Exhibit 10.6
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SERVICING AGREEMENT
dated as of May 10, 2005
among
XXXXXX FUNDING CORPORATION
XXXXXX CO.
and
THE CIT GROUP/BUSINESS CREDIT, INC.
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This SERVICING AGREEMENT (as amended, supplemented or otherwise modified
from time to time, this "Agreement") is entered into as of May 10, 2005, among
XXXXXX FUNDING CORPORATION, a Delaware corporation, as purchaser under the
Account Purchase Agreement (the "Purchaser"), XXXXXX CO., a Pennsylvania
corporation ("Xxxxxx"), as servicer (in such capacity, together with its
successors and permitted assigns in such capacity, the "Servicer") and THE CIT
GROUP/BUSINESS CREDIT, INC., a New York corporation ("CIT"), as agent (in such
capacity, together with its successors and assigns in such capacity, the
"Agent").
PRELIMINARY STATEMENTS. All terms used herein but not defined herein shall
have the meaning ascribed to such term in the Financing Agreement dated of even
date herewith among Xxxxxx Funding Corporation, as borrower, The CIT
Group/Business Credit, Inc, as agent, and the various lenders party from time to
time thereto.
WHEREAS, pursuant to the Account Purchase Agreement, Xxxxxx has agreed to
sell, transfer and assign the Accounts and Related Rights to the Purchaser, and
the Purchaser has agreed to acquire such Accounts and Related Rights.
WHEREAS, pursuant to the Financing Agreement, CIT and the other lenders
party from time to time thereto have agreed to make loans to the Purchaser, as
borrower thereunder, and the Purchaser, as borrower thereunder, has granted to
the Agent on behalf of the lenders party from time to time thereto, a security
interest in all of its assets, including the Accounts and Related Rights.
WHEREAS, the parties hereto wish to establish an arrangement with respect
to the servicing of the Accounts and grant the Agent certain rights with respect
thereto.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained herein, the parties hereto agree as follows:
ARTICLE I.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 1.1. Representations and Warranties: Covenants. The Servicer hereby
makes the representations and warranties, and hereby agrees to perform and
observe the covenants, set forth below:
(a) Representations and Warranties of the Servicer. The Servicer
represents and warrants as follows:
(i) It is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Pennsylvania, 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 on
(A) its assets, operations, business or condition or (B) its
ability to perform its obligations under this Agreement and each
other Transaction Document to which it is a party (a "Material
Adverse Effect").
(ii) The execution, delivery and performance by the Servicer of this
Agreement and the other Transaction Documents to which it is a
party: (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
charter or by-laws, (B) any material 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 lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement upon
or with respect to any of its properties. This Agreement has been
duly executed and delivered by the Servicer.
(iii) No authorization, approval or other action by, and no notice to
or filing with 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
(each, a "Governmental Authority") or other person, is required
for the due execution, delivery and performance by the Servicer
of this Agreement or any other Transaction Document to which it
is a party.
(iv) Each of this Agreement and the other Transaction Documents to
which it is a party constitutes the legal, valid and binding
obligation of the Servicer enforceable against it 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.
(v) There is no pending or, to its knowledge, threatened action or
proceeding affecting it or any of its Subsidiaries or properties
before any Governmental Authority or arbitrator that is likely to
result in a Material Adverse Effect.
(vi) It is not in violation of any order of any court, arbitrator or
Governmental Authority that is likely to result in a Material
Adverse Effect.
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(vii) No event has occurred and is continuing that constitutes a
Termination Event or which, with the giving of notice, the lapse
of time or both, would constitute a Termination Event.
(viii) The Servicer has complied in all material respects with the
receivables credit and collection policies and practices of the
relevant Originator in effect on the date of this Agreement and
described in Schedule I to this Agreement, as modified in
compliance with this Agreement (the "Credit and Collection
Policies") with regard to each Account and with all of the terms,
covenants and agreements contained in this Agreement and the
other Transaction Documents that are applicable to it.
(b) Covenants of the Servicer. Until the later of (i) the Termination Date
and (ii) the date on which all Obligations shall be paid in full and
all Commitments under the Financing Agreement shall have terminated:
(i) Compliance with Laws. Etc. The Servicer shall 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; provided that the
Servicer may contest any law, rule, regulation or order in good
faith in any reasonable manner which the Agent determines, in the
exercise of its reasonable business judgment, will not have a
Material Adverse Effect on the Agent's or the Lenders' rights or
priorities pursuant to the Financing Agreement in the Accounts
and Related Rights; provided further that the Purchaser or the
Servicer, as applicable, shall have set aside on its books all
appropriate reserves in accordance with generally accepted
accounting principles in effect from time to time.
(ii) Offices, Records and Books of Account, Etc. The Servicer shall
keep its principal place of 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 Accounts
at the address of the Servicer set forth under its name on the
signature page to the Agreement or, upon at least 15 days' prior
written notice of a proposed change to the Agent, at any other
locations in jurisdictions where all actions reasonably requested
by the Agent to protect and perfect the interest of the Agent in
the Accounts and Related Rights have been taken and completed.
The Servicer will maintain and implement administrative and
operating procedures (including an ability to recreate records
evidencing Accounts and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain all
documents, books, records, computer tapes and disks and other
information reasonably necessary or advisable for the collection
of all Accounts and Related Rights (including records
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adequate to permit the daily identification of each Account and
all collections of and adjustments to each Account).
(iii) Compliance with Contracts and Credit and Collection Policy. The
Servicer shall, at its expense, timely and fully (A) perform and
comply in all material respects with the provisions, covenants
and other terms required to be observed by it under the Contracts
related to the Accounts and (B) comply in all material respects
with the Credit and Collection Policy with regard to each Account
and related Contract.
(iv) Extension or Amendment of Accounts. Except as provided in the
Agreement, the Servicer shall not extend the maturity or adjust
the outstanding balance or otherwise modify the terms of any
Account, or amend, modify or waive any term or condition of any
related Contract.
(v) Change in Business or Credit and Collection Policy. The Servicer
shall not make any material change in the character of its
business or in any Credit and Collection Policy that would have a
Material Adverse Effect. The Servicer shall not make any other
change in any Credit and Collection Policy without giving prior
written notice thereof to the Agent.
(vi) Audits. In order to enable the Purchaser to comply with its
obligations under Section 5.2(a) of the Financing Agreement, the
Servicer will permit the Agent, and/or any agent representative
designated by it, (i) access to all books and records in its
possession or under its control relating to the Accounts and the
Related Rights, including the related Contracts; and (ii) to
enter upon its premises for the purpose of examining such
materials described in clause (i) above, and to discuss matters
relating to Accounts and the Related Rights or its performance
hereunder or under the Contracts with any of its officers and
employees. The foregoing provision shall not be deemed to give
the Agent any greater rights than it has under said Section
5.2(a).
(vii) Change in Lock-Box Banks, Lock-Box Accounts and Payment
Instructions to Customers. The Servicer and shall not add or
terminate any bank as a lock-box bank or any account as a
lock-box account from those permitted or required under the
Financing Agreement, or make any change in the instructions to
Customers regarding payments to be made to the Servicer or any
lock-box account (or related post office box), unless the Agent
shall have consented thereto in writing and such account shall
have been established as a Depository Account in accordance with
the Financing Agreement.
(viii) Deposits to Lock-Box Accounts. The Servicer shall: (i) instruct
all account debtors to make payments of all Accounts to one or
more Depository Accounts or Existing Depository Accounts (subject
to the requirement of Section 5.2(k) of the Financing Agreement
to have
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payments of all Accounts made to Depository Accounts within
forty-five (45) days of the Closing Date) or to any related post
office boxes (and shall instruct the banks at which such
Depository Accounts or Existing Depository Accounts are
maintained to cause all items and amounts relating to the
Accounts received in any such post office boxes to be removed and
deposited into the appropriate, related Depository Account or
Existing Depository Account on a daily basis); and (ii) deposit,
or cause to be deposited (A) any and all funds that are received
by any Originator, Xxxxxx, the Purchaser or the Servicer in
payment of any amounts owed in respect of such Accounts
(including finance charges, interest and all other charges), or
applied to amounts owed in respect of such Accounts (including
insurance payments and net proceeds of the sale or other
disposition of repossessed goods or other collateral or property
of the related Customer or any other person directly or
indirectly liable for the payment of such Accounts and available
to be applied thereon) and (B) all other proceeds of such
Accounts (the items referred to in clauses (A) and (B) above
being referred to herein collectively as "Collections") into
Depository Accounts not later than one Business Day after receipt
thereof. Each Depository Account shall at all times be subject to
a Depository Account Control Agreement (and, from the Closing
Date up until the date on which all Accounts are made payable to
Depository Accounts (which date shall not be more than forty-five
days after the Closing Date), the Existing Depository Accounts
will be daily swept into the PNC concentration account in respect
of which PNC shall have executed and delivered to the Agent a
deposit account control agreement pursuant to and in accordance
with Section 2.1(h) of the Financing Agreement). The Servicer
will not deposit or otherwise credit, or cause or permit to be so
deposited or credited, to any Depository Account or Existing
Depository Account cash or cash proceeds other than Collections.
(ix) Marking of Records. At its expense, the Servicer shall xxxx its
master data processing records relating to Accounts and related
Contracts to show the Purchaser's ownership thereof.
(x) Notice of Termination Events. The Servicer shall promptly notify
the Agent, to the extent the Agent does not already have notice
thereof, of the occurrence and continuance of any Termination
Event (as hereinafter defined).
(xi) Acknowledgment of Separateness. The Servicer (and any subservicer
or successor Servicer) acknowledges its status as, and shall
maintain itself, separate and distinct from the Purchaser, all in
accordance with the separateness acknowledgment delivered
pursuant to Section 2.1(j) of the Financing Agreement.
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Section 1.2. Termination Events. If any of the following (each, a
"Termination Event") shall occur:
(a) (i) the Servicer shall fail to perform or observe any term, covenant
or agreement under this Agreement and, except as otherwise provided
herein, such failure shall continue for 30 days after knowledge or
notice thereof, (ii) the Servicer shall fail to make when due any
payment or deposit to be made by it under this Agreement and such
failure shall continue unremedied for two Business Days or (iii)
Xxxxxx shall resign as Servicer in contravention of Section 2.1(c)
hereof and no successor Servicer reasonably acceptable to the Agent
shall have been appointed by the Agent or Xxxxxx (or any affiliate
thereof) shall fail to transfer to any successor Servicer when
required any rights pursuant to this Agreement;
(b) any representation or warranty made or deemed made by the Servicer
under or in connection with this Agreement or any other Transaction
Document to which it is a party, or any information or report
delivered by the Servicer pursuant to this Agreement or any other
Transaction Document to which it is a party, 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 Servicer of such inaccuracy;
(c) the Servicer 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
Servicer 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 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 Servicer shall take any corporate action to authorize
any of the actions set forth above in this paragraph;
(d) a Change in Control shall occur; or
(e) an Event of Default under the Financing Agreement shall have occurred
and be continuing;
then, in each case, the Agent shall have the right, by notice to the Servicer,
to terminate the rights of the Servicer to collect the Accounts hereunder.
Following such termination, the Agent shall have the right to (i) appoint itself
or another entity as successor Servicer hereunder in accordance with Section
2.1, (ii) direct the Customers to remit all amounts payable in respect of the
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Accounts directly to the Agent or its designee or into a Depository Account and
(iii) take any and all steps in the name of the Purchaser and on behalf of the
Purchaser necessary or desirable, in the determination of the Agent and in
accordance with Section 8.3 of the Financing Agreement, to collect any and all
amounts or portions thereof due in respect of any and all Accounts, Related
Rights and the related Contracts.
ARTICLE II.
ADMINISTRATION AND COLLECTIONS
Section 2.1. Appointment of the Servicer.
(a) The servicing, administering and collection of the Accounts and
Related Rights shall be conducted by the person so designated from
time to time as the Servicer in accordance with this Section. Until
the Agent gives notice to Xxxxxx (in accordance with this Section) of
the designation of a new Servicer, Xxxxxx 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 Agent may designate as Servicer any person (including
itself) to succeed Xxxxxx 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), Xxxxxx agrees that it will terminate its activities as Servicer
hereunder in a manner that the Agent determines will facilitate the
transition of the performance of such activities to the new Servicer,
and Xxxxxx shall cooperate with and assist such new Servicer. Such
cooperation shall include access to and transfer of related records
and use by the new Servicer of all licenses, hardware or software
necessary or desirable to collect the Accounts and the Related Rights.
(c) Xxxxxx acknowledges that, in making its decision to execute and
deliver the Financing Agreement, the Agent and the Lenders have relied
on Xxxxxx'x agreement to act as Servicer hereunder. Accordingly,
Xxxxxx 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 the case of
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
Purchaser and the Agent 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 Agent 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
that if any such delegation is to a person other than an
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Originator, the Agent shall have consented in writing in advance to
such delegation.
Section 2.2. 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 Account and
Related Rights 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 may, in accordance with the Credit
and Collection Policy, extend the maturity of any Account (but not
beyond 30 days) and extend the maturity or adjust the outstanding
balance of any defaulted Account as the Servicer may determine to be
appropriate to maximize Collections with respect thereto, provided,
however, that: (i) such extension or adjustment shall (A) affect the
determination whether such Account is or is not an Eligible Account
and (B) not limit the rights of the Agent under this Agreement and
(ii) if a Termination Event has occurred and Xxxxxx or an affiliate
thereof is serving as the Servicer, Xxxxxx or such affiliate may make
such extension or adjustment only upon the prior approval of the
Agent. The Purchaser shall deliver to the Servicer, and the Servicer
shall hold for the benefit of the Purchaser and the Agent, in
accordance with their respective interests, all records and documents
(including computer tapes or disks) with respect to each Account.
Notwithstanding anything to the contrary contained herein, if a
Termination Event has occurred and is continuing, the Agent may direct
the Servicer (whether the Servicer is Xxxxxx or any other person) to
commence or settle any legal action to enforce collection of any
Account or to foreclose upon or repossess any Related Rights.
(b) The Servicer shall, as soon as practicable following actual receipt of
Collections, deposit or cause such Collections to be deposited in a
Depository Account or an Existing Depository Account as provided in
the Financing Agreement.
(c) The Servicer's obligations hereunder shall terminate on the later of:
(i) the Termination Date and (ii) the date on which all Obligations
shall have been paid in full and all Commitments under the Financing
Agreement shall have terminated. After such termination, if Xxxxxx or
an affiliate thereof was not the Servicer on the date of such
termination, the Servicer shall promptly deliver to the Purchaser all
books, records and related materials that the Purchaser previously
provided to the Servicer, or that have been obtained by the Servicer,
in connection with this Agreement.
Section 2.3. Servicing Fee.
(a) Subject to clause (b), the Servicer shall be paid a fee equal to 0.50%
per annum (the "Servicing Fee Rate") of the daily average aggregate
outstanding balance of the Accounts. Such fee shall be paid out of
collections on the Accounts and
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Related Rights otherwise payable to the Purchaser, to the extent (but
only to the extent) permitted pursuant to the Financing Agreement.
(b) If the Servicer ceases to be Xxxxxx 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 100% of the aggregate reasonable
costs and expenses incurred by such successor Servicer in connection
with the performance of its obligations as Servicer.
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Servicer. Without limiting any other rights
that the Agent or Purchaser or any of their respective affiliates, employees,
officers, directors, counsel, successors, transferees or assigns (each, an
"Indemnified Party") may have hereunder or under applicable law, the Servicer
hereby agrees to indemnify each Indemnified Party from and against any and all
claims, damages, expenses, costs, losses and liabilities (including reasonable
attorney costs) arising out of or resulting from (whether directly or
indirectly): (a) 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, (b) the failure by the Servicer to comply with
any material applicable law, rule or regulation with respect to any Account or
the related Contract, (c) any dispute, claim, offset or defense of the related
account party to the payment of any Account resulting from or related to the
collection activities with respect to such Account, (d) any failure of the
Servicer to perform its duties or obligations in accordance with the provisions
hereof or under the Contracts or (e) the commingling of Collections at any time
with other funds.
ARTICLE IV.
MISCELLANEOUS
Section 4.1. Amendments, Etc. No amendment or waiver of any provision of
this Agreement, or consent to any departure by the Servicer therefrom, shall be
effective unless in a writing signed by the Agent and (unless an "Event of
Default" has occurred and is continuing under the Financing Agreement) the
Purchaser, 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 Agent to exercise, and no delay in exercising any right hereunder 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 4.2. Notices, Etc. All notices and other communications hereunder
shall, unless otherwise stated herein, be in writing (which shall include
facsimile communication) and be sent or delivered to the applicable party hereto
at its address set forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written notice to the
other parties hereto. Notices and communications by facsimile shall be effective
when sent
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(and shall be followed by hard copy sent by first class mail), and notices and
communications sent by other means shall be effective when received.
Section 4.3. Assignability.
(a) This Agreement and the rights and obligations of the Agent hereunder
shall be assignable by the Agent only to a successor to it in its role
as agent under the Financing Agreement.
(b) Except as provided in Section 2.1, none of the Purchaser, Xxxxxx or
the Servicer may assign its rights or delegate its obligations
hereunder or any interest herein without the prior written consent of
the Agent.
Section 4.3. Confidentiality. The Agent agrees that the confidentiality
provisions of Section 11.7 of the Financing Agreement shall apply to all
information obtained by it or its agents or representatives under this
Agreement.
Section 4.4. 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.
(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 4.5. 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; provided that any executed counterpart that is transmitted
by e-mail or telecopier shall constitute a valid signature for purposes hereof
and shall be deemed to have been validly delivered when received, so long as
such delivery shall be followed by hard copy sent by first class mail in
accordance with Section 4.2 hereof.
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Section 4.6. Survival of Termination. The provisions of Sections 3.1, 4.4,
4.5 and 4.8 shall survive any termination of this Agreement.
Section 4.7. 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 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 4.8. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the parties hereto, and supersedes all prior or
contemporaneous agreements and understandings of such persons, verbal or
written, relating to the subject matter hereof and thereof.
Section 4.9. Heading. 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.
[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.
XXXXXX FUNDING CORPORATION
By:
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Name:
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Title:
---------------------------------
Address: 0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx
0000 Xxxxxxxxxx, Xxx Xxxxxx
Xxxxxx, XX 00000
Attention:
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Telephone:
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Facsimile:
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XXXXXX CO.
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
Address: 000 Xxxxxxxxx Xx.
Xxxxxxxxxx, XX 00000-0000
Attention:
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Telephone:
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Facsimile:
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The CIT Group/Business Credit, Inc., as
Agent
By:
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Name:
----------------------------------
Title:
---------------------------------
Address:
The CIT Group/Business Credit,
Inc. 0000 Xxxxxx xx xxx
Xxxxxxxx Xxx Xxxx, XX 00000
Attention: Regional Credit Manager
Telephone:
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Facsimile:
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SCHEDULE I TO
SERVICING AGREEMENT
SCHEDULE I
CREDIT AND COLLECTION POLICY
RECEIVABLES OVERVIEW
CUSTOMER BASE
Xxxxxx is a manufacturer of ladder products and aluminum extruded products with
manufacturing facilities in Greenville, Pennsylvania; Franklin Park, Illinois;
Carrollton, Kentucky; Merced, California; and Juarez, Mexico. Werner is
headquartered in Greenville, Pennsylvania and had total sales of $446.2 million
in 2004. Xxxxxx'x business is separated into two distinct segments: the ladder
products segment and the extruded products segment, which comprised 84 and 16
percent of 2004 revenues, respectively. Products for Xxxxxx'x ladder products
include aluminum, fiberglass and wood ladders, scaffolding, stages and planks
and are sold to three major distribution channels: i) home improvement retail,
ii) hardware and iii) professional. In the extruded products division, Xxxxxx
manufacturers and sells aluminum extruded products and complex fabricated
components to several industries, including the automotive, electronics, and
architectural and construction industries. Due to the weather and the nature of
the ladder products, sales are highest between May and October. Sales are lowest
between December and February and begin to increase again in March. The majority
of the largest customers are from the ladder products division.
Xxxxxx'x largest customer is Lowes, with whom Xxxxxx entered into a strategic
alliance in December 2003, giving it exclusive rights to Xxxxxx branded climbing
products in the warehouse home center channel.
CREDIT APPROVAL, LIMITS, & FILES
Xxxxxx has two credit managers, one for each business segment and both long time
Xxxxxx employees. For potential customers, the credit manager references a D&B
database (on CD ROM). If the Credit Manager is not able to obtain sufficient
information from the database, a D&B report is ordered. In instances in which
the D&B history indicates poor payment history and/or outstanding suits or
judgments, the customer is only offered cash in advance terms.
In March 2004, credit limits were removed from the ladder product system, as
most credit limits were out-dated or not established for customers. Currently,
new ladder product orders are compared to the D&B "recommended credit limit" to
establish a credit limit. New limits are generally conservative compared to
those established by D & B, as the limit will be used to monitor initial payment
activity on the part of the customer. All credit applications are approved by
the Credit Managers.
A credit hold status is placed on customers having a questionable payment
history, and the customer order must, therefore, be approved by the Credit Dept.
before the system will permit shipment to take place.
Schedule I-1
XXXXXX COMPANY
CREDIT RENEWAL APRIL 2005
Credit files contain D&B reports and trade/bank references. The credit file is
typically updated annually for all customers for whom Xxxxxx'x sales exceed $5
million per year. Discretion is used based on the length of relationship with
the customer, sales volume, and payment history.
PAYMENT TERMS
Xxxxxx has a wide range of credit terms. Based upon past sales, the most heavily
used terms in relation to sales were those bearing Net 45 or Net 30 day terms.
However, many of the terms codes involve discounts, such as the commonly used
1%, 10 days/Net 30 days. Due to special promotions offered by the Sales
department, terms can extend to 120 days. Customers can have invoices that are
subject to more than one type of discount or terms. Approximately 10-15% of
receivables have invoices with terms between 61 and 120 days.
INFORMATION SYSTEMS
Xxxxxx currently operates on a XX Xxxxxxx computer system for AR, general ledger
and accounts payable. The system is backed up daily. A backup hot site is set up
in Philadelphia, PA. The backup tapes are stored in the Woodfield building in
Greenville and would be transported to Philadelphia for use. In the event of an
emergency, this site can attach all locations to the system. The most recent
test of the disaster recovery plan occurred in September 2002, and there were no
significant issues.
BILLING & COLLECTIONS
Collections are remitted to Xxxxxx in three ways. Cash is received via check or
wire transfer through one of three Existing Depository Accounts, wire transfers
directly to a PNC account (the "Cash Concentration Account") in respect of which
a deposit account control agreement will be executed on the Closing Date in
favor of the Agent, and local deposits made to another Existing Depository
Account at First National Bank (less than 1%). Wire transfers typically make up
about 40% of all Collections. The entire balance from Existing Depository
Accounts are swept daily into the Cash Concentration Account.
During April 2004, Xxxxxx began outsourcing the cash application function to a
third party vendor (Creditek LLC). Under this arrangement, Creditek has remote
access to the Xxxxxx system and applies cash daily. See "Duties of Creditek LLC"
for a description of Creditek's activities as they relate to Xxxxxx.
DELINQUENCY & WRITE-OFFS
The credit managers monitor delinquent accounts, as does Creditek for the ladder
product customers. Creditek will pursue collection to the point that it believes
the issue must be resolved by either the Xxxxxx XX Credit Manager or Xxxxxx
upper management. For certain accounts that are past due but not of such size
that they justify management intervention, the accounts are called to the
attention of the Credit Manager for placement with a credit agency. Balances are
typically written off after customers file for bankruptcy, bank foreclosures
occur, or collection action has been attempted through a collection agency and
failed.
Creditek has also assumed responsibility for researching short payments for
Xxxxxx'x ladder products division.
DILUTION
Dilution consists of cash discounts, returns, volume rebates and advertising
allowances (which are accrued for in a separate reserve on the balance sheet of
Xxxxxx), and general credit memos (shipping errors, price adjustments, etc.).
Returns can occur several months after the sale given the nature of the ladder
product. When a return occurs, an RMA is generated by the system and a credit
2
XXXXXX COMPANY
CREDIT RENEWAL APRIL 2005
is created to receivables. In the case of shipping errors, Xxxxxx requires a
copy of the invoice and proof of delivery from the customer to verify the error.
Credits for advertising rebates and other rebates typically relate to an entire
quarter of sales and the credit is not issued until after the end of the
quarter.
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