EXHIBIT 10.20
RECEIVABLES SALE AGREEMENT
Dated as of June 18, 1997
by and between
EQUALNET CORPORATION,
as Seller, and
RECEIVABLES FUNDING CORPORATION
as Purchaser and Master Servicer
RECEIVABLES SALE AGREEMENT (the "Agreement"), dated as of June 18,
1997, by and between EQUALNET CORPORATION, a Delaware corporation, as Seller and
Subservicer, and RECEIVABLES FUNDING 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 (e) 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 Account(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 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
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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; and
(d) The Termination Date shall not have occurred.
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 (as of the date hereof such representation is subject to that set forth
on Schedule 6 attached hereto) 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;
(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) Other than as set forth on Schedule 4 attached hereto, 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;
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(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) has furnished to the Purchaser copies of its financial
statements for the nine month period ended March 31, 1997, 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 March 31, 1997 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) the Seller
has delivered 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;
(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 on Schedule 2 attached hereto;
(i) The legal name of the Seller is as set forth at the beginning of
this Agreement. During the past six years, the Seller changed its name from
Equal Net Communications, Inc. to EqualNet Corporation, and during such period,
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 Schedule 2 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
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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 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 OBLIGATIONS. 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 2.3. In the
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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.
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, Clearinghouse Agreement or Billing and
Collection
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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.
Section 6.3. SUBSERVICING EXPENSES. 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.
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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;
(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
8
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 from 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 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.
9
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.
(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
10
INSTITUTED HEREUNDER AND CONSENTS 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.
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.
11
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.
EQUALNET CORPORATION, as Seller and as Subservicer
By: __________________________
Name: Xxxxxxx Xxxxxx
Title: Vice President / Chief Operating Officer
Address at which the chief executive office is located:
Address: 0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx, C.F.O.
Phone number: (000) 000-0000
Telecopier number: (000) 000-0000
ADDITIONAL LOCATIONS AT WHICH THE SELLER DOES
BUSINESS AND MAINTAINS RECORDS:
_______________________________________________
_______________________________________________
ADDITIONAL NAMES UNDER WHICH SELLER DOES BUSINESS:
Equal Net Communications
EqualNet Communications
Creative Communications
Creative Communications International
Agency Services
US Business Alliance
Digital Network Services
RECEIVABLES FUNDING CORPORATION
By: __________________________
Name: Xxxx X. Xxxxxxx
Title: Vice President
Address: 000 Xxxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
Phone number: (000) 000-0000
Telecopier number: (000) 000-0000
12
SCHEDULE 1
SELLER'S LICENSE NUMBERS
NAME OF SELLER LICENSE NUMBERS
EqualNet Corporation FCC Account No. 0760315215
1-1
SCHEDULE 2
LIST OF NAMES UNDER WHICH SELLER IS DOING BUSINESS
AND ADDRESSES AT WHICH SELLER IS DOING BUSINESS
NAMES UNDER WHICH SELLER IS ADDRESSES AT WHICH
DOING BUSINESS AND PAYEE NAMES SELLER IS DOING BUSINESS
EqualNet Corporation 0000 Xxxx Xxxxxx Xxxx Xxxxx
Xxxxxxx, Xxxxx 00000
Creative Communications (Xxxxxx County)
Creative Communications International
Agency Services
Equal Net Communications
EqualNet Communications
US Business Alliance
Digital Network Services
Agency Services
Equal WATS
EqualNet
United WATS
ACMI
Enhanced Wats
Tele Consortium
Comtel
UWI
Network Plus
NPI
2-1
SCHEDULE 3
BILLING AND COLLECTION AGREEMENTS
BILLING AND COLLECTION AGREEMENT DATE
-------------------------------- ----
2-1
SCHEDULE 4
LITIGATION DISCLOSURE
2-1
SCHEDULE 5
2-1
SCHEDULE 6
2-1
EXHIBIT A
DEFINITIONS
"BASE RATE" means, as of any Purchase Date, a percentage equal to the
Provident Bank prime lending rate plus 4.5% per annum.
"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 June 18, 1997.
"COLLECTION ACCOUNT" means the account established pursuant to Section
2.4(b).
"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(b); or (c) the Master
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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,
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 materially 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) 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(S)" means the account established pursuant to Section
2.4(a).
"MASTER SERVICER" means Receivables Funding Corporation, a Delaware
corporation, or any Person designated as the successor Master Servicer, and its
successors and assigns, from time to time.
A-2
"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, 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.
"PRIOR NET VALUE AMOUNT" has the meaning specified in Section 5.2(a).
"PROGRAM FEE" means (a) 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 $8,000,000 with an
initial maximum funding of up to $6,000,000. Maximum monthly increases
thereafter shall not exceed $350,000 above the prior month's highest outstanding
aggregate Net Value of Purchased Receivables, or other such amounts to which
Seller and Purchaser may otherwise agree in writing. 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, an incremental increase in the Purchase Commitment in an amount
equal to $3,000,000 during the period commencing six months from the Closing
Date through a period nine months from such Closing Date; and an additional
$4,000,000 during the period commencing ten months from the Closing Date through
the one year anniversary of the Closing Date.
"PURCHASE DATE" means the Closing Date and thereafter, Wednesday of
each week or the next succeeding Business Day if such day is not a Business Day,
or such other date that the Seller and Purchaser may 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 Receivables Funding 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 for a single monthly usage period (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,
A-3
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(e).
"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 EqualNet Corporation, a Delaware corporation, together
with its successors and assigns.
"SELLER CREDIT RESERVE ACCOUNT" means the account established pursuant
to Section 2.4(c).
"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 the Seller, or any Person designated as Subservicer
hereunder.
"TERMINATION DATE" means the earlier of (a) June 18, 1998; (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 2.5% 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
A-4
Purchaser and Purchaser has received from Seller an amount equal to (i) 2.5% of
the Purchase Commitment if such notice of termination is provided to the
Purchaser not less than 30 days prior to the expiration of the six month period
following the Closing Date; and (ii) 2.0% of the Purchase Commitment if such
notice of termination is provided to the Purchaser during the period commencing
with the seventh month from the Closing Date and ending on the one year
anniversary from the Closing 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.
A-5
EXHIBIT B
FORM OF NOTICE TO PAYORS - [LEC PAYORS]
[SELLER LETTERHEAD]
[NAME AND ADDRESS OF PAYOR]
Dear ________:
[SELLER] (the "Seller") has entered into an agreement with Receivables
Funding 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 ([NAME OF SELLER]) # ____________.
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]
________________________________
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 Receivables
Funding 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 ([NAME OF SELLER]) # ____________.
[BANK NAME]
[BANK ADDRESS]
[BANK ABA #]
Your payments will continue to be serviced by [name of Seller], and all
inquiries regarding your service, billing invoices and payments should continue
to be directed to [name of seller]'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]
__________________________________
By:
Its:
B-1
EXHIBIT C
FORM OF CORPORATE CERTIFICATE
FOR THE SELLER
I hereby certify that I am a duly elected [OFFICER] of [SELLER] (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 are 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 Receivables Funding
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 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.
C-1
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. The undersigned have held the respective office(s) set
forth opposite their name from [begin date offices held] through the
date hereof, 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
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 incorp.] 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.
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
C-2
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, the Board of Directors of SellerName, a corporation organized
and existing under the laws of the State of StateSellerIncorporated, 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 Receivables
Funding 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 SellerName'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 NameofPresident, President, and NameofSecretary, Secretary, with
the seal of this corporation affixed, is delivered to the Purchaser.
We, NameofPresident and NameofSecretary, hereby certify that we are the
President and Secretary, respectively, of SellerName; 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
NameofPresident, President, and NameofSecretary, Secretary, and affixed the seal
of said corporation as of SaleSubservAgmtDate.
Seller Name
__________________________ _______________________________
Name of President Name of Secretary
PRESIDENT SECRETARY
D-1
EXHIBIT D
FORM OF OPINION OF COUNSEL FOR THE SELLER
[CLOSING DATE]
Receivables Funding Corporation
000 X. Xxxxxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000
RE: RECEIVABLES FUNDING 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 Receivables
Funding 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-1 on file with 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 2B; and
v) Such other documents, records and papers as we have deemed
necessary and relevant as a basis for this opinion.
----------
(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-11 by the appropriate government
officials should be dated within ten (10) days of the closing of the
transaction.
D-2
The Sale Agreement and the Lockbox Account(s) Agreement are hereinafter
collectively referred to as the "Sale Agreement".
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.
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
D-2
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 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
D-3
(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 ss.9-104(g)
of the UCC [IN ENGLISH RULE STATES: PRIOR NOTICES TO PAYORS OF
SUCH POLICIES ARE REQUIRED] [IN AMERICAN RULE STATES: PRIOR
SALES OF SUCH PURCHASED RECEIVABLES].(3)
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);
----------
(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
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 ss.9-104(g)
of the UCC [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 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;
D-5
(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
(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-6
ANNEX 1
TO OPINION OF
COUNSEL FOR
THE SELLER
1-1
ANNEX 2A
TO OPINION OF
COUNSEL FOR
THE SELLER
2A-1
ANNEX 2B
TO OPINION OF
COUNSEL FOR
THE SELLER
2B-1
ANNEX 3
TO OPINION OF
COUNSEL FOR
THE SELLER
3-1
CLOSING CHECKLIST
1. Receivables Sale Agreement
2. Notice to Payors
3. Corporate Certificate of the Seller together with exhibits:
Exhibit A - Certified Articles of Incorporation
Exhibit B - Certificate of Good Standing
Exhibit C - Bylaws
Exhibit D - Certified Copy of Resolutions
4. Original time-stamped UCC-1 Financing Statements naming Seller as debtor
and Receivables Funding Corporation as secured party filed in Ohio and in
Seller's local jurisdictions
5. A copy of the Articles of Incorporation of the Seller CERTIFIED BY THE
SECRETARY OF STATE OF THE STATE in which Seller is incorporated and dated
no more than 10 days prior to the Closing Date
6. Good Standing Certificate for the Seller dated no more than 10 days prior
to the Closing Date issued by the Secretary of State of the State in which
Seller is incorporated and each State in which Seller is qualified to do
business.
7. UCC Search Results CERTIFIED BY THE RESPECTIVE FILING OFFICE showing
searches of applicable federal and state court and agency documents, lien
records and tax liens dated no more than 10 days prior to the Closing Date
8. Copies of filed UCC-3 Releases, if necessary
9. Copies of all date stamped and/or certified Public Service Commission
Orders or other evidence of regulatory approval from each state in which
the Seller has filed such Orders or where such regulatory approval is
required
10. Legal opinion of Seller's counsel
RECEIVABLES
FUNDING
CORPORATION
EQUALNET CORPORATION
CLOSING
BINDER
XXXXXXX & XXXXX
RECEIVABLES FUNDING CORPORATION
EQUALNET CORPORATION
CLOSING BINDER
XXXXXXX & XXXXX
CLOSING DATE: June 18, 1997
CLOSING BINDER
RECEIVABLES FUNDING CORPORATION
TELECOMMUNICATIONS RECEIVABLES FUNDING PROGRAM
PARTIES
-------
SELLER: EQUALNET CORPORATION
PURCHASER AND
MASTER SERVICER: RECEIVABLES FUNDING CORPORATION
EQUALNET CORPORATION
CLOSING BINDER INDEX
TAB
Receivables Sale Agreement................................................. 1
Lockbox Agreement.......................................................... 2
Notice to Payors........................................................... 3
Corporate Certificate...................................................... 4
Exhibit A - Certificate of Incorporation
Exhibit B - Certificate of Good Standing
Exhibit C - Bylaws
Exhibit D - Certified Copy of Resolutions
UCC-1 Financing Statements................................................. 5
UCC-11 Certified Search Results............................................ 6
UCC-3 Releases............................................................. 7
Escrow Agreement........................................................... 8
Opinion of Seller's Counsel................................................ 9
9 POST-CLOSING CHECKLIST
RECEIVABLES FUNDING CORPORATION
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DESCRIPTION OF TASK COMPLETE
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1. Check each and every page, making sure such documents are signed
and dated correctly by all parties.
======================================================================================== =================
2. Make sure all documents have the correct exhibits attached to each
and labeled accordingly.
======================================================================================== =================
3. Place the proper return sticker on the UCC-3 forms to ensure that
same will be sent to the offices of Xxxxxxx & Xxxxx when prepared by
outside party.
======================================================================================== =================
4. Prepare Closing Binder by inserting Cover Sheets Front & Side for
Closing Binder, Prepare Closing Binder Index.
======================================================================================== =================
5. Make sure documents are behind the right exhibit tab numbers.
======================================================================================== =================
6. Prepare Closing Binder Distribution List (Seller, Seller's Legal Counsel).
======================================================================================== =================
7. Prepare a copy of entire closing binder, making sure all copies
are legible, especially the UCC-1 financing statements.
======================================================================================== =================
8. Prepare transmittal and distribute Closing Binders to the respective parties.
======================================================================================== =================
9. Attend closing party at Xxxxx Xxxxx'x choice of Watering Holes.
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