EXHIBIT 10.31
[Citibank LOGO]
Citibank, N.A.
000 Xxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, XX 00000
Date: March 13, 2000
Xxxxxx Xxxxxx
Executive Vice President
Prodigy Communications Corp.
00 Xxxxx Xxxxxxxx
Xxxxx Xxxxxx, XX 00000
Dear Xx. Xxxxxx:
On behalf of ourselves and our affiliates (collectively, "Citibank"), we are
pleased to submit this proposal to Prodigy Communication Corp. ("Prodigy"), to
structure and arrange the up to $200,000,000 financing (the "Financing")
described in this letter agreement and in the "Indicative Summary of Terms and
Conditions" attached hereto as Annex A (the "Term Sheet") which is incorporated
by reference herein.
Description of Transaction
--------------------------
We would recommend that Prodigy establish a special-purpose, bankruptcy-remote
wholly owned subsidiary [Prodigy Funding Corporation] ("Prodigy Funding").
Prodigy shall initially sell the Contracts, originated over the past 12 months
under the retailer rebate programs, on a true sale basis to Prodigy Funding.
Prodigy Funding will be the issuer of a Variable Funding Note (the "Note"). The
Note will represent an undivided interest in the Receivables generated by the
assets of Prodigy Funding. We would anticipate that the Note would, initially,
be in an amount of up to US$ 200 million. As part of this transaction, we
intend to pursue a financial guarantee (the "Financial Guarantee") to wrap the
performance of the Note to achieve a rating of at least AA/Aa2. The Financial
Guarantee and overall financing will be contingent upon, among other factors, a
performance guarantee provided by SBC Communications, Inc. ("SBC") as detailed
in Annex A. The target market for this issuance would be one of the Citicorp
administered commercial paper conduits supported by a syndicated liquidity
facility. We believe this structure would provide Prodigy with unique
structural benefits, as well as attractive pricing and execution.
Note: It is understood by the parties undertaking this letter agreement
----
that Prodigy is currently negotiating the establishment of an operating
partnership with SBC Communications, Inc. ("SBC"). The proposed purpose of
this partnership is to join SBC and Prodigy's Consumer and Small Business
Internet operations. It is contemplated that Prodigy will act as the
General Partner within the proposed partnership structure. The parties
understand and agree that following the completion of the establishment of
the proposed partnership, it is Xxxxxxx's intention to transfer all of its
rights and obligations under the agreement to the operating partnership,
including but not limited to the ownership of Prodigy Funding. It is
further acknowledged that during the establishment of the financing
structure, all necessary steps will be taken to ensure that the program
documents will permit the transfer to the operating company and that the
operating company will be able to comply with such documents.
Indicative Terms
----------------
To meet your initial objective of financing the three-year contract subscribers,
we would recommend that the Note be structured with a 3-year final maturity. A
Credit Enhancer would be available at this tenor and would allow a placement
into one of the Citicorp administered commercial paper conduits. Under current
market conditions, we believe that the Note could be placed within one of the
Citicorp administered conduits at an effective spread of 100 bps over one month
LIBOR. Below is a breakdown of the indicative spread calculation as of
March 10, 2000:
Conduit Base Cost versus LIBOR(1) (8) bps
Ongoing Annual Costs
Program Fee 40
Liquidity Fee(2) 30
Dealer Commission(3) 5
Ratings Agencies(4) 1
Administration Fee 2
Surety Cost(5) 30
--------------------------------------------------------------
Average Ongoing Costs 100 bps
(1) Based on Charta Inc. commercial paper issuance cost compared to the 30-day
LIBOR average.
(2) Assumes 1-year backstop facility. Liquidity fee will depend on market
conditions at the time of issuance and be subject to re-pricing at eat 364-
day renewal.
(3) Distribution fee paid by Charta to distribute the CP in the market.
(4) To monitor the transaction.
(5) Surety Cost estimate based on initial negotiation with two independent
surety providers.
Prodigy acknowledges that Citibank's representative are not tax, accounting,
legal or regulatory experts and accordingly can make no representation as to any
2
tax, accounting, legal or regulatory result. Prodigy will seek separate advice
regarding such matters from its own qualified advisors.
Not a Commitment
----------------
This letter does not constitute a commitment by Citibank to lend money, to
underwrite the Financing, to purchase securities or otherwise assets, or to
provide financing to Prodigy or obtain financing for Prodigy from others. The
delivery of such a commitment will be subject to, among other things;
satisfaction of the conditions precedent set forth below.
Conditions Precedent
--------------------
Citibank's obligations hereby and its ability to consummate the Financing
described herein, are expressly subject to the satisfaction of the following:
(i) completion of such due diligence review as Citibank deems advisable,
the results of which are satisfactory to Citibank;
(ii)in Citibank's determination, the absence of any material adverse change
in the financial markets or in the financial condition or operations of
Prodigy;
(iii)negotiation and execution of mutually satisfactory documentation of the
Financing (collectively, the "Program Documents"), including, without
limitation, note purchaser agreement, credit agreement, Financial
Guarantee documentation and the receivables contribution and sale
agreement;
(iv) the receipt of a structure shadow rating of at least investment grade
and an overall transaction rating of at least AA/Aa2 from S&P and
Xxxxx'x respectively;
(v) the receipt of internal credit approval and such other approvals and
legal opinion as Citibank may deem necessary or advisable, in form and
substance satisfactory to Citibank; and
(vi) any other condition precedent set forth in the Term Sheet.
Fees and Expenses
-----------------
In consideration of the services to be provided by the Arranger hereunder,
Prodigy shall pay the Arranger a structuring fee equal to 0.75% of the aggregate
principal amount of the Note with a minimum structuring fee equal to $1.250
million. Such fee shall be due and payable only at and upon closing and shall
be deducted from the proceeds of the transaction.
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The following are estimates of key expenses for the potential transaction.
Arranger Legal Counsel US$ 100,000-150,000 (plus disbursements)
Citicorp out-of-pocket US$ 15,000
Information Memorandum
Production (Syndication) US$ 7,500
Collection Agent Gees US$ 10,000 per annum
Trustee Legal Expenses US$ 15,000 (plus disbursements)
Rating Agency Expenses US$ 50,000-100,000
Surety Upfront Fees US$ 50,000-75,000
All payments to the Arranger under this Proposal Letter shall be payable in U.S.
dollars in New York free and clear of any set-off, claims and all applicable
withholding, stamp and other similar taxes and of all other governmental charges
of any nature whatsoever.
Recognizing that Citibank is incurring substantial costs and expenses in
connection with the proposal described herein, Xxxxxxx also agrees to reimburse
Citibank on demand for any out-of-pocket expenses incurred by it in performing
its obligations hereunder, including, without limitation, all reasonable fees
and disbursements listed above and counsel for the surety provider, whether or
not the Program Documents are executed or the Financing is consummated or
Citibank's engagement hereunder is terminated, up to $750,000. Such expenses
will be in addition to any direct expenses incurred by Prodigy in connection
with the Financing, including without limitation, fees and disbursements of
counsel to Prodigy, rating agency fees, and agency and trustees fees. Xxxxxxx
also agrees to pay o demand all out-of-pocket 3rd party costs and expenses of
Citibank (including, without limitation fees and disbursements of counsel)
incurred in connect with the enforcement of any of its rights and remedies
hereunder.
Termination
-----------
Citibank's engagement hereunder shall terminate on the earlier of (i) the
execution of mutually satisfactory Program Documents, and (ii) the written
notice of Prodigy to Citibank, or of Citibank to Prodigy, that the engagement is
terminated (such date, the "Termination Date"). The obligations of Prodigy
under "Fees and Expenses", "Indemnification" and "Confidentiality" shall survive
termination of Citibank's engagement hereunder, except to the extent, and only
to the extent, such matters are explicitly covered in such Program Documents.
Indemnification
---------------
Prodigy shall indemnify and hold harmless and release each indemnified Party
from and against any losses, claims, damages, liabilities or expenses (including
fees and expenses of counsel), joint and several, resulting from or arising out
of, or in connection with or relating to (i) the Financing or the use of
proceeds therefrom, or (ii) Citibank's engagement hereunder, whether or not the
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transactions contemplated hereby are consummated, except to the extent such
loss, claim, damage, liability or expense is found in a final, non-appealable
judgment of a court of competent jurisdiction to have resulted from such
Indemnified Party's gross negligence or willful misconduct or breach of the
obligations of the Indemnified Party under this agreement. Prodigy further
agrees that no Indemnified Party shall have any liability (whether direct or
indirect, in contract, tort or otherwise) to Prodigy or any of their
shareholders or creditors for or in connection with the transactions
contemplated hereby, except to the extent such liability is found in a final,
non-appealable judgment of a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct or breach
of the obligations of the Indemnified Party under this agreement. An
"Indemnified Party" means Citibank, each of its affiliates and each special
purpose or receivable securitization company for which Citibank acts as
administrative agent, servicing agent, servicer or in a similar capacity, and
each of the respective officers, director, agents and employees of such
Indemnified Parties.
Confidentiality
---------------
The proposal and structure of the Financing, any related structures developed by
Citibank for Prodigy, any related analyses, computer models, information or
documents, this Agreement, the Term Sheet, the Program Documents, Citibank's
written and oral reports to Prodigy and any related written information
(collectively, "Product Information") constitutes proprietary information of
Citibank. Xxxxxxx agrees:
(i) to keep all Product Information confidential and to disclose Product
Information only to those of its officers, employees, agents, accountants, legal
counsel and other representatives (collectively "Representatives") who have a
need to know such Product Information for the purpose of assisting in the
negotiation and completion of the Financing:
(ii) to use the Product Information only in connection with the Financing
and not for any other purpose;
(iii) to cause its Representatives to comply with these provisions and to
be responsible for any failure of any Representative to so comply.
All information provided to Citibank which, under the circumstances of its
provisions and receipt, would ordinarily be considered confidential shall
similarly be subject to the provisions set forth in subparagraphs (i) through
(iii) and the obligations of non-disclosure contained therein by Citibank and
its representatives.
The provisions of this section shall not apply to Product Information or to
information provided by Prodigy to Citibank that is a matter of general public
knowledge or that has heretofore been or is hereafter published in any source
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generally available to the public or that is required to be disclosed by law or
in requested by any regulatory body with jurisdiction over Citibank.
Potential Conflicts; Principal Transactions
-------------------------------------------
Prodigy acknowledges that:
(i) Citibank may be providing financing or other services to parties whose
interests may conflict with Prodigy; it being understood that consistent with
its long-standing policy to hold in confidence the affairs of its customers,
Citibank will not furnish confidential information obtained from Prodigy to any
of its other customers and will not make available to Prodigy confidential
information that it has obtained or may obtain from any other customers;
(ii) Citibank is not acting as an agent or fiduciary for Prodigy in
connection with the Financing and Xxxxxxx has the capacity to evaluate and
negotiate the terms of the Financing on an arm's length basis; and
(iii) Citibank may act as principal in various aspects of the Financing.
Prodigy waives any claim against Citibank based upon any conflict of interest
that Citibank may have with regard to acting under this Agreement and as a
principal in the Financing, except to the extent that such conflict of interest
results in a breach of Citibank's obligations to Prodigy under this letter
agreement.
Exclusivity
-----------
Xxxxxxx agrees that, during the terms of this agreement, no other person is or
will be appointed, authorized or retained by Prodigy or any of their affiliates
to perform substantially similar services on behalf of Prodigy that the
Arrangers has been engaged to perform hereunder for the proposed securitization
of the ISP contract receivables. Furthermore, during the period from the date
hereof through the date which is 6 months after the date hereof, Prodigy will
not, and will cause its affiliates not to, initiate, solicit or enter into any
dissuasions or negotiations looking toward the issuance, offering, or sale of
the Notes, or any other substantially similar security, to any third parties,
except through the Arrangers. In the event Xxxxxxx receives any inquiry
concerning the Financing during such period, Xxxxxxx will promptly inform the
Arranger of such inquiry.
Additionally, for a period of one year from the date of this agreement, Xxxxxxx
agrees that Citibank shall have the right of first refusal to act as sole agent
for the next substantially similar financing transaction undertaken by Xxxxxxx.
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Cooperation
-----------
It is understood that Prodigy will furnish Citibank with all information and
data that Citibank shall reasonably deem appropriate in connection with its
engagement hereunder. Prodigy agrees to do those things that are reasonable and
necessary to assist Citibank to facilitate the consummation of the Financing.
Xxxxxxx recognizes and confirms that Citibank, in acting pursuant hereto, will
be using information in public reports and other information provided by others,
including information provided by Prodigy and that Citibank does not assume
responsibility for the accuracy or completeness of such information.
Complete Agreement; Amendments; Governing Law
---------------------------------------------
This Agreement sets forth the entire understanding of the parties relating to
the subject matter hereof and supersedes and cancels any prior communications,
understandings and agreements between the parties relating to the subject matter
hereof. This Agreement may not be amended or modified except in writing. The
terms of this Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without reference to the conflicts of laws
provisions thereof.
If the foregoing terms meet with your approval, please indicate your acceptance
by signing and returning the attached copy of this letter to us no later than
March 20, 2000.
Sincerely,
CITIBANK N.A. NEW YORK
By: /s/ Xxxxxxx Xxx
---------------
Title: Xxxxxxx Xxx-Vice President
Date:
ACCEPTED AND AGREED
PRODIGY COMMUNICATIONS CORP.
By: /s/ Xxxxxx X. Xxxxxx
---------------------------
Xxxxxx Xxxxxx
Title: EVP General Counsel
Date: 3/16/00
cc: Xxx Xxxxxxx, Prodigy
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March 13, 2000
Prodigy Communications Corporation, Inc.
Receivables Securitization Program
Preliminary Summary of Principal Terms and Conditions
(Not a Commitment - For discussion purposes only)
Program: Revolving transfer of an undivided
interest in receivables (the
"Receivables") arising under certain
contracts (the "Contracts") between
Prodigy Communications Corp.
("Prodigy") and various consumer
obligators (the "Subscribers") in
connection with Prodigy's computer
purchase rebate program. Payments by
the Subscribers under the Contracts
will be due monthly over a period of
one, two, or three years unless sooner
terminated. The maximum tenor of the
Contracts is three years.
Originator: Prodigy shall initially transfer all of
the contracts originated under the Best
Buy rebate program, which meet the
eligibility criteria, on a true sale
basis to the Issuer.
Issuer: [Prodigy Funding Corp.] ("Prodigy
Funding"); Prodigy Funding will be
established as a special-purpose,
bankruptcy-remote wholly-owned
subsidiary of Prodigy or its
successors. The Issuer will issue the
Variable Funding Note (the "Note"),
representing an undivided interest in
the Receivables generated by the assets
of Prodigy Funding, to the Purchaser
pursuant to the Note Sale Agreement.
Opinions of law will be provided to
conform the separateness of Prodigy
from the Issuer, the true sale nature
of the transfer, and that the assets
transferred to the Issuer would not be
consolidated with the estate of Prodigy
in the case of a bankruptcy or
insolvency event with respect to
prodigy.
Credit Enhancement: To be in the form of:
. Overcollateralization of anticipated
future receipts at a level to be
determined following due diligence
and of sufficient debt service
coverage to meet
A-1
. both S&P's and Xxxxx'x minimum
investment grade standards on a stand
alone basis;
. A performance guarantee provided by
SBC Communications Corp. ("SBC")
that, in the event Prodigy becomes
unable to continue to provide its
service obligations under the
Contracts, SBC shall either (a)
provide prodigy's service obligations
directly, or (b) replace Prodigy with
a substitute ISP, as allowed by the
Contracts, acceptable to the program
agent or its assignees;
. A financial guarantee provided by
either a monoline insurer or a re-
insurance company whose rating shall
be at least AA/A12 by S&P and Xxxxx'x
respectively.
. Additional credit enhancement in the
form of an affirmative pledge by
Prodigy and its successors to replace
defaulted Receivables with "month to
month" subscriber cash flows to the
extent necessary to maintain the
minimum investment grade shadow or
ratings required by from S&P and
Xxxxx'x.
Purchaser: A multi-seller receivables
securitization company (each, an "RSC")
administered by Citicorp North America,
Inc., and/or its eligible assignees,
including the Liquidity Provider.
Program Agent: Citicorp North America, Inc. will act
as the Purchaser's agent ("Program
Agent") to administer the Program.
Receivables: The Receivables represent either (i)
scheduled payments, cancellation fees,
late fees and other amounts due
(collectively, the "Contractual
Payments") under the Contracts from the
Subscribers who, as a result of
receiving a $400, $250, or $100
computer purchase rebate, subscribe to
"Prodigy", an ISP service provided by
Prodigy for a period of three, two or
one years respectively, with a regular
monthly payment of [either $19.95 or
$21.95], (ii) payments [less
interchange fees] due from various
credit card companies (e.g. MasterCard,
VISA etc.) approved by the Program
Agent (the "Credit Card Companies") who
bill and collect all or a part of the
Contractual
A-2
Payments from the Subscribers, or (iii)
Payments due from all other "month to
month" Prodigy subscribers.
Facility Size: Up to $200 million, subject to due
diligence. The collection of
Receivables will be used to repay the
Program.
Revolving Period: The period commencing on the closing
date and ending on the date (the
"Termination Date") which occurs six
months thereafter, or sooner if agreed
to by all parties to the Program
documents.
Maturity Date: Three years from the Termination Date.
Transfer Date: With regard to any Receivable, the date
such Receivable is transferred under
the Program. The Initial transfer is
anticipated to occur on or before
[May 31, 2000].
Servicer: Prodigy. The duties of the Servicer
will include billing, collecting, re-
billing, enforcement and pursuit of
past due payments on any Receivables,
funds disbursement, and periodic
reporting. Prodigy may sub-contract all
or part of its servicing obligations if
it remains primarily liable therefore.
The Program Agent may, under certain
circumstances, terminate Prodigy as
Servicer and appoint a new Servicer.
Servicer Fee: As Servicer, Prodigy will receive a fee
of [$ ] per month per Subscriber
payable by the Issuer unless an Event
of Termination has occurred. If Prodigy
is not the Servicer, a market rate for
such Servicer, capped at [ %] of such
successor Servicer's actual cost of
collection, will be deducted from cash
proceeds from the Receivables. The
Servicer Fee will be set following
rating agency review and negotiation
with a financial guarantor.
Security Interest: The Purchaser will be conveyed, in
connection with the purchaser of the
Variable Funding Note, a first priority
perfected ownership/security interest
in the Receivables, the proceeds
thereof, and any security related
thereto.
Settlement Procedures: Provided no Event of Termination has
occurred, monthly collections are
allocated as follows: (i) to the
Purchaser for interest and fees, (ii)
to the Servicer for
A-3
the Servicer Fee and (iii) (1) prior to
the Termination Date, to the Originator
to reinvest in new Eligible Receivables
to the extent such Eligible Receivables
exist, otherwise to the Purchaser for
repayment of outstanding capital or (2)
after the Termination Date, to the
Purchase for repayment of the aggregate
amount of outstanding Capital and other
amounts owed to the purchaser.
Upon the occurrence, and following an
Event of Termination or a "SBC Event"
(to be defined following the
negotiation of the SBC Performance
Guarantee), monthly collections are
allocated as follows: (i) to the
Purchaser for interest and fees, (ii)
to the Purchaser for repayment of the
aggregate amount of outstanding Capital
and other amounts owned to the
purchaser, and (iii) after Capital is
paid in full, to the Servicer for the
Servicer Fee.
Eligible Receivables Due Any Receivables:
from Subscribers:
. Which arise under a valid and binding
Contract and which at the time of the
transfer of such Receivable conveyed
good and marketable title thereto
free and clear of all liens.
. With regard to which the related
Subscriber is not affiliated with the
Issuer or Prodigy.
. Which will at all times be the legal
and assignable payment obligation of
the Subscriber of such Receivable,
enforceable against such Subscriber
in accordance with its terms.
. Which arises under a Contract which
(I) is fully payable no later than
[35] months after its related
Transfer Date and (ii) requires
payments to be made no less
frequently than monthly.
. Which, on the Transfer Date, is not a
Defaulted Receivable.
. Which, together with the contract
related thereto, does violate any
law or regulation.
A-4
. Which is (a) freely transferable and
(b) arises under a Contract which is
(i) a legal, valid and binding
obligation of the Issuer and the
Subscriber enforceable in accordance
with its terms, (ii) in form and
substance satisfactory to the Program
Agent.
. Which is an "account" as defined
within the UCC.
. Which is denominated and payable by
approved Credit Card Companies in
United States dollars in the United
States to Prodigy who in turn
deposits into Purchaser's Accounts.
. Which is not the subject of any
dispute, offset, counterclaim or
defense.
. Which complies with Xxxxxxx's credit
and collection policy.
. Which Represents the sale of goods or
services per Section 3(c)(5) of the
Investment Company Act of 1940 and
which arises out of a current
transaction per Section 3(a)(3) of
the Securities Act of 1933.
. Other, as applicable.
Eligible Receivables Due To be determined after due diligence
from Credit Card Companies:
Defaulted Subscriber Receivable: All Receivables outstanding (whether or
not then due) under any Contract (i)
that has Receivables or part thereof
which remain unpaid for more than [60]
days (subject to due diligence) from
the original due date, (ii) the
Subscriber under whish is in bankruptcy
or similar proceedings, (iii) which,
consistent with Prodigy's credit and
collection policy, has been or should
have been written off as uncollectable,
or (iv) as to which there is a breach
in the underlying contract.
Defaulted Credit Card Company To be determined after due diligence
Receivable:
A-5
Delinquent Subscriber Receivable: All Receivables outstanding (whether or
not then due) that are not Defaulted
Receivables under any Contract (i) that
has Receivables or part thereof which
remain unpaid for more than [30] days
from the original due date or (ii)
which, consistent with Prodigy's credit
and collection policy, has been or
should be classified as delinquent.
Delinquent Credit Card Company To be determined after due diligence
Receivable:
Covenants: Customary covenants with respect to the
issuer and Prodigy, including:
. Issuer will furnish to Program Agent
a monthly report which will include,
without limitation, information with
regard to agings, defaults,
collections, deemed collections,
Subscriber volumes and Subscriber and
Credit Card Company cancellations;
etc.
. Issuer and Prodigy will maintain all
documents and records necessary with
respect to the collection of the
Receivables.
. Issuer and Prodigy will provide
certified quarterly and annual
financial statements. Prodigy will
provide certified quarterly and
audited annual financial statements.
Prodigy and Issuer will provide such
other information as Program Agent
may reasonably request.
. Issuer and Prodigy will permit audits
of information related to the
Program.
. Issuer will maintain its separate
existence from Prodigy.
. Issuer will only accept transfers of
Receivables from Prodigy or its
successors.
A-6
. Prodigy and Issuer will perform and
comply with the terms and conditions
specified in the Program documents,
and shall maintain such documents in
full force and effect.
. Issuers and Prodigy or successors
will not modify its organizational
documents in such a way as to have an
adverse effect on Purchaser.
. Issuer will not incur debt, except as
permitted under the Program
documents.
. Issuer will not make distributions,
except as permitted under the Program
documents.
. Issuer will not enter into
transactions with affiliates or third
parties, except as permitted under
the Program documents.
. Neither Issuer nor Prodigy will sell,
assign or otherwise encumber any
Receivable except as contemplated
under the Program documents.
. Prodigy and the Issuer will each
comply with its credit and collection
policy and will not materially change
its credit and collection policy,
except as specifically permitted by
the Program Agent.
. Prodigy and the Issuer will comply
with all terms of the Contracts.
. Neither Prodigy nor the Issuer will
cancel, terminate, amend, modify or
waive any term or condition of any
Contract related to the receivables,
except as specifically permitted by
the Program Agent.
. Prodigy will offer to the Subscribers
the same upgrades to their level of
service that Prodigy provides to
their other on-line customers at no
higher price.
. Prodigy, or its successor, must
either (a) directly provide the
Prodigy service or (b) wholly own the
entity which provides the Prodigy
service, in each case for the
duration of the Contracts and at
least at the level of service
presently provided.
A-7
. Prodigy, or its successor, must own,
directly or indirectly, 100% of the
capital stock of the Issuer and
maintain control of them.
. Other, as applicable.
Events of Termination: Events of Termination shall result in
acceleration of the transaction via a
100% trapping of cash to be used to pay
down the facility in advance of
scheduled amortization. Upon the
occurrence of an Event of Termination
the revolving nature of the facility
shall cease a no new contract
purchasers shall occur. The Events of
Termination shall include:
. Servicer fails to make payments when
due (a cure period will be negotiated
within the program documents).
. Any representation or warranty or
Issuer Report or any information is
materially false or incorrect.
. Issuer fails to perform or observe
any other term or covenant.
. The parent fails to pay other debt
with a principal balance in excess of
[ ] million or defaults under any
other debt agreement or instrument
with a principal balance in excess of
[ ] million.
. The Note purchased by Purchaser
ceases to create a valid and
perfected first priority ownership
interest in the Pool Receivables.
. Bankruptcy or insolvency of Issuer or
the Parent.
. 3 month rolling average Default Ratio
exceeds [ ]; 3 month rolling average
Dilution Ratio exceeds [ ]; 3 month
rolling average Loss-to-Liquidation
Ratio exceeds [ ]; and 3 month
rolling average Delinquency Ratio
exceeds [ ]. These triggers will be
set as part of the negotiation of the
program documents.
. Material adverse change in financial
condition or operations of Issuer or
in the collectibility of Pool
Receivables.
A-8
. SBC senior unsecured long term debt
rating falls below either, BBB by
S&P, or Baa2 by Xxxxx'x.
. Others to be determined in the course
of due diligence including a minimum
debt service coverage factor to be
set based upon rating agency
requirements.
Conditions Precedent: Completion and execution of all
documentation delivered and
satisfactory to the Program Agent,
including filing of UCC-1 financing
statements plus:
. Representations and warranties are
true.
. No event of Termination has occurred.
. The Program Agent has received such
other approvals as reasonably
requested.
. Satisfactory reviewed by the Program
Agent of Servicer's billing,
collection and reporting systems and
Pool Receivables.
. Tue sale, enforceability, and other
necessary opinions.
. Consents of third parties as
appropriate.
. Other, as applicable
Representations and Customary representations and
Warranties: warranties of the Issuer and Prodigy
found in similar rated bank or
securitization transactions,
including:
. Due organization, qualification, etc.
of Issuer and Prodigy.
. Due authorization, execution,
delivery and performance of the
Program documents by the Issuer and
Xxxxxxx, respectively, which
establishes legal, valid, and binding
obligations of Issuer and Prodigy
respectively, with respect thereto.
A-9
. The Note Purchase Agreement will
evidence the transfer of a first
priority perfected ownership interest
in the Receivables to the Purchaser.
. All filings and recordings required
to perfect the Interest of the
transferor and the Purchaser in the
Receivables, including the Contracts
sold to the issuer, and any related
security shall have been accomplished
and are in full force and effect.
. Each Receivable is an Eligible
Receivable and is free of adverse
claims.
. Transfer of the Receivables by
Prodigy to issuer is for reasonably
equivalent value.
. Invoices and/or credit card billing
statements with respect to each
Receivable will be sent in accordance
with the Receivables Transfer
Agreement.
. All information furnished by Transfer
or Prodigy to the Program Agent (and
other transaction parties), whether
on or before the closing date, (i) is
true and accurate in all material
respects, (ii) does not contain any
materially misleading statements, and
(iii) does not omit material facts.
. No material adverse change in the (i)
collectibility of Receivables or (ii)
operations or ability to perform its
obligations under the program
documents, of Issuer or Prodigy.
. Prodigy has complied with their
credit and collection policy and such
policy has not changed.
. Neither the Issuer nor Prodigy will
cause a voluntary bankruptcy of
Issuer so long as Issuer is solvent.
. Issuer and Prodigy are solvent.
. Issuer is not an "investment company"
within the meaning of the Investment
Company Act of 1940, as amended.
. Other, as applicable.
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Indemnities: Prodigy shall jointly and severally
indemnify the parties to the
transaction, (each an "Indemnified
Party") against all third party
liabilities, expenses, damages or
losses ("Losses") associated with the
Program, excluding however, (i) Losses
to the extent resulting from the gross
negligence or willful misconduct of the
Indemnified Party, (ii) income,
franchise or similar taxes or (iii)
recourse (except as herein
contemplated) for uncollectible
Receivables.
Without limiting the foregoing, Prodigy
shall indemnify the Indemnified Parties
for all Losses resulting from:
. Misrepresentations and omissions.
. Any reduction or offset in the amount
owed by a Subscriber or a Credit Card
Company.
. Failure to vest in the Purchaser for
a first priority perfected ownership
interest in the Receivables.
. Failure by Prodigy or the Servicer to
perform the servicing duties or other
obligations under the Program
documents or to comply with any term
or condition thereunder.
. Any increase in the fees (including
without limitation, intercharge fees)
payable by Prodigy to the Credit Card
Companies.
. Commingling of funds.
. Others as may be required upon
completion of due diligence.
Assignability: The Purchaser and its assignees may
each assign, in whole or in part, its
interest in the Notes pursuant to the
Program documents. Neither Prodigy, nor
the issuer shall be permitted to assign
any of its rights or obligations
pursuant to the Program documents
without the prior written consent of
the Program Agent.
Governing Law: The laws of State of New York.
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Costs and Expenses: All out-of-pocket costs and expenses of
Citibank and its affiliates associated
with the preparation, execution and
delivery, waivers and amendments,
administration and enforcement of the
Program including fees and expenses of
counsel and auditing fees are to be
paid by Prodigy regardless of whether
the Program closes.
A-12
