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RECEIVABLES PURCHASE AND
SERVICING AGREEMENT
RECEIVABLES PURCHASE AND SERVICING AGREEMENT, dated as of October 1,
1996 (this "Agreement"), by and among ROYAL APPLIANCE RECEIVABLES, INC. an Ohio
corporation as Seller (the "Seller"), CAPITAL USA FUNDING, L.P., a Delaware
limited partnership, as Purchaser (as such, together with its successors and
assigns, the ("Purchaser"), ROYAL APPLIANCE MFG. CO., an Ohio corporation as
originator of the Receivables (the "Parent") and as servicer (as such, together
with its successors and assigns, the "Servicer") and CAPITAL USA, L.L.C., a
Delaware limited liability company in its capacity as administrator hereunder
(as such, together with its successors and assigns, the "Administrative Agent").
W I T N E S S E T H:
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WHEREAS, the Seller is a wholly-owned, bankruptcy-remote subsidiary of
the Parent;
WHEREAS, the Seller has been formed for the sole purpose of purchasing
and selling certain trade receivables originated by the Parent in the ordinary
course of its business and sold or contributed to the Seller from time to time
pursuant to the Receivables Sale Agreement by and between the Parent and the
Seller;
WHEREAS, the Administrative Agent has been requested and is willing to
provide certain administrative services on behalf of the Purchaser in connection
with the making and financing of such purchases;
WHEREAS, the Purchaser desires that a Servicer be appointed to service
receivables purchased by the Purchaser under this Agreement and the Parent has
been requested and is willing to act as the Servicer;
NOW, THEREFORE, the parties agree as follows:
This Agreement hereby expressly incorporates by reference herein the
Standard Terms and Conditions attached hereto as Annex A.
1. (a) CERTAIN DEFINED TERMS. As used in this agreement, the
following additional terms shall have the following meanings:
APPLICABLE MARGIN: means 0.90% per annum.
BALANCE SHEET DATE: means June 30, 1996.
BUSINESS DAY: means any day of the year other than a Saturday,
Sunday or any day on which banks generally are required, or authorized,
to close in New York, New York, Fayetteville, Arkansas, or Cleveland,
Ohio.
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COLLECTION ACCOUNT: means the Eligible Bank Account titled
"Capital USA Funding, L.P. -- Collection Account Royal Appliance"
established pursuant to Section 2.03(b).
ESCROW PERIOD: means, with respect to any Escrowed Amount, the
period expiring on the 91st day (or such longer period as may be
required by Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy Code to the
extent the Seller or the Parent was an "insider" within the meaning of
Xxxxxxx 000 xx xxx Xxxxxx Xxxxxx Bankruptcy Code at the time of such
transfer) following the deposit or allocation of such Escrowed Amount
into the Escrowed Amount Subaccount.
FINAL PURCHASE DATE: means the date that is 90 days following
the Effective Date, which date shall be extended for additional 90-day
periods unless the Administrative Agent provides written notice to the
Seller that an extension will not be made; PROVIDED, however, that in
no event shall any such extension be made that would cause the Final
Purchase Date to occur more than 364 days following the Effective Date.
MINIMUM INVESTMENT AMOUNT: means $100,000.
MAXIMUM DILUTION RATIO: means 20%
PARENT JUDGMENT AMOUNT: means $5 million.
PROGRAM FEE RATE: means 0.10%, as adjusted from time to time
by written notice from the Administrative Agent to the Seller.
PURCHASE DATE: means the Effective Date and, thereafter, each
successive Business Day.
PURCHASE LIMIT: means from the Effective Date through December
31, 1996, $16,000,000, and thereafter $9,000,000.
SERVICING FEE RATE: means 1.00%.
(b) All capitalized terms used and not defined herein, shall
have the meaning specified in Annex A to this Agreement.
(c) The words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole. All references to
Articles and Sections shall be deemed to refer to Articles and Sections of this
Agreement as the context requires.
2. ADDITIONS AND MODIFICATIONS TO THIS AGREEMENT.
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(a) The following defined term is hereby added:
"MONTHLY DSO: means, for any calendar month, the
Days' Sales Outstanding for such month, calculated as
of the first day of the month next succeeding such
month."
(b) The following defined terms are hereby amended in
full to read as follows:
"AVERAGE HISTORICAL DSO: means, for any date of
determination, (a) the sum of the Monthly DSOs for
the immediately preceding twelve calendar months
DIVIDED BY (b) 12."
"DILUTION DISCOUNT: means, on any date, 10%."
"DILUTION FACTOR: means, with respect to any month
and any date of calculation, the greater of (a) a
fraction (i) the numerator of which is equal to the
aggregate Dilutions for the immediately preceding 12
calendar months and (ii) the denominator of which is
equal to the aggregate Cumulative Sales for the
immediately preceding 12 calendar months and (b) the
product of (i) a fraction (A) the numerator of which
is equal to the maximum Dilutions that occur in any
given calendar month during the immediately preceding
twelve calendar month period and (B) the denominator
of which is equal to the aggregate Outstanding
Balance of Purchased Receivables that are Eligible
Receivables as of such date (after giving effect to
any Purchase to be made on such date) and (ii) the
greater of (A) 1.00 and (B) a fraction (I) the
numerator of which is equal to the Cumulative Sales
for the Parent's most recently ended fiscal year and
(II) the denominator of which is equal to the
Cumulative Sales for the Parent's second most
recently ended fiscal year."
"PURCHASE TERMINATION DATE: means the earliest to
occur of: (a) the date so designated pursuant to
Section 7.1 of this Agreement as a result of the
occurrence of a Termination Event, (b) the date
designated in writing by the Seller to each of the
Purchaser, the Banks, the Administrative Agent and
the Agent, such date to occur no earlier than 10
Business Days following receipt by the last party to
receive such notice and (c) the Final Purchase Date."
"REVOLVING PERIOD: means the period commencing on the
Effective Date of this Agreement and ending on the
day prior to the Purchase Termination Date."
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"STANDARD DEVIATION OF DSO: means, for any date of
determination, the square root of the Average DSO
Deviation.
Where:
AVERAGE DSO DEVIATION equals (a) the
aggregate Square of DSO Differences
for all Target Monthly DSOs used to
calculate the Average Historical DSO
on such date DIVIDED BY (b) 12;
SQUARE OF DSO DIFFERENCE equals the
DSO Difference MULTIPLIED BY itself;
DSO DIFFERENCE means, for each
Target Monthly DSO, an amount equal
to the Average Historical DSO on
such date MINUS the Target Monthly
DSO; and
TARGET MONTHLY DSO is each Monthly
DSO used to calculate the Average
Historical DSO."
(c) The following defined terms are amended as follows:
(i) Clause (d) of the definition of "Eligible
Receivable" is hereby amended by adding the following after the word
"adjusted:"
(other than as contemplated in (c) above)
(ii) Clause (o) of the definition of "Eligible
Receivable" is hereby amended by deleting the words "30 days'" and
inserting the words "60 days'."
(iii) The definition of "Related Documents" is
hereby amended by adding the following after the words "Standby
Receivables Purchase Agreement:"
, the Management Agreement, dated as of
October 1, 1996, between the Parent and the
Seller
(d) Section 2.8(a)(iii) is hereby amended as follows: the
words "Escrowed Accounts" in the parenthetical phrase is deleted and replaced
by the words "Escrowed Amounts."
(e) Section 3.1(l) is hereby deleted and replaced in its
entirety as follows:
(l) Payment of the Purchaser's legal fees (in an
amount not to exceed $7,500) and expenses and other
document preparation costs;
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(f) Section 3.1(n) is hereby deleted and replaced in its
entirety as follows:
(n) (i) Consolidated balance sheets and
statements of income and changes in financial
position of the Parent, the Servicer and their
respective Subsidiaries for each of the years in the
three year period ended the Balance Sheet Date,
audited by an independent nationally recognized
accounting firm;
(ii) Unaudited balance sheets of the
Seller as of the Effective Date and consolidated
balance sheets and statements of income and changes
in financial position of the Parent, the Servicer and
their respective Subsidiaries for each fiscal quarter
following the Balance Sheet Date ended more than 45
days prior to the Effective Date;
(iii) The Seller's balance sheet, dated
as of the Effective Date and certified by the chief
executive or accounting officer of the Parent;
(g) Section 4.3(a)(i) is hereby amended as follows:
(A) by adding the following in the fourth line
of the first sentence after the words
"requires it to be so qualified:"
in which the failure to be so
qualified could have a material
adverse effect on the Parent
(B) by adding the following at the end of the
second sentence:
, which the failure to comply with
could have a material adverse effect
on the Parent
(h) Section 4.3(a)(xi) is hereby amended by adding at the
end thereof the following: "which failure to pay could have a material adverse
effect on the Parent."
(i) Section 4.5(b) is hereby amended by deleting the
fourth sentence thereof and replacing it with the following sentence:
Any such repurchase shall be made without recourse
to, or warranty, express or implied (other than a
warranty that such Receivable is free and clear of
any and all encumbrances, liens, security interests
and claims created by the Purchaser), of, the
Purchaser.
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(j) Section 5.3(b) is hereby amended by deleting the
phrase "in a manner acceptable to the Administrative Agent."
(k) Section 5.3(f) is hereby deleted and replaced in its
entirety as follows:
(f) promptly upon the request of the
Administrative Agent, copies of any ERISA reports
filed by the Seller or the Parent; and
(l) Section 5.3(g) is hereby deleted and replaced in its
entirety as follows:
(g) promptly, from time to time, such other
information, documents, records or reports respecting
the Purchased Receivables, the Contracts, the
condition or operations, financial or otherwise, of
the Seller or the transactions contemplated by this
Agreement and the Related Documents as the Purchaser
or the Administrative Agent may, from time to time,
reasonably request from the Seller, the Servicer or
the Parent.
(m) Section 6.2(b)(iv) is hereby deleted and replace in
its entirety as follows:
(iv) notifying the Purchaser and the
Administrative Agent of any action, suit, proceeding,
dispute, defense or counterclaim, or offset or
deduction not arising as a result of normal and
expected merchandise returns, that is or may be
asserted by Wal-Mart or any Adverse Claim against the
Purchased Receivables, threatened, pending or
asserted by any party with respect to any Purchased
Receivable; and
(n) Section 6.5(b) and (d) are each hereby amended by
adding at the end of each such section the following:
in any way that could materially affect the
Servicer's ability to perform is obligations under
this Agreement or any Related Document
(o) Section 6.6(d) is hereby amended by adding at the
end of such section the following:
with respect to the Receivables or the obligations of
the Servicer under this Agreement
(p) Section 6.11(c) is hereby deleted and replace in its
entirety as follows:
the Servicer shall generally not pay any of its Debts
as such Debts become due, or shall admit in writing
its inability to pay its Debts generally, or shall
make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by
or against the Servicer
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(and, in the case of any such proceeding instituted
against it, but not instituted by it, any such
proceeding shall remain undismissed or unstayed for a
period of 60 days) seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or any of its
Debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or
seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial
part of its property, or any of the actions sought in
such proceeding (including, without limitation, the
entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial
part of its property) shall occur, or the Servicer
shall take any corporate action to authorize any of
the actions set forth in this subsection; or
(q) Section 6.11(f) is hereby amended by inserting the
word "reasonably" before the word "determined."
(r) Section 7.1((b) is hereby amended by inserting the
following after the words "Debt of the Parent:"
in excess of $5 million, individually or in the
aggregate
(s) Section 7.1(c) is hereby deleted and replace in its
entirety as follows:
the Parent or the Seller shall generally not pay any
of its respective Debts as such Debts become due, or
shall admit in writing its inability to pay its Debts
generally, or shall make a general assignment for the
benefit of creditors, or any proceeding shall be
instituted by or against the Parent (and, in the case
of any such proceeding instituted against the Parent,
but not instituted by it, any such proceeding shall
remain undismissed or unstayed for a period of 60
days) or the Seller seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation,
winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or any of its
Debts under any law relating to bankrupt cy,
insolvency, reorganization or relief of debtors, or
seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or
other similar official for it or for any substantial
part of its property, or any of the actions sought in
such proceeding (including, without limitation, the
entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or
other similar official for, it or for any substantial
part of its property) shall occur, or the Parent or
the Seller shall take any corporate action to
authorize any of the actions set forth in this
subsection; or
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(t) Section 7.1(m) is hereby amended by deleting the
phrase "or for any other reason whatsoever."
(u) Section 10.4 is amended by inserting "lenders," in
the second parenthetical phrase thereof, before the word "directors."
(v) Section 2.15 is hereby added as follows:
Section 2.15 PAYMENTS IN RESPECT OF DILUTIONS. On any
day on which one or more Dilutions arise as a result
of any action by Wal-Mart or otherwise, the Seller
shall pay to the Administrative Agent within ten
days, for application hereunder in reduction of
Capital Investment, in immediately available funds,
by wire transfer or otherwise, an amount equal to the
aggregate dollar amount of such Dilutions.
3. COUNTERPARTS. This Agreement may be executed in counterparts
each of which shall be an original, but all of which together shall constitute
one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Receivables
Purchase and Servicing Agreement to be executed by their respective officers
thereunto duly authorized as of the date first written above.
ROYAL APPLIANCE RECEIVABLES, INC.,
as Seller
By:
---------------------------------------
Name:
Title:
CAPITAL USA FUNDING, L.P.,
as Purchaser,
By Capital USA Funding Corp.,
its general partner
By:
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Name: Xxxxx X. Xxxxxx
Title: President
ROYAL APPLIANCE MFG. CO., as Parent and
Servicer
By:
---------------------------------------
Name:
Title:
CAPITAL USA, L.L.C.,
as Administrative Agent
By:
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Name: Xxxxx X. Xxxxxx
Title: Vice President
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