EXHIBIT 10.44
RECEIVABLES SALE AGREEMENT
Dated as of July 23, 1998
by and between
USC TELECOM, INC.,
as Seller, and
RFC CAPITAL CORPORATION
as Purchaser and Master Servicer
RECEIVABLES SALE AGREEMENT (the "Agreement"), dated as of July 23, 1998, by
and between USC TELECOM, INC., a Delaware corporation, as Seller and
Subservicer, and RFC CAPITAL CORPORATION, a Delaware corporation, as Purchaser
and Master Servicer.
WITNESSETH:
WHEREAS, the Seller desires to sell certain of its telecommunication
receivables and the Purchaser is a corporation formed for the purpose of
purchasing certain telecommunication receivables from time to time;
WHEREAS, the Purchaser shall act in its capacity as the Master Servicer to
perform certain servicing, administrative and collection functions in respect of
the receivables purchased by the Purchaser under this Agreement (the "Purchased
Receivables");
WHEREAS, the Purchaser and the Master Servicer desire that the Subservicer
be appointed to perform certain servicing, administrative and collection
functions in respect of the Purchased Receivables; and
WHEREAS, the Seller has been requested and is willing to act as the
Subservicer.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I - DEFINITIONS
Section 1.1. Certain Defined Terms. The terms used in this Agreement
shall have the respective meanings set forth on Exhibit A.
Section 1.2. Other Terms. All accounting terms not specifically defined
in this Agreement shall be construed in accordance with generally accepted
accounting principles. All terms used in Article 9 of the UCC, and not
specifically defined in this Agreement, are used in this Agreement as defined in
such Article 9.
ARTICLE II - PURCHASE AND SALE; ESTABLISHMENT OF ACCOUNTS
Section 2.1. Offer to Sell. Seller shall offer to sell, transfer, assign
and set over to Purchaser those Eligible Receivables set forth on a list of such
Eligible Receivables which shall be delivered by the Seller to the Purchaser no
later than three (3) Business Days prior to each Purchase Date.
Section 2.2. Purchase of Receivables. Upon receipt of the list of
Eligible Receivables pursuant to Section 2.1, the Master Servicer, in its sole
discretion, will confirm which of the Eligible Receivables offered by Seller
that the Purchaser will Purchase. The Purchase of such Receivables shall occur
upon payment of the Purchase Price. Upon Purchase of the Receivables, Seller
will have sold, transferred, assigned, set over and conveyed to Purchaser, all
of Seller's right, title and interest in and to the Purchased Receivables. The
Seller shall not take any action inconsistent with such ownership and shall not
claim any ownership in any Purchased Receivable. The Seller shall indicate in
its Records that ownership interest in any Purchased Receivable is held by the
Purchaser. In addition, the Seller shall respond to any inquiries with respect
to ownership of a Purchased Receivable by stating that it is no longer the owner
of such Purchased Receivable and that ownership of such Purchased Receivable is
held by the Purchaser. Documents relating to the Purchased Receivables shall be
held in trust by the Seller and the Subservicer, for the benefit of the
Purchaser as the owner of the Purchased Receivables, and possession of any
Required Information relating to the
Purchased Receivables so retained is for the sole purpose of facilitating the
servicing of the Purchased Receivables. Such retention and possession is at the
will of the Purchaser and in a custodial capacity for the benefit of the
Purchaser only.
Section 2.3. Purchase Price and Payment. The Purchase Price for
Receivables purchased on any Purchase Date shall be an amount equal to the
aggregate Net Values of such Purchased Receivables. The Purchase Price to be
paid on such Purchase Date shall be reduced by (a) the Program Fees as of such
Purchase Date, (b) the amount, if any, by which the Seller Credit Reserve
Account (net of withdrawals required hereunder) is less than the Specified
Credit Reserve Balance as of such Purchase Date, (c) any Rejected Receivable
Amount, (c) any Defaulted Receivable Amount, and (c) other amounts due the
Purchaser in accordance with this Agreement.
Section 2.4. Establishment of Accounts; Conveyance of Interests Therein;
Investments. (a) A Lockbox Account(s) will be established or assigned, as the
case may be, for the benefit of the Purchaser into which all Collections from
Payors with respect to Receivables shall be deposited. The Lockbox Account(s)
will be maintained at the expense of the Seller. The Seller agrees to deposit
all Collections it receives with respect to Receivables in said Lockbox
Account(s) and will instruct all Payors to make all payments on Receivables to
said Lockbox Account(s). Such direction shall be provided to each Payor in a
timely manner mutually agreed upon by the Seller and Purchaser.
(b) The Purchaser has established and shall maintain the "Collection
Account" (the "Collection Account") and the "Seller Credit Reserve Account" (the
"Seller Credit Reserve Account").
(c) The Seller does hereby sell, transfer, assign, set over and convey to
the Purchaser all right, title and interest of the Seller in and to all amounts
deposited, from time to time, in the Lockbox Account(s), the Collection Account
and the Seller Credit Reserve Account. The Purchaser agrees to return in a
timely manner to Seller any payments or amounts received in the Collection
Account other than Collections with respect to Purchased Receivables subject to
(i) that the Purchaser has reasonably sufficient information to properly
identify the underlying Receivable to which such Collection(s) should be applied
and (ii) the satisfaction of any amounts due and owing the Purchaser in
accordance with Section 5.3 of this Agreement. Any Collections relating to
Receivables held by the Seller or the Subservicer pending deposit to the Lockbox
Account(s) as provided in this Agreement, shall be held in trust for the benefit
of the Purchaser until such amounts are deposited into the Lockbox Accounts(s)
or such other accounts established by the Seller and placed under the sole
direction and control of the Purchaser. All Collections in respect of Purchased
Receivables received by the Seller and not deposited directly by the Payor in
the Lockbox Account(s) shall be remitted to the Lockbox Account(s) or other such
account(s) established by the Seller and which shall be assigned to and under
the sole discretion of the Purchaser on the day of receipt or the following
Business Day if the day of receipt is not a Business Day, and if such
Collections are not remitted on a timely basis, in addition to its other
remedies hereunder, the Purchaser shall be entitled to receive a late charge
(which shall be in addition to the Program Fee) equal to 12% per annum or the
maximum rate legally permitted if less than such rate, calculated as of the
first Business Day of such delinquency.
Section 2.5. Grant of Security Interest. It is the intention of the
parties to this Agreement that each payment of the Purchase Price by the
Purchaser to the Seller for Purchased Receivables to be made under this
Agreement shall constitute part of the purchase and sale of such Purchased
Receivables and not a loan. In the event, however, that a court of competent
jurisdiction were to hold that the transaction evidenced by this Agreement
constitutes a loan and not a purchase and sale, it is the intention of the
parties that this Agreement shall constitute a Security agreement under the UCC
and any other applicable law, and that the Seller shall be
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deemed to have granted to the Purchaser a first priority perfected security
interest in all of the Seller's right, title and interest in, to and under the
Purchased Receivables; all payments of principal of or interest on such
Purchased Receivables; all amounts on deposit from time to time in the Lockbox
Account(s), the Collection Account and the Seller Credit Reserve Account; all
other rights relating to and payments made under this Agreement, and all
proceeds of any of the foregoing.
Section 2.6. Further Action Evidencing Purchases. The Seller 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 may be
necessary or appropriate, or that the Purchaser may reasonably request, in order
to perfect, protect or more fully evidence the transfer of ownership of the
Purchased Receivables or to enable the Purchaser to exercise or enforce any of
its rights hereunder.
ARTICLE III - CONDITIONS OF PURCHASES
Section 3.1. Conditions Precedent to All Purchases. Each Purchase from
the Seller by the Purchaser shall be subject to the conditions precedent that:
(a) No Event of Seller Default has occurred and the Seller is in compliance
with each of its covenants and representations set forth in Sections 4.1 and 4.2
of this Agreement;
(b) The Seller shall have delivered to the Purchaser a complete copy of
each of the then current Carrier Agreements, Clearinghouse Agreements and
Billing and Collection Agreements and any amendment or modification of such
agreements;
(c) The Seller shall have delivered to the Purchaser a copy of each
written notice delivered by or received by either the Carrier, Billing and
Collection Agent, Clearinghouse Agent or the Seller with respect to any Carrier
Agreements, Clearinghouse Agreements and/or the Billing and Collection
Agreements;
(d) The Termination Date shall not have occurred; and
(e) Except as pertaining to Purchases occurring before September 30, 1998,
Seller shall deliver to Purchaser an opinion of counsel on or before September
30, 1998 (or such other time as Purchaser may agree in writing) as to its
compliance with any and all necessary regulatory matters necessary for the
Seller to validly generate telecommunications receivables and to conduct its
business as then conducted.
ARTICLE IV - REPRESENTATIONS, WARRANTIES
AND COVENANTS OF THE SELLER
Section 4.1. Representations, Warranties and Covenants as to the Seller.
The Seller represents and warrants to the Purchaser and Master Servicer, as of
the date of this Agreement and on each subsequent Purchase Date, as follows:
(a) The Seller is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation and is duly qualified
to do business and is in good standing in each jurisdiction in which it is doing
business and has the power and authority to own and convey all of its properties
and assets and to execute and deliver this Agreement and the Related Documents
and to perform the transactions contemplated thereby; and each is the legal,
valid and binding obligation of the Seller enforceable against the Seller in
accordance with its terms;
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(b) The execution, delivery and performance by the Seller of this
Agreement and the Related Documents and the transactions contemplated thereby
(i) have been duly authorized by all necessary corporate or other action on the
part of the Seller, (ii) do not contravene or cause the Seller to be in default
under (A) any contractual restriction contained in any loan or other agreement
or instrument binding on or affecting the Seller or its property; or (B) any
law, rule, regulation, order, writ, judgment, award, injunction, or decree
applicable to, binding on or affecting the Seller or its property and (iii) does
not result in or require the creation of any adverse claim upon or with respect
to any of the property of the Seller (other than in favor of the Purchaser as
contemplated hereunder);
(c) There is no court order, judgment, writ, pending or threatened action,
suit or proceeding, of a material nature against or affecting the Seller, its
officers or directors, or the property of the Seller, in any court or tribunal,
or before any arbitrator of any kind or before or by any Governmental Authority
(i) asserting the invalidity of this Agreement or any of the Related Documents,
(ii) seeking to prevent the sale and assignment of any Receivable or the
consummation of any of the transactions contemplated thereby, (iii) seeking any
determination or ruling that might materially and adversely affect the Seller,
this Agreement, the Related Documents, the Receivables, the Contracts or any
LOA, or (iv) asserting a claim for payment of money in excess of $50,000;
(d) The primary business of the Seller is the provision of
telecommunication services and/or equipment. All license numbers issued to the
Seller by any Governmental Authority are set forth on Schedule 1 and the Seller
has complied in all material respects with all applicable laws, rules,
regulations, orders and related Contracts and all restrictions contained in any
agreement or instrument binding on or affecting the Seller, and has and
maintains all permits, licenses, certifications, authorizations, registrations,
approvals and consents of Governmental Authorities or any other party materially
necessary for the business of the Seller and each of its Subsidiaries;
(e) The Seller (i) has filed on a timely basis all tax returns (federal,
state, and local) required to be filed and has paid or made adequate provisions
for the payment of all taxes, assessments, and other governmental charges due
from the Seller, which, if not paid in such manner could have a material adverse
affect on the results or operations or the financial condition of the Seller or
its ability to comply with the terms and conditions of this Agreement; (ii)
shall furnish to the Purchaser copies of its financial statements for the six
month period ending December 31, 1998, prepared internally by the Seller, which
fairly present the financial condition of the Seller, all in accordance with
generally accepted accounting principles consistently applied; (iii) since the
date of its organization and formation, there has been no material adverse
change in any such condition, business or operations other than that disclosed
to the Purchaser by the Seller prior to the date of this Agreement; and (iv)
shall deliver to the Purchaser within 45 days after the end of each subsequent
three month period the financial statements, including balance sheet and income
statement prepared in accordance with generally accepted accounting principles,
of the Seller as of the end of such three month period, certified by an officer
of the Seller;
(f) All information furnished by or on behalf of the Seller to the Master
Servicer or the Purchaser in connection with this Agreement is true and complete
in all material respects and does not omit to state a material fact and the
sales of Purchased Receivables under this Agreement are made by the Seller for
reasonably equivalent value and without intent to hinder, delay or defraud
present or future creditors of the Seller;
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(g) The Lockbox Account(s) is/are the only lockbox account(s) to which
Payors have been or will be instructed to direct Receivable proceeds and each
Payor of an Eligible Receivable has been directed upon its receipt of the notice
attached hereto as Exhibit B, which such notice is to provided to each Payor in
a timely manner, to remit all payments with respect to such Receivable for
deposit in the Lockbox Account(S);
(h) The principal place of business and chief executive office of the
Seller are located at the address of the Seller set forth under its signature
below and there are not now, and during the past four months there have not
been, any other locations where the Seller is located (as that term is used in
the UCC) or keeps Records except as set forth in the designated space beneath
its signature line in this Agreement;
(i) The legal name of the Seller is as set forth at the beginning of this
Agreement and the Seller has not changed its legal name in the last six years,
and during such period, the Seller did not use, nor does the Seller now use any
tradenames, fictitious names, assumed names or "doing business as" names other
than those appearing on the signature page of this Agreement;
(j) The Seller has not done anything to impede or interfere with the
collection by the Purchaser of the Purchased Receivables and shall not waive or
otherwise permit or agree to any deviation from the terms or conditions of any
Purchased Receivable or any related Carrier Agreement, Clearinghouse Agreement,
Billing and Collection Agreement, Contract or LOA without first providing the
Purchaser with thirty days written notice thereof except where such amendment or
waiver would not have a material adverse effect upon either the validity or
ability of the Subservicer to collect amounts due and owing with respect to
Purchased Receivables; and
(k) For federal income tax reporting and accounting purposes, the Seller
will treat the sale of each Purchased Receivable pursuant to this Agreement as a
sale of, or absolute assignment of its full right, title and ownership interest
in such Purchased Receivable to the Purchaser to the extent such treatment does
not conflict with either GAAP or the Internal Revenue Code of 1986, as amended
from time to time (the "Code"), to the extent that such treatment does not
conflict with either GAAP or the Code.
Section 4.2. Representations and Warranties of the Seller as to Purchased
Receivables. With respect to each Purchased Receivable sold pursuant to this
Agreement the Seller represents and warrants, as of the date hereof and on each
subsequent Purchase Date, as follows:
(a) Such Receivable (i) consists of all the Required Information, (ii) is
the liability of an Eligible Payor and (iii) was created by the provision or
sale of telecommunication services or equipment by the Seller in the ordinary
course of its business, (iv) has a Purchase Date no later than 90 days from its
Billing Date, is not a Purchased Receivable which, as of any Determination Date,
payment by the Payor of such Receivable has been received and is not duplicative
of any other Receivable; and (v) is owned by the Seller free and clear of any
adverse claim, and the Seller has the right to sell, assign and transfer the
same and interests therein as contemplated under this Agreement and no consent
other than those secured and delivered to the Purchaser on or prior to the
Closing Date from any Governmental Authority, the Payor, a Carrier, the Billing
and Collection Agent, the Clearinghouse Agent or any other Person shall be
required to effect the sale of any Purchased Receivables;
(b) The Eligible Receivable Amount set forth in the applicable Required
Information of such Receivable is payable in United States Dollars and is not in
excess of $25,000 with respect to any one individual Payor of any Payor Class
other than an Eligible Receivable payable under a Billing and Collection
Agreement as set forth on the attached Schedule 3, and is net of any adjustments
or other modifications
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contemplated by any Carrier Agreement, Clearinghouse Agreement, Billing and
Collection Agreement or otherwise and neither the Receivable nor the related
Carrier Agreement, Clearinghouse Agreement, Billing and Collection Agreement or
Contract has or will be compromised, adjusted, extended, satisfied,
subordinated, rescinded, set-off or modified by the Seller, the Payor, the
Carrier, the Clearinghouse Agent or the Billing and Collection Agent other than
routine credits and adjustments made in the ordinary course of providing
customer service to customer accounts, and is not nor will be subject to
compromise, adjustment, termination or modification, whether arising out of
transactions concerning the Contract, any Carrier Agreement, Clearinghouse
Agreement, Billing and Collection Agreement or otherwise; and
(c) There are no procedures or investigations pending or threatened before
any Governmental Authority (i) asserting the invalidity of such Receivable,
Carrier Agreement, Clearinghouse Agreement, Billing and Collection Agreement,
LOA or such Contract, (ii) asserting the bankruptcy or insolvency of the related
Payor, (iii) seeking the payment of such Receivable or payment and performance
of the related Carrier Agreement, Clearinghouse Agreement, Billing and
Collection Agreement, or such other Contract, (iv) seeking any determination or
ruling that might materially and adversely affect the validity or enforceability
of such Receivable or the related Carrier Agreement, Clearinghouse Agreement,
Billing and Collection Agreement, or such other Contract or LOA.
Section 4.3. Negative Covenants of the Seller. The Seller shall not,
without the written consent of the Purchaser and the Master Servicer, which such
consent will not be unreasonably withheld:
(a) Sell, assign or otherwise dispose of, or create or suffer to exist any
adverse claim or lien upon any Receivable, related Contract, the Lockbox
Account(s), the Collection Account, or any other account in which any
Collections of any Receivable are deposited, or assign any right to receive
income in respect of any Receivable;
(b) Submit or permit to be submitted to Payors any invoice for
telecommunication services or equipment rendered by or on behalf of Seller which
contains a "pay to" address other than the Lockbox Account(s);
(c) Make any change to (i) the location of its chief executive office or
the location of the office where Records are kept or (ii) its corporate name or
use any tradenames, fictitious names, assumed names or "doing business as"
names; or
(d) Enter into or execute any Clearinghouse Agreement or Billing and
Collection Agreement (other than those listed on Exhibit 3 hereof) or any
amendment or modification thereof, unless such amendment or modification would
not have a material adverse effect upon either the validity or ability of the
Subservicer to collect amounts due and owing with respect to Purchased
Receivables.
Section 4.4. Repurchase Obligation. Upon discovery by any party to this
Agreement of a breach of any representation or warranty in this Article IV which
materially and adversely affects the value of a Purchased Receivable or the
interests of the Purchaser therein (herein a "Rejected Receivable"), the party
discovering such breach shall give prompt written notice to the other parties to
this Agreement. Thereafter, on the next Purchase Date, the Net Value of the
Rejected Receivables shall be deducted from the amount otherwise payable to the
Seller pursuant to Section 23, In the event that the full Net Value of such
Rejected Receivables is not deposited in the Collection Account pursuant to the
foregoing sentence, the Purchaser shall deduct any such deficiency from the
Excess Collection Amount and/or make demand upon the Seller to pay any such
deficiency to the Purchaser for deposit to the Collection Account.
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ARTICLE V - ACCOUNTS ADMINISTRATION
Section 5.1. Collection Account. The Purchaser and the Master Servicer
acknowledge that certain amounts deposited in the Collection Account may relate
to Receivables other than Purchased Receivables and that such amounts continue
to be owned by the Seller. All such amounts shall be administered in accordance
with Section 5.3.
Section 5.2. Determinations of the Master Servicer. On each
Determination Date, the Master Servicer will determine:
(a) the Net Value of all Purchased Receivables which have become Rejected
Receivables since the prior Purchase Date (the "Rejected Receivable Amount");
(b) the amount of Collections up to the Purchase Price of all Purchased
Receivables received since the prior Determination Date (the "Paid Receivables
Amount");
(c) the Net Value of all Purchased Receivables which have become Defaulted
Receivables since the prior Purchase Date (the "Defaulted Receivable Amount");
(d) the aggregate amount deposited in the Collection Account in excess of
the Purchase Price of each Purchased Receivable since the prior Determination
Date (the "Excess Collection Amount"); and
(e) the Net Value of all Purchased Receivables less the Rejected Receivable
Amount and the Defaulted Receivable Amount as of the current Determination Date.
The Master Servicer's determinations of the foregoing amounts shall be presumed
correct unless later determined to be in error, in which case the party alleging
such error must provide the other party with written notification thereof, and
any mutually agreed upon and verified variance in such determination shall be
corrected in a timely manner. The Master Servicer shall notify the Purchaser of
such determinations.
Section 5.3. Distributions from Accounts. (a) No later than 11:00 a.m.
on each Determination Date, following the determinations set forth in Section
5.2, the Master Servicer will withdraw from the accounts the following amounts:
(i) the Paid Receivables Amount and the Rejected Receivable Amount
plus any outstanding Rejected Receivable Amount applicable to any prior period
from the Collection Account and deposit such amount in the Purchase Account;
(ii) the Defaulted Receivable Amount from the Seller Credit Reserve
Account and deposit such amount in the Purchase Account; and
(iii) the Excess Collection Amount and deposit such amount in the
Seller Credit Reserve Account to the extent that the Seller Credit Reserve
Account is less than the Specified Credit Reserve Balance.
(b) Until the Termination Date, on each Purchase Date the Master Servicer
shall pay to the Purchaser by withdrawal from the Collection Account all amounts
due and owing the Purchaser in accordance with Sections 2.3, 4.4, 5.4, 8.1 and
9.4 and pay the balance, if any, to the Seller by check or wire transfer;
provided, however, with respect to Receivables processed or cleared pursuant to
any Carrier Agreement,
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Clearinghouse Agreement or Billing and Collection Agreement, if applicable, any
Excess Collection Amount shall be retained by the Purchaser until such time that
the billing cycle (or batch) to which such Excess Collection Amount applies is
deemed closed by the Purchaser which, absent the occurrence of an Event of
Default, will occur no later than the Purchase Date following such
determination.
Section 5.4. Allocation of Moneys following Termination Date. Following
the Termination Date and the Purchaser's receipt of the Termination Fee, if
applicable, from the Seller, the Master Servicer shall withdraw an amount equal
to the Program Fee, to the extent owed, Rejected Receivable Amount and any
deficiency in the Specified Credit Reserve Account balance from the Collection
Account on each Purchase Date and deposit it in the Purchase Account. To the
extent that such funds do not equal the Program Fee and Rejected Receivable
Amount, the Seller shall deposit any such deficiency in the Purchase Account
within five Business Days following demand therefor. After withdrawing such
amounts, if any, owed to Purchaser, Purchaser shall forward to Seller in a
timely manner the balance of any funds held by Purchaser which the right, title
and interest therein belongs to Seller. Distribution of monies collected
subsequent to the Termination Date will continue in a manner consistent with
that described in Section 5.3.
ARTICLE VI - APPOINTMENT OF THE SUBSERVICER
Section 6.1. Appointment of the Subservicer. The Master Servicer and the
Purchaser hereby appoint the Seller and the Seller hereby accepts such
appointment to act as Subservicer under this Agreement. The Subservicer shall
service the Purchased Receivables and enforce the Purchaser's respective rights
and interests in and under each Purchased Receivable and each related Contract
or LOA; and shall take, or cause to be taken, all such actions as may be
necessary or advisable to service, administer and collect each Purchased
Receivable all in accordance with (i) customary and prudent servicing procedures
for telecommunication receivables of a similar type, and (ii) all applicable
laws, rules and regulations; and shall serve in such capacity until the
termination of its responsibilities pursuant to Section 6.4 or 7.1. The
Subservicer may, with the prior consent of the Purchaser, which consent shall
not be unreasonably withheld and which shall be considered delivered upon
execution of this Agreement with respect to USBI, ESBI, Claremont, Centillion,
ACUS, Xxxxxxxx & Xxxxxxx and Pinnacle Financial, subcontract with a subservicer
for billing, collection, servicing or administration of the Receivables. Any
termination or resignation of the Subservicer under this Agreement shall not
affect any claims that the Purchaser may have against the Subservicer for events
or actions taken or not taken by the Subservicer arising prior to any such
termination or resignation.
Section 6.2. Duties and Obligations of the Subservicer. (a) The
Subservicer shall at any time permit the Purchaser or any of its representatives
to visit the offices of the Subservicer and examine and make copies of all
Servicing Records;
(b) The Subservicer shall notify the Purchaser of any action, suit,
proceeding, dispute, offset, deduction, defense or counterclaim, other than
routine matters which are processed and resolved by the Subservicer in less than
thirty days, that is or may be asserted by any Person with respect to any
Purchased Receivable.
(c) The Purchaser shall not have any obligation or liability with respect
to any Purchased Receivables or related Contracts, nor shall it be obligated to
perform any of the obligations of the Subservicer hereunder.
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Section 6.3. Subservicing Expense. The Subservicer shall be required to
pay for all expenses incurred by the Subservicer in connection with its
activities hereunder (including any payments to accountants, counsel or any
other Person) and shall not be entitled to any payment or reimbursement
therefor.
Section 6.4. Subservicer Not to Resign. The Subservicer shall not resign
from the duties and responsibilities hereunder except upon determination that
(a) the performance of its duties hereunder has become impermissible under
applicable law and (b) there is no reasonable action which the Subservicer could
take to make the performance of its duties hereunder permissible under
applicable law evidenced as to clause (a) above by an opinion of counsel to such
effect delivered to the Purchaser.
Section 6.5. Authorization of the Master Servicer. The Seller hereby
authorizes the Master Servicer (including any successors thereto) to take any
and all reasonable steps in its name and on its behalf necessary or desirable in
the determination of the Master Servicer to collect all amounts due under any
and all Purchased Receivables, process all Collections, commence proceedings
with respect to enforcing payment of such Purchased Receivables and the related
Contracts, and adjusting, settling or compromising the account or payment
thereof. The Seller shall furnish the Master Servicer (and any successors
thereto) with any powers of attorney and other documents necessary or
appropriate to enable the Master Servicer to carry out its servicing and
administrative duties under this Agreement, and shall cooperate with the Master
Servicer to the fullest extent in order to ensure the collectibility of the
Purchased Receivables.
ARTICLE VII - EVENTS OF SELLER DEFAULT
Section 7.1. Events of Seller Default. If any of the following events
(each, an "Event of Seller Default") shall occur and be continuing:
(a) The Seller (either as Seller or Subservicer) shall materially fail to
perform or observe any term, covenant or agreement contained in this Agreement
which remains uncured for 5 Business Days following notice from the Purchaser
with respect thereto, provided, however, the failure of the Purchaser to provide
such notice shall not in any way be considered a waiver of any right or remedy
available to the Purchaser under this Agreement;
(b) An Insolvency Event shall have occurred; however, if such Insolvency
Event is initiated by third parties against the Seller, Seller shall not be in
default unless Seller fails or refuses to have such third party action dismissed
within sixty days of service of process on Seller seeking such relief,
(c) There is a material breach of any of the representations and warranties
of the Seller as stated in Sections 4.1 or 4.2 that has remained uncured for a
period of 30 days;
(d) Any Governmental Authority shall file notice of a lien with regard to
any of the assets of the Seller or with regard to the Seller which remains
undischarged for a period of 30 days;
(e) As of the first day of any month, the aggregate Net Value of Purchased
Receivables which became Defaulted Receivables or Rejected Receivables during
the prior three-month period shall exceed 5.0% of the average aggregate Net
Values of all Purchased Receivables then owned by the Purchaser at the end of
each of such three months;
(f) This Agreement shall for any reason cease to evidence the transfer to
the Purchaser (or its assignees or transferees) of the legal and equitable title
to, and ownership of, the Purchased Receivables;
9
(g) The termination of any Clearinghouse Agreement, if applicable, and/or
any Carrier Agreement or Billing and Collection Agreement for any reason
whatsoever absent the consummation of a substitute Clearinghouse Agreement,
Carrier Agreement and/or Billing and Collections Agreement, as the case may be,
within ten Business Days of the termination thereof;
(h) The amount deposited hereunder (net of withdrawals required hereunder)
in the Seller Credit Reserve Account has remained at less than the Specified
Credit Reserve Balance for fourteen consecutive days; or
(i) A Termination Event shall have occurred;
then and in any such event, the Master Servicer may, by notice to the Seller and
the Purchaser declare that an Event of Seller Default shall have occurred and,
the Termination Date shall forthwith occur, without demand, protest or further
notice of any kind, and the Purchaser shall make no further Purchases from the
Seller. The Purchaser and the Master Servicer shall have, in addition to all
other rights and remedies under this Agreement, all other rights and remedies
provided under the UCC and other applicable law, which rights shall be
cumulative.
ARTICLE VIII - INDEMNIFICATION AND SECURITY INTEREST
Section 8.1. Indemnities by the Seller. (a) Without limiting any other
rights that the Purchaser, the Master Servicer, or any director, officer,
employee or agent of either such party (each an "Indemnified Party") may have
under this Agreement or under applicable law, the Seller hereby agrees to
indemnify each Indemnified Party front and against any and all claims, losses,
liabilities, obligations, damages, penalties, actions, judgments, suits, and
related costs and expenses of any nature whatsoever, including reasonable
attorneys' fees and disbursements (all of the foregoing being collectively
referred to as "Indemnified Amounts") which may be imposed on, incurred by or
asserted against an Indemnified Party in any way arising out of or relating to
this Agreement or the ownership of the Purchased Receivables or in respect of
any Receivable or any Contract, excluding, however, Indemnified Amounts to the
extent resulting from gross negligence or willful misconduct on the part of such
Indemnified Party.
(b) Any Indemnified Amounts subject to the indemnification provisions of
this Section shall be paid to the Indemnified Party within five Business Days
following demand therefor, which such demand shall set forth satisfactory
evidence of a right of indemnification and the corresponding amount at issue,
together with interest at the lesser of 12% per annum or the highest rate
permitted by law from the date of demand for such Indemnified Amount.
Section 8.2 Security Interest. The Seller hereby grants to the Purchaser
a first priority perfected security interest in the Seller's Customer Base,
including but not limited to, all past, present and future customer contracts,
lists, agreements, LOA's (other than as set forth on Schedule 5 attached hereto
as to such LOA's only) or arrangements relating thereto, all of the Seller's
right, title and interest in, to and under all of the Seller's Receivables not
sold to the Purchaser hereunder, including all rights to payments under any
related Contracts, contract rights, instruments, documents, chattel paper,
general intangibles, LOA's or other agreements with all Payors and all the
Collections, Records and proceeds thereof, any other obligations or rights of
Seller to receive any payments in money or kind; all cash or non-cash proceeds
of the foregoing; all of the right, title and interest of the Seller in and with
respect to the goods, services or other property which gave rise to or which
secure any of the foregoing as security for the timely payment and performance
of any
10
and all obligations the Seller or the Subservicer may owe the Purchaser under
Sections 2.4, 4.4, 5.2, 7.1 (a) and (b), and 8.1, but excluding recourse for
unpaid Purchased Receivables. This Section 8.2 shall constitute a security
agreement under the UCC and any other applicable law and the Purchaser shall
have the rights and remedies of a secured party thereunder. Such security
interest shall be further evidenced by Seller's execution of appropriate UCC-1
financing statements prepared by and acceptable to the Purchaser, and such other
further assurances that may be reasonably requested by the Purchaser from time
to time.
ARTICLE IX - MISCELLANEOUS
Section 9.1. Notices, Etc. All notices, shall be in writing and mailed
or telecommunicated, or delivered as to each 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. All such notices and communications shall not be effective until
received by the party to whom such notice or communication is addressed.
Section 9.2. Remedies. No failure or delay on the part of the Purchaser
or the Master Servicer to exercise any right hereunder shall operate as a waiver
or partial waiver thereof The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
Section 9.3. Binding Effect, Assignability. This Agreement shall be
binding upon and inure to the benefit of the Seller, the Subservicer, the
Purchaser, the Master Servicer and their respective successors and permitted
assigns. Neither the Seller nor the Subservicer may assign any of their rights
and obligations hereunder or any interest herein without the prior written
consent of the Purchaser and the Master Servicer. The Purchaser may, at any
time, without the consent of the Seller or the Subservicer, assign any of its
rights and obligations hereunder or interest herein to any Person. Without
limiting the generality of the foregoing, the Seller acknowledges that the
Purchaser has assigned its rights hereunder for the benefit of third parties.
The Seller does hereby further agree to execute and deliver to the Purchaser all
documents and amendments presented to the Seller by the Purchaser in order to
effectuate the assignment by the Purchaser in furtherance of this Section 9.3
consistent with the terms and provisions of this Agreement. 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 its
termination; provided, that the rights and remedies with respect to any breach
of any representation and warranty made by the Seller or the Master Servicer
pursuant to Article IV and the indemnification and payment provisions of Article
VIII shall be continuing and shall survive any termination of this Agreement.
Section 9.4. Costs, Expenses and Taxes. (a) In addition to the rights of
indemnification under Article VIII, the Seller agrees to pay upon demand, all
reasonable costs and expenses in connection with the administration (including
periodic auditing, modification and amendment) of this Agreement, and the other
documents to be delivered hereunder, including, without limitation: (i) the
reasonable fees and out-of-pocket expenses of counsel for the Purchaser or the
Master Servicer with respect to (A) advising the Purchaser as to its rights and
remedies under this Agreement or (B) the enforcement (whether through
negotiations, legal proceedings or otherwise) of this Agreement or the other
documents to be delivered hereunder; (ii) any and all accrued Program Fee and
amounts related thereto not yet paid to the Purchaser; and (iii) any and all
stamp, sales, excise and other taxes and fees payable or determined to be
payable in connection with the execution, delivery, filing or recording of this
Agreement or the other agreements and documents to be delivered hereunder, and
agrees to indemnify and save each Indemnified Party from and against any and all
liabilities with respect to or resulting from any delay in paying or omission to
pay such taxes and fees.
11
(b) If the Seller or the Subservicer fails to pay any Lockbox Account(s)
fees or other charges or debits related to such accounts, to pay or perform any
agreement or obligation contained under this Agreement, the Purchaser may, or
may direct the Master Servicer to pay or perform, or cause payment or
performance of, such agreement or obligation, and the expenses of the Purchaser
or the Master Servicer incurred in connection therewith shall be payable by the
party which has failed to so perform.
Section 9.5. Amendments; Waivers; Consents. No modification, amendment
or waiver of, or with respect to, any provision of this Agreement or the Related
Documents shall be effective unless it shall be in writing and signed by each of
the parties hereto. This Agreement, the Related Documents and the documents
referred to therein embody the entire agreement among the Seller, the
Subservicer, the Purchaser and the Master Servicer, and supersede all prior
agreements and understandings relating to the subject hereof, whether written or
oral.
Section 9.6. GOVERNING LAW, CONSENT TO JURISDICTION; WAIVER OF JURY
TRIAL. (a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE INTERNAL LAWS (AS OPPOSED TO CONFLICT OF LAWS PROVISIONS) OF THE STATE OF
OHIO, EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF THE INTERESTS OF
THE PURCHASER IN THE PURCHASED RECEIVABLES OR REMEDIES HEREUNDER OR THEREUNDER,
IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF OHIO.
(b) THE SELLER AND THE SUBSERVICER HEREBY SUBMIT TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF OHIO AND THE UNITED STATES DISTRICT
COURT LOCATED IN THE SOUTHERN DISTRICT OF OHIO, AND EACH WAIVES PERSONAL SERVICE
OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF PROCESS BE
MADE BY REGISTERED MAIL DIRECTED TO THE ADDRESS SET FORTH ON THE SIGNATURE PAGE
HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER THE
SAME SHALL HAVE BEEN DEPOSITED IN THE U.S. MAILS, POSTAGE PREPAID. THE SELLER
AND THE SUBSERVICER EACH HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER AND
CONSENT'S TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION SHALL AFFECT THE RIGHT OF THE
PURCHASER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT
THE RIGHT OF THE PURCHASER TO BRING ANY ACTION OR PROCEEDING AGAINST THE SELLER
OR ITS PROPERTY, OR THE SUBSERVICER OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION. THE SELLER AND THE SUBSERVICER EACH HEREBY AGREE THAT THE
EXCLUSIVE AND APPROPRIATE FORUMS FOR ANY DISPUTE HEREUNDER ARE THE COURTS OF THE
STATE OF OHIO AND THE UNITED STATES DISTRICT COURT LOCATED IN THE SOUTHERN
DISTRICT OF OHIO AND AGREE NOT TO INSTITUTE ANY ACTION IN ANY OTHER FORUM.
(c) THE SELLER, AND THE SUBSERVICER EACH HEREBY WAIVES ANY RIGHT TO HAVE A
JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT,
OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR IN CONNECTION WITH
THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A
BENCH TRIAL WITHOUT A JURY.
12
Section 9.7. Execution in Counterparts; Severability. 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. In case any provision in or obligation
under this Agreement shall be invalid, illegal or unenforceable in any
jurisdiction, the validity, legality and enforceability of the remaining
provisions or obligations, or of such provision or obligation in any other
jurisdiction, shall not in any way be affected or impaired thereby.
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.
USC TELECOM, INC., as Seller and as Subservicer
By:
-----------------------------------------
Name: Xxxxx X. Hack
Title: Treasurer
Address at which the chief executive office is
located:
Address: 0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxx, Secretary/General Counsel
Phone number: 281/529-4646
Telecopier number: 281/529-4650
Additional locations at which the Seller does
business and maintains Records:
-----------------------------------------
-----------------------------------------
Additional names under which Seller does business:
-----------------------------------------
-----------------------------------------
RFC CAPITAL CORPORATION
By:
-----------------------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Phone number: (000) 000-0000
Telecopier number: (000) 000-0000
14
SCHEDULE 1
SELLER'S LICENSE NUMBERS
Name of Seller License Numbers
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SCHEDULE 2
LIST OF NAMES UNDER WHICH SELLER IS DOING BUSINESS
AND ADDRESSES AT WHICH SELLER IS DOING BUSINESS
Names Under Which Seller Addresses At Which Seller Is
Is Doing Business and Payee Names Doing Business
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SCHEDULE 3
BILLING AND COLLECTION AGREEMENTS
Billing and Collection Agreement Date
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EXHIBIT A
DEFINITIONS
"ADVERSE CLAIM" means any claim of ownership, any lien, security interest
or other charge or encumbrance, or any other type of preferential arrangement
having the effect of a lien or security interest.
"AFFILIATE" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person within the meaning of control under Section 15 of the Securities Act
of 1933.
"BASE RATE" means, as of any Purchase Date, a variable percentage rate
equal to the then applicable Provident Bank prime lending rate plus (i) 4.0% per
annum in the event EqualNet Communications Corporation's EBITDA for the prior
quarter is less than $0.00, (ii) 3.00% per annum in the event EqualNet
Communications Corporation's EBITDA for the prior quarter is greater than $0.00
but less than $1,000,000 or (iii) 2.0% per annum in the event EqualNet
Communications Corporation's EBITDA for the prior quarter is greater than
$1,000,000.
"BILLED AMOUNT" means, with respect to any Receivable the amount billed or
to be billed to the related Payor with respect thereto prior to the application
of any Gross Liquidation Rate.
"BILLING AND COLLECTION AGENT" means the party performing billing and
collection services for and on behalf of the Seller pursuant to the terms of a
Billing and Collection Agreement.
"BILLING AND COLLECTION AGREEMENT" means any written agreement whereby a
party is obligated to provide end-user billing and collection services with
respect. to the Seller's accounts.
"BILLING DATE" means the date on which the invoice with respect to a
Receivable was submitted to the related Payor which shall be not more than 45
days from the date on which telecommunication services were provided to the end
user of such services.
"BUSINESS DAY" means any day of the year other than a Saturday, Sunday or
any day on which banks are required, or authorized, by law to close in the State
of Ohio.
"CARRIER" means a provider of telecommunication services which such
services are resold by the Seller.
"CARRIER AGREEMENT" means any written agreement, contract or arrangement
whereby a Carrier is obligated to provide certain services to the Seller.
"CLEARINGHOUSE AGENT" means the party performing services for and on behalf
of the Seller pursuant to the terms and provisions of a Clearinghouse Agreement.
"CLEARINGHOUSE AGREEMENT" means any written agreement, contract or
arrangement whereby a party is obligated to perform certain services for the
Seller, including, without limitation, processing certain information provided
by the Seller to the Clearinghouse Agent and remitting such processed
information to one or more Billing and Collection Agents for billing and
collection of Seller's accounts.
"CLOSING DATE" means July 23, 1998.
"COLLECTION ACCOUNT" means the account established pursuant to Section
2.4(b).
A-1
"COLLECTIONS" means, with respect to any Receivable, all cash collections
and other cash proceeds of such Receivable.
"CONTRACT" means an agreement (or agreements) pursuant to, or under which,
a Payor shall be obligated to pay for telecommunication services rendered by the
Seller from time to time.
"CUSTOMER BASE" means all of the Seller's past, present and future customer
contracts, agreements, LOA's or other arrangements, any customer list relating
thereto and any information regarding prospective customers and contracts,
agreements, LOA's or other arrangements and all of the goodwill and other
intangible assets associated with any of the foregoing.
"DEFAULTED RECEIVABLE" means a Receivable as to which, on any Determination
Date (a) any part of the Net Value thereof remains unpaid for more than 90 days
from the Billing Date for such Receivable; or (b) the Payor thereof has taken
any action, or suffered any event to occur, of the type described in Section
7.1(f) or (g); or (c) the Master Servicer otherwise deems any part of the Net
Value thereof to be uncollectible for reasons other than a breach of a
representation or warranty under Article IV hereof.
"DEFAULTED RECEIVABLE AMOUNT" has the meaning specified in Section 5.2(c).
"DETERMINATION DATE" means the Business Day preceding the Purchase Date of
each week.
"ELIGIBLE PAYOR" means a Payor which is (a) (i) a corporation, limited
liability company, partnership or any other statutory organization organized
under the laws of any jurisdiction in the United States and having its principal
office in the United States; (ii) an individual or sole proprietorship which is
a resident of any jurisdiction in the United States; (iii) a Clearinghouse
Agent; or (iv) a Billing and Collection Agent; (b) not an Affiliate of any of
the parties hereto; (c) has executed and delivered to the Seller either (i) a
Contract, (ii) an LOA, (iii) a Clearinghouse Agreement or (iv) a Billing and
Collection Agreement; and (d) not subject to bankruptcy or insolvency
proceedings at the time of sale of the Receivables to be purchased.
"ELIGIBLE RECEIVABLE" means, at any time, a Receivable as to which the
representations and warranties of Section 4.2 are true and correct in all
respects at the time of Purchase.
"ELIGIBLE RECEIVABLE AMOUNT" means, with respect to any Eligible
Receivable, an amount equal to its Billed Amount after giving effect to the
Gross Liquidation Rate associated with the Payor Class with respect to such
Eligible Receivable.
"EVENT OF SELLER DEFAULT" has the meaning specified in Section 7.1.
"EXCESS COLLECTION AMOUNT" has the meaning specified in Section 5.2(d).
"GOVERNMENTAL AUTHORITY" means the United States of America, Federal, any
state, local or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions thereof
or pertaining thereto.
"GROSS LIQUIDATION RATE" means a factor, conclusively determined by the
Master Servicer from time to time, with respect to a designated Payor Class
based on (i) the Seller's historical experience with respect to Collections for
such Payor Class, (ii) the terms and provisions of any Billing and Collection
Agreement and (iii)
A-2
the terms and provisions of any Clearinghouse Agreement, determined on the basis
of actual Collections which are expected to be received on a Receivable within
90 days of its Billing Date.
"INSOLVENCY EVENT" means the occurrence of an event whereby the Seller
makes a general assignment for the benefit of creditors; or where any proceeding
is instituted by or against the Seller seeking to adjudicate it a bankrupt or
insolvent, or which seeks the liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of the Seller or any
of 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, custodian or other similar official for it or for any
substantial part of its property.
"LOA" means a letter of agency, or other authorization, obtained by the
Seller from each Payor designating the Seller as its long distance
telecommunications provider and otherwise of a type or in a form acceptable
under applicable laws.
"LOCKBOX ACCOUNT" means the account established pursuant to Section 2.4(a).
"MASTER SERVICER" means RFC Capital Corporation, a Delaware corporation, or
any Person designated as the successor Master Servicer, and its successors and
assigns, from time to time.
"NET VALUE" of any Receivable at any time means an amount (not less than
zero) equal to (a)(i) the Eligible Receivable Amount multiplied by (ii) .90;
minus (b) all Collections received with respect thereto; provided, that if the
Master Servicer makes a determination that all payments by the Payor with
respect to such Receivable have been made, the Net Value shall be zero.
"PAID RECEIVABLES AMOUNT" has the meaning specified in Section 5.2(b).
"PAYOR" means, the Person obligated to make payments in respect of any
Receivables.
"PAYOR CLASS" means, with respect to any Payor, one of the following: (a)
Clearinghouse Agent; (b) Billing and Collection Agent; (c) statutory
organization; or (d) individuals and sole proprietorships.
"PERSON" means an individual, partnership, , limited liability company,
corporation (including a business trust), joint stock company, trust, voluntary
association, joint venture, a government or any agency or political subdivision
thereof, or any other entity of whatever nature.
"PROGRAM FEE" means as of each Purchase Date, an amount equal to (i) 7/360,
of the annualized Base Rate multiplied by (ii) the then current Net Value of all
Purchased Receivables including (A) Rejected Receivables and (B) those
Receivables to be purchased on such Purchase Date.
"PURCHASE" means a purchase by the Purchaser of Eligible Receivables from
the Seller pursuant to Section 2.2.
"PURCHASE ACCOUNT" means the account of the Purchaser titled "Purchase
Account."
"PURCHASE COMMITMENT" means an amount not to exceed $4,000,000; provided,
however, that with respect to the initial Purchase Date, such amount shall not
exceed $3,500,000 and other than with respect to the initial Purchase Date, the
aggregate Net Value of Purchased Receivables on the first Purchase Date of any
month may not be greater than $350,000, or such other amount as the Purchaser
and Seller may otherwise agree in writing,
A-3
over the highest aggregate Net Value of Purchased Receivables at any time during
the immediately preceding month. Subject to the prior written approval by the
Purchaser and payment by the Seller of all applicable fees as agreed by and
between the Seller and Purchaser, the Seller may request, in writing, that the
Purchase Commitment be increased to $10,000,000, provided, however, that no
single incremental increase in such Purchase Commitment shall be less than
$2,000,000.
"PURCHASE DATE" means the date on which the Purchaser initially Purchases
Receivables from the Seller and thereafter, such other date of each week or
month, as the case may be, that the Seller and Purchaser mutually agree.
"PURCHASE PRICE" has the meaning specified in Section 2.3.
"PURCHASED RECEIVABLE" means any Receivable which has been purchased by the
Purchaser hereunder including a Rejected Receivable prior to its repurchase.
"PURCHASER" means RFC Capital Corporation, a Delaware corporation, together
with its successors and assigns.
"RECEIVABLE" means (a) an account receivable arising from the provision or
sale of telecommunication services (and any services or sales ancillary thereto)
by the Seller including the right to payment of any interest or finance charges
and other obligations of such Payor with respect thereto; (b) all security
interests or liens and property subject thereto from time to time purporting to
secure payment by the Payor; (c) all rights, remedies, guarantees, indemnities
and warranties and proceeds thereof, proceeds of insurance policies, UCC
financing statements and other agreements or arrangements of whatever character
from time to time supporting or securing payment of such Receivable including,
but not limited to, any Billing and Collection Agreement and any Clearinghouse
Agreement, and (d) all Collections, Records and proceeds with respect to any of
the foregoing. In the instance of a Receivable with respect to which the Payor
is a Billing and Collection Agent pursuant to a Billing and Collection
Agreement, the amount owed to the Seller by the Billing and Collection Agent is
the "Receivable" which is eligible for Purchase by the Purchaser and not the
amount owing to, or collected by, the Billing and Collection Agent from the end
user of telecommunication services provided by the Seller.
"RECORDS" means all Contracts, LOA's and other documents, books, records
and other information (including, without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
prepared and maintained by the Seller, the Subservicer or Additional Subservicer
with respect to Receivables (including Purchased Receivables) and the related
Payors.
"REJECTED RECEIVABLE AMOUNT" has the meaning specified in Section 5.2(a).
"REJECTED RECEIVABLE" has the meaning specified in Section 4.4.
"RELATED DOCUMENTS" means all documents required to be delivered thereunder
and under this Agreement.
"REQUIRED INFORMATION" means, with respect to a Receivable, (a) the Payor,
(b) the Eligible Receivable Amount, (c) the Billing Date, (d) the Payor
telephone number and (e) the Payor account number, if applicable.
"SELLER" means USC Telecom, Inc., a Delaware corporation, together with its
successors and assigns.
A-4
"SELLER CREDIT RESERVE ACCOUNT" means the account established pursuant to
Section 2.4(b).
"SERVICING RECORDS" means all documents, books, records and other
information (including, without limitation, computer programs, tapes, disks,
punch cards, data processing software and related property and rights) prepared
and maintained by the Subservicer, Additional Subservicer or the Master Servicer
with respect to the Purchased Receivables and the related Payors.
"SPECIFIED CREDIT RESERVE BALANCE" means, as of any Purchase Date, an
amount equal to 5.00% of the Net Value of Purchased Receivables including (a)
Rejected Receivables (net of recoveries) and (b) those Receivables to be
purchased on such Purchase Date.
"SUBSERVICER" means, individually and collectively, the Seller and EqualNet
Corporation, a Delaware corporation, or any Person designated as Subservicer
hereunder.
"TERMINATION DATE" means the earlier of (a) July 23, 2000; (b) a
Termination Event; (c) the occurrence of an Event of Seller Default as set forth
in Section 7.1 of this Agreement; or (d) ninety days following the Seller's
delivery of a written notice to the Purchaser setting forth Seller's desire to
terminate this Agreement and the payment of the Termination Fee with respect
thereto.
"TERMINATION EVENT" means the occurrence of an event under any loan
agreement, indenture or governing document following which the funding of the
Purchaser to be utilized in purchasing Receivables hereunder may be terminated.
"TERMINATION FEE" means an amount to be paid by the Seller to the Purchaser
equal to 4.0% of the Purchase Commitment in the event of an occurrence of an
Event of Seller Default resulting in the termination of this Agreement; or in
the event the Seller desires to terminate this Agreement, whereby such
termination shall be effective only in the event that (a) the Seller has
provided the Purchaser prior written notice thereof; and (b) the Seller has paid
to Purchaser and Purchaser has received from Seller an amount equal to (i) 3.0%
of the Purchase Commitment if such notice of termination is provided to the
Purchaser during the one year period commencing on the Closing Date and ending
on the one year anniversary of the Closing Date, or (ii) 2.0% in the event such
notice of termination is provided to the Purchaser during the period commencing
the day after the one year anniversary of the Closing Date through the
Termination Date.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the state of the location of the Seller's chief executive office.
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EXHIBIT B
FORM OF NOTICE TO PAYORS - [LEC PAYORS]
[SELLER LETTERHEAD]
[NAME AND ADDRESS OF PAYOR]
Dear _____________________________:
SELLER NAME (the "Seller") has entered into an agreement with RFC Capital
Corporation ("RFC") under which certain telecommunication receivables, including
the right to payment of any interest, finance charges or late fees with respect
thereto, originated by the Seller ("Receivables") have been and will be sold,
from time to time, to RFC or affiliates of RFC. RFC or such affiliates may, in
turn, from time to time, pledge and or assign such Receivables to such other
third parties as RFC deems necessary. It is contemplated that the Receivables
will continue to be serviced by the Seller.
RFC has established a lockbox (the "Lockbox") for collection of the
Receivables. Accordingly, you are hereby instructed to remit all payments on
Receivables to:
Provident Bank-Lockbox Account (SELLER NAME) #_______________________.
PROVIDENT BANK
00 XXXX XXXXX XXXXXX
XXXXXXXX, XXXX 00000
Payment of such Receivables in this manner will operate to discharge your
obligation with respect thereto (to the extent of such payment), whether or not
ownership has been transferred to RFC. Any prior notice of an assignment of any
interest in the Seller's Receivables previously delivered to you is hereby
superseded by this notice and all prior notices of such assignment are hereby
revoked. This notice shall be considered irrevocable absent written notice
otherwise received by you from RFC. Thank you for your cooperation.
Very truly yours,
SELLER NAME
----------------------------------
By:
Its:
AGREED TO AND ACKNOWLEDGED BY
ON THIS DAY OF , 19 :
[LEC]
By:
------------------------------
Name:
Title:
B-1
EXHIBIT B
[SELLER LETTERHEAD]
FORM OF NOTICE TO PAYORS - [INDIVIDUAL PAYORS]
[NAME AND ADDRESS OF PAYOR]
Dear :
Because of our continued growth and in an effort to better serve our valued
customers, we have entered into a funding arrangement with RFC Capital
Corporation ("RFC"). One result of this relationship is that your payments will
be received and posted in a more timely manner. Payments should [for resellers
with existing lockboxes] continue to be forwarded to the same address which is
as follows or [for resellers establishing new lockboxes] be forwarded to the
following new address:
[bank name]-Lockbox Account (SELLER NAME) # .
[BANK NAME]
[BANK ADDRESS]
[BANK ABA #]
Your payments will continue to be serviced by Seller Name, and all
inquiries regarding your service, billing invoices and payments should continue
to be directed to Seller Name's Customer Service Department at [phone number].
This change is effective immediately and may not be further amended or modified
without the written consent of RFC.
Thank you for your cooperation and we look forward to continuing to satisfy
your telecommunication needs.
Sincerely,
SELLER NAME
---------------------------------
By:
Its:
B-2
EXHIBIT C
FORM OF CORPORATE CERTIFICATE
FOR THE SELLER
I hereby certify that I am a duly elected [OFFICER] of SELLER NAME (in its
capacity as Seller, the "Seller") with all requisite knowledge of the matters
set forth below, and further certify as follows:
1. There has been no change of the Seller's legal name, identity or
corporate structure within the six month period preceding the execution
date hereof.
2. No proceedings looking toward merger, liquidation, dissolution or
bankruptcy of the Seller re pending or contemplated.
3. There is no litigation pending, or to my knowledge, threatened,
which, if determined adversely to the Seller, would adversely affect the
execution, delivery or enforceability of the Receivables Sale Agreement
(the "Sale Agreement"), dated as of [date of Sale Agreement] by and among
the Seller and RFC Capital Corporation ("RFC") as Purchaser (the
"Purchaser") and as Master Servicer (the "Master Servicer"), or the sale or
servicing of the Receivables as provided therein.
4. With respect to the Sale Agreement, the Seller has complied with
all the agreements by which it is bound and has satisfied all the
conditions on its part to be performed or satisfied prior to the Closing
Date.
5. No Event of Seller Default or other event of default in the
performance of any of the Seller's covenants or agreements under the Sale
Agreement has occurred and is continuing, nor has an event occurred which
with the passage of time or notice or both would become such an Event of
Seller Default.
6. The Seller is not a party to, or governed by, any contract,
indenture, mortgage, loan agreement, note, lease, deed of trust or other
instrument which restricts the Seller's ability to sell or service
telecommunication receivables or consummate any of the transactions
contemplated by the Sale Agreement.
7. For tax and reporting purposes, the Seller will treat the transfer
to the Purchaser of the Seller's interests in the Receivables as a sale.
8. The transfer to the Purchaser of the Seller's interests in the
Receivables will be made (a) in good faith and without intent to hinder,
delay, or defraud present or future creditors, and (b) in exchange for
reasonably equivalent value and fair consideration.
9. On the date hereof, the Seller (a) was paying its Debts, if any,
as they matured; (b) neither intended to incur, nor believed that it would
incur, Debts beyond its ability to pay as they mature; and (c) after giving
effect to the transfer to the Purchaser of the Seller's interests in the
Receivables, will have an
C-1
adequate amount of capital to conduct its business and anticipates no
difficulty in continuing to do so for the foreseeable future.
10. The Seller has and maintains all material permits, licenses
(including any applicable and necessary license, permit or certification
from the Federal Communication Commission), authorizations, registrations,
approvals and consents of Governmental Authorities necessary for (a) the
activities and business of the Seller and each of its Subsidiaries as
currently conducted, (b) the ownership, use, operation and-maintenance by
each of them of its respective properties, facilities and assets, and (c)
the performance by the Seller of the Agreement.
11. Without limiting the generality of the foregoing paragraph:. (a)
each Contract of the Seller and each Subsidiary is in full force and effect
and has not been amended or otherwise modified, rescinded or revoked or
assigned, and (b) no condition exists or event has occurred which, in
itself or with the giving of notice or lapse of time or both, would result
in the suspension, revocation, impairment, forfeiture, and non-renewal
thereof.
12. Other than those UCC financing statements to be filed by the
Purchaser, no UCC financing statements, federal or state tax liens or
judgments with respect to the Purchased Receivables and all other
Receivables generated by the Seller have been filed nor shall be filed from
and after the date and time of the UCC search results provided by the
Seller in accordance with the conditions precedent set forth in the Sale
Agreement.
13. As of the date hereof, the undersigned hold the respective office
set forth opposite their name, and the signature set forth opposite their
name is their genuine signature:
NAME OFFICE SIGNATURE
----------------------------
----------------------------
----------------------------
----------------------------
14. The Seller is a corporation duly organized and validly existing
under the laws of the State of [state incorporated] validly acting by and
through its Board of Directors. Other than the Articles of Incorporation
filed on [date articles filed] and annexed to the Certificate of the
Secretary of State of the State of State Seller is incorporated, a true,
correct and complete copy of which is attached hereto as Exhibit A and
which are in effect on the date hereof, there has been no amendment or
other document filed with said Secretary of State with respect to the
Seller and no such amendment or other document has been authorized.
15. The Seller is in good standing (including the payment of all
franchise taxes and the filing of required reports) under the laws of the
State of State Seller is incorporated and is duly qualified to do business
in the State(s) of [states qualified]. A certificate of good standing
issued by the Secretary of State of [states qualified] is attached hereto
as Exhibit B.
C-2
16. Attached hereto as Exhibit C is a true, correct and complete copy
of the Bylaws of the Seller, which Bylaws have not been amended, modified
or rescinded since their adoption on [date bylaws adopted]; no such
amendment, modification or rescission is contemplated and said Bylaws
continue in force on the date hereof.
17. Attached hereto as Exhibit D is a true, correct and complete copy
of resolutions (the "Resolutions") duly authorized and adopted by the Board
of Directors of the Seller pertaining to the RFC Receivables Program; said
Resolutions were duly adopted by the unanimous written consent of the Board
of Directors without a meeting in accordance with the Articles of
Incorporation and Bylaws of the Seller and have not been amended, modified,
annulled or revoked and are in full force and effect; and the instruments
referred to in said Resolutions to which the Seller is a party were
executed pursuant thereto and in compliance therewith by the duly
authorized officer of the Seller.
All capitalized terms used herein that are not otherwise defined shall have
the respective meanings ascribed thereto in the Sale Agreement.
IN WITNESS WHEREOF, I have hereunto signed my name and affixed the seal of
the Seller this _________ day of
___________________________________________________ , 199______.
By
--------------------------------
Name:
Title:
C-3
EXHIBIT D
TO CORPORATE CERTIFICATE
CERTIFIED COPY OF RESOLUTION
WHEREAS, at a meeting of the Board of Directors of SELLER NAME, a
corporation organized and existing under the laws of the State of State Seller
is incorporated, duly and regularly called and held at the office of the
corporation on the __________ day of ((MeetingMonthandYear)), at which meeting a
quorum of said Board was present, the following resolution was duly adopted by
the unanimous vote of all Directors present, and the same has not been rescinded
or modified:
RESOLVED, that the ((OfficerTitlesonGenCert)) of this corporation be and
they are hereby authorized on behalf of and in the name of this corporation to
enter into and perform that certain "Receivables Sale Agreement" or
modifications, amendments, or supplements thereof or thereto with RFC Capital
Corporation (the "Purchaser"), a corporation organized and existing under the
laws of the State of Delaware, relating to the sale, assignment, transfer,
conveyance and/or the creation of a security interest in Seller Name's
Receivables, Seller Credit Reserve Account and Collection Account as defined in
said "Receivables Sale Agreement", and to execute and deliver said "Receivables
Sale Agreement" and any other documents to be executed and delivered in relation
to, or pursuant to said "Receivables Sale Agreement"; and said officers are
hereby further authorized at any time to sell, assign, transfer, convey and/or
create a security interest in such Receivables and related Seller Credit Reserve
Account and Collection Account on such terms and conditions and in such form as
may be acceptable to the Purchaser; and said officers are authorized to execute
and deliver all such instruments and documents and to do all such things as may
be required to complete any such transactions; and all acts and things of the
nature herein referred to, heretofore and hereafter done by the said officers or
any of them, are hereby approved, ratified, and confirmed.
RESOLVED FURTHER, that the authority conferred upon said officers by this
resolution shall remain in full force until written notice of revocation thereof
shall have been received by the Purchaser and a copy of this resolution
certified by President Name, President, and Secretary Name, Secretary, with the
seal of this corporation affixed, is delivered to the Purchaser.
We, President Name and Secretary Name, hereby certify that we are the
President and Secretary, respectively, of Seller Name; and that the foregoing
resolution was duly and regularly passed, as above stated, by the said Board of
Directors at a meeting of said Board of Directors, duly and regularly called and
held at the office of said corporation at the time and place hereinbefore
stated.
IN WITNESS WHEREOF, we have hereunto signed our names as President Name,
President, and Secretary Name, Secretary, and affixed the seal of said
corporation as of ((SaleSubservAgmtDate)).
SELLER NAME
--------------------------------- ---------------------------------
President Name Secretary Name
PRESIDENT SECRETARY
C-4
EXHIBIT D
TO CORPORATE CERTIFICATE
CERTIFIED COPY OF RESOLUTION
WHEREAS, the Board of Directors of SELLER NAME, a corporation organized and
existing under the laws of the State of State Seller is incorporated, duly and
regularly adopted by unanimous written consent without a meeting the following
resolution and the same has not been rescinded or modified:
RESOLVED, that the ((OfficerTitlesonGenCert)) of this corporation be and
they are hereby authorized on behalf of and in the name of this corporation to
enter into and perform that certain "Receivables Sale Agreement" or
modifications, amendments, or supplements thereof or thereto with RFC Capital
Corporation (the "Purchaser"), a corporation organized and existing under the
laws of the State of Delaware, relating to the sale, assignment, transfer,
conveyance and/or the creation of a security interest in Seller Name's
Receivables, Seller Credit Reserve Account and Collection Account as defined in
said "Receivables Sale Agreement", and to execute and deliver said "Receivables
Sale Agreement" and any other documents to be executed and delivered in relation
to, or pursuant to said "Receivables Sale Agreement"; and said officers are
hereby further authorized at any time to sell, assign, transfer, convey and/or
create a security interest in such Receivables and related Seller Credit Reserve
Account and Collection Account on such terms and conditions and in such form as
may be acceptable to the Purchaser; and said officers are authorized to execute
and deliver all such instruments and documents and to do all such things as may
be required to complete any such transactions; and all acts and things of the
nature herein referred to, heretofore and hereafter done by the said officers or
any of them, are hereby approved, ratified, and confirmed.
RESOLVED FURTHER, that the authority conferred upon said officers by this
resolution shall remain in full force until written notice of revocation thereof
shall have been received by the Purchaser and a copy of this resolution
certified by President Name, President, and Secretary Name, Secretary, with the
seal of this corporation affixed, is delivered to the Purchaser.
We, President Name and Secretary Name, hereby certify that we are the
President and Secretary, respectively, of Seller Name; and that the foregoing
resolution was duly and regularly adopted by the unanimous written consent of
said Board of Directors.
IN WITNESS WHEREOF, we have hereunto signed our names as President Name,
President, and Secretary Name, Secretary, and affixed the seal of said
corporation as of ((SaleSubservAgmtDate)).
SELLER NAME
-----------------------------------
President Name Secretary Name
PRESIDENT SECRETARY
C-5
EXHIBIT D
FORM OF OPINION OF COUNSEL FOR THE SELLER
CLOSING DATE
RFC Capital Corporation
000 X. Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
RE: RFC CAPITAL CORPORATION - RECEIVABLES SALE AGREEMENT
Gentlemen and Ladies:
We have acted as legal counsel to ________________________________________
(the "Seller") in connection with the transactions contemplated by that certain
Receivables Sale Agreement (the "Sale Agreement"), dated as of _____________,
199___, by and among the Seller, a(n) ______________ corporation, and RFC
Capital Corporation, a Delaware corporation, as Purchaser ("Purchaser") and as
Master Servicer ("Master Servicer"). All references herein to the Seller shall
refer to the Seller in its capacity as both Seller and Subservicer under the
Sale Agreement. This opinion is being delivered at the Seller's request.
Capitalized terms used and not otherwise defined herein shall have the
meanings ascribed thereto in the Sale Agreement.
In this connection, we have examined the following:
i) An executed copy of the Sale Agreement and all exhibits and
attachments thereto;
ii) Copies of the UCC-1 financing statements executed by the Seller as
assignor/debtor and naming the Purchaser as assignee/secured party
relating to the Purchased Receivables and all other Receivables
generated by the Seller (the "Financing Statements"), copies of which
are attached hereto as Annex 1;
iii) The results of the searches (the "Searches") conducted by the
Secretary of State of _____ ___/1/ [AND THE COUNTY RECORDER, _____
COUNTY, __________ , AS OF __________________,]/2/ certified by such
filing offices on Form UCC- 11, as to financing statements on
Form UCC-I on file with
--------------------
/1/ All references to "State of ____________________" in this form of opinion
mean the state of the present location of the Seller.
/2/ UCC searches certified on form UCC-II by the appropriate government
officials should be dated within ten (10) days of the closing of the
transaction.
D-1
such offices and naming the Seller as a "debtor" as of such date, copies
of which are attached hereto as Annex 2A;
iv) [ADD IF APPLICABLE] [EXECUTED COPIES OF APPROPRIATE RELEASES OF ALL
OUTSTANDING FINANCING STATEMENTS RELATING TO SECURITY INTERESTS IN
ACCOUNTS OF THE SELLER IN FAVOR OF THIRD PARTIES WHICH ARE REFLECTED ON
THE SEARCHES AND WHICH SHALL BE RELEASED AT CLOSING] (the "Releases")
copies of which are attached hereto as Annex 213; and
v) Such other documents, records and papers as we have deemed necessary and
relevant as a basis for this opinion.
As to various questions of fact material to our opinions set forth below we
have relied upon certificates of officers of the Seller, copies of which are
attached hereto as Annex 3. Nothing has come to our attention in the course of
our representation of the Seller which leads us to believe that the
representations set forth in any of the foregoing certificates are inaccurate or
incomplete in any material respect.
In connection with the opinions set forth below we have assumed, with your
agreement, that each party to the Sale Agreement other than the Seller has
executed and delivered such Sale Agreement and has the corporate power and
authority to enter into and perform its obligations thereunder, and that the
execution, delivery and performance of the Sale Agreement by each party thereto
other than the Seller will not breach, contravene, conflict with, or constitute
a violation of any provision of the articles of incorporation or bylaws or other
organizational documents of such party, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which such party is bound or
to which any of its property or assets is subject, or constitute a violation of
any law, statute, rule, regulation, order, writ, judgment, award, injunction or
decree of any Governmental Authority as to any such party.
In connection with the opinions set forth below which deal with the
perfection and priority of security interests, we have assumed that no financing
statements relating to Seller, the Receivables or the Purchased Receivables have
been misindexed or misfiled in the appropriate filing offices covered by the
Searches.
We have also assumed that all documents submitted to us as originals are
complete and authentic, that all copies of documents submitted to us conform in
all respects to the originals thereof, including all amendments or modifications
thereto; and that all signatures of parties, other than those of the Seller and
its authorized officers, to the respective documents are genuine. We have also
assumed that all documents or copies thereof examined by us have been or will be
duly, validly and properly authorized, executed, acknowledged and delivered by
all parties thereto other than the Seller.
As you have agreed, for purposes solely of ascertaining the existence of
security interests perfected by the filing of UCC financing statements, we have
limited our investigation to an examination of the Searches, which indicate that
there are no filed financing statements naming the Seller as debtor and relating
to the Seller's Receivables [,OTHER THAN THOSE WHICH WILL BE TERMINATED BY THE
FILING OF THE RELEASES].
For purposes of the opinion expressed in the first sentence of Paragraph 4
below, we have assumed, with your consent, that the description of "Purchased
Receivables" set forth in the Sale Agreement accurately and completely describes
all of the Seller's Purchased Receivables being transferred to the Purchaser
pursuant to the Sale Agreement and the description of "Receivable" set forth in
the Sale Agreement accurately and completely describes all of the Seller's
Receivables generated by the Seller historically and from time to time.
D-2
For purposes of the opinions expressed in Paragraphs 5 and 6 below, with
your agreement we have assumed that all transfers of Purchased Receivables will
have occurred in accordance with the terms and conditions set forth in the Sale
Agreement.
In addition to the foregoing, in rendering the opinions set forth herein we
have acted only as attorneys licensed to practice in the State of and do
not hold ourselves out as being knowledgeable as to the laws of any other
jurisdiction. We therefore express no opinions as to the effect of any laws
other than federal laws of the United States of America and the laws of the
State of . In this regard, we note that [- if the Seller is located in a
state other than Ohio -] the Sale Agreement is governed by the laws of the State
of Ohio. We have assumed, for purposes of issuing this letter, that insofar as
the laws of any such other jurisdiction are applicable to the matters set forth
below, such laws (including applicable conflict of laws provisions) are
identical to and will be interpreted in-all respects in the same manner as the
laws of the State of .
On the basis of the foregoing and subject to the limitations,
qualifications and exceptions set forth above, we are of the opinion as of the
date hereof that:
1. The Seller is a corporation duly organized and validly existing under
the laws of the State of __________________, is in good standing under the laws
of the State of [STATE OF ORGANIZATION] and is duly qualified to do business,
and is in good standing in each jurisdiction in which it maintains an office and
has the corporate power and authority to own, lease and operate its properties
and to conduct its business as now conducted. The Seller has made all filings
with, and has obtained all necessary or appropriate licenses and approvals from
federal and State of _____ Governmental Authorities, which such licenses and
approvals are in full force and effect as of the date hereof, that are necessary
to permit the Seller to own, lease and operate its properties, to lawfully
generate telecommunication receivables and to lawfully conduct its business as
presently conducted, and to consummate the transactions contemplated by the Sale
Agreement.
2. The Seller has the corporate power and authority to execute, deliver
and perform the Sale Agreement. The execution, delivery and performance of the
Sale Agreement has been duly authorized by all necessary corporate action of the
Seller and such Sale Agreement constitutes a legal, valid and binding obligation
of Seller enforceable against the Seller in accordance with its terms.
3. The execution and delivery of, and the performance of the Purchaser's
obligations under, the Sale Agreement does not and will not (a) violate any
provision of the Seller's articles of incorporation or bylaws, (b) violate any
statute, law, ordinance, rule or regulation of the United States of America or
the State of ___________________ binding on the Seller, (c) violate any orders,
judgments, writs or decrees known to us to which the Seller is subject in any
respect, or (d) violate or create a breach or default under any loan agreement,
indenture, note, evidence of indebtedness, mortgage, financing agreement, bond,
debenture or similar agreement or instrument relating to obligations of the
Seller for borrowed money or for the deferred purchase price of property or
services payable more than one year from the date of incurrence thereof or on
demand or relating to obligations of the Seller under capital leases which is
presently in effect and known to us and to which the Seller is a party of its
property is subject.
4. The Purchased Receivables and Receivables constitute "accounts" and
"general intangibles" within the meaning of the UCC. The Seller is "located" in
the State of __________________________________ for purposes of Section 9-
103(3)(b) of the UCC such that the laws (including the conflict of law rules) of
the State of ___________________________________ govern the perfection of
security interests in accounts and general intangibles of the Seller and the
sale of
D-3
accounts by the Seller. The grant of a first priority security interest in the
Receivables, other than Purchased Receivables, is perfected by the filing of
appropriate UCC financing statements in the appropriate UCC filing offices
identified in paragraph 5(i) below. The transfers of the Purchased Receivables
are "true sales" of the Purchased Receivables to the Purchaser. In the event,
however, that a court of competent jurisdiction were to hold that such
transaction constitutes a loan and not a purchase and sale, then the Sale
Agreement creates a first priority perfected valid security interest in the
Receivables and Purchased Receivables in favor of the Purchaser.
5. If transfers of the Purchased Receivables from the Seller to the
Purchaser pursuant to the Sale Agreement constitute a "true sale" of the
Purchased Receivables to the Purchaser, the execution and delivery of the Sale
Agreement and
(i) upon the proper filing of the Financing Statements in the UCC filing
offices of the Secretary of State of ________, [and in the UCC filing
offices of the County Recorder of __________ County,] and
(ii) the delivery to the Payors of such Purchased Receivables of the
notices in the form of the notices on Exhibit B to the Sale Agreement
(assuming no such prior notice has been delivered to any such Payor by
any person claiming an interest in the Purchased Receivables, and we
hereby advise you that we have no knowledge that the Seller has
previously made any such assignment thereof or granted any such lien
or encumbrance thereupon);
are effective under the laws of the [STATE OR LOCATION OF SELLER] to vest title
thereto in the Purchaser, and all necessary steps have been taken under the laws
of the State of [LOCATION OF SELLER] to protect the Purchaser's ownership
interest in the Purchased Receivables now existing, and hereafter created,
against creditors of, or subsequent Purchasers from, the Seller, provided that
(x) if the transfers of the Purchased Receivables are deemed to be subject
to Article 9 of the UCC, or previously filed financing statements,
priority may be subject to financing statements effective as a result
of Section 9-401(2) of the UCC, or
(y) if the Purchased Receivables are deemed to be interests or claims "in
or under any policy of insurance" under (S)9-104(g) of the UCC,
priority may be subject to [IN ENGLISH RULE STATES: PRIOR NOTICES TO
PAYORS OF SUCH POLICIES] [IN AMERICAN RULE STATES: PRIOR SALES OF SUCH
PURCHASED RECEIVABLES]. /3/
-----------------------
/3/ As to assignments of accounts and intangibles, if the UCC is not
applicable because of Section 9-104, most jurisdictions follow either the
so-called "American rule" (which in general provides that the transfer of
an interest therein is made effective by a written assignment, with
priority being granted to the assignment which is first in time) or the
so-called "English rule" (which in general provides that the transfer of
an interest therein is only effective if notice is given to the payor).
Counsel should choose one approach or the other in completing paragraph
5(y) or, if the law in the jurisdiction is unsettled, counsel may include
both as exceptions (i.e., by indicating in paragraph 5(y) "prior notices
to payors of such policies or prior sales of such Purchased
Receivables").
D-4
The filing of the Financing Statements in the filing offices identified in
paragraph 5(i) above are the only filings required to be made in the State of
to evidence, provide notice to third parties with respect to, or otherwise
perfect the Purchaser's ownership interest in the Purchased Receivables and the
Purchaser's security interest in all Receivables other than Purchased
Receivables under any applicable law of the State of ____. No other filings,
either in the filing offices identified in paragraph 5(i) or in any other filing
offices in the State of ____, are required or are advisable to be made to
evidence, provide notice to third parties with respect to, or otherwise perfect
such interests, or to establish the priority of the Purchaser's interest with
respect to such Purchased Receivables.
6. If the transfers of the Purchased Receivables from the Seller to the
Purchaser pursuant to the Sale Agreement does not constitute a "true sale" of
the Purchased Receivables to the Purchaser, the Sale Agreement creates a valid
security interest in favor of the Purchaser in the Purchased Receivables from
time to time transferred to the Purchaser pursuant to the Sale Agreement, which
security interest will constitute
(i) upon the proper filing of the Financing Statements in the UCC filing
offices of the Secretary of State of _________, [and in the UCC filing
offices of the County Recorder of ________________, County,] and
(ii) upon the delivery to the Payors of such Purchased Receivables of the
notices in the form of the notices on Exhibit B to the Sale Agreement
(assuming that no such prior notice has been delivered to any such
Payor by any person claiming an interest in the Purchased Receivables
and we hereby advise you that we have no knowledge that the Seller has
previously delivered any prior notice);
a security interest (perfected under the UCC and under other appropriate law to
the extent applicable) in the Seller's right, title and interest in and to the
Purchased Receivables and the proceeds thereof now existing, and hereafter
created, prior and senior to all other liens, provided that:
(x) if the granting of a security interest in the Purchased Receivables is
deemed to be subject to Article 9 of the UCC or previously filed
financing statements, priority may be subject to financing statements
effective as a result of Section 9-401(2) of the UCC, or
(y) if the Purchased Receivables are deemed to be interests or claims "in
or under any policy of insurance" under (S)9-104(g) of the UCC,
priority may be subject to [IN ENGLISH RULE STATES: PRIOR NOTICES TO
PAYORS OF SUCH POLICIES] [IN AMERICAN RULE STATES: PRIOR SALES OF SUCH
PURCHASED RECEIVABLES].
The filing of the Financing Statements in the filing offices identified in
paragraph 6(i) above are the only filings required to be made in the State of
to evidence, provide notice to third parties with respect to, or otherwise
perfect the Purchaser's security interest in the Purchased Receivables under any
applicable law of the State of ___________________________. No other filings,
either in the filing offices identified in paragraph 6(i) or in any other filing
offices in the State of __________, are required or are advisable to be made to
evidence, provide notice to third parties with respect to, or otherwise perfect
such interests, or to establish the priority of the Purchaser's interest with
respect to such Purchased Receivables.
7. A State of court and a federal court sitting in the State of
would give effect to the choice of law provisions of the Sale Agreement, except
that such court may apply State of law to (a) certain remedial and procedural
rights, (b) matters of public policy, (c) matters pertaining to the perfection
D-5
and priority of security interests, and (d) matters as to which Ohio law cannot
be proven to such court to be sufficiently authoritative or certain for such
court to rely on it.
8. No consent of, or other action by, and no notice to or filing with, or
licensing by any federal or State of Governmental Authority or any other
party (except for those consents required under Section _________________ of the
Sale Agreement which have been provided by the Seller to the Purchaser) is
required for the due execution, delivery and performance by the Seller of the
Sale Agreement or any other agreement, document or instrument to be delivered
thereunder or for the perfection of or the exercise by the Seller, the Purchaser
or the Master Servicer of any of their rights or remedies thereunder. The
transactions contemplated by the Sale Agreement will not cause the Purchaser to
be subjected to any obligation to pay any transfer tax to any Governmental
Authority in the State of , including without limitation any transfer,
sales, use, added value, documentary stamp or other similar transfer tax other
than [DESCRIBE ANY SUCH TAXES WHICH ARE APPLICABLE].
9. To the best of our knowledge, there are no actions or proceedings
against or affecting the Seller or any of its assets, pending or threatened,
before any Governmental Authority (including, without limitation, any federal or
state court of competent jurisdiction) (i) which seek to affect the
enforceability of the Sale Agreement or the transactions contemplated thereby,
or (ii) which, if determined adversely, would materially and adversely affect
the ability of the Seller to perform its obligations under the Sale Agreement.
Our opinions set forth herein are subject to the following qualifications
and exceptions:
(a) The effect of certain laws governing bankruptcy, reorganization,
fraudulent conveyance, moratorium and insolvency and relating to or affecting
the enforcement of creditors' rights generally, including, but not limited to,
the right to take or retain personal property encumbered by the Sale Agreement
and the Financing Statements;
(b) The application of general principles of equity (regardless of whether
considered in a proceeding in equity or at law);
(c) Standards of commercial reasonableness and good faith;
(d) In the case of proceeds, perfection of security interests is limited to
the extent set forth in Section 9-306 of the UCC;
(e) Continuation of perfection in any proceeds which are subject to a
security interest or in any after acquired property may, if such proceeds or
after acquired property consist of property of a type in which a perfected
security interest cannot be obtained by filing a financing statement, require
additional compliance with applicable provisions of the UCC and we express no
opinion as to the perfection, priority an effectiveness of any security
interest in any proceeds of the Purchased Receivables initially subject to the
security interest or after acquired property to the extent that perfection,
priority or effectiveness depends upon additional compliance with the UCC. Any
change (from one state to another state) in the location of the Seller's place
of business or chief executive offices to a location outside of the State of
, or any change in the name, identity or corporate structure of the
Seller that would make a filed financing statement seriously misleading, may
result in the lapse of perfection of the security interest to the extent that
perfection is dependent on filing unless new and appropriate financing
statements are filed in a timely manner; and
D-6
(f) In the case of collateral (as such term is defined in Article 9 of the
UCC) in which a debtor (as such term is defined in Article 9 of the UCC) has
no present rights, a security interest will be created therein only when the
debtor acquires rights to such collateral.
Our opinions expressed herein are limited to those matters expressly set
forth herein, and no opinion may be implied or inferred beyond the matters
expressly stated herein. Further, the opinions expressed herein are being
rendered solely in connection with the consummation of the transactions
contemplated by the Sale Agreement to which Seller is a party, and may not be
relied upon for any other purpose.
Our opinions are rendered only as of the date hereof and we assume no
obligation to update or supplement this opinion to reflect any facts or
circumstances that may hereafter occur or to reflect the applicability of any
laws that may affect the transactions contemplated by the Sale Agreement after
the date hereof.
In addition to the foregoing, this letter may not be distributed to,
furnished to or relied upon by any person without the express written consent of
this firm, provided, however, that any assignee of the Purchaser pursuant to the
Sale Agreement may likewise rely upon this opinion as if named as an addressee
herein.
Very truly yours,
D-7
ANNEX 1
TO OPINION OF
COUNSEL FOR
THE SELLER
X-0-0
XXXXX 0X
XX XXXXXXX OF
COUNSEL FOR
THE SELLER
D-2A-1
ANNEX 2B
TO OPINION OF
COUNSEL FOR
THE SELLER
D-2B-1
ANNEX 3
TO OPINION OF
COUNSEL FOR
THE SELLER
D-3-1
