations of such Person, (f) all obligations of such Person to pay a specified purchase
price for goods or services whether or not delivered or accepted, i.e., take-or-pay and similar obligations, (g) all obligations of such Person
under interest rate agreements, (h) without duplication, all contingent obligations of such Person required to be reflected as a liability on the
balance sheet of such Person prepared in accordance with GAAP, (i) all obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments required to be reflected as a liability on the balance sheet of such Person prepared in accordance with GAAP, (j) all
obligations of such Person upon which interest charges are customarily paid, and
(k) current obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of such Person or any
warrants, rights or options to acquire such capital stock (with redeemable preferred stock being valued at the greater of its voluntary or
involuntary liquidation preference plus accrued and unpaid dividends); provided, however, that Indebtedness shall not include trade payables,
accrued expenses, accrued dividends, deferred compensation, accrued income taxes, deferred income taxes and minority interests in
Subsidiaries.
"Intercompany Notes": As defined in Section 5.16.
"Interest Rate Determination Date": With respect to a LIBOR Based Rate Advance, the date which is two (2) Business Days prior to the
commencement of the LIBOR Interest Period for such Borrowing.
"Inventory": All of the "inventory" (as that term is defined in of the Uniform Commercial Code as in effect from time to time in the
Commonwealth of Pennsylvania) of the Borrower and its Subsidiaries, whether now existing or hereinafter acquired or created.
"Investments": Investments of any Person shall mean (i) any direct or indirect purchase or other acquisition of any share of capital stock,
evidence of Indebtedness or other security issued by any other Person, (ii) any loan, advance (other than advance to employees for travel
expenses, drawing accounts and similar expenditures extended in the ordinary course and consistent with past practice) or extension of credit
(other than accounts receivable created in the ordinary course) to, or contribution to the capital of any other Person, including any guarantee or
Indebtedness of any other Person and any joint venture, (iii) any commitment or option to make an investment if, in the case of an option, the
consideration therefor exceeds $1,000,000 and (iv) any capital contribution to any other Person; and any of the foregoing shall be considered an
Investment whether such investment is acquired by purchase, exchange, issuance of stock or other securities, merger, reorganization or any
other method. Notwithstanding the foregoing, non-speculative Hedge Agreements shall not be considered Investments.
"Knowledge ": Whenever used in this Agreement, the actual knowledge of any executive officer of the Borrower or of the president of any of
the Subsidiaries.
"L/C Commitment": $20,000,000.
11
"L/C Fees": As defined in Section 2.6(b)(i).
"Lender(s)": The lending institutions listed on Annex I attached hereto and incorporated herein by reference and any assignees thereof in
accordance with Section 10.10 hereof.
"Letter of Credit or Letters of Credit": (a) Standby letter or letters of credit, and (b) commercial letter or letters of credit, in each case issued or
to be issued by the Fronting Lender for the account of the Borrower pursuant to Section 2.2 herein.
"LIBOR Based Rate": As defined in Section 2.5(b)(i).
"LIBOR Based Rate Advance": Any Advance on which interest accrues at the LIBOR Based Rate.
"LIBOR Based Rate Margin": As defined in Section 2.5(b)(i).
"LIBOR Interest Period": As defined in Section 2.5(b)(ii).
"Lien": Other than as expressly excluded in the next sentence, any interest in Property securing an obligation owed to, or a claim by, a Person
other than the owner of the Property, whether such interest is based on the common law, statute or contract, and including, but not limited to,
the security interest or lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment
for security purposes. The term "Lien" shall include without limitation, reservations, exceptions, encroachments, easements, rights-of-way,
covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting Property other than Property which is leased by
the Borrower or any of its Subsidiaries or for which the Borrower or any of its Subsidiaries has an unexercised option to purchase such
Property and other than those which would not materially adversely interfere with the Borrower's or any of the Borrower's Subsidiary's use of
the Property and would not materially detract from the value of the Property. For the purposes of this Agreement, the Borrower and each of its
Subsidiaries shall be deemed to be the owner of any Property which it has acquired or holds subject to a conditional sale agreement or other
arrangement pursuant to which title to the Property has been retained by or vested in some other Person for security purposes.
"Loan Documents": This Agreement, the Revolving Credit Notes, the Swing Line Note, the Guarantees and all agreements, instruments and
documents executed and/or delivered in connection herewith or therewith, all as may be amended, supplemented, replaced, restated or
superseded from time to time.
"Losses": Of any Person, the losses, liabilities, claims (including those based upon negligence, strict or absolute liability and liability in tort),
damages, expenses, obligations, penalties, actions, judgments, Liens, penalties, fines, suits, costs or disbursements of any kind or nature
whatsoever (including reasonable fees and expenses of counsel in connection with any Proceeding commenced or threatened, whether or not
such Person shall be designated a party
12
thereto) at any time (including following the payment of the Obligations and/or the termination of the Revolving Credit) incurred by, imposed
on or asserted against such Person.
"Majority Lenders": The Lenders holding Pro Rata Percentages aggregating more than 66? % of the total Revolving Credit.
"Mandatory Loan": As defined in Section 2.4(b)(iii)(B).
"Material Adverse Effect": With respect to the Borrower and its Subsidiaries, (a) any material adverse effect (both before and after giving
effect to the transactions contemplated by this Agreement and the other Loan Documents) with respect to the business, assets, properties,
financial condition, stockholders' equity, contingent liabilities, prospects, material agreements or results of operations of the Borrower and its
Subsidiaries, taken as one enterprise on a consolidated basis, or (b) any fact or circumstance that, singly or in the aggregate with any other fact
or circumstance, has a reasonable likelihood of resulting in or leading to (i) a material adverse effect hereunder or under any other Loan
Document or the inability of the Lenders to enforce in any material respect their rights purported to be granted hereunder or under any other
Loan Document, or (ii) a material adverse effect on the ability of the Borrower and its Subsidiaries taken as a whole on a consolidated basis to
effect (including hindering or unduly delaying) the transactions contemplated by this Agreement and the other Loan Documents on the terms
contemplated hereby and thereby.
"Material Subsidiary": As of the last day of the immediately preceding fiscal year of the Borrower, any Subsidiary which either (i) owns five
percent (5%) or more of the assets of the Borrower and its consolidated Subsidiaries or (ii) for the immediately preceding fiscal year had net
income representing 5% or more of the Consolidated Net Income of the Borrower.
"Maturity Date": April 30, 2004 as the same may be extended pursuant to Section 2.13.
"Moody's": Moody's Investors Service, Inc.
"Net Cash Proceeds from Equity Offerings": With respect to any Equity Offering, the Cash Proceeds resulting therefrom net of customary and
reasonable expenses of such offering.
"New Lender Joinder": A New Lender Joinder among a proposed Lender, the Administrative Agent and the Borrower substantially in the form
of Exhibit H, as amended, supplemented or otherwise modified from time to time.
"Notes": The Revolving Credit Notes and the Swing Line Note.
"Notice of Borrowing": As defined in Section 2.4(b)(ii).
"Obligations": All existing and future liabilities and obligations of every kind or nature at any time owing by the Borrower to any one or more
of the Lenders, the Fronting Lender or to the Administrative Agent, whether joint or several, related or unrelated, primary or
13
secondary, matured or contingent, due or to become due, and whether principal, interest, fees or Expenses, including, without limitation,
liabilities and obligations in respect of the Revolving Credit, whether related to cash Advances or Letters of Credit (whether drawn or
undrawn), and under Hedge Agreements to which any Lender is a party.
"Offered Amount": As defined in Section 2.3(b).
"Over-Limit Amount": As defined in Section 2.3.
"Outstandings": At any time, the sum of the (a) aggregate amount of all cash Advances outstanding hereunder, and (b) face amount of all
Letters of Credit and all outstanding Reimbursement Obligations.
"Permitted Acquisitions": As defined in Section 6.2.
"Permitted Liens": As defined in Section 6.3.
"Person": An individual, partnership, corporation, limited liability company, limited liability partnership, trust, unincorporated association or
organization, joint venture or any other entity.
"PNC": PNC Bank, National Association.
"Prime Rate": That rate so designated by the Administrative Agent from time to time as its prime rate of interest, which is not necessarily the
lowest or best rate of interest charged by the Administrative Agent.
"Proposed New Lender": As defined in Section 2.3(b).
"Pro Rata Percentages": As defined in Section 2.1(a)(i).
"Pro Rata Shares": As defined in Section 2.1(a)(i).
"Proceeding": Any claim, action, judgment, suit, hearing, governmental investigation, arbitration (to the extent binding on the Borrower or any
of its Subsidiaries) or proceeding, including by or before any Governmental Authority.
"Property": Any existing or future interest of the Borrower or any of its Subsidiaries (other than the Bankruptcy Remote Subsidiary) in any
existing or future property or asset of any kind or nature, whether real, personal or mixed, or tangible or intangible, now owned or hereafter
acquired or created (including without limitation the capital stock of any Subsidiary).
"Quarterly Compliance Certificate": As defined in Section 5.8.
"Real Property": All right, title and interest of the Borrower or any of its Subsidiaries (including any leasehold estate) in and to any parcel of
real property owned, leased or operated by the Borrower or any of its Subsidiaries together with, in each case, all
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improvements and appurtenant fixtures, equipment, personal property, easements and other property and rights incidental to the ownership,
lease or operation thereof.
"Reduced Level": As defined in Section 2.11(d).
"Regular Advances": Advances other than Swing Line Advances.
"Regulation D": Regulation D of the Board of Governors of the Federal Reserve System, comprising Part 204 of Title 12, Code of Federal
Regulations, as amended, and any successor thereto.
"Regulations": As defined in Section 2.12(b).
"Reimbursement Obligations": As defined in Section 2.2(c).
"Requested Increase": As defined in Section 2.3(b).
"Reserve": For any day, that reserve (expressed as a decimal) which is in effect (whether or not actually incurred) with respect to a Lender (or
any Affiliate of such Lender if applicable pursuant to Section 2.9(e)) on such day, as prescribed by the Board of Governors of the Federal
Reserve System (or any successor or any other banking authority to which a Lender (or any Affiliate of such Lender if applicable pursuant to
Section 2.9(e)) is subject including any board or governmental or administrative agency of the United States or any other jurisdiction to which
a Lender (or any Affiliate of such Lender if applicable pursuant to Section 2.9(e)) is subject), for determining the maximum reserve
requirement (including without limitation any basic, supplemental, marginal or emergency reserves) for Eurocurrency Liabilities as defined in
Regulation D.
"Reserve Percentage": For a Lender (or any Affiliate of such Lender if applicable pursuant to Section 2.9(e)) on any day, that percentage
(expressed as a decimal) which is in effect on such day, prescribed by the Board of Governors of the Federal Reserve System (or any successor
or any other banking authority to which a Lender (or any Affiliate of such Lender if applicable pursuant to Section 2.9(e)) is subject, including
any board or governmental or administrative agency of the United States or any other jurisdiction to which a Lender (or any Affiliate of such
Lender if applicable pursuant to Section 2.9(e)) is subject), for determining the maximum reserve requirement (including without limitation any
basic, supplemental, marginal or emergency reserves) for (a) deposits of United States dollars or (b) Eurocurrency Liabilities as defined in
Regulation D, in each case applicable to a LIBOR Based Rate Advance(s) subject to an Adjusted LIBO Rate. The Adjusted LIBO Rate shall be
adjusted automatically on and as of the effective day of any change in the Reserve Percentage.
"Revolving Credit": As defined in Section 2.1.
"Revolving Credit Notes": As defined in Section 2.1(c)(i).
"S&P": Standard & Poor's Corporation.
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"Securities Act": The Securities Act of 1933, as amended, together with all rules and regulations promulgated in connection therewith.
"Subsidiary": With respect to any Person at any time, (a) any corporation more than fifty (50%) percent of whose voting stock is legally and
beneficially owned by such Person or owned by a corporation more than fifty (50%) percent of whose voting stock is legally and beneficially
owned by such Person; (b) any trust of which a majority of the beneficial interest is at such time owned directly or indirectly, beneficially or of
record, by such Person or one or more Subsidiaries of such Person; and (c) any partnership, joint venture or other entity of which ownership
interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at such
time owned directly or indirectly, beneficially or of record, by, or which is otherwise controlled directly, indirectly or through one or more
intermediaries by, such Person or one or more Subsidiaries of such Person.
"Swing Line Advances": Advances under the Swing Line Commitment made by the Swing Line Lender to the Borrower pursuant to Section
2.1(b).
"Swing Line Commitment": The amount set forth opposite the Swing Line Lender's name on Annex I attached hereto directly below the
column entitled "Swing Line Commitment", as the same may be reduced from time to time pursuant to Section 8.
"Swing Line Lender": PNC, in its capacity as such, and its permitted successors and assigns in such capacity.
"Swing Line Note": As defined in Section 2.1(c)(ii).
"Taxes": As defined in Section 2.12(a)
"Transferee": As defined in Section 10.10(d).
"Withholding Certificate": As defined in Section 2.12(b).
1.2 Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or
any consolidation or other accounting computation is required to be made for the purposes of this Agreement, this shall be done in accordance
with GAAP, to the extent applicable, except where such principles are inconsistent with the requirements of this Agreement.
SECTION 2. THE LOAN.
2.1 Revolving Line of Credit. Subject to the terms and conditions of this Agreement, the Lenders hereby establish for the benefit of the
Borrower a revolving line of credit (collectively, the "Revolving Credit") which shall include Advances extended by the Lenders to or for the
benefit of the Borrower from time to time hereunder, in aggregate principal amount at any time outstanding, not to exceed the then Available
Commitment in effect from time to time.
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(a) (i) Each Lender agrees severally to make Regular Advances to the Borrower as a part of the Revolving Credit, subject to the terms of this
Agreement, up to the lesser of the amounts (the "Pro Rata Shares") or percentages (the "Pro Rata Percentages") of the Revolving Credit
opposite its name on Annex I attached hereto and incorporated herein by reference.
(ii) Regular Advances under the Revolving Credit (A) shall be made at any time and from time to time on and after the Closing Date and prior
to the Maturity Date, (B) may be made as Alternate Base Rate Advances or, at the Borrower's option and subject to the terms hereof, as LIBOR
Based Rate Advances or, at the Borrower's option and subject to the terms hereof, as Letters of Credit; provided that all Advances made by all
of the Lenders pursuant to the same Borrowing shall, unless otherwise specifically provided herein, consist entirely of Advances of the same
type, (C) may be repaid and reborrowed in accordance with the provisions hereof, (D) shall not, when aggregated with a Lender's Pro Rata
Percentage of other Advances then outstanding, exceed for such Lender, at any time outstanding, the Pro Rata Share of such Lender, at such
time and (E) shall not be made if, at the time the requested Advance is to be made, the aggregate Outstandings, after giving effect to the
Advance requested by the relevant Notice of Borrowing, would exceed the Available Commitment in effect at such time.
(b) (i) The Swing Line Lender may, in its sole and absolute discretion, make Swing Line Advances to the Borrower as a part of the Revolving
Credit, subject to the terms of this Agreement, up to the Swing Line Commitment.
(ii) Swing Line Advances under the Revolving Credit (A) shall be made at any time and from time to time on and after the Closing Date and
prior to the Maturity Date, (B) shall be made only in cash and as Alternate Base Rate Advances and shall not be entitled to be converted into
LIBOR Based Rate Advances so long as they remain Swing Line Advances, (C) shall be repaid on the earlier of (x) the Maturity Date or (y) the
seventh day after the date such Swing Line Advance was made and may be reborrowed in accordance with the provisions hereof, (D) shall not
be made if the aggregate principal amount of Swing Line Advances and the Swing Line Lender's Pro Rata Percentage of all other Advances
then outstanding, after giving effect to the Swing Line Advance requested by the relevant Notice of Borrowing, would exceed the Swing Line
Lender's Pro Rata Share and (E) shall not be made if the aggregate principal amount of Swing Line Advances and all other Advances then
outstanding, after giving effect to the Swing Line Advance requested by the relevant Notice of Borrowing, would exceed the Available
Commitment in effect at such time. In no event shall the aggregate principal amount of Swing Line Advances outstanding at any time exceed
the Swing Line Commitment.
(c) (i) At Closing, the Borrower shall execute and deliver its promissory note to each Lender in the principal amount of such Lender's Pro Rata
Share, each in the form attached hereto as Exhibit B-1 (as amended, replaced, restated or superseded from time to time, collectively the
"Revolving Credit Notes") to evidence its unconditional obligation to repay each Lender for all Advances made under the Revolving Credit,
with interest as herein and therein provided. Each Advance under the Revolving Credit shall be deemed evidenced by the
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Revolving Credit Notes, which are deemed incorporated herein by reference and made a part hereof.
(ii) At Closing, the Borrower shall execute and deliver its promissory note to the Swing Line Lender in the principal amount of the Swing Line
Commitment, in the form attached hereto as Exhibit B-2 (as amended, replaced, restated or superseded from time to time, the "Swing Line
Note") to evidence its unconditional obligation to repay the Swing Line Lender for all Swing Line Advances made under the Revolving Credit,
with interest as herein and therein provided. Each Swing Line Advance under the Revolving Credit shall be deemed evidenced by the Swing
Line Note, which is deemed incorporated herein by reference and made a part hereof.
(d) The term of the Revolving Credit shall expire on the Maturity Date unless earlier terminated in accordance with the terms hereof. On such
date, unless having been sooner accelerated by the Administrative Agent pursuant to the terms hereof, the Revolving Credit shall be terminated
and all of the Obligations shall be due and payable in full, and as of which date, no further Advances shall be available from the Lenders.
2.2 Letters of Credit.
(a) As part of the Revolving Credit and subject to its terms and conditions and the customary terms, conditions and procedures of the Fronting
Lender, the Fronting Lender, shall, at the request of the Administrative Agent and on behalf of and for the benefit of the Lenders, make
available to the Borrower (either for its own account or, at the Borrower's request, as a co-applicant with any of the Guarantors, each of which
is authorized to request the issuance of a Letter of Credit) Letters of Credit which shall not exceed, in the aggregate at any one time
outstanding, the L/C Commitment. All Letters of Credit issued under the Revolving Credit shall reduce dollar for dollar the amount available to
be borrowed by the Borrower under the Available Commitment. No standby Letter of Credit shall be issued with an expiry date later than the
earlier of: (i) one (1) year from the date of issuance and
(ii) the Maturity Date. No commercial Letter of Credit shall be issued with an expiry date later than the earlier of: (i) one hundred twenty (120)
days from the date of issuance and (ii) the Maturity Date. The Borrower shall, and shall cause any Guarantor with which it is a co-applicant as
to any Letter of Credit to, execute and deliver to the Fronting Lender all letter of credit agreements and other documents, instruments and
agreements customarily required by the Fronting Lender for such purposes. All such documents, instruments and agreements shall be in form
and substance satisfactory to the Fronting Lender.
(b) Immediately upon the issuance of any Letter of Credit, the Fronting Lender is deemed to have granted to each Lender, and each Lender is
hereby deemed to have irrevocably acquired, an individual participating interest (without recourse or warranty), in accordance with each
Lender's respective Pro Rata Percentage, in all of the Fronting Lender's rights and liabilities with respect to such Letter of Credit. Each Lender
shall be directly, irrevocably and unconditionally obligated to the Fronting Lender, according to its Pro Rata Percentage, to reimburse the
Fronting Lender for any draws made at any time without regard to the occurrence of a Default or Event of Default (including without
limitation, following the
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commencement of any bankruptcy, reorganization, receivership, liquidation or dissolution proceeding with respect to the Borrower) under any
Letter of Credit outstanding under the L/C Commitment not immediately reimbursed by the Borrower.
(c) In the event of any request for drawing under any Letter of Credit by the beneficiary thereof, the Fronting Lender shall promptly notify the
Borrower and the Borrower shall immediately reimburse the Fronting Lender on the day when such drawing is honored, by either a cash
payment by the Borrower, or in the absence of such payment by the Borrower, by the Lenders automatically making, or having been deemed to
have made, (without further request or approval of the Borrower) a cash Advance under the Revolving Credit on such date which shall accrue
interest at the Alternate Base Rate. All Advances which constitute a reimbursement for a draw under a Letter of Credit shall be shared by the
Lenders in accordance with their respective Pro Rata Percentages. If, for any reason, proceeds of Advances are not received by the Fronting
Lender on the date a drawing under a Letter of Credit is honored in an amount equal to the amount of such drawing, the Borrower shall
reimburse the Fronting Lender, on the Business Day immediately following the date of such drawing, in an amount in same day funds equal to
the excess of the amount of such drawing over the amount of such proceeds, if any, that are so received, plus accrued interest on such amount
at the Alternate Base Rate. The Borrower's reimbursement obligation for draws under Letters of Credit along with its obligation to pay L/C
Fees and Fronting Fees shall herein be referred to collectively as the Borrower's "Reimbursement Obligations". All of the Borrower's
Reimbursement Obligations hereunder with respect to Letters of Credit shall apply unconditionally and absolutely to, and shall be joint and
several with respect to, Letters of Credit issued hereunder on behalf of the Borrower as a co-applicant with any of the Guarantors as if such
Letters of Credit had been issued for the account of the Borrower alone and the term "Reimbursement Obligations" as used throughout this
Agreement and the other Loan Documents shall be deemed to include the Borrower's Reimbursement Obligations and its obligation to pay L/C
Fees and Fronting Fees with respect to all such Letters of Credit.
(d) (i) In the event that the Borrower shall fail to reimburse the Fronting Lender as provided in Section 2.2(c) in an amount equal to the amount
of the drawing honored by the Fronting Lender under a Letter of Credit, the Fronting Lender shall promptly notify each Lender of the
unreimbursed amount of such drawing and of such Lender's participation therein based on such Lender's Pro Rata Percentage. Each Lender
shall make available to the Fronting Lender an amount equal to its respective participation in same day funds, at the office of the Fronting
Lender specified in such notice, not later than 1:00 p.m. (Philadelphia time) on the Business Day after the date notified by the Fronting Lender.
In the event that any Lender fails to make available to such Fronting Lender the amount of such Lender's participation based on such Lender's
Pro Rata Percentage in such Letter of Credit, as provided in this Section 2.2(d), the Fronting Lender shall be entitled to recover such amount on
demand from such Lender together with interest at the overnight Fed Funds Rate for the first three (3) days and at the Alternate Base Rate for
each day thereafter. The Fronting Lender shall distribute to each other Lender which has paid all amounts payable by it under this Section
2.2(d) with respect to any Letter of Credit, such other Lender's share, based on such Lender's Pro Rata Percentage, of all payments received by
the Fronting Lender from the Borrower in reimbursement of drawings honored by the Fronting Lender under such Letter of Credit, when
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such payments are received. Nothing in this Section 2.2(d) shall be deemed to relieve any Lender from its obligation to pay all amounts payable
by it under this Section 2.2(d) with respect to any Letter of Credit issued by the Fronting Lender or to prejudice any rights that the Borrower or
any other Lender may have against a Lender as a result of any default by such Lender hereunder and no Lender shall be responsible for the
failure of any other Lender to pay its respective participation, based on its Pro Rata Percentage, payable under this
Section 2.2(d).
(ii) In connection with the failure of any Lender to make available to the Fronting Lender the amount of such Lender's participation in any
Letter of Credit, such Lender hereby agrees to protect, indemnify, and save the Fronting Lender harmless from and against any and all claims,
demands, liabilities, damages, losses, costs, charges and expenses (including, without limitation, reasonable attorneys' fees, allocated costs of
internal counsel and the costs (including judgments) in connection with any related litigation) which the Fronting Lender may incur or be
subject to as a consequence, direct or indirect, of the failure of such Lender to make available its participation in such Letter of Credit.
Notwithstanding anything to the contrary contained in this
Section 2.2(d), each Lender providing its participation in any Letter of Credit shall have no obligation to indemnify the Fronting Lender in
respect of any liability incurred by the Fronting Lender arising solely out of the gross negligence or willful misconduct of the Fronting Lender.
(e) The obligation of the Borrower to reimburse the Fronting Lender for drawings made under the Letters of Credit and the obligations of the
Lenders to the Fronting Lender under Section 2.2(d) shall be unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, setoff, defense or other right that the Borrower or any Affiliate of the Borrower or any other Person may have at
any time against a beneficiary or any transferee of any Letter of Credit (or any Persons for whom any such beneficiary or transferee may be
acting), the Fronting Lender, any Lender or any other Person, whether in connection with this Agreement, the transactions contemplated herein
or any unrelated transaction;
(iii) any draft, demand, certificate or any other document presented under any Letter of Credit proving to be forged, fraudulent or invalid in any
respect or any statement therein being untrue or inaccurate in any respect;
(iv) payment by the Fronting Lender under any Letter of Credit against presentation of a demand, draft or certificate or other document that
does not comply with the terms of such Letter of Credit unless the Fronting Lender shall have acted in the absence of good faith or with willful
misconduct or gross negligence in issuing such payment; or
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(v) the fact that a Default or Event of Default shall have occurred and be continuing.
(f) If by reason of (i) any change after the Closing Date in applicable law, regulation, rule, decree or regulatory requirement or any change in
the interpretation or application by any judicial or regulatory authority of any law, regulation, rule, decree or regulatory requirement or (ii)
compliance by the Fronting Lender or any Lender with any direction, reasonable request or requirement (whether or not having the force of
law) of any governmental or monetary authority including, without limitation, Regulation D:
(A) the Fronting Lender or any Lender shall be subject to any tax or other levy or charge of any nature or to any variation thereof (except for
changes in the rate of any tax on the net income of the Fronting Lender or any Lender or its applicable lending office) or to any penalty with
respect to the maintenance or fulfillment of its obligations under this Section 2.2, whether directly or by such being imposed on or suffered by
the Fronting Lender or any Lender;
(B) any reserve, deposit or similar requirement is or shall be applicable, imposed or modified in respect of any Letter of Credit issued by the
Fronting Lender or participations therein purchased by any Lender; or
(C) there shall be imposed on the Fronting Lender or any Lender any other condition regarding this Section 2.2, any Letter of Credit or any
participation therein;
and the result of the foregoing is to directly or indirectly increase the cost to the Fronting Lender or any Lender of issuing, creating, making or
maintaining any Letter of Credit or of purchasing or maintaining any participation therein, or to reduce the amount receivable in respect thereof
by the Fronting Lender or any Lender, then and in any such case the Fronting Lender or such Lender shall, within 90 days after the additional
cost is incurred or the amount received is reduced, notify the Borrower and the Borrower shall pay on demand such amounts as may be
necessary to compensate the Fronting Lender or such Lender on an after-tax basis for such additional cost or reduced receipt, together with
interest on such amount from the date demanded until payment in full thereof at a rate per annum equal at all times to the Alternate Base Rate.
A certificate signed by an officer of the Lender as to the amount of such increased cost or reduced receipt showing in reasonable detail the basis
for the calculation thereof, submitted to the Borrower and the Administrative Agent by the Fronting Lender or any Lender, as the case may be,
shall, except for manifest error, be final, conclusive and binding for all purposes.
(g) In addition to amounts payable as elsewhere provided in this Section 2.2, without duplication, the Borrower hereby agrees to protect,
indemnify, pay and save the Fronting Lender harmless from and against any and all claims, demands, liabilities, damages, losses, costs, charges
and expenses (including reasonable attorneys' fees and reasonable allocated costs of internal counsel) which the Fronting Lender may incur or
be subject to as a consequence, direct or indirect, of (i) the issuance of the Letters of Credit or (ii) the failure of the Fronting Lender to honor a
drawing under any Letter of Credit as a result of any act or omission,
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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").
As between the Borrower and the Fronting Lender, the Borrower assumes all risks of the acts and omissions of, or misuse of the Letters of
Credit issued by the Fronting Lender by, the respective beneficiaries of such Letters of Credit. In furtherance and not in limitation of the
foregoing, the Fronting Lender shall not be responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or legal effects of any
document submitted by any party in connection with the application for and issuance of such Letters of Credit, even if it should in fact prove to
be in any or all respects invalid, insufficient, inaccurate, fraudulent or forged; (ii) for the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any such Letter of Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, that may prove to be invalid or ineffective for any reason; (iii) for failure of the beneficiary of any such Letter of Credit to comply fully
with conditions required in order to draw upon such Letter of Credit; (iv) for errors, omissions, interruptions or delays in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, whether or not they are in cipher, unless any of the foregoing are caused
by the Fronting Lender's gross negligence or willful misconduct; (v) for errors in interpretation of technical terms; (vi) for any loss or delay in
the transmission of any document required in order to make a drawing under any such Letter of Credit or of the proceeds thereof, unless caused
by the Fronting Lender's gross negligence or willful misconduct; (vii) for the misapplication by the beneficiary of any such Letter of Credit of
the proceeds of any drawing under such Letter of Credit; and (viii) for any consequences arising from causes beyond the control of the Fronting
Lender, including, without limitation, any Government Acts. None of the above shall affect, impair, or prevent the vesting of any of the
Fronting Lender's rights or powers hereunder.
In furtherance and extension and not in limitation of the specific provisions hereinabove set forth, any action taken or omitted by the Fronting
Lender in connection with the Letters of Credit issued by it or the related certificates, if taken or omitted in good faith, shall not create any
liability on the part of the Fronting Lender to the Borrower.
Notwithstanding anything to the contrary contained in this
Section 2.2(g), the Borrower shall have no obligation to indemnify the Fronting Lender in respect of any liability incurred by the Fronting
Lender arising solely out of the gross negligence or willful misconduct of the Fronting Lender.
2.3 Voluntary Reduction or Increase of Commitment.
(a) The Borrower may, at any time, without premium or penalty, permanently reduce the Available Commitment then available. The exercise
of the foregoing option shall be evidenced by the Borrower giving the Administrative Agent written notice of the Borrower's election to do so
(as evidenced for the purposes of this Section by a written acknowledgment of receipt executed by such officer of the Administrative Agent as
the Administrative Agent may designate to the Borrower in writing) of such reduction request. Such notice shall be irrevocable and shall
specify the extent to which the reduction should be applied to the Available Commitment, the date upon which such reduction shall be effective
(which
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effective date shall be a Business Day and shall be no less than 5 days after receipt of such notice by the Administrative Agent) and the amount
thereof, which shall be in integral multiples of $1,000,000. In the event of such a reduction in the Available Commitment, Advances in an
aggregate outstanding principal amount that is in excess of the Available Commitment, as so reduced (the "Over-Limit Amount"), shall be
simultaneously paid on the effective date of such reduction, with interest accrued on the amount so paid or prepaid to the date of such
reduction. On the effective date of such reduction, the Borrower shall cash collateralize Letters of Credit, on terms satisfactory to the
Administrative Agent, in the amount, if any, by which the Over-Limit Amount exceeds the amount of non-Letter of Credit Advances then
outstanding and shall execute such documents, instruments and agreements as the Administrative Agent shall deem necessary to perfect a
security interest in such cash collateral. A reduction in the Available Commitment shall reduce each Lender's Pro Rata Share in accordance
with its respective Pro Rata Percentage.
(b) The Borrower may at any time and from time to time, subject to clause (d) of this Section 2.3, request an increase in the Available
Commitment of the Lenders by sending a written notice thereof to the Administrative Agent. Such notice shall specify the total amount of the
increase requested by the Borrower (the "Requested Increase"), which amount shall be at least $10,000,000 and not exceed $25,000,000. The
Administrative Agent shall notify each Lender of the Requested Increase upon receipt of the Borrowers notice thereof. Each Lender shall
respond in writing to the Borrower (with a copy simultaneously sent to the Administrative Agent), within thirty (30) days of receipt of notice
from the Administrative Agent of a Requested Increase (or such shorter period as the Administrative Agent and the Borrower shall agree),
stating the maximum amount, if any, by which such Lender is willing to increase its Pro Rata Share (the "Offered Amount"). If the total of the
Offered Amount for all of the Lenders is greater that the Requested Increase, the Requested Increase shall be allocated among the offering
Lenders as the Borrower and the Administrative Agent shall agree or, absent any such agreement, pro rata based on each Lender's then existing
Pro Rata Percentage. Any Lender that increases its Pro Rata Share shall execute and deliver a Commitment and Acceptance. If the total of the
Offered Amount for all the Lenders is equal to or less than the Requested Increase, (x) unless the Borrower and Administrative Agent shall
otherwise agree, each Lender's Pro Rata Share shall increase by its Offered Amount and (y) the Borrower may offer the difference, if any,
between the Requested Increase and the amount of the increase in the Pro Rata Shares pursuant to clause (x) above to one or more new lenders
reasonably acceptable to the Administrative Agent (each, a "Proposed New Lender"). If the Borrower requests that a Proposed New Lender
join this Agreement and provide Advances hereunder, the Borrower shall, at least seven (7) days prior to the date (or such other period as the
Administrative Agent and the Borrower shall agree) on which the Proposed New Lender proposes to join the Agreement, notify the
Administrative Agent of the name of the Proposed New Lender and the amount of its proposed Pro Rata Share and deliver a duly completed
New Lender Joinder with respect to such Proposed New Lender. Upon the consent of the Administrative Agent to a Proposed New Lender
joining this Agreement, which consent shall not be unreasonably withheld, such Proposed New Lender shall join this Agreement pursuant to
the provisions of Section 10.10(e), including that its minimum Pro Rata Share be $5,000,000 or such lesser amount as the Administrative Agent
shall agree. The Borrower may make multiple requests for Requested Increases during the period from the
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Closing Date to the Maturity Date provided, that the Available Commitment shall not be increased pursuant to such requests by more than
$25,000,000 in the aggregate.
(c) Following any increase in the Available Commitment pursuant to clause (b) of this Section 2.3, the Administrative Agent shall send to the
Lenders and the Borrower a revised Annex I setting forth the new Pro Rata Shares and Pro Rata Percentages of the Lenders. Such revised
Annex I shall replace the existing Annex I if no Lender objects thereto within 10 days of its receipt thereof.
(d) Notwithstanding anything to the contrary in this
Section 2.3, (i) the Borrower may not request an increase in the Available Commitment if at the time of such request a Default or Event of
Default shall exist and (ii) no increase in the Available Commitment (including by way of addition of a Proposed New Lender) shall become
effective if on the date that such increase would become effective, a Default or Event of Default shall exist.
2.4 Advances, Conversions, Renewals and Payments.
(a) (i) Except to the extent otherwise set forth in this Agreement, all payments of principal and of interest on the Revolving Credit, the
Available Commitment Fee, the L/C Fees, all other charges, Expenses and any other Obligations of the Borrower hereunder, shall be made to
the Administrative Agent at its main Philadelphia banking office, 1600 Market Street, Philadelphia, Pennsylvania (or such other office as may
be designated by the Administrative Agent to the Borrower in writing), in immediately available funds in lawful money of the United States of
America. The Administrative Agent shall have the unconditional right and discretion to charge the Borrower's operating account with the
Administrative Agent (or any Subsidiary's operating account with the Administrative Agent, if so directed by the Borrower or if an Event of
Default has occurred hereunder) for all of the Borrower's Obligations as they become due from time to time under this Agreement, including
without limitation, interest, principal, fees and reimbursement of Expenses.
(ii) So long as no Event of Default is outstanding, Borrower shall have the option to designate whether payments (including prepayments) shall
be applied to Acquisition Advances or to other Advances. If no such designation is made or if an Event of Default is outstanding, such
application shall be made by the Administrative Agent.
(b) (i) Advances (except Letters of Credit) which may be made by the Lenders from time to time under the Revolving Credit shall be made
available by crediting such proceeds to the Borrower's operating account with the Administrative Agent or to such other Persons or accounts as
may be specified by the Borrower to the Administrative Agent in writing.
(ii) All Regular Advances (except Letters of Credit) requested by the Borrower must be in the minimum amount of (A) $2,000,000 (unless the
Swing Line Lender shall refuse to, or is unable, to make a Swing Line Advance for a lesser amount in which case such minimum amount shall
be $500,000) and integral multiples of $100,000 in excess of such amount for Alternate Base Rate Advances (unless otherwise agreed by the
Administrative Agent in its sole and absolute discretion) and (B) $5,000,000 and integral multiples of $100,000
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in excess of such amount for LIBOR Based Rate Advances. All Swing Line Advances must be in the minimum amount of $50,000 and in
integral multiples of $10,000. All Advances must be requested:
(A) For all Alternate Base Rate Advances (other than Swing Line Advances) by eleven o'clock (11:00) A.M., Philadelphia time, on the date
such Advance is to be made;
(B) For all Swing Line Advances by two o'clock (2:00) P.M., Philadelphia time, on the date such Swing Line Advance is to be made; and
(C) For all LIBOR Based Rate Advances or any Letter of Credit, by ten o'clock (10:00) A.M., Philadelphia time, at least three (3) Business
Days before such Advance is to be made.
All requests for an Advance are to be made by telephone immediately confirmed in writing by letter, facsimile or telex in the form attached
hereto as Exhibit C and made a part hereof ("Notice of Borrowing") which form is to be executed by an Authorized Officer of the Borrower.
Such request may be sent by telecopy or facsimile transmission provided that receipt of such request shall not be effective unless confirmed via
telephone by the Administrative Agent. Once made, Advance requests are irrevocable. Each request must indicate the amount of such Advance,
the date of such Advance, and whether or not the requested Advance is a LIBOR Based Rate Advance or an Alternate Base Rate Advance or a
conversion or renewal of an existing Advance, and in the case of a LIBOR Based Rate Advance, must specify the applicable LIBOR Interest
Period. Upon receiving a request for an Advance in accordance with this subparagraph (ii) on the date of such request, the Administrative
Agent shall promptly notify all Lenders of the request.
(iii) (A) Each Lender shall advance its applicable Pro Rata Percentage of a requested Regular Advance (and in the case of a Swing Line
Advance, the Swing Line Lender shall advance the amount of the requested Swing Line Advance) to the Administrative Agent by remitting
federal funds immediately available to the Administrative Agent pursuant to the Administrative Agent's instructions prior to three o'clock
(3:00) p.m. Philadelphia time on the date of the Advance. Subject to the satisfaction of the terms and conditions hereof and receipt by the
Administrative Agent of all required funds from the other Lenders, the Administrative Agent shall make the requested Advance available to the
Borrower by crediting such amount to such account as the Borrower has advised the Administrative Agent as soon as is reasonably practicable
thereafter on the day the requested Advance is to be made.
(B) (1) The Swing Line Lender shall, so long as and to the extent that amounts are available to be borrowed under the Available Commitment
(whether or not any conditions precedent thereto can be or are met) and to the extent any Swing Line Advances are not repaid by the Borrower
with its own funds, require each other Lender, and each other Lender hereby agrees, subject to this Section 2.4(b)(iii)(B), on such date (which
shall be a Business Day) as designated by the Swing Line Lender in writing to the Borrower and the other Lenders, to make a Regular
Advance, which shall be an Alternate Base Rate Advance, in
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an amount equal to such Lender's Pro Rata Percentage of the amount of the Swing Line Advances specified in such notice (each a "Mandatory
Loan"). If Alternate Base Rate Advances are made by the Lenders other than the Swing Line Lender under the immediately preceding sentence,
each such Lender shall make the amount of its Regular Advance available to the Administrative Agent, in same day funds, at the
Administrative Agent's office, not later than 2:00 p.m. (Philadelphia time) on the Business Day next succeeding the date such notice is given.
The conversion of Swing Line Advances to Regular Advances will not require the Borrower to comply with the conditions set forth in Section
3 hereof or the notice requirements of Section 2.4(b) hereof or require any other action on the part of the Borrower. The proceeds of such
Regular Advances shall be immediately delivered to the Swing Line Lender (and not to the Borrower) and applied to repay the outstanding
Swing Line Advances. On the day such Regular Advances are made, the Swing Line Lender's Swing Line Advances shall be deemed to be paid
with the proceeds of a Regular Advance made by the Lenders and such portion of the Swing Line Advances deemed to be so paid shall no
longer be outstanding as Swing Line Advances, shall no longer be due under the Swing Line Note and shall be due under the respective
Revolving Credit Notes issued to the Lenders to the extent of each Lender's Pro Rata Share. If any portion of any such amount paid to the
Swing Line Lender should be recovered by or on behalf of the Borrower from the Swing Line Lender in bankruptcy, by assignment for the
benefit of creditors or otherwise, the loss of the amount so recovered shall be ratably shared among all of the Lenders in the manner
contemplated by Section 9.7 hereof. Each Lender's obligation to make the Regular Advances referred to in this paragraph shall be absolute and
unconditional and shall not be affected by any circumstance, including, without limitation, (i) 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; (ii) the
occurrence or continuance of a Default or an Event of Default; (iii) the occurrence of any Material Adverse Effect with respect to the Borrower;
(iv) any breach of this Agreement or any of the other Loan Documents by the Borrower or any of its Subsidiaries or any other Lender; or (v)
any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.
(2) In the event that any Mandatory Loan 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 the Bankruptcy Code with respect to the Borrower), then each Lender hereby agrees that it
shall forthwith purchase (as of the date the Mandatory Loan would otherwise have occurred, but adjusted for any principal payments received
by the Swing Line Lender relating to the Swing Line Advance from the Borrower on or after such date and prior to such purchase) from the
Swing Line Lender, such participations in the outstanding Swing Line Ad vances as shall be necessary to cause such Lenders to share in such
Swing Line Advances ratably based upon their respective Pro Rata Percentages; provided, however, that (x) all interest payable on the Swing
Line Advances shall be for the account of the Swing Line Lender until the date as of which the respective participation required to be
purchased is paid and, to the extent attributable to the purchased participation, shall be payable to the participant from and after such date and
(y) at the time any purchase of participations pursuant to this sentence is actually made, the purchasing Lender shall be required to pay the
Swing Line Lender interest on the principal amount of the participation purchased for each day from and including the day in which the
Mandatory Loan would otherwise have occurred to but excluding the date of payment for such participation, at a rate per
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annum equal to (I) the overnight Fed Funds Rate for the first three (3) days and
(II) at the Alternate Base Rate for each day thereafter.
(3) A copy of each notice given by the Swing Line Lender to the Lenders pursuant to Section 2.4(b)(iii)(B)(1) shall be promptly delivered by
the Swing Line Lender to the Administrative Agent and the Borrower. Upon the making of a Regular Advance by a Lender pursuant to this
Section 2.4(b)(iii)(B), the amount so funded shall become due under such Lender's Revolving Credit Note and shall no longer be owed under
the Swing Line Note.
(C) Neither the Administrative Agent nor any other Lender shall be obligated, for any reason whatsoever, to advance the share of any other
Lender (including, any Lender's share of funding obligations with respect to Letters of Credit). If such corresponding amount is not made
available to the Administrative Agent by such Lender on the date the Advance is made and the Administrative Agent elects (at its sole and
absolute discretion, without any obligation to do so) to make such Lender's share of the Advance available to the Borrower, the Administrative
Agent shall be entitled to recover such amount on demand from such Lender, or from the Borrower, together with interest thereon in respect of
each day during the period commencing on the date such amount was made available to the Borrower and ending on (but excluding) the date
the Administrative Agent recovers such amount, at a rate per annum equal to the Fed Funds Rate, for each such day (or, if such day is not a
Business Day, for the next preceding Business Day). The Administrative Agent shall also be entitled to recover any and all losses and damages
(including without limitation, reasonable attorneys' fees and costs) from any Lender failing to so advance upon demand of the Administrative
Agent. The Administrative Agent may set off the obligations of a Lender under this paragraph against any distributions or payments of the
Obligations which the Administrative Agent would otherwise make available to such Lender. To the extent any Lender fails to provide its
respective Pro Rata Percentage of any requested Advance, such Lender's Pro Rata Percentage of all payments of the Obligations shall decrease
to reflect the actual percentage which its actual outstanding Advances bears to the total outstanding Advances of all Lenders.
2.5 Interest. The unpaid principal balance of the Revolving Credit shall bear interest, subject to the terms hereof, on one of the two bases
selected by the Borrower from among the borrowing options set forth below, it being understood that subject to the provisions hereof, the
Borrower may select different options to apply simultaneously to different parts of the outstanding Revolving Credit.
(a) Alternate Base Rate Option. Interest on the outstanding Alternate Base Rate Advances under the Revolving Credit will accrue at the rate
equal to the sum of (A) the Alternate Base Rate plus (B) the Applicable Base Rate Margin. Interest on all Alternate Base Rate Advances shall
be payable quarterly, in arrears, on the first day of each calendar quarter beginning on the first day of the first full calendar quarter after the date
hereof.
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(b) LIBO Rate Option.
(i) Interest on the outstanding LIBOR Based Rate Advances under the Revolving Credit shall accrue at the rate (the "LIBOR Based Rate")
equal to the sum of (A) the Adjusted LIBO Rate as determined by the Administrative Agent on the Interest Rate Determination Date plus (B)
the Applicable LIBO Rate Margin
(ii) Those portions of the Revolving Credit subject to this option shall be selected and outstanding for either a one (1) month, two (2) month,
three (3) month, or six (6) month period from the date such LIBOR Based Rate Advance is made or renewed or an Advance is converted to a
LIBOR Based Rate Advance ("LIBOR Interest Period") and must be repaid in full on the last day of such applicable period with all accrued
and unpaid interest thereon. Interest shall also be due and payable, for LIBOR Based Rate Advances having a LIBOR Interest Period of three
(3) months or greater, on each date occurring at three-month intervals after the first day of such LIBOR Based Rate Advance Period. No
LIBOR Interest Period may end after the Maturity Date. Subject to all of the terms and conditions applicable to a request for a new Advance
which the Borrower desires to select as a LIBOR Based Rate Advance, the Borrower may convert any Advance to a LIBOR Based Rate
Advance or extend a LIBOR Based Rate Advance as of the last day of the LIBOR Interest Period to a new LIBOR Based Rate Advance.
(iii) No more than seven (7) portions (tranches) of principal of LIBOR Based Rate Advances may be outstanding at any one time.
(iv) The initial LIBOR Interest Period for any Borrowing of LIBOR Based Rate Advances shall commence on the date of such Borrowing
(including the date of any conversion from a Borrowing of an Alternate Base Rate Advance) and each LIBOR Interest Period occurring
thereafter (including continuations thereof) in respect of such Borrowing shall commence on the date on which the next preceding LIBOR
Interest Period expires.
(v) If any LIBOR Interest Period relating to a Borrowing of LIBOR Based Rate Advances begins on a date for which there is no numerically
corresponding date in the calendar month in which such LIBOR Interest Period ends, such LIBOR Interest Period shall end on the last Business
Day of such calendar month.
(vi) If any LIBOR Interest Period would otherwise expire on a day which is not a Business Day, such LIBOR Interest Period shall expire on the
next succeeding Business Day; provided that if any LIBOR Interest Period in respect of a LIBOR Based Rate Advance would otherwise expire
on a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such LIBOR Interest
Period shall expire on the next preceding Business Day.
(c) Calculation of Interest. Interest shall be calculated on the basis of A 360 day year (or a year of 365 or 366 days, as the case may be, in the
case of all Advances based on the Prime Rate) and charged on the actual days elapsed.
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(d) Failure to Specify Rate. All Advances for which an interest rate option is not specifically designated by the Borrower, pursuant to the terms
hereof, or not requested in conformity with the terms hereof, shall be Alternate Base Rate Advances.
(e) Default Rate. After the occurrence and during the continuance of an Event of Default hereunder, the per annum effective rate of interest on
all Advances may, in the discretion of the Administrative Agent or at the direction of the Majority Lenders, be increased (and shall be
automatically so increased if the Event of Default is a payment default) by two (2%) percentage points and may be applied retroactively to the
date of the occurrence of such Event of Default. Upon an acceleration of the obligations by the Administrative Agent and/or the Lenders
hereunder, the Administrative Agent may (and shall, at the direction of the Majority Lenders), automatically and without prior notice to the
Borrower, convert each LIBOR Based Rate Advance to an Alternate Base Rate Advance. The Administrative Agent will subsequently give
notice to the Borrower of such conversion.
(f) Continuation of Interest Charges. All rates of interest charged on Advances under the Revolving Credit shall, until such Advances are paid,
continue to accrue at the applicable contract rate provided in this Agreement and be paid even after the occurrence of any Default or Event of
Default, or after maturity, acceleration, recovery of judgment, bankruptcy, insolvency proceedings of any kind or the happening of any event or
occurrence similar or dissimilar.
(g) Applicable Interest Limitations. In no contingency or event whatsoever shall the aggregate of all amounts deemed interest hereunder and
charged or collected pursuant to the terms of this Agreement exceed the highest rate permissible under any law which a court of competent
jurisdiction shall, in a final determination, deem applicable hereto. In the event that such court determines the Lenders have charged or received
interest hereunder in excess of the highest applicable rate, the Lenders shall apply and set off such excess interest received by the Lenders
against other Obligations due or to become due and such rate shall automatically be reduced to the maximum rate permitted by such law.
2.6 Fees.
(a) So long as the Revolving Credit is outstanding and has not been terminated, the Borrower shall unconditionally pay to the Administrative
Agent, for the ratable benefit of the Lenders, a non-refundable fee (the "Available Commitment Fee") at a rate per annum equal to the
Applicable Available Commitment Fee Percentage from time to time in effect on the average daily unused amount of the Available
Commitment (giving effect to any reductions or increases therein) of such Lender during the preceding quarter (or shorter period commencing
with the date hereof or ending with the Maturity Date or any date on which the Available Commitment of such Lender shall be terminated). All
Available Commitment Fees shall be computed and paid on a quarterly basis in arrears on the first day of each fiscal quarter, beginning in the
first fiscal quarter after the Closing Date, in each case for the actual number of days elapsed over a year of 360 days. The Available
Commitment Fee due to each Lender shall commence to accrue on the date hereof, and shall cease to accrue on the Maturity Date and the
termination of the Available Commitment of such Lender as provided herein. Solely for the
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purposes of calculating the distributive share of the Available Commitment Fee to be remitted to each Lender, the daily unused Available
Commitment shall be determined (the "Fee Determination") as if no Swing Line Advances were outstanding during such period and the share
of such fee owing to the Swing Line Lender shall be reduced to the extent necessary for each Lender (other than the Swing Line Lender) to
receive its share of such fee based on such Fee Determination.
(b) (i) The Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders, non-refundable letter of credit fees equal to
(A) one quarter of one (.25%) percent of the face amount of each commercial letter of credit, which shall be paid upon negotiation of the letter
of credit and (B), for each day, the Applicable LIBO Rate Margin multiplied by the aggregate undrawn face amount of the outstanding standby
letters of credit (collectively, the "L/C Fees") which shall be computed and paid on a quarterly basis, in arrears, on the first day of each calendar
quarter, beginning in the first calendar quarter after the Closing Date, in each case for the actual number of days elapsed over a 360 day year.
(ii) In addition to the foregoing, the Borrower shall pay to the Fronting Lender, for its own account, (A) a fee (the "Fronting Fee") equal to one
eighth of one (1/8%) percent per annum of the aggregate face amount of the outstanding Letters of Credit which shall be computed and paid on
a quarterly basis, in arrears, on the first day of each calendar quarter, beginning in the first calendar quarter after the Closing Date, in each case
for the actual number of days elapsed over a 360 day year, and (B) customary issuance, amendment, extension, cancellation and administration
fees and charges for each Letter of Credit, due and payable upon demand of the Fronting Lender.
2.7 Prepayments.
(a) The Borrower shall have the right at any time and at its option from time to time to prepay the Advances in whole or in part without
premium or penalty, subject to reimbursement of the Lender's re-deployment costs of prepayments of LIBOR Based Rate Advances in
accordance with Section 2.9. Whenever the Borrower desires to prepay any part of the Advances, it shall provide a prepayment notice to the
Administrative Agent by eleven o'clock (11:00) A.M., Philadelphia time, at least one (1) Business Day prior to the date of prepayment of any
LIBOR Based Rate Advances and no later than two o'clock (2:00) P.M., Philadelphia time, on the date of prepayment of any Alternate Base
Rate Advances, setting forth (i) the date, which shall be a Business Day, on which the proposed prepayment is to be made; (ii) a statement
indicating the application of the prepayment between the Regular Advances and the Swing Line Advances and (iii) the total principal amount
of such prepayment, the amount of which shall not be less than $1,000,000 in the case of Regular Advances and $10,000 in the case of Swing
Line Advances.
(b) All prepayment notices shall be irrevocable. The principal amount of the Advances for which a prepayment notice is given, together with
interest on such principal amount except with respect to Alternate Base Rate Advances, shall be due and payable on the date specified in such
prepayment notice as the date on which the proposed prepayment is to be made. Unless the Borrower indicates otherwise in the prepayment
notice, prepayments shall be
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applied, first, to reduce Alternate Base Rate Advances and, second, to reduce LIBOR Based Rate Advances. Any prepayment hereunder shall
be subject to the Borrower's obligation to indemnify the Lenders under Section 10.15.
2.8 Use of Proceeds. The proceeds of the Lenders' Advances shall be used by the Borrower solely: (i) to provide Letters of Credit to be used by
the Borrower solely in the ordinary course of its business and (ii) for working capital needs and general corporate purposes, including the
funding of Permitted Acquisitions, permitted dividends and permitted stock repurchases, not otherwise prohibited under this Agreement.
2.9 Special Provisions Governing LIBOR Based Rate Advances. Notwithstanding other provisions of this Agreement, the following provisions
shall govern with respect to LIBOR Based Rate Advances as to the matters covered:
(a) On the Interest Rate Determination Date the Administrative Agent shall determine (which determination shall, absent manifest error, be
final, conclusive and binding upon all parties hereto) the interest rate which shall apply to the LIBOR Based Rate Advances for which an
interest rate is then being determined for the applicable LIBOR Interest Period and shall promptly give notice thereof (in writing or by
telephone confirmed in writing or by facsimile) to the Borrower and to each Lender.
(b) In the event that (x) in the case of clause (i) below, the Administrative Agent or (y) in the case of clause (ii) or (iii) below, any Lender, shall
have determined (which determination shall, absent manifest error, be final, conclusive and binding upon all parties hereto):
(i) at any time that a LIBO Rate is to be determined by the Administrative Agent that, by reason of any changes arising on or after the Closing
Date affecting the interbank Eurodollar market, adequate and fair means do not exist for ascertaining the applicable interest rate on the basis
provided for in the definition of Adjusted LIBO Rate;
(ii) at any time that such Lender shall incur increased costs or reductions in the amounts received or receivable hereunder with respect to any
Lender on its obligation to make LIBOR Based Rate Advances (which increase in cost or reduction in receivables shall be calculated in
accordance with such Lender's reasonable averaging and attribution methods) because of (x) any change since the Closing Date (including
changes proposed or published prior to the Closing Date but not reflected in the pricing of the Advances) in any applicable law or
governmental (or quasi-governmental or other body or entity accorded the status of a rule or regulation making authority) rule, regulation,
guideline or order, whether or not having the force of law, or in the interpretation or administration thereof and including the introduction of
any new law or governmental rule, regulation, guideline or order, such as, for example, but not limited to: (A) a change in the basis of taxation
of payments to any Lender of the principal of or interest on the Revolving Credit Notes or any other amounts payable hereunder (except for
changes in the rate of tax on, or determined by reference to, the net income or profits of such Lender) or (B) 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
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LIBO Rate and/or (y) other circumstances since the date of this Agreement affecting such Lender or the interbank Eurodollar market or the
position of such Lender in such market; or
(iii) at any time that the making or continuance of any LIBOR Based Rate Advance has become unlawful by compliance by such Lender in
good faith with any applicable law or governmental (or quasi-governmental or other body or entity accorded the status of a rule or regulation
making authority) rule, regulation, guideline or order (or would conflict with any such governmental rule, regulation, guideline or order not
having the force of law even though the failure to comply therewith would not be unlawful), or has become impracticable as a result of a
contingency occurring after the Closing Date which materially and adversely affects the interbank eurodollar market;
then, and in any such event, the Administrative Agent in the case of clause (i) above or such Lender in the case of clause (ii) or (iii) above shall
on such date give notice (by telephone confirmed in writing or by facsimile) to the Borrower of the Advance(s) affected and, in the case of
clause (ii) or (iii) to the Administrative Agent, of such determination (which notice the Administrative Agent shall promptly transmit to each of
the other Lenders). Thereafter (x) in the case of clause (i) above, LIBOR Based Rate Advances shall no longer be available until such time as
the Administrative Agent notifies the Borrower and the Lenders that the circumstances giving rise to such notice by the Administrative Agent
no longer exist, and any Notice of Borrowing given by the Borrower with respect to the borrowing of or conversion into (including continuance
of) LIBOR Based Rate Advances which have not yet been incurred shall be deemed rescinded by the Borrower, (y) in the case of clause (ii)
above, the Borrower shall pay to such Lender, upon written demand therefor, such additional amounts (in the form of an increased rate of, or a
different method of calculating, interest or otherwise as such Lender in its reasonable discretion shall determine) as shall be required to
compensate such Lender on an after-tax basis for such increased costs or reductions in amounts receivable hereunder (a written certificate
signed by an officer of such Lender as to the additional amounts owed to such Lender, showing in reasonable detail the basis for the calculation
thereof, submitted to the Borrower by such Lender shall, absent manifest error, be final, conclusive and binding upon all parties hereto) and
(z) in the case of clause (iii) above, the Borrower shall take one of the actions specified in Section 2.9(c) as promptly as possible and, in any
event, within the time period required under Section 2.9(c) or, if earlier, the time period required by law. All demands for payment hereunder
shall be given no more than ninety (90) days after the occurrence of the change in law or other event giving rise to such demand; provided
however, that failure to deliver notice on a timely basis shall not constitute a waiver of any Lender's right to receive payment for any costs
relating to the 90-day period preceding the date of demand and any costs incurred after the giving of such notice.
(c) At any time that any LIBOR Based Rate Advance is affected by the circumstances described in Section 2.9(b)(ii) or (iii), the Borrower may
(and in the case of a LIBOR Based Rate Advance affected pursuant to
Section 2.9(b)(iii) shall) either (i) if a Notice of Borrowing has been given with respect to the affected LIBOR Based Rate Advance, cancel said
Notice of Borrowing by giving the Administrative Agent telephonic notice (confirmed promptly in writing or by facsimile) thereof on the same
date that the Borrower was notified by a Lender pursuant to Section 2.9(b)(ii) or (iii), or (ii) if the affected LIBOR Based Rate Advance is then
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outstanding, upon at least three (3) Business Days' notice to the Administrative Agent, require the affected Lender to convert each such LIBOR
Based Rate Advance into an Alternate Base Rate Advance or prepay such LIBOR Based Rate Advance on the last day of the current LIBOR
Interest Period therefor unless earlier payment is required by law; provided that if more than one Lender is affected at any time, then all
affected Lenders must be treated the same pursuant to this
Section 2.9(c); and provided, further, that the Borrower shall compensate any such affected Lenders as set forth in Section 2.9(f).
(d) Anything herein to the contrary notwithstanding, if, on any Interest Rate Determination Date, no LIBO Rate is available by reason of any
changes arising on or after the Closing Date affecting the interbank Eurodollar market or adequate and fair means do not exist for ascertaining
the applicable interest rate on the basis provided for in the definition of LIBO Rate, the Administrative Agent shall give the Borrower and each
Lender prompt notice thereof and the Advances requested to be made as LIBOR Based Rate Advances shall, subject to the applicable notice
requirements, be made as Alternate Base Rate Advances.
(e) Each Lender agrees that, as promptly as practicable after it has actual knowledge of the occurrence of any event or the existence of a
condition that would cause it to be an affected Lender under
Section 2.9(b)(ii) or (iii), it will, to the extent not inconsistent with such Lender's internal policies, use reasonable efforts to make, fund or
maintain the affected LIBOR Based Rate Advances of such Lender through another lending office of such Lender if as a result thereof the
additional moneys which would otherwise be required to be paid in respect of such Advances pursuant to Section 2.9(b)(ii) would be materially
reduced or the illegality or other adverse circumstances which would otherwise require prepayment of such Advances pursuant to Section
2.9(b)(iii) would cease to exist, and if, as determined by such Lender, in its reasonable discretion, the making, funding or maintaining of such
Advances through such other lending office would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to promptly
pay all reasonable out-of-pocket expenses incurred by any Lender in utilizing another lending office of such Lender pursuant to this Section
2.9(e).
(f) The Borrower shall compensate each Lender, upon written request by that Lender, for all reasonable losses, expenses and liabilities
(including, without limitation, such factors as any interest paid by that Lender to lenders of funds borrowed by it to make or carry its LIBOR
Based Rate Advances and any loss sustained by the Lender in connection with re-deployment of such funds (based upon the difference between
the amount earned in connection with the re-deployment of such funds and the amount payable by the Borrower if such funds had been
borrowed or remained outstanding, but not for loss of profit)) which that Lender may sustain with respect to the Borrower's LIBOR Based Rate
Advances: (i) if for any reason attributable to the Borrower, a Borrowing of any LIBOR Based Rate Advance does not occur on a date specified
therefor in a Notice of Borrowing or a telephonic request for borrowing or conversion, or a successive LIBOR Interest Period does not
commence after notice therefor is given or is deemed to have been given pursuant to Section 2.4(b) (whether or not withdrawn by the Borrower
or deemed withdrawn pursuant to clause
(x) of the last paragraph of Section 2.9(b)); or (ii) if any prepayment or repayment (in accordance with Section 2.7 or this Section 2.9, by
acceleration or otherwise) or conversion of any of such Lender's LIBOR Based Rate Advances occurs on a date which is not the last day of the
LIBOR Interest Period applicable to
33
that advance; or (iii) if any prepayment or repayment of any such Lender's LIBOR Based Rate Advances is not made on any date specified in a
notice of prepayment or repayment given by the Borrower; or (iv) as a consequence of (x) any other failure by the Borrower to repayment such
Lender's LIBOR Based Rate Advances when required by the terms of this Agreement or (y) any election made pursuant to Section 2.9(c).
Compensation owing under this Section 2.9(f) shall be equal to the amount of interest which would have accrued on the amount of principal
prepaid or repaid or converted or not borrowed for the period from the date of such prepayment or repayment or conversion or failure to borrow
to the last day of the then current LIBOR Interest Period for the relevant LIBOR Based Rate Advance (or, in the case of a failure to borrow, the
LIBOR Interest Period for such LIBOR Based Rate Advance which would have commenced on the date of such failure to borrow) at the
applicable rate of interest for such LIBOR Based Rate Advance provided for herein minus any amount such Lender, in good faith and in its
sole discretion (absent manifest error), determines is realizable upon the re-deployment of such funds. A certificate signed by an officer of the
Lender as to the amount of such losses, expenses and liabilities, showing in reasonable detail the calculation thereof and submitted to the
Borrower by such Lender shall, absent manifest error, be final, conclusive and binding of all purposes.
(g) Any Lender may make, carry or transfer LIBOR Based Rate Advances at, to, or for the account of any of its branch offices or the office of
an Affiliate of that Lender; provided that any increased costs associated therewith shall be borne by such Lender except as provided in Section
2.9(e) above.
(h) During the continuance of a Default or an Event of Default, the Borrower may not elect to have an Advance made or maintained as, or
converted into, a LIBOR Based Rate Advance after the expiration of any LIBOR Interest Period then in effective for that Advance.
(i) Calculation of all amounts payable to the Lender under this Section 2.9 in respect of LIBOR Based Rate Advances shall be made as though
the Lender had actually funded its relevant LIBOR Based Rate Advance through the purchase of a Eurodollar deposit bearing interest at the
LIBO Rate applicable to such LIBOR Based Rate Advance of such Eurodollar deposit from an offshore office of the applicable Lender to a
domestic office of such Lender in the United States of America; provided, however, that the Lenders may fund each of their LIBOR Based
Rate Advances in any manner they deem fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under
this Section 2.9.
2.10 Capital Requirements, Etc. If the adoption or effectiveness after the Closing Date of any applicable law or governmental (or
quasi-governmental or other body or entity accorded the status of a rule or regulation making authority) rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or compliance by such Lender or such Lender's direct or indirect
parent with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or
comparable agency (including in each case any such change proposed or published prior to the date hereof but not reflected in the pricing of the
Advances), has or would have the effect of reducing the rate of return on such
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Lender's or such Lender's parent's capital or assets as a consequence of such Lender's obligations hereunder to a level below that which such
Lender or such Lender's parent could have achieved but for such adoption, effectiveness or change or as a consequence of an increase in the
amount of capital required to be maintained by such Lender (including in each case, without limitation, with respect to any Lender's
commitment hereunder or any Advance), then from time to time, within fifteen (15) days after demand by such Lender (with a copy to the
Administrative Agent), the Borrower shall pay to such Lender such additional amount or amounts as will compensate, on an after-tax basis,
such Lender or such Lender's parent, as the case may be, for such reduction. Each Lender, upon determining in good faith that any additional
amounts will be payable pursuant to this Section 2.10, will give prompt written notice thereof to the Borrower, which notice shall set forth in
reasonable detail the basis of the calculation of such additional amounts, although any delay in giving any notice shall not release or diminish
any of the Borrower's obligations to pay additional amounts pursuant to this Section 2.10.
2.11 Mandatory Prepayments/Commitment Reductions.
(a) (i) The Borrower shall immediately prepay the outstanding principal amount of the Advances (exclusive of undrawn Letters of Credit) in
accordance with Section 2.3 on any date on which the Outstandings exceed the Available Commitment in effect at such time, in the amount of
such excess.
(ii) The Borrower shall immediately prepay to the Swing Line Lender the outstanding principal amount of the Swing Line Advances on any
date on which the aggregate outstanding principal amount of such Swing Line Advances exceed the Swing Line Commitment in effect at such
time, in the amount of such excess.
(b) Immediately upon funds being made available to the Borrower constituting Net Cash Proceeds from Equity Offerings, an amount equal to
50% of such Net Cash Proceeds from Equity Offerings shall be applied to, and shall constitute a prepayment of, the Advances as provided in
Section 2.11(d).
(c) During the first calendar quarter of each calendar year during the term hereof the Borrower shall cause the aggregate outstanding principal
balance of Advances (exclusive of undrawn Letters of Credit) under the Revolving Credit and any outstanding Capital (as that term is defined
in the Accounts Receivable Securitization Documents) under the Accounts Receivable Securitization to be less than an amount equal to
$35,000,000 plus the applicable Adjustment Amount for a consecutive thirty (30) day period in such first calendar quarter (the "Reduced
Level"). If, as of March 1 of each year the Borrower has not completed its compliance with this covenant for such year, the Borrower shall, on
such date, reduce outstanding Advances (exclusive of undrawn Letters of Credit) to the applicable Reduced Level or (if at or below such
Reduced Level on such date) maintain the outstanding advances (exclusive of undrawn Letters of Credit) at or below the applicable Reduced
Level for a sufficient number of days to complete its compliance with this covenant for such year.
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(d) With respect to each prepayment of Advances required by Section 2.11(a), (b), (c) or (d) other than Alternate Base Rate Advances, the
Borrower shall give the Administrative Agent one (1) Business Day's notice and may designate the types of Advances and the specific
Borrowing or Borrowings which are to be prepaid. In the absence of a designation by the Borrower, the Administrative Agent shall make such
designation in its sole discretion. All prepayments shall include payment of accrued interest on the principal amount so prepaid, shall be
applied to the payment of interest, Expenses, fees and charges before application to principal and shall include amounts payable, if any, under
Section 2.9(f). On the effective date of any such prepayment, the Borrower shall cash collateralize Letters of Credit, on terms and conditions
satisfactory to the Administrative Agent, in the amount, if any, by which the amount of such prepayment exceeds the outstanding cash
Advances and shall execute such documents, instruments and agreements as the Administrative Agent shall deem necessary to perfect a
security interest in such cash collateral.
(e) The amount required to be applied in accordance with Sections 2.11(b) shall permanently reduce the Available Commitment on a
dollar-for-dollar basis. A reduction in the Available Commitment shall reduce each Lender's Pro Rata Share in accordance with its respective
Pro Rata Percentage.
2.12 Net Payments. (a) Except as otherwise required by law, all payments made by the Borrower to any Lender or the Administrative Agent
under this Agreement and/or any Loan Document shall be made free and clear of, and without reduction for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any Governmental Authority, excluding income, bank shares and franchise taxes imposed by any jurisdiction
in which such Lender's principal or lending office is located or in which such Lender is engaged in a trade or business or any political
subdivision or taxing authority thereof or therein (such non-excluded taxes being called "Taxes"). If any Taxes are required to be withheld from
any amounts payable to the Administrative Agent or any Lender under this Agreement and/or any Loan Document, the Borrower shall timely
remit such Taxes to the Governmental Authority imposing the same and the amounts so payable to such Lender shall be increased to the extent
necessary to yield to such Lender (after payment of all Taxes) interest or any such other amounts payable at the rates or in the amounts
specified in this Agreement and/or any Loan Document. Whenever any Tax is payable by the Borrower, as promptly as possible thereafter, the
Borrower shall send to the Administrative Agent, for its own account or the account of such Lender, as the case may be, a certified copy of an
original official receipt received by the Borrower showing payment thereof. Without prejudice to the foregoing, if any Lender or the
Administrative Agent is required to make any payment on account of Taxes, the Borrower will, upon notification by the Lender or the
Administrative Agent, promptly indemnify such Person against such Taxes. Notwithstanding the foregoing provisions of this
Section 2.12(a), the Borrower will have no obligation to indemnify any Lender or the Administrative Agent, in respect of any Taxes that would
not have been payable had (i) such Lender, assignee of such Lender or participant of a Lender (or each interestholder in such Lender, assignee
or participant, where such Lender, assignee or participant is a pass-through entity for purposes of the U.S. withholding tax rules) provided to
each of the Borrower and the Administrative Agent, the applicable Withholding Certificate. For purposes of this Section 2.12, the term "Taxes"
includes interest, penalties and
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expenses payable or incurred in connection therewith. The Lender shall submit a certification or otherwise provide written notice to the
Borrower within a reasonable period of time after becoming aware of any Taxes for which it is entitled to payments of additional amounts
under this Section 2.12(a). All demands for payment hereunder shall be given no more than 90 days after the occurrence of the event giving rise
to such demand; provided however, that failure to deliver notice on a timely basis shall not constitute a waiver of any Lender's right to receive
payment for any costs relating to the 90-day period preceding the date of demand and any costs incurred after the giving of such notice.
(b) Each Lender or assignee or participant of a Lender that is not incorporated under the laws of the United States of America or a state thereof
(and, upon the written request of the Administrative Agent, each other Lender or assignee or participant of a Lender) agrees that it will deliver
to each of the Borrower and the Administrative Agent two (2) duly completed appropriate valid Withholding Certificates (as defined under
Section 1.1441-1(c)(16) of the Income Tax Regulations (the "Regulations") certifying its status (i.e., U.S. or foreign person) and, if appropriate,
making a claim of reduced, or exemption from, U.S. withholding tax on the basis of an income tax treaty or an exemption provided by the
Internal Revenue Code of 1986 (as amended, the "Code"). The term "Withholding Certificate" means a Form W-9; a form W-8BEN; a form
W-8ECI; a form W-8IMY and the related statements and certifications as required under Section 1.1441-1(e)(3) of the Regulations; a statement
described in Section 1.871-14(c)(2) of the Regulations; or any other certificates under the Code or Regulations that certify or establish the
status of a payee or beneficial owner as a U.S. or foreign person. Each Lender, assignee or participant required to deliver to the Borrower and
the Administrative Agent a valid Withholding Certificate pursuant to the preceding sentence shall deliver such valid Withholding Certificate as
follows: (A) each Lender which is a party hereto on the Closing Date shall deliver such valid Withholding Certificate at least five (5) Business
Days prior to the first date on which any interest or fees are payable by the Borrower hereunder for the account of such Lender; (B) each
assignee or participant shall deliver such valid Withholding Certificate at least five (5) Business Days before the effective date of such
assignment or participation (unless the Administrative Agent in its sole discretion shall permit such assignee or participant to deliver such
Withholding Certificate less than five (5) Business Days before such date in which case it shall be due on the date specified by the
Administrative Agent). Each Lender, assignee or participant which so delivers a valid Withholding Certificate further undertakes to deliver to
each of the Borrower and the Administrative Agent two (2) additional copies of such Withholding Certificate so delivered by it, and such
amendments thereto or extensions or renewals thereof as may reasonably requested by the Borrower or Administrative Agent. Notwithstanding
the submission of a Withholding Certificate claiming a reduced rate of, or exemption from, U.S. withholding tax, the Administrative Agent
shall be entitled to withhold United States federal income taxes at the full 30% withholding rate if in its reasonable judgment it is required to do
so under the due diligence imposed upon a withholding agent under Section 1.1441-7(b) of the Regulations. Further, the Administrative Agent
is indemnified under Section 1.1441-6(b) of the Regulations against any claims and demands of any Lender or assignee or participant of a
Lender for the amount of any tax it deducts or withholds in accordance with regulations under Section 1441 of the Code.
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2.13 Maturity Date Extension. Not more than 120 days nor less than 60 days prior to each anniversary hereof the Borrower may request in
writing that the then effective Maturity Date be extended for an additional year and the Lenders shall use their best efforts to respond to such
request within 30 days of receipt thereof. The then effective Maturity Date shall be extended as requested, but only if (i) no Default or Event of
Default shall have occurred and be continuing on the effective date of such extension and (ii) all of the Lenders consent to such extension.
2.14 Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Sections 2.10 or 2.12
that affects fewer than all the Lenders, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of
such Lender) to designate another lending office for any Advances affected by such event with the object of avoiding the consequences of such
event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending offices to
suffer no economic, legal, regulatory or other disadvantage, and provided, further, that, nothing in this
Section shall affect or delay the required performance of any of the obligations of the Borrower or the rights of any Lender pursuant to Sections
2.10 or 2.12.
2.15 Replacement of a Lender in Certain Circumstances. If an event occurs giving rise to the operation of Section 2.10 or 2.12, and the event
affects fewer than all the Lenders, (each, an "Affected Lender"), the Borrower may (a) request one or more of the other Lenders to acquire and
assume all or part of such Affected Lender's Pro Rata Share or (b) replace such Affected Lender by designating another lender or financial
institution that is willing to acquire the Affected Lender's Pro Rata Share; provided, that (i) such replacement does not conflict with any
applicable law or governmental rule or regulation, (ii) no Default or Event of Default shall have occurred and be continuing at the time of such
replacement, (iii) the replacement lender or financial institution shall purchase, at par, the Pro Rata Share, accrued interest and other amounts
owing to such Affected Lender on a pro rata basis as of the date of replacement, (iv) the Borrower shall be liable to such Affected Lender under
Section 2.9 if any LIBOR Based Rate Advances owing to such Affected Lender shall be prepaid (or purchased) other than on the last day of the
LIBOR Interest Period relating thereto and shall pay any such amounts to such Affected Lender on the date of such replacement, (v) the
replacement lender or financial institution, if not already a Lender, shall be satisfactory to the Administrative Agent, (vi) the replaced Lender
shall be obligated to make such replacement in accordance with the provisions of Section 10.10 (provided that the Borrower or replacement
Lender shall be obligated to pay the assignment fee according to Section 10.10(b)(i)(D)) and (vii) the Borrower shall pay all additional amounts
(if any) required pursuant to Sections 2.10 or 2.12, as the case may be, to the extent such additional amounts are incurred on or prior to the
consummation of such replacement.
SECTION 3. CLOSING AND CONDITIONS PRECEDENT TO ADVANCES.
3.1 Conditions Precedent to Closing. Closing under this Agreement is subject to the following conditions precedent (all documents, instruments
and agreements to be in form and substance satisfactory to the Administrative Agent and the Administrative Agent's counsel):
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(a) Resolutions, Opinions, and Other Documents. The Borrower shall have delivered to the Administrative Agent the following:
(i) this Agreement, the Revolving Credit Notes, and the Swing Line Note all properly executed;
(ii) each of the other Loan Documents to be executed by the Borrower or by any other Person pursuant to the terms hereof;
(iii) Guarantees properly executed by each of the Guarantors;
(iv) certified copies of (A) resolutions of the Borrower's board of directors authorizing the execution of this Agreement, the Revolving Credit
Notes, the Swing Line Note to be issued hereunder and each of the other Loan Documents, and (B) the Borrower's Articles or Certificate of
Incorporation or Formation and By-laws or Operating Agreement;
(v) certified copies of (A) resolutions of each Guarantor's board of directors authorizing the execution of the Guarantees and (B) each
Guarantor's Articles or Certificate of Incorporation and By-laws;
(vi) an incumbency certificate for the Borrower identifying the parties executing this Agreement, the Revolving Credit Notes, the Swing Line
Note and the other Loan Documents with specimen signatures;
(vii) an incumbency certificate for each Guarantor identifying the parties executing the Guarantees, with specimen signatures;
(viii) a written opinion of the Borrower's and Guarantors' counsel addressed to the Administrative Agent and the Lenders;
(ix) certification by the chief financial officer or vice president of finance of the Borrower that there has not occurred any material adverse
change in the business, assets, operations, properties, financial condition, contingent liabilities, prospects or material agreements of the
Borrower and its subsidiaries taken as a whole, since December 31, 2000 as reflected on the applicable Financial Statements of the Borrower
delivered to the Administrative Agent;
(x) payment of all fees set forth in the Fee Letter due on the Closing Date and Expenses associated with the Revolving Credit;
(xi) Uniform Commercial Code, judgment, federal and state tax lien searches against the Borrower and each of the Guarantors at the
Borrower's sole cost and expense, showing that the Property of the Borrower and each Guarantor is not subject to any Liens except for
Permitted Liens, and certificates of good standing showing the Borrower and each of the Guarantors to be in good standing in each jurisdiction
in which it is qualified to do business;
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(xii) evidence that the Existing Loan Agreement is terminated and all Indebtedness thereunder shall have been repaid in full, all collateral (if
any) pledged to secure such Indebtedness shall be released and executed termination statements to Uniform Commercial Code financing
statements shall either have been filed or be provided to the Administrative Agent; and
(xiii) copies of all other documents, instruments, agreements, opinions and certificates as the Administrative Agent may reasonably request.
(b) Absence of Certain Events. As of the Closing Date, (i) no Default or Event of Default hereunder shall have occurred and be continuing and
(ii) there shall not have occurred any event or condition having a Material Adverse Effect with respect to the Borrower since December 31,
2000, as reflected on the applicable Financial Statements delivered to the Administrative Agent.
(c) Warranties and Representations at Closing. The warranties and representations contained in Section 4 as well as any other
Section of this Agreement shall be true and correct in all material respects on the Closing Date with the same effect as though made on and as
of that date. The Borrower shall not have taken any action or permitted any condition to exist which would have been prohibited by any Section
hereof. All warranties and representations contained in this Agreement, unless expressly stated to the contrary, are deemed to have been made
to the Administrative Agent and Lenders immediately following completion of Closing hereunder.
(d) Compliance with this Agreement. The Borrower shall have performed and complied with all agreements, covenants and conditions
contained herein which are required to be performed or complied with by the Borrower before or at the Closing Date, including, without
limitation, the provisions of Sections 5, 6 and 7 hereof.
(e) Officers' Certificate. The Administrative Agent shall receive a certificate dated the Closing Date and signed by the chief financial officer or
vice president of finance of the Borrower certifying that all of the conditions precedent to the Borrowings to occur on the Closing Date have
been fulfilled.
(f) Indebtedness; Liens, etc. (i) The Borrower and each of the Guarantors shall have received all necessary consents or waivers or shall have
amended, supplemented or otherwise modified, repaid, redeemed or defeased its outstanding Indebtedness in a manner and on terms
satisfactory to the Administrative Agent such that there exists no default or potential default (including, without limitation, as a result of the
consummation of the transactions contemplated by any Borrowing hereunder) with respect to such Indebtedness or under any note, evidence of
indebtedness, mortgage, deed of trust, security document or other agreement relating to such Indebtedness and such indentures, notes,
evidences of indebtedness, mortgages, deeds of trust or other agreements relating to such Indebtedness shall not contain any restriction on the
ability of the Borrower or any of the Guarantors to enter into this Agreement, the Guarantees or the other Loan Documents to which it is
entering or the granting of any Lien in favor of the Lenders, nor do such agreements, documents or instruments contain any provision
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giving rise to the creation of any Lien in favor of any Person as a result of any Borrowing hereunder.
(ii) The Administrative Agent and the Lenders shall be satisfied, in their reasonable discretion, with all Indebtedness of the Borrower and each
of the Guarantors, outstanding on the Closing Date and not reflected on the Financial Statements.
(g) Consents, etc. All material consents of any Governmental Authority and third-party consents (including, without limitation, all material
approvals and consents required in connection with any Environmental Law or other environmental statutes, rules or regulations), if any, in
connection with the transactions contemplated by this Agreement and the other Loan Documents (including any consents and approvals that are
necessary for the Borrower to borrow and for each of the Guarantors to perform its obligations hereunder and to perform in a full and timely
manner all of its obligations under the other Loan Documents) and otherwise referred to herein or therein to be completed on or before the
Closing Date, shall have been obtained and delivered to the Administrative Agent, and shall remain in effect and all applicable waiting periods
shall have expired without any action being taken by any competent authority which restrains, prevents or imposes, in the judgment of the
Administrative Agent or the Majority Lenders, materially adverse conditions upon the consummation of the transactions contemplated by this
Agreement. There shall not exist any judgment, order, injunction or other restraint issued or filed with respect to the making of the Advances
hereunder.
(h) Environmental Review. At or prior to the Closing Date, there shall have been delivered to the Administrative Agent all environmental
reports, investigations, studies, audits, assessments or reviews in the possession of the Borrower or any Subsidiary, as set forth in Schedule
"3.1(h)" attached hereto and made a part hereof, in relation to the current business or operations of the Borrower or any Subsidiary or any Real
Property, Property or facilities now owned, operated, leased or controlled by the Borrower or any of the Subsidiaries which contain information
pertaining to any event(s) or conditions) which have, or to the best of the Borrower's present Knowledge are reasonably likely to cause, a
Material Adverse Effect.
(i) Compliance with Laws. The Borrower and each of its Subsidiaries shall be in compliance with all applicable statutes, regulations and
ordinances of the United States of America and each other country and jurisdiction, and of each state, city, town, municipality, country, and
each agency thereof (including, without any limitation, ERISA laws, Environmental Laws and margin regulations), a violation of which would
cause a Material Adverse Effect.
3.2 Closing. Subject to the conditions of this Section 3, the Revolving Credit shall be made available on such date (the "Closing Date") and at
such time as may be mutually agreeable to the parties contemporaneously with the execution hereof ("Closing") at the offices of the Borrower's
counsel, Morgan, Lewis & Bockius LLP, in Philadelphia, Pennsylvania.
3.3 Conditions Precedent to all Advances. The obligation of Lenders to make Advances hereunder is subject, at the time of making each such
Advance, to the satisfaction of
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the following conditions precedent (all documents, instruments and agreements to be in form and substance satisfactory to the Administrative
Agent and the Administrative Agent's counsel):
(a) Agreements Effective. This Agreement, the Revolving Credit Notes, the Swing Line Note and each of the other Loan Documents shall be
effective;
(b) Notice of Borrowing. With respect to any Advance, the Administrative Agent shall have received, in accordance with the provisions of
Section 2.4 hereof, prior to the making of any such Advance, an originally executed Notice of Borrowing signed by an Authorized Officer, in
writing, delivered to the Administrative Agent (the furnishing by the Borrower of each such Notice of Borrowing shall be deemed to constitute
a representation and warranty of the Borrower to the effect that the other conditions set forth in this Section 3 are satisfied in all material
respects as of the date of delivery and will be satisfied on the date such Advances are made).
(c) No Default; Representations and Warranties. At the time of the making of each Advance and also after giving effect thereto, (i) there shall
exist no Default or Event of Default and (ii) all representations and warranties contained herein and in the other Loan Documents in effect at
such time (as amended or modified from time to time, including by the delivery of amendments or supplements (in form, scope and substance
satisfactory to the Administrative Agent and the Majority Lenders) to the schedules and exhibits to this Agreement and/or the other Loan
Documents) shall be true and correct in all material respects with the same effect as though such representations and warranties had been made
on and as of such date, unless such representation and warranty expressly indicates that it is being made as of any other specific date, in which
case, on and as of such other date.
(d) Material Adverse Change, etc. (i) No event or condition shall have occurred or become known or would result from any Borrowing on the
date of any such Borrowing and the use of the proceeds therefrom that has resulted or would result, singly or in the aggregate, in a Material
Adverse Effect.
(ii) There shall not exist any judgment, order, injunction or other restraint issued or filed prohibiting, limiting or otherwise adversely affecting
the making of any Advances hereunder.
(e) Fees. The Borrower shall have paid to the Administrative Agent, the Lenders and the Fronting Lender, all fees payable to the
Administrative Agent, the Lenders and/or the Fronting Lender to the extent due hereunder and all costs and Expenses (including legal fees and
expenses) payable to the Administrative Agent, the Lenders and/or the Fronting Lender hereunder.
(f) Litigation. There shall be no Proceeding pending or, to the best of Borrower's Knowledge, threatened with respect to the Borrower or any of
its Subsidiaries or any Property of any such Person that, in the reasonable judgment of the Administrative Agent, would, singly or in the
aggregate, have a Material Adverse Effect. No injunction or other restraining order to be issued shall be pending or noticed with respect to any
Proceeding seeking to enjoin or otherwise prevent the consummation of, or to recover any damages or obtain relief
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as a result of, this Agreement or the other Loan Documents or the transactions contemplated hereby or thereby.
(g) Margin Rules. Neither the making of any Advance nor the use of the proceeds therefrom will violate the provisions of Regulation T, U or X
or any other regulation of the Board of Governors of the Federal Reserve System or the provisions of Section 7 of the Exchange Act.
The acceptance of the proceeds of each Borrowing of Advances shall constitute a representation and warranty by the Borrower to each of the
Lenders that all of the applicable conditions specified in Section 3 and in any other provision of this Agreement or any of the other Loan
Documents have been satisfied or waived.
3.4 Waiver of Rights. By completing the Closing hereunder or by making Advances hereunder, the Administrative Agent does not thereby
waive a breach of any warranty or representation made by the Borrower hereunder or in any agreement, document, or instrument delivered to
the Administrative Agent or otherwise referred to herein, and all of the Administrative Agent's claims and rights resulting from any breach or
misrepresentation by the Borrower are specifically reserved by the Administrative Agent.
3.5 Delivery of Documents. All of the certificates and other agreements, documents, instruments and papers referred to in this Section 3, unless
otherwise specified, shall be delivered to the Administrative Agent at its office (or such other location as may be specified by the
Administrative Agent) for the account of each of the Lenders and in sufficient counterparts for each of the Lenders (and the Administrative
Agent shall furnish such counterparts to the Lenders).
SECTION 4. REPRESENTATIONS AND WARRANTIES.
To induce the Lenders to make the Advances under the Revolving Credit to the Borrower, the Borrower warrants and represents to the
Administrative Agent and the Lenders that:
4.1 Corporate Organization and Validity.
(a) The Borrower and its domestic Subsidiaries are corporations duly organized and validly existing under the laws of their respective states (or
countries or other jurisdictions, as applicable) of incorporation, are duly qualified, are validly existing and in good standing and have lawful
power and authority to engage in the business each conducts in each state and each foreign country where the nature and extent of their
businesses require qualification, except when the failure to so qualify would not have a Material Adverse Effect.
(b) The making and performance of this Agreement and the other Loan Documents does not violate any law, government rule or regulation,
court or administrative order or other such order having the effect of law, or the charter, minutes or bylaw provisions of the Borrower or any of
the Guarantors or violate or result in a default (immediately or with the passage of time) under any contract, agreement or instrument to which
any such Person is a
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party, or by which any such Person or its Property is bound. Neither the Borrower nor any of the Guarantors is in violation of any term of any
agreement or instrument to which any such Person is a party or by which it or its Property may be bound or of its charter, minutes or its bylaws,
which violation has had a Material Adverse Effect.
(c) The Borrower and each of the Guarantors has all requisite corporate power and authority to enter into and perform under this Agreement
and each of the Loan Documents (as applicable) and to incur the obligations herein provided for, and has taken all proper and necessary
corporate action to authorize the execution, delivery and performance of this Agreement and the other Loan Documents (as applicable).
(d) This Agreement, the Revolving Credit Notes, the Swing Line Note, the Guarantees and all of the other Loan Documents, when delivered,
will be valid and binding upon the Borrower and the Guarantors (as applicable) and enforceable in accordance with their respective terms.
4.2 Places of Business. As of the Closing Date, the only places of business of the Borrower and the Guarantors and the places where each keeps
and intends to keep its Property and records concerning its Property, are at the addresses listed in Schedule 4.2 attached hereto and made part
hereof.
4.3 Pending Litigation. There are no judgments or judicial or administrative orders against or binding upon the Borrower or any of its
Subsidiaries, proceedings or investigations (civil or criminal) pending, or to the knowledge of the Borrower threatened, against or affecting the
Borrower or any of its Subsidiaries in any court or before any governmental authority or arbitration board or tribunal which would cause a
Material Adverse Effect, except as shown in Schedule 4.3 attached hereto and made part hereof. Neither the Borrower nor any of its
Subsidiaries is in default with respect to any order of any court, Governmental Authority, regulatory agency or arbitration board or tribunal
which would cause a Material Adverse Effect.
4.4 Title to Properties. The Borrower and each of its domestic Subsidiaries has good and marketable title in fee simple (or its equivalent under
applicable law) to all the Property it respectively purports to own, free from Liens and free from the claims of any other Person, except for
those Liens set forth on Schedule 4.4 attached hereto and made part hereof and for other Permitted Liens.
4.5 Governmental Consent. Neither the nature of the Borrower or any of its Subsidiaries' respective businesses or Property, nor any relationship
between such entities and any other Person, nor any circumstance affecting any such entities in connection with the issuance or delivery of this
Agreement, the Revolving Credit Notes, the Swing Line Note, the Guarantees or the other Loan Documents is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any Governmental Authority on the part of any such party in
conjunction with the execution and delivery of this Agreement or the issuance or delivery of the Revolving Credit Notes, the Swing Line Note,
the Guarantees, or the other Loan Documents, other than such of the foregoing as have been obtained or made.
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4.6 Taxes. All tax returns required to be filed (except for those tax returns which, if not filed, would not have a Material Adverse Effect) by the
Borrower and each of its Subsidiaries in any jurisdiction, have in fact been filed or extensions have been obtained, and all taxes, assessments,
fees and other governmental charges upon any such Person, or upon any of such Person's respective Property, income or franchises, which are
due and payable, have been paid, except for those taxes being contested in good faith with due diligence by appropriate proceedings for which
appropriate reserves have been maintained pursuant to GAAP and except for those taxes which, if not paid, would not cause a Material Adverse
Effect. Neither the Borrower nor any of its Subsidiaries is aware of any proposed additional tax assessment or tax to be assessed against or
applicable to such Person (except for those tax assessments which would not cause a Material Adverse Effect).
4.7 Financial Statements. The Financial Statements (complete copies of which have been delivered to the Administrative Agent for distribution
to the Lenders), were prepared in accordance with GAAP (excluding footnotes for unaudited statements) are complete in all material respects
and present fairly the financial position of the Borrower and its Subsidiaries as of such dates and the results of their operations for such periods
provided, however, that interim financial statements are subject to normal year end audit adjustments. The fiscal year for the Borrower and
each of its Subsidiaries ends on March 31.
4.8 Full Disclosure. Neither the Financial Statements nor any written statement furnished by, or on behalf of, the Borrower to the
Administrative Agent and/or Lenders in connection with the Revolving Credit contained in any Financial Statements or documents,
instruments, agreements or certificates relating to the Borrower and its Subsidiaries contains any untrue statement of a material fact or omits a
material fact necessary to make the statements contained therein or herein not misleading. There is no fact known to the Borrower which the
Borrower has not disclosed to the Administrative Agent in writing, which would cause a Material Adverse Effect. The projections and pro
forma financial information contained in any materials provided by the Borrower to the Administrative Agent or any Lender are based upon
good faith estimates and assumptions believed by the Borrower to be reasonable at the time made, it being recognized by the Lenders that such
projections as to future events are not to be viewed as facts and that actual results during the period or periods covered by any such projections
may differ from the projected results.
4.9 Subsidiaries. Other than the parties listed on Schedule 4.9, attached hereto, the Borrower has, as of the Closing Date, no actively operating
Subsidiaries. The jurisdiction of incorporation of each of such Subsidiaries is also set forth on Schedule 4.9.
4.10 Guarantees, Indebtedness, etc.
(a) As of the Closing Date, neither the Borrower nor any of the Guarantors owns or holds equity (excepting the stock of its Subsidiaries) or
long term debt investments in, has any outstanding advances to, or serves as guarantor, surety or accommodation maker for the obligations of,
or has any outstanding borrowings from any Person, which, in the case of any such equity, investment, advance, guarantee or borrowing,
45
involves the expenditure of money or incurrence of an obligation, as the case may be, of at least $1,000,000 except as described in Schedule
4.10, attached hereto and made part hereof.
(b) Neither the Borrower nor any of its Subsidiaries is a party to any contract or agreement, or subject to any charter or other corporate
restriction, which would cause a Material Adverse Effect.
(c) Except as otherwise specifically provided in this Agreement, neither the Borrower nor any of its Subsidiaries has agreed or consented to
cause or permit any of its Property, whether now owned or hereafter acquired, to be subject in the future (upon the happening of a contingency
or otherwise) to a Lien not permitted by this Agreement.
4.11 Government Regulations, etc.
(a) Assuming each of the Lenders is acquiring its Note or Notes hereunder and its interests hereunder for its own account, for investment and
not with a view toward distribution, nor with the assets of any Employee Benefit Plan subject to Part 4, Title I of ERISA, the use of the
proceeds of, and the Borrower's issuance of the Revolving Credit Notes and the Swing Line Note, will not directly or indirectly violate or result
in a violation of the Securities Act of 1933 or the Securities Exchange Act of 1934, as amended, or any regulations issued pursuant thereto,
including, without limitation, Regulations U, T and X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The
Borrower does not own or intend to carry or purchase any "margin security" within the meaning of said Regulations, except in conformity with
said Regulations.
(b) The Borrower and each of the Guarantors has obtained all licenses, permits, franchises or other governmental authorizations necessary for
the ownership of its Property and for the conduct of its business, except for those which, if not obtained, would not cause a Material Adverse
Effect.
(c) Assuming none of the Lenders is acquiring its Note or Notes hereunder or its interests hereunder with the assets of any employee benefit
plan subject to Part 4, Title I of ERISA, as of the date hereof, no employee benefit plan, as defined in Section 3(2) of ERISA, (other than a
multi-employer plan described in Section 3(37) of ERISA) ("Employee Benefit Plan") maintained by the Borrower or any of its Subsidiaries, or
under which any such Person could have any liability under ERISA or the Internal Revenue Code (i) has failed to meet the minimum funding
standards established in
Section 302 of ERISA for which such Person continues to be liable, (ii) except as set forth on Schedule 4.11(c), has failed to comply, in any
material respect, with any applicable requirement of ERISA and of the Internal Revenue Code, including all applicable rulings and regulations
thereunder for which it continues to be responsible, or (iii) has, to its knowledge, engaged in or been involved in a Prohibited Transaction (as
defined in ERISA or the Internal Revenue Code) under ERISA or the Internal Revenue Code, except to the extent that a failure to comply with
the foregoing would not present a reasonable likelihood of having a Material Adverse Effect. Except set forth on Schedule 4.11(c) attached
hereto and made a part hereof, no Employee Benefit Plan maintained by the Borrower or any of its Subsidiaries has been terminated within the
one (1) year period prior to
46
the date hereof. Neither the Borrower nor any of its Subsidiaries has assumed, or received notice of a claim asserted against such Person,
withdrawal liability (as defined in the Multi-employer Pension Plan Amendments Act of 1980, as amended) with respect to any multi-employer
pension plan in which it participates. Other than as shown on Schedule 4.11(c), neither the Borrower nor any of its Subsidiaries is a member of
any Controlled Group (as defined in Sections 414(b),(c),(m) and (o) of the Internal Revenue Code and Section 4001(a)(14) of ERISA). The
Borrower and each of its Subsidiaries has timely made all contributions when due with respect to any multi-employer pension plan in which it
participates and no event has occurred triggering a claim against such Person for withdrawal liability with respect to any multi-employer
pension plan in which such Person participates.
(d) Neither the Borrower nor any of the Guarantors is in violation of any applicable statute, regulation or ordinance of the United States of
America or any other country or jurisdiction, or of any state, city, town, municipality, county or of any other jurisdiction, or of any agency
thereof, (including without limitation, Environmental Laws and regulations), a violation of which would cause a Material Adverse Effect.
(e) The Borrower and all of the Guarantors are current with all reports and all documents required to be filed with any state or federal securities
commission or similar agency, if any, and are in full compliance in all material respects with all applicable rules and regulations of such
commissions.
(f) Neither the Borrower nor any of the Guarantors are, or will be after giving effect to the transactions contemplated hereby, subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act or to any federal or state statute or regulation limiting
its ability to incur indebtedness for money borrowed or guarantee such indebtedness as contemplated by this Agreement or any other Loan
Document.
(g) Neither the Borrower, nor any of its Subsidiaries is, or will be after giving effect to the transactions contemplated hereby, an "investment
company" or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended.
4.12 Business Interruptions. Within five (5) years prior to the date hereof, neither the business, Property or operations of the Borrower or any of
the Guarantors have been materially and adversely affected in any way by any casualty, strike, lockout, combination of workers, order of the
United States of America, or any state or local government, or any political subdivision or agency thereof, directed against such Persons. To the
best of the Borrower's Knowledge, as of the Closing Date, except as set forth on Schedule 4.12 attached hereto and made part hereof, there are
no pending or threatened labor disputes, strikes, lockouts or similar occurrences or grievances affecting the businesses being operated by the
Borrower or any of the Guarantors which are reasonably expected to have or result in a Material Adverse Effect.
4.13 Names.
(a) Within five (5) years prior to the Closing Date, neither the Borrower nor any of the Guarantors has conducted business under or used any
other name
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(whether corporate or assumed) except for the names shown on Schedule 4.13(a), attached hereto and made part hereof. As of the Closing Date,
the Borrower and its domestic Subsidiaries are, respectively, the sole owners of each of their names listed on such Schedule 4.13(a) and any
and all business done and all invoices issued in such trade names are the applicable party's sales, business and invoices. As of the Closing Date,
each trade name of the Borrower and the Guarantors represents a division or trading style of such entities and not a separate corporate
subsidiary, affiliated, or independent entity.
(b) As of the Closing Date, all federally registered trademarks, patents or copyrights of the Borrower and the Guarantors are listed on Schedule
4.13(b) attached hereto and made part hereof. Schedule 4.13(b) shall also list all agreements for the license to use third party-owned
trademarks, patents and copyrights. The Borrower and/or the Guarantor, and to the best of Borrower's knowledge, each third party identified on
such Schedule 4.13(b) is the sole owner of such Property except to the extent any other Person has or claims rights in such Property as also
described on such Schedule 4.13(b). To the best of the Borrower's Knowledge, neither the Borrower nor any of the Guarantors are in violation
in any material respect of any intellectual property rights of any other Person with respect to such Property.
4.14 Other Associations. As of the Closing Date, neither the Borrower nor any of the Guarantors is engaged in any joint venture or partnership
with any other Person except as described on Schedule 4.14 attached hereto and made part hereof.
4.15 Environmental Matters. Except as disclosed on Schedule 14.15 attached hereto and made part hereof, or as would not have, singly or in
the aggregate, a Material Adverse Effect:
(a) The Borrower and each of its Subsidiaries has obtained all permits, licenses and other authorizations (collectively "Environmental
Authorizations") that are required with respect to the use, ownership and operation of their business, Real Property and other Property under
any Environmental Law and each such Environmental Authorization is in full force and effect.
(b) The Borrower and each of its Subsidiaries is in compliance with all terms and conditions of the Environmental Authorizations specified in
Section 4.15(a) above, and is also in compliance with, and not subject to liability under, any Environmental Law applicable to it and its
respective businesses, operations, Real Property and other Property.
(c) There is no civil, criminal or administrative action, suit, demand, claim, hearing, notice of violation, investigation, proceeding, written
notice or demand letter or request for information pending or, to the knowledge of the Borrower, are any such actions or any investigations
threatened against the Borrower or any of its Subsidiaries under any Environmental Law.
(d) There are no past or present events, conditions, circumstances, activities, practices, incidents, actions or current plans which could
reasonably be expected to materially interfere with or prevent compliance by the Borrower or any of its Subsidiaries with any Environmental
Law, or which could reasonably be expected to give rise to any liability
48
under any Environmental Law, including, without limitation, liability under the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended ("CERCLA"), or similar applicable state, local or foreign laws for response or corrective action, or which
could reasonably be expected to form the basis of any suit, proceeding, hearing, notice of violation, or notice of potential liability or
responsibility, based on or primarily related to the manufacture, processing, distribution, use, generation, treatment, storage, disposal, transport,
shipping or handling, or the arrangement for treatment or disposal or the emission, discharge, release or threatened release into the
environment, of any Hazardous Materials.
(e) Neither the Borrower nor any of its Subsidiaries has received written notice that it has been identified as a potentially responsible party or
any request for information under CERCLA or any comparable state law, nor has any such Person received any written notification that any
Hazardous Materials that it or any of its respective predecessors in interest has used, generated, stored, treated, handled, transported or disposed
of, or arranged for transport or treatment of, or arranged for disposal or treatment of, has been found at any site at which any Governmental
Authority or private party is conducting or plans to conduct an investigation or other action pursuant to any Environmental Law.
(f) There have been no releases (i.e., any past or present releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or dumping into the environment) of Hazardous Materials by the Borrower or any of its Subsidiaries or
to the Borrower's knowledge after due inquiry, any of their respective predecessors in interest, at, on, upon, under, into or from any of the Real
Properties. To the knowledge of the Borrower, there have been no such releases at, on, upon, under, from or into any real property in the
vicinity of any of the Real Properties that, through soil, air, surface water or groundwater migration or contamination, has become located on,
in or under such Real Properties.
(g) There is no friable asbestos or friable asbestos-containing material in, on, or at any of the Real Properties or any facility or equipment
owned or operated by the Borrower or any of its Subsidiaries.
(h) No Real Property of the Borrower or any of its Subsidiaries is (i) listed or proposed for listing on the National Priorities List under
CERCLA or (ii) listed in the Comprehensive Environmental Response, Compensation, Liability Information System List promulgated pursuant
to CERCLA, or on any comparable list published by any Governmental Authority.
(i) No regulated underground storage tanks or related piping are located at, under or on the Real Property, or, to the best of the Borrower's
Knowledge, located in the vicinity of such Real Property.
(j) Except as listed on Schedule 3.1(h) attached hereto, no environmental reports, investigations, studies, audits, assessments or reviews in the
possession of the Borrower or any Subsidiary with respect to the current business or operations of the Borrower or any Subsidiary or any Real
Property or other Property or facility now owned,
49
operated, leased or controlled by the Borrower or any Subsidiary contain information pertaining to any event(s) or conditions) which have or,
to the best of the Borrower's present Knowledge, are reasonably likely to cause a Material Adverse Effect. No environmental reports,
investigations, studies, audits, assessments or reviews in the possession of the Borrower or any Subsidiary with respect to the current or prior
business or Property of the Borrower or any Subsidiary or any Real Property or other Property or facility now, or to the best of Borrower's
Knowledge, previously owned, leased, operated or controlled by the Borrower or any Subsidiary, contain information pertaining to events or
conditions which would be, or otherwise are, reasonably likely to have or cause a Material Adverse Effect.
(k) No Lien has been recorded under any Environmental Law with respect to any facility, inventory, Real Property or other Property presently
owned, operated, leased or controlled by the Borrower or any of its Subsidiaries.
4.16 Regulation O. No director, executive officer or principal shareholder of the Borrower is a director, executive officer or principal
shareholder of any Lender. For the purposes hereof the terms "director" (when used with reference to a Lender), "executive officer" and
"principal shareholder" have the respective meanings assigned thereto in Regulation O issued by the Board of Governors of the Federal
Reserve System.
4.17 Capital Stock. The authorized and outstanding capital stock of the Borrower and each of the Guarantors is, as of the Closing Date, as set
forth on Schedule 4.17 attached hereto and made part hereof. All of the capital stock of each such Person has been duly and validly authorized
and, to the extent outstanding, is issued and is fully paid and non-assessable and has been sold and delivered to the holders thereof in
compliance with, or under valid exemption from, all federal and state laws and the rules and regulations of all regulatory bodies thereof
governing the sale and delivery of securities. As of the Closing Date hereof, except for the rights and obligations set forth in Schedule 4.17,
there are no subscriptions, warrants, options, calls, commitments, rights or agreements by which the Borrower or any of the Guarantors or any
of their respective shareholders are bound relating to the issuance, transfer, voting or redemption of shares of its capital stock or any
pre-emptive rights held by any Person with respect to the shares of capital stock of such parties. As of the Closing Date hereof, neither the
Borrower nor any of the Guarantors has issued any securities that remain outstanding that are convertible into or exchangeable for shares of its
capital stock or any options, warrants or other rights to acquire such shares or securities convertible into or exchangeable for such shares except
as shown on Schedule 4.17.
4.18 Solvency. After giving effect to the creation of the Revolving Credit and the transactions described herein and therein, the Borrower and
its Subsidiaries, on a consolidated basis, are solvent, are able to pay their respective debts as they become due and have capital sufficient to
carry on their respective business and all businesses in which any such Persons are about to engage, and now own Property having a value both
at fair valuation and at present fair salable value greater than the amount required to pay such entity's debts. After giving effect to the creation
of the Revolving Credit and the transactions described herein and therein, the Borrower and its Subsidiaries, on a consolidated basis, will not be
rendered insolvent by the execution and delivery of this Agreement or any of the other agreements, documents or
50
instruments executed in connection with this Agreement (including, without limitation, the Guarantees) or by the transactions contemplated
hereunder or thereunder.
4.19 Interrelatedness of the Borrower and the Guarantors. The business operations of the Borrower and the Guarantors are related and have a
common business purpose. To permit their uninterrupted and continuous operations, such companies now require and will from time to time
hereafter require funds for general business purposes. The proceeds of Advances under the Revolving Credit will directly or indirectly benefit
the Borrower and each of the Guarantors severally and jointly, regardless of which entity requests or receives part or all of the proceeds of such
Advances from the Borrower.
SECTION 5. AFFIRMATIVE COVENANTS.
The Borrower covenants that until all of the Borrower's Obligations to the Lenders and the Administrative Agent hereunder are paid and
satisfied in full and the Revolving Credit has been terminated (it being understood that the Borrower shall cause each of its Subsidiaries (or, as
the case may be, the Guarantors) to observe and comply in a timely manner with each provision of the covenants in this Section 5 to the extent
applicable to such Subsidiary (or, as the case may be, such Guarantor)):
5.1 Payment of Taxes and Claims. The Borrower shall, and shall cause each of its Subsidiaries to, pay, before they become delinquent,
(a) all taxes, assessments and governmental charges or levies imposed upon it or upon any such party's Property, and
(b) all claims or demands of materialmen, mechanics, carriers, warehousemen, landlords and other like Persons, which, if unpaid, would result
in the imposition of a Lien upon its Property; provided, however, that the Borrower and its Subsidiaries shall not be required to pay any such
tax, assessment, charge, levy or claim if the amount, applicability or validity thereof shall at the time be contested in good faith and by
appropriate proceedings by such party, and if such party shall have set aside on its books adequate reserves in respect thereof, if so required in
accordance with GAAP; which deferment of payment is permissible so long as no Lien has been entered and such party's title to, and its right
to use, its Property are not materially adversely affected thereby.
5.2 Maintenance of Properties and Corporate Existence.
(a) Property. The Borrower shall, and shall cause each of the Guarantors to, maintain its Property in good condition (normal wear and tear and
fire and other insured casualty excepted) and make all necessary renewals, replacements, additions, betterments and improvements thereto and
will pay and discharge when due the cost of repairs and maintenance to its Property, and will pay all rentals when due for all real estate leased
by such parties.
(b) Property Insurance. The Borrower shall, and shall cause each of the Guarantors to, maintain and deliver to the Administrative Agent, upon
the Administrative
51
Agent's request, evidence of business interruption insurance and insurance on all insurable tangible Property against fire, flood, casualty and
such other hazards as may be reasonably acceptable to the Administrative Agent in such amounts, with such deductibles and with such insurers
as are customary for companies in the same or similar business located in the same or similar area.
(c) General and Products Liability Insurance. The Borrower shall, and shall cause each of the Guarantors to, maintain general liability and
products liability insurance in such amounts as is customary for companies in the same or similar businesses located in the same or similar area
and shall deliver to the Administrative Agent upon the Administrative Agent's request, evidence of such insurance.
(d) Financial Records. The Borrower shall, and shall cause each of the Guarantors to, keep in all material respects current and accurate books of
records and accounts in which full and correct entries will be made of all of its business transactions, and will reflect in its financial statements
adequate accruals and appropriations to reserves, all in accordance with GAAP. The Borrower and each of the Guarantors shall not change
their respective fiscal year end dates without the prior written consent of the Administrative Agent.
(e) Corporate Existence and Rights. Except for mergers, consolidations and liquidations permitted under this Agreement, the Borrower shall,
and shall cause each of the Guarantors to, do (or cause to be done) all things necessary to preserve and keep in full force and effect its
existence, good standing, rights and franchises unless Borrower's failure to do so would not have a Material Adverse Effect.
(f) Compliance with Law. The Borrower shall, and shall cause each of the Guarantors to, comply with all laws, ordinances, governmental rules
and regulations to which it is subject, and will obtain all licenses, permits, franchises or other governmental authorizations necessary to the
ownership of its Property or to the conduct of its businesses, a violation of which or failure to obtain would have a Material Adverse Effect.
5.3 Litigation. The Borrower shall, and shall cause each of its Subsidiaries to, give immediate notice to the Administrative Agent of any
litigation or governmental investigation affecting the Borrower or any of its Subsidiaries except for litigation with potential liability to any such
party of less than $5,000,000 or litigation which is fully covered by insurance (exclusive of a deductible not to exceed $5,000,000).
5.4 Taxes. Subject to Sections 2.12 and 10.17, the Borrower shall, and shall cause each of the Guarantors to, pay all taxes (other than bank
shares taxes and taxes based upon or measured by any Lender's income or revenues or any personal property tax), if any, in connection with the
issuance of the Revolving Credit Notes, the Swing Line Note and the Guarantees (as applicable). The obligations of each such party hereunder
shall survive the payment of such party's Obligations hereunder and the termination of this Agreement.
5.5 Employee Benefit Plans. The Borrower shall, and shall cause each of its Subsidiaries to, (a) fund all of its Employee Benefit Plans in a
manner that will satisfy the minimum funding standards of Section 302 of ERISA (unless failure to do the same would not
52
have a Material Adverse Effect) and will promptly satisfy any accumulated funding deficiency that arises under Section 302 of ERISA, (b)
furnish the Administrative Agent, promptly after the filing of the same, with copies of all reports (with all attachments thereto) required, by
statute, regulation, administrative consent or order or similar written understanding, to be filed with the United States Department of Labor, the
Pension Benefit Guaranty Corporation ("PBGC") or the Internal Revenue Service ("IRS") with respect to all Employee Benefit Plan(s) to the
extent such reports contain information pertaining to events or conditions which would be, or otherwise are, reasonably likely to have a
Material Adverse Effect, or reports which any such party, or any member of a Controlled Group of which the Borrower or any of its
Subsidiaries has knowledge (with respect to any assertions of termination liability under Title IV of ERISA or, withdrawal liability, as defined
in ERISA), may receive from the United States Department of Labor, the IRS or the PBGC, with respect to any such Employee Benefit Plan(s),
and (c) promptly advise the Administrative Agent of the occurrence of any Reportable Event (as defined in Section 4043 of ERISA) which
requires the giving of notice to the PBGC or any Prohibited Transaction, of which the Borrower or any of its Subsidiaries has knowledge, with
respect to any such Employee Benefit Plan(s) and the action which such party proposes to take with respect thereto. The Borrower and each of
its Subsidiaries will make all contributions when due with respect to any multi-employer pension plan in which it participates and will
promptly advise the Administrative Agent (i) upon its receipt of notice of the assertion against such party of a claim for withdrawal liability, (ii)
upon the Borrower's knowledge of the occurrence of any event which would trigger the assertion of a claim for withdrawal liability against the
Borrower or any of its Subsidiaries, or (iii) upon the Borrower's knowledge of the occurrence of any event which, to the best of the Borrower's
Knowledge, would, after the date hereof, place the Borrower or any of its Subsidiaries in a Controlled Group (other than as shown on Schedule
4.11(c) hereto) as a result of which any member (including such party) thereof may be subject to a claim for withdrawal liability, whether
liquidated or contingent.
5.6 Financial and Business Information. The Borrower shall deliver to the Administrative Agent and to each of the Lenders the following:
(a) Financial Statements and Covenant Reports. Such data, reports, statements and information, financial or otherwise, as the Administrative
Agent may reasonably request (except for information for which an attorney/client privilege has been reasonably claimed or asserted by the
Borrower) with sufficient copies for all Lenders, including, without limitation:
(i) within forty-five (45) days after the end of each of the first three quarterly accounting periods in each fiscal year of the Borrower as at the
end of such quarter setting forth in comparative form the corresponding figures for the corresponding periods of the previous fiscal year, (A) on
a consolidated and consolidating basis for the Borrower and its Subsidiaries (x) a balance sheet and (y) a statement of income, and, (B) on a
consolidated basis for the Borrower and its Subsidiaries a cash flow statement in reasonable detail and certified by the chief financial officer or
vice president of finance of the Borrower to have been prepared in accordance with GAAP (without footnotes);
53
(ii) within ninety (90) days after the end of each fiscal year of the Borrower as at the end of such fiscal year, setting forth in each case in
comparative form the corresponding figures as at the end of the previous fiscal year (A) on a consolidated and consolidating basis for the
Borrower and its Subsidiaries, (x) a balance sheet and (y) a statement of income and, (B) on a consolidated basis, for the Borrower and its
Subsidiaries a cash flow statement and a retained earnings statement all in reasonable detail, audited and certified without qualifications, except
those which are acceptable to the Administrative Agent, (as to the consolidated statements) by independent public accountants of recognized
standing, selected by the Borrower and satisfactory to the Administrative Agent, to have been prepared in accordance with GAAP, and such
independent public accountants shall also certify without qualifications except those which are acceptable to the Administrative Agent that in
making the examinations necessary to their certification mentioned above they have reviewed the terms of this Agreement and the accounts and
conditions of the Borrower during the accounting period covered by the certificate and that such review did not disclose the existence of any
condition or event which constitutes an Event of Default (or if such conditions or events existed, describing them); and
(iii) within sixty (60) days of March 31 of each year an internally prepared budget of projected expenses and revenues for such fiscal year.
(b) Notice of Event of Default. Promptly upon becoming aware of the existence of any condition or event which constitutes a Default or an
Event of Default under this Agreement, a written notice specifying the nature and period of existence thereof and what action the Borrower is
taking (and proposes to take) with respect thereto;
(c) Notice of Claimed Default. Immediately upon receipt by the Borrower or any of its Subsidiaries of a notice of default, oral or written, given
to such party by any creditor for borrowed money or holding Indebtedness of such party which has an outstanding principal balance in excess
of $1,000,000, a copy of such notice (or a written explanation, if given orally) along with an explanation of what action the Borrower is taking
(and proposes to take) with respect thereto;
(d) Securities and Other Reports. If and as long as the Borrower or any Subsidiary of the Borrower is a publicly traded company, promptly
upon its becoming available, one copy of each financial statement, report, notice or proxy statement sent by such party to stockholders
generally, and a copy of each regular or periodic report, and any registration statement, or prospectus or any other document, in respect thereof
filed by such party with any securities exchange or with all federal or state securities and exchange commissions or any successor agency. In
addition to the foregoing, the Borrower shall, promptly upon its becoming available, deliver to the Administrative Agent one copy of each
regular or periodic report and any registration statement or prospectus and any other document filed by the Borrower or any of its Subsidiaries
with any securities exchange or with all federal or state securities and exchange commissions or any successor agency.
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5.7 Officers' Certificates. Along with the set of financial statements delivered to the Administrative Agent at the end of each calendar quarter
and fiscal year pursuant to Section 5.7(a) hereof, the Borrower shall deliver to the Administrative Agent a certificate (in the form of Exhibit E
attached hereto and made a part hereof) (the "Quarterly Compliance Certificate") from the chief financial officer or vice president of finance of
the Borrower (and as to certificates accompanying the annual statements of the Borrower, also certified by the Borrower's independent certified
public accountant) in form and substance satisfactory to the Administrative Agent setting forth, to the best of such officer's knowledge after due
investigation:
(a) Covenant Compliance. The information (including detailed calculations) required in order to establish whether the Borrower is in
compliance with the requirements of Sections 5, 6 and 7, as of the end of the period covered by the financial statements then being furnished
(and any exhibits appended thereto) under Section 5.6; and
(b) Event of Default. That the signer has reviewed the relevant terms of this Agreement and has made (or caused to be made under his
supervision) a review of the transactions and conditions of the Borrower from the beginning of the accounting period covered by the income
statements being delivered therewith to the date of the certificate, and that such review has not disclosed the existence during such period of
any condition or event which constitutes a Default or an Event of Default or if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action the Borrower has taken or proposes to take with respect thereto.
5.8 Inspection. So long as the Borrower is indebted to the Lenders, and subject in all events to the provisions of Section 10.24 hereof, the
Borrower and each of the Guarantors will, on not less than twenty-four (24) hours prior notice, permit any of the Administrative Agent's
officers or other representatives (at its own expense, prior to the occurrence of an Event of Default) to visit and inspect during business hours
any of the locations of the Borrower and each of the Guarantors, to examine and audit all of such parties' books of account, records, reports and
other papers (to the extent not subject to an attorney-client privilege), to make copies and extracts therefrom and to discuss such parties, affairs,
finances and accounts with its officers, employees and independent certified public accountants. Representatives of each Lender may
accompany the Administrative Agent during each such inspection and visit. Representatives of any Lender may visit with executive officers of
the Borrower as they may mutually agree.
5.9 Tax Returns and Reports. Subject to Section 10.24, at the Administrative Agent's request from time to time, the Borrower and each of the
Guarantors shall immediately furnish the Administrative Agent with copies of the annual federal and state income tax returns of each such
party for such years such parties have not been audited and may be subject to audit. The Lenders and the Administrative Agent shall not
disclose any such returns or other written financial information to any third party (except as permitted in Section 5.11) without the prior written
consent of the Borrower, or unless required by law or so compelled by order of a court of competent jurisdiction. The Borrower further agrees
that if requested by the Administrative Agent, it shall immediately furnish the Administrative Agent with copies of all reports filed with
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any Governmental Authority or agency, board or commission and shall supply such information with respect to each of the Guarantors which
becomes a publicly traded company.
5.10 Information to Participants and Assignees. Subject to
Section 10.24 hereof, the Administrative Agent and each Lender may divulge to any actual or prospective participant, assignee or co-lender it
may obtain with respect to the Revolving Credit, or any portion thereof, all information, and furnish to such Person copies of reports, financial
statements, certificates, and documents obtained under any provision of this Agreement or any of the other Loan Documents. The
Administrative Agent and the Lenders shall not divulge the contents of any written financial information to any other Person other than as set
forth above without the prior written consent of the Borrower, or unless required by law or so compelled by an order of a court of competent
jurisdiction.
5.11 Material Adverse Developments. The Borrower agrees that immediately upon becoming aware of any development or other information
outside the ordinary course of business (excluding matters of a general economic, financial or political nature) which materially and adversely
affects its, or any of its Subsidiaries' Property, businesses, prospects, or financial condition, in all cases taken as a whole on a consolidated
basis, or such parties, ability to perform under this Agreement or any of the other Loan Documents (as applicable), it shall give to the
Administrative Agent telephonic or telegraphic notice specifying the nature of such development or information and such anticipated effect. In
addition, such verbal communication shall be confirmed by written notice thereof to the Administrative Agent on the same day such verbal
communication is made.
5.12 Additional Parties. In the event that any Person other than the Bankruptcy Remote Subsidiary or any Person which is already a Guarantor
becomes a Material Subsidiary of the Borrower after the Closing Date (each such Material Subsidiary referred to herein as an "Additional
Party" and collectively as the "Additional Parties"), then, promptly after such Person becomes a Material Subsidiary of the Borrower (but in
any event prior to any capitalization (other than de minimis capitalization) of, or contribution of assets to, such Material Subsidiary by the
Borrower), the Borrower shall cause such Material Subsidiary to execute and deliver all such agreements, guarantees, suretyship agreements,
documents and certificates (including any amendments to the Loan Documents) and do such other acts and things as the Administrative Agent
may reasonably request in order to have such Subsidiary guarantee and act as surety for the Obligations and effect fully the purposes of this
Agreement and the other Loan Documents and to provide for payment of the obligations in accordance with the terms of this Agreement and
the other Loan Documents. Without limiting the generality of the foregoing, in such event, such Additional Party shall execute and deliver to
the Administrative Agent a Guarantee (upon the execution of which, such Additional Party shall become a Guarantor for all of the Obligations
and for all purposes hereunder and under the other Loan Documents).
5.13 Performance of Obligations. The Borrower shall, and shall cause each of the Guarantors to, perform in all material respects all of its
obligations under the terms of each mortgage, indenture, security agreement, other debt instrument and any material contract by which it is
bound or to which it is a party, except where such nonperformance would not, singly or in the aggregate, have a Material Adverse Effect.
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5.14 Further Assurances. At any time and from time to time upon the reasonable request of the Administrative Agent, the Borrower shall, and
shall cause each of the Guarantors to, execute and deliver such further documents, instruments and agreements, and do such other acts and
things as the Administrative Agent may reasonably request, in order to effect fully the purposes of this Agreement and the other Loan
Documents and to provide for payment of the Obligations in accordance with the terms of this Agreement and the other Loan Documents.
5.15 Evidence of Intercompany Indebtedness. All Indebtedness owing at any time and from time to time from the Borrower to any of its
Subsidiaries or any of the Borrower's Subsidiaries to the Borrower, or to any other such Subsidiary (except for intercompany balances of the
type disclosed in Item 1 of Schedule 4.10 due to or from, and among any of, the Borrower and/or the Guarantors) shall be evidenced by a
master promissory note or notes (the "Intercompany Notes"), in form and substance satisfactory to the Administrative Agent. All Intercompany
Notes, in the case of any such existing Indebtedness, shall have been executed, or shall contemporaneously herewith be executed by the
applicable obligor(s). True and correct copies of all Intercompany Notes (including all amendments, replacements and additions executed from
time to time) shall be delivered to the Administrative Agent promptly upon execution thereof accompanied by a certificate executed by an
Authorized Officer of the Borrower to the effect that such copies are true and correct copies of the original instruments and that all such
intercompany Indebtedness is then evidenced by such Intercompany Notes.
5.16 Evidence of Securitization. The Borrower shall within 30 days of the Closing Date deliver to the Administrative Agent true and correct
copies of the Accounts Receivable Securitization Documents and evidence of the closing of the Accounts Receivable Securitization in form
and substance reasonably satisfactory to the Administrative Agent.
SECTION 6. NEGATIVE COVENANTS.
The Borrower covenants that until all of the Borrower's obligations hereunder to the Lenders are paid and satisfied in full and the Revolving
Credit has been terminated that (it being understood that the Borrower shall cause each of its Subsidiaries (or, as the case may be, the
Guarantors) to observe and comply in a timely manner with each provision of the covenants in this Section 6 to the extent applicable to such
Subsidiary (or, as the case may be, such Guarantor)):
6.1 Mergers. The Borrower shall not, nor shall it cause or permit any of the Guarantors to, merge or consolidate or otherwise combine with or
into any other Person other than the merger of a Subsidiary of Borrower into a Guarantor (or into another Person which thereby becomes a
Guarantor to the extent such merger is consummated contemporaneously with and as part of a transaction permitted under Section 6.2 below)
or into the Borrower, or commence a dissolution or liquidation other than a liquidation or dissolution of a Guarantor pursuant to which all
Property thereof is directly and promptly transferred into the Borrower or another Guarantor.
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6.2 Acquisitions. The Borrower shall not, nor shall it cause or permit any of the Guarantors to, acquire all or a material portion of the stock,
securities or other Property of any nature (other than inventory or supplies purchased in the ordinary course of business of the purchaser) of any
Person in any transaction or in any series of related transactions or enter into any sale and leaseback transaction, provided, however, that the
Borrower and the Guarantors may consummate any such transaction (a "Permitted Acquisition") only if: (i) no Default or Event of Default
hereunder has occurred and is outstanding or would otherwise be caused by, or would exist after giving effect to, the consummation of such
acquisition; (ii) the aggregate consideration (exclusive of the working capital needs of the acquired entity) for all such acquisitions in a given
year shall not exceed an amount (the "Acquisition Amount") equal to thirty (30%) percent of the prior fiscal year-end Consolidated Net Worth
(disregarding the three-month stub period ended March 31, 2001), with a carryover only into the following year commencing with a carryover
from the fiscal year ended March 31, 2002 to the fiscal year ended March 31, 2003, of fifty (50%) percent of the previous year's unused
Acquisition Amount, exclusive of any carryover amount from a previous year, (for purposes of calculating the amount to be carried into any
other year, the amount of acquisitions in any year shall first be counted against the Acquisition Amount (exclusive of any carryover amount
from the previous year)) provided, however, that the Borrower shall be entitled to a carryover amount to the fiscal year ended March 31, 2002
of $32,921,000; (iii) the aggregate consideration in all acquisitions following the Closing Date until termination of the Revolving Credit shall
not exceed forty (40%) percent of the Consolidated Net Worth as of the end of the year immediately preceding the year of determination; (iv)
the acquiring Person must acquire, in the case of a stock acquisition, at least 80% of the issued and outstanding capital stock of the Person
being acquired (provided, however, that if the acquiring Person acquires less than 100% of the issued and outstanding capital stock of the
acquired Person, the owners of the unacquired shares must be bound by a shareholders agreement reasonably satisfactory to the Administrative
Agent which shall include, at a minimum, "drag along" rights in respect of such minority shares);
(v) the Borrower and the Guarantors shall not assume any new contingent liabilities which would cause, or be reasonably likely to cause, a
Material Adverse Effect; (vi) the business of the acquired entity shall be generally similar to the lines of business of the Borrower and the
Guarantors; (vii) any Person acquired by the Borrower (and becoming a Material Subsidiary of the Borrower) shall unconditionally guarantee
and become surety for all of the Borrower's Obligations on terms and conditions satisfactory to the Administrative Agent; (viii) the
Administrative Agent shall have received a satisfactory certificate (substantially in the form of Exhibit E attached hereto and made part hereof)
prepared and signed by the chief financial officer or vice president of finance of the Borrower showing the cost of acquiring the applicable
Person exclusive of amounts attributable to the working capital requirements of such Person and (after taking into effect the proposed
acquisition) pro forma covenant compliance with the financial covenants set forth in Section 7 herein immediately following the applicable
acquisition and projected compliance with such covenants for no fewer than the next four (4) succeeding fiscal quarters of the Borrower, setting
forth in reasonable detail the calculations used in presenting such costs and projections and with such supporting information as may be
reasonably requested by the Administrative Agent; and (ix) the Administrative Agent shall have received a satisfactory officer's certificate from
an Authorized Officer of the Borrower to the effect that the conditions set forth in clauses (i) through (viii) have been satisfied as of the date of
the acquisition.
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6.3 Liens and Encumbrances. (a) The Borrower shall not, nor shall it cause or permit any of the Guarantors to: (i) execute a negative pledge
agreement with any Person covering any of its Property, or (ii) create or cause or authorize or agree or consent to cause or permit, assume or
suffer to exist or remain in effect (upon the happening of a contingency or otherwise), its Property, whether now owned or hereafter acquired,
to be subject to a Lien or be subject to any claim except for the following (the "Permitted Liens"):
(1) Liens securing taxes, assessments or governmental charges or levies or the claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords, and other like Persons, or Liens evidencing consignment or bailment arrangements with the Borrower or any of the
Guarantors as consignee or bailee, provided the payment thereof is not at the time required by Section 5.1;
(2) Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance,
social security and other like laws and in connection with leases or trade contracts;
(3) Purchase money security interests (attaching solely to the fixed asset purchased and securing only the obligation incurred to finance such
purchase) from the Borrower or any of the Guarantors to Persons providing financing for permitted Consolidated Capital Expenditures
provided that each such financing obligation incurred by the Borrower shall not exceed the lesser of (A) cost or (B) appraised fair market value;
(4) Existing Liens described on Schedule 4.4 hereto;
(5) Liens (other than on Accounts and/or Inventory) deemed to be assumed or taken subject to by the Borrower or any of the Guarantors in
connection with Permitted Acquisitions on Property of the acquired entity as of the date of the Permitted Acquisition;
(6) Liens which are not otherwise permitted pursuant to this Section, securing Indebtedness not exceeding $1,000,000 in the aggregate
outstanding at any one time;
(7) Trademark license agreements under which the Borrower or any Guarantor, as licensee, is prohibited from granting a security interest in
such licenses or in inventory with the licensed mark to be sold by the Borrower or any Guarantor provided, that at no time shall the value of all
licensed inventory exceed the lesser of (i) twenty (20%) percent of the total value of the Borrower's or any Guarantor's Inventory or (ii)
$20,000,000 and, provided, further, that such restriction on the granting of a security interest contained in any such license shall only extend to
cover the subject license agreement and the licensed inventory and that in no event shall such lien restriction apply to the proceeds of any
licensed inventory generated from time to time, including, without limitation, any Accounts generated from the sale of such licensed inventory;
and
(8) Liens in connection with Asset Sales permitted under Section 6.12(b)(v).
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(b) If the Borrower or any Subsidiary shall create or assume any Lien upon any of its Property or income or profits therefrom, other than Liens
permitted under this Section 6.3, and without having such provisions be deemed for any purpose to represent a consent by any Lender or
Lenders to such Lien, it shall make or cause to be made effective provisions whereby the obligations will be secured by such Lien equally and
ratably with any and all other indebtedness secured thereby.
6.4 Transactions With Affiliates or Subsidiaries. The Borrower shall not, nor shall it cause or permit any of the Guarantors to, enter into any
transaction of any kind or nature with any Affiliate, including, without limitation, the purchase, sale, transfer or exchange of Property, or the
loaning or giving of funds to any Affiliate or any Subsidiary, excepting (a) sales of Property (including the sale of receivables and related
accounts to the Bankruptcy Remote Subsidiary) and/or services and co-licensing or co-marketing arrangements or agreements pursuant to the
reasonable requirements of the Borrower's or the Guarantors' business and upon terms substantially the same and no less favorable to such
party as it would obtain in a comparable arm's length transaction with any Person not an Affiliate, and so long as such transaction is not
otherwise prohibited hereunder, (b) loans and transfers of Property by the Borrower to the Guarantors and loans and transfers of Property by
the Guarantors to the Borrower or to other Guarantors, (c) loans by the Borrower or a Guarantor to any of the Subsidiaries (other than
Guarantors) after the date hereof in an aggregate amount as to all such loans under this clause (c) not to exceed $20,000,000 at any time
outstanding in the aggregate after the Closing Date, provided, however, that a loan may be made by the Borrower or a Guarantor to any of the
Subsidiaries (other than Guarantors) which, when aggregated with all then outstanding loans referenced in this clause (c), would exceed
$20,000,000 so long as the recipient of such loan unconditionally guarantees and becomes surety for all of the Borrower's Obligations on terms
and conditions and under a written guaranty satisfactory to the Administrative Agent within sixty (60) days of the funding of such loan, (d) the
de minimis transfer by the Borrower or any of the Guarantors of their Property to any of the Subsidiaries and (e) transactions expressly
permitted pursuant to Sections 6.5 and 6.6 hereof.
6.5 Guarantees. Excepting (a) the endorsement in the ordinary course of business of negotiable instruments for deposit or collection, (b) the
Guarantees, (c) guarantees by the Borrower or by any Guarantor of operating leases of any Subsidiary entered into in the ordinary course of
business, (d) indemnification obligations to directors and officers under applicable law or set forth in the certificate of incorporation and/or
by-laws of the Borrower or any Subsidiary, (e) guarantees by the Borrower or by any Guarantor for the Indebtedness of Borrower or any
Guarantor and (f) additional guarantees by the Borrower and/or any of the Guarantors for the Indebtedness of any Person which, together with
Indebtedness permitted under Section 6.11(b)(iii) below shall not exceed $20,000,000 at any one time outstanding (which amount is subject to
temporary increase as set forth in the proviso contained in Section 6.11(b)(iii), the Borrower shall not, nor shall it cause or permit any of the
Guarantors to, become or be liable, directly or indirectly, primary or secondary, matured or contingent, in any manner, whether as guarantor,
surety, accommodation maker, or otherwise for the existing or future indebtedness or obligations) of any kind or nature of any Person.
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6.6 Dividends and Redemptions. (a) The Borrower shall not, nor shall it cause or permit any of its Subsidiaries (other than the Bankruptcy
Remote Subsidiary) to, directly or indirectly: (i) declare, pay, authorize or make any form of dividend (except for stock dividends or stock
splits) or return any capital, in cash or property, to its shareholders, their successors or assigns, except (A) as expressly permitted by Section 6.1
hereof, (B) dividends payable to the Borrower or any Guarantor by any Subsidiary, and (C) if, after giving effect to such dividend or
distribution to shareholders, the Borrower is in compliance with Section 7.2.
(b) Notwithstanding the provisions of paragraph (a) above, (i) dividends or redemptions, etc. otherwise permitted as set forth above shall not be
made so long as any Default or Event of Default is then outstanding or would be outstanding after taking into effect such dividend, redemption
or setting aside of funds, and (ii) no dividend may be declared or paid or redemption made if the Borrower is not then in compliance with the
covenants set forth in Sections 5.6 and 5.7.
6.7 Loans and Investments. The Borrower shall not, nor shall it cause or permit any of the Guarantors to, make or have outstanding Investments
in, any Person, other than (a) Investments in commercial paper maturing in one (1) year or less from the date of issuance rated at the time of
purchase either A-1 by S&P, P-1 by Moody's or other similar nationally recognized credit rating agency of similar standing; (b) Investments in
direct obligations of the United States of America, or any agency or instrumentality thereof, maturing in five (5) years or less from the date of
acquisition thereof; (c) Investments in certificates of deposit maturing within one (1) year from the date of origin issued by, or money market
funds on deposit with, a Lender; (d) Investments in repurchase agreements secured by direct obligations of the United States of America, or any
agency thereof, maturing in twelve (12) months or less and having a market value at the time such repurchase agreement is entered into at least
equal to the amount of the repurchase obligations thereunder, entered into with a Lender, (e) loans and guarantees permitted under Sections 6.4
and 6.5 above, (f) Investments which are Permitted Acquisitions,
(g) by the Borrower or any of the Guarantors as permitted, under Sections 6.2(a) and (b), (h) Investments in any Guarantor and Investments in
any other Subsidiary of the Borrower as such Investments existed as of the Closing Date,
(i) permitted Investments in connection with Asset Sales permitted pursuant to
Section 6.12(b)(i)(C) and Investments resulting from Asset Sales permitted pursuant to Section 6.12(b)(v), (j) other Investments not to exceed
$5,000,000 in the aggregate outstanding at any one time, (k) loans to its employees or directors made by the Borrower or any Guarantor for the
purpose of enabling such employees or directors to exercise stock options up to an aggregate loan balance of $3,500,000 at any time
outstanding (as to all loans permitted under this clause (k)), and (l) Investments in the Bankruptcy Remote Subsidiary from the sale of Assets to
the Bankruptcy Remote Subsidiary as part of the Accounts Receivable Securitization.
6.8 Amendment or Waivers of Certain Documents. (a) The Borrower shall not, nor shall it cause or permit any of the Guarantors to, amend,
modify, supplement or otherwise change the terms of their respective certificates of incorporation or bylaws or any agreement entered into by
the Borrower or any of the Guarantors with respect to their respective capital stock or other equity interests (other than any amendment,
modification, supplement or change which individually, or together with all amendments, modifications, waivers or changes
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made, would not be adverse to the Borrower and the Guarantors taken as a whole, the Administrative Agent or the Lenders) without the prior
written consent of the Administrative Agent, which consent shall not be unreasonably withheld.
(b) The Borrower shall not, nor shall it cause or permit any of the Guarantors to, amend, modify, supplement or otherwise change, or waive
compliance with or consent to a departure from, any of the terms or provisions of any Existing Debt of the Borrower, or any other material
agreement, including, without limitation, the Accounts Receivable Securitization Documents of the Borrower or the Guarantors (other than any
amendments, modifications, supplements, changes, waivers and consents which individually, or together with all other amendments,
modifications, supplements, changes, waivers and consents made, would not be adverse to the Borrower, any of the Guarantors, the
Administrative Agent or the Lenders) without the prior written consent of the Administrative Agent, which consent shall not be unreasonably
withheld.
(c) Neither the Borrower nor any Subsidiary shall enter into, suffer to exist or become or remain subject to any agreement or instrument to
which any such Person is a party or by which any such Person or its Property may be subject or bound, except for the Loan Documents, that
would prohibit or restrict in any manner, directly or indirectly, or require the consent of any Person to, any amendment to, or waiver or consent
to departure from the terms of, any of the Loan Documents.
6.9 Sale and Lease-Backs. The Borrower shall not, nor shall it cause or permit any of the Guarantors to, directly or indirectly, become or
thereafter remain liable as lessee or as guarantor or surety with respect to the lessee's obligations under any lease, whether an operating lease or
a capital lease, of any property (whether real or personal or mixed), whether now owned or hereafter acquired, (i) which the Borrower or any of
the Guarantors has sold or transferred or is to sell or transfer to any other Person or (ii) which the Borrower or any such Subsidiary intends to
use for substantially the same purpose as any other property which has been or is to be sold or transferred by the Borrower or any such
Subsidiary to any Person in connection with such lease, if in the case of clause (i) or (ii) above, such sale and such lease are part of the same
transaction or a series of related transactions or such sale and such lease occur within one (1) year of each other or are with the same other
Person.
6.10 Business Conducted. The Borrower shall not, nor shall it cause or permit any of the Guarantors to, engage, directly or indirectly, in any
line of business substantially different from the business conducted by it immediately prior to the Closing Date, or engage in business or lines
of business which are not reasonably and substantially related thereto.
6.11 Indebtedness. The Borrower shall not, nor shall it cause or permit any of the Guarantors to (a) make any prepayments of any nature
whatsoever (or deposit money or other Property for the purpose thereof) on any existing or future long-term Indebtedness to any Person except
the conversion of Indebtedness to equity so long as the entire amount of the portion of the Indebtedness so prepaid is so converted or (b)
hereafter incur or be or become liable for Indebtedness except for (i) Indebtedness to the Lenders pursuant to this Agreement, (ii) purchase
money financing supported by Liens permitted pursuant to Sections 6.3(a)(3) or
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6.3(a)(5) above and Indebtedness secured by the existing Liens described in
Section 6.3(a)(4), (iii) Indebtedness permitted under Section 6.4(b), and (iv) additional Indebtedness in an aggregate principal amount, together
with all obligations described in Section 6.5(f) herein, not exceeding $20,000,000 at any one time outstanding, provided, however, that such
$20,000,000 limit may be temporarily exceeded but only during the sixty (60) day period following the date of this Agreement and solely as a
result of the existence of the intercompany balances disclosed in Item 1 on Schedule 4.10 so long as such intercompany balances are eliminated
or sufficiently reduced by the end of such sixty (60) day period either as a result of repayment or recharacterization so that such $20,000,000
limit is no longer exceeded.
6.12 Restrictions on Fundamental Changes; Asset Sales. The Borrower shall not, nor shall it cause or permit any of its Subsidiaries to, (a)
materially alter the corporate, partnership, capital or legal structure of the Borrower or any Subsidiary of the Borrower other than alterations of
the structure of (i) Guarantors as permitted in Sections 6.1, 6.2, 6.9 and 6.12(a) above, (ii) any Subsidiaries which are not Guarantors so long as
(A) such alteration would not give rise to a Material Adverse Effect and (B) no Default or Event of Default has occurred or is continuing or
would occur after taking into effect such alteration or (b) make or effect any Asset Sale excepting (i) Asset Sales made (A) at a time when no
Default of Event or Default is outstanding hereunder or would be outstanding after taking into effect such Asset Sale, (B) the consideration
received shall be an amount at least substantially equal to the fair market value of the Property which is the subject of the Asset Sale, as
certified to the Administrative Agent by the Borrower's chief financial officer or vice president of finance; (C) at least 20% of the consideration
received therefrom shall be cash (any non-cash consideration must be in the form of either (1) senior commercial paper with a rating of at least
"A-1" by S & P or "P-1" by Moody's, (2) a senior debt instrument fully secured by marketable securities of a company listed on a nationally
recognized exchange) or (3) a debt instrument secured by a first lien on the assets sold; (D) such Asset Sales are not to an Affiliate of the seller;
and (E) the assets sold in all transactions permitted hereby after the Closing Date shall have an aggregate book value of not more than
$17,500,000; (ii) transactions permitted under Section 6.1, 6.2 or Section 6.4 above; (iii) the Borrower and any of its Subsidiaries may from
time to time abandon any personal Property of the Borrower or such Subsidiary which is not the business of the Borrower or such Subsidiary
and cannot be sold; (iv) at a time when no Default or Event of Default is outstanding hereunder or would be outstanding after taking into effect
such Asset Sale, sales of minority interests of capital stock or partnership interests of any Subsidiary (other than a Guarantor) to any employees
thereof; and (v) Asset Sales in connection with the Accounts Receivable Securitization.
6.13 Agreements Regarding Dividends. Neither the Borrower nor any of the Guarantors shall create or otherwise cause or suffer to exist or
become effective any consensual encumbrance or restriction of any kind (whether arising by operation of law, by agreement, by its articles or
certificate of incorporation, bylaws or other constituent documents of such Person, or otherwise) on the ability of any Subsidiary of the
Borrower to (i) pay dividends or make any other distribution on any of such Subsidiary's capital stock, partnership interests or other interests,
as the case may be, owned by the Borrower or any other Subsidiary of Borrower, (ii) make loans or advances to, or guarantee any Indebtedness
or any other obligation of, the Borrower or any other Subsidiary of Borrower or (iii) transfer any of its Property to the Borrower
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or any other Subsidiary of Borrower, except restrictions pursuant to (A) the Loan Documents, (B) applicable law and (C) the Accounts
Receivable Securitization Documents.
6.14 Miscellaneous Covenants.
(a) The Borrower shall not, nor shall it cause or permit any of the Guarantors to, become or be a party to any Hedge Agreement entered into
purely for speculative purposes or to any contract or agreement which materially impairs such party's ability to perform under this Agreement,
or under any other instrument, agreement or document to which the Borrower or such Subsidiary is a party or by which it is or may be bound.
(b) The Borrower shall not, nor shall it cause or permit any of the Guarantors to, carry or purchase any "margin security" within the meaning of
Regulations U, T or X of the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II except in accordance with such
Regulations.
SECTION 7. FINANCIAL COVENANTS.
The Borrower shall comply with the following financial covenants (each to be measured as of the end of each of the Borrower's fiscal quarters
during the applicable respective measurement periods:
7.1 Fixed Charge Coverage Ratio. The Borrower shall have and maintain a Fixed Charge Coverage Ratio of not less than 1.40 to 1 (measured
on a rolling four quarter basis).
7.2 Minimum Consolidated Net Worth. The Borrower shall have and maintain a minimum Consolidated Net Worth of not less than
$193,027,000 for the period from the Closing Date through March 31, 2001. For each subsequent fiscal quarter thereafter, the Borrower shall
maintain, minimum Consolidated Net Worth in an amount not less than the sum of the preceding fiscal year-end's minimum Consolidated Net
Worth requirement plus an amount equal to fifty (50%) percent of the Borrower's current year-to-date Consolidated Net Income through the
end of such fiscal quarter (with no adjustment for losses).
7.3 Ratio of Consolidated Funded Debt to Consolidated Capitalization. The Borrower shall have and maintain at all times from and after the
Closing Date a ratio of Consolidated Funded Debt to Consolidated Capitalization equal to or less than .50 to 1.
7.4 Ratio of Consolidated EBITDA to Consolidated Interest Expense. The Borrower shall have and maintain a ratio of Consolidated EBITDA
to Consolidated Interest Expense of not less than 4.50 to 1 (measured on a rolling four quarter basis).
SECTION 8. DEFAULT
8.1 Events of Default. Each of the following events shall constitute an event of default (an "Event of Default"):
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(a) Payments. The Borrower fails to make any payment of principal or interest under the Revolving Credit on its due date; or
(b) Other Charges. The Borrower fails to pay any other charges, fees, Expenses or other monetary obligations owing to any Lender or the
Administrative Agent or the Fronting Lender arising out of or incurred in connection with this Agreement when such payment is due and
payable and such breach is not cured within five (5) days of the Borrower's receipt of notice from the Administrative Agent of such breach; or
(c) Particular Covenant Defaults. The Borrower fails to perform or observe any covenant or undertaking contained in this Agreement, (other
than with respect to the covenants contained in Sections 5.7(b), 6.1 through 6.15 and Sections 7.1 through 7.4 inclusive, as to which no notice
and cure period shall be applicable), and such breach is not cured within fifteen
(15) days of the Borrower's receipt of notice thereof from the Administrative Agent, or if such breach could not be cured by the Borrower due
to circumstances beyond the Borrower's control within such fifteen (15) day period, for such longer period as may be necessary for the
Borrower to cure such default (in no event to exceed a total of thirty (30) days from any such notice) so long as the Borrower is diligently
taking all necessary steps to cure any such default(s); or
(d) Financial Information. Any statement, report, financial statement, or certificate made and delivered by the Borrower or any of its officers,
employees or agents, to the Administrative Agent or any Lender, is not true and correct, in all material respects, when made (provided,
however, that an Event of Default shall not be deemed to have occurred hereunder because interim financial statements are subject to normal
and recurring year end adjustments in the ordinary course); or
(e) Uninsured Loss. There shall occur any uninsured damage to or loss, theft, or destruction of any portion of any Property of the Borrower or
any of the Guarantors in excess of $5,000,000; or
(f) Warranties or Representations. Any warranty, representation or other statement by or on behalf of the Borrower or any of the Guarantors
contained in or pursuant to this Agreement, or in any of the Loan Documents or in any other existing or future agreement between the
Borrower and/or any of the Borrower's Subsidiaries, on the one hand, and the Administrative Agent and/or any one or more of the Lenders, on
the other hand, is false, erroneous, or misleading in any material respect when made; or
(g) Agreements with Others. The Borrower or any of the Guarantors shall (i) default beyond any grace period under any agreement(s) with any
creditor(s) of the Borrower or any such Subsidiary or holder(s) of Indebtedness from the Borrower or such Subsidiary which has an aggregate
outstanding principal balance of $1,000,000, if the effect of such default is to cause or enable the holder(s) of such party's obligations to declare
any such obligation of such party to become due (whether or not actually accelerated) prior to its maturity date or prior to its regularly
scheduled date of payment or (ii) fail to pay any Indebtedness at final maturity; or
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(h) Other Agreements with Lenders. The Borrower or any of the Guarantors materially breaches or violates the terms of, or if a default (subject
to any cure periods contained therein) or an Event of Default occurs under any other existing or future agreement (related or unrelated) between
the Borrower and/or any of the Borrower's Subsidiaries, on the one hand, and the Administrative Agent and/or any/all Lenders, on the other
hand; or
(i) Judgments. Any final, non-appealable judgment for the payment of $5,000,000 or more or final, non-appealable judgments aggregating
$5,000,000 or more (not acknowledged, in writing, by the Borrower's or its applicable Subsidiary's insurance company as unconditionally
covered by insurance or not stayed within five (5) days of entry) shall be rendered by a court of competent jurisdiction against the Borrower or
any of the Guarantors; or
(j) Assignment for Benefit of Creditors, etc. The Borrower or any of the Guarantors makes or proposes an assignment for the benefit of
creditors generally or offers a composition or extension to creditors; or
(k) Bankruptcy, Dissolution, etc. Any action is taken for the dissolution or liquidation of the Borrower or any of the Guarantors not otherwise
permitted hereunder, or if there shall be commenced any case or proceeding for reorganization or liquidation of the Borrower's or any of
Subsidiary's debts under the Bankruptcy Code or any other state or federal law, now or hereafter enacted for the relief of debtors, whether
instituted by or against such party, provided that as to any such action or proceeding commenced against any Borrower or any of the
Guarantors, such Borrower or Subsidiary shall have forty-five (45) days to have such action or proceeding dismissed, it being understood that
prior to such dismissal, the Lenders and the Administrative Agent shall not be obligated to make Advances to or for the benefit of the
Borrower; or
(l) Receiver. There shall be appointed a receiver, liquidator, custodian, trustee or similar official or fiduciary for (i) the Borrower or any of the
Guarantors, (ii) a substantial part of the Borrower's or any of the Guarantors' Property or (iii) for such part of the Property of the Borrower or a
Guarantor, such control over which would give rise to a Material Adverse Effect; or
(m) Execution Process, etc. There shall be issued any execution or distraint process against the Borrower or any of the Guarantors, or any
Property of the Borrower or any Property of any Subsidiary of the Borrower, which execution is not released, stayed or dismissed within fifteen
(15) days of its entry, it being understood that nothing herein shall in any way impair the Administrative Agent's and the Lenders' rights to
immediately effect an offset against any asset of the Borrower or the Guarantors; or
(n) Termination of Business. The Borrower or any of the Guarantors ceases any material portion of its respective business operations as
presently conducted unless, in the case of a Guarantor, such Guarantor immediately merges into or consolidates with or is dissolved or
liquidated into the Borrower or another Guarantor; or
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(o) Pension Benefits, etc. The Borrower or any of the Guarantors fail to comply with ERISA so that grounds exist to permit the appointment of
a trustee under ERISA to administer the Borrower's or such Subsidiary's employee plans or to allow the Pension Benefit Guaranty Corporation
to institute proceedings to appoint a trustee to administer such plan(s), or to permit the entry of a Lien to secure any deficiency or claim; or
(p) Transfer of Stock. The Borrower shall not be the owner (directly or indirectly) of at least 100% of all of the issued and outstanding voting
stock of each of the Guarantors (or 80% in the case of Guarantors formed in connection with Permitted Acquisitions), provided, however, that
the foregoing shall not prohibit mergers, dissolutions or stock dividends expressly permitted by Sections 6.1 or 6.4 hereof; or
(q) Investigations. Evidence shall be received by the Administrative Agent or any Lender that the Borrower or any of the Guarantors is or has
been engaged in any type of activity which, in the Administrative Agent's reasonable judgment, could result in the forfeiture of Property of any
of the Guarantors or the Borrower to any Governmental Authority other than a forfeiture under Environmental Laws or products liability law
which would not give rise to a Material Adverse Effect; or
(r) Guarantees. Any Guarantee ceases to be effective or any Guarantor disclaims liability under such Guarantee or attempts to revoke or
otherwise terminate its respective Guarantee for any reason and to any extent, except to the extent of a merger, consolidation or liquidation
permitted hereunder; or
(s) Change of Control. There shall occur any Change of Control.
8.2 Rights and Remedies on Default.
(a) Upon the occurrence of a Default or an Event of Default, the Administrative Agent may, in its discretion, or shall, upon the direction of the
Majority Lenders, withhold or cease making Advances under the Revolving Credit.
(b) In addition to all other rights, options and remedies granted or available to the Administrative Agent under this Agreement or the other Loan
Documents (each of which is also then exercisable by the Administrative Agent), the Administrative Agent may, in its discretion, or shall, upon
the direction of Majority Lenders, upon the occurrence and during the continuance of an Event of Default, terminate the Revolving Credit,
accelerate the Obligations (other than any Obligations under any Hedge Agreement which may be accelerated only by the Lender which is a
party thereto pursuant to the terms of such Hedge Agreement) and exercise any rights and remedies available hereunder or under any of the
other Loan Documents, at law or in equity to enforce the Lenders, and the Administrative Agent's rights and collect the obligations, all without
demand, notice, presentment or protest or further action of any kind (it also being understood that the occurrence of any of the events or
conditions set forth in subparagraphs (j), (k) or (1) of Section 8.1 above shall automatically cause an acceleration of the Obligations).
Nevertheless, if at any time within sixty (60) days after acceleration of the Obligations, (i) the Borrower shall pay all accrued and unpaid
interest and all payments on account of the principal Obligations, which shall have become due otherwise than by
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acceleration (with interest, to the extent permitted by law, on overdue interest, at the Alternate Base Rate) and all other fees or Expenses then
owed hereunder and (ii) all Defaults and Events of Default (other than non-payment of principal of and accrued interest on the Advances and
the Revolving Credit Notes due and payable solely by virtue of acceleration) shall be remedied or waived pursuant to Section 9.15, then the
Majority Lenders, by written notice to the Borrower, may (in their absolute and sole discretion) rescind and annul the acceleration and its
consequences; but such action shall not affect any subsequent Default or Event of Default or impair any right consequent thereto. The
provisions of the immediately preceding sentence are intended merely to bind the Lenders to a decision that may be made at the election of the
Lenders and are not intended in any manner or under any circumstances whatsoever to benefit the Borrower or any of the Guarantors and do
not grant in any manner or under any circumstances whatsoever the Borrower or any of the Guarantors the right to require the Lenders to
rescind or annul any acceleration hereunder, even if the conditions set forth herein are met.
(c) Upon the occurrence and during the continuance of an Event of Default and in addition to all other rights and remedies available to the
Administrative Agent, the Borrower shall, upon demand of the Administrative Agent, be obligated to deliver and pledge to the Administrative
Agent, on behalf of all Lenders, cash collateral in the amount of all outstanding Letters of Credit.
8.3 Nature of Remedies. All rights and remedies granted the Administrative Agent and/or the Lenders hereunder and under any of the other
Loan Documents, or otherwise available at law or in equity, shall be deemed concurrent and cumulative, and not alternative remedies, and the
Administrative Agent and/or the Lenders may proceed with any number of remedies at the same time until all Obligations are satisfied in full.
The exercise of any one right or remedy shall not be deemed a waiver or release of any other right or remedy, and the Administrative Agent,
upon the occurrence of an Event of Default, may proceed against the Borrower, at any time, under any agreement, document or instrument,
with any available remedy and in any order.
8.4 Set-Off. If any bank account of the Borrower with the Administrative Agent, any Lender or any participant is attached or otherwise liened
or levied upon by any third party, the Administrative Agent and/or such Lender (and/or any participant) need not await the running of any
applicable grace period hereunder, but the Administrative Agent and/or such Lender (and/or such participant) as agent for the Lenders and the
Administrative Agent shall have and be deemed to have the immediate right of set-off and may apply the funds or amount thus set-off against
any of the Obligations. Any such funds shall be held for the ratable benefit of all Lenders and shall be remitted to the Administrative Agent for
distribution to all Lenders in accordance with each Lender's Pro Rata Percentage (subject to such sharing agreements as the Administrative
Agent may reasonably determine to effectuate the terms of this Agreement).
SECTION 9. THE ADMINISTRATIVE AGENT.
9.1 Appointment and Authorization. Each Lender, and each subsequent holder of any of the Revolving Credit Notes by its acceptance thereof,
hereby irrevocably appoints and authorizes the Administrative Agent to take such action on its behalf and to
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exercise such powers under this Agreement as are delegated to the Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. The Administrative Agent will handle all transactions relating to the Revolving Credit and all other Obligations,
including without limitation, all transactions with respect to Letters of Credit, this Agreement, and all of the other Loan Documents, in
accordance with its usual banking practices. The Borrower is hereby authorized by the Lenders to deal solely with the Administrative Agent in
all transactions which affect the Lenders under this Agreement and the Loan Documents. The rights, privileges and remedies accorded to the
Administrative Agent hereunder shall be exercised by the Administrative Agent on behalf of all of the Lenders.
9.2 General Immunity. In performing its duties as the Administrative Agent hereunder, the Administrative Agent will take the same care as it
takes in connection with loans in which it alone is interested, using reasonable and prudent banking practices. However, neither the
Administrative Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or
them hereunder or in connection herewith except as such actions or omissions are caused from its or their own gross negligence or willful
misconduct unless such action was taken or omitted to be taken by the Administrative Agent at the direction of the Majority Lenders.
9.3 Consultation with Counsel. The Administrative Agent may consult with legal counsel and other experts selected by it and shall not be liable
for any action taken or suffered in good faith by it in accordance with the advice of such counsel.
9.4 Documents. The Administrative Agent shall not be under a duty to examine into or pass upon the effectiveness, genuineness or validity of
this Agreement or any of the Revolving Credit Notes or any of the other Loan Documents, and the Administrative Agent shall be entitled to
assume that the same are valid, effective and genuine and what they purport to be. In addition, the Administrative Agent shall not be liable for
failing to make any inquiry concerning the accuracy, performance or observance of any of the terms, provisions or conditions of such
instrument, document or agreement. The Administrative Agent shall furnish to the Lenders copies of all notices and other documents (including
financial statements) received from the Borrower hereunder.
9.5 Rights as a Lender. With respect to its Pro Rata Share of the Revolving Credit, the Administrative Agent shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were not the Administrative Agent, and the term "Lender" or
"Lenders" shall, unless the context otherwise indicates, include the Administrative Agent in its capacity as a Lender. Subject to the provisions
of this Agreement, the Administrative Agent and any Lender may accept deposits from, lend money to and generally engage in any kind of
banking or trust business with the Borrower and its Affiliates and Subsidiaries as if it were not the Administrative Agent.
9.6 Responsibility of the Administrative Agent. It is expressly understood and agreed that the obligations of the Administrative Agent
hereunder are only those expressly set forth in this Agreement and that the Administrative Agent shall be entitled to assume that no Event of
Default, and no event that, with notice, or lapse of time or both would, if unremedied,
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constitute an Event of Default, has occurred and is continuing, unless the Administrative Agent has actual knowledge of such fact. Except to
the extent the Administrative Agent is required by the Lenders pursuant to the express terms hereof to take a specific action, the Administrative
Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights which may be vested in it by, or
with respect to taking or refraining from taking any action or actions that it may he able to take under or in respect of, this Agreement and the
Loan Documents. The Administrative Agent shall incur no liability under or in respect of this Agreement and the other Loan Documents by
acting upon any notice, consent, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by
the proper party or parties, or with respect to anything that it may do or refrain from doing in the reasonable exercise of its judgment, or that
may seem to it to be necessary or desirable under the circumstances. It is agreed among the Administrative Agent and the Lenders that the
Administrative Agent shall have no responsibility to carry out audits or otherwise examine the books and records or properties of the Borrower
or any of the Borrower's Subsidiaries, except as the Administrative Agent in its sole discretion deems appropriate or unless directed to do so by
the Majority Lenders. The relationship between the Administrative Agent and each Lender is and shall be that of agent and principal only and
nothing herein shall be construed to constitute the Administrative Agent a joint venturer with any Lender, a trustee or fiduciary for any of the
Lenders or for the holder of a participation herein nor impose on the Administrative Agent duties and obligations other than those set forth
herein. Nothing contained in this Section 9.6 is intended to relieve the Administrative Agent from liability for its gross negligence or its willful
misconduct unless any act, omission or conduct of the Administrative Agent is or has been directed by the Majority Lenders.
9.7 Collections and Disbursements.
(a) The Administrative Agent will have the right to collect and receive all payments of the Obligations, and to collect and receive all
reimbursements for draws made under the Letters of Credit, together with all fees, charges or other amounts due under this Agreement and the
Loan Documents, and the Administrative Agent will remit to each Lender, according to its Pro Rata Percentage, all such payments actually
received by the Administrative Agent (subject to any required clearance procedures) on the same Business Day of receipt thereof (provided
such payments shall have been received by the Administrative Agent prior to 1:00 p.m., Philadelphia time, on such Business Day) otherwise on
the next Business Day.
(b) If any such payment received by the Administrative Agent is rescinded or otherwise required to be returned for any reason at any time,
whether before or after termination of this Agreement and the Loan Documents, each Lender will, upon written notice from the Administrative
Agent promptly pay over to the Administrative Agent its Pro Rata Percentage of the amount so rescinded or returned, together with interest and
other fees thereon if also required to be rescinded or returned.
(c) On the same Business Day on which notice is given to the Lenders by the Administrative Agent (or on the next following Business Day if
such notice is not given by the Administrative Agent prior to 1:00 p.m., Philadelphia time) with respect to any payment which has been made
on account of any Letter of Credit, which notice shall state the date and
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amount of such payment, each Lender (other than the Fronting Lender) shall remit to the Fronting Lender its Pro Rata Percentage of the
payment in respect of such Letter of Credit. The obligations of the Lenders hereunder are unconditional, not subject to setoff and irrevocable
and may not be terminated at any time.
(d) All payments by the Administrative Agent and the Lenders to each other hereunder shall be in lawful money of the United States of
America and at all times maintain proper books of account and records reflecting the interest of each Lender in the Revolving Credit and the
Letters of Credit, in a manner customary to the Administrative Agent's keeping of such records, which books and records shall be available for
inspection by each Lender at reasonable times during normal business hours, at such Lender's sole expense. The Administrative Agent may
treat the payees of any Revolving Credit Note as the holder thereof until written notice of the transfer thereof shall have been received by the
Administrative Agent.
(e) The Lenders and any subsequent holder by acceptance of a Revolving Credit Note agree among themselves that (i) with respect to all
amounts received by them which are applicable to the payment of principal of or interest on the Revolving Credit Notes and amounts payable
in respect of any fees or commissions hereunder, equitable adjustment will be made so that, in effect, all such amounts will be shared among
the Lenders pro rata based on their respective Pro Rata Share of the Obligations with respect to which such payment was received, whether
received by voluntary payment, by the exercise of the right of setoff or banker's lien, by counterclaim or cross action or by the enforcement of
any or all of the Revolving Credit Notes, (ii) if any of them shall exercise any right of counterclaim, setoff, banker's lien or similar right with
respect to amounts owed by the Borrower or any Guarantor hereunder or under the Revolving Credit Notes that Lender or holder, as the case
may be, shall apportion the amount recovered as a result of the exercise of such right pro rata in accordance with each Lender's Pro Rata
Percentage, and (iii) if any of them shall thereby through the exercise of any right of counterclaim, setoff, banker's lien or otherwise or as
adequate protection of a deposit treated as cash collateral under the Bankruptcy Code, receive payment or rejection of a proportion of the
aggregate amount of principal and interest due with respect to the Revolving Credit Notes held by a Lender or holder, or any other amount
payable hereunder which is greater than the proportion received by any other holder of the Revolving Credit Notes in respect of the aggregate
amount of principal and interest due with respect to the Revolving Credit Notes held by it or any other amount payable hereunder that Lender
or that holder of the Revolving Credit Notes receiving such proportionately greater payments shall
(y) notify each other Lender and the Administrative Agent of such receipt and
(z) purchase for cash, without recourse or warranty, participations (which it shall be deemed to have done simultaneously upon the receipt of
such payment) in the Revolving Credit Notes held by the other holders so that all such recoveries of principal and interest with respect to the
Revolving Credit Notes shall be proportionate to their respective Pro Rata Percentages; provided, however, that if all or part of such
proportionately greater payment received by such purchasing holder is thereafter recovered from such holder, those purchases shall be
rescinded and the purchase prices paid for such participations shall be returned to that holder to the extent of such recovery, but without
interest. The Borrower expressly consents to the foregoing arrangement.
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9.8 Indemnification. The Lenders severally and not jointly hereby each indemnify the Administrative Agent ratably according to the respective
amounts of their Pro Rata Percentages to the extent not paid or otherwise reimbursed by the Borrower, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may
be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, any other Loan
Document or the Revolving Credit or any action taken or omitted by the Administrative Agent under or related to this Agreement, any other
Loan Document or the Revolving Credit, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Administrative Agent's gross negligence or willful
misconduct unless such action was taken or omitted to be taken by the Administrative Agent at the direction of the Majority Lenders. The
Administrative Agent shall have the right to deduct, from any amounts to be paid by the Administrative Agent to any Lender hereunder, any
amounts owing to the Administrative Agent by such Lender by virtue of this paragraph.
9.9 Expenses.
(a) All out-of-pocket costs and out-of-pocket expenses incurred by the Administrative Agent for which the Borrower is responsible hereunder
and not reimbursed on demand by the Borrower, in connection with the analysis, negotiation, preparation, consummation, amendment,
administration, refinancing, termination, work-out, forbearance and enforcement of the Loan Documents, the Revolving Credit or the
Obligations (including, without limitation, reasonable counsel and expert fees and expenditures to enforce, protect, preserve, analyze, negotiate
and defend the Administrative Agent's and each Lender's rights and interest under the Loan Documents) shall be shared and paid on demand by
the Lenders pro rata based on their respective Pro Rata Percentages.
(b) The Administrative Agent may deduct from payments or distributions to be made to the Lenders such funds as may be necessary to pay or
reimburse the Administrative Agent for such costs or expenses.
9.10 No Reliance. Each Lender has entered into this Agreement and the Loan Documents solely upon its own independent investigation and is
not relying upon any information supplied by or any representations made by the Administrative Agent. Each Lender shall continue to make its
own analysis and evaluation of the Borrower and the Guarantors. The Administrative Agent makes no representation or warranty and assumes
no responsibility with respect to the financial condition, prospects or results of operations of the Borrower or any of the Guarantors, any obligor
or any account debtor of the Borrower; the accuracy, sufficiency or currency of any information concerning the financial condition, prospects
or results of operations of the Borrower or any Subsidiary; the sufficiency, authenticity, legal effect, validity or enforceability of the Loan
Documents; or with regard to any other matters, whether similar or dissimilar. The Administrative Agent assumes no responsibility or liability
with respect to the collectibility of the obligations or the performance by the Borrower or any Subsidiary of any obligation under the Loan
Documents.
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9.11 Reporting. During the term of this Agreement, the Administrative Agent will promptly furnish each Lender with copies of all financial
statements and reports with respect to the Borrower or any Guarantor actually received by the Administrative Agent pursuant to Section 5 of
this Agreement. The Administrative Agent will promptly notify the Lenders when it receives actual knowledge of any Event of Default under
the Loan Documents.
9.12 Resignation of the Administrative Agent. The Administrative Agent may resign at any time upon giving thirty (30) days prior written
notice thereof to the Lenders and the Borrower. Upon the resignation of the Administrative Agent, the Lenders (exclusive of the Administrative
Agent) shall have the right to appoint a successor to the Administrative Agent by majority vote of the Lenders (exclusive of the Administrative
Agent and based upon the percentages of the total Pro Rata Shares of such other Lenders). Upon the acceptance of its appointment as a
successor to the Administrative Agent hereunder, by such successor to the Administrative Agent, such successor to the Administrative Agent
shall thereupon succeed to and become vested with all rights, powers, obligations and duties of the retiring Administrative Agent and the
retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's
resignation as Administrative Agent, the provisions of this Section 9 shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent.
9.13 Action on Instructions of Lenders. With respect to any provision of this Agreement or any of the other Loan Documents, or any issue
arising hereunder or thereunder, concerning which the Administrative Agent is authorized to act or withhold action by direction of the Lenders
(or, if applicable, the Majority Lenders), the Administrative Agent shall in all cases be fully protected in so acting, or in so refraining from
acting, hereunder or thereunder in accordance with written instructions signed by the Lenders (or, if applicable, the Majority Lenders). Such
instructions and any action taken or failure to act pursuant thereto shall be binding on all Lenders and on all holders of the Revolving Credit
Notes.
9.14 Several Obligations. The obligations of each Lender hereunder and under each of the other Loan Documents are several, and neither the
Administrative Agent nor any other Lender shall be responsible for the obligations and commitments of any other Lender.
9.15 Amendments.
(a) Except as expressly provided herein, the Administrative Agent shall have the sole and exclusive right to, service, administer and monitor the
Revolving Credit and the Loan Documents, including without limitation, the right to exercise all rights, privileges and options under the Loan
Documents, including the credit judgment with respect to the making of Advances and the determination as to the basis on which and the extent
to which Advances may be made.
(b) Notwithstanding anything to the contrary contained in subparagraph (a) above, prior to an acceleration of the Obligations, the
Administrative Agent shall not, without the prior written consent of all Lenders: (i) extend the Maturity Date or any payment date under the
Revolving Credit Notes or under this Agreement, including without
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limitation, any mandatory prepayment date under Section 2.11 hereof, (ii) decrease any interest rate on the Revolving Credit (unless otherwise
expressly provided for herein) or any fee (except fees that are solely for the account of the Fronting Lender) chargeable to the Borrower by the
Lenders and/or the Administrative Agent and/or the Fronting Lender hereunder or elsewhere, (iii) increase the Available Commitment or the
Pro Rata Share or Pro Rata Percentage of any of the Lenders except by permitted assignments (or unless otherwise expressly provided for
herein), (iv) release any obligor from the Obligations (including releasing any Guarantor from its obligations under its respective Guarantee),
except in connection with termination of the Revolving Credit and full payment and satisfaction of all obligations (v) change the definition of
Majority Lenders, (vi) consent to the assignment or delegation by the Borrower or any Guarantor of its obligations under any Loan Document,
(vii) change the definition of Available Commitment, (viii) change the definition of Outstandings; or (ix) modify this Subsection 9.15(b) or any
of Sections 2.9(f), 2.10, 2.12, 8.4, 10.5, 10.10 or 10.15.
(c) Notwithstanding anything to the contrary contained in subparagraph (a) above, prior to an acceleration of the obligations, the
Administrative Agent shall not, without the prior written consent of the Majority Lenders: (i) enter into any written amendment to any of the
Loan Documents; (ii) waive the Borrower's compliance with the terms and conditions of the Loan Documents or any Event of Default
hereunder or thereunder; or (iii) consent to the Borrower taking any action which, if taken, would constitute an Event of Default under this
Agreement or under any of the Loan Documents.
(d) After an acceleration of the Obligations, the Administrative Agent shall have the sole and exclusive right, after consultation (to the extent
reasonably practicable under the circumstances) with all Lenders, to exercise or refrain from exercising any and all rights, remedies, privileges
and options under the Loan Documents or available at law or in equity, to protect the rights of the Lenders and collect the obligations, including
without limitation, instituting and pursuing all legal actions brought against the Borrower or to collect the Obligations, or defending any and all
actions brought by the Borrower; incurring Expenses or otherwise making expenditures to protect the Revolving Credit or the Lenders' rights or
remedies; modifying the Revolving Credit or the Loan Documents; and releasing or settling any amounts owing under the Obligations.
Notwithstanding this subsection (d), after an acceleration of the Obligations, the Administrative Agent may not, without the prior written
consent of the Majority Lenders, enter into a written agreement with the Borrower which provides that the obligations are not immediately due
and payable or which provides that the Administrative Agent will forebear from exercising its remedies hereunder, and may not without the
prior written consent of all of the Lenders (i) compromise or satisfy the Obligations for less than payment in full; (ii) reduce any rate of interest
charged to any outstanding Advance; or
(iii) release the Borrower or any of the Guarantors from its obligations hereunder or under the Guarantees (as applicable).
9.16 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event
of Default hereunder unless it has received notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event
of Default and stating that such notice is a "notice of default". In the event that the Administrative Agent receives such a notice, the Agent shall
give notice thereof to the
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Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by
the Majority Lenders; provided, that unless and until the Administrative Agent shall have received such directions, it may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in
the best interests of the Lenders.
SECTION 10. MISCELLANEOUS.
10.1 GOVERNING LAW. THIS AGREEMENT, AND ALL OF THE OTHER LOAN DOCUMENTS SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS THEREOF.
10.2 Integrated Agreement. This Agreement, the Revolving Credit Notes and the other Loan Documents shall be construed as integrated and
complementary of each other, and as augmenting and not restricting Lenders' and/or the Administrative Agent's rights and remedies. If, after
applying the foregoing, an inconsistency still exists, the provisions of this Agreement shall constitute an amendment to such inconsistent
document and shall control.
10.3 Omission or Delay Not Waiver. No omission or delay by the Administrative Agent or any Lender in exercising any right or power under
this Agreement or any of the other Loan Documents will impair such right or power or be construed to be a waiver of any Default, or Event of
Default or an acquiescence therein, and any single or partial exercise of any such right or power will not preclude other or further exercise
thereof or the exercise of any other right, and as to the Borrower, no waiver will be valid unless in writing and signed by the Administrative
Agent and then only to the extent specified.
10.4 Time. Unless otherwise expressly set forth herein, whenever the Borrower shall be required to make any payment or perform any act on a
day which is not a Business Day, such payment may be made, or such act may be performed, on the next succeeding Business Day. Time is of
the essence in the Borrower's, the Administrative Agent's and each Lender's performance under all provisions of this Agreement and all Loan
Documents.
10.5 Expenses of the Administrative Agent and Lenders. At Closing and from time to time thereafter, the Borrower will pay promptly upon
demand of the Administrative Agent all reasonable out-of-pocket costs, fees and expenses (a) of the Administrative Agent in connection with
(i) the analysis, negotiation, preparation, execution, administration and delivery of this Agreement and the other Loan Documents and the
documents and instruments referred to herein and therein and any amendment, amendment and restatement, supplement, waiver or consent
relating hereto or thereto, whether or not any such amendment, amendment and restatement, supplement, waiver or consent is executed or
becomes effective (including, without limitation, search costs, the reasonable fees, expenses and disbursements of counsel for the
Administrative Agent, and reasonable charges of any expert consultant to the Administrative Agent) and (ii) the syndication of the
commitments and (b) the Administrative Agent and each of the Lenders in connection with the enforcement of any Obligations of, or the
collection of any
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payments owing from, the Borrower or any of the Borrower's Subsidiaries under this Agreement and/or the other Loan Documents to which
they are a party, or protection or defense of the rights of the Lenders and/or the Administrative Agent under the Loan Documents, following the
occurrence of any Event of Default or in connection with any refinancing or restructuring of the credit arrangements provided under this
Agreement and the other Loan Documents in the nature of a "work-out" or of any insolvency or bankruptcy proceedings, or otherwise
(including the reasonable fees and disbursements of counsel for the Administrative Agent and each of the Lenders and reasonable allocated
costs of internal counsel) (collectively, the "Expenses");
10.6 Brokerage. Except as otherwise provided herein, this transaction was brought about and entered into by the Administrative Agent, the
Lenders and the Borrower acting as principals and without any brokers, agents or finders being the effective procuring cause hereof. The
Borrower, the Administrative Agent and each Lender each represents that it has not committed any party hereunder to the payment of any
brokerage fee, commission or charge in connection with this transaction. If any such claim is made on the Borrower, Administrative Agent or
any Lender by any broker, finder or agent or other Person (unless such broker, finder, agent or other similar Person is engaged by the affected
party), the party or parties (each, a "Responsible Party") which committed the affected party to the payment of such fees hereby agrees to
indemnify, defend and save the affected party or parties harmless against such claim and further will defend, with counsel satisfactory to the
affected party or parties, any action or actions to recover on such claim, at the sole cost and expense of the Responsible Party, including such
affected party's counsel fees and costs. The Borrower further agrees that, if it is the Responsible Party, until any such claim or demand is
adjudicated in the affected party's favor, the amount demanded shall be deemed a liability of the Borrower under this Agreement.
10.7 Notices; Lending Offices. (a) All notices, requests and demands to or upon the respective parties hereto (i) to be effective shall be in
writing (including electronic transmission, facsimile transmission or posting on a secured Web site), and if any such notice, request or demand
is regarding an Event of Default shall be transmitted by hand delivery, mail or facsimile transmission and (ii) unless otherwise expressly
provided herein, shall be deemed to have been duly given or made when delivered by hand, or three days after being deposited in the mail,
postage prepaid, or, in the case of facsimile transmission notice, when sent during normal business hours with electronic confirmation or
otherwise when received, or in the case of electronic transmission, when received and in the case of posting on a secured Web site, upon receipt
of (x) in each instance, notice of such posting and (y) rights to access such Web site, addressed as follows in the case of the Borrower, and the
Administrative Agent, and as set forth in Annex I in the case of the other parties hereto, or to such other address as may be hereafter notified by
the respective parties hereto and any future holders of the Notes:
If to the Administrative Agent to:
PNC Bank, National Association
1600 Market Street
Philadelphia, PA 19103
Attention: Robert J. Giannone
Director
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Telecopy No: (215) 585-6987
With copies to:
PNC Bank, National Association One PNC Plaza, 22nd Floor 249 Fifth Avenue Pittsburgh, PA 15222 Attention: Arlene M. Ohler Telecopy
No: (412) 762-8672
Ballard Spahr Andrews & Ingersoll, LLP 1735 Market Street Philadelphia, PA 19103 Attention: Carl H. Fridy, Esquire Telecopy No: (215)
864-8999
If to the Borrower or any Guarantor to:
CSS Industries, Inc.
1845 Walnut Street, Suite
800 Philadelphia, PA 19102
Attention: Clifford E. Pietrafitta
Telecopy No.: (215) 569-9979
With copies to:
Stephen V. Dubin, Esquire
CSS Industries, Inc.
1845 Walnut Street, Suite 800
Philadelphia, PA 19102
Telecopy No:(215) 569-9979
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Attention: Howard Shecter, Esquire
Telecopy No. (215) 963-5442
(b) Any notice sent by the Administrative Agent, any Lender or the Borrower by any of the above methods shall be deemed to be given when
so received. Any notice sent by overnight carrier shall be presumed to have been received the day after it was sent, if by hand delivery by 5:00
p.m. Philadelphia, PA time on the day sent, and if by facsimile, no such presumption shall be raised.
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(c) The Administrative Agent shall be fully entitled to rely upon any facsimile transmission or other writing purported to be sent by any
Authorized Officer (whether requesting an Advance or otherwise) as being genuine and authorized.
10.8 Headings. The headings of any paragraph or Section of this Agreement are for convenience only and shall not be used to interpret any
provision of this Agreement.
10.9 Survival. All warranties, representations, and covenants made by the Borrower herein, or in any agreement referred to herein or on any
certificate, document or other instrument delivered by it or on its behalf under this Agreement or any of the other Loan Documents, shall be
considered to have been relied upon by the Administrative Agent and the Lenders, and shall survive the delivery to the Lenders of the
Revolving Credit Notes, regardless of any investigation made by the Lenders or on their behalf. All statements in any such certificate or other
instrument prepared and/or delivered for the benefit of the Administrative Agent and any/all Lenders shall constitute warranties and
representations by the Borrower hereunder. Except as otherwise expressly provided herein, all covenants made by the Borrower hereunder or
under any other agreement or instrument shall be deemed continuing until all obligations are satisfied in full and the Revolving Credit is
terminated.
10.10 Successors and Assigns.
(a) This Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties. Neither the Borrower nor
any Guarantor may transfer, assign or delegate any of its duties or obligation hereunder.
(b) (i) Notwithstanding any other provision of this Agreement, each Lender may assign all or any part of, or any interest in, such Lender's rights
and benefits hereunder, under the Revolving Credit Notes and under the other Loan Documents, as well as all obligations related to such
assigned rights and interest, provided that each such assignment:
(A) must (unless the assignment is to an Affiliate of the assigning Lender that is a U.S. person within the meaning of
Section 7701(a) of the Code) be approved by the Borrower (such approval not to be unreasonably withheld or delayed); provided, however,
that if a Default or Event of Default has occurred hereunder, the approval of the Borrower shall not be required,
(B) shall, if not an assignment of the entire commitment of the applicable Lender, be in a minimum amount of $5,000,000),
(C) must be evidenced by an Assignment Agreement in the form of Exhibit F attached hereto and made a part hereof, a true and correct copy of
which shall be delivered to the Administrative Agent,
(D) shall be accompanied by the unconditional payment by the assigning Lender to the Administrative Agent of an assignment fee equal to
$3,500 except if the assignment is made to an Affiliate of the assigning Lender or to another Lender, and
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(E) shall be effective upon the Administrative Agent's receipt of written notice from the assignor and assignee Lenders of such assignment and
compliance with subparagraphs (A), (B), (C) and (D) above.
(ii) Each Lender may at any time enter into participation agreements with one or more participating lenders whereby such Lender may allocate
certain percentages of its Pro Rata Share of the Revolving Credit to such participant(s), provided that no participant shall have, except as
provided below, any voting or consent rights on any issue with respect to this Agreement, the other Loan Documents or the Revolving Credit.
No participant (unless and only to the extent such participant is itself a Lender) shall be entitled to require the Lender from whom its
participation interest was obtained, to take or refrain from taking any action under this Agreement or any other Loan Document, except that
such Lender may agree with such participant that such Lender will not, without such participant's consent, agree to any modification,
amendment or waiver of this Agreement described in Section 9.15(b)(i)-(viii). Notwithstanding the foregoing, any such participant shall be
considered to be a "Lender" for purposes of Sections 2.2(f), 2.9, 2.10, 2.12, 8.4, 10.5 and 10.15 with respect to its participation; provided,
however, that no participant shall be entitled to receive any greater amount pursuant to Sections 2.2(f), 2.9, 2.10 or 2.12 than the transferor
Lender would have been entitled to receive in respect of the participation effected by such transferor Lender had no participation occurred. The
Borrower acknowledges that, for the convenience of all parties, this Agreement is being entered into with the Lenders only and that its
obligations under this Agreement are, to the extent expressly provided for in this Section 10.10(b)(ii), undertaken for the benefit of, and as an
inducement to, any such participating lenders as well as the Lenders. Any grant of a participation by any Lender shall not discharge, reduce or
otherwise affect said Lender's obligation, in accordance with its Pro Rata Percentage, under this Agreement to fund Advances, which
obligations shall remain primary and absolute. Such grants of participations shall not affect or diminish the rights of the granting Lender to
reimbursement or other payments which may become due to said Lender under this Agreement and such reimbursements and other payments
will be calculated as if said Lender had not granted any such participation. Except as provided for herein, no participant shall have, by virtue of
any participation, any rights or benefits under this Agreement or claims of any kind against the Administrative Agent or any Lender or the
Borrower other than the Lender from whom the participation has been obtained.
(c) Nothing in this Section 10.10 shall prevent or prohibit any Lender from pledging its Advances hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank.
(d) Subject to the provisions of Section 10.24 hereof, the Borrower on its own behalf and on behalf of each of its Subsidiaries authorizes each
Lender to disclose to any participant or assignee (each, a "Transferee") and any prospective Transferee any and all information in such Lender's
possession concerning the Borrower or any of its Subsidiaries which has been delivered to such Lender by the Borrower or any such Subsidiary
in connection with such Lender's credit evaluation of the Borrower and its Subsidiaries. In addition, subject to Section 10.24 hereof, the
Administrative Agent may furnish any information concerning the Borrower or any of its Subsidiaries in the Administrative Agent's possession
to any Affiliate of the Administrative Agent. The Borrower shall and shall cause each of its Subsidiaries to assist
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any Lender in effectuating any assignment or participation pursuant to this
Section 10.10 (including during syndication) in whatever manner such Lender reasonably deems necessary, including the participation in
meetings with prospective Transferee.
(e) Any Proposed New Lender shall, at least seven (7) days before the effective date of such Lender's joinder hereto, complete and deliver to
the Administrative Agent a New Lender Joinder. Such New Lender Joinder shall include, among other things, a joinder to this Agreement and
otherwise be satisfactory to the Administrative Agent and the Borrower. Upon the effective date of such joinder, such Proposed New Lender
shall be a party hereto and shall be one of the Lenders hereunder for all purposes except as provided below. Such Proposed New Lender's rights
and the rights of any existing Lender which increases its Pro Rata Share according to Section 2.3(b) shall be limited in the following respects:
(i) on the effective date of such joinder or increase, the Borrower shall repay all outstanding Advances that are Alternate Base Rate Advances,
if any, and reborrow a like amount of the Alternate Base Rate Advances from the Lenders, including the Proposed New Lender, according to
their new Pro Rata Percentages and (ii) such Proposed New Lender or existing Lender which increases it Pro Rata Share shall not participate in
any LIBOR Based Rate Advances (except, with respect to an existing lender, with respect to its existing interest) which are outstanding on the
effective date of such joinder or increase but shall participate in all new Advances made to the Borrower after the effective date of such joinder
or increase in accordance with its new Pro Rata Percentage, including, without limitation, new LIBOR Based Rate Advances and renewals and
conversions of LIBOR Based Rate Advances. If the Borrower should (i) renew after the effective date of such joinder or increase any Advances
that are LIBOR Based Rate Advances existing on such effective date or (ii) convert after the date of such joinder or increase any Advances that
are LIBOR Based Rate Advances existing on such effective date, the Borrower shall be deemed to repay the applicable Advances on the
conversion or renewal date, as the case may be, and then reborrow a similar amount on such date so that the Proposed New Lender and any
Lender that increases its Pro Rata Share shall participate in such Advances after such renewal or conversion date in accordance with its Pro
Rata Percentage. Simultaneously, with the execution and delivery of such joinder or the increase in a Lender's Pro Rata Share, the Borrower
shall execute a new Revolving Credit Note for such Proposed New Lender or existing Lender. Notwithstanding the foregoing, upon the
occurrence of an Event of Default prior to the date on which such Proposed New Lender or such existing Lender that is increasing its Pro Rata
Share is holding Advances that are LIBOR Based Rate Advances equal to its pro rata share (in accordance with its then Pro Rata Percentage
without giving effect to any termination of the Available Commitment), such Lender shall, upon notice from the Administrative Agent, on or
after the date on which the Advances are accelerated or become due following such Event of Default, pay to the Administrative Agent (for the
account of the other Lenders, to which the Administrative Agent shall pay their pro rata share thereof promptly after receipt) a sum equal to
such Lender's pro rata share of each Advance that is a LIBOR Based Rate Advance then outstanding with respect to which such Lender does
not then hold its pro rata share in accordance with its Pro Rata Percentage; such payment by such Lender shall constitute an Alternate Base
Rate Advance hereunder.
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10.11 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be an original and, all of which, taken
together, shall constitute one fully executed document.
10.12 Modification. No modification hereof or any agreement referred to herein shall be binding or enforceable unless in writing and signed by
the Borrower, the Administrative Agent and the Lenders required by Section 9.15 hereof.
10.13 Signatories. Each individual signatory hereto represents and warrants that he is duly authorized to execute this Agreement on behalf of
his principal and that he executes the Agreement in such capacity and not as a party.
10.14 Third Parties. No rights are intended to be created hereunder or under any of the other Loan Documents for the benefit of any third party
donee, creditor or incidental beneficiary of the Borrower. Nothing contained in this Agreement shall be construed as a delegation to the
Administrative Agent or any Lender of the Borrower's duty of performance, including, without limitation, the Borrower's duties under any
account or contract with any other Person.
10.15 Indemnification. (a) The Borrower agrees to indemnify each of the Lenders and the Administrative Agent and their respective officers,
directors, employees, representatives, agents, attorneys-in-fact and Affiliates and each other Person, if any, controlling any of them or any of
their Affiliates within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act (each, an "Indemnitee" and
collectively, the "Indemnities") from, and hold each of them harmless against, any and all Losses resulting from, arising out of, in any way
related to or by reason of, (i) the execution, delivery, performance, administration or enforcement of any Loan Document, (ii) the Lenders' or
the Administrative Agent's agreement to make the Advances, (iii) the use or intended use of the proceeds of any Advances hereunder (iv) the
consummation of any other transactions contemplated in any Loan Document, (v) the performance by the Administrative Agent of their duties
hereunder or (vi) any inaccuracy in any material respect, or any untrue statement or alleged untrue statement of any material fact, made in any
report, exhibit, schedule or publication in connection with the transactions contemplated hereby furnished to the Administrative Agent or the
Lenders by or on behalf of the Borrower, or by reason of the omission or the alleged omission therefrom of a material fact necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading, whether or not such Indemnitee is a party and
whether or not such Proceeding is initiated or brought by or on behalf of the Borrower; provided, however, that the Borrower shall not be liable
under the foregoing indemnification provision to an Indemnitee to the extent that any such Loss is judicially determined by a court of
competent jurisdiction in a final non-appealable judgment to have resulted solely by reason of the gross negligence or willful misconduct of
such Indemnitee. To the extent that the undertaking to indemnify and hold harmless set forth in this Section 10.15 is unenforceable because it is
violative of any law or public policy or otherwise, the Borrower shall contribute the maximum portion that it is permitted to pay and satisfy
under applicable law to the payment and satisfaction of all indemnified liabilities incurred by any of the Indemnities.
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(b) The Borrower agrees on its own behalf and on behalf of the Guarantors that no Indemnitee shall have any liability (whether direct or
indirect, in contract or tort or otherwise) for any Losses to the Borrower or any of the Guarantors or any such entities, security holders or
creditors resulting from, arising out of, in any way related to or by reason of
(i) the execution, delivery, performance, administration or enforcement of any Loan Document, (ii) the Lenders' or the Administrative Agent's
agreement to make the Advances, (iii) the use or intended use of the proceeds of any Advances hereunder or (iv) the consummation of any
other transactions contemplated in any Loan Document, except to the extent that any Losses judicially determined by a court of competent
jurisdiction in a final non-appealable judgment to have resulted solely by reason of the gross negligence or willful misconduct of such
Indemnitee.
(c) Each Indemnitee shall give prompt notice to the Borrower of any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify the Borrower shall not relieve it from any liability which it may otherwise have hereunder. The Borrower
may participate at its own expense in the defense of such action.
(d) In the event that any Indemnitee is requested or required to appear as a witness in any Proceeding brought by or on behalf of or against the
Borrower or any Affiliate of the Borrower in which such Indemnitee is not named as a defendant, the Borrower agrees to reimburse each
Indemnitee for all reasonable expenses incurred by each Indemnitee in connection with such Indemnitee's appearing and preparing to appear as
such a witness, including, without limitation, the reasonable fees and disbursements of each Indemnitee's legal counsel, and to compensate such
Indemnitee in an amount to be mutually agreed upon.
(e) The Borrower agrees on its own behalf and on behalf of each of the Guarantors that, without the prior written consent of the Administrative
Agent and the Majority Lenders, no such entity will settle, compromise or consent to the entry of any judgment in any pending or threatened
Proceeding in respect of which indemnification could be sought under the indemnification provisions of this Section 10.15 (whether or not any
Indemnitee is an actual or potential party to such Proceeding), unless such settlement, compromise or consent includes an unconditional written
release in form, scope and substance satisfactory to the Administrative Agent and the Majority Lenders, of each Indemnitee from all liability
arising out of such Proceeding and does not include any statement as to an admission of fault, culpability or failure to act by or on behalf of any
Indemnitee.
10.16 Discharge of Taxes, The Borrower's Obligations, Etc. The Administrative Agent, in its sole discretion, shall have the right at any time,
and from time to time, on one day's notice to Borrower (unless the Administrative Agent deems immediate action to be necessary under the
circumstances), if the Borrower fails to do so, to: (a) pay for the performance of any of the Borrower's obligations hereunder, and (b) discharge
taxes or Liens, at any time levied or placed on any of the Borrower's Property in violation of this Agreement unless the Borrower or such
Subsidiary or any of the Borrower's Subsidiaries is in good faith with due diligence by appropriate proceedings contesting such taxes or Liens
and maintaining proper reserves therefor in accordance with GAAP. Such expenses and advances shall be added to the Revolving Credit and
shall bear interest at the Alternate Base Rate until reimbursed to the Administrative Agent.
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Such payments and advances made by the Administrative Agent shall not be construed as a waiver by the Administrative Agent or the Lenders
of an Event of Default under this Agreement.
10.17 Withholding and Other Tax Liabilities. The Administrative Agent, in its sole discretion and without any duty to exercise such rights or
monitor such obligation of the Borrower, shall have the right to withhold or direct the Lenders to withhold any Advances from time to time
unless the Borrower shall, at the Administrative Agent's request, have given to the Administrative Agent evidence, reasonably satisfactory to
the Administrative Agent, that the Borrower has properly deposited or paid, as required by law, all withholding taxes and all federal, state, city,
county or other taxes due up to and including the date of the requested Advance. Copies of deposit slips showing payment shall likewise
constitute satisfactory evidence for such purpose. In the event that any Lien, assessment or tax liability against the Borrower or any of the
Borrower's Subsidiaries shall arise in favor of any taxing authority, whether or not notice thereof shall be filed or recorded as may be required
by law, the Administrative Agent shall have the right, on one day's notice to Borrower (unless the Administrative Agent deems immediate
action to be necessary under the circumstances) (but shall not be obligated, nor shall the Administrative Agent or any Lender hereby assume
the duty) to pay any such Lien, assessment or tax liability by virtue of which such charge shall have arisen; provided, however, that the
Administrative Agent shall not pay any such tax, assessment or Lien before its due date or if the amount, applicability or validity thereof is
being contested in good faith and by appropriate proceedings by the Borrower or such Subsidiary. In order to pay any such Lien, assessment or
tax liability, the Administrative Agent shall not be obliged to wait until said Lien, assessment or tax liability is filed before taking such action
as hereinabove set forth. Any sum or sums which the Administrative Agent (shared ratably by the Lenders) shall have paid for the discharge of
any such Lien shall be added to the Revolving Credit and shall be paid by the Borrower to the Administrative Agent with interest thereon, upon
demand, and the Administrative Agent shall be subrogated to all rights of such taxing authority against the Borrower or such Subsidiary.
10.18 Submission To Jurisdiction; Waivers. The Borrower hereby irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or proceeding relating to this Agreement or the Notes, or for recognition and
enforcement of any judgment in respect thereof, to the non-exclusive general jurisdiction of the Courts of the Commonwealth of Pennsylvania,
the courts of the United States of America for the Eastern District of Pennsylvania, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought in such courts and waives any objection that it may now or hereafter have to the
venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(c) agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or
any substantially similar
83
form of mail), postage prepaid, to the Borrower at its address set forth in
Section 9.2 or at such other address of which the Agent shall have been notified pursuant thereto;
(d) agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to
sue in any other jurisdiction; and
(e) waives, and without limiting the provisions of
Section 5.8(c), each of the Agent and the Banks waives, any right it may have to claim or recover in any legal action or proceeding referred to
in this Section any special, exemplary, punitive or consequential damages.
10.19 Waivers.
(a) EACH OF THE PARTIES TO THIS AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. The scope of this waiver is intended to be
all-encompassing of any and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including without
limitation, contract, claims, tort claims, breach of duty claims, and all other common law and statutory claims. Each party hereto acknowledges
that this waiver is a material inducement to enter into a business relationship, that each has already relied on the waiver in entering into this
Agreement, and that each will continue to rely on the waiver in their related future dealings. Each party hereto further warrants and represents
that each has reviewed this waiver with its legal counsel, and that each knowingly and voluntarily waives its jury trial rights following
consultation with legal counsel. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY
OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, REPLACEMENTS,
SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE ADVANCES. In the event of litigation, this Agreement may be filed as a written
consent to a trial by the court.
(b) (i) The Borrower, on behalf of itself and each of the Guarantors, waives, to the maximum extent not prohibited by law, any right it may
have to claim or recover any special, exemplary, punitive or consequential damages from the Administrative Agent or the Lenders in any
Proceeding in connection with, arising out of, or in any way related to the transactions contemplated herein or in any other Loan Document.
(ii) The Agent and each of the Lenders waives, to the maximum extent not prohibited by law, any right it may have to claim or recover any
special, exemplary, punitive or consequential damages from the Borrower or any of the Guarantors in any Proceeding in connection with,
arising out of, or in any way related to the transactions contemplated herein or in any other Loan Document to the extent the foregoing is not in
derogation of the Administrative Agent's or any of the Lender's rights to claim or recover any
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amounts under Sections 2.2(g), 2.9, 2.10, 2.12, 10.5, 10.6, 10.15 or for any other Obligations expressly provided for in this Agreement or any
of the other Loan Documents.
(c) The Borrower, on its own behalf and on behalf of the Guarantors, hereby waives promptness, diligence, notice of acceptance and any other
notice with respect to any of the obligations and any requirement that any Lender protect, secure, perfect or insure any Lien or any property
subject thereto or exhaust any right to take any action against any other obligor or any other Person or any collateral or other direct or indirect
security for any of the obligations.
10.20 Severability. Each provision of this Agreement shall be severable from every other provision of this Agreement. If any provision is
determined to be invalid or unenforceable, such determination shall not affect or limit the validity or enforceability of all other provisions.
10.21 Independence of Representations, Warranties and Covenants. The representations, warranties and covenants contained herein shall be
independent of each other and no exception to any representation, warranty or covenant shall be deemed to be an exception to any other
representation, warranty or covenant contained herein unless expressly provided, nor shall any such exception be deemed to permit any action
or omission that would be in contravention of applicable law.
10.22 Obligations Several; Independent Nature of Lenders' Rights. The obligation of each Lender hereunder is several, no Lender shall be
responsible for the obligation or commitment of any other Lender hereunder, and the Administrative Agent shall not be responsible for any
obligations of any Lender. Nothing contained in this Agreement and no action taken by the Lenders pursuant hereto shall be deemed to
constitute the Lenders to be a partnership, an association, a joint venture or any other kind of entity. The amounts payable at any time
hereunder to each Lender shall be a separate and independent debt, and each Lender shall be entitled to protect and enforce its rights arising out
of this Agreement, and it shall not be necessary for any other Lender to be joined as an additional party in any Proceeding for such purpose.
10.23 Prior Understandings. This Agreement and the other Loan Documents supersede all prior and contemporaneous understandings and
agreements, whether written or oral, among the parties hereto relating to the transactions provided for herein and therein, except (a) the letter
(the "Engagement Letter") agreement dated February 21, 2001 among PNC and the Borrower (other than the Term Sheet (as defined in the
Engagement Letter) and (b) the Fee Letter (as defined in the Engagement Letter) shall remain in effect, to the extent not conflicting herewith.
10.24 Confidentiality. The Administrative Agent and each Lender agree to keep confidential all material non-public information provided to it
by or on behalf of the Borrower and/or the Guarantors pursuant to this Agreement or the other Loan Documents that is designated by the
provider of such information in writing as confidential; provided that nothing herein shall prevent the Administrative Agent or any Lender from
disclosing any such information (a) to the
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Administrative Agent or any other Lender, (b) to any assignee, proposed assignee, participant or proposed participant which agrees to comply
with the provisions of this subsection, (c) to its Affiliates, employees, directors, agents, attorneys, accountants and other professional advisors,
(d) upon the request or demand of any Governmental Authority having jurisdiction over such Person, (e) in response to any order of any court
or other Governmental Authority or as may otherwise be required pursuant to any requirement of applicable law, (f) which has been publicly
disclosed other than in breach of this Agreement, or (g) in connection with the exercise of any remedy or other enforcement of the rights of the
Administrative Agent and/or the Lenders hereunder.
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IN WITNESS WHEREOF, the undersigned parties have executed this Agreement the day and year first above written.
CSS INDUSTRIES, INC.,
a Delaware corporation
By:
Title
Attest:
PNC BANK, NATIONAL ASSOCIATION,
as the Administrative Agent
By:
Title
PNC BANK, NATIONAL ASSOCIATION,
as a Lender
By:
Name
Title
FIRST UNION NATIONAL BANK,
as a Lender
By:
Name
Title
FLEET NATIONAL BANK,
as a Lender
By:
Name
Title
MELLON BANK, N.A.,
as a Lender
By:
Name
Title
UNION PLANTERS BANK
By:
Name
Title
EXHIBIT AND SCHEDULE LIST
Annex I
--
Lenders, Pro Rata Shares, Pro Rata Percentages
Annex II
--
Applicable Margins
Exhibit A
--
Form of Guarantee
Exhibit B-1
--
Form of Revolving Credit Note
Exhibit B-2
--
Form of Swing Line Note
Exhibit C
--
Form of Notice of Borrowing
Exhibit D
--
Form of Quarterly Compliance Certificate
Exhibit E
--
Form of Certificate regarding Permitted Acquisitions
Exhibit F
--
Form of Assignment Agreement
Exhibit G
--
Form of Commitment and Acceptance
Exhibit H
--
Form of New Lender Joinder
Schedule 1.1(c)
--
Financial Statements
Schedule 3.1(h)
--
Material Environmental Investigations,
Studies, Audits, Etc.
Schedule 4.2
--
Places of Business
Schedule 4.3
--
Judgments, Proceedings, Litigation and Orders
Schedule 4.4
--
Existing Liens and Claims
Schedule 4.9
--
Subsidiaries and Affiliates and Jurisdictions of
Incorporation
Schedule 4.10
--
Existing Guarantees, Investments and Borrowings
Schedule 4.11(c) --
ERISA Matters
Schedule 4.12
Business Interruptions
--
Schedule 4.13(a) -- Schedule of Names
Schedule 4.13(b) -- Trademarks, Patents and Copyrights
-1-
Schedule 4.14
--
Other Associations
Schedule 4.15
--
Environmental Matters
Schedule 4.17
--
Capital Stock
-2-
ANNEX I
Lenders
-------
Pro Rata Percentage
-------------------
PNC Bank, National Association
26.667%
Pro Rata Share
-------------$ 20,000,000
First Union National Bank
23.333%
17,500,000
Fleet National Bank
23.333%
17,500,000
Mellon Bank, N.A.
13.333%
10,000,000
United Planters Bank
13.333%
10,000,000
----------------------------------------100%
$ 75,000,000
-3-
Swing Line Lender
-----------------
Swing Line Commitment
---------------------
PNC Bank, National Association
$10,000,000
-4-
ANNEX II
Applicable Margins
Compliance Levels
---------------------------------------------------------------------------------------------------Basis for Determination
I
II
III
---------------------------------------------------------------------------------------------------Interest Coverage Ratio
Greater than or
Less than 8.00 to 1
Less than 6.25 to 1
equal to 8.00 to 1
but greater than or
equal to 6.25 to 1
---------------------------------------------------------------------------------------------------Applicable Base Rate Margin
-.50%
-.25%
0%
---------------------------------------------------------------------------------------------------Applicable LIBO Rate Margin
1.00%
1.25%
1.5%
---------------------------------------------------------------------------------------------------Applicable Available
.25%
.30%
.35%
Commitment Fee Percentage
----------------------------------------------------------------------------------------------------
-5-
EXHIBIT 10.9
RECEIVABLES PURCHASE AGREEMENT
dated as of April 30, 2001
among
CSS FUNDING LLC
CSS INDUSTRIES, INC.
MARKET STREET FUNDING CORPORATION
and
PNC BANK, NATIONAL ASSOCIATION
TABLE OF CONTENTS
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section
Section
Section
Section
Section
Section
Section
Section
Section
1.1.
1.2.
1.3.
1.4.
1.5.
1.6.
1.7.
1.8.
1.9.
Purchase Facility .............................................
Making Purchases ..............................................
Purchased Interest Computation ................................
Settlement Procedures .........................................
Fees ..........................................................
Payments and Computations, Etc.................................
Increased Costs ...............................................
Requirements of Law ...........................................
Inability to Determine Euro-Rate ..............................
1
1
2
3
6
6
6
7
8
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants .....................
Section 2.2. Termination Events ............................................
9
9
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller ..................................... 9
Section 3.2. Indemnities by the Servicer ................................... 11
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section
Section
Section
Section
Section
Section
4.1.
4.2.
4.3.
4.4.
4.5.
4.6.
Appointment of the Servicer ...................................
Duties of the Servicer ........................................
Lock-Box Arrangements .........................................
Enforcement Rights ............................................
Responsibilities of the Seller ................................
Servicing Fee .................................................
i
12
12
13
14
15
15
ARTICLE V.
MISCELLANEOUS
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
Section
5.1. Amendments, Etc................................................
5.2. Notices, Etc...................................................
5.3. Assignability .................................................
5.4. Costs, Expenses and Taxes .....................................
5.5. No Proceedings; Limitation on Payments ........................
5.6. Confidentiality ...............................................
5.7. GOVERNING LAW AND JURISDICTION ................................
5.8. Execution in Counterparts .....................................
5.9. Survival of Termination .......................................
5.10. WAIVER OF JURY TRIAL .........................................
5.11. Entire Agreement .............................................
5.12. Headings .....................................................
5.13. Issuer's, Administrator's, Seller's and Servicer's
Liabilities ..................................................
EXHIBIT
EXHIBIT
EXHIBIT
EXHIBIT
EXHIBIT
I
II
III
IV
V
SCHEDULE
SCHEDULE
SCHEDULE
SCHEDULE
ANNEX A
ANNEX B
ANNEX C
I
II
III
IV
Definitions
Conditions of Purchases
Representations and Warranties
Covenants
Termination Events
Credit and Collection Policy
Lock-box Banks and Lock-box Accounts
Trade Names
Proceedings
Form of Information Package
Form of Purchase Notice
Form of Paydown Notice
ii
15
16
16
17
17
17
18
18
18
18
19
19
19
This RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or otherwise modified from time to time, this "Agreement") is
entered into as of April 30, 2001, among CSS FUNDING CORPORATION, a Delaware limited liability company, as seller (the "Seller"), CSS
INDUSTRIES, INC., a Delaware corporation ("CSS"), as initial servicer (in such capacity, together with its successors and permitted assigns in
such capacity, the "Servicer"), MARKET STREET FUNDING CORPORATION, a Delaware corporation (together with its successors and
permitted assigns, the "Issuer"), and PNC BANK, NATIONAL ASSOCIATION, a national banking association ("PNC"), as administrator (in
such capacity, together with its successors and assigns in such capacity, the "Administrator").
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used throughout this Agreement are defined in Exhibit I. References in
the Exhibits hereto to the "Agreement" refer to this Agreement, as amended, supplemented or otherwise modified from time to time.
The Seller desires to sell, transfer and assign an undivided variable percentage interest in a pool of receivables, and the Issuer desires to acquire
such undivided variable percentage interest, as such percentage interest shall be adjusted from time to time based upon, in part, reinvestment
payments that are made by the Issuer.
In consideration of the mutual agreements, provisions and covenants contained herein, the parties hereto agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) On the terms and conditions hereinafter set forth, the Issuer hereby agrees to purchase, and make
reinvestments of, undivided percentage ownership interests with regard to the Purchased Interest from the Seller from time to time from the
date hereof to the Facility Termination Date. Under no circumstances shall the Issuer make any such purchase or reinvestment if, after giving
effect to such purchase or reinvestment, the aggregate outstanding Capital of the Purchased Interest would exceed the Purchase Limit.
(b) The Seller may, upon at least 60 days' written notice to the Administrator, terminate the purchase facility provided in this Section in whole
or, upon at least 30 days' written notice to the Administrator, from time to time, irrevocably reduce in part the unused portion of the Purchase
Limit; provided, that each partial reduction shall be in the amount of at least $5,000,000, or an integral multiple of $1,000,000 in excess
thereof.
Section 1.2. Making Purchases. (a) Each purchase (but not reinvestment) of undivided percentage ownership interests with regard to the
Purchased Interest hereunder shall be made upon the Seller's irrevocable written notice in the form of Annex B (the "Purchase Notice")
delivered to the Administrator in accordance with Section 5.2 (which notice must be received by the
Administrator before 11:00 a.m., New York City time) at least two Business Days before the requested purchase date, which notice shall
specify: (A) the amount requested to be paid to the Seller (such amount, which shall not be less than $1,000,000 and shall be in integral
multiples of $100,000, being the Capital relating to the undivided percentage ownership interest then being purchased), (B) the date of such
purchase (which shall be a Business Day), and (C) the pro forma calculation of the Purchased Interest after giving effect to the increase in
Capital.
(b) On the date of each purchase (but not reinvestment) of undivided percentage ownership interests with regard to the Purchased Interest
hereunder, the Issuer shall, upon satisfaction of the applicable conditions set forth in Exhibit II, make available to the Seller in same day funds,
at First Union Bank, account number 2000006163185, ABA # 031201467, an amount equal to the Capital relating to the undivided percentage
ownership interest then being purchased.
(c) Effective on the date of each purchase pursuant to this Section and each reinvestment pursuant to Section 1.4, the Seller hereby sells and
assigns to the Issuer an undivided percentage ownership interest in: (i) each Pool Receivable then existing, (ii) all Related Security with respect
to such Pool Receivables, and (iii) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security.
(d) To secure all of the Seller's obligations (monetary or otherwise) under this Agreement and the other Transaction Documents to which it is a
party, whether now or hereafter existing or arising, due or to become due, direct or indirect, absolute or contingent, the Seller hereby grants to
the Issuer a security interest in all of the Seller's right, title and interest (including any undivided interest of the Seller) in, to and under all of the
following, whether now or hereafter owned, existing or arising: (i) all Pool Receivables,
(ii) all Related Security with respect to such Pool Receivables, (iii) all Collections with respect to, and other proceeds of, such Pool Receivables
and Related Security, (iv) the Lock-Box Accounts and all amounts on deposit therein, and all certificates and instruments, if any, from time to
time evidencing such Lock-Box Accounts and such amounts on deposit therein, (v) all books and records of each Receivable, and all rights,
remedies, powers and privileges of the Seller in any accounts into which Collections are or may be received and (vi) all proceeds and products
of, and all amounts received or receivable under any or all of, the foregoing (collectively, the "Pool Assets"). The Issuer shall have, with
respect to the Pool Assets, and in addition to all the other rights and remedies available to the Issuer, all the rights and remedies of a secured
party under any applicable UCC.
Section 1.3. Purchased Interest Computation. The Purchased Interest shall be initially computed on the date of the initial purchase hereunder.
Thereafter, until the Facility Termination Date, the Purchased Interest shall be automatically recomputed (or deemed to be recomputed) on each
Business Day other than a Termination Day. From and after the occurrence of any Termination Day, the Purchased Interest shall (until the
event(s) giving rise to such Termination Day are satisfied or are waived by the Administrator or the happening of the events set forth in the
next sentence) be deemed to be 100%. The Purchased Interest shall become zero when the Capital thereof and Discount thereon shall have been
paid in full, all the amounts owed by the Seller hereunder to the Issuer, the Administrator and any other Indemnified Party or Affected Person
are paid in full, and
2
the Servicer shall have received the accrued Servicing Fee thereon; provided that the reduction of the Purchased Interest to zero shall not affect
in any way the outstanding obligations (if any) of the Servicer.
Section 1.4. Settlement Procedures. (a) The collection of the Pool Receivables shall be administered by the Servicer in accordance with this
Agreement. The Seller shall provide to the Servicer on a timely basis all information needed for such administration, including notice of the
occurrence of any Termination Day and current computations of the Purchased Interest.
(b) The Servicer shall, on each day on which Collections of Pool Receivables are received (or deemed received) by the Seller or the Servicer:
(i) set aside and hold in trust (and shall, at the request of the Administrator, segregate in a separate account approved by the Administrator) for
the Issuer, out of the Issuer's Share of such Collections, first, an amount equal to the Discount accrued through such day for each Portion of
Capital and not previously set aside, second, an amount equal to the fees set forth in the Fee Letter accrued and unpaid through such day, and
third, to the extent funds are available therefor, an amount equal to the Issuer's Share of the Servicing Fee accrued through such day and not
previously set aside,
(ii) subject to Section 1.4(f), if such day is not a Termination Day, remit to the Seller, on behalf of the Issuer, the remainder of the Issuer's
Share of such Collections. Such remainder shall be automatically reinvested in Pool Receivables, and in the Related Security, Collections and
other proceeds with respect thereto; provided, however, that if the Purchased Interest would exceed 100%, then the Servicer shall not reinvest,
but shall set aside and hold in trust for the Issuer (and shall, at the request of the Administrator, segregate in a separate account approved by the
Administrator) a portion of such Collections that, together with the other Collections set aside pursuant to this paragraph, shall equal the
amount necessary to reduce the Purchased Interest to 100%,
(iii) if such day is a Termination Day, set aside, segregate and hold in trust (and shall, at the request of the Administrator, segregate in a
separate account approved by the Administrator) for the Issuer the entire remainder of the Issuer's Share of the Collections; provided, that if
amounts are set aside and held in trust on any Termination Day of the type described in clause (a) of the definition of "Termination Day" and,
thereafter, the conditions set forth in
Section 2 of Exhibit II are satisfied or waived by the Administrator, such previously set-aside amounts shall be reinvested in accordance with
clause (ii) on the day of such subsequent satisfaction or waiver of conditions, and
(iv) release to the Seller (subject to Section 1.4(f)) for its own account any Collections in excess of: (x) amounts required to be reinvested in
accordance with clause (ii) or the proviso to clause
(iii) plus (y) the amounts that are required to be set aside pursuant to clause (i), the proviso to clause (ii) and clause (iii) plus (z) the Seller's
Share of the Servicing Fee accrued and unpaid through such day and all reasonable and appropriate out3
of-pocket costs and expenses of the Servicer for servicing, collecting and administering the Pool Receivables.
(c) The Servicer shall deposit into the Administration Account (or such other account designated by the Administrator), on each Settlement
Date (or, solely with respect to Collections held for the Issuer for payment pursuant to clause (f), such other date with at least the applicable
number of Business Days prior written notice as set forth in clause (f) to the Administrator of such payment), Collections held for the Issuer
pursuant to clause (b)(i), (f) or (g) plus the amount of Collections then held for the Issuer pursuant to clauses
(b)(ii) and (iii) of Section 1.4; provided, that if CSS or an Affiliate thereof is the Servicer, such day is not a Termination Day and the
Administrator has not notified CSS (or such Affiliate) that the right to retain the portion of the Collections set aside pursuant to clause (b)(i)
that represent the Issuer's Share of the Servicing Fee is revoked, CSS (or such Affiliate) may retain the portion of the Collections set aside
pursuant to clause (b)(i) that represents the Issuer's Share of the Servicing Fee. On the last day of each Settlement Period, the Administrator
will notify the Servicer by facsimile of the amount of Discount accrued with respect to each Portion of Capital during such Settlement Period or
portion thereof.
(d) Upon receipt of funds deposited into the Administration Account pursuant to clause (c), the Administrator shall cause such funds to be
distributed as follows:
(i) if such distribution occurs on a day that is not a Termination Day and the Purchased Interest does not exceed 100%, first to the Issuer in
payment in full of all accrued Discount and fees (other than Servicing Fees) with respect to each Portion of Capital, and second, if the Servicer
has set aside amounts in respect of the Servicing Fee pursuant to clause (b)(i) and has not retained such amounts pursuant to clause (c), to the
Servicer (payable in arrears on each Settlement Date) in payment in full of the Issuer's Share of accrued Servicing Fees so set aside, and
(ii) if such distribution occurs on a Termination Day or on a day when the Purchased Interest exceeds 100%, first to the Issuer in payment in
full of all accrued Discount with respect to each Portion of Capital, second to the Issuer in payment in full of Capital (or, if such day is not a
Termination Day, the amount necessary to reduce the Purchased Interest to 100%), third, to the Servicer in payment in full of all accrued
Servicing Fees, and fourth, if the Capital and accrued Discount with respect to each Portion of Capital have been reduced to zero, and all
accrued Servicing Fees payable to the Servicer have been paid in full, to the Issuer, the Administrator and any other Indemnified Party or
Affected Person in payment in full of any other amounts owed thereto by the Seller hereunder.
After the Capital, Discount, fees payable pursuant to the Fee Letter and Servicing Fees with respect to the Purchased Interest, and any other
amounts payable by the Seller and the Servicer to the Issuer, the Administrator or any other Indemnified Party or Affected Person hereunder,
have been paid in full, all additional Collections with respect to the Purchased Interest shall be paid to the Seller for its own account.
4
(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool Receivable is reduced or adjusted as a result of any defective, rejected, returned,
repossessed or foreclosed goods or services, or any revision, cancellation, allowance, rebate, discount or other adjustment made by the Seller or
any Affiliate of the Seller, or any setoff or dispute between the Seller or any Affiliate of the Seller and an Obligor, the Seller shall be deemed to
have received on such day a Collection of such Pool Receivable in the amount of such reduction or adjustment;
(ii) if on any day any of the representations or warranties in
Section 1(g) or (n) of Exhibit III is not true with respect to any Pool Receivable, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in full;
(iii) except as provided in clause (i) or (ii), or as otherwise required by applicable law or the relevant Contract, all Collections received from an
Obligor of any Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the
oldest such Receivable, unless such Obligor designates its payment for application to specific Receivables; and
(iv) if and to the extent the Administrator or the Issuer shall be required for any reason to pay over to an Obligor (or any trustee, receiver,
custodian or similar official in any Insolvency Proceeding) any amount received by it hereunder, such amount shall be deemed not to have been
so received by the Administrator or the Issuer but rather to have been retained by the Seller and, accordingly, the Administrator or the Issuer, as
the case may be, shall have a claim against the Seller for such amount, payable when and to the extent that any distribution from or on behalf of
such Obligor is made in respect thereof.
(f) If at any time the Seller shall wish to cause the reduction of Capital (but not to commence the liquidation, or reduction to zero, of the entire
Capital of the Purchased Interest), the Seller may do so as follows:
(i) the Seller shall give the Administrator and the Servicer written notice in the form of Annex C (A) at least two Business Days prior to the
date of such reduction for any reduction of Capital less than or equal to $10,000,000, (B) at least four Business Days prior to the date of such
reduction for any reduction of Capital greater than $10,000,000 and less than or equal to $20,000,000 and (C) at least ten Business Days prior
to the date of such reduction for any reduction of Capital greater than $20,000,000 in each case such notice shall include the amount of such
proposed reduction and the proposed date on which such reduction will commence;
(ii) to the extent funds equal to the amount of the proposed reduction have not been set aside pursuant to Section 1.4(g) below, on the proposed
date of the commencement of such reduction and on each day thereafter, the Servicer shall cause Collections not to be
5
reinvested until the amount thereof not so reinvested, when added to the amounts set aside pursuant to Section 1.4(g) below, shall equal the
desired amount of reduction; and
(iii) the Servicer shall hold such Collections, and all amounts set aside pursuant to Section 1.4(g)(iii) below, in trust for the Issuer, for payment
to the Administrator on (A) the next Settlement Date immediately following the current Settlement Period or (B) such other earlier date with at
least (1) two Business Days prior written notice to the Administrator with respect to any payment of Capital less than or equal to $10,000,000,
or (2) four Business Days prior written notice to the Administrator with respect to any payment of Capital greater than $10,000,000 and less
than or equal to $20,000,000 or (3) ten Business Days prior written notice to the Administrator with respect to any payment of Capital greater
than $20,000,000, and Capital shall be deemed reduced in the amount to be paid to the Administrator only when in fact finally so paid;
provided, that (a) the amount of any such reduction shall be not less than $1,000,000 and shall be an integral multiple of $100,000, and (b) the
Seller shall choose a reduction amount, and the date of commencement thereof, so that to the extent practicable such reduction shall commence
and conclude in the same Settlement Period.
(g) If at any time the Seller shall wish to halt reinvestment during a Settlement Period in order to fund reductions of Capital under Section
1.4(f) above, the Seller may do so as follows:
(i) the Seller shall give written notice to the Administrator and the Servicer specifying the Settlement Period during which it wishes
reinvestment to halt and the date it wishes such halt to commence;
(ii) the Servicer shall, from the date specified in the notice in Section 1.4(f)(i) above, cause Collections not to be reinvested until either (A) it
receives notice from the Seller that the Seller wishes to resume reinvestment, (B) the Settlement Period specified in the notice in Section
1.4(g)(i) ends or (C) reinvestment of Collections shall be halted pursuant to Section 1.4(f)(ii) above; provided that Collections may be
reinvested pursuant to the proviso to Section 1.4(g)(iii) below; and
(iii) the Servicer shall set aside such Collections and hold them in trust for the Issuer (and shall, at the request of the Administrator, segregate in
a separate account approved by the Administrator); provided that at any time that Collections are thus set aside, the Seller may request that the
Servicer release all or a portion of such amounts, and the Servicer shall then apply such amounts pursuant to Section 1.4(b) (or, if the date of
such request is a Settlement Date, deposit such amounts in the Administration Account pursuant to Section 1.4(b)).
Section 1.5. Fees. The Seller shall pay to the Administrator certain fees in the amounts and on the dates set forth in a letter, dated the date
hereof, among CSS, the Seller and the Administrator
6
(as such letter agreement may be amended, supplemented or otherwise modified from time to time, the "Fee Letter").
Section 1.6. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller or the Servicer hereunder shall be made
without reduction for offset or counterclaim and shall be paid or deposited no later than noon (New York City time) on the day when due in
same day funds to the Administration Account. All amounts received after noon (New York City time) will be deemed to have been received
on the next Business Day.
(b) The Seller or the Servicer, as the case may be, shall, to the extent permitted by law, pay interest on any amount not paid or deposited by the
Seller or the Servicer, as the case may be, when due hereunder, at an interest rate equal to 2.0% per annum above the Base Rate, payable on
demand.
(c) All computations of interest under clause (b) and all computations of Discount, fees and other amounts hereunder shall be made on the basis
of a year of 360 (or 365 or 366, as applicable, with respect to Discount or other amounts calculated by reference to the Base Rate) days for the
actual number of days elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such
payment or deposit shall be made on the next Business Day and such extension of time shall be included in the computation of such payment or
deposit.
Section 1.7. Increased Costs. (a) If the Administrator, the Issuer, any Purchaser, any other Program Support Provider or any of their respective
Affiliates (each an "Affected Person") reasonably determines that the existence of or compliance with: (i) any law or regulation or any change
therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or (ii) any request,
guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued or occurring after
the date of this Agreement, affects or would affect the amount of capital required or expected to be maintained by such Affected Person, and
such Affected Person determines that the amount of such capital is increased by or based upon the existence of any commitment to make
purchases of (or otherwise to maintain the investment in) Pool Receivables related to this Agreement or any related liquidity facility, credit
enhancement facility and other commitments of the same type, then, upon demand by such Affected Person (with a copy to the Administrator),
the Seller shall promptly pay to the Administrator, for the account of such Affected Person, from time to time as specified by such Affected
Person, additional amounts sufficient to compensate such Affected Person in the light of such circumstances, to the extent that such Affected
Person reasonably determines such increase in capital to be allocable to the existence of any of such commitments. A certificate as to such
amounts submitted to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent
manifest error.
(b) If, due to either: (i) the introduction of or any change in or in the interpretation of any law or regulation or (ii) compliance with any
guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be any
increase in the cost to any Affected Person of agreeing to purchase or purchasing, or maintaining the ownership of, the Purchased Interest in
respect of which Discount is computed by reference to the Euro-Rate, then,
7
upon demand by such Affected Person, the Seller shall promptly pay to such Affected Person, from time to time as specified by such Affected
Person, additional amounts sufficient to compensate such Affected Person for such increased costs. A certificate as to such amounts submitted
to the Seller and the Administrator by such Affected Person shall be conclusive and binding for all purposes, absent manifest error.
(c) If such increased costs affect the related Affected Person's portfolio of financing transactions, such Affected Person shall use reasonable
averaging and attribution methods to allocate such increased costs to the transactions contemplated by this Agreement.
(d) Each Affected Person will notify Seller and the Administrator promptly after it has received official notice of any event which will entitle
such Affected Person to such additional amounts as compensation pursuant to this
Section 1.7. Such additional amounts shall accrue from the date as to which such Affected Person becomes subject to such additional costs as a
result of such event (or if such notice of such event is not given to Seller by such Affected Person within 90 days after such Affected Person
received such official notice of such event, from the date which is 90 days prior to the date such notice is given to Seller by such Affected
Person). The Administrator will make reasonable efforts to cause the interest of any Affected Party (other than Issuer or its domestic Affiliates)
that makes a claim under this Section 1.7 to be transferred to a party that is not subject to increased costs under this Section 1.7; provided that
neither the Administrator nor any of its Affiliates shall be required hereunder to itself accept such transferred interest.
Section 1.8. Requirements of Law. If any Affected Person reasonably determines that the existence of or compliance with: (a) any law or
regulation or any change therein or in the interpretation or application thereof, in each case adopted, issued or occurring after the date hereof, or
(b) any request, guideline or directive from any central bank or other Governmental Authority (whether or not having the force of law) issued
or occurring after the date of this Agreement:
(i) does or shall subject such Affected Person to any tax of any kind whatsoever with respect to this Agreement, any increase in the Purchased
Interest or in the amount of Capital relating thereto, or does or shall change the basis of taxation of payments to such Affected Person on
account of Collections, Discount or any other amounts payable hereunder (excluding taxes imposed on the overall or branch pre-tax net income
of such Affected Person, and franchise taxes imposed on such Affected Person, by the jurisdiction under the laws of which such Affected
Person is organized or otherwise is considered doing business (unless the Affected Person would not be considered doing business in such
jurisdiction, but for having entered into, or engaged in the transactions in connection with, this Agreement or any other Transaction Document)
or a political subdivision thereof),
(ii) does or shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by,
or deposits or other liabilities in or for the account of, purchases, advances or loans by, or other credit extended by, or any other acquisition of
funds by, any office of such Affected Person that are not otherwise included in the determination of the Euro-Rate or the Base Rate hereunder,
or
8
(iii) does or shall impose on such Affected Person any other condition,
and the result of any of the foregoing is: (A) to increase the cost to such Affected Person of acting as Administrator, or of agreeing to purchase
or purchasing or maintaining the ownership of undivided percentage ownership interests with regard to the Purchased Interest (or interests
therein) or any Portion of Capital, or (B) to reduce any amount receivable hereunder (whether directly or indirectly), then, in any such case,
upon demand by such Affected Person, the Seller shall promptly pay to such Affected Person additional amounts necessary to compensate such
Affected Person for such additional cost or reduced amount receivable. All such amounts shall be payable as incurred. A certificate from such
Affected Person to the Seller and the Administrator certifying, in reasonably specific detail, the basis for, calculation of, and amount of such
additional costs or reduced amount receivable shall be conclusive and binding for all purposes, absent manifest error; provided, however, that
no Affected Person shall be required to disclose any confidential or tax planning information in any such certificate.
Section 1.9. Inability to Determine Euro-Rate. (a) If the Administrator determines before the first day of any Settlement Period (which
determination shall be final and conclusive) that, by reason of circumstances affecting the interbank eurodollar market generally, deposits in
dollars (in the relevant amounts for such Settlement Period) are not being offered to banks in the interbank eurodollar market for such
Settlement Period, or adequate means do not exist for ascertaining the Euro-Rate for such Settlement Period, then the Administrator shall give
notice thereof to the Seller. Thereafter, until the Administrator notifies the Seller that the circumstances giving rise to such suspension no
longer exist, (a) no Portion of Capital shall be funded at the Alternate Rate determined by reference to the Euro-Rate and (b) the Discount for
any outstanding Portions of Capital then funded at the Alternate Rate determined by reference to the Euro-Rate shall, on the last day of the then
current Settlement Period, be converted to the Alternate Rate determined by reference to the Base Rate.
(b) If, on or before the first day of any Settlement Period, the Administrator shall have been notified by any Purchaser that, such Purchaser has
determined (which determination shall be final and conclusive) that, any enactment, promulgation or adoption of or any change in any
applicable law, rule or regulation, or any change in the interpretation or administration thereof by a governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or compliance by such Purchaser with any guideline, request or
directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or
impossible for such Purchaser to fund or maintain any Portion of Capital at the Alternate Rate and based upon the Euro-Rate, the Administrator
shall notify the Seller thereof. Upon receipt of such notice, until the Administrator notifies the Seller that the circumstances giving rise to such
determination no longer apply, (a) no Portion of Capital shall be funded at the Alternate Rate determined by reference to the Euro-Rate and (b)
the Discount for any outstanding Portions of Capital then funded at the Alternate Rate determined by reference to the Euro-Rate shall be
converted to the Alternate Rate determined by reference to the Base Rate either (i) on the last day of the then current Settlement Period if such
Purchaser may lawfully continue to maintain such Portion of Capital at the Alternate Rate determined by reference to the Euro-Rate to such
day, or (ii)
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immediately, if such Purchaser may not lawfully continue to maintain such Portion of Capital at the Alternate Rate determined by reference to
the Euro-Rate to such day.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS; TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. Each of the Seller, CSS and the Servicer hereby makes the representations and
warranties, and hereby agrees to perform and observe the covenants, applicable to it set forth in Exhibits III and IV, respectively.
Section 2.2. Termination Events. If any of the Termination Events set forth in Exhibit V shall occur, the Administrator may, by notice to the
Seller, declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred);
provided, that automatically upon the occurrence of any event (without any requirement for the passage of time or the giving of notice)
described in paragraph (f) of Exhibit V, the Facility Termination Date shall occur. Upon any such declaration, occurrence or deemed
occurrence of the Facility Termination Date, the Issuer and the Administrator shall have, in addition to the rights and remedies that they may
have under this Agreement, all other rights and remedies provided after default under the New York UCC and under other applicable law,
which rights and remedies shall be cumulative.
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller. Without limiting any other rights that the Administrator, the Issuer, any Program Support Provider or
any of their respective Affiliates, employees, officers, directors, agents, counsel, successors, transferees or assigns (each, an "Indemnified
Party") may have hereunder or under applicable law, the Seller hereby agrees to indemnify each Indemnified Party from and against any and all
claims, damages, expenses, costs, losses and liabilities (including Attorney Costs) (all of the foregoing being collectively referred to as
"Indemnified Amounts") arising out of or resulting from this Agreement (whether directly or indirectly), the use of proceeds of purchases or
reinvestments, the ownership of the Purchased Interest, or any interest therein, or in respect of any Receivable, Related Security or Contract,
excluding, however: (a) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such
Indemnified Party or its officers, directors, agents or counsel, (b) any indemnification which has the effect of recourse for the non-payment of
Receivables to any indemnitor (except as otherwise specifically provided under Section 1.4(e) and this Section 3.1) for Receivables, or (c) any
overall net income taxes or franchise taxes imposed on such Indemnified Party by the jurisdiction under the laws of which such Indemnified
Party is organized or any political subdivision thereof. Without limiting or being limited by the foregoing, and subject to the exclusions set
forth in the preceding sentence, the Seller shall pay on demand (which demand shall be accompanied by documentation of the Indemnified
Amounts, in reasonable detail) to each
10
Indemnified Party any and all amounts necessary to indemnify such Indemnified Party from and against any and all Indemnified Amounts
relating to or resulting from any of the following:
(i) the failure of any Receivable included in the calculation of the Net Receivables Pool Balance as an Eligible Receivable to be an Eligible
Receivable, the failure of any information contained in an Information Package to be true and correct as of the date set forth in such
Information Package, or the failure of any other information provided to the Issuer or the Administrator with respect to Receivables or this
Agreement to be true and correct as of the date such information is provided,
(ii) the failure of any representation, warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection
with this Agreement to have been true and correct as of the date made or deemed made in all respects when made,
(iii) the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract,
or the failure of any Pool Receivable or the related Contract to conform to any such applicable law, rule or regulation,
(iv) the failure to vest in the Issuer a valid and enforceable: (A) perfected undivided percentage ownership interest, to the extent of the
Purchased Interest, in the Receivables in, or purporting to be in, the Receivables Pool and the other Pool Assets, or (B) first priority perfected
security interest in the Pool Assets, in each case, free and clear of any Adverse Claim,
(v) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any Receivables in, or purporting to be in, the Receivables Pool and the other
Pool Assets, whether at the time of any purchase or reinvestment or at any subsequent time,
(vi) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
in, or purporting to be in, the Receivables Pool (including a defense based on such Receivable or the related Contract not being a legal, valid
and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the
goods or services related to such Receivable or the furnishing or failure to furnish such goods or services or relating to collection activities with
respect to such Receivable (if such collection activities were performed by the Seller or any of its Affiliates acting as Servicer or by any agent
or independent contractor retained by the Seller or any of its Affiliates),
(vii) any failure of the Seller (or any of its Affiliates acting as the Servicer) to perform its duties or obligations in accordance with the
provisions hereof or under the Contracts,
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(viii) any products liability or other claim, investigation, litigation or proceeding arising out of or in connection with merchandise, insurance or
services that are the subject of any Contract,
(ix) the commingling of Collections at any time with other funds,
(x) the use of proceeds of purchases or reinvestments, or
(xi) any reduction in Capital as a result of the distribution of Collections pursuant to Section 1.4(d), if all or a portion of such distributions shall
thereafter be rescinded or otherwise must be returned for any reason.
Section 3.2. Indemnities by the Servicer. Without limiting any other rights that the Administrator, the Issuer or any other Indemnified Party
may have hereunder or under applicable law, the Servicer hereby agrees to indemnify each Indemnified Party from and against any and all
Indemnified Amounts arising out of or resulting from (whether directly or indirectly): (a) the failure of any information contained in an
Information Package to be true and correct as of the date set forth in such Information Package, or the failure of any other information provided
to the Issuer or the Administrator by, or on behalf of, the Servicer to be true and correct as of the date such information is provided, (b) the
failure of any representation, warranty or statement made or deemed made by the Servicer (or any of its officers) under or in connection with
this Agreement to have been true and correct as of the date made or deemed made in all respects when made, (c) the failure by the Servicer to
comply with any applicable law, rule or regulation with respect to any Pool Receivable or the related Contract,
(d) any dispute, claim, offset or defense of the Obligor to the payment of any Receivable in, or purporting to be in, the Receivables Pool
resulting from or related to the collection activities with respect to such Receivable, or (e) any failure of the Servicer to perform its duties or
obligations in accordance with the provisions hereof or any other Transaction Document to which it is a party,
(f) the failure to have filed, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any Receivables, in or purporting to be in the Receivables Pool and any other
Pool Assets, whether at the time of any purchase or reinvestment or at any subsequent time, or (g) any commingling by the Servicer of
Collections at any time with other funds.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer. (a) The servicing, administering and collection of the Pool Receivables shall be conducted by the
Person so designated from time to time as the Servicer in accordance with this Section. Unless the Administrator gives notice to CSS upon or
after the occurrence of a Termination Event (in accordance with this Section) of the designation of a new Servicer, CSS is hereby designated
as, and hereby agrees to perform the duties and obligations of, the Servicer pursuant to the terms hereof. Upon the occurrence of a Termination
Event, the
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Administrator may designate as Servicer any Person (including itself) to succeed CSS or any successor Servicer, on the condition in each case
that any such Person so designated shall agree to perform the duties and obligations of the Servicer pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set forth in clause
(a), CSS agrees that it will terminate its activities as Servicer hereunder in a manner that the Administrator determines will facilitate the
transition of the performance of such activities to the new Servicer, and CSS shall cooperate with and assist such new Servicer. Such
cooperation shall include access to and transfer of related records and the Required Servicing Data and use by the new Servicer of all licenses,
hardware or software (in each case to the extent permitted by the applicable licence or contract) necessary or desirable to collect the Pool
Receivables and the Related Security to the extent permissible under the applicable agreements. To the extent the new Servicer finds its
necessary or desirable to use any license, hardware or software and such use requires the consent of a third party under the applicable license or
contract, CSS shall use all commercially reasonable efforts to obtain such consent on an expedited basis.
(c) CSS acknowledges that, in making their decision to execute and deliver this Agreement, the Administrator and the Issuer have relied on
CSS's agreement to act as Servicer hereunder. Accordingly, CSS agrees that it will not voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to any subservicer (each a "Sub-Servicer"); provided, that, in each such
delegation: (i) such Sub-Servicer shall agree in writing to perform the duties and obligations of the Servicer pursuant to the terms hereof, (ii)
the Servicer shall remain primarily liable for the performance of the duties and obligations so delegated, (iii) the Seller, the Administrator and
the Issuer shall have the right to look solely to the Servicer for performance, and (iv) the terms of any agreement with any Sub-Servicer shall
provide that the Administrator may terminate such agreement upon the termination of the Servicer hereunder by giving notice of its desire to
terminate such agreement to the Servicer (and the Servicer shall provide appropriate notice to each such Sub-Servicer); provided, however, that
if any such delegation is to any Person other than an Originator or an Affiliate of an Originator, the Administrator shall have consented in
writing in advance to such delegation.
Section 4.2. Duties of the Servicer. (a) The Servicer shall take or cause to be taken all such action as may be necessary or advisable to
administer and collect each Pool Receivable from time to time, all in accordance with this Agreement and all applicable laws, rules and
regulations, with reasonable care and diligence, and in accordance with the Credit and Collection Policies. The Servicer shall set aside, for the
accounts of the Seller and the Issuer, the amount of the Collections to which each is entitled in accordance with Article I. The Servicer may, in
accordance with the applicable Credit and Collection Policy, extend the maturity of any Pool Receivable (but not beyond 30 days) and extend
the maturity or adjust the Outstanding Balance of any Defaulted Receivable as the Servicer may determine to be appropriate to maximize
Collections thereof; provided, however, that: for the purposes of this Agreement, (i) such extension shall not change the number of days such
Pool Receivable has remained unpaid from the date of the original due date related to such Pool Receivable, (ii) such extension or adjustment
shall not alter the status of such Pool Receivable as
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a Delinquent Receivable or a Defaulted Receivable or limit the rights of the Issuer or the Administrator under this Agreement and (iii) if a
Termination Event has occurred and CSS or an Affiliate thereof is serving as the Servicer, CSS or such Affiliate may make such extension or
adjustment only upon the prior approval of the Administrator. The Seller shall deliver to the Servicer and the Servicer shall hold for the benefit
of the Seller and the Administrator (individually and for the benefit of the Issuer), in accordance with their respective interests, all records and
documents (including computer tapes or disks) with respect to each Pool Receivable. Notwithstanding anything to the contrary contained
herein, at any time after a Termination Event has occurred and is continuing the Administrator may direct the Servicer (whether the Servicer is
CSS or any other Person) to commence or settle any legal action to enforce collection of any Pool Receivable or to foreclose upon or repossess
any Related Security.
(b) The Servicer shall, as soon as practicable following actual receipt of collected funds, turn over to the Seller (who shall then turn over, or
cause to be turned over, such funds to the appropriate party in the case of receivables assigned in accordance with the Transaction Documents)
the collections of any indebtedness that is not a Pool Receivable, less, if CSS or an Affiliate thereof is not the Servicer, all reasonable and
appropriate out-of-pocket costs and expenses of such Servicer of servicing, collecting and administering such collections. The Servicer, if other
than CSS or an Affiliate thereof, shall, as soon as practicable upon demand, deliver to the Seller all records in its possession that evidence or
relate to any indebtedness that is not a Pool Receivable, and copies of records in its possession that evidence or relate to any indebtedness that
is a Pool Receivable.
(c) The Servicer's obligations hereunder shall terminate on the later of: (i) the Facility Termination Date and (ii) the date on which all amounts
required to be paid to the Issuer, the Administrator and any other Indemnified Party or Affected Person hereunder shall have been paid in full.
After such termination, if CSS or an Affiliate thereof was not the Servicer on the date of such termination, the Servicer shall promptly deliver
to the Seller all books, records and related materials that the Seller previously provided to the Servicer, or that have been obtained by the
Servicer, in connection with this Agreement.
Section 4.3. Lock-Box Arrangements. Prior to the initial purchase hereunder, the Seller shall enter into Lock-Box Agreements with all of the
Lock-Box Banks and deliver original counterparts thereof to the Administrator. Upon the occurrence and continuation of a Termination Event,
the Administrator may at any time thereafter give notice to each Lock-Box Bank that the Administrator is exercising its rights under the
Lock-Box Agreements to do any or all of the following: (a) to have the exclusive ownership and control of the Lock-Box Accounts transferred
to the Administrator and to exercise exclusive dominion and control over the funds deposited therein, (b) to have the proceeds that are sent to
the respective Lock-Box Accounts redirected pursuant to the Administrator's instructions rather than deposited in the applicable Lock-Box
Account, and (c) to take any or all other actions permitted under the applicable Lock-Box Agreement. The Seller hereby agrees that if the
Administrator at any time takes any action set forth in the preceding sentence, the Administrator shall have exclusive control of the proceeds
(including Collections) of all Pool
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Receivables and the Seller hereby further agrees to take any other action that the Administrator may reasonably request to transfer such control.
Any proceeds of Pool Receivables received by the Seller or the Servicer thereafter shall be sent immediately to the Administrator. The parties
hereto hereby acknowledge that if at any time the Administrator takes control of any Lock-Box Account, the Administrator shall not have any
rights to the funds therein in excess of the unpaid amounts due to the Administrator, the Issuer or any other Person hereunder, and the
Administrator shall distribute or cause to be distributed such funds in accordance with Section 4.2(b) and Article I (in each case as if such funds
were held by the Servicer thereunder).
Section 4.4. Enforcement Rights. (a) At any time following the occurrence and continuation of a Termination Event:
(i) the Administrator may direct the Obligors that payment of all amounts payable under any Pool Receivable is to be made directly to the
Administrator or its designee,
(ii) the Administrator may instruct the Seller or the Servicer to give notice of the Issuer's interest in Pool Receivables to each Obligor, which
notice shall direct that payments be made directly to the Administrator or its designee, and the Seller or the Servicer, as the case may be, shall
give such notice at the expense of the Seller or the Servicer, as the case may be; provided, that if the Seller or the Servicer, as the case may be,
fails to so notify each Obligor, the Administrator (at the Seller's or the Servicer's, as the case may be, expense) may so notify the Obligors, and
(iii) the Administrator may request the Servicer to, and upon such request the Servicer shall: (A) assemble all of the records necessary or
desirable to collect the Pool Receivables and the Related Security, and transfer or license to a successor Servicer the use of all software
necessary or desirable to collect the Pool Receivables and the Related Security, and make the same available to the Administrator or its
designee at a place selected by the Administrator to the extent permissible under the applicable agreements, and (B) segregate all cash, checks
and other instruments received by it from time to time constituting Collections in a manner acceptable to the Administrator and, promptly upon
receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Administrator or its
designee.
(b) The Seller hereby authorizes the Administrator, and irrevocably appoints the Administrator as its attorney-in-fact with full power of
substitution and with full authority in the place and stead of the Seller, which appointment is coupled with an interest, to take any and all steps
in the name of the Seller and on behalf of the Seller necessary or desirable, in the determination of the Administrator, to collect any and all
amounts or portions thereof due under any and all Pool Assets, including endorsing the name of the Seller on checks and other instruments
representing Collections and enforcing such Pool Assets. Notwithstanding anything to the contrary contained in this subsection, (i) the
Administrator agrees that it will refrain from taking any such steps until the occurrence of a Termination Event and (ii) none of the powers
conferred upon such attorney-in-fact pursuant to the preceding sentence shall subject such attorney-in-fact to any liability if any
15
action taken by it shall prove to be inadequate or invalid, nor shall they confer any obligations upon such attorney-in-fact in any manner
whatsoever; provided, however, that the Administrator shall not be relieved of any liability it might otherwise have to any party hereunder for
its own gross negligence or willful misconduct.
Section 4.5. Responsibilities of the Seller. (a) Anything herein to the contrary notwithstanding, the Seller shall: (i) perform all of its obligations,
if any, under the Contracts related to the Pool Receivables to the same extent as if interests in such Pool Receivables had not been transferred
hereunder, and the exercise by the Administrator or the Issuer of their respective rights hereunder shall not relieve the Seller from such
obligations, and (ii) pay when due any taxes, including any sales taxes payable in connection with the Pool Receivables and their creation and
satisfaction. The Administrator and the Issuer shall not have any obligation or liability with respect to any Pool Asset, nor shall either of them
be obligated to perform any of the obligations of the Seller, CSS or the Originator thereunder.
(b) CSS hereby irrevocably agrees that if at any time it shall cease to be the Servicer hereunder, it shall act (if the then-current Servicer so
requests) as the data-processing agent of the Servicer and, in such capacity, CSS shall conduct the data-processing functions of the
administration of the Receivables and the Collections thereon in substantially the same way that CSS conducted such data-processing functions
while it acted as the Servicer.
Section 4.6. Servicing Fee. (a) Subject to clause (b), the Servicer shall be paid a fee equal to 1.0% per annum (the "Servicing Fee Rate") of the
daily average aggregate Outstanding Balance of the Pool Receivables. The Issuer's Share of such fee shall be paid through the distributions
contemplated by Section 1.4(d), and the Seller's Share of such fee shall be paid by the Seller on each Settlement Date.
(b) If the Servicer ceases to be CSS or an Affiliate thereof, the servicing fee shall be the greater of: (i) the amount calculated pursuant to clause
(a), and (ii) an alternative amount specified by the successor Servicer not to exceed 110% of the aggregate reasonable costs and expenses
incurred by such successor Servicer in connection with the performance of its obligations as Servicer.
ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc. No amendment or waiver of any provision of this Agreement or any other Transaction Document, or consent to
any departure by the Seller or the Servicer therefrom, shall be effective unless in a writing signed by the Administrator, and, in the case of any
amendment, by the other parties thereto; and then such amendment, waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given. No failure on the part of the Issuer or the Administrator to exercise, and no delay in exercising any right
hereunder
16
shall operate as a waiver thereof, nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or
the exercise of any other right.
Section 5.2. Notices, Etc. (i) All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or by facsimile, to the
intended party at the mailing address or facsimile number of such party set forth under its name on the signature pages hereof or at such other
address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and
communications shall be effective (i) if personally delivered, when received, (ii) if sent by certified mail three Business Days after having been
deposited in the mail, postage prepaid, and (iii) if transmitted by facsimile, when sent, receipt confirmed by telephone or electronic means (and
shall be followed by a hard copy sent by first class mail).
Section 5.3. Assignability. (a) This Agreement and the Issuer's rights and obligations herein (including ownership of the Purchased Interest or
an interest therein) shall be assignable, in whole or in part, by the Issuer and its successors and assigns with the prior written consent of the
Seller; provided, however, that such consent shall not be unreasonably withheld; and provided further, that no such consent shall be required if
the assignment is made to PNC, any domestic Affiliate of PNC (other than a director or officer of PNC), any Purchaser or other Program
Support Provider or any Person that is: (i) in the business of issuing Notes and (ii) associated with or administered by PNC or any Affiliate of
PNC. Each assignor may, in connection with the assignment, disclose to the applicable assignee (that shall have agreed to be bound by
Section 5.6) any information relating to the Servicer, the Seller or the Pool Receivables furnished to such assignor by or on behalf of the
Servicer, the Seller, the Issuer or the Administrator. The Administrator shall give prior written notice of any assignment of the Issuer's rights
and obligations (including ownership of the Purchased Interest to any Person other than a Program Support Provider).
(b) The Issuer may at any time grant to one or more banks or other institutions (each a "Purchaser") party to the Liquidity Agreement, or to any
other Program Support Provider, participating interests in the Purchased Interest. In the event of any such grant by the Issuer of a participating
interest to a Purchaser or other Program Support Provider, the Issuer shall remain responsible for the performance of its obligations hereunder.
The Seller agrees that each Purchaser or other Program Support Provider shall be entitled to the benefits of Sections 1.7 and 1.8.
(c) This Agreement and the rights and obligations of the Administrator hereunder shall be assignable, in whole or in part, by the Administrator
and its successors and assigns; provided, that unless: (i) such assignment is to an Affiliate of PNC, (ii) it becomes unlawful for PNC to serve as
the Administrator or (iii) a Termination Event exists, the Seller has consented to such assignment, which consent shall not be unreasonably
withheld.
(d) Except as provided in Section 4.1(d), none of the Seller, CSS or the Servicer may assign its rights or delegate its obligations hereunder or
any interest herein without the prior written consent
17
of the Administrator (which shall not be unreasonably withheld if the proposed assignee is an Affiliate of CSS).
(e) Without limiting any other rights that may be available under applicable law, the rights of the Issuer may be enforced through it or by its
agents.
Section 5.4. Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted under Section 3.1, the Seller agrees to pay on
demand (which demand shall be accompanied by documentation thereof in reasonable detail) all reasonable costs and expenses in connection
with the preparation, execution, delivery and administration (including periodic internal audits by the Administrator of Pool Receivables
provided, that the Company shall not pay for more than one audit per year unless a Termination Event or an Unmatured Termination Event has
occurred and is continuing) of this Agreement, the other Transaction Documents and the other documents and agreements to be delivered
hereunder (and all reasonable costs and expenses in connection with any amendment, waiver or modification of any thereof), including: (i)
Attorney Costs for the Administrator, the Issuer and their respective Affiliates and agents with respect thereto and with respect to advising the
Administrator, the Issuer and their respective Affiliates and agents as to their rights and remedies under this Agreement and the other
Transaction Documents, and (ii) all reasonable costs and expenses (including Attorney Costs), if any, of the Administrator, the Issuer and their
respective Affiliates and agents in connection with the enforcement of this Agreement and the other Transaction Documents.
(b) In addition, the Seller shall pay on demand any and all stamp and other taxes and fees payable in connection with the execution, delivery,
filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and agrees to save each Indemnified
Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees.
Section 5.5. No Proceedings; Limitation on Payments. Each of the Seller, CSS, the Servicer, the Administrator, each assignee of the Purchased
Interest or any interest therein, and each Person that enters into a commitment to purchase the Purchased Interest or interests therein, hereby
covenants and agrees that it will not institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and
one day after the latest maturing Note issued by the Issuer is paid in full. The provision of this
Section 5.5 shall survive any termination of this Agreement.
Section 5.6. Confidentiality. Each of the Seller and the Servicer agrees to maintain the confidentiality of this Agreement and the other
Transaction Documents (and all drafts thereof) in communications with third parties and otherwise; provided, that this Agreement may be
disclosed to: (a) third parties to the extent such disclosure is made pursuant to a written agreement of confidentiality in form and substance
reasonably satisfactory to the Administrator, (b) the Seller's legal counsel and auditors if they agree to hold it confidential and (c) to any Person
as otherwise required by applicable law. Unless otherwise required by applicable law, each of the Administrator
18
and the Issuer agrees to maintain the confidentiality of non-public financial information regarding CSS and its Subsidiaries and Affiliates;
provided, that such information may be disclosed to: (i) third parties to the extent such disclosure is made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to CSS, (ii) legal counsel and auditors of the Issuer or the Administrator if they
agree to hold it confidential, (iii) the rating agencies rating the Notes, (iv) any Program Support Provider or potential Program Support Provider
(if they agree to hold it confidential), (v) any placement agent placing the Notes and (vi) any regulatory authorities having jurisdiction over
PNC, the Issuer, any Program Support Provider or any Purchaser.
Section 5.7. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE
SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE
EXTENT THAT THE VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT OF
ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW
YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT 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 AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR
HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF
ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER MEANS PERMITTED
BY NEW YORK LAW.
Section 5.8. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which, when so executed,
shall be deemed to be an original, and all of which, when taken together, shall constitute one and the same agreement.
Section 5.9. Survival of Termination. The provisions of Sections 1.7, 1.8, 3.1, 3.2, 5.4, 5.5, 5.6, 5.7, 5.10 and 5.13 shall survive any termination
of this Agreement.
Section 5.10. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY
JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY
19
OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF
THE PARTIES HERETO AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT ITS
RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
Section 5.11. Entire Agreement. This Agreement and the other Transaction Documents embody the entire agreement and understanding
between the parties hereto, and supersede all prior or contemporaneous agreements and understandings of such Persons, verbal or written,
relating to the subject matter hereof and thereof, except for any prior arrangements made with respect to the payment by the Issuer of (or any
indemnification for) any fees, costs or expenses payable to or incurred (or to be incurred) by or on behalf of the Seller, the Servicer and the
Administrator.
Section 5.12. Headings. The captions and headings of this Agreement and any Exhibit, Schedule or Annex hereto are for convenience of
reference only and shall not affect the interpretation hereof or thereof.
Section 5.13. Issuer's, Administrator's, Seller's and Servicer's Liabilities. The obligations of the Issuer, the Administrator, the Seller and the
Servicer under the Transaction Documents are solely the corporate obligations of the Issuer, the Administrator, the Seller and the Servicer,
respectively. No recourse shall be had for any obligation or claim arising out of or based upon any Transaction Document against any
stockholder, employee, officer, director or incorporator of the Issuer, the Administrator, the Seller or the Servicer; provided, however, that this
Section shall not relieve any such Person of any liability it might otherwise have for its own gross negligence or willful misconduct.
Section 5.14. Purchaser Tax Documentation. The Administrator agrees to provide to CSS, from time to time upon CSS's request, completed
and signed copies of any documents that may be required by an applicable taxing authority to certify each Purchaser's exemption from
withholding tax with respect to payments to be made to such Purchaser under this Agreement (and shall notify CSS if any Purchaser is unable
or unwilling to provide such documents).
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of
the date first above written.
CSS FUNDING LLC
By:
Name:
Title:
Address:
CSS Funding LLC
1845 Walnut Street, Suite 800
Philadelphia, PA 19103-4755
Attention: Clifford Pietrafitta
Telephone: (215) 569-9900
Facsimile: (215) 569-9979
CSS INDUSTRIES, INC.
By:
Name:
Title:
Address:
CSS Industries, Inc.
1845 Walnut Street, Suite 800
Philadelphia, PA 19103-4755
Attention: Clifford Pietrafitta
Telephone: (215) 569-9900
Facsimile: (215) 569-9979
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BERWICK INDUSTRIES LLC, as a Subservicer
By:
Name:
Title:
Address:
Berwick Industries LLC
Bomboy Lane and Ninth Street
Berwick, PA 18603
Attention: Christopher J. Munyan
Telephone: (570) 752-5934
Facsimile: (570) 752-6531
CLEO INC, as a Subservicer
By:
Name:
Title:
Address:
Cleo Inc
4025 Viscount
Memphis, TN 38118
Attention: Andrew W. Kelly
Telephone: (901) 369-6620
Facsimile: (901) 362-0864
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THE PAPER MAGIC GROUP, INC.,
as a Subservicer
By:
Name:
Title:
Address:
The Paper Magic Group, Inc.
401 Adams Avenue
Scranton, PA 18510
Attention: Frank Macero, Jr.
Telephone: (570) 961-3863
Facsimile: (570) 961-3930
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MARKET STREET FUNDING CORPORATION
By:
Name:
Title:
Address:
Market Street Funding
Corporation
c/o AMACAR Group, LLC
6525 Morrison Boulevard,
Suite 318
Charlotte, North Carolina 28211
Attention: Douglas K. Johnson
Telephone No.: (704) 365-0569
Facsimile No.: (704) 365-1362
With a copy to:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania
15222-2707
Attention: John T. Smathers
Telephone No.: (412) 762-6440
Facsimile No.: (412) 762-9184
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PNC BANK, NATIONAL ASSOCIATION,
as Administrator
By:
Name:
Title:
Address:
PNC Bank, National Association
One PNC Plaza
249 Fifth Avenue
Pittsburgh, Pennsylvania
15222-2707
Attention: John T. Smathers
Telephone No.: (412) 762-6440
Facsimile No.: (412) 762-9184
S-5
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits, Schedules and Annexes), the following terms shall have the following meanings (such
meanings to be equally applicable to both the singular and plural forms of the terms defined). Unless otherwise indicated, all Section, Annex,
Exhibit and Schedule references in this Exhibit are to Sections of and Annexes, Exhibits and Schedules to the Agreement.
"Administration Account" means the account (account number 1002422076, ABA number 043000096) of the Administrator maintained at the
office of PNC at One PNC Plaza, 249 Fifth Avenue, Pittsburgh, Pennsylvania 15222-2707, or such other account as may be so designated in
writing by the Administrator to the Servicer.
"Administrator" has the meaning set forth in the preamble to the Agreement.
"Adverse Claim" means a lien, security interest or other charge or encumbrance, or any other type of preferential arrangement; it being
understood that any thereof in favor of, or assigned to, the Issuer or the Administrator (for the benefit of the Issuer) shall not constitute an
Adverse Claim.
"Affected Person" has the meaning set forth in Section 1.7 of the Agreement.
"Affiliate" means, as to any Person: (a) any Person that, directly or indirectly, is in control of, is controlled by or is under common control with
such Person, or (b) who is a director or officer: (i) of such Person or (ii) of any Person described in clause (a), except that, with respect to the
Issuer, Affiliate shall mean the holder(s) of its capital stock. For purposes of this definition, control of a Person shall mean the power, direct or
indirect: (x) to vote 25% or more of the securities having ordinary voting power for the election of directors or managers of such Person, or (y)
to direct or cause the direction of the management and policies of such Person, in either case whether by ownership of securities, contract,
proxy or otherwise.
"Agreement" has the meaning set forth in the preamble to the Agreement.
"Alternate Rate" for any Settlement Period for any Portion of Capital of the Purchased Interest means an interest rate per annum equal to: (a) (i)
at anytime the Issuer is not funding a Portion of Capital during such Settlement Period through the issuance of Notes as a result of factors
adversely affecting securitization transactions in general but not as a result of any action or inaction of the Originators, the Servicer or the
Seller, the applicable rate of interest under the Credit Agreement or (ii) at any other time, 1.50% per annum above the Euro-Rate for such
Settlement Period; provided, however, that if (x) it shall become unlawful for any Purchaser or Program Support Provider to obtain funds in the
London interbank eurodollar market in order to make, fund or maintain any Purchased Interest, or if such funds shall not be reasonably
available to any
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Purchaser or Program Support Provider, or (y) there shall not be at least two Business Days prior to the commencement of an applicable
Settlement Period to determine a Euro-Rate in accordance with its terms, then the "Alternate Rate" shall be equal to the Base Rate in effect for
each day during the remainder of such Settlement Period or (b) if requested by the Seller the Base Rate for such Settlement Period; provided,
however, that the "Alternate Rate" for any day while a Termination Event exists shall be an interest rate equal to 2.00% per annum above the
Base Rate in effect on such day.
"Attorney Costs" means and includes all reasonable fees and disbursements of any law firm or other external counsel.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978 (11 U.S.C. ss. 101, et seq.), as amended from time to time.
"Base Rate" means, for any day, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times
equal to the higher of:
(a) the rate of interest in effect for such day as publicly announced from time to time by PNC in Pittsburgh, Pennsylvania as its "prime rate."
Such "prime rate" is set by PNC based upon various factors, including PNC'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, and
(b) 0.50% per annum above the latest Federal Funds Rate.
"BBA" means the British Bankers' Association.
"Benefit Plan" means any employee benefit pension plan as defined in
Section 3(2) of ERISA in respect of which the Seller, the Originator, CSS or any ERISA Affiliate is, or at any time during the immediately
preceding six years was, an "employer" as defined in Section 3(5) of ERISA.
"Berwick" means Berwick Industries LLC, a Pennsylvania limited liability company.
"Berwick Default Amount" means an amount computed as of the last day of each calendar month equal to: (a) the aggregate Outstanding
Balance of all Pool Receivables, the Originator of which is Berwick, that became Defaulted Receivables during such month minus (b) the
portion of such Defaulted Receivables which represents the Reserved Dispute Amount.
"Berwick Default Factor" means (a) for all months other than March or April, the aggregate credit sales made by Berwick during the calendar
month that is three calendar months prior to such month, (b) for the month of March, the Berwick Peak Christmas Sales times 50% plus the
aggregate credit sales made by Berwick during the month of December and (c) for the month of April, the
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Berwick Peak Christmas Sales times 50% plus the aggregate credit sales made by Berwick during the month of January.
"Berwick Peak Christmas Sales" means the sum of the aggregate credit sales made by Berwick during the months of August through
November.
"Berwick Specific Reserve Percentage" means a percentage determined by the Seller and Servicer and reasonably consented to by the
Administrator, that represents the maximum allowable reserves and allowances negotiated between Berwick and its Obligors.
"Berwick Specifically Reserved Dilution Amount" means, for any calendar month, the greater of (a) the sum of the reported reserves for
Obligor programs and returns and allowances on the books and records of Berwick at the end of such month and (b) an amount equal to the
product of (i) the sum of the year to date aggregate credit sales of Berwick and (ii) the Berwick Specific Reserve Percentage.
"Business Day" means any day (other than a Saturday or Sunday) on which: (a) banks are not authorized or required to close in New York City,
New York or Pittsburgh, Pennsylvania, and (b) if this definition of "Business Day" is utilized in connection with the Euro-Rate, dealings are
carried out in the London interbank market.
"Capital" means the amount paid to the Seller in respect of the Purchased Interest by the Issuer pursuant to the Agreement, or such amount
divided or combined in order to determine the Discount applicable to any Portion of Capital, in each case reduced from time to time by
Collections distributed and applied on account of such Capital pursuant to Section 1.4(d) of the Agreement; provided, that if such Capital shall
have been reduced by any distribution, and thereafter all or a portion of such distribution is rescinded or must otherwise be returned for any
reason, such Capital shall be increased by the amount of such rescinded or returned distribution as though it had not been made.
"Change in Control" means that (a) CSS ceases to own, directly or indirectly, 100% of the equity of the Seller free and clear of all Adverse
Claims and (b) CSS, ceases to own, directly or indirectly, 100% of the equity of the Originators free and clear of all Adverse Claims.
"Cleo" means Cleo Inc. a Tennessee corporation.
"Cleo Default Amount" means an amount computed as of the last day of each calendar month equal to: (a) the aggregate Outstanding Balance
of all Pool Receivables, the Originator of which is Cleo, that became Defaulted Receivables during such month minus (b) the portion of such
Defaulted Receivables which represent the Reserved Dispute Amount.
"Cleo Default Factor" means (a) for all months other than March or April, the aggregate credit sales made by Cleo during the calendar month
that is four calendar months prior to such month, (b) for the month of March, the Cleo Peak Christmas Sales times 33.00% (or such other
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factor as reasonably determined by the Administrator and CSS, as may be representative of the percentage of Obligors of Cleo with invoice
payment dates of December 10th) and (c) for the month of April, the Cleo Peak Christmas Sales times 67.00% (or such other factor as
reasonably determined by the Administrator and CSS, as may be representative of the percentage of Obligors of Cleo with invoice payment
dates of January 10th or such other date after January 10th) plus the aggregate credit sales made by Cleo during the month of December.
"Cleo Peak Christmas Sales" means the sum of the aggregate credit sales made by Cleo during the months of August through November.
"Cleo Specific Reserve Percentage" means a percentage determined by the Seller and Servicer and reasonably consented to by the
Administrator, that represents the maximum allowable reserves and allowances negotiated between Cleo and its Obligors.
"Cleo Specifically Reserved Dilution Amount" means, for any calendar month, the greater of (a) the sum of the reported reserves for Obligor
programs and returns and allowances on the books and records of Cleo at the end of such month and (b) an amount equal to the product of (i)
the sum of the year to date aggregate credit sales of Cleo and (ii) the Cleo Specific Reserve Percentage.
"Closing Date" means April 30, 2001.
"Collections" means, with respect to any Pool Receivable: (a) all funds that are received by any Originator, CSS, the Seller or the Servicer in
payment of any amounts owed in respect of such Receivable (including purchase price, finance charges, interest and all other charges), or
applied to amounts owed in respect of such Receivable (including insurance payments and net proceeds of the sale or other disposition of
repossessed goods or other collateral or property of the related Obligor or any other Person directly or indirectly liable for the payment of such
Pool Receivable and available to be applied thereon), (b) all amounts deemed to have been received pursuant to Section 1.4(e) of the
Agreement and (c) all other proceeds of such Pool Receivable.
"Concentration Percentage" means for any: (a) Group A Obligor (i) other than Wal-Mart Stores, Inc. or any Affiliate thereof (and, to the extent
Wal-Mart Stores, Inc. fails to maintain a rating of at least "AA-" from Standard & Poors and "AA3" by Moody's on its long-term senior
unsecured and uncredit-enhanced debt securities but remains a Group A Obligor, Wal-Mart Stores, Inc. or any Affiliate thereof) 16.00% and
(ii) that is Wal-Mart Stores, Inc. or any Affiliate thereof (to the extent Wal-Mart Stores, Inc. maintains a rating of at least "AA-" from Standard
& Poors and "AA3" by Moody's on its long-term senior unsecured and uncredit-enhanced debt securities) 30.00%, (b) Group B Obligor,
16.00%, (c) Group C Obligor, 8.00% and (d) Group D Obligor, 4.00%.
"Concentration Reserve" means, at any time: (a) the aggregate Capital at such time multiplied by (b)(i) the Concentration Reserve Percentage,
divided by (ii) 100%, minus the Concentration Reserve Percentage.
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"Concentration Reserve Percentage" means, at any time, the largest of:
(a) the sum of four largest Group D Obligor Percentages, (b) the sum of the two largest Group C Obligor Percentages and (c) the largest Group
B Obligor Percentage or Group A Obligor Percentage; provided that if such Obligor is Wal-Mart Stores, Inc. or any Affiliate thereof, its Group
A Obligor Percentage shall not exceed 16% for the purposes of calculating the Concentration Reserve Percentage.
"Contract" means, with respect to any Receivable, any and all contracts, instruments, agreements, leases, invoices, notes or other writings
pursuant to which such Receivable arises or that evidence such Receivable or under which an Obligor becomes or is obligated to make payment
in respect of such Receivable.
"CP Rate" for any Settlement Period for any Portion of Capital means a rate calculated by the Administrator equal to: (a) the rate (or if more
than one rate, the weighted average of the rates) at which Notes of the Issuer on each day during such period have been outstanding; provided,
that if such rate(s) is a discount rate(s), then the CP Rate shall be the rate (or if more than one rate, the weighted average of the rates) resulting
from converting such discount rate(s) to an interest-bearing equivalent rate plus (b) the commissions and charges charged by such placement
agent or commercial paper dealer with respect to such Notes, expressed as a percentage of the face amount of such Notes and converted to an
interest-bearing equivalent rate per annum. Notwithstanding the foregoing, the "CP Rate" for any day while a Termination Event exists shall be
an interest rate equal to 2% above the Base Rate in effect on such day.
"Credit Agreement" means, the Loan Agreement, dated as of April 30, 2001 among, CSS, the various lenders parties thereto and PNC as agent.
"Credit and Collection Policy" means, as the context may require, those receivables credit and collection policies and practices of each
Originator in effect on the date of the Agreement and described in Schedule I to the Agreement, as modified in compliance with the
Agreement.
"CSS" has the meaning set forth in the preamble to the Agreement.
"Cut-off Date" has the meaning set forth in the Purchase and Sale Agreement.
"Debt" means: (a) indebtedness for borrowed money, (b) obligations evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations to pay the deferred purchase price of property or services, (d) obligations as lessee under leases that shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital leases, and (e) obligations under direct or indirect guaranties in
respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the kinds referred to in clauses (a) through (d).
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"Defaulted Receivable" means a Receivable:
(a) as to which any payment, or part thereof, remains unpaid for more than (i) 90 days from the original due date for such payment for
Receivables originated by Cleo, or (ii) 60 days for Receivables originated by Paper Magic and Berwick, or
(b) without duplication (i) as to which an Insolvency Proceeding shall have occurred with respect to the Obligor thereof or any other Person
obligated thereon or owning any Related Security with respect thereto, or (ii) that has been written off the Seller's books as uncollectible;
provided that in each case the portion of such Receivable, if any, consisting of Reserved Dispute Amount shall not be deemed defaulted.
"Default Ratio" means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward)
computed as of the last day of each calendar month by dividing: (a) the sum of the Berwick Default Amount, plus the Cleo Default Amount,
plus the Paper Magic Default Amount by (b) the sum of the Berwick Default Factor, plus the Cleo Default Factor, plus the Paper Magic Default
Factor.
"Delinquency Ratio" means the ratio (expressed as a percentage and rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward)
computed as of the last day of each calendar month by dividing: (a) the aggregate Outstanding Balance of all Pool Receivables that were
Delinquent Receivables on such day by (b) the aggregate Outstanding Balance of all Pool Receivables on such day.
"Delinquent Receivable" means a Receivable as to which any payment, or part thereof, remains unpaid for more than 60 days from the original
due date for such payment; provided that the portion of such Receivable, if any, consisting of Reserved Dispute Amount shall not be deemed
delinquent.
"Dilution Horizon" means, for any calendar month, the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1%, with
5/1000th of 1% rounded upward) computed as of the last day of such calendar month of: (a) the aggregate credit sales made by the Originator
during the two most recent calendar months to (b) the aggregate Outstanding Balance of the Eligible Receivables at the last day of the most
recent calendar month.
"Dilution Ratio" means the ratio (expressed as a percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward),
computed as of the last day of each calendar month by dividing: (a) the aggregate amount of payments, other than credit memos and non-cash
adjustments related to Specifically Reserved Dilution Amount, required to be made by the Seller pursuant to Section 1.4(e)(i) of the Agreement
during such calendar month by (b) the aggregate credit sales made by the Originator during the month that is two calendar months before such
month.
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"Dilution Reserve" means, on any date, an amount equal to: (a) the Capital at the close of business of the Servicer on such date multiplied by
(b)
(i) the Dilution Reserve Percentage on such date, divided by (ii) 100% minus the Dilution Reserve Percentage on such date.
"Dilution Reserve Percentage" means on any date, the product of (a) the Dilution Horizon multiplied by (b) the sum of (i) 2 times the average
of the Dilution Ratios for the twelve most recent calendar months and (ii) the Spike Factor.
"Discount" means:
(a) for the Portion of Capital for any Settlement Period to the extent the Issuer will be funding such Portion of Capital during such Settlement
Period through the issuance of Notes:
CPR x C x ED/360
(b) for the Portion of Capital for any Settlement Period to the extent the Issuer will not be funding such Portion of Capital during such
Settlement Period through the issuance of Notes:
AR x C x ED/Year + TF
where:
AR
=
the Alternate Rate for the Portion of Capital
for such Settlement Period,
C
=
the Portion of Capital during such Settlement
Period,
CPR
=
the CP Rate for the Portion of Capital for such
Settlement Period,
ED
=
the actual number of days during such Settlement
Period,
Year
=
if such Portion of Capital is funded based upon:
(i) the Euro-Rate, 360 days, and (ii) the Base
Rate, 365 or 366 days, as applicable, and
TF
=
the Termination Fee, if any, for the Portion of
Capital for such Settlement Period;
provided, that no provision of the Agreement shall require the payment or permit the collection of Discount in excess of the maximum
permitted by applicable law; and provided further, that Discount for the Portion of Capital shall not be considered paid by any distribution to
the extent that at any time all or a portion of such distribution is rescinded or must otherwise be returned for any reason.
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"Eligible Receivable" means, at any time and without duplication, a Pool Receivable:
(a) the Obligor of which is (i) a (1) United States resident; provided, however, that if the Obligor of such Pool Receivable is a resident of
Canada, such Receivable shall satisfy the requirements of clause (a)(i), if the Outstanding Balance of such Receivable when added to the
aggregate Outstanding Balance of all other Eligible Receivables that are included in the calculation of Net Receivables Pool Balance at such
time of Obligors that are residents of Canada does not exceed 5% of the Outstanding Balance of all Eligible Receivables at such time as
determined without giving effect to this proviso, (ii) not a government or a governmental subdivision, affiliate or agency, (iii) not subject to any
action of the type described in paragraph (f) of Exhibit V to the Agreement and (iv) not an Affiliate of CSS,
(b) that is denominated and payable only in U.S. dollars in the United States,
(c) that does not have a stated maturity which is more than 180 days after the original invoice date of such Receivable,
(d) that arises under a duly authorized Contract for the sale and delivery of goods and services in the ordinary course of the applicable
Originator's business,
(e) that arises under a duly authorized Contract that is in full force and effect and that is a legal, valid and binding obligation of the related
Obligor, enforceable against such Obligor in accordance with its terms, except as limited by the potential future application of applicable
bankruptcy, fraudulent conveyance, insolvency, reorganization and other similar laws.
(f) that conforms in all material respects with all applicable laws, rulings and regulations in effect,
(g) to the extent that it is not the subject of any asserted dispute, offset, hold back defense, Adverse Claim or other claim,
(h) that satisfies all applicable requirements of the applicable Credit and Collection Policy,
(i) that has not been modified, waived or restructured since its creation, except as permitted pursuant to Section 4.2 of the Agreement,
(j) in which the Seller owns good and marketable title, free and clear of any Adverse Claims, and that is freely assignable by the Seller
(including without any consent of the related Obligor),
(k) for which the Issuer shall have a valid and enforceable undivided percentage ownership or security interest, to the extent of the Purchased
Interest, and a valid and
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enforceable first priority perfected security interest therein and in the Related Security and Collections with respect thereto, in each case free
and clear of any Adverse Claim,
(l) that constitutes an account as defined in the UCC, and that is not evidenced by instruments or chattel paper,
(m) that is neither a Defaulted Receivable nor a Delinquent Receivable,
(n) for which neither the Originator thereof, the Seller nor the Servicer has established any offset arrangements with the related Obligor,
(o) of an Obligor as to which Defaulted Receivables (other than the portion of such Defaulted Receivables which represent the Reserved
Dispute Amount) of such Obligor do not exceed 35% of the Outstanding Balance of all such Obligor's Receivables, and
(p) that represents amounts earned and payable by the Obligor that are not subject to the performance of additional services by any Originator
thereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any successor statute of similar
import, together with the regulations thereunder, in each case as in effect from time to time. References to sections of ERISA also refer to any
successor sections.
"ERISA Affiliate" means: (a) any corporation that is a member of the same controlled group of corporations (within the meaning of Section
414(b) of the Internal Revenue Code) as the Seller, any Originator or CSS, (b) a trade or business (whether or not incorporated) under common
control (within the meaning of Section 414(c) of the Internal Revenue Code) with the Seller, any Originator or CSS, or (c) a member of the
same affiliated service group (within the meaning of Section 414(m) of the Internal Revenue Code) as the Seller, any Originator, any
corporation described in clause (a) or any trade or business described in clause (b).
"Euro-Rate" means with respect to any Settlement Period the interest rate per annum determined by the Administrator by dividing (the resulting
quotient rounded upwards, if necessary, to the nearest 1/100th of 1% per annum)
(i) the rate of interest determined by the Administrator in accordance with its usual procedures (which determination shall be conclusive absent
manifest error) to be the average of the London interbank market offered rates for U.S. dollars quoted by the British Bankers' Association
("BBA") as set forth on Dow Jones Markets Service (formerly known as Telerate) (or appropriate successor or, if British Bankers' Association
or its successor ceases to provide display page 3750 (or such other display page on the Dow Jones Markets Service system as may replace
display page 3750) at or about 11:00 a.m. (London time) on the Business Day which is two (2) Business Days prior to the first day of such
Settlement Period for an amount comparable to the Portion of Capital to be funded at the Alternate Rate and based upon the Euro-Rate during
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such Settlement Period by (ii) a number equal to 1.00 minus the Euro-Rate Reserve Percentage. The Euro-Rate may also be expressed by the
following formula:
Average of London interbank offered rates quoted by
BBA as shown on Dow Jones Markets Service display page 3750
or appropriate successor
Euro-Rate =
--------------------------------------------------1.00 - Euro-Rate Reserve Percentage
where "Euro-Rate Reserve Percentage" means, the maximum effective percentage in effect on such day as prescribed by the Board of
Governors of the Federal Reserve System (or any successor) for determining the reserve requirements (including without limitation,
supplemental, marginal, and emergency reserve requirements) with respect to eurocurrency funding (currently referred to as "Eurocurrency
Liabilities"). The Euro-Rate shall be adjusted with respect to any Portion of Capital funded at the Alternate Rate and based upon the Euro-Rate
that is outstanding on the effective date of any change in the Euro-Rate Reserve Percentage as of such effective date. The Administrator shall
give prompt notice to the Seller of the Euro-Rate as determined or adjusted in accordance herewith (which determination shall be conclusive
absent manifest error).
"Excess Concentration" means the sum of the amounts by which the Outstanding Balance of Eligible Receivables of each Obligor then in the
Receivables Pool exceeds an amount equal to: (a) the Concentration Percentage for such Obligor multiplied by (b) the Outstanding Balance of
all Eligible Receivables then in the Receivables Pool.
"Facility Termination Date" means the earliest to occur of: (a) April 30, 2004, (b) the date determined pursuant to Section 2.2 of the
Agreement, (c) the date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of the Agreement, (d) the date that the commitments of
the Purchasers terminate under the Liquidity Agreement, and (e) the Issuer shall fail to cause the amendment or modification of any
Transaction Document or related opinion as required by Moody's or Standard and Poor's, and such failure shall continue for 30 days after such
amendment is initially requested.
"Federal Funds Rate" means, for any day, the per annum rate set forth in the weekly statistical release designated as H.15(519), or any
successor publication, published by the Federal Reserve Board (including any such successor, "H.15(519)") for such day opposite the caption
"Federal Funds (Effective)." If on any relevant day such rate is not yet published in H.15(519), the rate for such day will be the rate set forth in
the daily statistical release designated as the Composite 3:30 p.m. Quotations for U.S. Government Securities, or any successor publication,
published by the Federal Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m. Quotations") for such day under
the caption "Federal Funds Effective Rate." If on any relevant day the appropriate rate is not yet published in either H.15(519) or the
Composite 3:30 p.m. Quotations, the rate for such day will be the arithmetic mean as determined by the Administrator of the rates for the last
transaction in overnight Federal funds arranged before 9:00 a.m. (New York time) on that
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day by each of three leading brokers of Federal funds transactions in New York City selected by the Administrator.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve System, or any entity succeeding to any of its principal
functions.
"Fee Letter" has the meaning set forth in Section 1.5 of the Agreement.
"Governmental Authority" means any nation or government, any state or other political subdivision thereof, any central bank (or similar
monetary or regulatory authority) thereof, any body or entity exercising executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government, including any court, and any Person owned or controlled, through stock or capital ownership or otherwise, by any
of the foregoing.
"Group A Obligor" means any Obligor with a short-term rating of at least: (a) "A-1" by Standard & Poor's, or if such Obligor does not have a
short-term rating from Standard & Poor's, a rating of "A+" or better by Standard & Poor's on its long-term senior unsecured and
uncredit-enhanced debt securities, and (b) "P-1" by Moody's, or if such Obligor does not have a short-term rating from Moody's, "A1"or better
by Moody's on its long-term senior unsecured and uncredit-enhanced debt securities.
"Group A Obligor Percentage" means, at any time, for each Group A Obligor, the percentage equivalent of: (a) the aggregate Outstanding
Balance of the Eligible Receivables of such Group A Obligor less any Excess Concentrations of such Obligor, divided by (b) the aggregate
Outstanding Balance of all Eligible Receivables at such time.
"Group B Obligor" means an Obligor, not a Group A Obligor, with a short-term rating of at least: (a) "A-2" by Standard & Poor's, or if such
Obligor does not have a short-term rating from Standard & Poor's, a rating of "BBB+" to "A" by Standard & Poor's on its long-term senior
unsecured and uncredit-enhanced debt securities, and (b) "P-2" by Moody's, or if such Obligor does not have a short-term rating from Moody's,
"Baa1" to "A2" by Moody's on its long-term senior unsecured and uncredit-enhanced debt securities.
"Group B Obligor Percentage" means, at any time, for each Group B Obligor, the percentage equivalent of: (a) the aggregate Outstanding
Balance of the Eligible Receivables of such Group B Obligor less any Excess Concentrations of such Obligor, divided by (b) the aggregate
Outstanding Balance of all Eligible Receivables at such time.
"Group C Obligor" means an Obligor, not a Group A Obligor or a Group B Obligor, with a short-term rating of at least: (a) "A-3" by Standard
& Poor's, or if such Obligor does not have a short-term rating from Standard & Poor's, a rating of "BBB-" to "BBB" by Standard & Poor's on
its long-term senior unsecured and uncredit-enhanced debt securities, and (b) "P-3" by Moody's, or if such Obligor does not have a short-term
rating from Moody's, "Baa3" to "Baa2" by Moody's on its long-term senior unsecured and uncredit-enhanced debt securities.
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"Group C Obligor Percentage" means, at any time, for each Group C Obligor, the percentage equivalent of: (a) the aggregate Outstanding
Balance of the Eligible Receivables of such Group C Obligor less any Excess Concentrations of such Obligor, divided by (b) the aggregate
Outstanding Balance of all Eligible Receivables at such time.
"Group D Obligor" means any Obligor that is not a Group A Obligor, Group B Obligor or Group C Obligor.
"Group D Obligor Percentage" means, at any time, for each Group D Obligor: (a) the aggregate Outstanding Balance of the Eligible
Receivables of such Group D Obligor less any Excess Concentrations of such Obligor, divided by
(b) the aggregate Outstanding Balance of all Eligible Receivables at such time.
"Indemnified Amounts" has the meaning set forth in Section 3.1 of the Agreement.
"Indemnified Party" has the meaning set forth in Section 3.1 of the Agreement.
"Independent Director" has the meaning set forth in paragraph 3(c) of Exhibit IV to the Agreement.
"Insured Receivable" mean any Receivable which is covered by a credit insurance policy.
"Information Package" means a report, in substantially the form of either Annex A-1 (in the case of a Information Package delivered in
connection with a Settlement Date) or Annex A-2 (in the case of Information Package delivered at any other time) to the Agreement, furnished
to the Administrator pursuant to the Agreement.
"Insolvency Proceeding" means: (a) any case, action or proceeding before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up or relief of debtors, or (b) any general assignment for the benefit
of creditors of a Person, or composition, marshaling of assets for creditors of a Person, or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors, in each of cases (a) and (b) undertaken under U.S. Federal, state or foreign law, including
the Bankruptcy Code.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended from time to time, and any successor statute of similar import,
together with the regulations thereunder, in each case as in effect from time to time. References to sections of the Internal Revenue Code also
refer to any successor sections.
"Issuer" has the meaning set forth in the preamble to the Agreement.
"Issuer's Share" of any amount means such amount multiplied by the Purchased Interest at the time of determination.
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"Liquidity Agent" means PNC in its capacity as the Liquidity Agent pursuant to the Liquidity Agreement.
"Liquidity Agreement" means the Liquidity Asset Purchase Agreement, dated as of even date herewith, between the purchasers from time to
time party thereto, the Issuer and PNC, as Administrator and Liquidity Agent, as the same may be further amended, supplemented or otherwise
modified from time to time.
"Lock-Box Account" means an account in the name of the Seller and maintained by the Seller at a bank or other financial institution for the
purpose of receiving Collections.
"Lock-Box Agreement" means an agreement, in form and substance satisfactory to the Administrator, among the Seller, the applicable
Originator, the Servicer, the Administrator, the Issuer and a Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial institutions holding one or more Lock-Box Accounts.
"Loss Reserve" means, on any date, an amount equal to: (a) the Capital at the close of business of the Servicer on such date multiplied by (b)(i)
the Loss Reserve Percentage on such date divided by (ii) 100% minus the Loss Reserve Percentage on such date.
"Loss Reserve Percentage" means, on any date, the greater of: (a) 12.00% or (b) the product of (i) 2, (ii) the highest average of the Default
Ratios for any three consecutive calendar months during the twelve most recent calendar months, and (iii)(A) the aggregate credit sales (other
than Peak Christmas Sales) made by the Originators during the four most recent calendar months, plus, for the months of August through
February only, the year to date Peak Christmas Sales for such months less the product of (x) the amount of Collections received on a
cumulative basis from December through February times
(y) in the case of Cleo and Paper Magic, 100% or, in the case of Berwick, 80% , divided by (B) the aggregate Outstanding Balance of Eligible
Receivables as of such date.
"Material Adverse Effect" means, relative to any Person with respect to any event or circumstance, a material adverse effect on:
(a) the assets, operations, business or financial condition of such Person,
(b) the ability of any of such Person to perform its obligations under the Agreement or any other Transaction Document to which it is a party,
(c) the validity or enforceability of any other Transaction Document, or the validity, enforceability or collectibility of a material portion of the
Pool Receivables, or
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(d) the status, perfection, enforceability or priority of the Issuer's or the Seller's interest in the Pool Assets.
"Moody's" means Moody's Investors Service, Inc.
"Net Receivables Pool Balance" means, at any time: (a) the Outstanding Balance of Eligible Receivables then in the Receivables Pool minus
(b) the sum of (i) the Excess Concentration and (ii) the Specifically Reserved Dilution Amount.
"Notes" means short-term promissory notes issued, or to be issued, by the Issuer to fund its investments in accounts receivable or other
financial assets.
"Obligor" means, with respect to any Receivable, the Person obligated to make payments pursuant to the Contract relating to such Receivable.
"Originator" has the meaning set forth in the Purchase and Sale Agreement.
"Originator Assignment Certificate" means the assignment, in substantially the form of Exhibit C to the Purchase and Sale Agreement,
evidencing Seller's ownership of the Receivables generated by each Originator, as the same may be amended, supplemented, amended and
restated, or otherwise modified from time to time in accordance with the Purchase and Sale Agreement.
"Outstanding Balance" of any Receivable at any time means the then outstanding principal balance thereof.
"Paper Magic" means The Paper Magic Group, Inc., a Pennsylvania corporation.
"Paper Magic Default Amount" means an amount computed as of the last day of each calendar month equal to: (a) the aggregate Outstanding
Balance of all Pool Receivables, the Originator of which is Paper Magic, that became Defaulted Receivables during such month minus (b) the
aggregate portion of such Defaulted Receivables which respresents the Reserved Dispute Amount.
"Paper Magic Default Factor" means (a) for the months of November, December and January, the sum of the aggregate credit sales made by
Paper Magic during the months of June and July and the aggregate credit sales made by the Minneapolis division of Paper Magic during the
month of August, (b) for the months of February and March, the Paper Magic Peak Christmas Sales times 70%,
(c) for the month of March, the Paper Magic Peak Christmas Sales times 30%, (d) for the month of April, the aggregate sales made by Paper
Magic during the month of December less aggregate credit sales made by the Scranton division of Paper Magic during the month of December
times 25%, (e) for the month of May, the Paper Magic Peak Christmas Sales times 15.00%, (f) for the month of June, the sum of the aggregate
credit sales made by Paper Magic during the months of January through March plus the aggregate credit sales made by the Scranton division of
Paper Magic in the month of December times 25%, and (g) for the months of July, August, September and
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October, the aggregate credit sales made by Paper Magic during the calendar month that is three calendar months prior to such month.
"Paper Magic Peak Christmas Sales" means the sum of the aggregate credit sales made by Paper Magic during the months of August through
November other than the aggregate credit sales made by the Minneapolis division of Paper Magic during the month of August..
"Paper Magic Specific Reserve Percentage" means a percentage determined by the Seller and Servicer and reasonably consented to by the
Administrator, that represents the maximum allowable reserves and allowances negotiated between Paper Magic and its Obligors.
"Paper Magic Specifically Reserved Dilution Amount" means, for any calendar month, the greater of (a) the sum of the reported reserves for
Obligor programs and returns and allowances on the books and records of Paper Magic at the end of such month and (b) an amount equal to the
product of (i) the sum of the year to date aggregate credit sales of Paper Magic and (ii) the Paper Magic Specific Reserve Percentage.
"Payment Date" has the meaning set forth in Section 2.1 of the Purchase and Sale Agreement.
"Peak Christmas Sales" means for any calendar month the sum of the Berwick Peak Christmas Sale, plus the Cleo Peak Christmas Sales plus,
the Paper Magic Peak Christmas Sales.
"Person" means an individual, partnership, corporation (including a business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any political subdivision or agency thereof.
"PNC" has the meaning set forth in the preamble to the Agreement.
"Pool Assets" has the meaning set forth in Section 1.2(d) of the Agreement.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Portion of Capital" means any separate portion of Capital being funded or maintained by the Issuer (or its successors or permitted assigns) by
reference to a particular interest rate basis. In addition, at any time when the Capital of the Purchased Interest is not divided into two or more
such portions, "Portion of Capital" means 100% of the Capital.
"Program Support Agreement" means and includes the Liquidity Agreement and any other agreement entered into by any Program Support
Provider providing for: (a) the issuance of one or more letters of credit for the account of the Issuer, (b) the issuance of one or more surety
bonds for which the Issuer is obligated to reimburse the applicable Program Support Provider for any drawings thereunder, (c) the sale by the
Issuer to any Program Support Provider of the Purchased Interest (or portions thereof) and/or (d) the making of loans and/or other extensions of
credit to the Issuer in
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connection with the Issuer's Receivables-securitization program contemplated in the Agreement, together with any letter of credit, surety bond
or other instrument issued thereunder (but excluding any discretionary advance facility provided by the Administrator).
"Program Support Provider" means and includes any Purchaser and any other Person (other than any customer of the Issuer) now or hereafter
extending credit or having a commitment to extend credit to or for the account of, or to make purchases from, the Issuer pursuant to any
Program Support Agreement.
"Purchase and Sale Agreement" means the Purchase and Sale Agreement, dated as of even date herewith, between the Seller, and each of the
entities listed on Schedule I thereto, as such agreement may be amended, amended and restated, supplemented or otherwise modified from time
to time.
"Purchase and Sale Indemnified Amounts" has the meaning set forth in
Section 9.1 of the Purchase and Sale Agreement.
"Purchase and Sale Indemnified Party" has the meaning set forth in
Section 9.1 of the Purchase and Sale Agreement.
"Purchase Notice" has the meaning set forth in Section 1.2(a) of the Agreement.
"Purchase and Sale Termination Date" has the meaning set forth in
Section 1.4 of the Purchase and Sale Agreement.
"Purchase and Sale Termination Event" has the meaning set forth in
Section 8.1 of the Purchase and Sale Agreement.
"Purchase Facility" has the meaning set forth in Section 1.1 of the Purchase and Sale Agreement.
"Purchase Limit" means $100,000,000, as such amount may be reduced pursuant to Section 1.1(b) of the Agreement. References to the unused
portion of the Purchase Limit shall mean, at any time, the Purchase Limit minus the then outstanding Capital.
"Purchase Price" has the meaning set forth in Section 2.1 of the Purchase and Sale Agreement.
"Purchase Report" has the meaning set forth in Section 2.1 of the Purchase and Sale Agreement.
"Purchased Interest" means, at any time, the undivided percentage ownership interest in: (a) each and every Pool Receivable now existing or
hereafter arising, (b) all Related Security with
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respect to such Pool Receivables and (c) all Collections with respect to, and other proceeds of, such Pool Receivables and Related Security.
Such undivided percentage interest shall be computed as:
Capital + Total Reserves
Net Receivables Pool Balance
The Purchased Interest shall be determined from time to time pursuant to Section 1.3 of the Agreement.
"Purchaser" has the meaning set forth in Section 5.3(b) of the Agreement.
"Receivable" means any indebtedness and other obligations owed to the Seller (as assignee of any Originator) or any Originator by, or any right
of the Seller or any Originator to payment from or on behalf of, an Obligor, whether constituting an account, chattel paper, instrument or
general intangible, arising in connection with the sale of goods or the rendering of services by any Originator, and includes the obligation to
pay any finance charges, fees and other charges with respect thereto. Indebtedness and other obligations arising from any one transaction,
including indebtedness and other obligations represented by an individual invoice or agreement, shall constitute a Receivable separate from a
Receivable consisting of the indebtedness and other obligations arising from any other transaction.
"Receivables Pool" means, at any time, all of the then outstanding Receivables (other than Receivables assigned to the Originators or a third
party in accordance with the terms of the Transaction Documents) purchased by the Seller pursuant to the Purchase and Sale Agreement prior
to the Facility Termination Date.
"Reference Bank" means PNC.
"Related Rights" has the meaning set forth in Section 1.1 of the Purchase and Sale Agreement.
"Related Security" means, with respect to any Receivable:
(a) all of the Seller's and the Originator thereof's interest in any goods (including returned goods), and documentation of title evidencing the
shipment or storage of any goods (including returned goods), relating to any sale giving rise to such Receivable,
(b) all instruments and chattel paper that may evidence such Receivable,
(c) all other security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise, together with all UCC financing statements or similar filings relating thereto,
and
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(d) all of the Seller's and the Originator thereof's rights, interests and claims under the Contracts and all guaranties, indemnities, insurance,
letters of credit and other agreements (including the related Contract) or arrangements of whatever character from time to time supporting or
securing payment of such Receivable or otherwise relating to such Receivable, whether pursuant to the Contract related to such Receivable or
otherwise.
"Required Servicing Data" shall mean data (in a readily downloadable and transferrable software format in widespread commercial use and not
subject to any third party consent or other restrictions on transfer) regarding the Receivables including (a) the corporate name, corporate
address, and key corporate contact person(s) (included telephone and fax numbers) for each Obligor; (b) detailed daily balances for each
Receivable, including the name of the related Obligor, the invoice number, invoice amount, due date and all applicable credit memos thereof
and (c) detailed listing of daily Collections on the Receivables, identified by Obligor and by Receivable.
"Reserved Dispute Amount" means the Outstanding Balance of a Pool Receivable which remains unpaid for more than 60 days from the
original due date for such payment which has been specifically identified by the Seller or the Servicer as an amount related to a claim and
deduction taken by an Obligor related to a customer program or allowance and the reserve for which is included in the Specifically Reserved
Dilution Amount.
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller's Share" of any amount means the greater of: (a) $0 and (b) such amount minus the Issuer's Share.
"Servicer" has the meaning set forth in the preamble to the Agreement.
"Servicing Fee" shall mean the fee referred to in Section 4.6 of the Agreement.
"Servicing Fee Rate" shall mean the rate referred to in Section 4.6 of the Agreement.
"Settlement Date" means with respect to any Portion of Capital for any Settlement Period, (i) prior to the Facility Termination Date, the 20th
day of each calendar month (or the next succeeding Business Day if such day is not a Business Day) beginning with May 20, 2001 and (ii) on
and after the Facility Termination Date, each day selected from time to time by the Administrator (it being understood that the Administrator
may select such Settlement Date to occur as frequently as daily), or, in the absence of such selection, the date specified in clause (i) above.
"Settlement Period" means: (a) before the Facility Termination Date:
(i) initially the period commencing on the date of the initial purchase pursuant to Section 1.2 of the Agreement (or in the case of any fees
payable hereunder, commencing on the Closing Date) and ending on (but not including) the next Settlement Date, and (ii) thereafter, each
period commencing on such Settlement Date and ending on (but not including) the next Settlement Date, and (b) on and after the Facility
Termination Date: such period (including a period of one day) as shall be selected from time to time
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by the Administrator or, in the absence of any such selection, each period of 30 days from the last day of the preceding Settlement Period.
"Solvent" means, with respect to any Person at any time, a condition under which:
(i) the fair value and present fair saleable value of such Person's total assets is, on the date of determination, greater than such Person's total
liabilities (including contingent and unliquidated liabilities) at such time;
(ii) the fair value and present fair saleable value of such Person's assets is greater than the amount that will be required to pay such Person's
probable liability on its existing debts as they become absolute and matured ("debts," for this purpose, includes all legal liabilities, whether
matured or unmatured, liquidated or unliquidated, absolute, fixed, or contingent);
(iii) such Person is and shall continue to be able to pay all of its liabilities as such liabilities mature; and
(iv) such Person does not have unreasonably small capital with which to engage in its current and in its anticipated business.
For purposes of this definition:
(A) the amount of a Person's contingent or unliquidated liabilities at any time shall be that amount which, in light of all the facts and
circumstances then existing, represents the amount which can reasonably be expected to become an actual or matured liability;
(B) the "fair value" of an asset shall be the amount which may be realized within a reasonable time either through collection or sale of such
asset at its regular market value;
(C) the "regular market value" of an asset shall be the amount which a capable and diligent business person could obtain for such asset from an
interested buyer who is willing to Purchase such asset under ordinary selling conditions; and
(D) the "present fair saleable value" of an asset means the amount which can be obtained if such asset is sold with reasonable promptness in an
arm's-length transaction in an existing and not theoretical market.
"Specifically Reserved Dilution Amount" mean, for any calendar month the sum of the Berwick Specially Reserved Amount, plus the Cleo
Specifically Reserved Amount plus the Paper Magic Specifically Reserved Dilution Amount.
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"Spike Factor" means, for any calendar month, (a) the positive difference, if any, between: (i) the highest Dilution Ratio for any calendar month
during the twelve most recent calendar months and (ii) the arithmetic average of the Dilution Ratios for such twelve months times (b) (i) the
highest Dilution Ratio for any calendar month during the twelve most recent calendar months divided by (ii) the arithmetic average of the
Dilution Ratios for such twelve months
"Standard & Poor's" means Standard & Poor's, a division of The McGraw-Hill Companies, Inc.
"Subsidiary" means, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of stock of each class
or other interests having ordinary voting power (other than stock or other interests having such power only by reason of the happening of a
contingency) to elect a majority of the Board of Directors or other managers of such entity are at the time owned, or management of which is
otherwise controlled: (a) by such Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and one or more Subsidiaries of
such Person.
"Termination Day" means: (a) each day on which the conditions set forth in Section 2 of Exhibit II to the Agreement are not satisfied or (b)
each day that occurs on or after the Facility Termination Date.
"Termination Event" has the meaning specified in Exhibit V to the Agreement.
"Termination Fee" means, for any Settlement Period during which a Termination Day occurs, the amount, if any, by which: (a) the additional
Discount (calculated without taking into account any Termination Fee or any shortened duration of such Settlement Period pursuant to the
definition thereof) that would have accrued during such Settlement Period on the reductions of Capital relating to such Settlement Period had
such reductions not been made, exceeds (b) the income, if any, received by the Issuer from investing the proceeds of such reductions of Capital,
as determined by the Administrator, which determination shall be binding and conclusive for all purposes, absent manifest error.
"Total Reserves" means, at any time the sum of : (a) the Yield Reserve, plus (b) the greater of (i) the sum of (A) Loss Reserve plus (B) the
Dilution Reserve and (ii) the Concentration Reserve.
"Transaction Documents" means the Agreement, the Lock-Box Agreements, the Fee Letter, the Purchase and Sale Agreement and all other
certificates, instruments, UCC financing statements, reports, notices, agreements and documents executed or delivered under or in connection
with any of the foregoing, in each case as the same may be amended, supplemented or otherwise modified from time to time in accordance with
the Agreement.
"Turnover Rate" means, for any calendar month, an amount computed as of the last day of such calendar month equal to: (a) the Outstanding
Balance of all Pool Receivables as of the last day of such calendar month divided by (b)(i) the aggregate credit sales made by the Originator
during the three calendar months ended on or before the last day of such calendar month divided by (ii) 3.
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"UCC" means the Uniform Commercial Code as from time to time in effect in the applicable jurisdiction.
"Unmatured Purchase and Sale Termination Event" means any event which, with the giving of notice or lapse of time, or both, would become a
Purchase and Sale Termination Event.
"Unmatured Termination Event" means an event that, with the giving of notice or lapse of time, or both, would constitute a Termination Event.
"Yield Reserve" means, on any date, an amount equal to: (a) the Capital at the close of business of the Servicer on such date multiplied by
(b)(i) the Yield Reserve Percentage on such date divided by (ii) 100% minus the Yield Reserve Percentage on such date.
"Yield Reserve Percentage" means at any time:
(PY + SFR) x 1.5 x TR
12
where:
PY
=
the Base Rate as of the last day of the most
recent Settlement Period,
TR
=
the Turnover Rate, and
SFR
=
the Servicing Fee Rate
Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting
principles. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in
such Article 9. Unless the context otherwise requires, "or" means "and/or," and "including" (and with correlative meaning "include" and
"includes") means including without limiting the generality of any description preceding such term.
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EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The Initial Purchase under this Agreement is subject to the following conditions precedent that the
Administrator shall have received on or before the date of such purchase, each in form and substance (including the date thereof) satisfactory to
the Administrator:
(a) A counterpart of the Agreement and the other Transaction Documents executed by the parties thereto.
(b) Certified copies of: (i) the resolutions of the Board of Directors of each of the Seller, each Originator and CSS authorizing the execution,
delivery and performance by the Seller, each Originator and CSS, as the case may be, of the Agreement and the other Transaction Documents
to which it is a party;
(ii) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to the Agreement and the other
Transaction Documents and (iii) the certificate of incorporation and by-laws of the Seller and CSS.
(c) A certificate of the Secretary or Assistant Secretary of the Seller, each Originator and CSS certifying the names and true signatures of its
officers who are authorized to sign the Agreement and the other Transaction Documents. Until the Administrator receives a subsequent
incumbency certificate from the Seller, any Originator or CSS, as the case may be, the Administrator shall be entitled to rely on the last such
certificate delivered to it by the Seller, such Originator or CSS, as the case may be.
(d) (i) evidence of proper financing statements, duly executed and filed on or before the date of such initial purchase under the UCC of all
jurisdictions that the Administrator may deem necessary or desirable in order to perfect the interests of the Seller, CSS and the Issuer
contemplated by the Agreement and the Purchase and Sale Agreement and (ii) evidence of the payment of all taxes or filing fees by the Seller
or Originator, and the making and/or filing of such statements and affidavits by one or more Originators, that shall be required in connection
with the filing of such financing statements in the Administrator's sole discretion.
(e) Proper financing statements (UCC-3), duly executed on or before the date of such initial purchase suitable for filing under the UCC of all
jurisdictions that the Administrator may deem, if any, necessary or desirable to release all security interests and other rights of any Person in
the Receivables, Contracts or Related Security previously granted by any Originator, CSS or the Seller.
(f) Completed UCC search reports, dated on or shortly before the date of the initial purchase hereunder, listing the financing statements filed in
all applicable jurisdictions referred to in subsection (e) above that name any Originator or the Seller as debtor, together with copies of such
other financing statements, and similar search reports with respect to judgment liens, federal tax
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liens, liens of the Pension Benefit Guaranty Corporation in such jurisdictions, as the Administrator may request, showing no Adverse Claims
on any Pool Assets.
(g) Favorable opinions, in form and substance reasonably satisfactory to the Administrator, of: (i) Morgan, Lewis & Bockius LLP, counsel for
the Seller, the Originators, and the Servicer, and (ii) [Richards] , special counsel for the Seller.
(h) Satisfactory results of a review and audit (performed by the Administrator) of the Servicer's collection, operating and reporting systems, the
Credit and Collection Policy of each Originator, historical receivables data and accounts, including satisfactory results of a review of the
Servicer's operating location(s) and satisfactory review and approval of the Eligible Receivables in existence on the date of the initial purchase
under the Agreement; provided, however, that within 90 days of the Closing Date such review and audit shall be performed by a representative
of the Administrator.
(i) A pro forma Information Package representing the performance of the Receivables Pool for the calendar month before closing.
(j) Evidence of payment by the Seller of all accrued and unpaid fees (including those contemplated by the Fee Letter), costs and expenses to the
extent then due and payable on the date thereof, including any such costs, fees and expenses arising under or referenced in Section 5.4 of the
Agreement and the Fee Letter.
(k) The Fee Letter duly executed by the Seller and the Servicer.
(l) Good standing certificates with respect to each of the Seller, each Originator and the Servicer issued by the Secretary of State (or similar
official) of the state of each such Person's organization or formation and principal place of business.
(m) The Liquidity Agreement and all other Transaction Documents duly executed by the parties thereto.
(n) A computer file containing all information with respect to the Receivables as the Administrator or the Issuer may reasonably request.
(o) prior to the initial purchase by the Issuer hereunder, copies of executed Lock-Box Agreements with each Lock-Box Bank.
(q) Such other approvals, opinions or documents as the Administrator or the Issuer may reasonably request.
2. Conditions Precedent to All Purchases and Reinvestments. Each purchase (except as to clause (a), including the initial purchase) and each
reinvestment shall be subject to the further conditions precedent that:
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(a) in the case of each purchase, the Servicer shall have delivered to the Administrator on or before such purchase, in form and substance
satisfactory to the Administrator, a completed pro forma Information Package to reflect the level of Capital and related reserves and the
calculation of the Purchased Interest after such subsequent purchase and a completed Purchase Notice in the form of Annex B; and
(b) on the date of such purchase or reinvestment the following statements shall be true (and acceptance of the proceeds of such purchase or
reinvestment shall be deemed a representation and warranty by the Seller that such statements are then true):
(i) the representations and warranties contained in Exhibit III to the Agreement are true and correct on and as of the date of such purchase or
reinvestment as though made on and as of such date (except to the extent that such representations and warranties relate expressly to an earlier
date, and in which case such representations and warranties shall be true and correct in all material respects as of such earlier date);
(ii) no event has occurred and is continuing, or would result from such purchase or reinvestment, that constitutes a Termination Event or an
Unmatured Termination Event; and
(iii) the Capital does not exceed the Purchase Limit.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Seller. The Seller represents and warrants as follows:
(a) The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, and
is duly qualified to do business and is in good standing as a foreign limited liability company in every jurisdiction where the nature of its
business requires it to be so qualified, except where the failure to be so qualified would not have a Material Adverse Effect.
(b) The execution, delivery and performance by the Seller of the Agreement and the other Transaction Documents to which it is a party,
including its use of the proceeds of purchases and reinvestments: (i) are within its organizational powers; (ii) have been duly authorized by all
necessary organizational action; (iii) do not contravene or result in a default under or conflict with: (A) its certificate of formation, limited
liability company agreement or any other organizational documents of the Seller, (B) any law, rule or regulation applicable to it, (C) any
indenture, loan agreement, mortgage, deed of trust or other material agreement or instrument to which it is a party or by which it is bound, or
(D) any order, writ, judgment, award, injunction or decree binding on or affecting it or any of its property; and (iv) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its properties. The Agreement and the other Transaction Documents to which
it is a party have been duly executed and delivered by the Seller.
(c) No authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or other Person is required for its
due execution, delivery and performance by the Seller of the Agreement or any other Transaction Document to which it is a party, other than
the Uniform Commercial Code filings referred to in Exhibit II to the Agreement, all of which shall have been delivered to the Administrator on
or before the date of the first purchase hereunder and such authorizations, approvals, actions, notices or filings the failure to be obtained would
not have a Material Adverse Effect.
(d) Each of the Agreement and the other Transaction Documents to which the Seller is a party constitutes its legal, valid and binding obligation
enforceable against the Seller in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws from time to time in effect affecting the enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in equity or at law.
(e) There is no pending or, to Seller's best knowledge, threatened action or proceeding affecting Seller or any of its properties before any
Governmental Authority or arbitrator.
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(f) No proceeds of any purchase or reinvestment will be used to acquire any equity security of a class that is registered pursuant to Section 12
of the Securities Exchange Act of 1934.
(g) The Seller is the legal and beneficial owner of the Pool Receivables and Related Security, free and clear of any Adverse Claim. Upon each
purchase or reinvestment, the Issuer shall acquire a valid and enforceable perfected undivided percentage ownership or security interest, to the
extent of the Purchased Interest, in each Pool Receivable then existing or thereafter arising and in the Related Security, Collections and other
proceeds with respect thereto, free and clear of any Adverse Claim. The Agreement creates a security interest in favor of the Issuer in the Pool
Assets, and the Issuer has a first priority perfected security interest in the Pool Assets, free and clear of any Adverse Claims. No effective
financing statement or other instrument similar in effect covering any Pool Asset is on file in any recording office, except those filed in favor of
the Seller pursuant to the Purchase and Sale Agreement and the Issuer relating to the Agreement.
(h) Each Information Package (if prepared by the Seller or one of its Affiliates, or to the extent that information contained therein is supplied by
the Seller or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time
by or on behalf of the Seller to the Administrator in connection with the Agreement or any other Transaction Document to which it is a party is
or will be complete and accurate in all material respects as of its date or (except as otherwise disclosed to the Administrator at such time) as of
the date so furnished,
(i) The Seller's principal place of business and chief executive office (as such terms are used in the UCC) and the office where it keeps its
records concerning the Receivables are located at the address referred to in Sections 1(b) and 2(b) of Exhibit IV to the Agreement.
(j) The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box
Banks, are specified in Schedule II to the Agreement (or at such other Lock-Box Banks and/or with such other Lock-Box Accounts as have
been notified to the Administrator in accordance with the Agreement) and all Lock-Box Accounts are
(as of and at all times after the initial purchase by the Issuer hereunder) subject to Lock-Box Agreements. The Seller has not granted to any
Person, other than the Administrator as contemplated by the Lock-Box Agreements, dominion and control of any Lock-Box Account, or the
right to take control of any such account at a future time or upon the occurrence of a future event.
(k) The Seller is not in violation of any order of any court, arbitrator or Governmental Authority.
(l) Neither the Seller nor any of its Affiliates has any direct or indirect ownership or other financial interest in the Issuer.
(m) No proceeds of any purchase or reinvestment will be used for any purpose that violates any applicable law, rule or regulation, including
Regulations T, U or X of the Federal Reserve Board.
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(n) Each Pool Receivable included as an Eligible Receivable in the calculation of the Net Receivables Pool Balance is an Eligible Receivable.
(o) No event has occurred and is continuing, or would result from a purchase in respect of, or reinvestment in respect of, the Purchased Interest
or from the application of the proceeds therefrom, that constitutes a Termination Event or an Unmatured Termination Event.
(p) Within 30 days of the Closing Date, and at all times thereafter, the Issuer shall be a named beneficiary (as its interests may appear) on each
credit insurance policy covering any of the Receivables to the extent such credit insurance is maintained from time to time.
(q) The Seller has complied in all material respects with the Credit and Collection Policies of each Originator with regard to each Receivable
originated by each Originator.
(r) The Seller has complied in all material respects with all of the terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
(s) The Seller's complete organizational name is set forth in the preamble to the Agreement, and it does not use and has not during the last six
years used any other organizational name, trade name, doing-business name or fictitious name, except as set forth on Schedule III to the
Agreement and except for names first used after the date of the Agreement and set forth in a notice delivered to the Administrator pursuant to
Section 1(l)(iv) of Exhibit IV to the Agreement.
(t) The Seller is not an "investment company," or a company "controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. In addition, the Seller is not a "holding company," a "subsidiary company" of a "holding company" or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(u) With respect to each Receivable transferred to the Seller under the Purchase and Sale Agreement, Seller has given reasonably equivalent
value to the Originator thereof in consideration therefor and such transfer was not made for or on account of an antecedent debt. No transfer by
any Originator of any Receivable under the Purchase and Sale Agreement is or may be voidable under any section of the Bankruptcy Code.
(v) Each Contract with respect to each Receivable is effective to create, and has created, a legal, valid and binding obligation of the related
Obligor to pay the Outstanding Balance of the Receivable created thereunder and any accrued interest thereon, enforceable against the Obligor
in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
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(w) Since its most recent fiscal year end, there has been no change in the business, operations, financial condition, properties or assets of the
Seller which would have a Material Adverse Effect on its ability to perform its obligations under the Agreement or any other Transaction
Document to which it is a party or materially and adversely affect the transactions contemplated under the Agreement or such other Transaction
Documents.
2. Representations and Warranties of CSS (including in its capacity as the Servicer). CSS, individually and in its capacity as the Servicer,
represents and warrants as follows:
(a) CSS is a corporation duly formed, validly existing and in good standing under the laws of the State of Delaware, and is duly qualified to do
business and is in good standing as a foreign corporation in every jurisdiction where the nature of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse Effect.
(b) The execution, delivery and performance by CSS of the Agreement and the other Transaction Documents to which it is a party, including
the Servicer's use of the proceeds of purchases and reinvestments: (i) are within its corporate powers; (ii) have been duly authorized by all
necessary corporate action; (iii) do not contravene or result in a default under or conflict with: (A) its certificate of incorporation or bylaws, (B)
any law, rule or regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed of trust or other material agreement or
instrument to which it is a party or by which it is bound, or (D) any order, writ, judgment, award, injunction or decree binding on or affecting it
or any of its property; and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties. The
Agreement and the other Transaction Documents to which CSS is a party have been duly executed and delivered by CSS.
(c) No authorization, approval or other action by, and no notice to or filing with any Governmental Authority or other Person, is required for
the due execution, delivery and performance by CSS of the Agreement or any other Transaction Document to which it is a party other than
such authorizations, approvals, actions, notices of filings the failure to be obtained would not have a Material Adverse Effect.
(d) Each of the Agreement and the other Transaction Documents to which CSS is a party constitutes the legal, valid and binding obligation of
CSS enforceable against CSS in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization
or other similar laws from time to time in effect affecting the enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in equity or at law.
(e) The balance sheets of CSS and its consolidated Subsidiaries as at December 31, 2000, and the related statements of income and retained
earnings for the fiscal year then ended, copies of which have been furnished to the Administrator, fairly present the financial condition of CSS
and its consolidated Subsidiaries as at such date and the results of the operations of CSS and its Subsidiaries for the period ended on such date,
all in accordance with generally accepted accounting
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principles consistently applied, and since December 31, 2000 there has been no event or circumstances which have had a Material Adverse
Effect.
(f) Except as disclosed in the most recent audited financial statements of CSS furnished to the Administrator, there is no pending or, to its best
knowledge, threatened action or proceeding affecting it or any of its Subsidiaries before any Governmental Authority or arbitrator that could
reasonably be expected to have a Material Adverse Effect.
(g) No proceeds of any purchase or reinvestment will be used to acquire any equity security of a class that is registered pursuant to Section 12
of the Securities Exchange Act of 1934.
(h) Each Information Package (if prepared by CSS or one of its Affiliates, or to the extent that information contained therein is supplied by CSS
or an Affiliate), information, exhibit, financial statement, document, book, record or report furnished or to be furnished at any time by or on
behalf of the Servicer to the Administrator in connection with the Agreement is or will be complete and accurate in all material respects as of
its date or (except as otherwise disclosed to the Administrator at such time) as of the date so furnished.
(i) The principal place of business and chief executive office (as such terms are used in the UCC) of CSS and the office where it keeps its
records concerning the Receivables are located at the address referred to in Section 2(b) of Exhibit IV to the Agreement.
(j) CSS is not in violation of any order of any court, arbitrator or Governmental Authority, which could have a Material Adverse Effect.
(k) Neither CSS nor any of its Affiliates has any direct or indirect ownership or other financial interest in the Issuer.
(l) CSS has complied in all material respects with the Credit and Collection Policy of each Originator with regard to each Receivable originated
by each Originator.
(m) CSS has complied in all material respects with all of the terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
(n) CSS is not an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. In addition, CSS is not a "holding company," a "subsidiary company" of a "holding company," or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
(o) Since its most recent fiscal year end, there has been no change in the business, operations, financial condition, properties or assets of CSS
which would be reasonably likely to have a Material Adverse Effect on its ability to perform its obligations under the Agreement or any
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other Transaction Document to which it is a party or materially and adversely affect the transactions contemplated under the Agreement or such
other Transaction Documents.
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EXHIBIT IV
COVENANTS
1. Covenants of the Seller. Until the latest of the Facility Termination Date, the date on which no Capital of or Discount in respect of the
Purchased Interest shall be outstanding or the date all other amounts owed by the Seller under the Agreement to the Issuer, the Administrator
and any other Indemnified Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Seller shall comply in all material respects with all applicable laws, rules, regulations and orders, and
preserve and maintain its organizational existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve and maintain such rights, franchises, qualifications and privileges
would not have a Material Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Seller: (i) shall keep its principal place of business and chief executive office (as such
terms or similar terms are used in the UCC) and the offices where it keeps its records concerning the Receivables at the address of the Seller set
forth under its name on the signature page to the Agreement (and, in the case of records, at the addresses of each Originator set forth under its
name on the signature page to the Purchase and Sale Agreement) or, pursuant to clause (l)(v) below, at any other locations in jurisdictions
where all actions reasonably requested by the Administrator to protect and perfect the interest of the Issuer in the Receivables and related items
(including the Pool Assets) have been taken and completed and (ii) shall provide the Administrator with at least 30 days' written notice before
making any change in the Seller's name or making any other change in the Seller's identity or organizational structure (including a Change in
Control) that could render any UCC financing statement filed in connection with this Agreement "seriously misleading" as such term (or
similar term) is used in the UCC; each notice to the Administrator pursuant to this sentence shall set forth the applicable change and the
effective date thereof. The Seller also will maintain and implement (or cause the Servicer to maintain and implement) administrative and
operating procedures (including an ability to recreate records evidencing Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain (or cause the Servicer to keep and maintain) the Required Servicing Data and all other documents,
books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all Receivables
(including records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing
Receivable). Notwithstanding the above, in no event shall the Seller have or maintain, or be a partner in any partnership that has or maintains,
its jurisdiction of organization, principal place of business or principal assets in any of the states of Colorado, Kansas, New Mexico, Oklahoma,
Utah or Wyoming.
(c) Performance and Compliance with Contracts and Credit and Collection Policy. The Seller shall (and shall cause the Servicer to), at its
expense, timely and fully perform and comply generally with provisions, covenants and other promises required to be observed by it under the
Contracts related to the Receivables to the extent necessary to prevent an adverse impact on the
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Receivables Pool generally and timely and fully comply in all material respects with the applicable Credit and Collection Policies with regard
to each Receivable and the related Contract.
(d) Ownership Interest, Etc. The Seller shall (and shall cause the Servicer to), at its expense, take all action necessary or desirable to establish
and maintain a valid and enforceable undivided percentage ownership or security interest, to the extent of the Purchased Interest, in the Pool
Receivables, the Related Security and Collections with respect thereto, and a first priority perfected security interest in the Pool Assets, in each
case free and clear of any Adverse Claim, in favor of the Issuer, including taking such action to perfect, protect or more fully evidence the
interest of the Issuer as the Issuer, through the Administrator, may reasonably request.
(e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to, any or all of its right, title or interest in, to or under any Pool Assets (including the Seller's undivided
interest in any Receivable, Related Security or Collections, or upon or with respect to any account to which any Collections of any Receivables
are sent), or assign any right to receive income in respect of any items contemplated by this paragraph; provided that the Seller may assign any
Insured Receivable to the applicable insurance provider after the deposit of the proceeds of the insurance policy in relation to such Insured
Receivable in a Lock-Box Account.
(f) Extension or Amendment of Receivables. Except as provided in the Agreement (including Section 4.2), the Seller shall not, and shall not
permit the Servicer to, extend the maturity or adjust the Outstanding Balance or otherwise modify the terms of any Pool Receivable in any
material respect, or amend, modify or waive, in any material respect, any term or condition of any related Contract (which term or condition
relates to payments under, or the enforcement of, such Contract).
(g) Change in Business or Credit and Collection Policy. The Seller shall not make (or permit any Originator to make) any material change in
the character of its business or in any Credit and Collection Policy, or any change in any Credit and Collection Policy that would have a
Material Adverse Effect with respect to the Receivables. The Seller shall not make (or permit any Originator to make) any other material
change in any Credit and Collection Policy without giving prior written notice thereof to the Administrator.
(h) Audits. The Seller shall (and shall cause the Originator to), from time to time during regular business hours as reasonably requested in
advance (unless a Termination Event or an Unmatured Termination Event exists) by the Administrator, permit the Administrator, or its agents
or representatives: (i) to examine and make copies of and abstracts from all books, records and documents (including computer tapes and disks)
in the possession or under the control of the Seller (or each Originator) relating to Receivables and the Related Security, including the related
Contracts, (ii) to visit the offices and properties of the Seller and each Originator for the purpose of examining such materials described in
clause (i) above, and to discuss matters relating to Receivables and the Related Security or the Seller's, CSS's or any Originator's performance
under the Transaction Documents or under the Contracts with any of the officers, employees, agents or
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contractors of the Seller, CSS or any Originator having knowledge of such matters and (iii) without limiting the clauses (i) and (ii) above, no
more than once annually (unless a Termination Event or an Unmatured Termination Event exists or there shall be a material variance in the
performance of the Receivables) to engage certified public accountants or other auditors acceptable to the Seller and the Administrator to
conduct, at the Seller's expense, a review of the Seller's books and records with respect to such Receivables.
(i) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions to Obligors. The Seller shall not, and shall not permit the
Servicer or any Originator to, add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account from those listed in
Schedule II to the Agreement, or make any change in its instructions to Obligors regarding payments to be made to the Seller, any Originator,
the Servicer or any Lock-Box Account (or related post office box), unless the Administrator shall have consented thereto in writing and the
Administrator shall have received copies of all agreements and documents (including Lock-Box Agreements) that it may request in connection
therewith.
(j) Deposits to Lock-Box Accounts. The Seller shall (or shall cause the Servicer to): (i) instruct all Obligors to make payments of all
Receivables to one or more Lock-Box Accounts or to post office boxes to which only Lock-Box Banks have access (and shall instruct the
Lock-Box Banks to cause all items and amounts relating to such Receivables received in such post office boxes to be removed and deposited
into a Lock-Box Account on a daily basis), and (ii) deposit, or cause to be deposited, any Collections received by it, the Servicer or any
Originator into Lock-Box Accounts not later than two Business Days after receipt thereof. Each Lock-Box Account (other than Lock-Box
Accounts that solely receive Collections not denominated in United States dollars) shall at all times on or after the initial purchase by the Issuer
hereunder be subject to a Lock-Box Agreement. The Seller will not (and will not permit the Servicer to) deposit or otherwise credit, or cause or
permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections.
(k) Marking of Records. At its expense, the Seller shall: (i) mark (or cause the Servicer to mark) its master data processing records relating to
Pool Receivables and related Contracts, including with a legend evidencing that the undivided percentage ownership interests with regard to the
Purchased Interest related to such Receivables and related Contracts have been sold in accordance with the Agreement, and (ii) cause each
Originator so to mark its master data processing records pursuant to the Purchase and Sale Agreement.
(l) Reporting Requirements. The Seller will provide to the Administrator (in multiple copies, if requested by the Administrator) the following:
(i) as soon as available and in any event within 50 days after the end of the first three quarters of each fiscal year of the Seller, balance sheets of
the Seller as of the end of such quarter and statements of income of the Seller for the period commencing at the end of the previous fiscal year
and ending with the end of such quarter, certified by the chief financial officer or treasurer of such Person;
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(ii) as soon as available and in any event within 105 days after the end of each fiscal year of the Seller, a copy of the balance sheet and
statement of income for such year certified as to accuracy by the chief financial officer or treasurer of the Seller;
(iii) as soon as possible and in any event within five Business Days after becoming aware of the occurrence of each Termination Event or
Unmatured Termination Event, a statement of the chief financial officer or treasurer of the Seller setting forth details of such Termination
Event or Unmatured Termination Event and the action that the Seller has taken and proposes to take with respect thereto;
(iv) promptly after the filing or receiving thereof, copies of all reports and notices that the Seller or any Affiliate files under ERISA with the
Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that the Seller or any Affiliate receives
from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which the Seller or any of
its Affiliates is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment of withdrawal
liability or an event or condition that could, in the aggregate, result in the imposition of liability on the Seller and/or any such Affiliate which
liability would be reasonably likely to have a Material Adverse Effect;
(v) at least thirty days before any change in the Seller's name or any other change requiring the amendment of UCC financing statements, a
notice setting forth such changes and the effective date thereof;
(vi) promptly after the Seller obtains knowledge thereof, notice of any: (A) material litigation, investigation or proceeding that may exist at any
time between the Seller and any Person or (B) material litigation or proceeding relating to any Transaction Document;
(vii) promptly after becoming aware of the occurrence thereof, notice of a material adverse change in the business, operations, property or
financial or other condition of the Seller, the Servicer or any Originator; and
(viii) such other information respecting the Receivables or the condition or operations, financial or otherwise, of the Seller or any of its
Affiliates as the Administrator may from time to time reasonably request.
(m) Certain Agreements. Without the prior written consent of the Administrator, the Seller will not (and will not permit any Originator to)
amend, modify, waive, revoke or terminate any Transaction Document to which it is a party or any provision of Seller's certificate of
formation, limited liability company agreement or other organizational document of the Seller.
(n) Restricted Payments. (i) Except pursuant to clause (ii) below, the Seller will not: (A) purchase or redeem any shares of its capital stock, (B)
declare or pay any dividend or set aside any funds for any such purpose, (C) prepay, purchase or redeem any Debt, (D) lend or advance any
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funds or (E) repay any loans or advances to, for or from any of its Affiliates (the amounts described in clauses (A) through (E) being referred to
as "Restricted Payments").
(ii) Subject to the limitations set forth in clause (iii) below, the Seller may make Restricted Payments in the form of dividends.
(iii) The Seller may make Restricted Payments only out of the funds it receives pursuant to Sections 1.4(b)(ii) and (iv) of the Agreement.
Furthermore, the Seller shall not pay, make or declare: (A) any distribution if, after giving effect thereto, the Seller's tangible net worth would
be less than the greater of (x) $1,000,000 and (y) 10% of the Net Receivables Pool Balance, or (B) any Restricted Payment (including any
dividend) if, after giving effect thereto, any Termination Event or Unmatured Termination Event shall have occurred and be continuing.
(o) Other Business. The Seller will not: (i) engage in any business other than the transactions contemplated by the Transaction Documents; (ii)
create, incur or permit to exist any Debt of any kind (or cause or permit to be issued for its account any letters of credit or bankers' acceptances)
other than pursuant to this Agreement; or (iii) form any Subsidiary or make any investments in any other Person; provided, however, that the
Seller shall be permitted to incur minimal obligations to the extent necessary for the day-to-day operations of the Seller (such as expenses for
stationery, audits, maintenance of legal status, etc.).
(p) Use of Seller's Share of Collections. The Seller shall apply the Seller's Share of Collections to make payments in the following order of
priority: (i) the payment of its expenses (including all obligations payable to the Issuer and the Administrator under the Agreement and under
the Fee Letter) and (ii) other legal and valid corporate purposes.
(q) Tangible Net Worth. The Seller will not permit its tangible net worth, at any time, to be less than the greater of [(i) $1,000,000 and (ii) 10%
of the Net Receivables Pool Balance.
2. Covenants of the Servicer and CSS. Until the latest of the Facility Termination Date, the date on which no Capital of or Discount in respect
of the Purchased Interest shall be outstanding or the date all other amounts owed by the Seller under the Agreement to the Issuer, the
Administrator and any other Indemnified Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Servicer and, to the extent that it ceases to be the Servicer, CSS shall comply (and shall cause each
Originator to comply) in all material respects with all applicable laws, rules, regulations and orders, and preserve and maintain its corporate
existence, rights, franchises, qualifications and privileges, except to the extent that the failure so to comply with such laws, rules and
regulations or the failure so to preserve and maintain such existence, rights, franchises, qualifications and privileges would not have a Material
Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Servicer and, to the extent that it ceases to be the Servicer, CSS, shall keep (and shall
cause each Originator to keep) its principal place of
IV-5
business and chief executive office (as such terms or similar terms are used in the applicable UCC) and the office where it keeps its records
concerning the Receivables at the address of the Servicer set forth under its name on the signature page to the Agreement (and, in the case of
records, at the addresses of each Originator set forth under its name on the signature page to the Purchase and Sale Agreement) or, upon at least
30 days' prior written notice of a proposed change to the Administrator, at any other locations in jurisdictions where all actions reasonably
requested by the Administrator to protect and perfect the interest of the Issuer in the Receivables and related items (including the Pool Assets)
have been taken and completed. The Servicer and, to the extent that it ceases to be the Servicer, CSS, also will (and will cause each Originator
to) maintain and implement administrative and operating procedures (including an ability to recreate records evidencing Receivables and
related Contracts in the event of the destruction of the originals thereof), and keep and maintain the Required Servicing Data and all other
documents, books, records, computer tapes and disks and other information reasonably necessary or advisable for the collection of all
Receivables (including records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each
existing Receivable).
(c) Performance and Compliance with Contracts and Credit and Collection Policy. The Servicer and, to the extent that it ceases to be the
Servicer, CSS, shall (and shall cause each Originator to), at its expense, timely and fully perform and comply with all material provisions,
covenants and other promises required to be observed by it under the Contracts related to the Receivables, and timely and fully comply in all
material respects with the Credit and Collection Policy with regard to each Receivable and the related Contract.
(d) Extension or Amendment of Receivables. Except as provided in the Agreement (including Section 4.2), the Servicer and, to the extent that
it ceases to be the Servicer, CSS, shall not extend (and shall not permit any Originator to extend), the maturity or adjust the Outstanding
Balance or otherwise modify the terms of any Pool Receivable in any material respect, or amend, modify or waive, in any material respect, any
term or condition of any related Contract (which term or condition relates to payments under, or the enforcement of, such Contract).
(e) Change in Business or Credit and Collection Policy. The Servicer and, to the extent that it ceases to be the Servicer, CSS, shall not make
(and shall not permit any Originator to make) any material change in the character of its business or in any Credit and Collection Policy, or any
change in any Credit and Collection Policy that would have a Material Adverse Effect. The Servicer and, to the extent that it ceases to be the
Servicer, CSS, shall not make (and shall not permit any Originator to make) any other material change in any Credit and Collection Policy
without giving prior written notice thereof to the Administrator.
(f) Audits. The Servicer and, to the extent that it ceases to be the Servicer, CSS, shall (and shall cause each Originator to), from time to time
during regular business hours as reasonably requested in advance (unless a Termination Event or an Unmatured Termination Event exists) by
the Administrator, permit the Administrator, or its agents or representatives: (i) to examine and make copies of and abstracts from all books,
records and documents (including computer tapes and disks) in its possession or under its control relating to Receivables and the Related
Security,
IV-6
including the related Contracts; (ii) to visit its offices and properties for the purpose of examining such materials described in clause (i) above,
and to discuss matters relating to Receivables and the Related Security or its performance hereunder or under the Contracts with any of its
officers, employees, agents or contractors having knowledge of such matters and (iii), without limiting the clauses (i) and (ii) above, no more
than once annually (unless a Termination Event or an Unmatured Termination Event exists or there shall be a material variance in the
performance of the Receivables) to engage certified public accountants or other auditors acceptable to the Servicer and the Administrator to
conduct, at the Servicer's expense, a review of the Servicer's books and records with respect to such Receivables.
(g) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions to Obligors. The Servicer and, to the extent that it ceases to be
the Servicer, CSS, shall not (and shall not permit any Originator to) add or terminate any bank as a Lock-Box Bank or any account as a
Lock-Box Account from those listed in Schedule II to the Agreement, or make any change in its instructions to Obligors regarding payments to
be made to the Servicer or any Lock-Box Account (or related post office box), unless the Administrator shall have consented thereto in writing
and the Administrator shall have received copies of all agreements and documents (including Lock-Box Agreements) that it may request in
connection therewith.
(h) Deposits to Lock-Box Accounts. The Servicer shall: (i) instruct all Obligors to make payments of all Receivables to one or more Lock-Box
Accounts or to post office boxes to which only Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause all items and
amounts relating to such Receivables received in such post office boxes to be removed and deposited into a Lock-Box Account on a daily
basis); and (ii) deposit, or cause to be deposited, any Collections received by it into Lock-Box Accounts not later than two Business Days after
receipt thereof. Each Lock-Box Account (other than Lock-Box Accounts that solely receive Collections not denominated in United States
dollars) shall at all times on and after the initial purchase by the Issuer hereunder be subject to a Lock-Box Agreement.
(i) Marking of Records. At its expense, the Servicer shall mark its master data processing records relating to Pool Receivables and related
Contracts, including with a legend evidencing that the undivided percentage ownership interests with regard to the Purchased Interest related to
such Receivables and related Contracts have been sold in accordance with the Agreement.
(j) Reporting Requirements. CSS shall provide to the Administrator (in multiple copies, if requested by the Administrator) the following:
(i) as soon as available and in any event within 50 days after the end of the first three quarters of each fiscal year of CSS, balance sheets of CSS
and its consolidated Subsidiaries as of the end of such quarter and statements of income, retained earnings and cash flow of CSS and its
consolidated Subsidiaries for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, certified by
the chief financial officer or Vice-President of Finance of such Person;
IV-7
(ii) as soon as available and in any event within 105 days after the end of each fiscal year of such Person, a copy of the annual report for such
year for such Person and its consolidated Subsidiaries, containing financial statements for such year audited by independent certified public
accountants of nationally recognized standing;
(iii) as to the Servicer only, as soon as available and in any event not later than two Business Days prior to the Settlement Date, an Information
Package as of the most recently completed calendar month or, if in the opinion of the Administrator reasonable grounds for insecurity exist
with respect to the collectibility of the Pool Receivables or with respect to the Seller or Servicer's performance or ability to perform its
obligations under the Agreement, within six Business Days of a request by the Administrator, an Information Package for such periods as is
specified by the Administrator (but in no event more frequently than weekly);
(iv) as soon as possible and in any event within five Business Days after becoming aware of the occurrence of each Termination Event or
Unmatured Termination Event, a statement of the chief financial officer of CSS setting forth details of such Termination Event or Unmatured
Termination Event and the action that such Person has taken and proposes to take with respect thereto;
(v) promptly after the sending or filing thereof, copies of all reports that CSS sends to its stockholders, and copies of all reports and registration
statements that CSS or any Subsidiary files with the Securities and Exchange Commission; provided, that any filings with the Securities and
Exchange Commission that have been granted "confidential" treatment shall be provided promptly after such filings have become publicly
available;
(vi) promptly after the filing or receiving thereof, copies of all reports and notices that CSS or any of its Affiliate files under ERISA with the
Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or that such Person or any of its
Affiliates receives from any of the foregoing or from any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) to which
such Person or any of its Affiliate is or was, within the preceding five years, a contributing employer, in each case in respect of the assessment
of withdrawal liability or an event or condition that could, in the aggregate, result in the imposition of liability on CSS and/or any such Affiliate
which liability would be reasonably likely to have a Material Adverse Effect;
(vii) at least thirty days before any change in CSS's or any Originator's name or any other change requiring the amendment of UCC financing
statements, a notice setting forth such changes and the effective date thereof;
(viii) promptly after CSS obtains knowledge thereof, notice of any: (A) litigation, investigation or proceeding that may exist at any time
between CSS or any of its Subsidiaries and any Governmental Authority that, if not cured or if adversely determined, as the case may be,
would have a Material Adverse Effect; (B) litigation or proceeding adversely
IV-8
affecting such Person or any of its Subsidiaries in which the amount involved is not covered by insurance or in which injunctive or similar
relief is sought and that, if not cured or if adversely determined, as the case may be, would have a Material Adverse Effect; or (C) litigation or
proceeding relating to any Transaction Document;
(ix) promptly after becoming aware of the occurrence thereof, notice of a material adverse change in the business, operations, property or
financial or other condition of CSS or any of its Subsidiaries; and
(x) such other information respecting the Receivables or the condition or operations, financial or otherwise, of CSS or any of its Affiliates as
the Administrator may from time to time reasonably request.
3. Separate Existence. Each of the Seller and CSS hereby acknowledges that the Purchasers, the Issuer and the Administrator are entering into
the transactions contemplated by this Agreement and the other Transaction Documents in reliance upon the Seller's identity as a legal entity
separate from CSS and its Affiliates. Therefore, from and after the date hereof, each of the Seller and CSS shall take all steps specifically
required by the Agreement or reasonably required by the Administrator to continue the Seller's identity as a separate legal entity and to make it
apparent to third Persons that the Seller is an entity with assets and liabilities distinct from those of CSS and any other Person, and is not a
division of CSS, its Affiliates or any other Person. Without limiting the generality of the foregoing and in addition to and consistent with the
other covenants set forth herein, each of the Seller and CSS shall take such actions as shall be required in order that:
(a) The Seller will be a limited purpose limited liability company whose primary activities are restricted in its limited liability company
agreement to: (i) purchasing or otherwise acquiring from the Originators (or their Affiliates), owning, holding, granting security interests or
selling interests in Pool Assets (or other receivables originated by any Originator or its Affiliates, and certain related assets), (ii) entering into
agreements for the selling and servicing of the Receivables Pool (or other receivables pools originated by any Originator or its Affiliates), and
(iii) conducting such other activities as it deems necessary or appropriate to carry out its primary activities;
(b) The Seller shall not engage in any business or activity, or incur any indebtedness or liability, other than as expressly permitted by the
Transaction Documents;
(c) Not less than one member of the Seller's Members (the "Independent Member") shall be an individual who is not a direct, indirect or
beneficial stockholder, officer, director, employee, affiliate, associate or supplier of CSS or any of its Affiliates. The limited liability company
agreement of the Seller shall provide that:
(i) the Seller's Members shall not approve, or take any other action to cause the filing of, a voluntary bankruptcy petition with respect to the
Seller unless the Independent Member shall approve the taking of such action in writing before the taking of such action, and (ii) such
provision cannot be amended without the prior written consent of the Independent Member;
IV-9
(d) The Independent Member shall not at any time serve as a trustee in bankruptcy for the Seller, CSS or any Affiliate thereof;
(e) Any employee, consultant or agent of the Seller will be compensated from the Seller's funds for services provided to the Seller. The Seller
will not engage any agents other than its attorneys, auditors and other professionals, and a servicer and any other agent contemplated by the
Transaction Documents for the Receivables Pool, which servicer will be fully compensated for its services by payment of the Servicing Fee,
and a manager, which manager will be fully compensated from the Seller's funds;
(f) The Seller will contract with the Servicer to perform for the Seller all operations required on a daily basis to service the Receivables Pool.
The Seller will pay the Servicer the Servicing Fee pursuant hereto. The Seller will not incur any material indirect or overhead expenses for
items shared with CSS (or any other Affiliate thereof) that are not reflected in the Servicing Fee. To the extent, if any, that the Seller (or any
Affiliate thereof) shares items of expenses not reflected in the Servicing Fee or the manager's fee, such as legal, auditing and other professional
services, such expenses will be allocated to the extent practical on the basis of actual use or the value of services rendered, and otherwise on a
basis reasonably related to the actual use or the value of services rendered; it being understood that CSS shall pay all expenses relating to the
preparation, negotiation, execution and delivery of the Transaction Documents, including legal, agency and other fees;
(g) The Seller's operating expenses will not be paid by CSS or any other Affiliate thereof;
(h) All of the Seller's business correspondence and other communications shall be conducted in the Seller's own name and on its own separate
stationery;
(i) The Seller's books and records will be maintained separately from those of CSS and any other Affiliate thereof;
(j) All financial statements of CSS or any Affiliate thereof that are consolidated to include Seller will contain detailed notes clearly stating that:
(i) a special purpose limited liability company exists as a Subsidiary of CSS, and (ii) each Originator has sold receivables and other related
assets to such special purpose Subsidiary that, in turn, has obtained financing based on undivided interests therein to certain financial
institutions and other entities;
(k) The Seller's assets will be maintained in a manner that facilitates their identification and segregation from those of CSS or any Affiliate
thereof;
(l) The Seller will strictly observe organizational formalities in its dealings with CSS or any Affiliate thereof, and funds or other assets of the
Seller will not be commingled with those of CSS or any Affiliate thereof except as permitted by the Agreement in connection
IV-10
with servicing the Pool Receivables. The Seller shall not maintain joint bank accounts or other depository accounts to which CSS or any
Affiliate thereof has independent access. Except in connection with the policies issued with respect to the Insured Receivables, the Seller is not
named, and has not entered into any agreement to be named, directly or indirectly, as a direct or contingent beneficiary or loss payee on any
insurance policy with respect to any loss relating to the property of CSS or any Subsidiary or other Affiliate of CSS other than Seller. The
Seller will pay to the appropriate Affiliate the marginal increase or, in the absence of such increase, the market amount of its portion of the
premium payable with respect to any insurance policy that covers the Seller and such Affiliate;
(m) The Seller will maintain arm's-length relationships with CSS (and any Affiliate thereof). Any Person that renders or otherwise furnishes
services to the Seller will be compensated by the Seller at market rates for such services it renders or otherwise furnishes to the Seller. Neither
the Seller nor CSS will be or will hold itself out to be responsible for the debts of the other or the decisions or actions respecting the daily
business and affairs of the other. The Seller and CSS will immediately correct any known misrepresentation with respect to the foregoing, and
they will not operate or purport to operate as an integrated single economic unit with respect to each other or in their dealing with any other
entity; and
(n) CSS shall not pay the salaries of Seller's employees, if any.
IV-11
EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a)(i) the Seller, CSS, any Originator or the Servicer (if CSS or any of its Affiliates) shall fail to perform or observe any term, covenant or
agreement under the Agreement or any other Transaction Document and, except as otherwise provided herein, such failure shall continue for
thirty days after knowledge or notice thereof, (ii) the Seller or the Servicer shall fail to make when due any payment or deposit to be made by it
under the Agreement and such failure shall continue unremedied for two (2) Business Days or (iii) CSS shall resign as Servicer, and no
successor Servicer reasonably satisfactory to the Administrator shall have been appointed;
(b) CSS (or any Affiliate thereof) shall fail to transfer to any successor Servicer when required any rights pursuant to the Agreement that CSS
(or such Affiliate) then has as Servicer;
(c) any representation or warranty made or deemed made by the Seller, CSS or any Originator (or any of their respective officers) under or in
connection with the Agreement or any other Transaction Document, or any information or report delivered by the Seller, CSS or any Originator
or the Servicer pursuant to the Agreement or any other Transaction Document, shall prove to have been incorrect or untrue in any material
respect when made or deemed made or delivered, and shall remain incorrect or untrue for 30 days after notice to the Seller or the Servicer of
such inaccuracy;
(d) the Seller or the Servicer shall fail to deliver the Information Package pursuant to the Agreement, and such failure shall remain unremedied
for two Business Days;
(e) the Agreement or any purchase or reinvestment pursuant to the Agreement shall for any reason: (i) cease to create, or the Purchased Interest
shall for any reason cease to be, a valid and enforceable perfected undivided percentage ownership or security interest to the extent of the
Purchased Interest in each Pool Receivable, the Related Security and Collections with respect thereto, free and clear of any Adverse Claim, or
(ii) cease to create with respect to the Pool Assets, or the interest of the Issuer with respect to such Pool Assets shall cease to be, a valid and
enforceable first priority perfected security interest, free and clear of any Adverse Claim,
(f) the Seller, CSS or any Originator shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its
debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Seller,
CSS or any Originator seeking to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, custodian or other
V-1
similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted against it (but not instituted by
it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding
(including the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or the Seller, CSS or any Originator shall take any corporate action to authorize any of the actions
set forth above in this paragraph;
(g)(i) the (A) Default Ratio shall exceed 7.25% or (B) for any of the month of September, October, November and December the Delinquency
Ratio shall exceed 4.8% or (ii) the average for three consecutive calendar months of: (A) the Default Ratio shall exceed 4.65%, or (B) the
Dilution Ratio shall exceed 5.0% or (iii) the average Delinquency Ratio over the months of September, October, November and December
shall exceed 4.8%.
(h) a Change in Control shall occur,
(i) at any time (i) the sum of (A) the Capital plus (B) the Total Reserves, exceeds (ii) the sum of (A) the Net Receivables Pool Balance at such
time plus (B) the Issuer's Share of the amount of Collections then on deposit in the Lock-Box Accounts (other than amounts set aside therein
representing Discount and fees), and such circumstance shall not have been cured within five
(5) Business Days,
(j) (i) CSS or any of its Subsidiaries shall fail to pay any principal of or premium or interest on any of its Debt that is outstanding in a principal
amount of at least $2,000,000 in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement,
mortgage, indenture or instrument relating to such Debt (and shall have not been waived); or (ii) any other event shall occur or condition shall
exist under any agreement, mortgage, indenture or instrument relating to any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement, mortgage, indenture or instrument (and shall have not been waived), if, in either case: (a) the effect of such
non-payment, event or condition is to give the applicable debtholders the right (whether acted upon or not) to accelerate the maturity of such
Debt, or (b) any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required
prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be required to be made, in
each case before the stated maturity thereof;
(k) either: (i) a contribution failure shall occur with respect to any Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA,
(ii) the Internal Revenue Service shall file a notice of lien asserting a claim or claims pursuant to the Internal Revenue Code with regard to any
of the assets of Seller, any Originator, CSS or any ERISA Affiliate and such lien shall have been filed and not released within 10 days, or (iii)
the Pension Benefit Guaranty Corporation shall, or shall indicate its intention in writing to the Seller, any Originator, CSS or any ERISA
Affiliate to, either file a notice of lien asserting a claim pursuant to ERISA with regard to any assets of the Seller, any
V-2
Originator, CSS or any ERISA Affiliate or terminate any Benefit Plan that has unfunded benefit liabilities, or any steps shall have been taken to
terminate any Benefit Plan subject to Title IV of ERISA so as to result in any liability and such lien shall have been filed and not released
within 10 days.
V-3
EXHIBIT 10.10
PURCHASE AND SALE AGREEMENT
Dated as of April 30, 2001
between
VARIOUS ENTITIES LISTED ON SCHEDULE I,
as the Originators
CSS INDUSTRIES, INC.
and
CSS FUNDING LLC
Purchase and Sale Agreement
TABLE OF CONTENTS
Page
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION
SECTION
SECTION
SECTION
SECTION
1.1
1.2
1.3
1.4
1.5
Agreement To Purchase and Sell ............................
Timing of Purchases .......................................
Consideration for Purchases ...............................
Purchase and Sale Termination Date ........................
Intention of the Parties ..................................
1
3
3
3
3
ARTICLE II
PURCHASE REPORT; CALCULATION OF PURCHASE PRICE
SECTION 2.1
SECTION 2.2
Purchase Report ...........................................
Calculation of Purchase Price .............................
4
4
ARTICLE III
PAYMENT OF PURCHASE PRICE
SECTION 3.1
SECTION 3.2
SECTION 3.3
SECTION 3.4
Contribution of Receivables and Initial Purchase
Price Payment .............................................
Subsequent Purchase Price Payments ........................
Settlement as to Specific Receivables and Dilution ........
Reconveyance of Receivables ...............................
5
5
6
7
ARTICLE IV
CONDITIONS OF PURCHASES
SECTION 4.1
SECTION 4.2
SECTION 4.3
Conditions Precedent to Initial Purchase ..................
Certification as to Representations and Warranties ........
Additional Originators ....................................
7
9
9
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE ORIGINATOR
SECTION 5.1
SECTION 5.2
SECTION 5.3
Organization and Good Standing ............................ 10
Due Qualification ......................................... 10
Power and Authority; Due Authorization .................... 10
Purchase and Sale Agreement
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
5.4
5.5
5.6
5.7
5.8
5.9
5.10
5.11
5.12
5.13
5.14
5.15
5.16
5.17
5.18
5.19
Valid Sale; Binding Obligations ..........................
No Violation .............................................
Proceedings ..............................................
Bulk Sales Acts ..........................................
Government Approvals .....................................
Financial Condition ......................................
Licenses, Contingent Liabilities, and Labor Controversies.
Margin Regulations .......................................
Quality of Title .........................................
Accuracy of Information ..................................
Offices ..................................................
Trade Names ..............................................
Taxes ....................................................
Compliance with Applicable Laws ..........................
Reliance on Separate Legal Identity ......................
Investment Company .......................................
10
10
11
11
11
11
11
12
12
12
12
12
13
13
13
13
ARTICLE VI
COVENANTS OF THE ORIGINATORS
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
6.1
6.2
6.3
6.4
6.5
6.7
Affirmative Covenants ....................................
Reporting Requirements ...................................
Negative Covenants .......................................
Lock-Box Banks ...........................................
Accounting for Purchases .................................
Substantive Consolidation ................................
13
15
15
16
16
16
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF RECEIVABLES
SECTION
SECTION
SECTION
SECTION
7.1
7.2
7.3
7.4
Rights of the Company ....................................
Responsibilities of the Originators ......................
Further Action Evidencing Purchases ......................
Application of Collections ...............................
18
18
19
19
ARTICLE VIII
PURCHASE AND SALE TERMINATION EVENTS
SECTION 8.1
SECTION 8.2
Purchase and Sale Termination Events ..................... 20
Remedies ................................................. 20
Purchase and Sale Agreement
ARTICLE IX
INDEMNIFICATION
SECTION 9.1
Indemnities by the Originators ........................... 21
ARTICLE X
MISCELLANEOUS
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
SECTION
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
SECTION
SECTION
SECTION
SECTION
10.10
10.11
10.12
10.13
Amendments, etc ..........................................
Notices, etc .............................................
No Waiver; Cumulative Remedies ...........................
Binding Effect; Assignability ............................
Governing Law ............................................
Costs, Expenses and Taxes ................................
SUBMISSION TO JURISDICTION ...............................
WAIVER OF JURY TRIAL .....................................
Captions and Cross References; Incorporation
by Reference .............................................
Execution in Counterparts ................................
Acknowledgment and Agreement .............................
No Proceeding ............................................
Limited Recourse .........................................
22
23
23
23
23
24
24
24
25
25
25
25
25
SCHEDULES
Schedule
Schedule
Schedule
Schedule
Schedule
I
5.6
5.14A
5.14B
5.15
List of Originators
Proceedings
Chief Executive Office of Each Originator
Location of Books and Records of Originators
Trade Names
EXHIBITS
Exhibit A
Exhibit B
Exhibit C
Form of Purchase Report
Form of Originator Assignment Certificate
Form of Joinder Agreement
Purchase and Sale Agreement
THIS PURCHASE AND SALE AGREEMENT (this "Agreement"), dated as of April 30, 2001, is entered into among the VARIOUS
ENTITIES LISTED ON SCHEDULE I (each, an "Originator"; and collectively, "Originators"), CSS INDUSTRIES, INC., a Delaware
corporation (the "Servicer") and CSS FUNDING LLC, a Delaware limited liability company (the "Company").
DEFINITIONS
Unless otherwise indicated herein, capitalized terms used in this Agreement are defined in Exhibit A to the Receivables Purchase Agreement of
even date herewith (as the same may be amended, supplemented or otherwise modified from time to time, the "Receivables Purchase
Agreement") among the Company, as the Seller; CSS Industries, Inc. (individually, "CSS"), as the initial Servicer; Market Street Funding
Corporation (the "Issuer") and PNC Bank, National Association, as the Administrator. All references herein to months are to calendar months
unless otherwise expressly indicated.
BACKGROUND:
1. The Company is a special purpose limited liability company, all of the issued and outstanding membership interests of which are owned by
the Originators;
2. The Originators generate Receivables in the ordinary course of their businesses;
3. The Originators, in order to finance their respective businesses, wish to sell Receivables to the Company, and the Company is willing to
purchase Receivables from the Originators, on the terms and subject to the conditions set forth herein;
4. The Originators and the Company intend this transaction to be an absolute and irrevocable true sale of Receivables and the Related Rights by
each Originator to the Company, providing the Company with the full benefits of ownership of the Receivables, and the Originators and the
Company do not intend the transactions hereunder to be, or for any purpose to be, characterized as a loan from the Company to any Originator
or for the Receivables to be a part of any Originator's estate in the event of an Insolvency Proceeding of any Originator;
5. The Company intends to sell the Purchased Interest in the Receivables to the Issuer pursuant to the Receivables Purchase Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual agreements herein contained, the parties hereto agree as follows:
Purchase and Sale Agreement
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
SECTION 1.1 Agreement To Purchase and Sell. On the terms and subject to the conditions set forth in this Agreement (including Article IV),
each Originator, severally and for itself, agrees to sell to the Company, and the Company agrees to purchase from such Originator, from time to
time on or after the Closing Date, but before the Purchase and Sale Termination Date, all of such Originator's right, title and interest in and to:
(a) each Receivable of such Originator that existed and was owing to such Originator at the closing of such Originator's business on March 31,
2001 (the "Cut-off Date") other than Receivables contributed pursuant to
Section 3.1 (the "Contributed Receivables");
(b) each Receivable generated by such Originator from and including the Cutoff Date to and including the Purchase and Sale Termination Date;
(c) all rights to, but not the obligations of such Originator under all Related Security;
(d) all monies due or to become due to such Originator with respect to any of the foregoing;
(e) all books and records of such Originator related to any of the foregoing, and all rights, remedies, powers and privileges of such Originator in
any accounts into which Collections are or may be received; and
(f) all collections and other proceeds and products of any of the foregoing (as defined in the applicable UCC) that are or were received by such
Originator on or after the Cutoff Date, including, without limitation, all funds which either are received by such Originator, the Company or the
Servicer from or on behalf of the Obligors in payment of any amounts owed (including, without limitation, invoice price, finance charges,
interest and all other charges) in respect of Receivables, or are applied to such amounts owed by the Obligors (including, without limitation,
any insurance payments that such Originator or the Servicer applies in the ordinary course of its business to amounts owed in respect of any
Receivable, and net proceeds of sale or other disposition of repossessed goods or other collateral or property of the Obligors in respect of
Receivables or any other parties directly or indirectly liable for payment of such Receivables).
All purchases and contributions hereunder shall be made without recourse, but shall be made pursuant to, and in reliance upon, the
representations, warranties and covenants of the Originators set forth in this Agreement and each other Transaction Document. No obligation or
liability to any Obligor on any Receivable is intended to be, or shall be, assumed by the Company hereunder, and any such assumption is
expressly disclaimed. The Company's
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2
foregoing commitment to purchase Receivables and the proceeds and rights described in clauses (c) through (f) (collectively, the "Related
Rights") is herein called the "Purchase Facility."
SECTION 1.2 Timing of Purchases.
(a) Closing Date Purchases. Each Originator's entire right, title and interest in, to and under (i) each Receivable that existed and was owing to
such Originator at the Cut-off Date (other than Contributed Receivables), (ii) all Receivables created by such Originator from and including the
Cut-off Date, to and including the Closing Date (other than Contributed Receivables), and (iii) all Related Rights with respect thereto
automatically shall be deemed to have been sold by such Originator to the Company on the Closing Date.
(b) Subsequent Purchases. After the Closing Date, until the Purchase and Sale Termination Date, each Receivable and the Related Rights
generated by each Originator shall be, deemed to have been sold by such Originator to the Company immediately (and without further action)
upon the creation of such Receivable.
SECTION 1.3 Consideration for Purchases. On the terms and subject to the conditions set forth in this Agreement, the Company agrees to
make Purchase Price payments to the Originators in accordance with Article III and to reflect all contributions in accordance with Article III.
SECTION 1.4 Purchase and Sale Termination Date. The "Purchase and Sale Termination Date" shall be the earliest to occur of (a) the date the
Purchase Facility is terminated pursuant to Section 8.2 and (b) the Payment Date immediately following the day on which the Originators shall
have given written notice to the Company at or prior to 10:00 a.m. (New York City time) that the Originators desire to terminate this
Agreement.
SECTION 1.5 Intention of the Parties. It is the express intent of the parties hereto that the transfers of the Receivables, Contributed Receivables
and Related Rights by the Originators to the Company, as contemplated by this Agreement be, and be treated as sales or contributions, as
applicable (without recourse except as expressly provided in Sections 3.3, 3.4 and 9.1), of all of the Originators' right, title and interest in, to
and under the Receivables or the Contributed Receivables, as applicable, and Related Rights, and not as loans secured by the Receivables,
Contributed Receivables and Related Rights. If, however, notwithstanding the intent of the parties, such transactions are deemed to be loans,
each Originator hereby grants to the Company a first priority security interest in all of such Originator's right, title and interest in and to: (i) the
Receivables, Contributed Receivables and the Related Rights now existing and hereafter created by such Originator, (ii) all monies due or to
become due and all amounts received with respect thereto,
(iii) all books and records of such Originator related to any of the foregoing, and all rights, remedies, powers and privileges of such Originator
in any accounts into which Collections are or may be received; and (iv) all proceeds and products of any of the foregoing to secure all of such
Originator's obligations hereunder.
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3
ARTICLE II
PURCHASE REPORT; CALCULATION OF PURCHASE PRICE
SECTION 2.1 Purchase Report. On the Closing Date and on each Settlement Date, the Servicer shall deliver to the Company and each
Originator a report in substantially the form of Exhibit A (each such report being herein called a "Purchase Report") identifying, among other
things:
(a) Receivables purchased by the Company from each Originator on the Closing Date (in the case of the Purchase Report to be delivered on the
Closing Date);
(b) Receivables purchased by the Company from each Originator during the period commencing on, and including, the Settlement Date
immediately preceding such Settlement Date to (but not including) such Settlement Date (in the case of each subsequent Purchase Report); and
(c) the calculations of reductions of the Purchase Price for any Receivables as provided in Section 3.3 (a) and (b).
SECTION 2.2 Calculation of Purchase Price. The "Purchase Price" to be paid to each Originator for the Receivables that are purchased
hereunder from such Originator shall be determined in accordance with the following formula:
PP
=
OB x FMVD
where:
PP
=
Purchase Price for each Receivable as calculated on
the relevant Payment Date.
OB
=
The Outstanding Balance of such Receivable on the
relevant Payment Date.
FMVD
=
Fair Market Value Discount, as measured on such
Payment Date, which is equal to the quotient (expressed
as percentage) of (a) one divided by (b) the sum of (i)
one, plus (ii) the product of (A) the Prime Rate on such
Payment Date plus 0.25% and (B) a fraction, the
numerator of which is the Turnover Rate (calculated as
of the last day of the Settlement Period next preceding
such Payment Date) and the denominator of which is 365.
"Payment Date" means (i) the Closing Date and (ii) each Business Day thereafter that Originators are open for business.
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4
"Prime Rate" means a per annum rate equal to the "Prime Rate" as published in the "Money Rates" section of The Wall Street Journal or if such
information ceases to be published in The Wall Street Journal, such other publication as determined by the Administrator in its reasonable
discretion.
ARTICLE III
PAYMENT OF PURCHASE PRICE
SECTION 3.1 Contribution of Receivables and Initial Purchase Price Payment.
On the Closing Date, each Originator shall, and hereby does, irrevocably and absolutely contribute to the capital of the Company Receivables
and Related Rights with respect thereto consisting of each Receivable of CSS that existed and was owing to CSS on the Closing Date
beginning with the oldest of such Receivables and continuing chronologically thereafter such that the aggregate Outstanding Balance of all
such Contributed Receivables shall be not less than the greater of (a) $1,000,000 and (b) 10% of (after giving effect to all purchases and
contributions on the Closing Date) the Net Receivables Pool Balance (provided that no Receivables shall be contributed in part, but only in
their entirety).
SECTION 3.2 Subsequent Purchase Price Payments and Contributions. On each Payment Date subsequent to the Closing Date, on the terms
and subject to the conditions set forth in this Agreement, the Company shall pay to each Originator the Purchase Price for the Receivables
generated by such Originator on such Payment Date:
(a) First, in cash to the extent the Company has cash available therefor; and
(b) Second, to the extent any portion of the Purchase Price remains unpaid, the remainder shall be deemed a contribution by such Originator in
an amount equal to such remaining Purchase Price.
SECTION 3.3 Settlement as to Specific Receivables and Dilution.
(a) If, on the day of purchase or contribution of any Receivable from an Originator hereunder, any of the representations or warranties set forth
in Sections 5.4 and 5.12 are not true with respect to such Receivable or as a result of any action or inaction of such Originator, on any
subsequent day, any of such representations or warranties set forth in Sections 5.4 and 5.12 are no longer true with respect to such Receivable,
then the Purchase Price (or in the case of a Contributed Receivable the Outstanding Balance of such Receivable (the "Contributed Value")),
with respect to such Receivable shall be reduced by an amount equal to the Outstanding Balance of such Receivable and shall be accounted to
such Originator as provided in clause (c) below; provided, that if the Company thereafter receives payment on account of Collections due with
respect to such Receivable, the Company promptly shall deliver such funds to such Originator.
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5
(b) If, on any day, the Outstanding Balance of any Receivable (including any Contributed Receivable) purchased or contributed hereunder is
reduced or adjusted as a result of any defective, rejected, returned goods or services, or any discount or other adjustment made by any
Originator, the Company or the Servicer or any setoff or dispute between any Originator or the Servicer and an Obligor as indicated on the
books of the Company (or, for periods prior to the Closing Date, the books of Originator), then the Purchase Price or Contributed Value, as the
case may be, with respect to such Receivable shall be reduced by the amount of such net reduction and shall be accounted to Originator as
provided in clause (c) below.
(c) Any reduction in the Purchase Price or Contributed Value of any Receivable pursuant to clause (a) or (b) above shall be applied as a credit
for the account of the Company against the Purchase Price of Receivables subsequently purchased by the Company from such Originator
hereunder; provided, however, if there have been no purchases of Receivables from such Originator (or insufficiently large purchases of
Receivables) to create a Purchase Price sufficient to so apply such credit against, the amount of such credit shall be paid in cash to the
Company by such Originator in the manner and for application as described in the following proviso, provided, further, that at any time (y)
when a Termination Event or Unmatured Termination Event exists under the Receivables Purchase Agreement or (z) on or after the Purchase
and Sale Termination Date, the amount of any such credit shall be paid by such Originator to the Company by deposit in immediately available
funds into the relevant Lock-Box Account for application by the Servicer to the same extent as if Collections of the applicable Receivable in
such amount had actually been received on such date.
SECTION 3.4 Reconveyance of Receivables. In the event that an Originator has paid to the Company the full Outstanding Balance of any
Receivable pursuant to Section 3.3, the Company shall reconvey such Receivable to such Originator, without representation or warranty, but
free and clear of all liens, security interests, charges, and encumbrances created by the Company.
ARTICLE IV
CONDITIONS OF PURCHASES
SECTION 4.1 Conditions Precedent to Initial Purchase. The initial purchase hereunder is subject to the condition precedent that the Servicer
(on the Company's behalf) shall have received, on or before the Closing Date, the following, each (unless otherwise indicated) dated the
Closing Date, and each in form and substance satisfactory to the Servicer (acting on the Company's behalf):
(a) An Originator Assignment Certificate in the form of Exhibit B from each Originator, duly completed, executed and delivered by each
Originator;
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6
(b) A copy of the resolutions of the Board of Directors of each Originator approving the Transaction Documents to be delivered by it and the
transactions contemplated hereby and thereby, certified by the Secretary or Assistant Secretary of such Originator;
(c) Good standing certificates for each Originator issued as of a recent date acceptable to the Servicer by the Secretary of State of the
jurisdiction of such Originator's organization and each jurisdiction where such Originator is qualified to transact business;
(d) A certificate of the Secretary or Assistant Secretary of each Originator certifying the names and true signatures of the officers authorized on
such Person's behalf to sign the Transaction Documents to be delivered by it (on which certificate the Servicer and the Company may
conclusively rely until such time as the Servicer shall receive from such Person a revised certificate meeting the requirements of this clause
(d));
(e) The certificate or articles of incorporation or other organizational document of each Originator duly certified by the Secretary of State of the
jurisdiction of such Originator's organization as of a recent date, together with a copy of the by-laws of such Originator, each duly certified by
the Secretary or an Assistant Secretary of such Originator;
(f) Originals of the proper financing statements (Form UCC-1) that have been duly executed and are suitable for filing and name each
Originator as the debtor/seller and the Company as the secured party/purchaser (and the Issuer, as assignee of the Company) of the Receivables
generated by such Originator as may be necessary or, in the Servicer's or the Administrator's opinion, desirable under the UCC of all
appropriate jurisdictions to perfect the Company's ownership interest in all Receivables and such other rights, accounts, instruments and
moneys (including, without limitation, Related Security) in which an ownership or security interest may be assigned to it hereunder;
(g) A written search report from a Person satisfactory to the Servicer listing all effective financing statements that name the Originators as
debtors or sellers and that are filed in the jurisdictions in which filings were made pursuant to the foregoing clause (f), together with copies of
such financing statements (none of which, except for those described in the foregoing clause (f), shall cover any Receivable or any Related
Rights which are to be sold to the Company hereunder), and tax and judgment lien search reports from a Person satisfactory to the Servicer
showing no evidence of such liens filed against any Originator;
(h) A favorable opinion of Morgan, Lewis & Bockius LLP, counsel to the Originators, in form and substance satisfactory to the Servicer and
the Administrator;
(i) [Reserved]
(j) A certificate from an officer of each Originator to the effect that the Servicer and such Originator have placed on the most recent, and have
taken all steps reasonably necessary to ensure that there shall be placed on each subsequent, data processing report that it
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7
generates which are of the type that a proposed purchaser or lender would use to evaluate the Receivables, the following legend (or the
substantive equivalent thereof): "THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN CONTRIBUTED OR SOLD PURSUANT TO
A PURCHASE AND SALE AGREEMENT, DATED AS OF APRIL 30, 2001, AS THE SAME MAY FROM TO TIME TO TIME BE
AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED, AMONG CERTAIN ENTITIES LISTED ON SCHEDULE I THERETO,
AS ORIGINATORS, CSS INDUSTRIES, INC. AND CSS FUNDING LLC, AS PURCHASER, AND AN UNDIVIDED, FRACTIONAL
OWNERSHIP INTEREST IN THE RECEIVABLES DESCRIBED HEREIN HAS BEEN SOLD TO MARKET STREET FUNDING
CORPORATION PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT, DATED AS OF APRIL 30, 2001 AS THE SAME MAY
FROM TO TIME TO TIME BE AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED, AMONG CSS FUNDING LLC, AS
SELLER, CSS INDUSTRIES, INC., AS SERVICER, MARKET STREET FUNDING CORPORATION, AND PNC BANK, NATIONAL
ASSOCIATION, AS ADMINISTRATOR."
SECTION 4.2 Certification as to Representations and Warranties. Each Originator, by accepting the Purchase Price related to each purchase of
Receivables generated by such Originator, shall be deemed to have certified that the representations and warranties contained in Article V are
true and correct on and as of such day, with the same effect as though made on and as of such day.
SECTION 4.3 Additional Originators. Additional Persons may be added as Originators hereunder, with the consent of the Company and the
Administrator, provided that following conditions are satisfied on or before the date of such addition:
(a) The Servicer shall have given the Administrator and the Company at least thirty days prior written notice of such proposed addition and the
identity of the proposed additional Originator and shall have provided such other information with respect to such proposed additional
Originator as the Administrator may reasonably request;
(b) such proposed additional Originator has executed and delivered to the Company and the Administrator an agreement substantially in the
form attached hereto as Exhibit D (a "Joinder Agreement");
(c) such proposed additional Originator has delivered to the Company and the Administrator each of the documents with respect to such
Originator described in Sections 4.1 and 4.2;
(d) the Administrator shall have received a written statement from each of Moody's and Standard & Poor's confirming that the addition of such
Originator will not result in a downgrade or withdrawal of the current ratings of the Notes; and
(e) the Purchase and Sale Termination Date shall not have occurred.
Purchase and Sale Agreement
8
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EACH ORIGINATOR
In order to induce the Company to enter into this Agreement and to make purchases hereunder, each Originator hereby makes, with respect to
itself, the representations and warranties set forth in this Article V.
SECTION 5.1 Organization and Good Standing. Such Originator has been duly incorporated or formed and is validly existing as a corporation,
limited liability company or partnership, as applicable, in good standing under the laws of its jurisdiction of incorporation or formation, with
power and authority to own its properties and to conduct its business as such properties are presently owned and such business is presently
conducted.
SECTION 5.2 Due Qualification. Such Originator is duly licensed and in good standing in each jurisdiction where its chief executive office is
located and is qualified to transact business as a foreign corporation, limited liability company or partnership, as applicable, in good standing in
all other jurisdictions in which (a) the ownership or lease of its property or the conduct of its business requires such licensing or qualification
and (b) the failure to be so licensed or qualified would be reasonably likely to have a Material Adverse Effect.
SECTION 5.3 Power and Authority; Due Authorization. Such Originator has
(a) all necessary power, authority and legal right (i) to execute and deliver, and perform its obligations under, each Transaction Document to
which it is a party and (ii) to generate, own, sell, contribute and assign Receivables on the terms and subject to the conditions herein and therein
provided; and (b) duly authorized such execution and delivery and such sale, contribution and assignment and the performance of such
obligations by all necessary corporate action.
SECTION 5.4 Valid Sale; Binding Obligations. Each sale or contribution, as the case may be, of Receivables made by such Originator pursuant
to this Agreement shall constitute a valid sale or contribution, as the case may be, transfer, and assignment of Receivables to the Company,
enforceable against creditors of, and purchasers from, such Originator; and this Agreement constitutes, and each other Transaction Document
to be signed by such Originator, when duly executed and delivered, will constitute, a legal, valid, and binding obligation of such Originator,
enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, or other similar
laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is
considered in a proceeding in equity or at law.
SECTION 5.5 No Violation. The consummation of the transactions contemplated by this Agreement and the other Transaction Documents, and
the fulfillment of the terms hereof or thereof, will not (a) 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 (i) such Originator's
Purchase and Sale Agreement
9
certificate or articles of incorporation or bylaws, limited partnership agreements, articles of organization or limited liability company
agreements, as applicable or (ii) any indenture, loan agreement, mortgage, deed of trust, or other material agreement or instrument to which it is
a party or by which it is bound, (b) result in the creation or imposition of any Adverse Claim upon any of its properties pursuant to the terms of
any such indenture, loan agreement, mortgage, deed of trust, or other agreement or instrument, other than the Transaction Documents, or (c)
violate any law or any order, rule or regulation applicable to it of any court or of any state or foreign regulatory body, administrative agency, or
other governmental instrumentality having jurisdiction over it or any of its properties.
SECTION 5.6 Proceedings. Except as set forth in Schedule 5.6, there is no action, suit, proceeding or investigation pending before any court,
regulatory body, arbitrator, administrative agency, or other tribunal or governmental instrumentality (a) asserting the invalidity of any
Transaction Document, (b) seeking to prevent such Originator from transferring any Receivable hereunder (or in the case such transfer does not
constitute a sale under any applicable law, from granting or maintaining the security interest in any Receivable) to the Company or the
consummation of any of the transactions contemplated by any Transaction Document or (c) seeking any determination or ruling that is
reasonably likely to have a Material Adverse Effect.
SECTION 5.7 Bulk Sales Acts. No transaction contemplated hereby requires compliance with, or will be subject to avoidance under, any bulk
sales act or similar law.
SECTION 5.8 Government Approvals. Except for the filing of the UCC financing statements referred to in Article IV, all of which, at the time
required in Article IV, shall have been duly made and shall be in full force and effect, no authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body is required for Originator's due execution, delivery and performance of
any Transaction Document to which it is a party.
SECTION 5.9 Financial Condition.
(a) Material Adverse Effect. Since December 31, 2000, no event has occurred that has had, or is reasonably likely to have, a Material Adverse
Effect.
(b) Solvent. On the date hereof, and on the date of each purchase hereunder (both before and after giving effect to such purchase), such
Originator shall be Solvent.
SECTION 5.10 Licenses, Contingent Liabilities, and Labor Controversies.
(a) Such Originator has not failed to obtain any licenses, permits, franchises or other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, which violation or failure to obtain would be reasonably likely to have a Material Adverse
Effect.
Purchase and Sale Agreement
10
(b) There are no labor controversies pending against such Originator that have had (or are reasonably likely to have) a Material Adverse Effect.
SECTION 5.11 Margin Regulations. No use of any funds acquired by any Originator under this Agreement will conflict with or contravene any
of Regulations, T, U and X promulgated by the Federal Reserve Board from time to time.
SECTION 5.12 Quality of Title.
(a) Each Receivable of such Originator (together with the Related Rights with respect to such Receivable) which is to be sold to the Company
hereunder is or shall be owned by such Originator, free and clear of any Adverse Claim, except as provided herein and in the Receivables
Purchase Agreement. Whenever the Company makes a purchase or accepts a contribution hereunder, it shall have acquired and shall continue
to have maintained a valid and perfected ownership interest (free and clear of any Adverse Claim) in all Receivables generated by such
Originator and all Collections related thereto, and in Originator's entire right, title and interest in and to the Related Rights with respect thereto.
(b) No effective financing statement or other instrument similar in effect covering any Receivable generated by such Originator or any Related
Rights is on file in any recording office except such as may be filed in favor of the Company or the Originators, as the case may be, in
accordance with this Agreement or in favor of the Issuer in accordance with the Receivables Purchase Agreement.
(c) Unless otherwise identified to the Company on the date of the purchase or contribution hereunder, each Receivable purchased hereunder is
on the date of purchase or contribution an Eligible Receivable.
SECTION 5.13 Accuracy of Information. All factual written information heretofore or contemporaneously furnished (and prepared) by such
Originator to the Company or the Administrator for purposes of or in connection with any Transaction Document or any transaction
contemplated hereby or thereby is, and all other such factual written information hereafter furnished (and prepared) by such Originator to the
Company or the Administrator pursuant to or in connection with any Transaction Document will be, true and accurate in all material respects
on the date as of which such information is dated or certified.
SECTION 5.14 Offices. Such Originator's principal place of business and chief executive office is located at the address set forth in Schedule
5.14A and the offices where such Originator keeps all its books, records and documents evidencing its Receivables, the related Contracts and
all other agreements related to such Receivables are located at the addresses specified in Schedule 5.14B (or at such other locations, notified to
the Servicer and the Administrator in accordance with Section 6.1(f)), in jurisdictions where all action required by Section 7.3 has been taken
and completed.
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11
SECTION 5.15 Trade Names. Such Originator does not use any trade name other than its actual corporate name and the trade names set forth
in Schedule
5.15. From and after the date that fell five (5) years before the date hereof, except as set forth in Schedule 5.15, such Originator has not been
known by any legal name other than its corporate name as of the date hereof, nor has such Originator been the subject of any merger or other
corporate reorganization.
SECTION 5.16 Taxes. Such Originator has filed all tax returns and reports required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes or charges which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on its books.
SECTION 5.17 Compliance with Applicable Laws. Such Originator is in compliance with the requirements of all applicable laws, rules,
regulations and orders of all governmental authorities, a breach of any of which, individually or in the aggregate, would be reasonably likely to
have a Material Adverse Effect.
SECTION 5.18 Reliance on Separate Legal Identity. Such Originator acknowledges that the Issuer and the Administrator are entering into the
Receivables Purchase Agreement in reliance upon the Company's identity as a legal entity separate from such Originator.
SECTION 5.19 Investment Company. Such Originator is not an "investment company," or a company "controlled" by an "investment
company" within the meaning of the Investment Company Act of 1940 as amended. In addition, such Originator is not a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company"
within the meaning of the Public Utility Holding Company Act of 1935, as amended.
ARTICLE VI
COVENANTS OF THE ORIGINATORS
SECTION 6.1 Affirmative Covenants. From the date hereof until the first day following the Purchase and Sale Termination Date, each
Originator will, unless the Administrator and the Company shall otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply in all material respects with all applicable laws, rules, regulations and orders with respect to the
Receivables generated by it and the Contracts and other agreements related thereto except where the failure to so comply would not materially
and adversely affect the collectibility of such Receivables or the rights of the Company hereunder.
(b) Preservation of Corporate Existence. Preserve and maintain its existence as a corporation, partnership or limited liability company, as
applicable, and all rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good
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12
standing as a foreign corporation, partnership or limited liability company, as applicable, in each jurisdiction where the failure to preserve and
maintain such existence, rights, franchises, privileges and qualification would be reasonably likely to have a Material Adverse Effect.
(c) Receivables Reviews. (i) At any time and from time to time during regular business hours, as reasonably requested in advance (unless a
Purchase and Sale Termination Event or an Unmatured Purchase and Termination Event exist) by the Company or the Administrator, permit
the Company or the Administrator, or their respective agents or representatives, (A) to examine and make copies of and abstracts from all
books, records and documents (including, without limitation, computer tapes and disks) in possession or under the control of each Originator
relating to Receivables, including, without limitation, the related Contracts and purchase orders and other agreements related thereto, and (B) to
visit the offices and properties of such Originator for the purpose of examining such materials described in clause (A) above and to discuss
matters relating to Receivables originated by it or the performance hereunder with any of the officers or employees of each Originator having
knowledge of such matters, and (ii) without limiting the foregoing clause (i) above, from time to time on reasonable request of the
Administrator, permit certified public accountants or other auditors acceptable to the Company and Administrator to conduct, at the Company's
expense (but no more than once annually, unless a Termination Event or Unmatured Termination Event exists or there shall be a material
variance in the performance of the Receivables), a review of such Originator's books and records with respect to such Receivables.
(d) Keeping of Records and Books of Account. Maintain and implement administrative and operating procedures (including, without limitation,
an ability to re-create records evidencing Receivables it generates in the event of the destruction of the originals thereof), and keep and
maintain the Required Servicing Data for the Receivables it generates and all other documents, books, records and other information
reasonably necessary or advisable for the collection of such Receivables (including, without limitation, records adequate to permit the daily
identification of each new Receivable and all Collections of and adjustments to each existing Receivable).
(e) Performance and Compliance with Receivables and Contracts. Timely and fully perform and comply with all material provisions, covenants
and other promises required to be observed by it under the Contracts and all other agreements related to the Receivables that it generates to the
extent necessary to prevent an adverse impact on the Receivables Pool generally.
(f) Location of Records. Keep its principal place of business and chief executive office, and the offices where it keeps its records concerning or
related to Receivables, at the address(es) referred to in Schedule 5.14 or, upon 15 days' prior written notice to the Company and the
Administrator, at such other locations in jurisdictions where all action required by Section 7.3 shall have been taken and completed.
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13
(g) Credit and Collection Policies. Comply in all material respects with its Credit and Collection Policy in connection with the Receivables that
it generates and all Contracts and other agreements related thereto.
(h) Post Office Boxes. On or prior to the date hereof, deliver to the Servicer (on behalf of the Company) a certificate from an authorized officer
of such Originator to the effect that (i) the name of the renter of all post office boxes into which Collections may from time to time be mailed
have been changed to the name of the Company (unless such post office boxes are in the name of the relevant Lock-Box Banks) and (ii) all
relevant postmasters have been notified that each of the Servicer and the Administrator are authorized to collect mail delivered to such post
office boxes (unless such post office boxes are in the name of the relevant Lock-Box Banks).
(i) Transaction Documents. Comply in all material respects with the Transaction Documents to which it is a party.
SECTION 6.2 Reporting Requirements. From the date hereof until the first day following the Purchase and Sale Termination Date, each
Originator will, unless the Servicer (on behalf of the Company) shall otherwise consent in writing, furnish to the Company and the
Administrator:
(a) Purchase and Sale Termination Events. As soon as possible after the Originator has knowledge of the occurrence of, and in any event within
five (5) days after the Originator has knowledge of the occurrence of each Purchase and Sale Termination Event or each Unmatured Purchase
and Sale Termination Event in respect of such Originator, the statement of the chief financial officer or chief accounting officer of such
Originator describing such Purchase and Sale Termination Event or Unmatured Purchase and Sale Termination Event and the action that such
Originator proposes to take with respect thereto, in each case in reasonable detail;
(b) Proceedings. As soon as possible and in any event within five (5) days after Originator otherwise has knowledge thereof, written notice of
(i) material litigation, investigation or proceeding of the type described in
Section 5.6 not previously disclosed to the Company and (ii) all material adverse developments that have occurred with respect to any
previously disclosed litigation, proceedings and investigations; and
(c) Other. Promptly, from time to time, such other information, documents, records or reports respecting the Receivables or the conditions or
operations, financial or otherwise, of such Originator as the Company, the Issuer or the Administrator may from time to time reasonably
request in order to protect the interests of the Company, the Issuer or the Administrator under or as contemplated by the Transaction
Documents.
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14
SECTION 6.3 Negative Covenants. From the date hereof until the date following the Purchase and Sale Termination Date, each Originator
agrees that, unless the Servicer (on behalf of the Company) and the Administrator shall otherwise consent in writing, it shall not:
(a) Sales, Liens, Etc. Except as otherwise provided herein or in any other Transaction Document, sell, assign (by operation of law or otherwise)
or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Receivable or related Contract or Related
Security, or any interest therein, or any Collections thereon, or assign any right to receive income in respect thereof; provided that an Originator
may assign (or cause to be assigned) any Insured Receivable to the applicable insurance provider after the deposit of the proceeds of the
insurance policy in relation to such Insured Receivable in a Lock-Box Account.
(b) Extension or Amendment of Receivables. Except as otherwise permitted in Section 4.2(a) of the Receivables Purchase Agreement, extend,
amend or otherwise modify the terms of any Receivable in any material respect generated by it, or amend, modify or waive, in any material
respect, any term or condition of any Contract related thereto (which term or condition relates to payments under, or the enforcement of, such
Contract).
(c) Change in Business or Credit and Collection Policy. Make any change in the character of its business or materially alter its Credit and
Collection Policy, which change or alteration would, in either case, materially change the credit standing required of particular Obligors or
potential Obligors or impair, in any material respect, the collectibility of the Receivables generated by it.
(d) Receivables Not to be Evidenced by Promissory Notes or Chattel Paper. Take any action to cause or permit any Receivable generated by it
to become evidenced by any "instrument" or "chattel paper" (as defined in the applicable UCC ); provided that in the context of an Obligor's
Insolvency Proceeding the Receivables of such Obligor may become evidenced by instruments or chattel paper if such instruments are
immediately delivered to the Administrator.
(e) Mergers, Acquisitions, Sales, etc. (i) Be a party to any merger or consolidation, except a merger or consolidation where such Originator is
the surviving entity or is merged or consolidated with another Originator, or
(ii) directly or indirectly sell, transfer, assign, convey or lease (other than to another Originator or wholly-owned Subsidiary thereof) (A)
whether in one or a series of transactions, all or substantially all of its assets or (B) any Receivables or any interest therein (other than pursuant
to this Agreement).
(f) Pledge of Membership Interest. Pledge to any Person its membership interest in the Company.
SECTION 6.4 Lock-Box Banks. Make any changes in its instructions to Obligors regarding Collections or add or terminate any bank as a
Lock-Box Bank unless the requirements of paragraph 2(g) of Exhibit IV to the Receivables Purchase Agreement have been met.
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15
SECTION 6.5 Accounting for Purchases. Account for or treat (whether in financial statements or otherwise) the transactions contemplated
hereby in any manner other than as sales or contributions to capital of the Receivables and Related Rights by such Originator to the Company.
SECTION 6.6 Transaction Documents. Enter into, execute, deliver or otherwise become bound by any agreement, instrument, document or
other arrangement that restricts the right of such Originator to amend, supplement, amend and restate or otherwise modify, or to extend or
renew, or to waive any right under, this Agreement or any other Transaction Document.
SECTION 6.7 Substantive Consolidation. Each Originator hereby acknowledges that this Agreement and the other Transaction Documents are
being entered into in reliance upon the Company's identity as a legal entity separate from such Originator and its Affiliates. Therefore, from
and after the date hereof, each Originator shall take all reasonable steps necessary to make it apparent to third Persons that the Company is an
entity with assets and liabilities distinct from those of such Originator and any other Person, and is not a division of such Originator, its
Affiliates or any other Person. Without limiting the generality of the foregoing and in addition to and consistent with the other covenants set
forth herein, such Originator shall take such actions as shall be required in order that:
(a) such Originator shall not be involved in the day to day management of the Company;
(b) such Originator shall maintain separate corporate records and books of account from the Company and otherwise will observe corporate
formalities and have a separate area from the Company for its business;
(c) the financial statements and books and records of such Originator shall be prepared after the date of creation of the Company to reflect and
shall reflect the separate existence of the Company; provided, that the Company's assets and liabilities may be included in a consolidated
financial statement issued by an affiliate of the Company; provided, however, that any such consolidated financial statement or the notes
thereto shall make clear that the Company's assets are not available to satisfy the obligations of such affiliate;
(d) except as permitted by the Receivables Purchase Agreement,
(i) such Originator shall maintain its assets separately from the assets of the Company, (ii) and the Originator's assets, and records relating
thereto, have not been, are not, and shall not be, commingled with those of the Company;
(e) all of the Company's business correspondence and other communications shall be conducted in the Company's own name and on its own
stationery;
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(f) such Originator shall not act as an agent for the Company, except in the capacity of Sub-Servicer;
(g) such Originator shall not conduct any of the business of the Company in its own name;
(h) such Originator shall not pay any liabilities of the Company out of its own funds or assets;
(i) such Originator shall maintain an arm's-length relationship with the Company;
(j) such Originator shall not assume or guarantee or become obligated for the debts of the Company or hold out its credit as being available to
satisfy the obligations of the Company;
(k) such Originator shall not acquire obligations of the Company;
(l) such Originator shall allocate fairly and reasonably overhead or other expenses that are properly shared with the Company, including,
without limitation, shared office space;
(m) such Originator shall identify and hold itself out as a separate and distinct entity from the Company;
(n) such Originator shall correct any known misunderstanding respecting its separate identity from the Company;
(o) such Originator shall not enter into, or be a party to, any transaction with the Company, except in the ordinary course of its business and on
terms which are intrinsically fair and not less favorable to it than would be obtained in a comparable arm's-length transaction with an unrelated
third party; and
(p) such Originator shall not pay the salaries of the Company's employees, if any.
ARTICLE VII
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF RECEIVABLES
SECTION 7.1 Rights of the Company. Each Originator hereby authorizes the Company (who may further authorize another Person), the
Servicer or their respective designees to take any and all steps in such Originator's name necessary or desirable, in their respective
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17
determination, to collect all amounts due under any and all Receivables, including, without limitation, indorsing the name of such Originator on
checks and other instruments representing Collections and enforcing such Receivables and the provisions of the related Contracts that concern
payment and/or enforcement of rights to payment.
SECTION 7.2 Responsibilities of the Originators. Anything herein to the contrary notwithstanding:
(a) Collection Procedures. Each Originator agrees to direct its respective Obligors to make payments of Receivables directly to a post office
box related to the relevant Lock-Box Account at a Lock-Box Bank. Each Originator further agrees to transfer any Collections that it receives
directly to the Servicer (for the Company's account) within two (2) Business Days of receipt thereof, and agrees that all such Collections shall
be deemed to be received in trust for the Company and shall be maintained and segregated separate and apart from all other funds and monies
of Originator until transfer of such Collections to the Servicer.
(b) Each Originator shall perform its obligations hereunder, and the exercise by the Company or its designee of its rights hereunder shall not
relieve such Originator from such obligations.
(c) None of the Company, the Servicer or the Administrator shall have any obligation or liability to any Obligor or any other third Person with
respect to any Receivables, Contracts related thereto or any other related agreements, nor shall the Company, the Servicer, the Issuer or the
Administrator be obligated to perform any of the obligations of such Originator thereunder.
(d) Each Originator hereby grants to the Company (who may further grant to another Person) and the Servicer an irrevocable power of attorney,
with full power of substitution, coupled with an interest, to take in the name of such Originator all steps necessary or advisable to endorse,
negotiate or otherwise realize on any writing or other right of any kind held or transmitted by such Originator or transmitted or received by the
Company (whether or not from such Originator) in connection with any Receivable.
SECTION 7.3 Further Action Evidencing Purchases. Each Originator agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action that the Servicer may reasonably request in order to perfect, protect or
more fully evidence the Receivables and Related Rights purchased by or contributed to the Company hereunder, or to enable the Company to
exercise or enforce any of its rights hereunder or under any other Transaction Document. Without limiting the generality of the foregoing, upon
the request of the Servicer, such Originator will:
(a) execute and file such financing or continuation statements, or amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate; and
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(b) mark the master data processing records that evidence or list (i) such Receivables and (ii) related Contracts with the legend set forth in
Section 4.1(j).
Each Originator hereby authorizes the Company or its designee to file one or more financing or continuation statements, and amendments
thereto and assignments thereof, relative to all or any of the Receivables and Related Rights now existing or hereafter generated by Originator.
If any Originator fails to perform any of its agreements or obligations under this Agreement, the Company or its designee may (but shall not be
required to) itself perform, or cause the performance of, such agreement or obligation, and the expenses of the Company or its designee
incurred in connection therewith shall be payable by Originator as provided in Section 9.1.
SECTION 7.4 Application of Collections. Any payment by an Obligor in respect of any amount owed by it to any Originator shall, except as
otherwise specified by such Obligor or otherwise required by contract or applicable law and unless otherwise instructed by the Company (or
any other Person to whom the Company has assigned such right to instruct) (with the prior written consent of the Administrator) or the
Administrator, be applied as a Collection of any Receivable or Receivables of such Obligor to the extent of any amounts then due and payable
thereunder (such application to be made starting with the oldest outstanding Receivable or Receivables) before being applied to any other
indebtedness of such Obligor.
SECTION 7.5 Subservicer. Each Originator shall initially serve as a Sub-Servicer under the Receivables Purchase Agreement, and shall
perform the duties and obligations of a Sub-Servicer thereunder unless and until such Originator shall be removed as Sub-Servicer pursuant to
the terms of the Receivables Purchase Agreement.
ARTICLE VIII
PURCHASE AND SALE TERMINATION EVENTS
SECTION 8.1 Purchase and Sale Termination Events. Each of the following events or occurrences described in this Section 8.1 shall constitute
a "Purchase and Sale Termination Event":
(a) A Termination Event (as defined in the Receivables Purchase Agreement) shall have occurred and, in the case of a Termination Event
(other than one described in paragraph (f) of Exhibit V of the Receivables Purchase Agreement), the Administrator, shall have declared the
Facility Termination Date to have occurred; or
(b) Any Originator shall fail to make any payment or deposit to be made by it hereunder when due and such failure shall remain unremedied for
two (2) Business Days; or
(c) Any representation or warranty made or deemed to be made by any Originator (or any of its officers) under or in connection with this
Agreement, any other
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19
Transaction Documents, or any other information or report delivered pursuant hereto or thereto shall prove to have been false or incorrect in
any material respect when made or deemed made, and shall remain false or incorrect for 30 days after knowledge of, or notice to, such
Originator of such inaccuracy; or
(d) Any Originator shall fail to perform or observe any other term, covenant or agreement contained in this Agreement on its part to be
performed or observed and such failure shall remain unremedied for thirty days after written notice thereof shall have been given by the
Servicer to such Originator.
SECTION 8.2 Remedies.
(a) Optional Termination. Upon the occurrence of a Purchase and Sale Termination Event, the Company (and not the Servicer) shall have the
option, by notice to the Originators (with a copy to the Administrator), to declare the Purchase Facility as terminated.
(b) Remedies Cumulative. Upon any termination of the Purchase Facility pursuant to Section 8.2(a), the Company shall have, in addition to all
other rights and remedies under this Agreement, all other rights and remedies provided under the UCC of each applicable jurisdiction and other
applicable laws, which rights shall be cumulative.
ARTICLE IX
INDEMNIFICATION
SECTION 9.1 Indemnities by the Originators. Without limiting any other rights which the Company may have hereunder or under applicable
law, each Originator, severally and for itself alone hereby agrees to indemnify the Company and each of its officers, directors, employees and
agents (each of the foregoing Persons being individually called a "Purchase and Sale Indemnified Party"), forthwith on demand, from and
against any and all damages, losses, claims, judgments, liabilities and related costs and expenses, including reasonable attorneys' fees and
disbursements (all of the foregoing being collectively called "Purchase and Sale Indemnified Amounts") awarded against or incurred by any of
them arising out of or as a result of the failure of such Originator to perform its obligations under this Agreement or any other Transaction
Document, or arising out of the claims asserted against a Purchase and Sale Indemnified Party relating to the transactions contemplated herein
or therein or the use of proceeds thereof or therefrom, excluding, however, (i) Purchase and Sale Indemnified Amounts to the extent resulting
from gross negligence or willful misconduct on the part of such Purchase and Sale Indemnified Party, (ii) any indemnification which has the
effect of recourse for non-payment of the Receivables to any indemnitor (except as otherwise specifically provided under this Section 9.1), and
(iii) any tax based upon or measured by net income property, or gross receipts. Without limiting the foregoing, each Originator, severally for
itself alone, shall indemnify each Purchase and Sale Indemnified Party for Purchase and Sale Indemnified Amounts relating to or resulting
from:
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20
(a) the transfer by such Originator of an interest in any Receivable to any Person other than the Company;
(b) the breach of any representation or warranty made by such Originator (or any of its officers) under or in connection with this Agreement or
any other Transaction Document, or any information or report delivered by Originator pursuant hereto or thereto, which shall have been false
or incorrect in any material respect when made or deemed made;
(c) the failure by such Originator to comply with any applicable law, rule or regulation with respect to any Receivable generated by such
Originator or the related Contract, or the nonconformity of any Receivable generated by such Originator or the related Contract with any such
applicable law, rule or regulation;
(d) the failure to vest and maintain vested in the Company an ownership interest in the Receivables generated by such Originator free and clear
of any Adverse Claim, other than an Adverse Claim arising solely as a result of an act of the Company, the Issuer or the Administrator whether
existing at the time of the purchase or contribution of such Receivables or at any time thereafter;
(e) the failure to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any Receivables or purported Receivables generated by such Originator, whether at the
time of any purchase or contribution or at any subsequent time;
(f) any dispute, claim, offset or defense (other than discharge in bankruptcy) of the Obligor to the payment of any Receivable or purported
Receivable generated by such Originator (including, without limitation, a defense based on such Receivable's or the related Contract's not being
a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the
services related to any such Receivable or the furnishing of or failure to furnish such services;
(g) any product liability claim arising out of or in connection with services that are the subject of any Receivable generated by such Originator;
and
(h) any tax or governmental fee or charge (other than any tax excluded pursuant to clause (iii) in the proviso to the preceding sentence), all
interest and penalties thereon or with respect thereto, and all out-of-pocket costs and expenses, including the reasonable fees and expenses of
counsel in defending against the same, which may arise by reason of the purchase or ownership of the Receivables generated by such
Originator or any Related Security connected with any such Receivables.
If for any reason the indemnification provided above in this Section 9.1 is unavailable to a Purchase and Sale Indemnified Party or is
insufficient to hold such Purchase and Sale Indemnified Party harmless, then each of the Originators, severally and for itself, shall
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21
contribute to the amount paid or payable by such Purchase and Sale Indemnified Party to the maximum extent permitted under applicable law.
ARTICLE X
MISCELLANEOUS
SECTION 10.1 Amendments, etc.
(a) The provisions of this Agreement may from time to time be amended, modified or waived, if such amendment, modification or waiver is in
writing and executed by the Company and each Originator (with respect to an Amendment) or by the Company (with respect to a waiver or
consent by it) (with the prior written consent of the Administrator).
(b) No failure or delay on the part of the Company, the Servicer, any Originator or any third party beneficiary in exercising any power or right
hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power or right preclude any other or further
exercise thereof or the exercise of any other power or right. No notice to or demand on the Company, the Servicer or any Originator in any case
shall entitle it to any notice or demand in similar or other circumstances. No waiver or approval by the Company or the Servicer under this
Agreement shall, except as may otherwise be stated in such waiver or approval, be applicable to subsequent transactions. No waiver or
approval under this Agreement shall require any similar or dissimilar waiver or approval thereafter to be granted hereunder.
(c) The Transaction Documents contain a final and complete integration of all prior expressions by the parties hereto with respect to the subject
matter thereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter thereof, superseding all prior
oral or written understandings.
SECTION 10.2 Notices, etc. All notices and other communications provided for hereunder shall, unless otherwise stated herein, be in writing
(including facsimile communication) and shall be personally delivered or sent by certified mail, postage prepaid, or by facsimile, to the
intended party at the mailing address or facsimile number of such party set forth under its name on the signature pages hereof or at such other
address or facsimile number as shall be designated by such party in a written notice to the other parties hereto. All such notices and
communications shall be effective (i) if personally delivered, when received, (ii) if sent by certified mail three (3) Business Days after having
been deposited in the mail, postage prepaid, and (iii) if transmitted by facsimile, when sent, receipt confirmed by telephone or electronic means
(and shall be followed by a hard copy sent by first class mail).
SECTION 10.3 No Waiver; Cumulative Remedies. The remedies herein provided are cumulative and not exclusive of any remedies provided
by law. Without limiting the foregoing, each Originator hereby authorizes the Company, at any time and from time to time, to the fullest extent
permitted by law, to set off, against any obligations of such Originator to the Company arising in connection with the Transaction Documents
(including, without limitation, amounts
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22
payable pursuant to Section 9.1) that are then due and payable or that are not then due and payable but are accruing in respect of the then
current Settlement Period, any and all indebtedness at any time owing by the Company to or for the credit or the account of such Originator.
SECTION 10.4 Binding Effect; Assignability. This Agreement shall be binding upon and inure to the benefit of the Company and each
Originator and their respective successors and permitted assigns. No Originator may assign any of its rights hereunder or any interest herein
without the prior written consent of the Company, except as otherwise herein specifically provided. This Agreement shall create and constitute
the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until such time as the
parties hereto shall agree. The rights and remedies with respect to any breach of any representation and warranty made by any Originator
pursuant to Article V and the indemnification and payment provisions of Article IX and
Section 10.6 shall be continuing and shall survive any termination of this Agreement.
SECTION 10.5 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.
SECTION 10.6 Costs, Expenses and Taxes. In addition to the obligations of the Originators under Article IX, each Originator, severally and for
itself alone, agrees to pay on demand:
(a) to the Company (and any successor and permitted assigns thereof) all reasonable costs and expenses incurred by such Person in connection
with the enforcement of this Agreement, the Originator Assignment Certificate and the other Transaction Documents; and
(b) all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing and recording of
this Agreement or the other Transaction Documents to be delivered hereunder, and agrees to indemnify each Purchase and Sale Indemnified
Party against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees.
SECTION 10.7 SUBMISSION TO JURISDICTION. EACH PARTY HERETO HEREBY IRREVOCABLY (a) SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF THE STATE OF NEW YORK OR THE FEDERAL COURT OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY
TRANSACTION DOCUMENT; (b) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE
HEARD AND DETERMINED IN SUCH STATE OR UNITED STATES FEDERAL COURT; (c) WAIVES, TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
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23
PROCEEDING; (d) IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SPECIFIED IN SECTION
10.2; AND (e) AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND
MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY
LAW. NOTHING IN THIS SECTION 10.7 SHALL AFFECT THE COMPANY'S RIGHT TO SERVE LEGAL PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO BRING ANY ACTION OR PROCEEDING AGAINST ANY ORIGINATOR OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTIONS.
SECTION 10.8 WAIVER OF JURY TRIAL. EACH PARTY HERETO WAIVES ANY RIGHT TO A TRIAL BY JURY IN ANY ACTION
OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER OR RELATING TO THIS AGREEMENT, ANY OTHER
TRANSACTION DOCUMENT, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH
MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN
CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT, AND AGREES THAT (a) ANY SUCH
ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY AND (b) ANY PARTY HERETO (OR
ANY ASSIGNEE OR THIRD PARTY BENEFICIARY OF THIS AGREEMENT) MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY OTHER PARTY OR
PARTIES HERETO TO WAIVER OF ITS OR THEIR RIGHT TO TRIAL BY JURY.
SECTION 10.9 Captions and Cross References; Incorporation by Reference. The various captions (including, without limitation, the table of
contents) in this Agreement are included for convenience only and shall not affect the meaning or interpretation of any provision of this
Agreement. References in this Agreement to any underscored Section or Exhibit are to such Section or Exhibit of this Agreement, as the case
may be. The Exhibits hereto are hereby incorporated by reference into and made a part of this Agreement.
SECTION 10.10 Execution in Counterparts. This Agreement 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 when taken together shall constitute
one and the same Agreement.
SECTION 10.11 Acknowledgment and Agreement. By execution below, each Originator expressly acknowledges and agrees that all of the
Company's rights, title, and interests in, to, and under this Agreement (but not its obligations), shall be assigned by the Company pursuant to
the Receivables Purchase Agreement, and each Originator consents to such assignment. Each of the parties hereto acknowledges and agrees
that the Administrator,
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24
and the Issuer are third party beneficiaries of the rights of the Company arising hereunder and under the other Transaction Documents to which
any Originator is a party.
SECTION 10.12 No Proceeding. Each Originator hereby agrees that it will not institute, or join any other Person in instituting, against the
Company any Insolvency Proceeding for at least one year and one day following the day on which the Company discharges all of its
obligations under the Receivables Purchase Agreement.
SECTION 10.13 Limited Recourse. Except as explicitly set forth herein, the obligations of the Company and the Originators under this
Agreement or any other Transaction Documents to which each is a party are solely the obligations of the Company and each such Originator.
No recourse under any Transaction Document shall be had against, and no liability shall attach to, any officer, employee, director, or
beneficiary, whether directly or indirectly, of the Company or any Originator; provided, however, that this Section shall not relieve any such
Person of any liability it might otherwise have for its own gross negligence or willful misconduct.
[Signature Pages Follow]
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25
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized as of
the date first above written.
CSS FUNDING LLC
By:
Name:
Title:
Address: CSS Funding LLC 1845 Walnut Street, Suite 800 Philadelphia, Pennsylvania 19103-4755
Attention: Clifford Pietrafitta Telephone: (215) 569-9900 Facsimile: (215) 569-9979
CSS INDUSTRIES, INC., as Servicer
By:
Name:
Title:
Address: CSS Industries, Inc. 1845 Walnut Street, Suite 800 Philadelphia, Pennsylvania 19103-4755
Attention: Clifford Pietrafitta Telephone: (215) 569-9900 Facsimile: (215) 569-9979
Purchase and Sale Agreement
S-1
ORIGINATORS:
BERWICK INDUSTRIES LLC
By:
Name:
Title:
Address: Berwick Industries LLC Bomboy Lane and Ninth Street Berwick, PA 18603
Attention: Christopher J. Munyan Telephone: (570) 752-5934 Facsimile: (570) 752-6531
CLEO INC
By:
Name:
Title:
Address: Cleo Inc 4025 Viscount Memphis, TN 38118
Attention: Andrew W. Kelly Telephone: (901) 369-6620 Facsimile: (901) 362-0864
Purchase and Sale Agreement
S-2
THE PAPER MAGIC GROUP, INC.
By:
Name:
Title:
Address: The Paper Magic Group, Inc. 401 Adams Avenue Scranton, PA 18510
Attention: Frank Macero, Jr.
Telephone: (570) 961-3863
Facsimile: (570) 961-3930
Purchase and Sale Agreement
S-3
EXHIBIT 10.11
WAIVER AND AMENDMENT TO LOAN AGREEMENT
THIS WAIVER AND AMENDMENT TO LOAN AGREEMENT (this "Amendment") is made as of this ____ day of March, 2002, by and
among CSS INDUSTRIES, INC., a Delaware corporation (the "Borrower"), the lending institutions which are parties hereto (each a "Lender"
and collectively, the "Lenders") and PNC BANK, NATIONAL ASSOCIATION in its capacity as administrative agent for the Lenders (in such
capacity, the "Administrative Agent").
BACKGROUND
A. The Lenders, the Borrower and the Administrative Agent are parties to a Loan Agreement, dated as of April 30, 2001 (as heretofore
amended and modified, the "Loan Agreement"), pursuant to which the Lenders agreed to make revolving credit loans to the Borrower in an
aggregate outstanding amount of up to Seventy-five Million Dollars ($75,000,000) (the "Loan"). The Loan is evidenced by the Borrower's
Revolving Credit Notes in the aggregate principal amount of $75,000,000 (the "Notes").
B. The Borrower intends to exercise its option under that certain Claims Put Agreement, dated as of January 16, 2002, (the "Put Agreement")
between the Borrower and Third Avenue Trust (the "Buyer") pursuant to which the Borrower will transfer and assign its right and title to
certain accounts receivable owed to the Borrower by one of its customers arising from merchandise delivered or services rendered by the
Borrower or its subsidiaries (the "Receivables") in exchange for good and valuable consideration.
C. The Borrower has requested and the Administrative Agent and the Lenders agree to waive any Event of Default which, absent this waiver,
would result from the Borrower's exercise of its rights and performance of its obligations under the Put Agreement and to modify one of the
covenants in the Loan Agreement in order to permit possible future transfers and exchanges of other receivables under similar circumstances,
all on the terms and subject to the conditions herein set forth.
NOW THEREFORE, the parties hereto, intending to be legally bound hereby, agree as follows:
AGREEMENT
1. Terms and References. Capitalized terms used herein and not otherwise defined herein shall have the meanings given to such terms in the
Loan Agreement. Unless otherwise specified, section references herein shall refer to sections of the Loan Agreement.
2. Waiver. The Borrower has requested and the Lenders hereby agree to waive any violation of the covenant contained in Section 6.12 that
would otherwise arise as a result of Borrower's exercise of its option under the Put Agreement and the transfer of Receivables to the Buyer in
accordance with the terms thereof. The foregoing waiver shall not be deemed to operate as a, or obligate the Lenders to grant any, future waiver
or modification of
the provisions of Section 6.12 or of any other term, condition or Default under the Loan Agreement.
3. Amendment to Loan Agreement. The Loan Agreement is hereby amended as follows:
(a) Section 6.12 of the Loan Agreement is hereby amended by
(i) deleting the parenthesis appearing in clause (b)(i)(C)(2) thereof after the phrase "nationally recognized exchange" and inserting a parenthesis
at the end of clause (b)(i)(C)(3) immediately after the word "sold", (ii) deleting the word "and" immediately prior to clause (b)(v) thereof and
(iii) deleting the period at the end of Section 6.12 and inserting the following clause (b)(vi);
"; and (vi) sales or transfers of accounts receivable of the Borrower or any of its Subsidiaries made in connection with any agreement, including
but not limited to credit insurance, that seeks to limit the risk of default by or bankruptcy of any customer of the Borrower or any of its
Subsidiaries on any such accounts receivable owed to the Borrower or any of its Subsidiaries for merchandise delivered or services rendered by
the Borrower or any of its Subsidiaries to such customer; provided that (A) no Default or Event of Default has occurred and is continuing at the
time of such sale or transfer and (B) the consideration received for such accounts receivable shall be an amount at least substantially equal to
the fair market value of the accounts receivable which is the subject of the Asset Sale, as certified to the Administrative Agent by the
Borrower's chief financial officer or vice president of finance.
4. Loan Documents. Except where the context clearly requires otherwise, all references to the Loan Agreement in any of the Loan Documents
or any other document delivered to the Lenders or the Administrative Agent in connection therewith shall be to the Loan Agreement, as
amended by this Amendment.
5. Borrower's Ratification. The Borrower agrees that it has no defenses or set-offs against the Lenders or the Administrative Agent or their
respective officers, directors, employees, agents or attorneys, with respect to the Loan Documents, all of which are in full force and effect, and
that all of the terms and conditions of the Loan Documents not inconsistent herewith shall remain in full force and effect unless and until
modified or amended in writing in accordance with their terms. The Borrower hereby ratifies and confirms its obligations under the Loan
Documents and agrees that the execution and delivery of this Amendment does not in any way diminish or invalidate any of its obligations
thereunder.
6. Representations and Warranties. The Borrower hereby represents and warrants to the Administrative Agent and the Lenders that:
(a) Except as otherwise previously disclosed to the Administrative Agent and the Lenders, the representations and warranties made in the Loan
Agreement, as amended by this Amendment, are true and correct as of the date hereof;
2
(b) No Default or Event of Default under the Loan Agreement exists on the date hereof; and
(c) This Amendment has been duly authorized, executed and delivered so as to constitute the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
All of the above representations and warranties shall survive the making of this Amendment.
7. Conditions Precedent. The effectiveness of this Amendment is subject to the fulfillment, to the satisfaction of the Administrative Agent and
its counsel, of the following conditions precedent:
(a) The Borrower shall have delivered to the Administrative Agent, with copies or counterparts for each Lender as appropriate, the following,
all of which shall be in form and substance satisfactory to the Administrative Agent and shall be duly completed and executed:
(i) This Amendment and
(ii) Such additional documents, certificates and information as the Administrative Agent or the Lenders may require, pursuant to the terms
hereof, or otherwise reasonably request.
(b) This Amendment shall have been executed and delivered by the Administrative Agent and Majority Lenders.
(c) The representations and warranties set forth in the Loan Agreement, as amended by this Amendment, shall be true and correct on and as of
the date hereof.
(d) No Default or Event of Default shall have occurred and be continuing as of the date hereof.
Upon the satisfaction of the foregoing conditions, this Amendment shall be binding on the Borrower, the Administrative Agent and all of the
Lenders (whether or not they have executed this Agreement).
8. Miscellaneous.
(a) All terms, conditions, provisions and covenants in the Loan Documents and all other documents delivered to the Administrative Agent and
the Lenders in connection therewith shall remain unaltered and in full force and effect except as modified or amended hereby. To the extent
that any term or provision of this Amendment is or may be deemed expressly inconsistent with any term or provision in any Loan Document or
any other document executed in connection therewith, the terms and provisions hereof shall control.
3
(b) The execution, delivery and effectiveness of this Amendment shall neither operate as a waiver of any right, power or remedy of the
Administrative Agent or the Lenders under any of the Loan Documents nor constitute a waiver of any Event of Default or default thereunder
except to the extent specifically set forth in Section 2 hererof.
(c) In consideration of Administrative Agent's and the Lenders' agreement to amend the existing credit facility, the Borrower hereby waives and
releases the Administrative Agent, the Lenders and their respective officers, attorneys, agents and employees from any liability, suit, damage,
claim, loss or expense of any kind or failure whatsoever and howsoever arising of which it has ever had, or has as of the date of this
Amendment, knowledge.
(d) This Amendment constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and
contemporaneous understandings and agreements.
(e) In the event any provisions of this Amendment shall be held invalid or unenforceable by any court of competent jurisdiction, such holding
shall not invalidate or render unenforceable any other provision hereof.
(f) This Amendment shall be governed by and construed according to the laws of the Commonwealth of Pennsylvania.
(g) This Amendment shall inure to the benefit of, and be binding upon, the parties hereto and their respective successors and assigns and may
be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same
instrument.
(h) The headings used in this Amendment are for convenience of reference only, do not form a part of this Amendment and shall not affect in
any way the meaning or interpretation of this Amendment.
4
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be executed by their duly authorized officers as of the date first
above written.
CSS INDUSTRIES, INC.
By:
Title
Attest:
PNC BANK, NATIONAL ASSOCIATION, as the
Administrative Agent and a Lender
By:
Title
FIRST UNION NATIONAL BANK
By:
Name Title
FLEET NATIONAL BANK
By:
Name Title
CITIZENS BANK OF PENNSYLVANIA
By:
Name Title
UNION PLANTERS BANK
By:
Name Title
5
EXHIBIT 10.12
[CSS]
FIRST AMENDMENT TO RECEIVABLES PURCHASE AGREEMENT
This FIRST AMENDMENT (this "Amendment"), dated as of August 24, 2001, is among CSS FUNDING LLC, a Delaware limited liability
company, as seller (the "Seller"), CSS INDUSTRIES, INC., a Delaware corporation ("CSS"), as initial servicer (in such capacity, together with
its successors and permitted assigns in such capacity, the "Servicer"), MARKET STREET FUNDING CORPORATION, a Delaware
corporation (together with its successors and permitted assigns, the "Issuer"), and PNC BANK, NATIONAL ASSOCIATION, a national
banking association ("PNC"), as administrator (in such capacity, together with its successors and assigns in such capacity, the "Administrator").
RECITALS
1. The Seller, the Servicer, the Issuer and the Administrator are parties to the Receivables Purchase Agreement, dated as of April 30, 2001 (the
"Agreement").
2. The Seller, the Servicer, the Issuer and the Administrator desire to amend the Agreement as hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. Amendments to the Agreement.
(a) The Preamble to the Agreement is hereby amended by deleting the phrase "CSS FUNDING CORPORATION" therein and substituting the
phrase "CSS FUNDING LLC" therefor.
(b) The definition of "Berwick Default Factor" set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as follows:
"Berwick Default Factor" means (a) for all months other than April or May, the aggregate credit sales made by Berwick during the calendar
month that is four calendar months prior to such month, (b) for the month of April, the Berwick Peak Christmas Sales times 50% plus the
aggregate credit sales made by Berwick during the month of December and (c) for the month of May, the Berwick Peak Christmas Sales times
50% plus the aggregate credit sales made by Berwick during the month of January.
(c) The definition of "Defaulted Receivable" set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as follows:
"Defaulted Receivable" means a Receivable:
(a) as to which any payment, or part thereof, remains unpaid for more than 90 days from the original due date for such payment, or
(b) without duplication (i) as to which an Insolvency Proceeding shall have occurred with respect to the Obligor thereof or any other Person
obligated thereon or owning any Related Security with respect thereto, or (ii) that has been written off the Seller's books as uncollectible;
provided that in each case the portion of such Receivable, if any, consisting of Reserved Dispute Amount shall not be deemed defaulted.
(d) The definition of "Dilution Ratio" set forth in Exhibit I to the Agreement is hereby amended by deleting the phrase "month that is two
calendar months before such month" therein and substituting "two most recent calendar months" therefor.
(e) Clause (a) of the definition of "Loss Reserve Percentage" set forth in Exhibit I to the Agreement is hereby amended by deleting the
percentage "12.00%" therein and substituting "9.00%" therefor.
(f) The definition of "Paper Magic Default Factor" set forth in Exhibit I to the Agreement is hereby amended and restated in its entirety as
follows:
"Paper Magic Default Factor" means (a) for the months of December, January and February, the sum of the aggregate credit sales made by
Paper Magic during the months of June and July and the aggregate credit sales made by the Minneapolis division of Paper Magic during the
month of August, (b) for the month of March, the Paper Magic Peak Christmas Sales times 70%, (c) for the month of April, the Paper Magic
Peak Christmas Sales times 30%, (d) for the month of May, the aggregate sales made by Paper Magic during the month of December less
aggregate credit sales made by the Scranton division of Paper Magic during the month of December times 25%, (e) for the month of June, the
Paper Magic Peak Christmas Sales times 15%, (f) for the month of July, the sum of the aggregate credit sales made by Paper Magic during the
months of January through March plus the aggregate credit sales made by the Scranton division of Paper Magic in the month of December
times 25%, and (g) for the months of August, September, October and November, the aggregate credit sales made by Paper Magic during the
calendar month that is four calendar months prior to such month.
-2-
SECTION 2. Conditions to Effectiveness.
2.1 This Amendment shall become effective as of the date hereof upon receipt by the Administrator of the following, each duly executed and
dated as of the date hereof (or such other date satisfactory to the Administrator), in form and substance satisfactory to the Administrator:
(a) counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the parties hereto; and
(b) such other documents and instruments as the Administrator may reasonably request.
SECTION 3. Effect of Amendment; Ratification. Except as specifically amended hereby, the Agreement is hereby ratified and confirmed in all
respects, and all of its provisions shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement
(or in any other Transaction Document) to "the Receivables Purchase Agreement", "this Agreement", "hereof", "herein", or words of similar
effect, in each case referring to the Agreement, shall be deemed to be references to the Agreement as amended hereby. This Amendment shall
not be deemed to expressly or impliedly waive, amend, or supplement any provision of the Agreement other than as specifically set forth
herein.
SECTION 4. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts,
and each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
SECTION 5. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New
York without regard to any otherwise applicable conflict of laws principles.
SECTION 6. Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment or the Agreement or any provision hereof or thereof.
[SIGNATURE PAGES TO FOLLOW]
-3-
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.
CSS FUNDING LLC
By:
Name:
Title:
CSS INDUSTRIES, INC.
By:
Name:
Title:
S-1
BERWICK INDUSTRIES LLC, as a Subservicer
By:
Name:
Title:
CLEO INC., as a Subservicer
By:
Name:
Title:
THE PAPER MAGIC GROUP, INC., as a Subservicer
By:
Name:
Title:
S-2
MARKET STREET FUNDING CORPORATION
By:
Name:
Title:
S-3
PNC BANK, NATIONAL ASSOCIATION,
as Administrator
By:
Name:
Title:
S-4
EXHIBIT 10.13
[CSS]
FIRST AMENDMENT TO PURCHASE AND SALE AGREEMENT
This FIRST AMENDMENT (this "Amendment"), dated as of August 24, 2001, is among CSS INDUSTRIES, INC., a Delaware corporation
(the "Servicer"), CSS FUNDING LLC, a Delaware limited liability company (the "Company") and each of the entities listed on Schedule I to
the Agreement (as defined below) (each, an "Originator"; and collectively, "Originators").
RECITALS
1. The Servicer, the Company and the Originators are parties to the Purchase and Sale Agreement, dated as of April 30, 2001 (the
"Agreement").
2. The Servicer, the Company and the Originators desire to amend the Agreement as hereinafter set forth.
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:
SECTION 1. Amendments to the Agreement.
(a) Clause (b)(ii)(B) of the definition of "FMVD" set forth in
Section 2.2 of the Agreement is hereby amended by deleting the phrase "Turnover Rate" therein and substituting "Days' Sales Outstanding"
therefor.
(b) Section 2.2 of the Agreement is hereby amended by adding immediately prior to the definition of "Payment Date" the following definition
of "Days' Sales Outstanding":
"Days' Sales Outstanding" means, for any calendar month, an amount computed as of the last day of such calendar month equal to: (a) the
Outstanding Balance of all Pool Receivables as of the last day of such calendar month divided by (b)(i) the aggregate credit sales made by the
Originator during the most recent four calendar months divided by (ii) 120.
SECTION 2. Conditions to Effectiveness.
2.1 This Amendment shall become effective as of the date hereof upon receipt by the Administrator of the following, each duly executed and
dated as of the date hereof (or such other date satisfactory to the Administrator), in form and substance satisfactory to the Administrator:
(a) counterparts of this Amendment (whether by facsimile or otherwise) executed by each of the parties hereto; and
(b) such other documents and instruments as the Administrator may reasonably request.
SECTION 3. Effect of Amendment; Ratification. Except as specifically amended hereby, the Agreement is hereby ratified and confirmed in all
respects, and all of its provisions shall remain in full force and effect. After this Amendment becomes effective, all references in the Agreement
(or in any other Transaction Document) to "the Purchase and Sale Agreement", "this Agreement", "hereof", "herein", or words of similar effect,
in each case referring to the Agreement, shall be deemed to be references to the Agreement as amended hereby. This Amendment shall not be
deemed to expressly or impliedly waive, amend, or supplement any provision of the Agreement other than as specifically set forth herein.
SECTION 4. Counterparts. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts,
and each counterpart shall be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
SECTION 5. Governing Law. This Amendment shall be governed by, and construed in accordance with, the internal laws of the State of New
York without regard to any otherwise applicable conflict of laws principles.
SECTION 6. Section Headings. The various headings of this Amendment are inserted for convenience only and shall not affect the meaning or
interpretation of this Amendment or the Agreement or any provision hereof or thereof.
[SIGNATURE PAGES TO FOLLOW]
-2-
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date first written above.
CSS FUNDING LLC
By:
Name:
Title:
CSS INDUSTRIES, INC., as Servicer
By:
Name:
Title:
S-1 First Amendment to PSA (CSS)
ORIGINATORS:
BERWICK INDUSTRIES LLC
By:
Name:
Title:
CLEO INC.
By:
Name:
Title:
THE PAPER MAGIC GROUP, INC.
By:
Name:
Title:
S-2 First Amendment to PSA (CSS)
CSS INDUSTRIES, INC.
2000 STOCK OPTION PLAN
FOR NON-EMPLOYEE DIRECTORS
1. Purpose. The purpose of this 2000 Stock Option Plan for Non-Employee Directors (the "Plan") of CSS Industries, Inc. (the "Company") is to
increase the ownership interest in the Company of Non-Employee Directors whose services are considered essential to the Company's
continued progress and to provide a further incentive to serve as a Director of the Company.
2. The Plan. The Plan shall consist of options to acquire Shares of the Common Stock of the Company, $.10 par value (the "Shares").
3. Administration. The Plan shall be administered by a Committee of the Board of Directors consisting of Directors who are not eligible to
participate in the Plan (the "Committee"). Subject to the provisions of the Plan, the Committee shall be authorized to interpret the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for the
administration of the Plan; providing, however, that the Committee shall have no discretion with respect to the eligibility or selection of
Directors to receive options under the Plan, the number of Shares subject to any such options, other than by reason of an adjustment pursuant to
Section 8 hereof, or the purchase price of options or the frequency of option grants thereunder, and provided further that the Committee shall
not have the authority to take any action to make any determination that would materially increase the benefits accruing to participants under
the Plan. The determination of the Committee in the administration of the Plan, as described herein, shall be final and conclusive and binding
upon all persons including, without limitation, the Company, its stockholders and persons granted options under the Plan. The Secretary of the
Company shall be authorized to implement the Plan in accordance with its terms and to take such actions of a ministerial nature as shall be
necessary to effectuate the intent and purposes thereof. The validity, construction and effect of the Plan and any rules and regulations relating to
the Plan shall be determined in accordance with the laws of the State of Delaware.
4. Participation in the Plan. Directors of the Company who are not employees of the Company or any subsidiary or affiliate of the Company
shall be eligible to participate in the Plan ("Eligible Directors").
5. Shares Subject to the Plan. Subject to adjustment as provided in Section 8, an aggregate of Two Hundred Thousand (200,000) Shares shall
be available for issuance upon the exercise of options granted under the Plan. The Shares deliverable upon the exercise of an option
1
may be made available from unissued Shares not reserved for any other purpose or Shares reacquired by the Company, including Shares
purchased in the open market or in private transactions. If any option granted under the Plan shall expire or terminate for any reason without
having been exercised in full, the Shares subject to, but not delivered under, such option may again become available for the grant of other
options under the Plan.
6. Non-Statutory Stock Options. All options granted under the Plan shall be non-statutory options not intended to qualify under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
7. Terms, Conditions and Forms of Options. Each option granted under this Plan shall be evidenced by a written agreement with the Company
in such form as the Committee shall from time to time approve, which agreements shall comply with and be subject to the following terms and
conditions:
(i) Option Grant Dates. Options to purchase 4,000 Shares (as adjusted pursuant to Section 8) shall be granted automatically to each Eligible
Director on the last day that the Company's Shares are traded on the New York Stock Exchange or other national securities exchange upon
which the shares are traded or if the Shares are not then listed on a national securities exchange and are not traded over-the-counter on the date
of the last trade as reported by NASDAQ or, if not reported by NASDAQ, the last trade which was reported, in each November through 2005,
except that any such grant shall be subject to and contingent upon approval of the Plan by the stockholders of the Company at the 2001 Annual
Meeting of Stockholders.
(ii) Purchase Price. The purchase price of Shares upon exercise of an option shall be 100% of the fair market value of the Shares on the date of
grant of an option; which shall be: (i) if the Shares are then listed on a national securities exchange, the closing price of the Shares on such date;
provided, however, if on such date the Shares were traded on more than one national securities exchange, then the closing price on the
exchange on which the greatest volume of Shares were traded on such day; (ii) if the Shares are not then listed on a national securities
exchange and are traded over-the-counter, the last sale price of the Shares on such date as reported by NASDAQ or, if not reported by
NASDAQ, the average of the closing bid and asked prices for the Shares on such date; and (iii) if the Shares are neither then listed on a
national securities exchange nor traded in the over-the-counter market, such value as the Committee shall in good faith determine. If the Shares
are then listed on a national securities exchange or are traded over-the-counter but are not traded on the date of grant, then the purchase price of
such shares shall be the closing price on the last day prior thereto on which such Shares were traded.
(iii) Exercisability and Term of Options. Each option granted under the Plan will become exercisable and mature in four equal installments,
commencing on the first anniversary of the date of grant and annually thereafter. Each option granted under the Plan shall
2
expire five years from the date of the grant, and shall be subject to earlier termination as hereinafter provided.
(iv) Termination of Service. In the event of the termination of service on the Board by the holder of any option, other than by reason of death as
set forth in Paragraph (v) hereof or by reason of such holders commencement of employment with the Company, the then outstanding options
of such holder may be exercised only to the extent that they were exercisable on the date of such termination and shall expire three months after
such termination, or on their stated expiration date, whichever occurs first.
(v) Death. In the event of the death of the holder of any option, each of the then outstanding options of such holder will immediately mature in
full and become exercisable by the holder's legal representative at any time within a period of six months after death, but in no event after the
expiration date of the term of the option.
(vi) Payment. Options may be exercised only upon payment to the Company in full of the purchase price of the Shares to be delivered. Such
payment shall be made (a) in cash or check at the time of purchase, (b) by delivering Shares already owned by the holder and having a fair
market value (as defined in
Section 7(ii)) equal to the purchase price, (c) with the proceeds of a promissory note payable by the holder of such option to the Company, but
only in accordance with the provisions of a Loan Program established by the Committee or any successor program as in effect from time to
time, (1) in a principal amount of up to 50% of the fair market value of the Shares to be delivered pursuant to the exercise of such option, or
such applicable lower percentage as may be specified by the Committee pursuant to the Loan Program, and (2) bearing interest at a rate not less
than the applicable Federal rate prescribed by
Section 1274 of the Code, or such higher rate as may be specified by the Committee pursuant to the Loan Program; or (d) through any
combination of (a),
(b) or (c). Notwithstanding the foregoing, the Committee reserves the right not to permit such payment to be made under the terms of
subsections (b) or (c) if it determines that the same would not be in the best interests of the Company.
8. Adjustment upon Changes in Shares; Acceleration and Cancellation of Options.
(i) In the event of any reclassification, recapitalization, merger, consolidation, reorganization, issuance of warrants, rights or debentures, stock
dividend, stock split or reverse stock split, extraordinary cash dividend, property dividend, combination or exchange of shares, repurchase of
shares or any other change in corporate structure which in the judgment of the Committee materially affects the value of Shares, the Committee
may determine the appropriate adjustments, if any, to the number and class of Shares available for issuance upon the exercise of options
granted under the Plan, the number and class of Shares and the exercise price per Share set forth in any option theretofore granted.
(ii) In the event of (a) the disposition of all or substantially all of the assets of
3
the Company, (b) the dissolution of the Company, (c) the merger or consolidation of the Company with or into any other entity or the merger or
consolidation of any other entity into the Company in each case whereby the Company is not the surviving entity, or (d) the making of a tender
offer or exchange offer to purchase all or substantially all of the Shares of the Company, all outstanding options awarded under the Plan shall
become exercisable in full immediately prior to such event and such options shall be canceled by the Company, which shall remit to each
Eligible Director a cash payment equal to the difference between (y) the aggregate fair market value of all Shares subject to the unexercised
portion of such options less (z) the aggregate exercise price of such unexercised options above.
9. Options Non-Assignable and Non-Transferable. Each option and all rights thereunder shall be non-assignable and non-transferable other
than by will or the laws of descent and distribution and shall be exercisable during the holder's lifetime only by the holder or the holder's
guardian or legal representative.
10. Limitations of Rights.
(i) No Right to Continue as a Director. Neither the Plan nor the granting of an option nor any other action taken pursuant to the Plan, shall
constitute or be evidence of any agreement or understanding, express or implied, that an Eligible Director has a right to continue as a Director
for any period of time, or at any particular rate of compensation.
(ii) No Stockholders' Rights for Holders of Options. A holder of options shall have no rights as a stockholder with respect to the Shares covered
by options granted hereunder until the date of the issuance of a stock certificate therefor, and no adjustment will be made for any cash dividend
distributions for which the record date is prior to the date such certificate is issued.
11. Effective Date and Duration of Plan. The Plan is effective upon its adoption by the Board of Directors, subject to approval by the
stockholders of the Company at the 2001 Annual Meeting of Stockholders. The period during which option grants shall be made under the Plan
shall terminate on December 31, 2005 (unless the Plan is extended or is terminated on an earlier date by action of the stockholders), but such
termination shall not affect the terms of any then outstanding options.
12. Amendment, Suspension or Termination of the Plan. Subject to the limitations described in this Section, the Committee may amend,
suspend or terminate the Plan; provided, however, that no such action shall adversely affect the rights of Directors who hold outstanding
options previously granted hereunder and, provided further, however, that any stockholder approval necessary or desirable in order to comply
with Rule 16b-3 under the Securities Exchange Act of 1934, as amended, shall be obtained in the manner required therein. Amendments to
Sections 4 and 7(i) and (ii) shall not be effected more than once every six months, unless such amendments are implemented to comport with
changes in the Code or
4
regulations thereunder.
13. Notice. Any notice to the Company required by any of the provisions of this Plan shall be in writing and addressed to the Secretary of the
Company at the Company's then Executive Offices and shall become effective when it is received.
14. Use of Proceeds. Proceeds from the sale of Shares pursuant to options granted under the Plan shall constitute general funds of the
Company.
15. No Fractional Shares. No fractional Shares shall be issued pursuant to options granted hereunder.
16. Expenses of the Plan. All of the expenses of administering the Plan shall be paid by the Company.
17. Compliance with Applicable Law. Notwithstanding anything herein to the contrary, the Company shall not be obligated to cause to be
issued or any certificate for Shares to be delivered pursuant to the exercise of an option unless and until the Company is advised by its counsel
that the issuance and delivery of such certificate is in compliance with all applicable laws, regulations or governmental authority and the
requirements of any exchange upon which Shares are traded. The Company shall in no event be obligated to register any securities pursuant to
the Securities Act of 1933 (as now in effect or as hereafter amended) or to take any other action in order to cause the issuance and delivery of
any such certificate to comply with any such law, regulations or requirement. The Committee may require, as a condition of the issuance and
delivery of any such certificate and in order to insure compliance with such laws, regulations and requirements, such representations as the
Committee, in its sole discretion, deems necessary or desirable. Each option shall be subject to the further requirement that if at any time the
Committee shall determine in its discretion that the listing or qualification of the Shares subject to such option, is required under any securities
exchange or association requirements or under any applicable law, or that the consent or approval of any governmental regulatory body is
necessary as a condition of, or in connection with, the granting of such option or the issuance of Shares thereunder, such option may not be
exercised in whole or in part unless such listing, qualification, consent or approval shall have been effected or obtained free of any conditions
not acceptable to the Committee.
18. Governing Law. Except to the extent pre-empted by federal law, this Plan shall be construed and enforced in accordance with, and
governed by, the laws of the State of Delaware.
5
May 21, 2002
Securities and Exchange Commission
Washington, DC
Ladies and Gentlemen:
Arthur Andersen LLP has represented to CSS Industries, Inc. that its audits for the year ended March 31, 2002 and the three month period
ended March 31, 2001 were subject to Andersen's quality control system for the U.S. accounting and auditing practice to provide reasonable
assurance that the engagement was conducted in compliance with professional standards and that there was appropriate continuity of Andersen
personnel working on the audit, availability of national office consultation and availability of personnel at foreign affiliates of Andersen to
conduct the relevant portions of the audit.
Sincerely,
/s/ Clifford E. Pietrafitta
-------------------------------Vice President - Finance and CFO
CEP/dem