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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0000950117-01-000593.txt : 20010329
<SEC-HEADER>0000950117-01-000593.hdr.sgml : 20010329
ACCESSION NUMBER: 0000950117-01-000593
CONFORMED SUBMISSION TYPE: 10-K405
PUBLIC DOCUMENT COUNT: 10
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010328
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PITTSTON CO
CENTRAL INDEX KEY: 0000078890
STANDARD INDUSTRIAL CLASSIFICATION: BITUMINOUS COAL & LIGNITE MINING [1220]
IRS NUMBER: 541317776
STATE OF INCORPORATION: VA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K405
SEC ACT:
SEC FILE NUMBER: 001-09148
FILM NUMBER: 1582803
BUSINESS ADDRESS:
STREET 1: P O BOX 4229
STREET 2: 1000 VIRGINIA CENTER PKWY
CITY: GLEN ALLEN
STATE: VA
ZIP: 23058-4229
BUSINESS PHONE: 8045533681
MAIL ADDRESS:
STREET 1: P O BOX 4229
STREET 2: 1000 VIRGINIA CENTER PKWY
CITY: GLEN ALLEN
STATE: VA
ZIP: 23058-4229
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K405
<SEQUENCE>1
<FILENAME>0001.txt
<DESCRIPTION>THE PITTSTON COMPANY 10-K 405
<TEXT>
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-9148
THE PITTSTON COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Virginia 54-1317776
(State or other jurisdiction of ( I. R. S. Employer
incorporation or organization) Identification No.)
P.O. Box 18100,
1801 Bayberry Court
Richmond, Virginia 23226-8100
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (804) 289-9600
Securities registered pursuant
to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Pittston Brink's Group Common Stock, Par Value $1 New York Stock Exchange
Rights to Purchase Series A Participating Cumulative Preferred Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
</TABLE>
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
As of March 1, 2001, there were issued and outstanding 51,777,782
shares of Pittston Brink's Group Common Stock. The aggregate market value of
such stocks held by nonaffiliates, as of that date, was $1,003,079,068.
Documents incorporated by reference: Part I, Part II and Part IV
incorporate information by reference from the Annual Report of the Company for
the year ended December 31, 2000. Part III incorporates information by reference
from portions of the Registrant's definitive Proxy Statement to be filed
pursuant to Regulation 14A.
<PAGE>
- -------------------------------------------------------------------------------
PART I
- -------------------------------------------------------------------------------
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
- -------------------------------------------------------------------------------
The Pittston Company
As used herein, the "Company" includes The Pittston Company except as otherwise
indicated by the context. The Company is comprised of four operating segments
and one discontinued segment. The four operating segments are Brink's,
Incorporated ("Brink's"), Brink's Home Security, Inc. ("BHS"), BAX Global Inc.
("BAX Global") and Other Operations, which consists of Pittston Mineral Ventures
("Mineral Ventures") and the Company's timber and gas operations (collectively,
"Allied Operations"). The discontinued segment is Pittston Coal Operations
("Coal Operations").
Prior to January 14, 2000, the Company was comprised of three groups - Pittston
Brink's Group, Pittston BAX Group, and Pittston Minerals Group. The Pittston
Brink's Group included the Brink's and BHS operations of the Company. The
Pittston BAX Group included the BAX Global operations of the Company. The
Pittston Minerals Group included the Pittston Coal Company and Mineral Ventures
operations of the Company. Also, prior to January 14, 2000, the Company had
three classes of common stock: Pittston Brink's Group Common Stock ("Brink's
Stock"), Pittston BAX Group Common Stock ("BAX Stock") and Pittston Minerals
Group Common Stock ("Minerals Stock"), which were designed to provide
shareholders with separate securities reflecting the performance of the Brink's
Group, the BAX Group and the Minerals Group, respectively.
On December 6, 1999, the Company announced that its Board of Directors (the
"Board") approved the elimination of the tracking stock capital structure by an
exchange of all outstanding shares of Minerals Stock and BAX Stock for shares of
Brink's Stock (the "Exchange"). The Exchange took place on January 14, 2000 (the
"Exchange Date"). On the Exchange Date, holders of Minerals Stock received
0.0817 shares of Brink's Stock for each share of their Minerals Stock; and
holders of BAX Stock received 0.4848 shares of Brink's Stock for each share of
their BAX Stock. See Note 10 of the Company's consolidated financial statements
for additional information concerning the Exchange on pages 44 through 46 of the
Company's 2000 Annual Report, which are incorporated herein by reference. From
and after the Exchange Date, Brink's Stock is the only outstanding class of
common stock of the Company and continues to trade on the New York Stock
Exchange under the symbol "PZB". Prior to the Exchange Date, the Brink's Stock
reflected the performance of the Brink's Group only; after the Exchange Date,
the Brink's Stock reflects the performance of the Company as a whole. Shares of
Brink's Stock after the Exchange are hereinafter referred to as "Pittston Common
Stock".
In addition, on December 6, 1999, the Company announced its intention to exit
the coal business. During the fourth quarter of 2000, the Company formalized its
plan of disposal and, as such, the operating results of Coal Operations are
reported as discontinued operations as of December 31, 2000.
Financial information related to the Company's segments is included in Note 14
of the Company's consolidated financial statements on pages 51 through 52 of the
Company's 2000 Annual Report, which are incorporated herein by reference. The
information set forth with respect to "Business and Properties" is as of
December 31, 2000 except where an earlier or later date is expressly stated.
Nothing herein should be considered as implying that such information is correct
as of any date other than December 31, 2000, except as so stated or indicated by
the context.
Activities relating to the Brink's segment are carried on by Brink's,
Incorporated and its subsidiaries and certain affiliates and associated
companies in foreign countries (together, "Brink's"). Activities relating to the
BHS segment are carried on by Brink's Home Security, Inc. and its subsidiaries
(together, "BHS"). Activities relating to the BAX Global segment are carried on
by BAX Global Inc. and its subsidiaries and certain affiliates and associated
companies in foreign countries (together, "BAX Global"). Activities relating to
Other Operations are carried on by Pittston Mineral Ventures Company and its
subsidiaries and certain affiliates (together, "Mineral Ventures") and
Pittston's timber and gas operations (together, "Allied Operations").
The Company has a total of approximately 49,400 employees.
BUSINESS AND SECURITY SERVICES
The business and security services businesses of the Company consist of Brink's,
Brink's Home Security and BAX Global.
Brink's
General
The major activities of Brink's are contract-carrier armored car, automated
teller machine ("ATM"), air courier (global services), coin wrapping, and
currency and deposit processing services. Brink's serves customers through 149
branches in the United States and 39 branches in Canada. Service is also
provided through subsidiaries, affiliates and associated companies in 52
countries outside the United States and Canada. These international operations
contributed approximately 49% of Brink's total reported 2000 operating profit.
Brink's ownership interest in subsidiaries and affiliated companies ranges from
20% to 100%. In some instances local laws limit the extent of Brink's interest.
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Representative customers include banks, commercial establishments, industrial
facilities, investment banking and brokerage firms and government agencies.
Brink's provides its individualized services under separate contracts designed
to meet the distinct transportation and security requirements of its customers.
These contracts are usually for an initial term of one year or less, but
generally continue in effect thereafter until canceled by either party.
Brink's armored car services include transportation of money from industrial and
commercial establishments to banks for deposit, and transportation of money,
securities and other negotiable items and valuables between commercial banks,
central banks, such as the US Federal Reserve Banks and their branches and
correspondents, and brokerage firms. Brink's also transports new currency, coins
and precious metals for a number of central banks throughout the world. For
transporting money and other valuables over long distances, Brink's offers a
combined armored car and air courier service linking many cities around the
world. Except for a subsidiary in Venezuela, Brink's does not own or operate any
aircraft, but uses regularly scheduled or chartered aircraft in connection with
its air courier services.
In addition to its armored car pickup and delivery services, Brink's provides
change services, coin wrapping services, currency and deposit processing
services, ATM services, safes and safe control services, check cashing and
pickup and delivery of valuable air cargo shipments. In certain geographic
areas, Brink's transports canceled checks between banks or between a clearing
house and its member banks. Brink's also offers CompuSafe'r' service, designed
to streamline the handling and management of cash receipts initially implemented
for the convenience store and gas station market.
Brink's operates a worldwide specialized diamond and jewelry transportation
business and has offices in the major diamond and jewelry centers of the world,
including London, Antwerp, Tel Aviv, Hong Kong, New York, Bombay, Bangkok, Tokyo
and Arezzo, Italy.
Brink's has the ability, through its information systems, to integrate a full
range of cash vault, ATM, transportation, storage, processing, inventory
management and reporting services. Brink's believes that its processing and
information capabilities differentiate its currency and deposit processing
services from its competitors and enable Brink's to take advantage of the trend
by banks, retail business establishments and others to outsource vaulting and
cash room operations.
Brink's International operations, which accounted for approximately 56% of its
revenues in 2000, operate in three regions: Europe, Latin America and
Asia/Pacific. In Europe, wholly owned subsidiaries of Brink's operate in France,
Germany, the United Kingdom and the Netherlands and, in the diamond and jewelry
transportation business, in Belgium, Italy and Russia. Brink's has a 70%
interest in subsidiaries in Israel and Morocco, a 50.05% interest in a
subsidiary in Greece and a 51% interest in a subsidiary in Switzerland. Brink's
also has ownership interests ranging from 45% to 50% in affiliates and
subsidiaries operating in Belgium, Ireland, Jordan and Luxembourg. Wholly owned
subsidiaries operate in South Africa, the United Arab Emirates and Turkey. In
Latin America, wholly owned subsidiaries operate in Brazil, Puerto Rico and
Bolivia. Brink's owns a 61% interest in a subsidiary in Venezuela, a 74%
interest in a subsidiary in Chile, a 51% interest in a subsidiary in Argentina,
a 58% interest in a subsidiary in Colombia and a 20% interest in a Mexican
company which operates one of the world's largest security transportation
services with over 1,500 armored vehicles. Brink's also has 49% and 36%
ownership interests in affiliates operating in Panama and Peru, respectively. In
the Asia/Pacific region, wholly owned subsidiaries of Brink's operate in
Australia and Taiwan, and majority owned subsidiaries operate in Hong Kong (90%
owned), Japan (81% owned) and Singapore (60% owned). Brink's has minority
interests in affiliates in India, Pakistan and Thailand ranging from 40% to 49%.
Brink's also operates representative offices in China, Vietnam and the
Philippines.
Because the financial results of Brink's are reported in US dollars, they are
affected by changes in the value of the various foreign currencies in relation
to the US dollar. Changes in exchange rates may also adversely affect
transactions that are denominated in currencies other than the functional
currency of the subsidiary performing the transaction. The diversity of foreign
operations helps to mitigate a portion of the impact that foreign currency
fluctuations in any one country may have on the translated results. Brink's,
from time to time, uses foreign currency forward contracts to hedge certain
transactional risks associated with foreign currencies. Brink's is also subject
to other risks customarily associated with doing business in foreign countries,
including labor and economic conditions, political instability, controls on
repatriation of earnings and capital, nationalization, expropriation and other
forms of restrictive action by local governments. The future effects of such
risks on Brink's cannot be predicted.
Competition
Brink's is the oldest and largest armored car service company in the United
States as well as a market leader in most of the countries in which it operates.
The foreign subsidiaries, affiliates and associates of Brink's compete with
numerous armored car and courier service companies in many areas of operation.
In the United States, Brink's presently competes nationally with one company and
regionally and locally with many smaller companies. Although the cost of service
is, in many instances, the controlling factor in obtaining and retaining
customers. Brink's believes that its service, high quality insurance coverage
and company reputation (including the name "Brink's") are important competitive
advantages. While Brink's cost structure is generally competitive, certain
competitors of Brink's have lower costs primarily as a result of lower wage and
benefit levels.
2
<PAGE>
See also "Government Regulation" below.
Service Mark, Patents and Copyrights
BRINKS is a registered service mark in the United States and certain foreign
countries. The BRINKS mark, name and related marks are of material significance
to Brink's business. Brink's owns patents with respect to certain coin sorting
and counting machines and armored truck design. Patents related to coin sorting
machines expire in 2007 and patents related to counting machines expire in 2008.
In addition, Brink's has a patented integrated service called CompuSafe'r'
service that expires in 2018. CompuSafe(R) service has been designed to
streamline the handling and management of cash receipts.
Insurance
Excess of prudent deductibles and/or retentions, Brink's carries insurance
coverage for its losses. Insurance policies cover liability for loss of various
types of property entrusted to Brink's from any cause except war and nuclear
risk. The various layers of insurance are covered by different groups of
participating underwriters. Such insurance is obtained by Brink's at rates and
upon terms negotiated periodically with the underwriters. The loss experience of
Brink's and, to a limited extent, other armored carriers affects premium rates
charged to Brink's. The availability of quality and reliable insurance coverage
is an important factor in the ability of Brink's to obtain and retain customers.
Quality insurance is available to Brink's in major markets although the premiums
charged are subject to fluctuations depending on market conditions. Less
expensive armored car and air courier all-risk insurance is available, but these
policies typically contain unacceptable operating warranties and limited
customer protection.
Government Regulation
The operations of Brink's are subject to regulation by the United States
Department of Transportation with respect to safety of operation and equipment
and financial responsibility. Intrastate operations in the United States and
intraprovince operations in Canada are subject to regulation by state and by
Canadian and provincial regulatory authorities, respectively. Brink's
International operations are regulated to varying degrees by the countries in
which they operate.
Employee Relations
At December 31, 2000, Brink's and its subsidiaries had approximately 11,300
employees in North America, of whom approximately 2,600 were classified as
part-time employees. In the United States, two locations (ten employees) are
covered by collective bargaining agreements. At December 31, 2000, Brink's was a
party to two United States and twelve Canadian collective bargaining agreements
with various local unions covering approximately 1,600 employees, most of whom
are employees in Canada and members of unions affiliated with the International
Brotherhood of Teamsters. Negotiations are continuing on one agreement that
expired in 2000 and two agreements expiring in 2001. The remaining agreements
will expire after 2001. At December 31, 2000, Brink's had approximately 24,200
employees outside North America. Brink's believes that its employee relations
are satisfactory.
Properties
In the United States and Canada, Brink's owns 29 branch offices and holds under
lease an additional 159 branch offices, located in 38 states, the District of
Columbia and nine Canadian provinces. Such branches generally include office
space and garage or vehicle terminals, and serve not only the city in which they
are located but also nearby cities. Brink's corporate headquarters in Darien,
Connecticut, is held under a lease expiring in 2005, with an option for an early
termination in 2003. The leased branches include 120 facilities held under
long-term leases, while the remaining 39 branches are held under short-term
leases or month-to-month tenancies.
Brink's owns or leases, in the United States and Canada, approximately 2,500
armored vehicles, 300 panel trucks and 200 other vehicles that are primarily
service cars. In addition, approximately 5,200 Brink's-owned safes are located
on customers' premises. The armored vehicles are of bullet-resistant
construction and are specially designed and equipped to afford security for crew
and cargo. Brink's subsidiaries and affiliated and associated companies located
outside the United States and Canada operate from approximately 500 owned or
leased branches with approximately 5,000 owned or leased armored vehicles.
Brink's Home Security ("BHS")
General
BHS is primarily engaged in the business of marketing, selling, installing,
monitoring and servicing electronic security systems in owner-occupied,
single-family residences. At December 31, 2000, BHS had approximately 675,200
systems under monitoring contracts, including sites for approximately 82,000 new
subscribers added since December 31, 1999. BHS services more than 100
metropolitan areas in 42 states, the District of Columbia and two western
provinces in Canada. BHS believes that it is the fourth largest provider of
residential monitored security service in North America.
BHS maintains a very high focus on delivering quality service in key areas of
its sales, installation and monitoring operations, including all major aspects
of its customer service functions. BHS believes that this commitment to quality
is reflected in its customer retention rate, believed to be the highest in the
industry among the major security service companies.
BHS's typical security system installation consists of sensors and other devices
which are installed at a customer's premises. The equipment is designed to
signal intrusion, fire, medical and other alerts. When an alarm is triggered, a
signal is sent by telephone line or wireless communication to BHS's central
monitoring station in Irving, Texas, a suburb of Dallas. The monitoring station
holds an Underwriters' Laboratories, Inc. ("UL") listing. A backup monitoring
center in Carrollton, Texas, helps protect against a
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catastrophic event at the primary monitoring center. In the event of an
emergency, such as fire, tornado, major interruption in telephone or computer
service, or any other calamity affecting the primary facility, monitoring
operations can be transferred to the backup facility.
BHS creates most of its new residential subscriber relationships through its
in-house marketing, sales and installation functions. BHS markets its alarm
systems primarily through advertising, inbound telemarketing and a field sales
force directly employed by the company. BHS employees install and service the
systems from local BHS branches. Subcontractors are utilized on occasion in some
service areas. BHS does not manufacture any of the equipment used in its
security systems; instead, it purchases such equipment from a limited number of
suppliers. Equipment inventories are maintained at each branch office.
BHS has established an authorized dealer program to expand the company's
geographic coverage and leverage the company's national advertising. During
2000, the dealer program accounted for less than 5% of installations and, as of
December 31, 2000, approximately 26 dealers were actively participating in the
program. BHS requires that its dealers install the same line of equipment as is
installed by its own branches, and adhere to the same installation quality
standards.
In addition to creating subscriber relationships through its branch and dealer
networks, BHS develops new residential subscribers through its Brink's Home
Technologies division and its multi-family housing program. Brink's Home
Technologies markets residential security systems, as well as a variety of
low-voltage security, home networking, communications and entertainment options,
directly to major home builders. BHS has begun working with multi-family housing
developers and operators to provide monitored security to individuals and
families residing in apartment and condominium complexes.
Although its core business is focused on the monitoring of residential security
systems, BHS installs and monitors commercial security systems on a limited
basis. Additionally, BHS has developed a licensing program by which it will
license the Brink's or BHS name. Examples include licenses to distributors of
security products (padlocks, home safes, etc.) offered for sale to consumers
through major retail chains.
BHS's alarm service contracts contain provisions limiting BHS's liability to its
customers. Courts have, from time to time, upheld such provisions, but there can
be no assurance that the limitations contained in BHS's agreements will be
enforced according to their terms in any or all cases. The nature of the service
provided by BHS potentially exposes it to greater risk of liability than may be
borne by other service businesses. However, BHS has not experienced any major
liability losses.
BHS carries insurance of various types, including general liability and errors
and omissions insurance, to protect it from product deficiencies and negligent
acts of its employees. Certain of BHS's insurance policies and the laws of some
states limit or prohibit insurance coverage for punitive or certain other kinds
of damages arising from employees' misconduct.
Regulation
BHS and its personnel are subject to various Federal, state and local consumer
protection, licensing and other laws and regulations. BHS's business relies upon
the use of telephone lines to communicate signals, and telephone companies are
currently regulated by both the Federal and state governments. Regulation of the
installation and monitoring of fire detection devices has also increased in
several local markets. BHS's wholly owned Canadian subsidiary, Brink's Home
Security Canada Limited, is subject to the laws of Canada, British Columbia and
Alberta.
The alarm service industry continues to experience a high incidence of false
alarms in some communities, including communities in which BHS operates. BHS
believes its false alarm rate compares favorably to other companies' rates.
However, there is a possibility that at some point some police departments may
refuse to respond to calls from alarm companies which would necessitate that
private response forces be used to respond to alarm signals. Additionally, the
high incidence of false alarms in the industry has caused some local governments
to impose assessments, fines and penalties on either subscribers of alarm
companies or the alarm companies themselves, based upon the number of false
alarms reported to the authorities. BHS believes its alarm service contracts
allow BHS to pass these charges on to the appropriate customers.
Competition
BHS competes in most major metropolitan markets in the United States and several
markets in western Canada through its company branch operations or its
authorized dealer program. BHS believes that its share of the North American
market for monitored single-family home security systems is between 4% and 5% of
new installations.
The home security market has large numbers of competitors, including many local
and regional companies. The largest provider of residential monitored security
systems is estimated by BHS to have approximately 20% of the North American
market for new installations. Several of the large competitors with whom BHS
competes on a national basis rely extensively on independent dealers to sustain
the growth in their customer bases.
There has been substantial competitive pressure on installation fees in recent
years. Several significant competitors offer installation prices which match or
are less than BHS prices; however, many of the small local competitors in BHS
markets continue to charge significantly more for installation. Competition in
every market is based on a variety of factors including, but not limited to,
price, product quality, company reputation, service quality, and warranty terms.
Competitive pressure on monitoring rates, while less intense than on
installation fees, is still
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<PAGE>
substantial. The monitoring rates offered by BHS are generally comparable to the
rates offered by other major security companies.
The Federal Telecommunications Reform Act of 1996 contains provisions specific
to the alarm industry, including a five-year waiting period prior to market
entry for regional Bell operating companies ("RBOCs") not already providing
alarm service. With the expiration of the prohibition in February 2001, RBOCs
may become significant competitors in the home alarm business.
Employees
BHS has approximately 2,300 employees, none of whom is covered by a collective
bargaining agreement. BHS believes that its employee relations are satisfactory.
Properties
BHS operates from 57 leased offices and warehouse facilities located throughout
the United States and two leased offices in Canada. All premises protected by
BHS alarm systems are monitored from the central monitoring station in Irving,
Texas. The central monitoring station is leased for a seven-year term ending in
2005, inclusive of renewals. This facility is also occupied by administrative,
technical and marketing services personnel who support branch operations. The
lease for the backup monitoring center in Carrollton, Texas, expires in 2002.
BHS leases all of the 1,178 vehicles used for installation and servicing of its
security systems.
BHS retains ownership of nearly all of the approximately 675,200 systems
currently under contract. When a current customer cancels monitoring services
and does not move, BHS either disables the system or removes the equipment, in
either case fully reserving any remaining book value of the equipment; retaining
ownership helps prevent another alarm company from providing services using BHS
security equipment. On the other hand, when a current customer cancels
monitoring services because of a move, the retention of ownership of the
equipment facilitates the marketing of monitoring services to the new homeowner.
BHS has two patents on its Model #2000 Control Panel and Keypad which expire in
2012 and 2018.
BAX Global
General
BAX Global is a transportation and supply chain management company offering
multi-modal freight forwarding to business-to-business shippers through a global
network. In North America, BAX Global is able to provide overnight, second day
and deferred freight delivery, and internationally it is engaged in
time-definite air and sea delivery, freight forwarding, supply chain management
services and international customs brokerage. In conducting its forwarding
business, BAX Global generally picks up or receives freight shipments from its
customers, consolidates the freight of various customers into shipments for
common destinations, arranges for the transportation of the consolidated freight
to such destinations (using either commercial carriers or, in the case of most
of its United States, Canadian and Mexican shipments, its own transportation
fleet and hub sorting facilities) and, at the destinations, distributes the
consolidated shipments and effects delivery to consignees. For international
shipments, BAX Global also frequently acts as customs broker, facilitating the
clearance of goods through customs at international points of entry. BAX Global
provides transportation customers with supply chain management services and
operates more than 40 logistics warehouse and distribution facilities in key
world markets.
BAX Global specializes in developing supply chain management programs for
companies wanting to quickly enter new global markets or consolidate regional
activity. It concentrates on providing service to customers with significant
supply chain management needs, such as manufacturers of computer and electronics
equipment. BAX Global offers its customers a variety of products and pricing
solutions for their shipment needs, such as guaranteed overnight delivery,
second-day delivery or delivery within one to three business days in North
America. A variety of ancillary services, such as shipment tracking, inventory
control and management reports are also provided. Internationally, BAX Global
offers a similar variety of services including ocean forwarding, door-to-door
delivery and standard and expedited freight services.
BAX Global has the ability to provide freight service to all North American
business communities as well as to virtually all foreign countries through its
network of company-operated stations and agent locations in 123 countries. The
pickup and delivery of freight are accomplished principally by independent
contractors. BAX Global markets its services primarily through its direct sales
force and also employs other marketing methods, including print media
advertising and direct marketing campaigns.
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BAX Global's freight business has tended to be seasonal, with a significantly
higher volume of shipments generally experienced during March, June and the
period August through December than during the other periods of the year. The
lowest volume of shipments has generally occurred in January and February.
Including United States export and import revenue, BAX Global's international
operations accounted for approximately 71% of its revenues in 2000. Intra-US
revenues accounted for 29% of total revenues in 2000.
BAX Global is continuing to develop import/export and supply chain management
business between shippers and consignees, in countries other than the United
States through BAX Global's network of company-operated stations and agent
locations. BAX Global has agents and sales representatives in many overseas
locations, although such agents and representatives are not subject to long-term
noncancellable contracts.
Because the financial results of BAX Global are reported in US dollars, they are
affected by changes in the value of the various foreign currencies in relation
to the US dollar. Changes in exchange rates may also adversely affect
transactions which are denominated in currencies other than the functional
currency. The diversity of foreign operations helps to mitigate a portion of the
impact that foreign currency fluctuations in any one country may have on the
translated results. BAX Global, from time to time, uses foreign currency forward
contracts to hedge certain transactional risks associated with foreign
currencies. BAX Global is also subject to other risks associated with doing
business in foreign countries, including labor and economic conditions,
political instability, controls on repatriation of earnings and capital,
nationalization, expropriation and other forms of restrictive action by local
governments. The future effects of such risks, if any, on BAX Global cannot be
predicted.
BAX Global's computer system, ARGUS, is a worldwide communications and
information system which, among other things, provides worldwide tracking and
tracing of shipments and various data for management information reports,
enabling customers to improve efficiency and control costs. BAX Global also
utilizes an image processing system to centralize domestic airbill and related
document storage in BAX Global's computers for automated retrieval by any BAX
Global office.
Aircraft Operations
On April 30, 1998, the Company acquired the privately held Air Transport
International LLC ("ATI"). ATI is a US-based freight and passenger airline which
operates a certificated fleet of DC-8 aircraft providing services to BAX Global,
the US Government Air Mobility Command, and other customers. ATI provides North
American lift service in the BAX Global system and domestic and international
lift service for the US Government Air Mobility Command and other charter
customers.
BAX Global utilizes a fleet of twenty-five leased or contracted aircraft
primarily providing regularly scheduled service, throughout the United States
and certain destinations in Canada and Mexico, from its freight sorting hub in
Toledo, Ohio. BAX Global's fleet is also used for charters and to serve other
international markets from time to time. The fleet and hub are primarily
dedicated to providing next-day service to or from domestic, Canadian and
Mexican locations. Besides providing lift capacity to BAX Global, ATI also
services other customers, primarily the US military, using four leased and two
owned planes, five of which are combi-configuration planes.
The following is a summary of the aircraft fleet as of March 2001. This summary
excludes ten planes subject to the BAX Global restructuring plan of which four
are owned planes that have been taken out of service and placed for sale, three
are planes under lease or contract that terminate early 2001, and three are
planes under leases that have been grounded:
<TABLE>
<CAPTION>
Commercial Cargo Combi
System Configuration Total
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Leased or Contracted:
DC-8 13 3 16
727 13 - 13
- ----------------------------------------------------------------------
Total Leased or Contracted 26 3 29
- ----------------------------------------------------------------------
Owned:
DC-8 - 2 2
- ----------------------------------------------------------------------
Total Owned: - 2 2
- ----------------------------------------------------------------------
Total Planes (a) 26 5 31
======================================================================
</TABLE>
(a) Of the 26 planes in the commercial cargo system, 25 are fully dedicated to
BAX Global as opposed to other customers serviced by ATI.
The aircraft in combi configuration (designed to carry cargo and passengers) are
utilized for US Government Air Mobility Command missions. The three which are
not owned are held under leases for terms expiring between January 2002 and
September 2003. At December 31, 2000, BAX Global had seventeen DC-8 cargo
aircraft (including those subject to the restructuring plan) under leases for
terms primarily expiring between January 2001 and July 2003. Thirteen 727 cargo
aircraft were under contract at December 31, 2000, for terms ranging between one
and two years. Based on the current state of the aircraft leasing market, BAX
Global believes that it should be able to renew these leases or enter into new
leases on terms reasonably comparable to those currently in effect.
6
<PAGE>
The nightly lift capacity in operation at December 31, 2000, excluding the
capacity related to planes that were subject to BAX Global's restructuring plan,
was approximately 1.4 million pounds, calculated on an average freight density
of 7.5 pounds per cubic foot. BAX Global's nightly lift capacity varies
depending upon the number and type of planes operated by BAX Global at any
particular time. Including trucking capacity available to BAX Global, the
aggregate daily cargo capacity at December 31, 2000, was approximately 2.3
million pounds.
For aircraft owned or held under long-term lease, ATI is generally responsible
for all the costs of operating and maintaining the aircraft, including any
special maintenance or modifications which may be required by Federal Aviation
Administration ("FAA") regulations or orders (see "Government Regulation"
below). In 2000, ATI had cash outlays totaling approximately $50 million on
routine heavy maintenance of its aircraft fleet.
The average airframe age of the fleet operated by ATI is 33 years, however, the
condition of particular aircraft is dependent on their maintenance history.
Factors other than age, such as cycles (essentially the number of flights) can
have a significant impact on an aircraft's serviceability. Generally, cargo
aircraft tend to have fewer cycles than passenger aircraft over comparable time
periods because they have fewer flights per day and longer flight segments.
Fuel costs are a significant element of the total costs of operating BAX
Global's aircraft fleet. For each one cent per gallon increase or decrease in
the price of jet fuel, BAX Global's airline operating costs may increase or
decrease approximately $50 thousand per month. In order to protect against price
increases in jet fuel, from time to time BAX Global enters into hedging and
other agreements, including swap contracts, options and collars.
Fuel prices are subject to world, as well as local market conditions. It is not
possible to predict the impact of future conditions on fuel prices and fuel
availability. Competition in the airfreight industry is such that no assurance
can be given that any future increases in fuel costs (including taxes relating
thereto) will be recoverable in whole or in part from customers.
BAX Global has a lease expiring in April 2019, with the Toledo-Lucas County Port
Authority covering its freight sorting hub and related facilities (the "Hub") at
Toledo Express Airport in Ohio. The Hub consists of various facilities,
including a technologically advanced material handling system which is capable
of sorting approximately one million pounds of freight per hour.
Over the course of 2000, the operating performance of BAX Global's Americas
region was negatively impacted by lower than expected demand and higher
transportation, operating and administrative costs relative to that lower
demand. As such, BAX Global evaluated alternatives directed at returning its
Americas operations to profitability, including ways to improve sales
performance and to reduce transportation, operating and administrative expenses.
During the fourth quarter of 2000, BAX Global finalized a restructuring plan
aimed at reducing the capacity and cost of its airlift capabilities in the US as
well as reducing station operating expenses, sales costs and overhead in the
Americas and Atlantic regions, including:
o The removal of 10 planes from the fleet, 9 of which were dedicated to
providing lift capacity in BAX Global's commercial cargo system.
o The closure of 9 operating stations and realignment of domestic operations.
o The reduction of employee-related costs at BAX Global and ATI through the
elimination of approximately 300 full-time positions including aircraft
crew and station operating, sales and business unit overhead positions.
In addition, certain Atlantic region operations were streamlined in order to
reduce overhead costs and improve overall performance in that region. The
Atlantic region restructuring efforts involved severance costs and station
closing costs in the UK, Denmark, Italy and South Africa. Approximately 50
positions were eliminated, most of which were positions at or above manager
level.
The following is a summary of the charges incurred in the fourth quarter related
to the restructuring:
<TABLE>
<CAPTION>
Americas Atlantic Total
(In thousands) Region Region BAX Global
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Fleet related charges $49,702 - 49,702
Severance costs 1,130 1,148 2,278
Station and other closure costs 3,777 1,730 5,507
- ---------------------------------------------------------------------
Total restructuring charge (a) $54,609 2,878 57,487
=====================================================================
</TABLE>
(a) Includes noncash charges of $45,180. Substantially all severance costs are
expected to be paid out before June 30, 2001. Other cash charges primarily
include contractual commitments for aircraft and facilities, approximately
two-thirds of which are expected to be paid out during 2001, with the remainder
expected to be paid out by the end of 2002.
7
<PAGE>
Customers
BAX Global's customer base includes thousands of industrial and commercial
shippers, both large and small. The industries they represent include the
automotive, aerospace, healthcare, high technology, retail and other industries
where rapid delivery of high-value products is required. In 2000, no single
customer accounted for more than 5% of BAX Global's total worldwide revenues.
BAX Global has a long-term, noncancellable services contract with a major
airline which expires at the end of 2001.
Competition
The air and ocean freight forwarding and supply chain management industries have
been and are expected to remain highly competitive. The principal competitive
factors in the market are price, the ability to provide consistently fast and
reliable delivery of shipments and the ability to provide ancillary services
such as warehousing, distribution, shipment tracking and sophisticated
information systems and reports. There is aggressive price competition in the
heavy freight market, particularly for the business of high volume shippers. BAX
Global competes with other integrated transportation companies that operate
their own fleet, as well as with air freight forwarders, premium LTL carriers,
express delivery services, passenger airlines and other transportation
companies. Domestically, BAX Global also competes with package delivery services
provided by ground transportation companies, including trucking firms and
surface freight forwarders, that offer specialized time specific services within
limited geographical areas. As a freight forwarder to, from and within
international markets, BAX Global also competes with government-owned or
subsidized passenger airlines and ocean shipping companies. In supply chain
management services, BAX Global competes with many third party logistics
providers.
Government Regulation
The air transportation industry is subject to Federal regulation under the
Federal Aviation Act of 1958, as amended ("FAA"), and pursuant to that statute,
the Department of Transportation (the "DOT") may exercise regulatory authority
over BAX Global. ATI operates an FAA-certificated fleet which is subject to such
regulations. In addition, ATI is subject to FAA regulations since it is an
airline. BAX Global's Toledo, Ohio, hub operations are also subject to the
direction of the FAA.
BAX Global is subject to other various requirements and regulations in
connection with the operation of its motor vehicles, including certain safety
regulations promulgated by the DOT and state agencies.
Employee Relations
BAX Global and its subsidiaries have approximately 10,100 employees worldwide,
of whom about 1,500 are classified as part-time. Approximately 130 of these
employees (principally customer service, clerical and/or dock workers) in BAX
Global's stations at John F. Kennedy Airport, New York, Secaucus, New Jersey,
and Minneapolis, Minnesota are represented by labor unions, that in most cases
are affiliated with the International Brotherhood of Teamsters. In November
2000, flight crewmembers employed by ATI (captains, first officers and flight
engineers), represented for purposes of collective bargaining by the
International Brotherhood of Teamsters, ratified an initial collective
bargaining agreement which covers a 42 month period. As of December 31, 2000,
approximately 180 of these flight crewmembers were employed by ATI. Other
employees are not represented by any labor organization. BAX Global successfully
negotiated contracts in 2000 with the clerical union at John F. Kennedy Airport,
as well as the dock union at Minneapolis, Minnesota. BAX Global did not
experience any significant strike or work stoppage in 2000 and considers that
its employee relations are satisfactory.
Most of BAX Global's cartage operations are conducted by independent
contractors. However, in 2000 BAX Global elected to insource cartage in three
south central division locations.
Properties
BAX Global operates 251 (99 domestic and 152 international) stations with BAX
Global personnel, and has agency agreements with an additional 237 (49 domestic
and 188 international) stations. These stations are located near primary
shipping areas, generally at or near airports. BAX Global-operated domestic
stations, which generally include office space and warehousing facilities, are
located in 44 states, the District of Columbia and Puerto Rico. BAX
Global-operated international facilities are located in 32 countries. Most
stations serve not only the city in which they are located, but also nearby
cities and towns. Nearly all BAX Global-operated stations are held under lease.
The Hub in Toledo, Ohio, is held under a lease expiring in 2019, with rights of
renewal for three five-year periods. Other facilities, including the corporate
headquarters in Irvine, California, are held under leases having terms of one to
ten years.
BAX Global owns or leases, in the United States and Canada, a fleet of 44
automobiles as well as 150 vans and trucks utilized in station work or for
hauling freight between airport facilities and BAX Global's stations.
8
<PAGE>
NATURAL RESOURCES
The Company's continuing natural resources businesses ("Other Operations")
include Pittston's timber and natural gas businesses (collectively, "Allied
Operations") and Mineral Ventures that mines and explores for gold.
Allied Operations
Through its Allied Operations, the Company owns non-coal properties, such as
land, hardwood forests and natural gas reserves. The oil and gas rights are
managed by an indirect wholly-owned subsidiary of the Company that, in general,
invests in and receives royalty income from gas development and operations. As
of December 31, 2000, including royalty interests, net proven developed natural
gas reserves located in Virginia and West Virginia approximated 55.8 Bcf. Allied
Operations' wood products subsidiary receives income from the sale of timber,
the operation of a high grade sawmill that produces 7 million board feet
annually, the operation of a railroad tie mill facility that produces 9.2
million board feet of ties (approximately 230 thousand ties) and 6.6 million
board feet of lumber annually, and the operation of a hardwood chip mill that
produces 250 thousand tons annually of hardwood chips for the pulp and paper
industry. The Company owns approximately 225 thousand surface acres of land
including approximately 125 thousand acres of saw timber grade hardwood forests,
mostly in Virginia, comprising approximately 435 million board feet.
Mineral Ventures
Mineral Ventures' business is directed at locating and acquiring mineral assets,
developing advanced stage projects and operating mines. Mineral Ventures
continued to evaluate gold projects in North America and Australia throughout
2000. During the fourth quarter of 2000, the decision was made to discontinue
exploration activities in Nevada. In 2000, Mineral Ventures expended
approximately $5.0 million on all exploration and operational activities.
Mineral Ventures has a 50% direct interest in the Stawell gold mine ("Stawell")
located in Western Victoria, Australia. The remaining 50% interest in Stawell is
owned by Mining Project Investors ("MPI"). In addition, Mineral Ventures has a
45.1% undiluted (40.1% fully diluted) ownership interest in its joint venture
partner MPI. The Stawell gold mine produced approximately 114,500 ounces of gold
in 2000. Mineral Ventures estimates that on December 31, 2000, the Stawell gold
mine had approximately 455,000 ounces of proven and probable gold reserves.
A substantial portion of Mineral Ventures' financial results is derived from
activities in Australia, which has a local currency other than the US dollar.
Because the financial results of Mineral Ventures are reported in US dollars,
they are affected by the changes in the value of the foreign currency in
relation to the US dollar. Rate fluctuations may adversely affect transactions
which are denominated in the Australian dollar. Mineral Ventures, from time to
time, uses foreign currency forward contracts to hedge the currency risks
associated with these transactions. Mineral Ventures also routinely enters into
gold price hedge transactions primarily utilizing spot deferred forward sales
contracts limited in amount to potential gold production over a given period.
Mineral Ventures is also subject to other risks customarily associated with
doing business in foreign countries, including labor and economic conditions.
DISCONTINUED OPERATIONS
The Company's Coal Operations has been reported as a discontinued operation as
of December 31, 2000 due to the Company's formal plan to exit the business. The
following is a brief description of that business.
Coal Operations
General
Coal Operations is primarily engaged in the mining, preparation and marketing of
coal, the purchase of coal for resale, and the sale or leasing of coal lands to
others. Through Coal Operations, the Company produces coal from approximately 23
company or contractor operated surface and deep mines located in Virginia, West
Virginia and eastern Kentucky for consumption in the steam and metallurgical
markets. Steam coal is sold primarily to utilities and industrial customers
located in the eastern United States. Metallurgical coal is sold to steel and
merchant coke producers primarily located in the United States, Western Europe,
the Mediterranean basin and Brazil. Coal Operations has substantial reserves of
low sulphur coal, much of which can be produced from lower cost surface mines.
Moreover, it has a significant share of the premium quality metallurgical coal
reserves in the United States, along with other high quality feed stock seams in
demand by the coke and steel-making industry.
9
<PAGE>
Production
The following table indicates the tonnage of coal purchased and produced by Coal
Operations for the years ended 2000, 1999 and 1998.
<TABLE>
<CAPTION>
Years Ended December 31
(In thousands of tons) 2000 1999 1998
- -------------------------------------------------------------------
<S> <C> <C> <C>
Produced 9,805 10,620 12,852
Purchased 1,524 2,346 3,536
- -------------------------------------------------------------------
Total 11,329 12,966 16,388
===================================================================
</TABLE>
Sales
The following table indicates the approximate tonnage of coal sold by Coal
Operations in the years ended December 31, 2000, 1999 and 1998 in the domestic
(United States and Canada) and export markets:
<TABLE>
<CAPTION>
Years Ended December 31
(In thousands of tons) 2000 1999 1998
- -------------------------------------------------------------------
<S> <C> <C> <C>
Domestic 9,272 9,360 10,906
Export 2,679 3,488 5,831
- -------------------------------------------------------------------
Total sold 11,951 12,848 16,737
===================================================================
</TABLE>
Environmental Matters
The Surface Mining Control and Reclamation Act of 1977 and the regulations
promulgated thereunder ("SMCRA") by the Federal Office of Surface Mining
Reclamation and Enforcement ("OSM"), and the enforcement thereof by the US
Department of the Interior, establish mining and reclamation standards for all
aspects of surface mining as well as many aspects of deep mining. SMCRA also
imposes a tax of $0.35 on each ton of surface-mined coal and $0.15 on each ton
of deep-mined coal. OSM and its state counterparts monitor compliance with SMCRA
and its regulations by the issuance of "notices of violation" which direct the
mine operator to correct the cited conditions within a stated period of time.
Coal Operations' policy is to correct the conditions that are the subject of
these notices or to contest those believed to be without merit in appropriate
proceedings.
As previously reported, Coal Operations has reached a broad settlement with the
OSM involving SMCRA liabilities of former contractors. Coal Operations has also
entered into a number of similar agreements with the states. Under these
agreements, Coal Operations agreed to perform certain reclamation and to pay
certain fees of former contractors. In return, the agencies agreed not to deny
or "block" permits to Coal Operations on account of the contractor liabilities
being settled. Coal Operations is in the process of successfully completing all
required work under these agreements.
Coal Operations is subject to various federal environmental laws, including the
Clean Water Act, the Clean Air Act and the Safe Drinking Water Act, as well as
state laws of similar scope in Virginia, West Virginia, Kentucky and Ohio. These
laws require approval of many aspects of coal mining operations, and both
federal and state inspectors regularly visit Coal Operations' mines and other
facilities to assure compliance.
Federal, state and local authorities strictly monitor the sulphur dioxide and
particulate emissions from electric power plants served by Coal Operations. In
1990, Congress enacted the Clean Air Act Amendments of 1990 that, among other
things, permit utilities to use low sulphur coals in lieu of constructing
expensive sulphur dioxide removal systems. The Company believes this should have
a favorable impact on the marketability of Coal Operations' extensive reserves
of low sulphur coals. However, the Company cannot currently predict the timing
or extent of such favorable impact.
Mine Health and Safety Laws
The coal operating companies included within Coal Operations are generally
liable under federal laws requiring payment of benefits to coal miners with
pneumoconiosis ("black lung"). Further, the Coal Operations' subsidiaries are
subject to the federal black lung excise tax ("FBLET") on domestic coal sales
imposed by the Black Lung Benefits Revenue Act of 1977 and the Black Lung
Benefits Reform Act of 1977, as amended by the Black Lung Benefits and Revenue
Amendments Act of 1981, the Consolidated Omnibus Budget Reconciliation Act of
1985 and the Omnibus Budget Reconciliation Act of 1987. On February 10, 1999,
the US District Court of the Eastern District of Virginia entered a final
judgment in favor of certain of the Company's subsidiaries, ruling that the
Federal Black Lung Excise Tax ("FBLET") imposed under Section 4121 of the
Internal Revenue Code is unconstitutional as applied to export coal sales and
ordering a refund to the subsidiaries. A total of $0.8 million (including
interest) was refunded in 1999 for the FBLET that those companies paid for the
quarter ended March 31, 1997. The Company has sought refunds of the FBLET it
paid on export coal sales for all open statutory periods and expects to receive
such refunds for some or all of that tax paid (plus interest) pursuant to a
review of claim documentation by the Internal Revenue Service. Due to the
uncertainty of the ultimate amounts to be received, which it estimates could
range from $12 million to $20 million (pretax), and timing of the FBLET refunds,
the Company has not currently recorded a receivable for such amounts in its
estimate of operating losses during the sale period. The Company is also
pursuing additional claims pending a decision by the US Supreme Court related to
another company. The ultimate amounts and timing of such additional refunds, if
any, cannot be determined at this time.
10
<PAGE>
Although the Company would not be currently liable for a multi-employer pension
plan withdrawal liability associated with its planned exit from the coal
business, it could, under certain circumstances, become liable for such
obligations during the sale process. Such liability, if any, is subject to
several factors, the effects of which cannot be predicted at this time. Those
factors include funding and benefit levels of the plans and the ultimate timing
and form of the sale transactions. Accordingly, the Company has not recorded a
withdrawal liability in the determination of the estimated loss on disposal.
Stringent safety and health standards have been imposed by federal legislation
since 1969 when the Federal Coal Mine Health and Safety Act was adopted, which
resulted in increased operating costs and reduced productivity. The Federal Mine
Safety and Health Act of 1977 significantly expanded the enforcement of health
and safety standards.
Compliance with health and safety laws is, in general, a cost common to all
domestic coal producers. The Company believes that the competitive position of
Coal Operations has not been and should not be adversely affected except in the
export market where Coal Operations competes with various foreign producers
subject to less stringent health and safety regulations.
Health Benefit Act
In October 1992, the Coal Industry Retiree Health Benefit Act of 1992 (the
"Health Benefit Act") was enacted as part of the Energy Policy Act of 1992. The
Health Benefit Act established rules for the payment of future health care
benefits for thousands of retired union mine workers and their dependents. The
Health Benefit Act established a trust fund to which "signatory operators" and
"related persons", including the Company and certain of its subsidiaries
(collectively, the "Pittston Companies"), are jointly and severally liable to
pay annual premiums for assigned beneficiaries, together with a pro rata share
for certain beneficiaries who never worked for such employers ("unassigned
beneficiaries"), including, in the Company's case, the Pittston Companies in
amounts determined on the basis set forth in the Health Benefit Act. In October
1993 and at various times in subsequent years, the Pittston Companies have
received notices from the Social Security Administration (the "SSA") with regard
to the assigned beneficiaries for which the Pittston Companies are responsible
under the Health Benefit Act. In addition, the Health Benefit Act requires the
Pittston Companies to fund, pro rata according to the total number of assigned
beneficiaries, a portion of health benefits for unassigned beneficiaries. At
this time, the funding for such health benefits is being provided from another
source; the statutory authorization to obtain such funds is currently scheduled
to cease by 2005. In the determination of the Pittston Companies' ultimate
obligation under the Health Benefit Act, such funding has been taken into
consideration.
Prior to December 31, 2000, the Company accounted for its obligations under the
Health Benefit Act as a participant in a multi-employer benefit plan and thus,
recognized the annual cost of these obligations on a pay-as-you-go basis. For
2000, 1999 and 1998, cash payments for such amounts were approximately $9.0
million, $10.4 million and $9.6 million, respectively. Pursuant to its formal
plan to exit the coal business, the Company recorded its estimated undiscounted
liability relating to such obligations at December 31, 2000 as a $161.7 million
one-time charge to the net loss from discontinued operations. Such obligations,
if discounted at 7.5%, would provide a present value estimate of approximately
$80 million. The Company currently estimates that the annual cash funding under
the Health Benefit Act for the Pittston Companies' assigned beneficiaries will
continue at about the same annual level for the next several years and should
begin to decline thereafter as the number of such assigned beneficiaries
decreases.
In addition, under the Health Benefit Act, the Pittston Companies are jointly
and severally liable for certain postretirement health benefits for thousands of
additional retired union mine workers and their dependents under plans provided
by the Company. Substantially all of the Company's accumulated postretirement
benefit obligation for retirees of $325.7 million as of December 31, 2000
relates to such retired workers and their beneficiaries.
The ultimate costs that will be incurred by the Company under the Health Benefit
Act and its postretirement medical plans could be significantly affected by,
among other things, the rate of inflation for medical costs, changes in the
number of beneficiaries, governmental funding arrangements and such federal
health benefit legislation of general application as may be enacted.
The Company acts as self-insurer with respect to almost all black lung benefits.
Provision is made for estimated benefits based on annual reports prepared by
outside actuaries. The excess of the present value of expected future benefits
over the accumulated book reserves is recognized over the amortization period.
Cumulative actuarial gains or losses are calculated periodically and amortized
on a straight-line basis. Prior to December 31, 2000, assumptions used in the
calculation of the actuarial present value of black lung benefits were based on
actual retirement experience of the Company's coal employees, black lung claims
incidence, actual dependent information, industry turnover rates, actual medical
and legal cost experience and projected inflation rates. As of December 31,
2000, certain assumptions were modified to reflect the planned sale of Coal
Operations. As of December 31, 2000 and 1999, the actuarially determined
discounted value of estimated future black lung benefits was approximately $47
million and $49 million, respectively. The amount expensed (credited) to
operations for federal and state black lung benefits was $5.3 million in 2000,
$5.1 million in 1999 and ($0.6) million in 1998. In 1998, the black lung credit
was favorably impacted by the amortization of actuarial gains.
11
<PAGE>
The Company has established a Voluntary Employees' Beneficiary Association
("VEBA") which is intended to tax efficiently fund certain retiree medical
liabilities primarily for retired coal miners and their dependents. The VEBA may
receive partial funding from the proceeds of the planned sale of the Company's
coal business as well as other sources over time. The Company contributed $15.0
million to the VEBA in December 1999. As of December 31, 2000, the balance of
the VEBA was $15.9 million.
Properties
The principal properties of Coal Operations are coal reserves, coal mines and
coal preparation plants, all of which are located in Virginia, West Virginia and
eastern Kentucky. Such reserves are either owned or leased. Leases of land or
coal mining rights generally are either for a long-term period or until
exhaustion of the reserves, and require the payment of a royalty based generally
on the sales price and/or tonnage of coal mined from a particular property. Many
leases or rights provide for payment of minimum royalties.
Coal Operations owns a 32.5% interest in Dominion Terminal Associates ("DTA"),
which leases and operates a ground storage-to-vessel coal transloading facility
in Newport News, Virginia. DTA has a throughput capacity of 22.0 million tons of
coal per year and ground storage capacity of 2.0 million tons. A portion of Coal
Operations' share of the throughput and ground storage capacity of the DTA
facility is subject to user rights of third parties, which pay Coal Operations a
fee. The DTA facility serves export customers, as well as domestic coal users
located on the eastern seaboard of the United States.
MATTERS RELATING TO FORMER OPERATIONS
In April 1990, the Company entered into a settlement agreement to resolve
certain environmental claims against the Company arising from hydrocarbon
contamination at a petroleum terminal facility ("Tankport") in Jersey City, New
Jersey, which operations were sold in 1983. Under the settlement agreement, the
Company is obligated to pay 80% of the remediation costs. Based on data
available to the Company and its environmental consultants, the Company
estimates its portion of the future actual clean-up costs, on an undiscounted
basis, using existing technologies to be between $6.0 million and $9.5 million.
Management is unable to determine that any amount within that range is a better
estimate due to a variety of uncertainties, which include the extent of the
contamination at the site, the permitted technologies for remediation and the
regulatory standards by which the clean-up will be conducted. The clean-up
estimates have been modified from prior years' in light of cost inflation, the
application of new technologies and certain assumptions the Company is making
with respect to the end use of the property. The estimate of costs and the
timing of payments could change as a result of changes to the remediation plan
required, changes in the technology available to treat the site, unforeseen
circumstances existing at the site and additional cost inflation.
The Company commenced insurance litigation in 1990, in the United States
District Court for the District of New Jersey, seeking a declaratory judgment
that all amounts payable by the Company pursuant to the Tankport obligation were
reimbursable under comprehensive general liability and pollution liability
policies maintained by the Company. The Company was able to conclude settlement
with all of its insurers without a trial. Taking into account the proceeds from
the settlement with its insurers, it is the Company's belief that the ultimate
amount that it would be liable for related to the remediation of the Tankport
site will not have a significant adverse impact on the Company's results of
operations or financial position.
Forward Looking Information
Certain of the matters discussed herein, including statements regarding
increased competition in the home alarm business by regional Bell operating
companies, the possibility that police departments may refuse to respond to
calls from alarm companies and the necessity that BHS use a private response
force, the ability of BAX Global to renew certain aircraft leases or enter into
new leases on reasonably comparable terms, the timing of the payment of charges
related to BAX Global's restructuring, reductions by BAX Global of the dedicated
cargo fleet, the highly competitive nature the air and ocean freight forwarding
and supply chain management industries, the amount of proven and probable gold
reserves in the Stawell gold mine, the amount of natural gas reserves, the
outcome of BAX Global's plans to reduce capacity and cost of its airlift
capabilities in the US and to reduce station operating expenses, sales costs and
overhead in the Americas and Atlantic regions, the amount and timing of FBLET
refunds, the competitive position of Coal Operations, costs of long-term benefit
obligations including black lung expenses, projections about market risk,
environmental clean-up estimates, Health Benefit Act expenses and the timing of
funding and source of funds for the VEBA involve forward looking information
which is subject to known and unknown risks, uncertainties, and contingencies
which could cause actual results, performance or achievements, to differ
materially from those which are anticipated. Such risks, uncertainties and
contingencies, many of which are beyond the control of the Company, include, but
are not limited to, strategic decisions by the regional Bell operating
companies, the incidence of false alarms, the market for airplanes, the actual
amount of gold reserves in the Stawell gold mine, the actual amount of natural
gas reserves held by Allied Operations, the position taken by the Internal
Revenue Service with respect to the timing and amount of FBLET refunds, overall
economic and business conditions, foreign currency exchange rates, the demand
for the Company's products and services, the timing and ultimate outcome of the
sale of the coal assets, initiatives to control costs and increase
profitability, pricing and other competitive industry factors, fuel prices, new
government regulations and/or legislative initiatives, issuance of permits,
judicial decisions, variations in costs or expenses including interest rates,
variations in the spot prices of coal and the ability of counterparties to
perform.
12
<PAGE>
- -------------------------------------------------------------------------------
ITEM 3. LEGAL PROCEEDINGS
- -------------------------------------------------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
- -------------------------------------------------------------------------------
Not applicable.
13
<PAGE>
The Pittston Company and Subsidiaries
Executive Officers of the Registrant
The following is a list as of March 15, 2001, of the names and ages of the
executive and other officers of Pittston and the names and ages of certain
officers of its subsidiaries, indicating the principal positions and offices
held by each. There is no family relationship between any of the officers named.
<TABLE>
<CAPTION>
Name Age Positions and Offices Held Held Since
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Executive Officers:
Michael T. Dan 50 President and Chief Executive Officer 1998
Chairman of the Board 1999
James B. Hartough 53 Vice President-Corporate Finance and Treasurer 1988
Frank T. Lennon 59 Vice President-Human Resources and Administration 1985
Austin F. Reed 49 Vice President, General Counsel and Secretary 1994
Robert T. Ritter 49 Vice President and Chief Financial Officer 1998
Other Officers:
Amanda N. Aghdami 32 Controller 1997
Arthur E. Wheatley 58 Vice President and Director of Risk Management 1988
Subsidiary Officers:
Joseph L. Carnes 43 President of BAX Global Inc. 2000
Thomas W. Garges, Jr. 61 President and Chief Executive Officer of Pittston Coal Company 1999
Richard Hickson 44 President of Brink's, Incorporated 2000
Peter A. Michel 58 President and Chief Executive Officer of Brink's Home 1988
Security, Inc.
==================================================================================================================
</TABLE>
Executive and other officers of Pittston are elected annually and serve at the
pleasure of its Board of Directors.
Mr. Dan was elected President, Chief Executive Officer and Director of The
Pittston Company on February 6, 1998 and was elected Chairman of the Board
effective January 1, 1999. He also serves as Chief Executive Officer of Brink's
Incorporated, a position he has held since July 1993 and as President and Chief
Executive Officer of Brink's Holding Company, a position he has held since
December 31, 1995. He also serves as Chairman of the Board of BAX Global Inc., a
position he has held since February 1998. He also serves as Chairman of the
Board of Pittston Mineral Ventures, a position he has held since August 31, 1998
and as Chairman of the Board of Pittston Coal Company, a position he has held
since September 1, 1998. From August 1992 to July 1993 he served as President of
North American operations of Brink's, Incorporated and as Executive Vice
President of Brink's, Incorporated from 1985 to 1992.
Mr. Ritter joined The Pittston Company as Vice President and Chief Financial
Officer in August of 1998. From June 1996 to July 1998, he served as Chief
Financial Officer of WLR Foods, Inc. He was a private investor and financial
consultant from April 1995 to May 1996 and was Treasurer at American Cyanamid
Company from March 1991 to January 1994 and Controller from February 1994 to
March 1995.
Messrs. Hartough, Lennon, Reed and Wheatley have served in their present
positions for more than the past five years.
Ms. Aghdami was elected to her current position on November 7, 1997. She joined
The Pittston Company in September 1996 as Manager of Financial Reporting. Prior
to September 1996, she was an Audit Manager with Ernst & Young LLP.
Mr. Carnes was elected President of BAX Global inc. in May 2000. He joined BAX
Global as President - US and Canada in September 1999. Prior to joining BAX
Global, he served as Executive Vice President, North America for Fritz Companies
Inc. where he was employed from 1987 - 1999.
Mr. Hickson was elected President of Brink's, Incorporated in November 2000. He
had served as Vice President and Managing Director of Brink's Europe from June
1999, and joined the Brink's organization as Managing Director - Brink's Limited
U.K. in February 1998. Prior to joining Brink's, Mr. Hickson served as a
Consultant from October 1995 to February 1998, and Chief Executive Officer for
Holmes Protection Group, Inc. USA where he was employed from February 1990 to
August 1995.
Mr. Garges joined Pittston Coal Company on January 4, 1999 as President and
Chief Executive Officer. Before joining Pittston Coal, he served as President
and Chief Executive Officer of Rochester and Pittsburgh Coal Company. From 1971
to 1986, he was Executive Vice President - Operations for Pittston Coal and
President of Pittston Coal's Pyxis operations.
Mr. Michel was elected President and Chief Executive Officer of Brink's Home
Security, Inc. in April 1988. From 1985 to 1987, he served as President and
Chief Executive Officer of Penn Central Technical Security Co.
14
<PAGE>
- -------------------------------------------------------------------------------
PART II
- -------------------------------------------------------------------------------
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
- -------------------------------------------------------------------------------
Prior to January 14, 2000, the Company was comprised of three groups - Pittston
Brink's Group, Pittston BAX Group, and Pittston Minerals Group. The Pittston
Brink's Group included the Brink's and BHS operations of the Company. The
Pittston BAX Group included the BAX Global operations of the Company. The
Pittston Minerals Group included the Pittston Coal Company and Mineral Ventures
operations of the Company. Also, prior to January 14, 2000, the Company had
three classes of common stock: Pittston Brink's Group Common Stock ("Brink's
Stock"), Pittston BAX Group Common Stock ("BAX Stock") and Pittston Minerals
Group Common Stock ("Minerals Stock"), which were designed to provide
shareholders with separate securities reflecting the performance of the Brink's
Group, the BAX Group and the Minerals Group, respectively.
On December 6, 1999, the Company announced that its Board of Directors approved
the elimination of the tracking stock capital structure by an exchange of all
outstanding shares of Minerals Stock and BAX Stock for shares of Brink's Stock
(the "Exchange"). The Exchange took place on January 14, 2000 (the "Exchange
Date"). On the Exchange Date, holders of Minerals Stock received 0.0817 shares
of Brink's Stock for each share of their Minerals Stock; and holders of BAX
Stock received 0.4848 shares of Brink's Stock for each share of their BAX Stock.
See Note 10 to the Company's consolidated financial statements for additional
information concerning the Exchange on pages 44 through 46 of the Company's 2000
Annual Report, which are incorporated herein by reference. From and after the
Exchange Date, Brink's Stock is the only outstanding class of common stock of
the Company and continues to trade on the New York Stock Exchange under the
symbol "PZB". Prior to the Exchange Date, the Brink's Stock reflected the
performance of the Brink's Group only; after the Exchange Date, the Brink's
Stock reflects the performance of the Company as a whole. Shares of Brink's
Stock after the Exchange are hereinafter referred to as "Pittston Common Stock".
Reference is made to pages 56 and 57 of the Company's 2000 Annual Report which
is incorporated herein by reference, for information required by this item.
On January 18, 2001, the Company issued $75 million of Senior Notes ("Notes") in
a private placement. The Notes are comprised of $55 million of 7.84% Senior
Notes, Series A, due in 2007, and $20 million of 8.02% Senior Notes, Series B,
due in 2008. The Notes were offered and sold solely to a limited number of
institutional investors and were exempt from registration under Section 4(2) of
the Securities Act of 1933. Proceeds were used to repay borrowings under a bank
credit facility.
ITEM 6. SELECTED FINANCIAL DATA
- -------------------------------------------------------------------------------
Reference is made to pages 58 through 59 of the Company's 2000 Annual Report
which is incorporated herein by reference, for information required by this
item.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITIONS
- -------------------------------------------------------------------------------
Reference is made to pages 6 through 22 of the Company's 2000 Annual Report
which is incorporated herein by reference, for information required by this
item.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------------------
The information regarding quantitative and qualitative disclosures about market
risk is included in this report under Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
- -------------------------------------------------------------------------------
Reference is made to pages 23 through 56 of the Company's 2000 Annual Report
which is incorporated herein by reference, for information required by this
item.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- -------------------------------------------------------------------------------
Not applicable.
15
<PAGE>
- -------------------------------------------------------------------------------
PART III
- -------------------------------------------------------------------------------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
- -------------------------------------------------------------------------------
The information required by this Item regarding directors is incorporated by
reference to the Company's definitive proxy statement to be filed pursuant to
Regulation 14A within 120 days after December 31, 2000. The information
regarding executive officers is included in this report following Item 4, under
the caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
- -------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------------------------------------------------------------------------------
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- -------------------------------------------------------------------------------
The information required by Items 11 through 13 is incorporated by reference to
the Company's definitive proxy statement to be filed pursuant to Regulation 14A
within 120 days after December 31, 2000.
- -------------------------------------------------------------------------------
PART IV
- -------------------------------------------------------------------------------
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
- -------------------------------------------------------------------------------
(a) 1. All financial statements - see index to financial
statements and schedules.
2. Financial statement schedules - see index to
3. Exhibits - see exhibit index.
- -------------------------------------------------------------------------------
(b) No reports on Form 8-K were filed during the fourth quarter of 2000.
Undertaking
For the purposes of complying with the amendments to the rules governing Form
S-8 (effective July 13, 1990) under the Securities Act of 1933, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorporated
by reference into Registrant's Registration Statements on Form S-8 Nos. 2-64258,
33-2039, 33-21393, 33-23333, 33-69040, 33-53565, 333-02219, 333-78631 and
333-78633.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person of the
Registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
16
<PAGE>
The Pittston Company and Subsidiaries
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 28, 2001.
The Pittston Company
-----------------------------
(Registrant)
By /s/ M. T. Dan
-----------------------------------
(M. T. Dan,
Chairman, President and
Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated, on March 28, 2001.
<TABLE>
<CAPTION>
Signatures Title
----------------- ----------
<S> <C>
R. G. Ackerman* Director
Betty C. Alewine* Director
J. R. Barker* Director
Marc C. Breslawsky* Director
J. L. Broadhead* Director
W. F. Craig* Director
/s/ M. T. Dan Chairman, President and
-------------------- Chief Executive Officer
(M. T. Dan) (principal executive officer)
G. Grinstein* Director
R. M. Gross* Director
/s/ R. T. Ritter Vice President
-------------------- and Chief Financial Officer
(R. T. Ritter) (principal financial officer and principal accounting officer)
C. S. Sloane* Director
*By /s/ M. T. Dan
-------------
(M. T. Dan,
Attorney-in-Fact)
</TABLE>
17
<PAGE>
The Pittston Company and Subsidiaries
Index to Financial Statements and Schedules
Financial Statements:
The consolidated financial statements of The Pittston Company, listed in the
index below which are included in the Company's 2000 Annual Report for the year
ended December 31, 2000, are incorporated herein by reference. With the
exception of the pages listed in the index below and the information
incorporated by reference included in Parts I, II and IV, the 2000 Annual Report
of the Shareholders is not deemed filed as part of this report.
PITTSTON ANNUAL REPORT
<TABLE>
<S> <C>
Management's Discussion and Analysis of Results of
Operations and Financial Condition................. 6-22
Independent Auditors' Report......................... 23
Consolidated Balance Sheets.......................... 24
Consolidated Statements of Operations................ 25-26
Consolidated Statements of Shareholders' Equity...... 27
Consolidated Statements of Cash Flows................ 28
Notes to Consolidated Financial Statements........... 29-56
Selected Financial Data ............................. 58-59
</TABLE>
Financial Statement Schedules:
Schedules are omitted because they are not material, not applicable or not
required, or the information is included elsewhere in the financial statements.
18
<PAGE>
The Pittston Company and Subsidiaries
Exhibit Index
Each Exhibit listed previously filed document is hereby incorporated by
reference to such document.
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
2(i) Membership Interest Acquisition Agreement Among Air Transport
International LLC and BAX Global Inc., dated February 3, 1998. Exhibit
2 to the Registrant's Current Report on Form 8-K filed May 14, 1998.
2(ii) Share Purchase Agreement, dated as of January 27, 1998, between Brink's
Security International, Inc., acting as Purchaser, and Generale de
Transport et D'Industrie, acting as Seller. Exhibit 10(v) to the
Registrant's Annual Report on Form 10-K for the year ended December 31,
1998 (the "1998 Form 10-K").
2(iii) Shareholders' Agreement, dated as of January 10, 1997, between Brink's
Security International, Inc., and Valores Tamanaco, C.A. Exhibit 10(w)
to the 1998 Form 10-K.
3(i) The Registrant's Articles of Correction to its Articles of
Incorporation. Exhibit 3(i) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998.
3(ii) The Registrant's Bylaws, as amended through July 14, 2000. Exhibit 3(b)
to the Registrant's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.
4(a) (i) Amended and Restated Rights Agreement dated as of January 14,
2000 (the "Rights Agreement"), between the Registrant and Bank
Boston, N.A., as Rights Agent.
(ii) Form of Right Certificate for Rights.
Instruments defining the rights of holders of long-term debt of the
Registrant and its consolidated subsidiaries have been omitted because
the amount of debt under any such instrument does not exceed 10% of the
total assets of the Registrant and its consolidated subsidiaries. The
Registrant agrees to furnish a copy of any such instrument to the
Commission upon request. Exhibit 4(a) to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1999 (the "1999 Form
10-K").
10(a)* The Key Employees' Incentive Plan, as amended. Exhibit 10(a) to the
1998 Form 10-K.
10(b)* The Key Employees' Deferred Compensation Program, as amended and
restated as of January 14, 2000. Exhibit 10(b) to the 1999 Form 10-K.
10(c)* (i) The Registrant's Pension Equalization Plan as amended. Exhibit
10(e)(I) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1997 (the "1997 Form 10-K").
(ii) Amended and Restated Trust Agreement, dated December 1, 1997,
between Registrant and Chase Manhattan Bank, as Trustee (the
"Trust Agreement"). Exhibit 10(e)(ii) to the 1997 Form 10-K.
(iii) Amendment No. 1 to Trust Agreement, dated as of August 18,
1999. Exhibit 10(c)(iii) to the 1999 Form 10-K.
(iv) Trust Agreement under the Pension Equalization Plan, Retirement
Plan for Non-Employee Directors and Certain Contractual
Arrangements of The Pittston Company made as of September 16,
1994, by and between the Registrant and Chase Manhattan Bank
(National Association), as Trustee. Exhibit 10(I) to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994 (filed November 14, 1994 - File No.
1-9148) (the "Third Quarter 1994 Form 10-Q").
(v) Form of letter agreement dated as of September 16, 1994,
between the Registrant and one of its officers. Exhibit 10(e)
to the Third Quarter 1994 Form 10-Q.
(vi) Form of letter agreement dated as of September 16, 1994,
between the Registrant and Participants pursuant to the Pension
Equalization Plan. Exhibit 10(f) to the Third Quarter 1994 Form
10-Q.
10(d)* The Registrant's Executive Salary Continuation Plan. Exhibit 10(e) to
the Registrant's Annual Report on Form 10-K for the year ended December
31, 1991 (filed March 26, 1991 - File No. 1-9148) (the "1991 Form
10-K").
10(e)* The Registrant's Non-Employee Directors' Stock Option Plan, as amended
and restated as of January 14, 2000. Exhibit 10(e) to the 1999 Form
10-K.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
10(f)* The Registrant's 1988 Stock Option Plan, as amended and restated as of
January 14, 2000. Exhibit 10(f) to the 1999 Form 10-K.
10(g)* The Pittston Company Management Performance Improvement Plan. Exhibit
10(g) to the 1999 Form 10-K.
10(h)* Form of change in control agreement replacing all prior change in
control agreements and amendments and modifications thereto, between
the Registrant (or a subsidiary) and various officers of the
Registrant. Exhibit 10(l)(ii) to the 1997 Form 10-K.
10(i)* Form of Indemnification Agreement entered into by the Registrant with
its directors and officers. Exhibit 10(l) to the 1991 Form 10-K.
10(j)* (i) Registrant's Retirement Plan for Non-Employee Directors, as
amended. Exhibit 10(g) to the Third Quarter 1994 Form 10-Q.
(ii) Form of letter agreement dated as of September 16, 1994,
between the Registrant and its Non-Employee Directors
pursuant to Retirement Plan for Non-Employee Directors.
Exhibit 10(h) to the Third Quarter 1994 Form 10-Q.
10(k)* (i) Form of severance agreement between the Registrant (or a
subsidiary) and various of the Registrant's officers.
Exhibit 10(o)(ii) to the 1997 Form 10-K.
10(l)* Registrant's Directors' Stock Accumulation Plan, as amended and
restated as of January 14, 2000. Exhibit 10(l) to the 1999 Form 10-K.
10(m)* Registrant's Amended and Restated Plan for Deferral of Directors' Fees.
Exhibit 10(o) to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989 (filed March 24, 1990 - File No. 1-9148).
10(n) (i) Lease dated as of April 1, 1989, between Toledo-Lucas County
Port Authority (the "Authority"), as Lessor, and Burlington,
as Lessee. Exhibit 10(i) to the Registrant's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1989 (filed
August 11, 1989 - File No. 1-9148) (the "Second Quarter 1989
Form 10-Q").
(ii) Lease Guaranty Agreement dated as of April 1, 1989, between
Burlington (formerly Burlington Air Express Management Inc.),
as Guarantor, and the Authority. Exhibit 10(ii) to the Second
Quarter 1989 Form 10-Q.
(iii) Trust Indenture dated as of April 1, 1989 between the
Authority and Society Bank & Trust (formerly, Trustcorp.
Bank, Ohio) (the "Trustee"), as Trustee. Exhibit 10(iii) to
the Second Quarter 1989 Form 10-Q.
(iv) Assignment of Basic Rent and Rights Under a Lease and Lease
Guaranty dated as of April 1, 1989 from the Authority to the
Trustee. Exhibit 10(iv) to the Second Quarter 1989 Form 10-Q.
(v) Open-End First Leasehold Mortgage and Security Agreement
dated as of April 1, 1989 from the Authority to the Trustee.
Exhibit 10(v) to the Second Quarter 1989 Form 10-Q.
(vi) First Supplement to Lease dated as of January 1, 1990,
between the Authority and Burlington, as Lessee. Exhibit 10
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1990 (filed May 15, 1990 - File No.
1-9148).
(vii) Revised and Amended Second Supplement to Lease dated as of
September 1, 1990, between the Authority and Burlington.
Exhibit 10(i) to the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1990 (filed November
13, 1990 - File No. 1-9148) (the "Third Quarter 1990 Form
10-Q").
(viii) Amendment Agreement dated as of September 1, 1990, among City
of Toledo, Ohio, the Authority, Burlington and the Trustee.
Exhibit 10(ii) to the Third Quarter 1990 Form 10-Q.
(ix) Assumption and Non-Merger Agreement dated as of September 1,
1990, among Burlington, the Authority and the Trustee.
Exhibit 10(iii) to the Third Quarter 1990 Form 10-Q.
(x) First Supplemental Indenture between Toledo-Lucas County Port
Authority, and Society National Bank, as Trustee, dated as of
March 1, 1994. Exhibit 10.1 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1994
(filed
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
May 12, 1994 - File No. 1-9148) (the "First Quarter 1994
Form 10-Q").
(xi) Third Supplement to Lease between Toledo-Lucas County Port
Authority, as Lessor, and Burlington Air Express Inc., as
Lessee, dated as of March 1, 1994. Exhibit 10.2 to the First
Quarter 1994 Form 10-Q.
(xii) Fourth Supplement to Lease between Toledo-Lucas County Port
Authority, as Lessor, and Burlington Air Express Inc., as
Lessee, dated as of June 1, 1991. Exhibit 10.3 to the First
Quarter 1994 Form 10-Q.
(xiii) Fifth Supplement to Lease between Toledo-Lucas County Port
Authority, as Lessor, and Burlington Air Express Inc., as
Lessee, dated as of December 1, 1996. Exhibit 10(r)(xiii) to
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996.
10(o) $370,000,000 Credit Agreement, dated as of October 3, 2000, among the
Registrant, as Borrower, Certain of Its Subsidiaries, as Guarantors,
Various Lenders and Fleet National Bank and Chase Manhattan Bank as
Co-Syndication Agents and Bank of America, N.A., as Administrative
Agent. Exhibit 10 to the Registrant's Quarterly Report on Form 10-Q for
the quarter ended September 30, 2000.
10(p)* Employment Agreement dated as of May 4, 1998, between the Registrant
and M. T. Dan. Exhibit 10(a) to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1998 (the "Third Quarter
1998 Form 10-Q").
10(q)* Executive Agreement dated as of May 4, 1998, between the Registrant and
M. T. Dan. Exhibit 10(b) to the Third Quarter 1998 Form 10-Q.
10(r)* Executive Agreement dated as of August 7, 1998, between the Registrant
and R. T. Ritter. Exhibit 10(c) to the Third Quarter 1998 Form 10-Q.
10(s)* Severance Agreement dated as of August 7, 1998, between the Registrant
and R. T. Ritter. Exhibit 10(d) to the Third Quarter 1998 Form 10-Q.
10(t) Trust Agreement for The Pittston Company Employee Welfare Benefit
Trust. Exhibit 10(t) to the 1999 Form 10-K.
10(u) (i) Note Purchase Agreement dated as of January 18, 2001, between
the Registrant and the Purchasers listed on Schedule A
thereto.
(ii) Form of Series A Promissory Note.
(iii) Form of Series B Promissory Note.
10(v) (i) Receivables Purchase Agreement dated as of December 15, 2000,
among BAX Funding Corporation, BAX Global Inc., Liberty Street
Funding Corp. and the Bank of Nova Scotia.
(ii) Purchase and Sale Agreement dated as of December 15, 2000,
among the Originators named therein, BAX Funding Corporation
and BAX Global Inc.
13 2000 Annual Report of the Registrant.
21 Subsidiaries of the Registrant.
23 Consent of independent auditors.
24 Powers of attorney.
99* (a) Amendment to Registrant's Pension-Retirement Plan relating to
preservation of assets of the Pension-Retirement Plan upon a
change in control. Exhibit 99 to the Registrant's Annual Report
on Form 10-K for the year ended December 31, 1992 (filed March
20, 1993 - File No. 1-9148).
</TABLE>
- -----------------
*Management contract or compensatory plan or arrangement.
21
<PAGE>
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<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
STATEMENT OF DIFFERENCES
------------------------
The section symbol shall be expressed as ............................. 'SS'
The registered trademark symbol shall be expressed as................. 'r'
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>2
<FILENAME>0002.txt
<DESCRIPTION>EXHIBIT 10(U)(I)
<TEXT>
<PAGE>
================================================================================
THE PITTSTON COMPANY
7.84% Senior Notes, Series A, due 2007
8.02% Senior Notes, Series B, due 2008
NOTE PURCHASE AGREEMENT
Dated as of January 18, 2001
================================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. AUTHORIZATION OF NOTES...............................................................................1
1.1. The Notes...............................................................................1
1.2. The Subsidiary Guarantees...............................................................1
2. SALE AND PURCHASE OF NOTES...........................................................................2
3. CLOSING..............................................................................................2
4. CONDITIONS TO CLOSING................................................................................2
4.1. Representations and Warranties..........................................................3
4.2. Performance; No Default.................................................................3
4.3. Compliance Certificates.................................................................3
4.4. Opinions of Counsel.....................................................................3
4.5. Subsidiary Guarantees...................................................................3
4.6. Purchase Permitted by Applicable Law, etc...............................................4
4.7. Payment of Special Counsel Fees.........................................................4
4.8. Private Placement Numbers...............................................................4
4.9. Changes in Corporate Structure..........................................................4
4.10. Proceedings and Documents...............................................................4
4.11. Sale of Notes to Other Purchasers.......................................................4
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................5
5.1. Organization; Power and Authority.......................................................5
5.2. Authorization, etc......................................................................5
5.3. Disclosure..............................................................................5
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates........................6
5.5. Financial Statements....................................................................6
5.6. Compliance with Laws, Other Instruments, etc............................................7
5.7. Governmental Authorizations, etc........................................................7
5.8. Litigation; Observance of Agreements, Statutes and Orders...............................7
5.9. Taxes...................................................................................7
5.10. Title to Property; Leases...............................................................8
5.11. Licenses, Permits, etc..................................................................8
5.12. Compliance with ERISA...................................................................8
5.13. Private Offering by the Company.........................................................9
5.14. Use of Proceeds; Margin Regulations.....................................................10
5.15. Existing Indebtedness...................................................................10
5.16. Foreign Assets Control Regulations, etc.................................................10
5.17. Status Under Certain Statutes...........................................................11
5.18. Environmental Matters...................................................................11
6. REPRESENTATIONS OF THE PURCHASER.....................................................................11
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
6.1. Purchase of Notes.......................................................................11
6.2. Source of Funds.........................................................................12
7. INFORMATION AS TO COMPANY............................................................................13
7.1. Financial and Business Information......................................................13
7.2. Officer's Certificate...................................................................16
7.3. Inspection..............................................................................16
8. PREPAYMENT OF THE NOTES..............................................................................17
8.1. Required Prepayments of Series A Notes..................................................17
8.2. Optional Prepayments with Make-Whole Amount.............................................18
8.3. Notice of Prepayment....................................................................18
8.4. Allocation of Partial Prepayments.......................................................18
8.5. Maturity; Surrender, etc................................................................18
8.6. Purchase of Notes.......................................................................19
8.7. Make-Whole Amount.......................................................................19
9. AFFIRMATIVE COVENANTS................................................................................20
9.1. Compliance with Law.....................................................................20
9.2. Insurance...............................................................................21
9.3. Maintenance of Properties...............................................................21
9.4. Payment of Taxes and Claims.............................................................21
9.5. Corporate Existence, etc................................................................22
9.6. Additional Subsidiary Guarantees; Release of Subsidiary Guarantees......................22
10. NEGATIVE COVENANTS...................................................................................23
10.1. Liens...................................................................................23
10.2. Restricted Subsidiary Indebtedness......................................................24
10.3. Limitation on Sale and Leaseback Transactions...........................................25
10.4. Limitation on Asset Sales...............................................................25
10.5. Financial Conditions....................................................................26
10.6. Merger, Consolidation, etc..............................................................27
10.7. Lines of Business.......................................................................28
10.8. Transactions with Affiliates............................................................28
10.9. Designation of Restricted and Unrestricted Subsidiaries.................................29
11. EVENTS OF DEFAULT....................................................................................29
12. REMEDIES ON DEFAULT, ETC.............................................................................31
12.1. Acceleration............................................................................31
12.2. Other Remedies..........................................................................32
12.3. Rescission..............................................................................32
12.4. No Waivers or Election of Remedies, Expenses, etc.......................................33
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES........................................................33
13.1. Registration of Notes...................................................................33
13.2. Transfer and Exchange of Notes..........................................................33
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C> <C>
13.3. Replacement of Notes....................................................................34
14. PAYMENTS ON NOTES....................................................................................34
14.1. Place of Payment........................................................................34
14.2. Home Office Payment.....................................................................34
15. EXPENSES, ETC........................................................................................35
15.1. Transaction Expenses....................................................................35
15.2. Survival................................................................................35
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.........................................35
17. AMENDMENT AND WAIVER.................................................................................36
17.1. Requirements............................................................................36
17.2. Solicitation of Holders of Notes........................................................36
17.3. Binding Effect, etc.....................................................................36
17.4. Notes held by Company, etc..............................................................37
18. NOTICES..............................................................................................37
19. REPRODUCTION OF DOCUMENTS............................................................................37
20. CONFIDENTIAL INFORMATION.............................................................................38
21. SUBSTITUTION OF PURCHASER............................................................................39
22. MISCELLANEOUS........................................................................................39
22.1. Successors and Assigns..................................................................39
22.2. Construction............................................................................39
22.3. Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.......................39
22.4. Payments Due on Non-Business Days.......................................................40
22.5. Severability............................................................................40
22.6. Accounting Terms; Changes in GAAP.......................................................40
22.7. Counterparts............................................................................41
22.8. Governing Law...........................................................................41
Exhibit 1.1(a) -- Form of 7.84% Senior Note, Series A, due 2007
Exhibit 1.1(b) -- Form of 8.02% Senior Note, Series B, due 2008
Exhibit 1.2 -- Form of Subsidiary Guarantee
Exhibit 4.4(a)(i) -- Form of Opinion of Special Counsel for the Company
Exhibit 4.4(a)(ii) -- Form of Opinion of Counsel for the Company
Exhibit 4.4(b) -- Form of Opinion of Special Counsel for the Purchasers
</TABLE>
(iii)
<PAGE>
<TABLE>
<S> <C> <C>
Schedule A -- Names and Addresses of Purchasers
Schedule B -- Defined Terms
Schedule 5.3 -- Disclosure Documents
Schedule 5.4 -- Subsidiaries
Schedule 5.8 -- Litigation
Schedule 5.11 -- Licenses, etc.
Schedule 5.15 -- Existing Indebtedness
</TABLE>
(iv)
<PAGE>
THE PITTSTON COMPANY
1801 Bayberry Court
P.O. Box 18100
Richmond, VA 23226
Telephone: 804-289-9600
Telecopier: 804-289-9770
7.84% Senior Notes, Series A, due 2007
8.02% Senior Notes, Series B, due 2008
As of January 18, 2001
TO EACH OF THE PURCHASERS LISTED IN
THE ATTACHED SCHEDULE A:
Ladies and Gentlemen:
THE PITTSTON COMPANY, a Virginia corporation (the "Company"), agrees
with you as follows:
1. AUTHORIZATION OF NOTES.
1.1. The Notes.
The Company has duly authorized the issue and sale of $75,000,000
aggregate principal amount of its Senior Notes, comprising $55,000,000 aggregate
principal amount of its 7.84% Senior Notes, Series A, due 2007 (the "Series A
Notes") and $20,000,000 aggregate principal amount of its 8.02% Senior Notes,
Series B, due 2008 (the "Series B Notes" and, together with the Series A Notes,
collectively the "Notes"), such notes to be substantially in the respective
forms set out in Exhibits 1.1(a) and 1.1(b). As used herein, the term "Notes"
shall mean all notes (irrespective of series unless otherwise specified)
originally delivered pursuant to this Agreement and the Other Agreements
referred to below and all notes delivered in substitution or exchange for any
such note and, where applicable, shall include the singular number as well as
the plural. The terms "Note", "Series A Note" and "Series B Note" mean one of
the Notes, Series A Notes and Series B Notes, respectively. Certain capitalized
and other terms used in this Agreement are defined in Schedule B; references to
a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or
an Exhibit attached to this Agreement.
1.2. The Subsidiary Guarantees.
The Notes will be unconditionally guaranteed by certain of the
Company's existing Restricted Subsidiaries, pursuant to subsidiary guarantees
substantially in the form of Exhibit 1.2 (individually a "Subsidiary Guarantee"
and collectively the "Subsidiary
<PAGE>
2
Guarantees", which terms shall include after the date of the Closing all
additional Subsidiary Guarantees from time to time executed and delivered
pursuant to Section 9.6).
2. SALE AND PURCHASE OF NOTES.
Subject to the terms and conditions of this Agreement, the Company will
issue and sell to you and you will purchase from the Company, at the Closing
provided for in Section 3, Notes of the series and in the principal amount
specified opposite your name in Schedule A at the purchase price of 100% of the
principal amount thereof. Contemporaneously with entering into this Agreement,
the Company is entering into separate Note Purchase Agreements (the "Other
Agreements") identical with this Agreement with each of the other purchasers
named in Schedule A (the "Other Purchasers"), providing for the sale at such
Closing to each of the Other Purchasers of Notes of the series and in the
principal amount specified opposite its name in Schedule A. Your obligation
hereunder and the obligations of the Other Purchasers under the Other Agreements
are several and not joint obligations and you shall have no obligation under any
Other Agreement and no liability to any Person for the performance or
non-performance by any Other Purchaser thereunder.
3. CLOSING.
The sale and purchase of the Notes to be purchased by you and the Other
Purchasers shall occur at the offices of Willkie Farr & Gallagher, 787 Seventh
Avenue, New York, NY 10019 at 10:00 a.m., New York time, at a closing (the
"Closing") on January 18, 2001 or on such other Business Day thereafter on or
prior to January 23, 2001 as may be agreed upon by the Company and you and the
Other Purchasers. At the Closing the Company will deliver to you the Notes to be
purchased by you in the form of a single Note of the series to be purchased by
you (or such greater number of Notes in denominations of at least $100,000 as
you may request prior to the Closing) dated the date of the Closing and
registered in your name (or in the name of your nominee), against delivery by
you to the Company or its order of immediately available funds in the amount of
the purchase price therefor by wire transfer of immediately available funds to
the Company's account (account number 9104010609) at The Chase Manhattan Bank,
ABA number 021000021.
If at the Closing the Company shall fail to tender such Notes to you as
provided above in this Section 3, or any of the conditions specified in Section
4 shall not have been fulfilled to your satisfaction, you shall, at your
election, be relieved of all further obligations under this Agreement, without
thereby waiving any rights you may have by reason of such failure or such
nonfulfillment.
4. CONDITIONS TO CLOSING.
Your obligation to purchase and pay for the Notes to be sold to you at
the Closing is subject to the fulfillment to your satisfaction, prior to or at
the Closing, of the following conditions:
<PAGE>
3
4.1. Representations and Warranties.
The representations and warranties of the Company in this Agreement
shall be correct when made and at the time of the Closing.
4.2. Performance; No Default.
The Company shall have performed and complied with all agreements and
conditions contained in this Agreement required to be performed or complied with
by it prior to or at the Closing and after giving effect to the issue and sale
of the Notes (and the application of the proceeds thereof as contemplated by
Section 5.14) no Default or Event of Default shall have occurred and be
continuing. Neither the Company nor any Subsidiary shall have entered into any
transaction since the date of the Memorandum that would have been prohibited by
Section 10.1 or 10.2 had such Sections applied since such date.
4.3. Compliance Certificates.
(a) Officer's Certificate. The Company shall have delivered to you an
Officer's Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled.
(b) Secretary's Certificate. The Company shall have delivered to you a
certificate of the Secretary or an Assistant Secretary of the Company certifying
as to the resolutions attached thereto and other corporate proceedings relating
to the authorization, execution and delivery of the Notes and this Agreement and
the Other Agreements.
4.4. Opinions of Counsel.
You shall have received opinions in form and substance satisfactory to
you, dated the date of the Closing (a) from Cravath, Swaine & Moore, special
counsel for the Company, substantially in the form set forth in Exhibit
4.4(a)(i) and from Austin F. Reed, Vice President, General Counsel and Secretary
of the Company substantially in the form set forth in Exhibit 4.4(a)(ii) (and
the Company hereby instructs its counsel to deliver such opinions to you) and
(b) from Willkie Farr & Gallagher, your special counsel in connection with such
transactions, substantially in the form set forth in Exhibit 4.4(b) and covering
such other matters incident to such transactions as you may reasonably request.
4.5. Subsidiary Guarantees.
A Subsidiary Guarantee, dated as of a date on or before the date of the
Closing and in the form hereinabove recited, shall have been executed and
delivered by Brink's, Incorporated, Brink's Home Security, Inc., Pittston
Services Group, Inc., Brink's Holding Company, BAX Holding Company, Pittston
Coal Company, BAX Global Inc. and Pittston Minerals Group Inc. (in such capacity
sometimes individually called a "Subsidiary Guarantor" and collectively the
"Subsidiary Guarantors", which term shall include after the date of the Closing
all additional Restricted Subsidiaries that from time to time execute and
deliver Subsidiary Guarantees pursuant to Section 9.6) and each such Subsidiary
Guarantee shall be in full force and effect.
<PAGE>
4
4.6. Purchase Permitted by Applicable Law, etc.
On the date of the Closing your purchase of Notes shall (a) be
permitted by the laws and regulations of each jurisdiction to which you are
subject, without recourse to provisions (such as Section 1405(a)(8) of the New
York Insurance Law) permitting limited investments by insurance companies
without restriction as to the character of the particular investment, (b) not
violate any applicable law or regulation (including without limitation
Regulation T, U or X of the Board of Governors of the Federal Reserve System)
and (c) not subject you to any tax, penalty or liability under or pursuant to
any applicable law or regulation, which law or regulation was not in effect on
the date hereof. If requested by you, you shall have received an Officer's
Certificate certifying as to such matters of fact as you may reasonably specify
to enable you to determine whether such purchase is so permitted.
4.7. Payment of Special Counsel Fees.
Without limiting the provisions of Section 15.1, the Company shall have
paid on or before the Closing the fees, charges and disbursements of your
special counsel referred to in Section 4.4 to the extent reflected in a
statement of such counsel rendered to the Company at least one Business Day
prior to the Closing.
4.8. Private Placement Numbers.
A Private Placement Number issued by Standard & Poor's CUSIP Service
Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Notes
of each series.
4.9. Changes in Corporate Structure.
The Company shall not have changed its jurisdiction of incorporation or
been a party to any merger or consolidation or succeeded to all or any
substantial part of the liabilities of any other entity at any time following
the date of the most recent financial statements referred to in Section 5.5.
4.10. Proceedings and Documents.
All corporate and other proceedings in connection with the transactions
contemplated by this Agreement and all documents and instruments incident to
such transactions shall be satisfactory to you and your special counsel, and you
and your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
4.11. Sale of Notes to Other Purchasers.
The Company shall sell to the Other Purchasers and the Other Purchasers
shall purchase the Notes to be purchased by them at the Closing as specified in
Schedule A.
<PAGE>
5
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to you that:
5.1. Organization; Power and Authority.
The Company is a corporation duly incorporated, validly existing and in
good standing under the laws of its jurisdiction of incorporation, and is duly
qualified as a foreign corporation and is in good standing in each jurisdiction
in which such qualification is required by law, other than those jurisdictions
as to which the failure to be so qualified or in good standing could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The Company has the corporate power and authority to own or hold
under lease the properties it purports to own or hold under lease, to transact
the business it transacts and proposes to transact, to execute and deliver this
Agreement and the Other Agreements and the Notes and to perform the provisions
hereof and thereof.
5.2. Authorization, etc.
This Agreement and the Other Agreements and the Notes have been duly
authorized by all necessary corporate action on the part of the Company, and
this Agreement constitutes, and upon execution and delivery thereof each Note
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by (a) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
5.3. Disclosure.
The Company, through its agent, Credit Suisse First Boston Corporation,
has delivered to you a copy of a Confidential Direct Placement Memorandum, dated
November 2000 (the "Memorandum"), relating to the transactions contemplated
hereby. The Memorandum fairly describes, in all material respects, the general
nature of the business and principal properties of the Company and its
Subsidiaries, except that the description of the coal business which the Company
intends to dispose of is limited. This Agreement, the Memorandum (including the
Appendices thereto), the documents, certificates or other writings delivered to
you by or on behalf of the Company in connection with the transactions
contemplated hereby and described in Schedule 5.3 (together with the Memorandum,
the "Disclosure Documents"), and the financial statements included in the
Appendices to the Memorandum, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. Since December 31, 1999, there has been no change in the
financial condition, operations, business, properties or prospects of the
Company or any Subsidiary except as disclosed in the Disclosure Documents or in
the financial statements included in the Appendices to the Memorandum and other
changes that individually or in the aggregate could not reasonably be expected
to have a Material Adverse Effect. There is no fact known to the Company that
could
<PAGE>
6
reasonably be expected to have a Material Adverse Effect that has not been set
forth herein or in the Memorandum or in the other Disclosure Documents.
5.4. Organization and Ownership of Shares of Subsidiaries; Affiliates.
(a) Schedule 5.4 contains (except as noted therein) complete and
correct lists (i) of the Company's Subsidiaries, showing, as to each Subsidiary,
the correct name thereof, the jurisdiction of its organization, and the
percentage of shares of each class of its capital stock or similar equity
interests outstanding owned by the Company and each other Subsidiary and (ii) of
the Company's directors and senior officers. Schedule 5.4 also identifies each
Restricted Subsidiary and each Unrestricted Subsidiary as of the date of this
Agreement. No Subsidiary listed in Schedule 5.4 is a guarantor under the Bank
Credit Agreement other than the Subsidiary Guarantors listed in Section 4.5.
(b) All of the outstanding shares of capital stock or similar equity
interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company
and its Subsidiaries have been validly issued, are fully paid and nonassessable
and are owned by the Company or another Subsidiary free and clear of any Lien
(except as otherwise disclosed in Schedule 5.4).
(c) Each Subsidiary identified in Schedule 5.4 is a corporation or
other legal entity duly incorporated, validly existing and in good standing
under the laws of its jurisdiction of organization, and is duly qualified as a
foreign corporation or other legal entity and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Each such Subsidiary has the corporate or other power
and authority to own or hold under lease the properties it purports to own or
hold under lease and to transact the business it transacts and proposes to
transact and, in the case of Subsidiary Guarantors, to execute and deliver and
perform its obligations under their respective Subsidiary Guarantees.
(d) No Restricted Subsidiary is a party to, or otherwise subject to any
legal restriction or any agreement (other than this Agreement, the agreements
listed on Schedule 5.4 and customary limitations imposed by corporate law
statutes) restricting the ability of such Subsidiary to pay dividends out of
profits or make any other similar distributions of profits to the Company or any
of its Subsidiaries that owns outstanding shares of capital stock or similar
equity interests of such Subsidiary.
5.5. Financial Statements.
The Company's financial statements included in the Appendices to the
Memorandum (including in each case the related schedules and notes) fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates specified in such
Schedule and the consolidated results of their operations and cash flows for the
respective periods so specified and have been prepared in accordance with GAAP
consistently applied throughout the periods involved except as set forth in the
notes thereto (subject, in the case of any interim financial statements, to
normal year-end adjustments).
<PAGE>
7
5.6. Compliance with Laws, Other Instruments, etc.
The execution, delivery and performance by the Company of this
Agreement and the Notes and by the Subsidiary Guarantors of their respective
Subsidiary Guarantees will not (i) contravene, result in any breach of, or
constitute a default under, or result in the creation of any Lien in respect of
any property of the Company or any Subsidiary under, any indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or
by-laws, or any other agreement or instrument to which the Company or any
Subsidiary is bound or by which the Company or any Subsidiary or any of their
respective properties may be bound or affected, (ii) conflict with or result in
a breach of any of the terms, conditions or provisions of any order, judgment,
decree, or ruling of any court, arbitrator or Governmental Authority applicable
to the Company or any Subsidiary or (iii) violate any provision of any statute
or other rule or regulation of any Governmental Authority applicable to the
Company or any Subsidiary.
5.7. Governmental Authorizations, etc.
No consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required for the validity of the
execution, delivery or performance by the Company of this Agreement or the Notes
or by the Subsidiary Guarantors of their respective Subsidiary Guarantees.
5.8. Litigation; Observance of Agreements, Statutes and Orders.
(a) Except as disclosed in Schedule 5.8, there are no actions, suits or
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any Subsidiary or any property of the Company or any
Subsidiary in any court or before any arbitrator of any kind or before or by any
Governmental Authority that, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect.
(b) Neither the Company nor any Subsidiary is in default under any term
of any agreement or instrument to which it is a party or by which it is bound,
or any order, judgment, decree or ruling of any court, arbitrator or
Governmental Authority or is in violation of any applicable law, ordinance, rule
or regulation (including without limitation Environmental Laws) of any
Governmental Authority, which default or violation, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect.
5.9. Taxes.
The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown
to be due and payable on such returns and all other taxes and assessments levied
upon them or their properties, assets, income or franchises, to the extent such
taxes and assessments have become due and payable and before they have become
delinquent, except for any taxes and assessments (a) the amount of which is not
individually or in the aggregate Material or (b) the amount, applicability or
validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which the Company or a Subsidiary, as the case
may be, has established adequate reserves in accordance with GAAP. The Company
knows of no basis for any other tax or assessment that could reasonably be
expected to have a Material Adverse Effect. The charges, accruals and
<PAGE>
8
reserves on the books of the Company and its Subsidiaries in respect of Federal,
state or other taxes for all fiscal periods are adequate. The Federal income tax
liabilities of the Company and its Subsidiaries have been determined by the
Internal Revenue Service and paid for all fiscal years up to and including the
fiscal year ended December 31, 1993.
5.10. Title to Property; Leases.
The Company and its Subsidiaries have good and sufficient title to
their respective properties that individually or in the aggregate are Material,
including all such properties reflected in the most recent audited balance sheet
referred to in Section 5.5 or purported to have been acquired by the Company or
any Subsidiary after said date (except as sold or otherwise disposed of in the
ordinary course of business), in each case free and clear of Liens prohibited by
this Agreement. All leases that individually or in the aggregate are Material
are valid and subsisting and are in full force and effect in all material
respects.
5.11. Licenses, Permits, etc.
Except as disclosed in Schedule 5.11,
(a) the Company and its Subsidiaries own or possess all licenses,
permits, franchises, authorizations, patents, copyrights, proprietary
software, service marks, trademarks and trade names, or rights thereto,
that individually or in the aggregate are Material, without known conflict
with the rights of others;
(b) to the knowledge of the Company, no product of the Company
infringes in any material respect any license, permit, franchise,
authorization, patent, copyright, proprietary software, service mark,
trademark, trade name or other right owned by any other Person; and
(c) to the knowledge of the Company, there is no Material violation by
any Person of any right of the Company or any of its Subsidiaries with
respect to any patent, copyright, proprietary software, service mark,
trademark, trade name or other right owned or used by the Company or any of
its Subsidiaries.
5.12. Compliance with ERISA.
(a) The Company and each ERISA Affiliate have operated and administered
each Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to
result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate
has incurred any liability pursuant to Title I or IV of ERISA or the penalty or
excise tax provisions of the Code relating to employee benefit plans (as defined
in Section 3 of ERISA), and no event, transaction or condition has occurred or
exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any
Lien on any of the rights, properties or assets of the Company or any ERISA
Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty
or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than
such liabilities or Liens as would not be individually or in the aggregate
Material.
<PAGE>
9
(b) The present value of the aggregate benefit liabilities under each
of the Plans (other than Multiemployer Plans), determined as of the end of such
Plan's most recently ended plan year on the basis of the actuarial assumptions
specified for funding purposes in such Plan's most recent actuarial valuation
report, did not exceed the aggregate current value of the assets of such Plan
allocable to such benefit liabilities. The term "benefit liabilities" has the
meaning specified in section 4001 of ERISA and the terms "current value" and
"present value" have the meaning specified in section 3 of ERISA.
(c) The Company and its ERISA Affiliates have not incurred withdrawal
liabilities that have not been discharged (and are not currently subject to
contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in
respect of Multiemployer Plans that individually or in the aggregate are
Material.
(d) Except as disclosed in the Disclosure Documents, the expected post
retirement benefit obligation (determined as of the last day of the Company's
most recently ended fiscal year in accordance with Financial Accounting
Standards Board Statement No. 106, without regard to liabilities attributable to
continuation coverage mandated by section 4980B of the Code) of the Company and
its Subsidiaries is not Material.
(e) With respect to each employee benefit plan, if any, disclosed by
you in writing to the Company in accordance with Section 6.2(c), neither the
Company nor any "affiliate" of the Company (as defined in Section V(c) of the
QPAM Exemption) has at this time, nor has exercised at any time during the
immediately preceding year, the authority to appoint or terminate the "QPAM" (as
defined in Part V of the QPAM Exemption) disclosed by you to the Company
pursuant to Section 6.2(c) as manager of any of the assets of any such plan or
to negotiate the terms of any management agreement with such QPAM on behalf of
any such plan, and the Company is not an "affiliate" (as so defined) of such
QPAM. The Company has advised you if it is a party in interest with respect to
any employee benefit plan originally disclosed by you in accordance with Section
6.2(b) or 6.2(e). The execution and delivery of this Agreement and the issuance
and sale of the Notes at the Closing hereunder will not involve any prohibited
transaction (as such term is defined in section 406(a) of ERISA and section
4975(c)(1)(A)-(D) of the Code), that could subject the Company or any holder of
a Note to any tax or penalty on prohibited transactions imposed under said
section 4975 of the Code or by section 502(i) of ERISA. The representation by
the Company in the preceding sentence of this Section 5.12(e) is made in
reliance upon and subject to the accuracy of your representation in Section 6.2
as to the source of the funds used to pay the purchase price of the Notes to be
purchased by you (including without limitation after giving effect to your
necessary change in the source in respect of a party in interest identified by
the Company as aforesaid).
5.13. Private Offering by the Company.
Neither the Company nor anyone acting on its behalf has offered the
Notes, the Subsidiary Guarantees or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any person other than you, the Other
Purchasers and not more than 35 other Institutional Investors, each of which has
been offered the Notes at a private sale for investment. Neither the Company nor
anyone acting on its behalf has taken, or will take, any action that would
subject the issuance or sale of the
<PAGE>
10
Notes or the issuance of the Subsidiary Guarantees to the registration
requirements of Section 5 of the Securities Act.
5.14. Use of Proceeds; Margin Regulations.
The Company will apply the net proceeds of the sale of the Notes to
repay Indebtedness and for general corporate purposes. No part of the proceeds
from the sale of the Notes hereunder will be used, and no part of the proceeds
of such Indebtedness being repaid was used, directly or indirectly, for the
purpose of buying or carrying any margin stock within the meaning of Regulation
U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for
the purpose of buying or carrying or trading in any securities under such
circumstances as to involve the Company in a violation of Regulation X of said
Board (12 CFR 224) or to involve any broker or dealer in a violation of
Regulation T of said Board (12 CFR 220). Margin stock does not constitute more
than 5% of the value of the consolidated assets of the Company and its
Subsidiaries and the Company does not have any present intention that margin
stock will constitute more than 25% of the value of such assets. As used in this
Section, the terms "margin stock" and "purpose of buying or carrying" shall have
the meanings assigned to them in said Regulation U.
5.15. Existing Indebtedness.
Schedule 5.15 sets forth a complete and correct list of all outstanding
Indebtedness of the Company and its Restricted Subsidiaries in an unpaid
principal amount exceeding $25,000,000 as of December 31, 2000, since which date
there has been no Material change in the amounts, interest rates, sinking funds,
instalment payments or maturities of the Indebtedness of the Company or its
Restricted Subsidiaries. Neither the Company nor any Restricted Subsidiary is in
default, and no waiver of default is currently in effect, in the payment of any
principal or interest on any Indebtedness of the Company or such Restricted
Subsidiary, and no event or condition exists with respect to any Indebtedness of
the Company or any Restricted Subsidiary that would permit (or that with the
giving of notice or the lapse of time, or both, would permit) one or more
Persons to cause such Indebtedness to become due and payable before its stated
maturity or before its regularly scheduled dates of payment.
Except as disclosed in Schedule 5.15, neither the Company nor any
Restricted Subsidiary has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien that would not be
permitted by Section 10.1 without equally and ratably securing the Notes.
5.16. Foreign Assets Control Regulations, etc.
Neither the sale of the Notes by the Company hereunder nor its use of
the proceeds thereof will violate the Trading with the Enemy Act, as amended, or
any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto.
<PAGE>
11
5.17. Status Under Certain Statutes.
Neither the Company nor any Subsidiary is subject to regulation under
the Investment Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the
Federal Power Act, as amended.
5.18. Environmental Matters.
Neither the Company nor any Subsidiary has knowledge of any claim or
has received any written notice of any claim against the Company or any of its
Subsidiaries that is outstanding or unresolved, and no proceeding has been
instituted and is pending raising any claim against the Company or any of its
Subsidiaries or any of their respective real properties now owned, leased or
operated by any of them or other assets, alleging any damage to the environment
or violation of any Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect. Except as
otherwise disclosed to you in writing,
(a) neither the Company nor any Subsidiary has knowledge of any facts
which would be reasonably likely to result in any claim, public or private,
against the Company or any Subsidiary under any Environmental Laws, except,
in each case, for such claims that could not reasonably be expected to
result in a Material Adverse Effect;
(b) neither the Company nor any of its Subsidiaries has stored any
Hazardous Materials on real properties now or formerly owned, leased or
operated by any of them or disposed of any Hazardous Materials, in any case
in a manner contrary to any Environmental Laws that could reasonably be
expected to result in a Material Adverse Effect; and
(c) all buildings on all real properties now owned, leased or operated
by the Company or any of its Subsidiaries are in compliance with applicable
Environmental Laws, except where failure to comply could not reasonably be
expected to result in a Material Adverse Effect.
6. REPRESENTATIONS OF THE PURCHASER.
6.1. Purchase of Notes.
You represent that you are purchasing the Notes for your own account or
for one or more separate accounts maintained by you or for the account of one or
more pension or trust funds for which you are the financial advisor or
investment manager and not with a view to the distribution thereof, provided
that the disposition of your or their property shall at all times be within your
or their control. You understand that the Notes have not been registered under
the Securities Act and may be resold only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration is
available, except under circumstances where neither such registration nor such
an exemption is required by law, and that the Company is not required to
register the Notes.
<PAGE>
12
6.2. Source of Funds.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Notes to be purchased by you hereunder:
(a) the Source is an "insurance company general account", as such term
is defined in Prohibited Transaction Exemption ("PTE") 95-60 (issued July
12, 1995), and there is no plan with respect to which the aggregate amount
of such general account's reserves and liabilities for the contracts held
by or on behalf of such plan and all other plans maintained by the same
employer (and affiliates thereof as defined in section V(a)(1) of PTE
95-60) or by the same employee organization (in each case determined in
accordance with PTE 95-60) exceeds or will exceed 10% of the total of all
reserves and liabilities of such general account (determined in accordance
with PTE 95-60, exclusive of separate account liabilities, plus any
applicable surplus) as of the date of the Closing; or
(b) the Source is either (i) an insurance company pooled separate
account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii)
a bank collective investment fund, within the meaning of the PTE 91-38
(issued July 12, 1991) and, except for any employee benefit plan or a group
of plans disclosed to the Company in writing pursuant to this paragraph (b)
(in response to which the Company has not advised you that it is a party in
interest with respect to any such plan or group of plans), no employee
benefit plan or group of plans maintained by the same employer or employee
organization beneficially owns more than 10% of all assets allocated to
such pooled separate account or collective investment fund; or
(c) the Source constitutes assets of an "investment fund" (within the
meaning of Part V of the QPAM Exemption) managed by a "qualified
professional asset manager" or "QPAM" (within the meaning of Part V of the
QPAM Exemption), no employee benefit plan's assets that are included in
such investment fund, when combined with the assets of all other employee
benefit plans established or maintained by the same employer or by an
affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of
such employer or by the same employee organization and managed by such
QPAM, exceed 20% of the total client assets managed by such QPAM, the
conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM
(applying the definition of "control" in section V(e) of the QPAM
Exemption) owns a 5% or more interest in the Company and (i) the identity
of such QPAM and (ii) the names of all employee benefit plans whose assets
are included in such investment fund have been disclosed to the Company in
writing pursuant to this paragraph (c); or
(d) the Source is a governmental plan; or
(e) the Source is one or more employee benefit plans, or a separate
account or trust fund comprised of one or more employee benefit plans, each
of which has been
<PAGE>
13
identified to the Company in writing pursuant to this paragraph (e) and the
Company has not advised you that it is a party in interest with respect to
any such plan; or
(f) the Source does not include assets of any employee benefit plan,
other than a plan exempt from the coverage of ERISA.
As used in this Section 6.2, the terms "employee benefit plan", "governmental
plan", "party in interest" and "separate account" shall have the respective
meanings assigned to such terms in section 3 of ERISA.
7. INFORMATION AS TO COMPANY.
7.1. Financial and Business Information.
The Company shall deliver to each holder of Notes that is an
Institutional Investor:
(a) Quarterly Statements -- within 60 days after the end of each
quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year), duplicate copies of
(i) a consolidated balance sheet of the Company and its
Subsidiaries or its Restricted Subsidiaries as at the end of such
quarter, and
(ii) consolidated statements of income and cash flows of the
Company and its Subsidiaries or its Restricted Subsidiaries, for such
quarter and (in the case of the second and third quarters) for the
portion of the fiscal year ending with such quarter,
setting forth in each case in comparative form the figures for the
corresponding periods in the previous fiscal year, all in reasonable
detail, prepared in accordance with GAAP applicable to quarterly financial
statements generally, and certified by a Senior Financial Officer as fairly
presenting, in all material respects, the financial position of the
companies being reported on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments, provided that
delivery within the time period specified above of copies of the Company's
Quarterly Report on Form 10-Q prepared in compliance with the requirements
therefor and filed with the Securities and Exchange Commission shall be
deemed to satisfy the requirements of this Section 7.1(a);
(b) Annual Statements -- within 120 days after the end of each fiscal
year of the Company, duplicate copies of,
(i) a consolidated balance sheet of the Company and its
Subsidiaries or its Restricted Subsidiaries as at the end of such
year, and
(ii) consolidated statements of income, changes in shareholders'
equity and cash flows of the Company and its Subsidiaries or its
Restricted Subsidiaries for such year,
<PAGE>
14
setting forth in each case in comparative form the figures for the
previous fiscal year, all in reasonable detail, prepared in accordance
with GAAP, and accompanied by
(A) an opinion thereon of independent public accountants of
recognized national standing, which opinion shall state that such
financial statements present fairly, in all material respects,
the financial position of the companies being reported upon and
their results of operations and cash flows and have been prepared
in conformity with GAAP, and that the examination of such
accountants in connection with such financial statements has been
made in accordance with generally accepted auditing standards,
and that such audit provides a reasonable basis for such opinion
in the circumstances,
(B) a certificate of such accountants stating that they have
reviewed this Agreement and stating further whether, in making
their audit, they have become aware of any condition or event
that then constitutes a Default or an Event of Default, and, if
they are aware that any such condition or event then exists,
specifying the nature and period of the existence thereof (it
being understood that such accountants shall not be liable,
directly or indirectly, for any failure to obtain knowledge of
any Default or Event of Default unless such accountants should
have obtained knowledge thereof in making an audit in accordance
with generally accepted auditing standards or did not make such
an audit), and
(C) in case such audited financial statements include the
accounts of Unrestricted Subsidiaries and all Unrestricted
Subsidiaries, if taken as a single Subsidiary, produced more than
10% of Consolidated Net Income for such fiscal year or the assets
of all Unrestricted Subsidiaries exceeded 10% of the consolidated
assets of the Company and its Subsidiaries as of the last day of
such fiscal year, a certificate of a Senior Financial Officer
containing calculations in reasonable detail deleting the
accounts of all Unrestricted Subsidiaries from such financial
statements,
provided that the delivery within the time period specified above of the
Company's Annual Report on Form 10-K for such fiscal year (together with
the Company's annual report to shareholders, if any, prepared pursuant to
Rule 14a-3 under the Exchange Act) prepared in accordance with the
requirements therefor and filed with the Securities and Exchange
Commission, together with the accountants' certificate described in clause
(B) above and (if required) the certificate of a Senior Financial Officer
described in clause (C) above, shall be deemed to satisfy the requirements
of this Section 7.1(b);
(c) SEC and Other Reports -- promptly upon their becoming available,
one copy of (i) each financial statement, written report, material notice
or proxy statement sent by the Company or any Restricted Subsidiary
generally to its public securities holders or its lending banks, (ii) each
regular or periodic report, each registration statement (without exhibits
except as expressly requested by such holder), and each prospectus and all
amendments thereto filed by the Company or any Restricted Subsidiary with
the Securities and Exchange Commission and (iii) all press releases and
<PAGE>
15
other statements made available generally by the Company to the public
concerning developments that are Material;
(d) Notice of Default or Event of Default -- promptly, and in any
event within five days after a Responsible Officer becoming aware of the
existence of any Default or Event of Default or that any Person has given
any notice or taken any action with respect to a claimed default hereunder
or that any Person has given any notice or taken any action with respect to
a claimed default of the type referred to in Section 11(f), a written
notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect thereto;
(e) ERISA Matters -- promptly, and in any event within five days after
a Responsible Officer becoming aware of any of the following, a written
notice setting forth the nature thereof and the action, if any, that the
Company or an ERISA Affiliate proposes to take with respect thereto:
(i) with respect to any Plan, any reportable event, as defined in
section 4043(b) of ERISA and the regulations thereunder, for which
notice thereof has not been waived pursuant to such regulations as in
effect on the date hereof;
(ii) the taking by the PBGC of steps to institute, or the
threatening by the PBGC of the institution of, proceedings under
section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan, or the receipt by the Company or any
ERISA Affiliate of a notice from a Multiemployer Plan that such action
has been taken by the PBGC with respect to such Multiemployer Plan; or
(iii) any event, transaction or condition that could result in
the incurrence of any liability by the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA or the penalty or excise tax
provisions of the Code relating to employee benefit plans, or in the
imposition of any Lien on any of the rights, properties or assets of
the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA
or such penalty or excise tax provisions, if such liability or Lien,
taken together with any other such liabilities or Liens then existing,
would have a Material Adverse Effect;
(f) Notices from Governmental Authority -- promptly, and in any event
within 30 days of receipt thereof, copies of any notice to the Company or
any Subsidiary from any United States Federal or state Governmental
Authority relating to any order, ruling, statute or other law or regulation
that could reasonably be expected to have a Material Adverse Effect; and
(g) Requested Information -- with reasonable promptness, such other
data and information relating to the business, operations, affairs,
financial condition, assets or properties of the Company or any of its
Subsidiaries or relating to the ability of the Company to perform its
obligations hereunder and under the Notes or relating to the ability of a
Subsidiary Guarantor to perform its obligations under its respective
<PAGE>
16
Subsidiary Guarantee, in each case as from time to time may be reasonably
requested in writing by any such holder of Notes (subject to the
limitations of the final paragraph of Section 7.3).
7.2. Officer's Certificate.
Each set of financial statements delivered to a holder of Notes
pursuant to Section 7.1(a) or Section 7.1(b) shall be accompanied by a
certificate of a Senior Financial Officer setting forth:
(a) Covenant Compliance -- the information (including detailed
calculations) required in order to establish whether the Company was in
compliance with the requirements of Sections 10.1 through 10.8 inclusive,
during the quarterly or annual period covered by the statements then being
furnished (including with respect to each such Section, where applicable,
the calculations of the maximum or minimum amount, ratio or percentage, as
the case may be, permissible under the terms of such Sections, and the
calculation of the amount, ratio or percentage then in existence); and
(b) Default -- a statement that such Senior Financial Officer has
reviewed the relevant terms hereof and has made, or caused to be made,
under his or her supervision, a review of the transactions and conditions
of the Company and its Subsidiaries from the beginning of the quarterly or
annual period covered by the statements then being furnished to the date of
the certificate and that such review shall not have disclosed the existence
during such period of any condition or event that constitutes a Default or
an Event of Default or, if any such condition or event existed or exists
(including without limitation any such event or condition resulting from
the failure of the Company or any Subsidiary to comply with any
Environmental Law), specifying the nature and period of existence thereof
and what action the Company shall have taken or proposes to take with
respect thereto.
In case any of the calculations provided pursuant to clause (a) above are made
without giving effect to a change in GAAP, by reason of an objection by the
Company or the Required Holders pursuant to Section 22.6 to calculations taking
into account such change in GAAP, such certificate of a Senior Financial Officer
shall be accompanied by a certificate or letter from the Company's independent
public accountants to the effect that they have reviewed and verified such
calculations.
7.3. Inspection.
The Company shall permit the representatives of each holder of Notes
that is an Institutional Investor (subject to compliance with Section 20):
(a) No Default -- if no Default or Event of Default then exists, at
the expense of such holder and upon reasonable prior notice to the Company,
to visit the principal executive office of the Company, to discuss the
affairs, finances and accounts of the Company and its Subsidiaries with the
Company's officers, and (with the consent of the Company, which consent
will not be
<PAGE>
17
unreasonably withheld) its independent public accountants, and (with the
consent of the Company, which consent will not be unreasonably withheld) to
visit the other offices and properties of the Company and each Subsidiary,
all at such reasonable times and as often as may be reasonably requested in
writing; and
(b) Default -- if a Default or Event of Default then exists, at the
expense of the Company, to visit and inspect any of the offices or
properties of the Company or any Subsidiary, to examine all their
respective books of account, records, reports and other papers, to make
copies and extracts therefrom, and to discuss their respective affairs,
finances and accounts with their respective officers, employees and
independent public accountants (and by this provision the Company
authorizes said accountants to discuss the affairs, finances and accounts
of the Company and its Subsidiaries), all at such times and as often as may
be requested.
Notwithstanding the foregoing, the Company shall not be required to
disclose to any holder of Notes any information (other than financial
information and other data related to the financial performance of the Company
and its Subsidiaries, including without limitation copies of written reports
that the Company provides to its lending banks) to the extent that the Company
is advised in writing by internal or external legal counsel that the Company is
prohibited from disclosing such information at such time to its creditors
generally under any applicable law, rule, regulation or order (or other binding
restriction imposed by any Governmental Authority) or as a result of any
agreement entered into in good faith with third parties that are not lenders to
the Company or a Subsidiary.
8. PREPAYMENT OF THE NOTES.
In addition to the payment of the entire unpaid principal amount of the
Notes of each series at the final maturity thereof, the Company will make
required prepayments on account of the Series A Notes and may make optional
prepayments in respect of the Notes as hereinafter provided.
8.1. Required Prepayments of Series A Notes.
On January 18, 2005 and January 18, 2006 the Company will prepay
$18,333,000 aggregate principal amount (or such lesser principal amount as shall
then be outstanding) of the Series A Notes, such prepayment to be made at the
principal amount to be prepaid, together with accrued interest thereon to the
date of such prepayment, without payment of any Make-Whole Amount or other
premium, allocated as provided in Section 8.4.
No partial prepayment of the Series A Notes pursuant to Section 8.2
shall relieve the Company of its obligation to make prepayments of the Notes
required by this Section 8.1 (with the effect that such optional prepayments
shall be applied to such required prepayments and to the payment at the final
maturity of the Series A Notes in inverse order), provided that upon any
purchase of less than all of the outstanding Series A Notes pursuant to Section
8.6 the principal amount of each required prepayment of the Series A Notes
becoming due under this Section 8.1 on and after the date of such purchase shall
be reduced in the same proportion as the aggregate unpaid principal amount of
the Series A Notes is reduced as a result of such purchase.
<PAGE>
18
8.2. Optional Prepayments with Make-Whole Amount.
The Company may, at its option and upon notice as provided in Section
8.3, prepay at any time all, or from time to time any part of, the Notes (in a
minimum amount of $5,000,000 and otherwise in multiples of $100,000) at the
principal amount so prepaid, together with interest accrued thereon to the date
of such prepayment, plus the Make-Whole Amount for the Notes of each series
determined for the prepayment date with respect to such principal amount.
8.3. Notice of Prepayment.
The Company will give each holder of Notes written notice of each
optional prepayment under Section 8.2 not less than 30 days and not more than 60
days prior to the date fixed for such prepayment. Each such notice shall specify
the date fixed for such prepayment (which shall be a Business Day), the
aggregate principal amount of the Notes to be prepaid on such date, the
principal amount of Notes held by such holder to be prepaid (determined in
accordance with Section 8.4) and the interest to be paid on the prepayment date
with respect to such principal amount being prepaid.
Each such notice of prepayment shall be accompanied by a certificate of
a Senior Financial Officer as to the estimated Make-Whole Amount for the Notes
of each series due in connection with such prepayment (calculated as if the date
of such notice were the date of the prepayment), setting forth the details of
such computation. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate of a Senior Financial Officer
specifying the calculation of such Make-Whole Amounts as of the specified
prepayment date.
8.4. Allocation of Partial Prepayments.
In the case of each partial prepayment of the Series A Notes pursuant
to Section 8.1 or all Notes pursuant to Section 8.2, the principal amount of the
Series A Notes or all Notes, as the case may be, to be prepaid shall be
allocated among all of the Series A Notes or all of the Notes, as the case may
be, at the time outstanding in proportion, as nearly as practicable, to the
respective unpaid principal amounts thereof.
8.5. Maturity; Surrender, etc.
In the case of each prepayment of Notes pursuant to this Section 8, the
principal amount of each Note to be prepaid shall mature and become due and
payable on the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Make-Whole Amount, if
any. From and after such date, unless the Company shall fail to pay such
principal amount when so due and payable, together with the interest and
Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall
cease to accrue. Any Note paid or prepaid in full shall be surrendered to the
Company and cancelled and shall not be reissued, and no Note shall be issued in
lieu of any prepaid principal amount of any Note.
<PAGE>
19
8.6. Purchase of Notes.
The Company will not and will not permit any Affiliate to purchase,
redeem, prepay or otherwise acquire, directly or indirectly, any of the
outstanding Notes except (a) upon the payment or prepayment of the Notes in
accordance with the terms of this Agreement and the Notes or (b) pursuant to an
offer to purchase made by the Company or an Affiliate pro rata to the holders of
all Notes at the time outstanding upon the same terms and conditions (except for
differences to reflect the terms of the Notes of each series). Any such offer
shall provide each holder with sufficient information to enable it to make an
informed decision with respect to such offer and shall remain open for at least
30 days. The Company will promptly cancel all Notes acquired by it or any
Affiliate pursuant to any such offer and no Notes may be issued in substitution
or exchange for any such Notes.
Promptly and in any event within ten Business Days after each such
purchase of Notes, the Company will furnish each holder of the Notes with a
certificate of a Senior Financial Officer describing such purchase (including
the aggregate principal amount of Notes of each series so purchased and the
purchase price therefor) and certifying that such purchase was made in
compliance with the requirements of this Section.
8.7. Make-Whole Amount.
The term "Make-Whole Amount" means, with respect to any Note, an amount
equal to the excess, if any, of the Discounted Value of the Remaining Scheduled
Payments with respect to the Called Principal of such Note over the amount of
such Called Principal, provided that the Make-Whole Amount may in no event be
less than zero. For the purposes of determining the Make-Whole Amount, the
following terms have the following meanings:
"Called Principal" means, with respect to any Note, the principal of
such Note that is to be prepaid pursuant to Section 8.2 or has become or is
declared to be immediately due and payable pursuant to Section 12.1, as the
context requires.
"Discounted Value" means, with respect to the Called Principal of any
Note, the amount obtained by discounting all Remaining Scheduled Payments
with respect to such Called Principal from their respective scheduled due
dates to the Settlement Date with respect to such Called Principal, in
accordance with accepted financial practice and at a discount factor
(applied on the same periodic basis as that on which interest on the Notes
is payable) equal to the Reinvestment Yield with respect to such Called
Principal.
"Reinvestment Yield" means, with respect to the Called Principal of
any Note, .50% (50 basis points) over the yield to maturity implied by (i)
the yields reported, as of 10:00 A.M. (New York City time) on the second
Business Day preceding the Settlement Date with respect to such Called
Principal, on (x) the Bloomberg Financial Markets News screen PX1 or the
equivalent screen provided by Bloomberg Financial Markets News, or (y) if
such on-line market data is not at the time provided by Bloomberg Financial
Markets News, on the display designated as "Page 500" on the Dow Jones
Markets service (or such other display as may replace Page 500 on the Dow
Jones Markets service), in any case for actively traded non-callable U.S.
Treasury securities
<PAGE>
20
having a maturity equal to the Remaining Average Life of such Called
Principal as of such Settlement Date, or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not
ascertainable (including by way of interpolation), the Treasury Constant
Maturity Series Yields reported, for the latest day for which such yields
have been so reported as of the second Business Day preceding the
Settlement Date with respect to such Called Principal, in Federal Reserve
Statistical Release H.15 (519) (or any comparable successor publication)
for actively traded U.S. Treasury securities having a constant maturity
equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary, by
(a) converting U.S. Treasury bill quotations to bond-equivalent yields in
accordance with accepted financial practice and (b) interpolating linearly
between (1) the actively traded U.S. Treasury security with a maturity
closest to and greater than the Remaining Average Life and (2) the actively
traded U.S. Treasury security with a maturity closest to and less than the
Remaining Average Life.
"Remaining Average Life" means, with respect to any Called Principal,
the number of years (calculated to the nearest one-twelfth year) obtained
by dividing (i) such Called Principal into (ii) the sum of the products
obtained by multiplying (a) the principal component of each Remaining
Scheduled Payment with respect to such Called Principal by (b) the number
of years (calculated to the nearest one-twelfth year) that will elapse
between the Settlement Date with respect to such Called Principal and the
scheduled due date of such Remaining Scheduled Payment.
"Remaining Scheduled Payments" means, with respect to the Called
Principal of any Note, all payments of such Called Principal and interest
thereon that would be due after the Settlement Date with respect to such
Called Principal if no payment of such Called Principal were made prior to
its scheduled due date, provided that if such Settlement Date is not a date
on which interest payments are due to be made under the terms of the Notes,
then the amount of the next succeeding scheduled interest payment will be
reduced by the amount of interest accrued to such Settlement Date and
required to be paid on such Settlement Date pursuant to Section 8.2 or
12.1.
"Settlement Date" means, with respect to the Called Principal of any
Note, the date on which such Called Principal is to be prepaid pursuant to
Section 8.2 or has become or is declared to be immediately due and payable
pursuant to Section 12.1, as the context requires.
9. AFFIRMATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
9.1. Compliance with Law.
The Company will and will cause each of its Restricted Subsidiaries to
comply with all laws, ordinances or governmental rules or regulations to which
each of them is subject, including without limitation Environmental Laws, and
will obtain and maintain in effect all licenses, certificates, permits,
franchises and other governmental authorizations necessary to the
<PAGE>
21
ownership of their respective properties or to the conduct of their respective
businesses, in each case to the extent necessary to ensure that non-compliance
with such laws, ordinances or governmental rules or regulations or failures to
obtain or maintain in effect such licenses, certificates, permits, franchises
and other governmental authorizations could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
9.2. Insurance.
The Company will and will cause each of its Restricted Subsidiaries to
maintain, with financially sound and reputable insurers, insurance with respect
to their respective properties and businesses against such casualties and
contingencies, of such types, on such terms and in such amounts (including
deductibles, co-insurance and self-insurance if adequate reserves are maintained
with respect thereto to the extent required by GAAP) as is customary in the case
of entities of established reputations engaged in the same or a similar business
and similarly situated.
9.3. Maintenance of Properties.
The Company will and will cause each of its Restricted Subsidiaries to
maintain and keep, or cause to be maintained and kept, their respective
properties in good repair, working order and condition (other than ordinary wear
and tear), so that the business carried on in connection therewith may be
conducted properly at all times, provided that this Section shall not prevent
the Company or any Restricted Subsidiary from selling all or any substantial
part of the assets of any member of the Pittston Minerals Group or from
discontinuing the operation and the maintenance of any of its other properties
if such discontinuance is desirable in the conduct of its business and the
Company has concluded that such discontinuance could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
9.4. Payment of Taxes and Claims.
The Company will and will cause each of its Restricted Subsidiaries to
file all tax returns required to be filed in any jurisdiction and to pay and
discharge all taxes shown to be due and payable on such returns and all other
taxes, assessments, governmental charges, or levies imposed on them or any of
their properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent
and all claims for which sums have become due and payable that have or might
become a Lien on properties or assets of the Company or any Restricted
Subsidiary, provided that neither the Company nor any Restricted Subsidiary need
pay any such tax or assessment or claims if (i) the amount, applicability or
validity thereof is contested by the Company or such Restricted Subsidiary on a
timely basis in good faith and in appropriate proceedings, and the Company or a
Restricted Subsidiary has established adequate reserves therefor in accordance
with GAAP on the books of the Company or such Restricted Subsidiary or (ii) the
nonpayment of all such taxes and assessments in the aggregate could not
reasonably be expected to have a Material Adverse Effect.
<PAGE>
22
9.5. Corporate Existence, etc.
Subject to Section 10.6, the Company will at all times preserve and
keep in full force and effect its corporate existence. Subject to Sections 10.4
and 10.6, the Company will at all times preserve and keep in full force and
effect the corporate existence of each of its Restricted Subsidiaries (unless
merged into the Company or a Restricted Subsidiary) and all rights and
franchises of the Company and its Restricted Subsidiaries unless, in the good
faith judgment of the Company, the termination of or failure to preserve and
keep in full force and effect such corporate existence, right or franchise could
not, individually or in the aggregate, have a Material Adverse Effect.
9.6. Additional Subsidiary Guarantees; Release of Subsidiary Guarantees.
(a) So long as the Bank Credit Agreement remains in effect the Company
will cause each Restricted Subsidiary that becomes a borrower or a guarantor
thereunder or in respect thereof after the date of the Closing (if such
Restricted Subsidiary is not at the time a Subsidiary Guarantor) to become a
Subsidiary Guarantor by executing and delivering a Subsidiary Guarantee, prior
to or concurrently with so becoming a borrower or a guarantor; and promptly and
in any event within ten Business Days thereafter the Company will furnish each
holder of the Notes with a counterpart of such executed Subsidiary Guarantee,
together with an opinion of Cravath, Swaine & Moore or other counsel reasonably
satisfactory to the Required Holders (which opinion may be subject to customary
exceptions, qualifications and limitations under the circumstances none of which
shall affect the parity of obligations of such Subsidiary Guarantor under its
Subsidiary Guarantee and the obligations of such Subsidiary Guarantor as a
borrower or guarantor under the Bank Credit Agreement) to the effect that such
Subsidiary Guarantee has been duly authorized, executed and delivered by such
Restricted Subsidiary and is valid, binding and enforceable in accordance with
its terms.
(b) Except as provided in Subsection (c) below, the Company will cause
each Subsidiary Guarantee to remain in full force and effect at all times after
the execution and delivery thereof, provided that you and each other holder of a
Note, by acceptance of such Note, agree that any Subsidiary Guarantor shall
automatically be discharged from all of its obligations and liabilities under
its Subsidiary Guarantee, effective at the time such Subsidiary Guarantor ceases
to be a Subsidiary of the Company after giving effect to a consolidation,
merger, sale or other disposition (other than in a transaction resulting in an
assumption by the successor pursuant to Section 10.6(a)(ii)), and except that
this proviso shall not apply (i) if a Default or Event of Default has occurred
and is continuing, (ii) to a Subsidiary Guarantor if any amount is then due and
payable under its Subsidiary Guarantee, (iii) to a Subsidiary Guarantor which at
the time is a guarantor of any other Indebtedness of the Company or another
Restricted Subsidiary (other than a Restricted Subsidiary that ceases to be a
Subsidiary of the Company after giving effect to such transaction) that is not
also concurrently being released or (iv) unless within three Business Days after
such discharge, the Company shall have furnished each holder of the Notes with a
certificate of a Senior Financial Officer describing such transaction and
certifying that such discharge was effected in compliance with the terms of this
Subsection (b).
(c) Notwithstanding the requirements of the foregoing Subsection (b),
Pittston Minerals Group Inc. and any Subsidiary of Pittston Minerals Group Inc.
that is a Subsidiary
<PAGE>
23
Guarantor shall automatically be discharged from their respective Subsidiary
Guarantees, without further action on the part of the holders of any of the
Notes, upon the sale by the Company of the capital stock of any member of the
Pittston Minerals Group to a Person which is not an Affiliate of the Company or
the sale of all or any substantial part of the assets of any member of the
Pittston Minerals Group to any person.
10. NEGATIVE COVENANTS.
The Company covenants that so long as any of the Notes are outstanding:
10.1. Liens.
The Company will not and will not permit any Restricted Subsidiary to
create, assume, incur or suffer to exist any Lien upon or with respect to any
property or assets, whether now owned or hereafter acquired, securing any
Indebtedness without making effective provision (pursuant to documentation in
form and substance reasonably satisfactory to the Required Holders) whereby the
Notes shall be secured by such Lien equally and ratably with or prior to any and
all Indebtedness and other obligations to be secured thereby, provided that
nothing in this Section 10.1 shall prohibit:
(a) Liens in respect of property of the Company or a Restricted
Subsidiary existing on the date of the Closing and described in Schedule
5.15;
(b) Liens in respect of property acquired or constructed or improved
by the Company or a Restricted Subsidiary after the date of the Closing,
which are created at the time of or within one year after acquisition or
completion of construction or improvement of such property to secure
Indebtedness assumed or incurred to finance all or any part of the purchase
price or cost of construction or improvement of such property, provided
that in any such case
(i) no such Lien shall extend to or cover any other property of
the Company or such Restricted Subsidiary, as the case may be, and
(ii) the aggregate principal amount of Indebtedness secured by
all such Liens in respect of any such property shall not exceed the
cost of such property and any improvements then being financed;
(c) Liens in respect of property acquired by the Company or a
Restricted Subsidiary after the date of the Closing, existing on such
property at the time of acquisition thereof (and not created in
anticipation thereof), or in the case of any Person that after the date of
the Closing becomes a Subsidiary or is consolidated with or merged with or
into the Company or a Restricted Subsidiary or sells, leases or otherwise
disposes of all or substantially all of its property to the Company or a
Restricted Subsidiary, Liens existing at the time such Person becomes a
Subsidiary or is so consolidated or merged or effects such sale, lease or
other disposition of property (and not created in anticipation thereof),
provided that in any such case no such Lien shall extend to or cover any
other property of the Company or such Restricted Subsidiary, as the case
may be;
<PAGE>
24
(d) Liens securing Indebtedness owed by a Restricted Subsidiary to the
Company or to a Wholly-Owned Restricted Subsidiary;
(e) extensions, renewals or replacements of Liens permitted by clause
(a), (b), (c) or (d) above (including successive extensions, renewals and
replacements), provided that the principal amount of Indebtedness (or the
maximum commitment therefor) secured by any such Lien is not increased and
such Lien does not extend to or cover any property other than the property
covered by such Lien on the date of such extension, renewal or replacement;
and
(f) Liens which would otherwise not be permitted by clauses (a)
through (e) above, securing additional Indebtedness of the Company or a
Restricted Subsidiary, provided that after giving effect thereto (and to
the substantially concurrent application of the proceeds of such
Indebtedness) Priority Debt does not exceed 35% of Consolidated
Capitalization.
As used in this Agreement the term "Priority Debt" means, at any date,
the sum (without duplication) of (A) the aggregate unpaid principal amount of
Indebtedness (including Capitalized Lease Obligations) of the Company and its
Restricted Subsidiaries secured by Liens permitted by Section 10.1(f) plus (B)
the aggregate unpaid principal amount of Indebtedness of all Restricted
Subsidiaries (other than Indebtedness permitted by clauses (a) to (d),
inclusive, of Section 10.2) plus (C) the aggregate Attributable Debt in
connection with all sale and leaseback transactions of the Company and its
Restricted Subsidiaries entered into after the date of the Closing in accordance
with the provisions of Section 10.3(a).
For purposes of this Section 10.1: any Lien existing in respect of
property of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary
is designated a Restricted Subsidiary pursuant to Section 10.9 shall be deemed
to have been created at that time; and the sale or transfer of (x) coal, oil,
gas or other minerals in place for a period of time until, or in an amount such
that, the transferee will realize therefrom a specified amount of money (however
determined) or a specified amount of such coal or other minerals or (y) any
other interest in property of the character commonly referred to as a
"production payment" shall not be deemed to constitute Indebtedness secured by a
Lien.
10.2. Restricted Subsidiary Indebtedness.
The Company will not permit any Restricted Subsidiary to create,
assume, incur, guarantee or otherwise become liable in respect of any
Indebtedness except
(a) Indebtedness secured by Liens permitted by clause (b), (c), (d) or
(e) of Section 10.1,
(b) in the case of any Person that after the date of the Closing
becomes a Restricted Subsidiary or is consolidated with or merged with or
into a Restricted Subsidiary or sells, leases or otherwise disposes of all
of its property to a Restricted Subsidiary, Indebtedness outstanding at the
time such Person becomes a Restricted Subsidiary or is so consolidated or
merged or effects such sale, lease or other disposition of property (and
not created in anticipation thereof, including extensions, renewals or
<PAGE>
25
replacements of such Indebtedness, provided that the principal amount of
such Indebtedness is not increased,
(c) Indebtedness of any Subsidiary Guarantor,
(d) Indebtedness owing to the Company or a Wholly-Owned Restricted
Subsidiary, and
(e) other Indebtedness, provided that immediately after giving effect
to such other Indebtedness Priority Debt does not exceed 35% of
Consolidated Capitalization.
For purposes of this Section 10.2: a Restricted Subsidiary shall be
deemed to have incurred Indebtedness in respect of any obligation previously
owed to the Company or to a Wholly-Owned Restricted Subsidiary on the date the
obligee ceases for any reason to be the Company or a Wholly-Owned Restricted
Subsidiary; a Person that hereafter becomes a Restricted Subsidiary shall be
deemed at that time to have incurred all of its outstanding Indebtedness; and
any Unrestricted Subsidiary or other Person that hereafter becomes a Restricted
Subsidiary shall be deemed at that time to have incurred all of its outstanding
Indebtedness.
10.3. Limitation on Sale and Leaseback Transactions.
The Company will not and will not permit any Restricted Subsidiary to
sell, lease, transfer or otherwise dispose of (collectively, a "transfer") any
asset on terms whereby the asset or a substantially similar asset is or may be
leased or reacquired by the Company or any Restricted Subsidiary over a period
in excess of three years, unless either
(a) after giving effect to such transaction and the incurrence of
Attributable Debt in respect thereof Priority Debt does not exceed 35% of
Consolidated Capitalization, or
(b) the net proceeds realized from the transfer are applied within 365
days after the receipt thereof to reinvest in property or assets for use in
the business of the Company and its Restricted Subsidiaries or to repay
unsubordinated funded Indebtedness of the Company or a Restricted
Subsidiary (which may, but need not, include prepayment of the Notes
pursuant to Section 8.2 or an offer to purchase Notes in accordance with
Section 8.7).
10.4. Limitation on Asset Sales.
The Company will not and will not permit any Restricted Subsidiary to,
directly or indirectly, make any sale, transfer, lease (as lessor), loan or
other disposition of any property or assets (an "Asset Sale") other than:
(a) Asset Sales in the ordinary course of business;
(b) Asset Sales of property or assets by a Restricted Subsidiary to
the Company or a Wholly-Owned Restricted Subsidiary;
<PAGE>
26
(c) any Asset Sale involving assets or the capital stock of any member
of the Pittston Minerals Group;
(d) any Asset Sale involving aircraft, aircraft replacement parts and
facilities and equipment by BAX Global Inc. and/or its Subsidiaries up to
$75,000,000 on a cumulative basis for all periods after September 30, 2000;
(e) any Asset Sale to the extent made in exchange for other property
or assets for use in the business of the Company and its Restricted
Subsidiaries; and
(f) other Asset Sales, provided that in each case
(i) immediately before and after giving effect thereto, no
Default or Event of Default shall have occurred and be continuing, and
(ii) the aggregate net book value of property or assets disposed
of in such Asset Sale and all other Asset Sales under this clause (f)
by the Company and its Restricted Subsidiaries does not exceed (x) 15%
of Consolidated Total Assets during the immediately preceding twelve
months or (y) 30% of Consolidated Total Assets since the date of the
Closing (Consolidated Total Assets in each case determined as of the
last day of the quarterly accounting period ending on or most recently
prior to the date of such Asset Sale)
and provided further that for purposes of subclause (ii) above there shall
be included the net book value of property or assets disposed of in an
Asset Sale only to the extent that an amount equal to the net proceeds
realized upon such Asset Sale has not been applied by the Company or such
Restricted Subsidiary, as the case may be, within 365 days after the
effective date of such Asset Sale to (1) the reinvestment in property or
assets for use in the business of the Company and its Restricted
Subsidiaries, (2) the repayment of unsubordinated funded Indebtedness or
(3) payment into The Pittston Company Employee Welfare Benefit Trust or any
successor of such trust.
10.5. Financial Conditions.
(a) The Company will not permit Consolidated EBITDA for any period of
four consecutive fiscal quarters (commencing with the four fiscal quarters
ending March 31, 2001) to be less than 300% of Consolidated Interest Expense for
such period.
(b) The Company will not at any time permit Consolidated Net Worth to
be less than the sum of (a) $554,000,000 plus (b) 25% of Consolidated Net Income
(if positive) for the fiscal quarter ending December 31, 2000 plus (c) 25% of
Consolidated Net Income for each fiscal year thereafter for which Consolidated
Net Income is positive.
(c) The Company will not permit the Ratio of Consolidated Indebtedness
to Consolidated Capitalization as of the last day of any fiscal quarter
(beginning on March 31, 2001) to exceed 0.60 to 1.00.
<PAGE>
27
As used in this Section 10.5(c): the term "Ratio of Consolidated
Indebtedness to Consolidated Capitalization" means, as of any date, the ratio of
(a) the sum of (i) Consolidated Indebtedness plus (ii) the amount, if any, by
which Discounted Consolidated Lease Rentals exceeds $350,000,000 to (b) the sum
of (i) the amount determined pursuant to the preceding clause (a) plus (ii)
Consolidated Net Worth; the term "Discounted Consolidated Lease Rentals" means,
as of the December 31 next preceding such date of determination (or as of such
date if such date is December 31), (a) the aggregate amount of Lease Rentals
payable by the Company and its Restricted Subsidiaries as lessee during the
remaining term of all noncancellable leases (other than Capital Leases) of real
or personal property (discounted on the same periodic basis from the respective
due dates thereof at an interest rate of 10% per annum) minus (b) the aggregate
minimum sublease rentals payable to the Company and its Restricted Subsidiaries
during the remaining term of all noncancellable subleases of real or personal
property (discounted as aforesaid), all determined on a consolidated basis
consistent with Note 13 to the audited financial statements of the Company at
and for the year ending December 31, 1999 (included as a Disclosure Document);
and the term "Lease Rentals" means, with respect to any particular lease or
sublease, the total amount of rent and other obligations (whether or not
designated as rent) payable by the lessee or sublessee during the remaining term
of such lease or sublease (excluding any extension or renewal thereof at the
option of either party to such lease or sublease unless such option has been
exercised), after excluding amounts required to be paid by the lessee or
sublessee (whether or not designated as rental or additional rental) on account
of maintenance and repairs, insurance, taxes, assessments, utilities (including
water rates), operating and labor costs and similar charges.
10.6. Merger, Consolidation, etc.
The Company will not and will not permit any Restricted Subsidiary to
consolidate with or merge with any other corporation or convey, transfer or
lease all or substantially all of its assets in a single transaction or series
of transactions to any Person (other than Asset Sales permitted by Section
10.4(c) and any consolidation or merger of any member of the Pittston Minerals
Group with, or conveyance, transfer or lease by any member of the Pittston
Minerals Group to, a Person which is not an Affiliate of the Company), except as
follows:
(a) a Restricted Subsidiary may consolidate with or merge with any
other corporation or convey or transfer all or substantially all of its
assets to
(i) the Company (provided that the Company shall be the
continuing or surviving corporation) or a then existing Restricted
Subsidiary, or
(ii) any other Person, provided that
(A) if such Restricted Subsidiary is a Subsidiary Guarantor
and the continuing, surviving or acquiring corporation is another
Subsidiary, such continuing, surviving or acquiring corporation
shall have (1) executed and delivered to each holder of a Note
its assumption of the due and punctual performance and observance
of all obligations of such Restricted Subsidiary under its
Subsidiary Guarantee and (2) caused to be delivered to each
holder of a Note an opinion of counsel reasonably
<PAGE>
28
satisfactory to the Required Holders to the effect that all
agreements or instruments effecting such assumption are
enforceable in accordance with their terms and comply with the
terms hereof, and
(B) immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be
continuing; and
(b) the Company may consolidate with or merge with any other
corporation or convey or transfer all or substantially all of its assets to
a corporation organized and existing under the laws of the United States or
any State thereof, provided that
(i) the continuing, surviving or acquiring corporation (if not
the Company) shall have (A) executed and delivered to each holder of a
Note its assumption of the due and punctual performance and observance
of all obligations of the Company under this Agreement, the Other
Agreements and the Notes and (B) caused to be delivered to each holder
of a Note an opinion of counsel reasonably satisfactory to the
Required Holders to the effect that all agreements or instruments
effecting such assumption are enforceable in accordance with their
terms and comply with the terms hereof, and
(ii) immediately after giving effect to such transaction, (A) no
Default or Event of Default shall have occurred and be continuing and
(B) the Company would be in compliance with paragraphs (a) and (c) of
Section 10.5 on a pro forma basis as if such transaction had occurred
on the last day of the most recently ended fiscal quarter.
No such conveyance, transfer or lease of all or substantially all of the assets
of the Company shall have the effect of releasing the Company or any successor
corporation that shall theretofore have become such in the manner prescribed in
this Section 10.6 from its liability under this Agreement or the Notes.
10.7. Lines of Business.
The Company will not and will not permit any Restricted Subsidiary to
engage in any business other than (a) the businesses in which the Company and
its Restricted Subsidiaries are engaged on the date of the Closing (as described
in the Memorandum) and businesses reasonably related or complementary thereto or
in furtherance thereof and (b) lines of business that are insignificant when
viewed in the overall context of the business then engaged in by the Company and
its Restricted Subsidiaries taken as a whole.
10.8. Transactions with Affiliates.
The Company will not and will not permit any Restricted Subsidiary to
enter into directly or indirectly any Material transaction or Material group of
related transactions (including without limitation the purchase, lease, sale or
exchange of properties of any kind or the rendering of any service) with any
Affiliate (other than the Company or another Restricted Subsidiary), except in
the ordinary course and pursuant to the reasonable requirements of the Company's
or such Restricted Subsidiary's business and upon fair and reasonable terms no
less favorable to the
<PAGE>
29
Company or such Restricted Subsidiary than would be obtainable in a comparable
arm's-length transaction with a Person not an Affiliate. For purposes of this
Section 10.8 a Material transaction or Material group of related transactions
shall be measured in relation to the Company and the Subsidiary Guarantors at
the time, taken as a whole.
10.9. Designation of Restricted and Unrestricted Subsidiaries.
(a) Subject to paragraph (b) below, the Company will not designate any
Restricted Subsidiary as an Unrestricted Subsidiary if such Restricted
Subsidiary was (i) more than twice previously (directly or indirectly) an
Unrestricted Subsidiary in the case of any Restricted Subsidiary listed as an
Unrestricted Subsidiary in Schedule 5.4 or any Restricted Subsidiary that is
designated as an Unrestricted Subsidiary at the time such Restricted Subsidiary
first became a Subsidiary or (ii) more than once previously (directly or
indirectly) an Unrestricted Subsidiary in the case of any other Restricted
Subsidiary.
(b) The Company will not designate any Restricted Subsidiary as an
Unrestricted Subsidiary or any Unrestricted Subsidiary or other Person as a
Restricted Subsidiary unless immediately after giving pro forma effect to such
designation, (i) no Default or Event of Default shall have occurred and be
continuing and (ii) the Company would be in compliance with paragraphs (a) and
(c) of Section 10.5 on a pro forma basis as if such designation had occurred on
the last day of the most recently ended fiscal quarter.
(c) Forthwith and in any event within ten Business Days after a
designation pursuant to this Section 10.9, the Company will furnish each holder
of the Notes with a certificate of a Senior Financial Officer specifying the
effective date of such designation and setting forth calculations in reasonable
detail demonstrating compliance with the conditions to such designation set
forth in the immediately preceding paragraph
11. EVENTS OF DEFAULT.
An "Event of Default" shall exist if any of the following conditions or
events shall occur and be continuing:
(a) the Company defaults in the payment of any principal or Make-Whole
Amount, if any, on any Note when the same becomes due and payable, whether
at maturity or at a date fixed for prepayment or by declaration or
otherwise; or
(b) the Company defaults in the payment of any interest on any Note
for more than five Business Days after the same becomes due and payable; or
(c) the Company defaults in the performance of or compliance with any
term contained in Section 7.1(d) or Sections 10.1 to 10.6, inclusive, and
in the case of Section 10.5(b) such default is not remedied within 30 days
after a Responsible Officer obtains knowledge thereof (so long as the
Company is proceeding diligently and in good faith to cure such default);
or
(d) the Company defaults in the performance of or compliance with any
term contained herein (other than those referred to in paragraphs (a), (b)
and (c) of this
<PAGE>
30
Section 11) and such default is not remedied within 30 days after a
Responsible Officer obtains knowledge of such default; or
(e) any representation or warranty made in writing by or on behalf of
the Company or any Subsidiary or by any officer of the Company or any
Subsidiary in this Agreement or a Subsidiary Guarantee or in any writing
furnished in connection with the transactions contemplated hereby proves to
have been false or incorrect in any material respect on the date as of
which made; or
(f) (i) the Company or any Restricted Subsidiary is in default (as
principal or as guarantor or other surety) in the payment of any principal
of or premium or make-whole amount or interest on any Indebtedness (other
than the Notes) that is outstanding in an aggregate principal amount of at
least $25,000,000 (or its equivalent in any other currency) beyond any
period of grace provided with respect thereto, or (ii) the Company or any
Restricted Subsidiary is in default in the performance of or compliance
with any term of any evidence of any Indebtedness outstanding in an
aggregate principal amount of at least $25,000,000 (or its equivalent in
any other currency) or of any mortgage, indenture or other agreement
relating thereto or any other default exists, and as a consequence of any
such default such Indebtedness has become, or has been declared, due and
payable before its stated maturity or before its regularly scheduled dates
of payment, or (iii) in any case as a consequence of the occurrence or
continuation of a change of control or rating downgrade or any other
similar adverse event the Company or any Restricted Subsidiary has become
obligated to purchase or repay Indebtedness outstanding in an aggregate
principal amount of at least $25,000,000 (or its equivalent in any other
currency) before its regular maturity or before its regularly scheduled
dates of payment; or
(g) the Company or any Restricted Subsidiary (i) admits in writing its
inability to pay, or is generally not paying, its debts as they become due
(within the meaning of the Federal Bankruptcy Code), (ii) files, or
consents by answer or otherwise to the filing against it of, a petition for
relief or reorganization or arrangement or any other petition in
bankruptcy, for liquidation or to take advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (iii) makes an assignment for the benefit of its creditors,
(iv) consents to the appointment of a custodian, receiver, trustee or other
officer with similar powers with respect to it or with respect to any
substantial part of its property, (v) is adjudicated as insolvent or to be
liquidated, or (vi) takes corporate action for the purpose of any of the
foregoing; or
(h) a court or governmental authority of competent jurisdiction enters
an order appointing, without consent by the Company or any Restricted
Subsidiary, a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a petition for
relief or reorganization or any other petition in bankruptcy or for
liquidation or to take advantage of any bankruptcy or insolvency law of any
jurisdiction, or ordering the dissolution, winding-up or liquidation of the
Company or such Restricted Subsidiary, or any such petition shall be filed
against the Company or such Restricted Subsidiary and such petition shall
not be dismissed within 60 days; or
<PAGE>
31
(i) a final judgment or judgments for the payment of money aggregating
in excess of $25,000,000 (or its equivalent in any other currency) are
rendered against one or more of the Company and its Restricted Subsidiaries
which judgments are not, within 60 days after entry thereof, bonded, paid,
discharged or stayed pending appeal, or are not discharged within 60 days
after the expiration of such stay; or
(j) if any Subsidiary Guarantor (or any Person at its authorized
direction or on its behalf) shall assert in writing that the Subsidiary
Guarantee of such Subsidiary Guarantor is unenforceable in any material
respect or any Subsidiary Guarantee shall cease to be in full force and
effect as an enforceable instrument except as permitted by Section 9.6; or
(k) if (i) any Plan shall fail to satisfy the minimum funding
standards of ERISA or the Code for any plan year or part thereof or a
waiver of such standards or extension of any amortization period is sought
or granted under section 412 of the Code, (ii) a notice of intent to
terminate any Plan shall have been or is reasonably expected to be filed
with the PBGC or the PBGC shall have instituted proceedings under ERISA
section 4042 to terminate or appoint a trustee to administer any Plan or
the PBGC shall have notified the Company or any ERISA Affiliate that a Plan
may become a subject of any such proceedings, (iii) the aggregate "amount
of unfunded benefit liabilities" (within the meaning of section 4001(a)(18)
of ERISA) under all Plans, determined in accordance with Title IV of ERISA,
shall exceed $5,000,000, (iv) the Company or any ERISA Affiliate shall have
incurred or is reasonably expected to incur any liability pursuant to Title
I or IV of ERISA or the penalty or excise tax provisions of the Code
relating to employee benefit plans, (v) the Company or any ERISA Affiliate
withdraws from any Multiemployer Plan (other than in connection with the
disposition of all or any part of the assets of the Pittston Minerals
Group), or (vi) the Company or any Subsidiary establishes or amends any
employee welfare benefit plan that provides post-employment welfare
benefits in a manner that would increase the liability of the Company or
any Subsidiary thereunder; and any such event or events described in
clauses (i) through (vi) above, either individually or together with any
other such event or events, would have a Material Adverse Effect.
As used in Section 11(k), the terms "employee benefit plan" and "employee
welfare benefit plan" shall have the respective meanings assigned to such terms
in section 3 of ERISA.
12. REMEDIES ON DEFAULT, ETC.
12.1. Acceleration.
(a) If an Event of Default with respect to the Company described in
paragraph (g) or (h) of Section 11 (other than an Event of Default described in
clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by
virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.
<PAGE>
32
(b) If any other Event of Default has occurred and is continuing, the
Required Holders may at any time at its or their option, by notice or notices to
the Company, declare all the Notes at the time outstanding to be immediately due
and payable.
(c) If any Event of Default described in paragraph (a) or (b) of
Section 11 has occurred and is continuing, any holder or holders of Notes at the
time outstanding affected by such Event of Default may at any time, at its or
their option, by notice or notices to the Company, declare all the Notes held by
it or them to be immediately due and payable.
Upon any Note becoming due and payable under this Section 12.1, whether
automatically or by declaration, such Note will forthwith mature and the entire
unpaid principal amount of such Note, plus (x) all accrued and unpaid interest
thereon and (y) the Make-Whole Amount determined in respect of such principal
amount (to the full extent permitted by applicable law), shall all be
immediately due and payable, in each and every case without presentment, demand,
protest or further notice, all of which are hereby waived. The Company
acknowledges, and the parties hereto agree, that each holder of a Note has the
right to maintain its investment in the Notes free from repayment by the Company
(except as herein specifically provided) and that the provision for payment of a
Make-Whole Amount by the Company in the event that the Notes are prepaid or are
accelerated as a result of an Event of Default, is intended to provide
compensation for the deprivation of such right under such circumstances.
12.2. Other Remedies.
If any Default or Event of Default has occurred and is continuing, and
irrespective of whether any Notes have become or have been declared immediately
due and payable under Section 12.1, the holder of any Note at the time
outstanding may proceed to protect and enforce the rights of such holder by an
action at law, suit in equity or other appropriate proceeding, whether for the
specific performance of any agreement contained herein or in any Note, or for an
injunction against a violation of any of the terms hereof or thereof, or in aid
of the exercise of any power granted hereby or thereby or by law or otherwise.
12.3. Rescission.
At any time after any Notes have been declared due and payable pursuant
to paragraph (b) or (c) of Section 12.1, the Required Holders, by written notice
to the Company, may rescind and annul any such declaration and its consequences
if (a) the Company has paid all overdue interest on the Notes, all principal of
and Make-Whole Amount, if any, on any Notes that are due and payable and are
unpaid other than by reason of such declaration, and all interest on such
overdue principal and Make-Whole Amount, if any, and (to the extent permitted by
applicable law) any overdue interest in respect of the Notes, at the Default
Rate, (b) all Events of Default and Defaults, other than the non-payment of
amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 17, and (c) no judgment or decree
has been entered for the payment of any monies due pursuant hereto or to the
Notes. No rescission and annulment under this Section 12.3 will extend to or
affect any subsequent Event of Default or Default or impair any right consequent
thereon.
<PAGE>
33
12.4. No Waivers or Election of Remedies, Expenses, etc.
No course of dealing and no delay on the part of any holder of any Note
in exercising any right, power or remedy shall operate as a waiver thereof or
otherwise prejudice such holder's rights, powers or remedies. No right, power or
remedy conferred by this Agreement or by any Note upon any holder thereof shall
be exclusive of any other right, power or remedy referred to herein or therein
or now or hereafter available at law, in equity, by statute or otherwise.
Without limiting the obligations of the Company under Section 15, the Company
will pay to the holder of each Note on demand such further amount as shall be
sufficient to cover all costs and expenses of such holder incurred in any
enforcement or collection under this Section 12, including without limitation
reasonable attorneys' fees, expenses and disbursements.
13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES.
13.1. Registration of Notes.
The Company shall keep at its principal executive office a register for
the registration and registration of transfers of Notes. The name and address of
each holder of one or more Notes, each transfer thereof and the name and address
of each transferee of one or more Notes shall be registered in such register.
Prior to due presentment for registration of transfer, the Person in whose name
any Note shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any
notice or knowledge to the contrary. The Company shall give to any holder of a
Note that is an Institutional Investor promptly upon request therefor, a
complete and correct copy of the names and addresses of all registered holders
of Notes.
13.2. Transfer and Exchange of Notes.
Upon surrender of any Note at the principal executive office of the
Company for registration of transfer or exchange (and in the case of a surrender
for registration of transfer, duly endorsed or accompanied by a written
instrument of transfer duly executed by the registered holder of such Note or
his attorney duly authorized in writing and accompanied by the address for
notices of each transferee of such Note or part thereof), within five Business
Days thereafter the Company shall execute and deliver, at the Company's expense
(except as provided below), one or more new Notes of the same series (as
requested by the holder thereof) in exchange therefor, in an aggregate principal
amount equal to the unpaid principal amount of the surrendered Note. Each such
new Note shall be payable to such Person as such holder may request. Each such
new Note shall be dated and bear interest from the date to which interest shall
have been paid on the surrendered Note or dated the date of the surrendered Note
if no interest shall have been paid thereon. The Company may require payment of
a sum sufficient to cover any stamp tax or governmental charge imposed in
respect of any such transfer of Notes. Notes shall not be transferred in
denominations of less than $100,000, provided that if necessary to enable the
registration of transfer by a holder of its entire holding of Notes, one Note
may be in a denomination of less than $100,000. Any transferee, by its
acceptance of a Note registered in its name (or the name of its nominee), shall
be deemed to have made the representations set forth in Sections 6.1 (so long as
applicable) and 6.2.
<PAGE>
34
13.3. Replacement of Notes.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the ownership of and the loss, theft, destruction or mutilation of any Note
(which evidence shall be, in the case of an Institutional Investor, notice from
such Institutional Investor of such ownership and such loss, theft, destruction
or mutilation), and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (provided that if the holder of such Note is, or is a
nominee for, an original Purchaser or any other Institutional Investor,
such Person's own unsecured agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender and cancellation
thereof,
within five Business Days thereafter the Company at its own expense shall
execute and deliver, in lieu thereof, a new Note of the same series, dated and
bearing interest from the date to which interest shall have been paid on such
lost, stolen, destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been paid thereon.
14. PAYMENTS ON NOTES.
14.1. Place of Payment.
Subject to Section 14.2, payments of principal, Make-Whole Amount, if
any, and interest becoming due and payable on the Notes shall be made at the
principal office of The Chase Manhattan Bank in New York City. The Company may
at any time, by notice to each holder of a Note, change the place of payment of
the Notes so long as such place of payment shall be either the principal office
of the Company in New York City or the principal office of a bank or trust
company in New York City.
14.2. Home Office Payment.
So long as you or your nominee shall be the holder of any Note, and
notwithstanding anything contained in Section 14.1 or in such Note to the
contrary, the Company will pay all sums becoming due on such Note for principal,
Make-Whole Amount, if any, and interest by the method and at the address
specified for such purpose below your name in Schedule A, or by such other
method or at such other address as you shall have from time to time specified to
the Company in writing for such purpose, without the presentation or surrender
of such Note or the making of any notation thereon, except that upon written
request of the Company made concurrently with or reasonably promptly after
payment or prepayment in full of any Note, you shall surrender such Note for
cancellation, reasonably promptly after any such request, to the Company at its
principal executive office or at the place of payment most recently designated
by the Company pursuant to Section 14.1. Prior to any sale or other disposition
of any Note held by you or your nominee you will, at your election, either
endorse thereon the amount of principal paid thereon and the last date to which
interest has been paid thereon or surrender such Note to the Company in exchange
for a new Note or Notes pursuant to Section 13.2. The Company will afford the
benefits of this Section 14.2 to any Institutional Investor that
<PAGE>
35
is the direct or indirect transferee of any Note purchased by you under this
Agreement and that has made the same agreement relating to such Note as you have
made in this Section 14.2.
15. EXPENSES, ETC.
15.1. Transaction Expenses.
Whether or not the transactions contemplated hereby are consummated,
the Company will pay all costs and expenses (including reasonable attorneys'
fees of your special counsel and, if reasonably required, local or other
counsel) incurred by you and each Other Purchaser or holder of a Note in
connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of this Agreement or the Notes (whether or not
such amendment, waiver or consent becomes effective), including without
limitation: (a) the costs and expenses incurred in enforcing or defending (or
reasonably determining whether or how to enforce or defend) any rights under
this Agreement or the Notes or in responding to any subpoena or other legal
process or informal investigative demand issued in connection with this
Agreement or the Notes, or by reason of being a holder of any Note, and (b) the
costs and expenses, including financial advisors' fees, incurred in connection
with the insolvency or bankruptcy of the Company or any Subsidiary or in
connection with any work-out or restructuring of the transactions contemplated
hereby and by the Notes. The Company will pay, and will save you and each other
holder of a Note harmless from, all claims in respect of any fees, costs or
expenses if any, of brokers and finders (other than those retained by you).
In furtherance of the foregoing, on the date of the Closing the Company
will pay or cause to be paid the fees and disbursements and other charges
(including estimated unposted disbursements and other charges as of the date of
the Closing) of your special counsel which are reflected in the statement of
such special counsel submitted to the Company on or prior to the date of the
Closing. The Company will also pay, promptly upon receipt of supplemental
statements therefor, reasonable additional fees, if any, and disbursements and
charges of such special counsel in connection with the transactions hereby
contemplated (including disbursements and other charges unposted as of the date
of the Closing to the extent such disbursements and other charges exceed
estimated amounts paid as aforesaid).
15.2. Survival.
The obligations of the Company under this Section 15 will survive the
payment or transfer of any Note, the enforcement, amendment or waiver of any
provision of this Agreement or the Notes, and the termination of this Agreement.
16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT.
All representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the Notes, the purchase or transfer
by you of any Note or portion thereof or interest therein and the payment of any
Note, and may be relied upon by any subsequent holder of a Note, regardless of
any investigation made at any time by or on behalf of you or any other holder of
a Note. All statements contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant to this Agreement shall be
deemed
<PAGE>
36
representations and warranties of the Company under this Agreement. Subject to
the preceding sentence, this Agreement and the Notes embody the entire agreement
and understanding between you and the Company and supersede all prior agreements
and understandings relating to the subject matter hereof.
17. AMENDMENT AND WAIVER.
17.1. Requirements.
This Agreement and the Notes may be amended, and the observance of any
term hereof or of the Notes may be waived (either retroactively or
prospectively), with (and only with) the written consent of the Company and the
Required Holders, except that (a) no amendment or waiver of any of the
provisions of Section 1, 2, 3, 4, 5, 6 or 21, or any defined term (as it is used
therein), will be effective as to you unless consented to by you in writing, and
(b) no such amendment or waiver may, without the written consent of the holder
of each Note at the time outstanding, (i) subject to the provisions of Section
12 relating to acceleration or rescission, change the amount or time of any
prepayment or payment of principal of, or change the rate or the time of payment
or method of computation of interest or of the Make-Whole Amount on, the Notes,
(ii) change the percentage of the principal amount of the Notes the holders of
which are required to consent to any such amendment or waiver, or (iii) amend
any of Sections 8, 11(a), 11(b), 12, 17 or 20.
17.2. Solicitation of Holders of Notes.
(a) Solicitation. The Company will provide each holder of the Notes
(irrespective of the amount of Notes then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to
enable such holder to make an informed and considered decision with respect to
any proposed amendment, waiver or consent in respect of any of the provisions
hereof or of the Notes. The Company will deliver executed or true and correct
copies of each amendment, waiver or consent effected pursuant to the provisions
of this Section 17 to each holder of outstanding Notes promptly following the
date on which it is executed and delivered by, or receives the consent or
approval of, the requisite holders of Notes.
(b) Payment. The Company will not directly or indirectly pay or cause
to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, or grant any security, to any holder of Notes as
consideration for or as an inducement to such holder's consideration of or
entering into by any holder of Notes of any waiver or amendment of any of the
terms and provisions hereof unless such remuneration is concurrently paid, or
security is concurrently granted, on the same terms, ratably to each holder of
Notes then outstanding even if such holder did not consent to such waiver or
amendment.
17.3. Binding Effect, etc.
Any amendment or waiver consented to as provided in this Section 17
applies equally to all holders of Notes and is binding upon them and upon each
future holder of any Note and upon the Company without regard to whether such
Note has been marked to indicate such amendment or waiver. No such amendment or
waiver will extend to or affect any obligation, covenant, agreement, Default or
Event of Default not expressly amended or waived or impair
<PAGE>
37
any right consequent thereon. No course of dealing between the Company and the
holder of any Note nor any delay in exercising any rights hereunder or under any
Note shall operate as a waiver of any rights of any holder of such Note. As used
herein, the term "this Agreement" and references thereto shall mean this
Agreement as it may from time to time be amended or supplemented.
17.4. Notes held by Company, etc.
Solely for the purpose of determining whether the holders of the
requisite percentage of the aggregate principal amount of Notes then outstanding
approved or consented to any amendment, waiver or consent to be given under this
Agreement or the Notes, or have directed the taking of any action provided
herein or in the Notes to be taken upon the direction of the holders of a
specified percentage of the aggregate principal amount of Notes then
outstanding, Notes directly or indirectly owned by the Company or any of its
Affiliates shall be deemed not to be outstanding.
18. NOTICES.
All notices and communications provided for hereunder shall be in
writing and sent (a) by telecopy if the sender on the same day sends a
confirming copy of such notice by a recognized overnight delivery service
(charges prepaid), or (b) by registered or certified mail with return receipt
requested (postage prepaid), or (c) by a recognized overnight delivery service
(with charges prepaid). Any such notice must be sent:
(a) if to you or your nominee, to you or it at the address specified
for such communications in Schedule A, or at such other address as you or
it shall have specified to the Company in writing,
(b) if to any other holder of any Note, to such holder at such address
as such other holder shall have specified to the Company in writing, or
(c) if to the Company, to the Company at its address set forth at the
beginning hereof to the attention of the Treasurer, or at such other
address as the Company shall have specified to the holder of each Note in
writing.
Notices under this Section 18 will be deemed given only when actually received.
19. REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed, (b) documents received by you at the Closing (except the Notes
themselves), and (c) financial statements, certificates and other information
previously or hereafter furnished to you, may be reproduced by you by any
photographic, photostatic, microfilm, microcard, miniature photographic or other
similar process and you may destroy any original document so reproduced. The
Company agrees and stipulates that, to the extent permitted by applicable law,
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
<PAGE>
38
course of business) and any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence. This Section 19
shall not prohibit the Company or any other holder of Notes from contesting any
such reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such reproduction.
20. CONFIDENTIAL INFORMATION.
For the purposes of this Section 20, "Confidential Information" means
information (including without limitation the Memorandum) delivered to you by or
on behalf of the Company or any Subsidiary in connection with the transactions
contemplated by or otherwise pursuant to this Agreement, provided that such term
does not include information that (a) was publicly known or otherwise known to
you prior to the time of such disclosure, (b) subsequently becomes publicly
known through no act or omission by you or any person acting on your behalf, (c)
otherwise becomes known to you other than through disclosure by the Company or
any Subsidiary or by a source that you know is required to maintain the
confidentiality of such information or (d) constitutes financial statements
delivered to you under Section 7.1 that are otherwise publicly available. You
will maintain the confidentiality of such Confidential Information in accordance
with procedures adopted by you in good faith to protect confidential information
of third parties delivered to you, provided that you may deliver or disclose
Confidential Information to (i) your directors, officers, trustees, employees,
agents, attorneys and affiliates (to the extent such disclosure reasonably
relates to the administration of the investment represented by your Notes and by
virtue of their position they are required to comply with this Section 20), (ii)
your financial advisors and other professional advisors whose duties require
them to hold confidential the Confidential Information substantially in
accordance with the terms of this Section 20, (iii) any other holder of any
Note, (iv) any Institutional Investor to which you sell or offer to sell such
Note or any part thereof or any participation therein (if such Person has agreed
in writing prior to its receipt of such Confidential Information to be bound by
the provisions of this Section 20), (v) any Person from which you offer to
purchase any security of the Company (if such Person has agreed in writing prior
to its receipt of such Confidential Information to be bound by the provisions of
this Section 20), (vi) any federal or state regulatory authority having
jurisdiction over you, (vii) the National Association of Insurance Commissioners
or any similar organization, or any nationally recognized rating agency that
requires access to information about your investment portfolio or (viii) any
other Person to which such delivery or disclosure may be necessary or
appropriate (w) to effect compliance with any law, rule, regulation or order
applicable to you, (x) in response to any subpoena or other legal process, (y)
in connection with any litigation to which you are a party or (z) if an Event of
Default has occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of a Note, will be
deemed to have agreed to be bound by and to be entitled to the benefits of this
Section 20 as though it were a party to this Agreement. On reasonable request by
the Company in connection with the delivery to any holder of a Note of
information required to be delivered to such holder under this Agreement or
requested by such holder (other than a holder that is a party to this Agreement
or its nominee), such holder will enter into an agreement with the Company
embodying the provisions of this Section 20.
<PAGE>
39
21. SUBSTITUTION OF PURCHASER.
You shall have the right to substitute any one of your Affiliates as
the purchaser of the Notes that you have agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both you and such
Affiliate, shall contain such Affiliate's agreement to be bound by this
Agreement and shall contain a confirmation by such Affiliate of the accuracy
with respect to it of the representations set forth in Section 6. Upon receipt
of such notice, wherever the word "you" is used in this Agreement (other than in
this Section 21), such word shall be deemed to refer to such Affiliate in lieu
of you. In the event that such Affiliate is so substituted as a purchaser
hereunder and such Affiliate thereafter transfers to you all of the Notes then
held by such Affiliate, upon receipt by the Company of notice of such transfer,
wherever the word "you" is used in this Agreement (other than in this Section
21), such word shall no longer be deemed to refer to such Affiliate, but shall
refer to you, and you shall have all the rights of an original holder of the
Notes under this Agreement.
22. MISCELLANEOUS.
22.1. Successors and Assigns.
All covenants and other agreements contained in this Agreement by or on
behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including without limitation any subsequent
holder of a Note) whether so expressed or not.
22.2. Construction.
Each covenant contained herein shall be construed (absent express
provision to the contrary) as being independent of each other covenant contained
herein, so that compliance with any one covenant shall not (absent such an
express contrary provision) be deemed to excuse compliance with any other
covenant. Where any provision herein refers to action to be taken by any Person,
or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.
22.3. Consent to Jurisdiction; Service of Process; Waiver of Jury Trial.
(a) The Company irrevocably submits to the non-exclusive in personam
jurisdiction of any New York State or federal court sitting in the Borough of
Manhattan, The City of New York, over any suit, action or proceeding arising out
of or relating to this Agreement or the Notes. To the fullest extent it may
effectively do so under applicable law, the Company irrevocably waives and
agrees not to assert, by way of motion, as a defense or otherwise, any claim
that it is not subject to the in personam jurisdiction of any such court, any
objection that it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding brought in any such court and any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
(b) The Company consents to process being served in any suit, action or
proceeding of the nature referred to in paragraph (a) of this Section 22.3 by
mailing a copy thereof by registered or certified mail, postage prepaid, return
receipt requested, to the address of
<PAGE>
40
such party specified in Section 18 or at such other address of which you shall
then have been notified pursuant to said Section. The Company agrees that such
service upon receipt (i) shall be deemed in every respect effective service of
process upon it in any such suit, action or proceeding and (ii) shall, to the
full extent permitted by law, be taken and held to be valid personal service
upon and personal delivery to such party. Notices hereunder shall be
conclusively presumed received as evidenced by a delivery receipt furnished by
the United States Postal Service or any reputable commercial delivery service.
(c) Nothing in this Section 22.3 shall affect the right of any holder
of Notes to serve process in any manner permitted by law, or limit any right
that the holders of any of the Notes may have to bring proceedings against the
Company in the courts of any appropriate jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.
(d) EACH OF THE PARTIES HERETO WAIVES TRIAL BY JURY IN ANY ACTION
BROUGHT ON OR WITH RESPECT TO THIS AGREEMENT, THE NOTES OR ANY OTHER DOCUMENT
EXECUTED IN CONNECTION HEREWITH OR THEREWITH.
22.4. Payments Due on Non-Business Days.
Anything in this Agreement or the Notes to the contrary notwithstanding
(but without limiting the requirement in Section 8.3 that notice of any optional
prepayment specify a Business Day as the date fixed for such prepayment), any
payment of principal of or Make-Whole Amount or interest on any Note that is due
on a date other than a Business Day shall be made on the next succeeding
Business Day without including the additional days elapsed in the computation of
the interest payable on such next succeeding Business Day.
22.5. Severability.
Any provision of this Agreement that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the fullest extent permitted by applicable law) not
invalidate or render unenforceable such provision in any other jurisdiction.
22.6. Accounting Terms; Changes in GAAP.
All accounting terms used herein which are not expressly defined in
this Agreement have the meanings respectively given to them in accordance with
GAAP. Except as otherwise specifically provided herein, all computations made
pursuant to this Agreement shall be made in accordance with GAAP and all balance
sheets and other financial statements with respect thereto shall be prepared in
accordance with GAAP; provided, however, if (a) at the time of delivery of any
financial statements pursuant to Section 7.1 the Company shall object to making
computations for the purpose of determining compliance with this Agreement on
the basis of any change in GAAP after the date of this Agreement or (b) the
Required Holders shall so object in writing within 60 days after receipt of such
financial statements, then in either case such computations shall be made on a
basis consistent with the most recent financial statements
<PAGE>
41
delivered by the Company to the holders of Notes as to which no such objection
shall have been made (or, prior to the delivery of the first financial
statements pursuant to Section 7.1, consistent with the annual audited financial
statements included in the Appendices to the Memorandum).
Without limiting the generality of Section 7.1, prior to or
concurrently with the delivery of financial statements reflecting any change in
GAAP, the Company will give notice of such change to the holders of Notes (and
for such purpose a note or explanation in reasonable detail accompanying such
financial statements shall be deemed to constitute notice). The Company will
also give prompt written notice to the holders of Notes in the event that the
Administrative Agent or Required Lenders (as such terms are defined in the Bank
Credit Agreement) object to determining compliance with the Bank Credit
Agreement on the basis of any change in GAAP.
Except as otherwise specifically provided herein, any consolidated
financial statement or financial computation shall be done in accordance with
GAAP; and, if at the time that any such statement or computation is required to
be made the Company shall not have any Restricted Subsidiary, such terms shall
mean a financial statement or a financial computation, as the case may be, with
respect to the Company only.
22.7. Counterparts.
This Agreement may be executed in any number of counterparts, each of
which shall be an original but all of which together shall constitute one
instrument. Each counterpart may consist of a number of copies hereof, each
signed by less than all, but together signed by all, of the parties hereto.
22.8. Governing Law.
This Agreement and the Notes shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the law of
the State of New York excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
<PAGE>
42
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
THE PITTSTON COMPANY
By /s/ James B. Hartough
----------------------------------
Title: Vice President -- Corporate
Finance and Treasurer
The foregoing is hereby agreed to as of
the date thereof.
AMERICAN HERITAGE LIFE INSURANCE COMPANY
By /s/ Ronald Mendel
-------------------------------------
Ronald Mendel
Authorized Signatory
By /s/ Charles D. Mires
-------------------------------------
Charles D. Mires
Authorized Signatory
<PAGE>
42
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
THE PITTSTON COMPANY
By /s/ James B. Hartough
----------------------------------
Title: Vice President -- Corporate
Finance and Treasurer
The foregoing is hereby agreed to as of
the date thereof.
ALLSTATE LIFE INSURANCE COMPANY
By /s/ Ronald Mendel
-------------------------------------
Ronald Mendel
Authorized Signatory
By /s/ Charles D. Mires
-------------------------------------
Charles D. Mires
Authorized Signatory
<PAGE>
42
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
THE PITTSTON COMPANY
By /s/ James B. Hartough
----------------------------------
Title: Vice President -- Corporate
Finance and Treasurer
The foregoing is hereby agreed to as of
the date thereof.
THE GUARDIAN LIFE INSURANCE
COMPANY OF AMERICA
By /s/ Thomas M. Donohue
-------------------------------------
Thomas M. Donohue
<PAGE>
42
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
THE PITTSTON COMPANY
By /s/ James B. Hartough
----------------------------------
Title: Vice President -- Corporate
Finance and Treasurer
The foregoing is hereby agreed to as of
the date thereof.
NATIONWIDE LIFE INSURANCE COMPANY
By /s/ Mark W. Poeppelman
-------------------------------------
Mark W. Poeppelman
Associate Vice President
<PAGE>
42
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
THE PITTSTON COMPANY
By /s/ James B. Hartough
----------------------------------
Title: Vice President -- Corporate
Finance and Treasurer
The foregoing is hereby agreed to as of
the date thereof.
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
By /s/ Mark W. Poeppelman
-------------------------------------
Mark W. Poeppelman
Associate Vice President
<PAGE>
42
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
THE PITTSTON COMPANY
By /s/ James B. Hartough
----------------------------------
Title: Vice President -- Corporate
Finance and Treasurer
The foregoing is hereby agreed to as of
the date thereof.
GUARDIAN INSURANCE & ANNUITY
COMPANY
By /s/ Thomas M. Donohue
-------------------------------------
Thomas M. Donohue
<PAGE>
42
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
THE PITTSTON COMPANY
By /s/ James B. Hartough
----------------------------------
Title: Vice President -- Corporate
Finance and Treasurer
The foregoing is hereby agreed to as of
the date thereof.
AMERICAN GENERAL ANNUITY
INSURANCE COMPANY
By /s/ C. Scott Inglis
-------------------------------------
C. Scott Inglis
Investment Officer
<PAGE>
42
If you are in agreement with the foregoing, please sign the form of
agreement in the space below provided on a counterpart of this Agreement and
return it to the Company, whereupon the foregoing shall become a binding
agreement between you and the Company.
Very truly yours,
THE PITTSTON COMPANY
By /s/ James B. Hartough
----------------------------------
Title: Vice President -- Corporate
Finance and Treasurer
The foregoing is hereby agreed to as of
the date thereof.
AMERICAN GENERAL LIFE INSURANCE
COMPANY
By /s/ C. Scott Inglis
-------------------------------------
C. Scott Inglis
Investment Officer
<PAGE>
SCHEDULE B
DEFINED TERMS
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
"Affiliate" means, at any time, with respect to any Person (including
without limitation the Company), (a) any other Person that at such time directly
or indirectly through one or more intermediaries Controls, or is Controlled by,
or is under common Control with, such first Person, and (b) any Person
beneficially owning or holding, directly or indirectly, 10% or more of any class
of voting or equity interests of the Company or any Subsidiary or any
corporation of which the Company and its Subsidiaries beneficially own or hold,
in the aggregate, directly or indirectly, 10% or more of any class of voting or
equity interests. As used in this definition, "Control" means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an "Affiliate" is a reference to an Affiliate of the
Company.
"Asset Sale" is defined in Section 10.4.
"Attributable Debt" means, as to any particular lease relating to a
sale and leaseback transaction, the Lease Rentals under such lease (discounted
on the same periodic basis from the respective due dates thereof at an interest
rate of 10% per annum) during the remaining term thereof.
"Bank Credit Agreement" means the Credit Agreement dated as of October
3, 2000 among the Company, certain of its Subsidiaries, Fleet National Bank and
The Chase Manhattan Bank, as Co-Syndication Agents, Bank of America, N.A., as
Administrative Agent, and the Lenders named therein, as supplemented, amended,
restated or refinanced from time to time.
"Business Day" means any day other than a Saturday, a Sunday or a day
on which commercial banks in New York City are required or authorized to be
closed.
"Capital Lease" means, at any time, a lease with respect to which the
lessee is required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.
"Capitalized Lease Obligations" means with respect to any Person, all
outstanding obligations of such Person in respect of Capital Leases, taken at
the capitalized amount thereof accounted for as indebtedness in accordance with
GAAP.
"Closing" is defined in Section 3.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time.
Schedule B
<PAGE>
-2-
"Company" means The Pittston Company, a Virginia corporation.
"Consolidated EBITDA" means, for any period, an amount equal to the sum
of (a) Consolidated Net Income for such period plus (b) to the extent deducted
in determining Consolidated Net Income for such period, (i) Consolidated
Interest Expense, (ii) income tax expense, (iii) depreciation, depletion and
amortization, and (iv) all other non-cash charges, in each case determined on a
consolidated basis in accordance with GAAP.
"Consolidated Interest Expense" means, for any period, as applied to
the Company and its Restricted Subsidiaries, all interest expense (whether paid
or accrued) and capitalized interest, including without limitation (a)
amortization of debt discount and premium and (b) the interest component under
Capital Leases, in each case determined on a consolidated basis in accordance
with GAAP.
"Confidential Information" is defined in Section 20.
"Consolidated Capitalization" means, at any date, the sum of (a)
Consolidated Indebtedness plus (b) Consolidated Net Worth, all as determined on
a consolidated basis for the Company and its Restricted Subsidiaries in
accordance with GAAP.
"Consolidated Indebtedness" means, at any date, all Indebtedness of the
Company and its Restricted Subsidiaries determined on a consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, for any period, the net income of the
Company and its Restricted Subsidiaries for such period, determined on a
consolidated basis in accordance with GAAP, excluding
(a) the proceeds of any life insurance policy,
(b) any gains arising from (i) the sale or other disposition of any
assets (other than current assets) to the extent that the aggregate amount
of the gains during such period exceeds the aggregate amount of the losses
(other than losses described in clause (h) below) during such period from
the sale, abandonment or other disposition of assets (other than current
assets), (ii) any write-up of assets or (iii) the acquisition of
outstanding securities of the Company or any Restricted Subsidiary,
(c) any amount representing any interest in the undistributed earnings
of any person other than a Restricted Subsidiary,
(d) any earnings, prior to the date of acquisition, of any person
acquired in any manner, and any earnings of any Subsidiary acquired prior
to its becoming a Restricted Subsidiary,
(e) any earnings of a successor to or transferee of the assets of the
Company prior to its becoming such successor or transferee,
Schedule B
<PAGE>
-3-
(f) any deferred credit (or amortization of a deferred credit) arising
from the acquisition of any person,
(g) any extraordinary gains not covered by clause (b) above, and
(h) any loss arising from or relating to the initial classification of
any portion of the Pittston Minerals Group as discontinued operations
and/or subsequent adjustments associated with the dispositions of such
discontinued operations and any loss or charges in connection with the
disposition of assets relating to aircraft, aircraft replacement parts and
facilities and equipment by BAX Global Inc. and/or its Subsidiaries up to
$75,000,000 on a cumulative basis for all periods after September 30, 2000.
"Consolidated Net Worth" means, at any date, on a consolidated basis
for the Company and its Restricted Subsidiaries, shareholders' equity or net
worth as determined and computed on a consolidated basis in accordance with
GAAP, provided that in determining "Consolidated Net Worth" there shall be (a)
included any issuance of Preferred Stock by the Company (except mandatorily
redeemable Preferred Stock), (b) added back the amount of any minority interest
and (c) excluded (i) any loss arising from or relating to sale of or the initial
classification of any portion of the Pittston Minerals Group as discontinued
operations and any subsequent adjustments associated with the disposition of
such discontinued operations, (ii) any loss or charges in connection with the
disposition of assets relating to aircraft, aircraft replacement parts and
facilities and equipment by BAX Global Inc. and/or its Subsidiaries up to
$75,000,000 on a cumulative basis for all periods after September 30, 2000.
"Default" means an event or condition the occurrence or existence of
which would, with the giving of notice or the lapse of time, or both, become an
Event of Default.
"Default Rate" means that rate of interest for the Notes of each series
that is the greater of (i) 2% per annum above the stated interest rate for the
Notes of such series and (ii) 2% above the rate of interest publicly announced
by The Chase Manhattan Bank from time to time at its principal office in New
York City as its prime rate.
"Discounted Consolidated Lease Rentals" is defined in Section 10.5(c).
"Environmental Laws" means any and all Federal, state, local, and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or
governmental restrictions relating to pollution and the protection of the
environment or the release of any materials into the environment, including but
not limited to those related to hazardous substances or wastes, air emissions
and discharges to waste or public systems.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the rules and regulations promulgated thereunder
from time to time.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) that is treated as a single employer together with the Company
under section 414 of the Code.
Schedule B
<PAGE>
-4-
"Event of Default" is defined in Section 11.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"GAAP" means, except as otherwise provided in Section 22.6, generally
accepted accounting principles as in effect from time to time in the United
States of America.
"Governmental Authority" means
(a) the government of
(i) the United States of America or any State or other political
subdivision thereof, or
(ii) any jurisdiction in which the Company or any Subsidiary
conducts all or any part of its business, or which asserts
jurisdiction over any properties of the Company or any Subsidiary, or
(b) any entity exercising executive, legislative, judicial, regulatory
or administrative functions of, or pertaining to, any such government.
"Guaranty" means, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing any
Indebtedness, dividend or other obligation of any other Person in any manner,
whether directly or indirectly, including without limitation obligations
incurred through an agreement, contingent or otherwise, by such Person:
(a) to purchase such Indebtedness or obligation or any property
constituting security therefor;
(b) to advance or supply funds (i) for the purchase or payment of such
Indebtedness or obligation, or (ii) to maintain any working capital or
other balance sheet condition or any income statement condition of any
other Person or otherwise to advance or make available funds for the
purchase or payment of such Indebtedness or obligation;
(c) to lease properties or to purchase properties or services
primarily for the purpose of assuring the owner of such Indebtedness or
obligation of the ability of any other Person to make payment of the
Indebtedness or obligation; or
(d) otherwise to assure the owner of such Indebtedness or obligation
against loss in respect thereof.
In any computation of the Indebtedness or other liabilities of the
obligor under any Guaranty, the Indebtedness or other obligations that are the
subject of such Guaranty shall be assumed to be direct obligations of such
obligor.
Schedule B
<PAGE>
-5-
"Hazardous Material" means any and all pollutants, toxic or hazardous
wastes or any other substances, the removal of which may be required or the
generation, manufacture, refining, production, processing, treatment, storage,
handling, transportation, transfer, use, disposal, release, discharge, spillage,
seepage, or filtration of which is restricted, prohibited or penalized by any
applicable law (including without limitation asbestos, urea formaldehyde foam
insulation and polycholorinated biphenyls).
"holder" means, with respect to any Note, the Person in whose name such
Note is registered in the register maintained by the Company pursuant to Section
13.1.
"Indebtedness" with respect to any Person means, at any time, without
duplication,
(a) its liabilities for borrowed money and its redemption obligations
in respect of Preferred Stock that is mandatorily redeemable prior to the
final maturity of the Notes,
(b) its liabilities for the deferred purchase price of property
acquired by such Person (excluding accounts payable arising in the ordinary
course of business and not overdue but including all liabilities created or
arising under any conditional sale or other title retention agreement with
respect to any such property),
(c) its Capitalized Lease Obligations,
(d) all liabilities for borrowed money secured by any Lien with
respect to any property owned by such Person (whether or not it has assumed
or otherwise become liable for such liabilities),
(e) the maximum amount of all drafts drawn under standby letters of
credit issued or bankers' acceptance facilities created for the account of
such Person (to the extent unreimbursed),
(f) Swaps of such Person not entered into for the purpose of hedging
in the ordinary course of business, and
(g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) above.
Indebtedness of any person shall include all obligations of such person of the
character described in clauses (a) through (g) above to the extent such person
remains legally liable in respect thereof notwithstanding that any such
obligation is deemed to be extinguished under GAAP.
"Institutional Investor" means (a) any original purchaser of a Note,
(b) any holder of a Note holding (together with one or more of its Affiliates)
more than 2% of the aggregate principal amount of the Notes then outstanding,
and (c) any bank, trust company, savings and loan association or other financial
institution, any pension plan, any investment company, any insurance company,
any broker or dealer, or any other similar financial institution or entity,
regardless of legal form.
Schedule B
<PAGE>
-6-
"Lease Rentals" is defined in Section 10.5(c).
"Lien" means, with respect to any Person, any mortgage, lien, pledge,
charge, security interest or other encumbrance, or any interest or title of any
vendor, lessor, lender or other secured party to or of such Person under any
conditional sale or other title retention agreement or Capital Lease, upon or
with respect to any property or asset of such Person (including in the case of
stock, stockholder agreements, voting trust agreements and all similar
arrangements).
"Make-Whole Amount" is defined in Section 8.7.
"Material" means material in relation to the business, operations,
affairs, financial condition, assets or properties of the Company and its
Restricted Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, operations, affairs, financial condition, assets or properties of the
Company and its Restricted Subsidiaries taken as a whole, (b) the ability of the
Company to perform its obligations under this Agreement and the Notes or (c) the
validity or enforceability of this Agreement or the Notes or any Subsidiary
Guarantee.
"Memorandum" is defined in Section 5.3.
"Multiemployer Plan" means any Plan that is a "multiemployer plan" (as
such term is defined in section 4001(a)(3) of ERISA).
"Notes" is defined in Section 1.1.
"Officer's Certificate" means a certificate of a Senior Financial
Officer or of any other officer of the Company whose responsibilities extend to
the subject matter of such certificate.
"Other Agreements" is defined in Section 2.
"Other Purchasers" is defined in Section 2.
"PBGC" means the Pension Benefit Guaranty Corporation referred to and
defined in ERISA or any successor thereto.
"Person" means an individual, partnership, corporation, limited
liability company, association, trust, unincorporated organization, or a
government or agency or political subdivision thereof.
"Pittston Minerals Group" means Pittston Minerals Group Inc. and its
Subsidiaries from time to time.
"Plan" means an "employee benefit plan" (as defined in section 3(3) of
ERISA) that is or, within the preceding five years, has been established or
maintained, or to which
Schedule B
<PAGE>
-7-
contributions are or, within the preceding five years, have been made or
required to be made, by the Company or any ERISA Affiliate or with respect to
which the Company or any ERISA Affiliate may have any liability.
"Preferred Stock" means any class of capital stock of a corporation
that is preferred over any other class of capital stock of such corporation as
to the payment of dividends or the payment of any amount upon liquidation or
dissolution of such corporation.
"Priority Debt" is defined in Section 10.1.
"property" or "properties" means, unless otherwise specifically
limited, real or personal property of any kind, tangible or intangible, inchoate
or otherwise.
"PTE" is defined in Section 6.2.
"QPAM Exemption" means Prohibited Transaction Class Exemption 84-14
issued on March 13, 1984 by the United States Department of Labor.
"Required Holders" means, at any time, the holders of at least a
majority in unpaid principal amount of the Notes at the time outstanding
(exclusive of Notes then owned by the Company or any of its Affiliates).
"Responsible Officer" means any Senior Financial Officer.
"Restricted Subsidiary" means as of the date of this Agreement each
Subsidiary as designated as such in Schedule 5.4 and thereafter means each other
Subsidiary that is not an Unrestricted Subsidiary; provided that each of the
Subsidiary Guarantors listed in Section 4.5 shall at all times remain a
Restricted Subsidiary, in each case so long as such corporation is a Subsidiary
Guarantor.
"Securities Act" means the Securities Act of 1933, as amended from time
to time.
"Senior Financial Officer" means the chief financial officer, principal
accounting officer, treasurer or controller of the Company.
"Series A Notes" is defined in Section 1.1.
"Series B Notes" is defined in Section 1.1.
"Subsidiary" means, as to any Person, any corporation or other business
entity a majority of the combined voting power of all Voting Stock of which is
owned by such Person or one or more of its Subsidiaries or such Person and one
or more of its Subsidiaries. Unless the context otherwise clearly requires, any
reference to a "Subsidiary" is a reference to a Subsidiary of the Company.
"Subsidiary Guarantee" is defined in Section 1.2.
Schedule B
<PAGE>
-8-
"Subsidiary Guarantors" is defined in Section 4.5.
"Swaps" means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency. For the purposes of this Agreement, the amount of
the obligation under any Swap shall be the amount determined in respect thereof
as of the end of the then most recently ended fiscal quarter of such Person,
based on the assumption that such Swap had terminated at the end of such fiscal
quarter, and in making such determination, if any agreement relating to such
Swap provides for the netting of amounts payable by and to such Person
thereunder or if any such agreement provides for the simultaneous payment of
amounts by and to such Person, then in each such case, the amount of such
obligation shall be the net amount so determined.
"Unrestricted Subsidiary" means any Subsidiary that has been designated
as an Unrestricted Subsidiary on Schedule 5.4, any Restricted Subsidiary that is
designated as an Unrestricted Subsidiary after the date of the Closing pursuant
to Section 10.9 and any Person that becomes a Subsidiary after the date of the
Closing that is not designated as a Restricted Subsidiary pursuant to said
Section, in each case other than an Unrestricted Subsidiary that is subsequently
redesignated as a Restricted Subsidiary pursuant to said Section.
"Voting Stock" means, with respect to any Person, any shares of stock
or other equity interests of any class or classes of such Person whose holders
are entitled under ordinary circumstances (irrespective of whether at the time
stock or other equity interests of any other class or classes shall have or
might have voting power by reason of the happening of any contingency) to vote
for the election of a majority of the directors, managers, trustees or other
governing body of such Person.
"Wholly-Owned Restricted Subsidiary" means, at any time, any Restricted
Subsidiary all of the equity interests (except directors' qualifying shares) and
voting interests of which are owned by any one or more of the Company and the
Company's other Wholly-Owned Restricted Subsidiaries at such time.
Schedule B
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>EXHIBIT 10(U)(II)
<TEXT>
<PAGE>
[FORM OF SERIES A NOTE]
THE PITTSTON COMPANY
7.84% Senior Note, Series A, due 2007
No. RA-[_____] New York, New York
$[_______] [Date]
PPN: 725701 B@ 4
FOR VALUE RECEIVED, the undersigned, The Pittston Company (the
"Company"), a Virginia corporation, hereby promises to pay to [ ], or
registered assigns, the principal sum of [ ] DOLLARS on January 18, 2007,
with interest (computed on the basis of a 360-day year of twelve 30-day months)
(a) from the date hereof on the unpaid balance thereof at the rate of 7.84%
per annum, payable semiannually on January 18 and July 18 in each year, until
the principal hereof shall have become due and payable, and (b) on any overdue
payment of principal, any overdue payment of interest (to the extent permitted
by applicable law) and any overdue payment of any premium or Make-Whole Amount
(as defined in the Note Purchase Agreements referred to below), payable
semiannually as aforesaid (or, at the option of the registered holder hereof,
on demand) at a rate per annum from time to time equal to the greater of
(i) 9.84% and (ii) 2% above the rate of interest publicly announced by The
Chase Manhattan Bank from time to time at its principal office in New York City
as its prime rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at said principal office of The Chase Manhattan Bank in New York City or
at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase Agreements referred to
below.
This Note is one of a series of 7.84% Senior Notes, Series A, due 2007
issued pursuant to separate Note Purchase Agreements dated as of January 18,
2001 (as from time to time amended, the "Note Purchase Agreements") between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. This Note is also entitled to the benefits of certain
Subsidiary Guarantees heretofore and from time to time hereafter executed and
delivered pursuant to the Note Purchase Agreements. Each holder of this Note
will be deemed, by its acceptance hereof, to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer or
exchange, accompanied by a written instrument of transfer duly executed by the
registered holder hereof or such holder's attorney duly authorized in writing, a
new Note of the same series for a like principal amount will be issued to, and
registered in the name of, the transferee. Prior to due presentment for
registration
<PAGE>
-2-
of transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and for all
other purposes, and the Company will not be affected by any notice to the
contrary.
The Company is required to make prepayments of principal, and may make
optional prepayments of principal in whole or from time to time in part, at the
times and on the terms specified in the Note Purchase Agreements, but not
otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable premium or Make-Whole Amount) and with the effect provided in the
Note Purchase Agreements.
This Note shall be construed and enforced in accordance with, and the
rights of the Company and the holder hereof shall be governed by, the laws of
the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
THE PITTSTON COMPANY
By
-------------------------
Title:
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>4
<FILENAME>0004.txt
<DESCRIPTION>EXHIBIT 10(U)(III)
<TEXT>
<PAGE>
[FORM OF SERIES B NOTE]
THE PITTSTON COMPANY
8.02% Senior Note, Series B, due 2008
No. RB-[_____] New York, New York
$[_______] [Date]
PPN: 725701 B# 2
FOR VALUE RECEIVED, the undersigned, The Pittston Company (the
"Company"), a Virginia corporation, hereby promises to pay to [ ], or
registered assigns, the principal sum of [ ] DOLLARS on January 18,
2008, with interest (computed on the basis of a 360-day year of twelve 30-day
months) (a) from the date hereof on the unpaid balance thereof at the rate of
8.02% per annum, payable semiannually on January 18 and July 18 in each year,
until the principal hereof shall have become due and payable, and (b) on any
overdue payment of principal, any overdue payment of interest (to the extent
permitted by applicable law) and any overdue payment of any premium or
Make-Whole Amount (as defined in the Note Purchase Agreements referred to
below), payable semiannually as aforesaid (or, at the option of the registered
holder hereof, on demand) at a rate per annum from time to time equal to the
greater of (i) 10.02% and (ii) 2% above the rate of interest publicly announced
by The Chase Manhattan Bank from time to time at its principal office in New
York City as its prime rate.
Payments of principal of, interest on and any Make-Whole Amount with
respect to this Note are to be made in lawful money of the United States of
America at said principal office of The Chase Manhattan Bank in New York City or
at such other place as the Company shall have designated by written notice to
the holder of this Note as provided in the Note Purchase Agreements referred to
below.
This Note is one of a series of 8.02% Senior Notes, Series B, due 2008
issued pursuant to separate Note Purchase Agreements dated as of January 18,
2001 (as from time to time amended, the "Note Purchase Agreements") between the
Company and the respective Purchasers named therein and is entitled to the
benefits thereof. This Note is also entitled to the benefits of certain
Subsidiary Guarantees heretofore and from time to time hereafter executed and
delivered pursuant to the Note Purchase Agreements. Each holder of this Note
will be deemed, by its acceptance hereof, to have agreed to the confidentiality
provisions set forth in Section 20 of the Note Purchase Agreements.
This Note is a registered Note and, as provided in the Note Purchase
Agreements, upon surrender of this Note for registration of transfer or
exchange, accompanied by a written instrument of transfer duly executed by the
registered holder hereof or such holder's attorney duly authorized in writing, a
new Note of the same series for a like principal amount will be
issued to, and registered in the name of, the transferee. Prior to due
presentment for registration
<PAGE>
of transfer, the Company may treat the person in whose name this Note is
registered as the owner hereof for the purpose of receiving payment and
for all other purposes, and the Company will not be affected by any notice
to the contrary.
The Company may make optional prepayments of principal in whole or from
time to time in part, at the times and on the terms specified in the Note
Purchase Agreements, but not otherwise.
If an Event of Default, as defined in the Note Purchase Agreements,
occurs and is continuing, the principal of this Note may be declared or
otherwise become due and payable in the manner, at the price (including any
applicable premium or Make-Whole Amount) and with the effect provided in the
Note Purchase Agreements.
This Note shall be construed and enforced in accordance with, and the
rights of the Company and the holder hereof shall be governed by, the laws of
the State of New York, excluding choice-of-law principles of the law of such
State that would require the application of the laws of a jurisdiction other
than such State.
THE PITTSTON COMPANY
By
-------------------------
Title:
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>5
<FILENAME>0005.txt
<DESCRIPTION>EXHIBIT 10(V)(I)
<TEXT>
<PAGE>
================================================================================
RECEIVABLES PURCHASE AGREEMENT
dated as of December 15, 2000
among
BAX FUNDING CORPORATION
BAX GLOBAL INC.
LIBERTY STREET FUNDING CORP.
and
THE BANK OF NOVA SCOTIA
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility....................................................................1
Section 1.2. Making Purchases.....................................................................2
Section 1.3. Purchased Interest Computation.......................................................3
Section 1.4. Settlement Procedures................................................................3
Section 1.5. Fees.................................................................................7
Section 1.6. Payments and Computations, Etc.......................................................7
Section 1.7. Increased Costs......................................................................8
Section 1.8. Requirements of Law..................................................................9
Section 1.9. Mitigation..........................................................................10
Section 1.10. Accounting Terms....................................................................11
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants...........................................11
Section 2.2. Termination Events..................................................................11
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller...........................................................13
Section 3.2. Indemnities by the Servicer.........................................................14
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer.........................................................14
Section 4.2. Duties of the Servicer..............................................................15
Section 4.3. Establishment and Use of Certain Accounts...........................................16
Section 4.4. Enforcement Rights..................................................................17
Section 4.5. Responsibilities of the Seller......................................................19
Section 4.6. Servicing Fee.......................................................................19
ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc.....................................................................20
Section 5.2. Notices, Etc........................................................................20
Section 5.3. Assignability.......................................................................20
Section 5.4. Costs, Expenses and Taxes...........................................................21
Section 5.5. No Proceedings; Limitation on Payments..............................................22
Section 5.6. GOVERNING LAW AND JURISDICTION......................................................22
Section 5.7. Execution in Counterparts...........................................................22
Section 5.8. Survival of Termination.............................................................23
Section 5.9. WAIVER OF JURY TRIAL................................................................23
Section 5.10. Entire Agreement....................................................................23
Section 5.11. Headings............................................................................23
Section 5.12. Liabilities.........................................................................23
Section 5.13. Confidentiality.....................................................................23
</TABLE>
i
<PAGE>
EXHIBIT I Definitions
EXHIBIT II Conditions of Purchases
EXHIBIT III Representations and Warranties
EXHIBIT IV Covenants
EXHIBIT V Termination Events
SCHEDULE I Credit and Collection Policy
SCHEDULE II Lock-box Banks and Lock-box Accounts
SCHEDULE III Trade Names
ANNEX A Form of Monthly Report
ANNEX B Form of Purchase Notice
ii
<PAGE>
This RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or otherwise
modified from time to time, this "Agreement") is entered into as of December 15,
2000, among BAX FUNDING CORPORATION, a California corporation, as seller (the
"Seller"), BAX GLOBAL INC., a Delaware corporation ("BAX"), as initial servicer
(in such capacity, together with its successors and permitted assigns in such
capacity, the "Servicer"), LIBERTY STREET FUNDING CORP., a Delaware corporation
(together with its successors and permitted assigns, the "Issuer"), and THE BANK
OF NOVA SCOTIA, a Canadian chartered bank acting through its New York Agency
("BNS"), as administrator (in such capacity, together with its successors and
assigns in such capacity, the "Administrator").
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I. References in the Exhibits
hereto to the "Agreement" refer to this Agreement, as amended, supplemented or
otherwise modified from time to time.
The Seller desires to sell, transfer and assign an undivided variable
percentage interest in a pool of receivables, and the Issuer desires to acquire
such undivided variable percentage interest, as such percentage interest shall
be adjusted from time to time based upon, in part, reinvestments made by the
Issuer.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) On the terms and conditions hereinafter
set forth, the Issuer hereby agrees to purchase, and make reinvestments in,
undivided percentage ownership interests with regard to the Purchased Interest
from the Seller from time to time from the date hereof to the Facility
Termination Date. Under no circumstances shall the Issuer make any such purchase
or reinvestment if, after giving effect to such purchase or reinvestment, the
aggregate outstanding Capital of the Purchased Interest would exceed the
Purchase Limit.
(b) The Seller may, upon at least 30 days' written notice to the
Administrator, terminate in whole or reduce in part the unused portion of the
Purchase Limit; provided, that each partial reduction shall be in the amount of
at least $1,000,000, and an integral multiple of $1,000,000, and that, unless
terminated in whole, the Purchase Limit shall in no event be reduced below
$20,000,000.
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Section 1.2. Making Purchases. (a) Each purchase (but not reinvestment) of
undivided percentage ownership interests with regard to the Purchased Interest
hereunder shall be made upon the Seller's irrevocable written notice in the form
of Annex B delivered to the Administrator in accordance with Section 5.2 (which
notice must be received by the Administrator before 2:00 p.m., New York City
time) at least three Business Days before the requested purchase date and shall
specify: (A) the amount requested to be paid to the Seller (such amount, which
shall not be less than $1,000,000, being the Capital relating to the undivided
percentage ownership interest then being purchased), and (B) the date of such
purchase (which shall be a Business Day).
(b) On the date of each purchase (but not reinvestment) of undivided
percentage ownership interests with regard to the Purchased Interest hereunder,
the Issuer shall, upon satisfaction of the applicable conditions set forth in
Exhibit II, make available to the Seller in same day funds, at The Chase
Manhattan Bank, account number 323181317, ABA 021000021, an amount equal to the
Capital relating to the undivided percentage ownership interest then being
purchased.
(c) Effective on the date of each purchase pursuant to this Section and
each reinvestment pursuant to Section 1.4, the Seller hereby sells and assigns
to the Issuer an undivided percentage ownership interest in: (i) each Pool
Receivable then existing, (ii) all Related Security with respect to such Pool
Receivables, and (iii) all Collections with respect to, and other proceeds of,
such Pool Receivables and Related Security.
(d) To secure all of the Seller's obligations (monetary or otherwise) under
this Agreement and the other Transaction Documents to which it is a party,
whether now or hereafter existing or arising, due or to become due, direct or
indirect, absolute or contingent, the Seller hereby grants to the Issuer a
security interest in all of the Seller's right, title and interest (including
any undivided interest of the Seller) in, to and under all of the following,
whether now or hereafter owned, existing or arising: (i) all Pool Receivables,
(ii) all Related Security with respect to such Pool Receivables, (iii) all
Collections with respect to such Pool Receivables, (iv) the Lock-Box Accounts
and the Collection Account and all amounts on deposit therein, and all
certificates and instruments, if any, from time to time evidencing such Lock-Box
Accounts and Collection Account and amounts on deposit therein, (v) all rights
(but none of the obligations) of the Seller under the Sale Agreement, and (vi)
all proceeds of, and all amounts received or receivable under any or all of, the
foregoing (collectively, the "Pool Assets"). The Issuer shall have, with respect
to the Pool Assets, and in addition to all the other
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rights and remedies available to the Issuer, all the rights and remedies of a
secured party under any applicable UCC.
Section 1.3. Purchased Interest Computation. The Purchased Interest shall
be initially computed on the date of the initial purchase hereunder. Thereafter,
until the Facility Termination Date, the Purchased Interest shall be
automatically recomputed (or deemed to be recomputed) on each Business Day other
than a Termination Day. From and after the occurrence of any Termination Day,
the Purchased Interest shall (until the event(s) giving rise to such Termination
Day are satisfied or are waived by the Administrator) be deemed to be 100%. The
Purchased Interest shall become zero when the Capital thereof and Discount
thereon shall have been paid in full, all the amounts owed by the Seller and the
Servicer hereunder to the Issuer, the Administrator and any other Indemnified
Party or Affected Person are paid in full, and the Servicer shall have received
the accrued Servicing Fee thereon.
Section 1.4. Settlement Procedures. (a) The collection of the Pool
Receivables shall be administered by the Servicer in accordance with this
Agreement. The Seller shall provide to the Servicer on a timely basis all
information needed for such administration, including notice of the occurrence
of any Termination Day and current computations of the Purchased Interest.
(b) The Servicer shall, on each Business Day on which Collections of Pool
Receivables are received (or deemed received) by the Seller or Servicer or are
deposited into the Lock-Box Accounts, transfer such Collections therefrom and
deposit such Collections into the Collection Account. With respect to such
Collections on such day, the Servicer shall:
(i) set aside within the Collection Account for the benefit of the
Issuer, out of the percentage of such Collections represented by the
Purchased Interest, first an amount equal to the Discount accrued through
such day for each Portion of Capital and not previously transferred,
second, an amount equal to all accrued and unpaid Fees not previously
transferred, and third, to the extent funds are available therefor, an
amount equal to the Issuer's Share of the Servicing Fee accrued through
such day and not previously transferred; and
(ii) subject to Section 1.4(f), if such day is not a Termination Day,
remit to the Seller, on behalf of the Issuer, the remainder of the
percentage of such Collections, represented by the Purchased Interest, to
the extent representing a return on the Capital; such Collections shall be
automatically reinvested in Pool Receivables, and in the Related Security
and Collections and other proceeds with respect thereto, and the Purchased
Interest shall be
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automatically recomputed pursuant to Section 1.3; it being understood,
that prior to remitting to the Seller the remainder of such Collections
by way of reinvestment in Pool
Receivables, the Servicer shall have calculated the Purchased Interest on
such day, and if such Purchased Interest shall exceed 100% of the Net
Receivables Pool Balance on such day, such Collections shall not be
remitted to the Seller but shall be set aside within the Collection Account
for the benefit of the Issuer in accordance with paragraph (iii) below;
(iii) if such day is a Termination Day, set aside within the
Collection Account for the benefit of the Issuer the entire remainder of
the percentage of the Collections represented by the Purchased Interest;
provided that so long as the Facility Termination Date has not occurred if
any amounts are so transferred to the Collection Account on any Termination
Day and thereafter, the conditions set forth in Section 2 of Exhibit II are
satisfied or are waived by the Administrator, such previously transferred
amounts shall, to the extent representing a return on the Capital, be
reinvested in accordance with the preceding paragraph (ii) on the day of
such subsequent satisfaction or waiver of conditions; and
(iv) if such day is not a Termination Day, release to the Seller
(subject to Section 1.4(f)) for its own account any Collections in excess
of (x) any amounts that are required to be reinvested in accordance with
the foregoing paragraph (ii) or the proviso to paragraph (iii), (y) the
amounts that are required to be set aside pursuant to paragraph (i) above
and (z) in the event the Seller is not the Servicer, all reasonable and
appropriate out-of-pocket costs and expenses of such Servicer of servicing,
collecting and administering the Pool Receivables.
(c) The Servicer shall deposit into the Administration Account (or such
other account designated by the Administrator), on each Settlement Date,
Collections held for the Issuer pursuant to clause (b)(i) or (f) plus the amount
of Collections then held for the Issuer pursuant to clauses (b)(ii) and (iii) of
Section 1.4; provided, that if BAX or an Affiliate thereof is the Servicer, such
day is not a Termination Day and the Administrator has not notified BAX (or such
Affiliate) that such right is revoked, BAX (or such Affiliate) may retain the
portion of the Collections set aside pursuant to clause (b)(i) that represents
the Issuer's Share of the Servicing Fee. On the last day of each Yield Period,
the Administrator will notify the Servicer by facsimile of the amount of
Discount accrued with respect to each Portion of Capital during such Yield
Period or portion thereof.
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(d) Upon receipt of funds deposited into the Administration Account
pursuant to clause (c), the Administrator shall cause such funds to be
distributed as follows:
(i) if such distribution occurs on a day that is not a Termination Day
and the Purchased Interest does not exceed 100%, first to the Issuer in
payment in full of all accrued Discount with respect to each Portion of
Capital and accrued and unpaid Fees, and second, if the Servicer has set
aside amounts in respect of the Servicing Fee pursuant to clause (b)(i) and
has not retained such amounts pursuant to clause (c), to the Servicer
(payable in arrears on each Settlement Date) in payment in full of the
Issuer's Share of accrued Servicing Fees so set aside, and
(ii) if such distribution occurs on a Termination Day or on a day when
the Purchased Interest exceeds 100%, first to the Issuer in payment in full
of all accrued Discount with respect to each Portion of Capital and accrued
and unpaid Fees, second to the Issuer in payment in full of Capital (or, if
such day is not a Termination Day, the amount necessary to reduce the
Purchased Interest to 100%), third, if BAX or an Affiliate thereof is not
the Servicer, to the Servicer in payment in full of the Issuer's Share of
all accrued Servicing Fees, fourth, if the Capital and accrued Discount
with respect to each Portion of Capital have been reduced to zero, and all
accrued Servicing Fees payable to the Servicer (if other than BAX or an
Affiliate thereof) have been paid in full, to the Issuer, the Administrator
and any other Indemnified Party or Affected Person in payment in full of
any other amounts owed thereto by the Seller under this Agreement and,
fifth, unless such amount has been retained by the Servicer pursuant to
clause (c), to the Servicer (if the Servicer is BAX or an Affiliate
thereof) in payment in full of the Issuer's Share of all accrued Servicing
Fees.
After the Capital, Discount, Fees and Servicing Fees with respect to the
Purchased Interest, and any other amounts payable by the Seller and the Servicer
to the Issuer, the Administrator or any other Indemnified Party or Affected
Person hereunder, have been paid in full, all additional Collections with
respect to the Purchased Interest shall be paid to the Seller for its own
account.
(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool Receivable is
reduced or adjusted as a result of any defective, rejected, returned,
repossessed or foreclosed goods or services, or any revision, cancellation,
allowance, discount or other adjustment made by any Originator, the
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Servicer, the Seller or any Affiliate of the Seller, or any setoff or
dispute between any Originator, the Seller or any Affiliate of the Seller
and an Obligor, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in the amount of such reduction or
adjustment;
(ii) if on any day any of the representations or warranties in Section
1(g), (m) or (s) of Exhibit III is not true with respect to any Pool
Receivable, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in full (Collections deemed to have been
received pursuant to clause (i) and (ii) of this paragraph (e) are
hereinafter sometimes referred to as "Deemed Collections");
(iii) except as otherwise required by applicable law or the relevant
Contract, all Collections received from an Obligor of any Receivable shall
be applied to the Receivables of such Obligor in the order of the age of
such Receivables, starting with the oldest such Receivable, unless such
Obligor designates in writing its payment for application to specific
Receivables; and
(iv) if and to the extent the Administrator or the Issuer shall be
required for any reason to pay over to an Obligor (or any trustee,
receiver, custodian or similar official in any Insolvency Proceeding) any
amount received by it hereunder, such amount shall be deemed not to have
been so received by the Administrator or the Issuer but rather to have been
retained by the Seller and, accordingly, the Administrator or the Issuer,
as the case may be, shall have a claim against the Seller for such amount,
payable when and to the extent that any distribution from or on behalf of
such Obligor is made in respect thereof.
(f) If at any time the Seller shall wish to cause the reduction of Capital
of the Purchased Interest (but not to commence the liquidation, or reduction to
zero, of the entire Capital of the Purchased Interest), the Seller may do so as
follows:
(i) the Seller shall give the Administrator and the Servicer at least
two Business Days' prior written notice thereof (including the amount of
such proposed reduction and the proposed date on which such reduction will
commence);
(ii) on the proposed date of commencement of such reduction and on
each day thereafter, the Servicer shall cause Collections not to be
reinvested until the amount thereof not so reinvested shall equal the
desired amount of reduction; and
(iii) the Servicer shall hold such Collections in the Collection
Account for the benefit of the Issuer, for payment
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to the Administrator on the next Settlement Date immediately following the
current Yield Period, and the Capital of the Purchased Interest shall be
deemed reduced in the amount to be paid to the Administrator only when
in fact finally so paid;
provided, that:
(A) the amount of any such reduction shall be not less than $1,000,000
and shall be an integral multiple of $1,000,000, and the entire Capital of
the Purchased Interest after giving effect to such reduction shall be not
less than $20,000,000 and shall be in an integral multiple of $1,000,000
(unless Capital shall have been reduced to zero); and
(B) the Seller shall choose a reduction amount, and the date of
commencement thereof, so that to the extent practicable such reduction
shall commence and conclude in the same Yield Period.
Section 1.5. Fees. The Seller shall pay to the Administrator certain fees
in the amounts and on the dates set forth in a letter, dated the date hereof,
among the Seller, the Servicer, the Issuer and the Administrator (as such letter
agreement may be amended, supplemented or otherwise modified from time to time,
the "Fee Letter").
Section 1.6. Payments and Computations, Etc. (a) All amounts to be paid or
deposited by the Seller or the Servicer hereunder shall be made without
reduction for offset or counterclaim and shall be paid or deposited no later
than 2:00 p.m. (New York City time) on the day when due in same day funds to the
Administration Account. All amounts received after 2:00 p.m. (New York City
time) will be deemed to have been received on the next Business Day.
(b) The Seller or the Servicer, as the case may be, shall, to the extent
permitted by law, pay interest on any amount not paid or deposited by the Seller
or the Servicer, as the case may be, when due hereunder, at an interest rate
equal to 2.0% per annum above the Base Rate, payable on demand.
(c) All computations of interest under clause (b) and all computations of
Discount, fees and other amounts hereunder shall be made on the basis of a year
of 360 (or 365 or 366, as applicable, with respect to Discount or other amounts
calculated by reference to the Base Rate) days for the actual number of days
elapsed. Whenever any payment or deposit to be made hereunder shall be due on a
day other than a Business Day, such payment or deposit shall be made on the next
Business Day and such extension of time shall be included in the computation of
such payment or deposit.
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Section 1.7. Increased Costs. (a) If either (i) the introduction of, or any
change or proposed change in, or in the interpretation of, any applicable law or
regulation, or (b) compliance with any guideline or request issued after the
date hereof from any central bank or comparable agency or other Governmental
Authority (whether or not having the force of law), has or would have the effect
of reducing the rate of return on the capital of, or has affected or would
affect the amount of capital required to be maintained by the Administrator,
the Issuer, any Purchaser, any other Program Support Provider or any of their
respective Affiliates (each, an "Affected Person"), below the rate which
such Affected Person could have achieved but for such introduction, change
or compliance by an amount such Affected Person deems material, and such
Affected Person determines that the amount of such reduction is based upon
the existence of any commitment to make purchases of (or otherwise to maintain
the investment in) Pool Receivables related to this Agreement or any other
Transaction Document, then within five (5) Business Days after written demand
by any such Affected Person, the Seller shall pay to such Affected Person from
time to time as specified by such Affected Person additional amounts sufficient
to compensate such Affected Person or other corporation for such reduction;
provided, however, that to the extent any reduction in the rate of return on
such Affected Person's capital results both from its obligations hereunder and
from developments in its business or financial position not related to this
Agreement, such Affected Person shall, in determining the amount necessary to
compensate it under this Section, attempt in good faith to take account of the
relative contributions of such obligations hereunder and such other developments
or change in its financial position to such reduction. A certificate of such
Affected Person setting forth in reasonable detail the basis for determining
such amounts necessary to compensate such Affected Person shall be forwarded
to the Seller through the Administrator and shall be conclusively presumed to
be correct save for manifest error.
(b) If, due to either: (i) the introduction of or any change in or in the
interpretation of any law or regulation or (ii) compliance with any guideline or
request from any central bank or other Governmental Authority (whether or not
having the force of law), there shall be any increase in the cost to any
Affected Person of agreeing to purchase or purchasing, or maintaining the
ownership of, the Purchased Interest in respect of which Discount is computed by
reference to the Eurodollar Rate, then, upon demand by such Affected Person, the
Seller shall promptly pay in any event not later than 30 days from the delivery
of such demand to such Affected Person, from time to time as specified by such
Affected Person, additional amounts sufficient to compensate such Affected
Person for such increased costs; provided, however, that to the extent any such
increase in costs results both from its obligations
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hereunder and from developments in its business or financial position not
related to this Agreement, such Affected Party shall, in determining
the amount necessary to compensate it under this Section 1.7(b) attempt
in good faith to take account of the relative contributions of such
obligations hereunder and such other developments or change in its
financial position to such increase. The Administrator and Affected Party
will promptly notify the Seller of any event of which it has knowledge
which will entitle such Affected Party to compensation pursuant to this
Section 1.7(b); provided that the Administrator shall incur no liability
whatsoever to the Affected Party or the Seller in the event it fails to do so.
The amount of such compensation shall be determined, in the Affected Party's
reasonable discretion, based upon the assumption that such Affected Party funded
its purchase or agreed to fund its purchase of such Purchased Interest in the
London interbank market and using any reasonable attribution or averaging
methods which such Affected Party deems appropriate and practical. A certificate
of such Affected Party setting forth in reasonable detail the basis for
determining such amount or amounts necessary to compensate such Affected party
shall be forwarded to the Seller through the Administrator and shall be
conclusively presumed to be correct save for manifest error. A certificate as to
such amounts submitted to the Seller and the Administrator by such Affected
Person shall be conclusive and binding for all purposes, absent manifest error.
Section 1.8. Requirements of Law. If any Affected Person reasonably
determines that the existence of or compliance with: (a) any law or regulation
or any change therein or in the interpretation or application thereof, in each
case adopted, issued or occurring after the date hereof, or (b) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement:
(i) does or shall subject such Affected Person to any tax of any kind
whatsoever with respect to this Agreement, any increase in the Purchased
Interest or in the amount of Capital relating thereto, or does or shall
change the basis of taxation of payments to such Affected Person on account
of Collections, Discount or any other amounts payable hereunder (excluding
taxes imposed on the overall pre-tax net income of such Affected Person,
and franchise taxes imposed on such Affected Person, by the jurisdiction
under the laws of which such Affected Person is organized or a political
subdivision thereof),
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets held
by, or deposits or other
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liabilities in or for the account of, purchases, advances or loans by,
or other credit extended by, or any other acquisition of funds by, any
office of such Affected Person that are not otherwise included in the
determination of the Eurodollar Rate or the Base Rate hereunder, or
(iii) does or shall impose on such Affected Person any other
condition, and the result of any of the foregoing is: (A) to increase
the cost to such Affected Person of acting as Administrator, or of
agreeing to purchase or purchasing or maintaining the ownership of
undivided percentage ownership interests with regard to the Purchased
Interest (or interests therein) or any Portion of Capital, or (B) to
reduce any amount receivable hereunder (whether directly or indirectly),
then, in any such case, upon demand by such Affected Person, the Seller
shall promptly pay to such Affected Person additional amounts necessary
to compensate such Affected Person for such additional cost or reduced
amount receivable. All such amounts shall be payable as incurred; provided,
however, that to the extent any such increase in costs or reduced amount
receivable results both from its obligations hereunder and from
developments in its business or financial position not related to this
Agreement, such Affected Person shall, in determining the amount necessary
to compensate it under this Section, attempt in good faith to take account
of the relative contributions of such obligations hereunder and such other
developments or change in its financial position to such reduction. A
certificate of such Affected Person setting forth in reasonable detail the
basis for determining such amounts necessary to compensate such Affected
Person shall be forwarded to the Seller though the Administrator and shall
be conclusively presumed to be correct save for manifest error.
Section 1.9. Mitigation. If any Affected Party demands compensation under
Section 1.7 or Section 1.8, then such Affected Party will use reasonable efforts
to designate a different office from which to participate in the Purchase
Facility if such designation would avoid the need for, or reduce the amount of,
such compensation and would not, in the sole judgment of such Affected Party, be
otherwise disadvantageous to such Affected Party. A certificate of such Affected
Party setting forth the additional amount or amounts required to compensate such
Affected Party in respect of any increased costs, the changes as a result of
which such amounts are due and the manner of computing such amounts shall be
deemed conclusive; provided that the determinations set forth in such
certificate are made reasonably and in good faith. If any Affected party demands
compensation from the Seller under Section 1.7 or Section 1.8 more than one
hundred eighty (180) days after such Affected Party had knowledge of the
occurrence of the event giving rise to such compensation, the Seller shall not
be
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obligated to reimburse such Affected Party for amounts incurred as a result
of the occurrence of such event more than one hundred eighty (180) days prior to
the date on which the Affected Party made such demand (provided that if the
event giving rise to the compensation or indemnification is retroactive, then
the one hundred eighty (180) day period referred to above shall be extended to
include the period of retroactive effect).
Section 1.10. Accounting Terms. Except as otherwise expressly provided
herein, all accounting terms used herein shall be interpreted, and all
financial statements and certificates and reports as to financial matters
required to be delivered to the Administrator, the Issuer or any other
party hereunder shall be prepared, in accordance with GAAP applied on
a consistent basis. All calculations made for the purposes of determining
compliance with this Agreement shall (except as otherwise expressly provided
herein) be made by application of GAAP applied on a basis consistent with the
most recent annual or quarterly financial statements delivered pursuant to
Section 2(f) of Exhibit IV hereof (or, prior to the delivery of the first
financial statements pursuant to Section 2(f) of Exhibit IV, consistent with the
annual audited financial statements referenced in Section 2(e) of Exhibit III
hereof); provided, however, if (a) the Seller shall object to determining such
compliance on such basis at the time of delivery of such financial statements
due to any change in GAAP or the rules promulgated with respect thereto or (b)
the Administrator shall so object in writing within 60 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Seller (or
the Servicer on its behalf) to the Administrator as to which no such objection
shall have been made.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. Each of the Seller
and the Servicer hereby makes the representations and warranties, and hereby
agrees to perform and observe the covenants, applicable to it set forth in
Exhibits III and IV, respectively.
Section 2.2. Termination Events. If any of the Termination Events set
forth in Exhibit V shall occur, the Administrator may, by notice to the Seller,
declare the Facility Termination Date to have occurred (in which case the
Facility Termination Date shall be deemed to have occurred); provided, that
automatically upon the occurrence of any event (without any requirement for the
passage of time or the giving of notice) described in paragraph (f) of Exhibit
V, the Facility Termination Date shall occur. Upon any such
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declaration, occurrence or deemed occurrence of the Facility Termination Date,
the Issuer and the Administrator shall have, in addition to the rights and
remedies that they may have under this Agreement, all other rights and
remedies provided after default under the applicable UCC and under other
applicable law, which rights and remedies shall be cumulative.
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller. Without limiting any other rights
that the Administrator, the Issuer, any Program Support Provider or any of their
respective Affiliates, employees, officers, directors, agents, counsel,
successors, transferees or assigns (each, an "Indemnified Party") may have
hereunder or under applicable law, the Seller hereby agrees to indemnify each
Indemnified Party from and against any and all claims, damages, expenses, costs,
losses and liabilities (including Attorney Costs) (all of the foregoing being
collectively referred to as "Indemnified Amounts") arising out of or resulting
from this Agreement (whether directly or indirectly), the use of proceeds of
purchases or reinvestments, the ownership of the Purchased Interest, or any
interest therein, or in respect of any Receivable, Related Security or Contract,
excluding, however: (a) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of such Indemnified Party or its
officers, directors, agents or counsel, (b) recourse (except as otherwise
specifically provided in this Agreement) for uncollectible Receivables, or (c)
any overall net income taxes or franchise taxes imposed on such Indemnified
Party by the jurisdiction under the laws of which such Indemnified Party is
organized or any political subdivision thereof. Without limiting or being
limited by the foregoing, and subject to the exclusions set forth in the
preceding sentence, the Seller shall pay on demand to each Indemnified Party any
and all amounts necessary to indemnify such Indemnified Party from and against
any and all Indemnified Amounts relating to or resulting from any of the
following:
(i) the failure of any Receivable included in the calculation of the
Net Receivables Pool Balance as an Eligible Receivable to be an Eligible
Receivable, the failure of any information contained in a Monthly Report to
be true and correct, or the failure of any other information provided to
the Issuer or the Administrator by a Responsible Officer with respect to
Receivables or this Agreement to be true and correct,
(ii) the failure of any representation, warranty or statement made or
deemed made by the Seller (or any of its
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officers) under or in connection with this Agreement to have been true
and correct as of the date made or deemed made in all respects when made,
(iii) the failure by the Seller to comply with any applicable law,
rule or regulation with respect to any Pool Receivable or the related
Contract, or the failure of any Pool Receivable or the related Contract to
conform to any such applicable law, rule or regulation,
(iv) the failure to vest in the Issuer a valid and enforceable: (A)
perfected undivided percentage ownership interest, to the extent of the
Purchased Interest, in the Receivables in, or purporting to be in, the
Receivables Pool and the other Pool Assets, or (B) first priority perfected
security interest in the Pool Assets, in each case, free and clear of any
Adverse Claim,
(v) the failure to have filed, or any delay in filing, financing
statements or other similar instruments or documents under the UCC of any
applicable jurisdiction or other applicable laws with respect to any
Receivables in, or purporting to be in, the Receivables Pool and the other
Pool Assets, whether at the time of any purchase or reinvestment or at any
subsequent time,
(vi) any dispute, claim, offset or defense (other than discharge in
bankruptcy of the Obligor) of the Obligor to the payment of any Receivable
in, or purporting to be in, the Receivables Pool (including a defense based
on such Receivable or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against it in accordance
with its terms), or any other claim resulting from the sale of the goods or
services related to such Receivable or the furnishing or failure to furnish
such goods or services or relating to collection activities with respect to
such Receivable (if such collection activities were performed by the Seller
or any of its Affiliates acting as Servicer or by any agent or independent
contractor retained by the Seller or any of its Affiliates),
(vii) any failure of the Seller (or any of its Affiliates acting as
the Servicer) to perform its duties or obligations in accordance with the
provisions hereof or under the Contracts,
(viii) the commingling of Collections at any time with other funds,
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(ix) the use of proceeds of purchases or reinvestments,
or
(x) any reduction in Capital as a result of the distribution of
Collections pursuant to Section 1.4(d), if all or a portion of such
distributions shall thereafter be rescinded or otherwise must be returned
for any reason.
Section 3.2. Indemnities by the Servicer. Without limiting any other
rights that the Administrator, the Issuer or any other Indemnified Party may
have hereunder or under applicable law, the Servicer hereby agrees to indemnify
each Indemnified Party from and against any and all Indemnified Amounts arising
out of or resulting from (whether directly or indirectly): (a) the failure of
any information contained in a Monthly Report to be true and correct, or the
failure of any other information provided to the Issuer or the Administrator
by a Responsible Officer of the Servicer to be true and correct, (b) the
failure of any representation, warranty or statement made or deemed made by
a Responsible Officer of the Servicer under or in connection with this
Agreement to have been true and correct in all respects as of the date
made or deemed made, (c) the failure by the Servicer to comply with any
applicable law, rule or regulation with respect to any Pool Receivable or the
related Contract, (d) any dispute, claim, offset or defense of the Obligor to
the payment of any Receivable in, or purporting to be in, the Receivables Pool
resulting from or related to the collection activities with respect to such
Receivable, or (e) any failure of the Servicer to perform its duties or
obligations in accordance with the provisions hereof.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer. (a) The servicing, administering
and collection of the Pool Receivables shall be conducted by the Person so
designated from time to time as the Servicer in accordance with this Section.
Until the Administrator gives notice to BAX (in accordance with this Section) of
the designation of a new Servicer, BAX is hereby designated as, and hereby
agrees to perform the duties and obligations of, the Servicer pursuant to the
terms hereof. Upon the occurrence of a Termination Event, the Administrator may
designate as Servicer any Person (including itself) to succeed BAX or any
successor Servicer, on the condition in each case that any such Person so
designated shall agree to perform the duties and obligations of the Servicer
pursuant to the terms hereof.
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(b) Upon the designation of a successor Servicer as set forth in clause
(a), BAX agrees that it will terminate its activities as Servicer hereunder in a
manner that the Administrator determines will facilitate the transition of the
performance of such activities to the new Servicer, and BAX shall cooperate with
and assist such new Servicer. Such cooperation shall include access to or
transfer of related records and use by the new Servicer of all licenses or
software necessary or desirable (to the extent that BAX may legally transfer or
allow the new Servicer to have access to such software without violating the
terms of any agreement between BAX and the provider of such licenses or software
which relate to the transfer or assignment thereof; it being understood that if
such transfer is not permissible, the Servicer shall use its reasonable
best efforts to assist the new Servicer in obtaining any such necessary or
desirable license or software) to collect the Pool Receivables and the
Related Security.
(c) BAX acknowledges that, in making their decision to execute and deliver
this Agreement, the Administrator and the Issuer have relied on BAX's agreement
to act as Servicer hereunder. Accordingly, BAX agrees that it will not
voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder with
respect to all or any portion of the Pool Receivables to any subservicer (each a
"Sub-Servicer"); provided, that, in each such delegation: (i) such Sub-Servicer
shall agree in writing to perform the duties and obligations of the Servicer
pursuant to the terms hereof, (ii) the Servicer shall remain primarily liable
for the performance of the duties and obligations so delegated, (iii) the
Seller, the Administrator and the Issuer shall have the right to look solely to
the Servicer for performance, and (iv) the terms of any agreement with any
Sub-Servicer shall provide that the Administrator may terminate such agreement
upon the termination of the Servicer hereunder by giving notice of its desire to
terminate such agreement to the Servicer (and the Servicer shall provide
appropriate notice to each such Sub-Servicer); provided, however, that if any
such delegation is to any Person other than an Originator, the Administrator
shall have consented in writing in advance to such delegation.
Section 4.2. Duties of the Servicer. (a) The Servicer shall take or cause
to be taken all such action as may be necessary or advisable to administer and
collect each Pool Receivable from time to time, all in accordance with this
Agreement and all applicable laws, rules and regulations, with reasonable care
and diligence, and in accordance with the Credit and Collection Policies. The
Servicer shall set aside, for the accounts of the Seller and the Issuer, the
amount of the Collections to which each is entitled in accordance with Article
I. The Servicer may, in accordance with the
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applicable Credit and Collection Policy, extend the maturity of any Pool
Receivable (but not beyond 30 days) and extend the maturity or adjust
the Outstanding Balance of any Defaulted Receivable as the Servicer
may determine to be appropriate to maximize Collections thereof;
provided, however, that: (i) such extension or adjustment shall not
alter the status of such Pool Receivable as a Delinquent Receivable or
a Defaulted Receivable or limit the rights of the Issuer or the Administrator
under this Agreement and (ii) if a Termination Event has occurred and is
continuing and BAX or an Affiliate thereof is serving as the Servicer, BAX or
such Affiliate may make such extension or adjustment only upon the prior written
approval of the Administrator. The Seller shall deliver to the Servicer and the
Servicer shall hold for the benefit of the Seller and the Administrator
(individually and for the benefit of the Issuer), in accordance with their
respective interests, all records and documents (including computer tapes
or disks) with respect to each Pool Receivable. Notwithstanding anything to
the contrary contained herein, the Administrator may direct the Servicer
(whether the Servicer is BAX or any other Person) to commence or settle
any legal action to enforce collection of any Pool Receivable or to foreclose
upon or repossess any Related Security.
(b) The Servicer shall, as soon as practicable following actual receipt of
collected funds, turn over to the Seller the collections of any indebtedness
that is not a Pool Receivable, less, if BAX or an Affiliate thereof is not the
Servicer, all reasonable and appropriate out-of-pocket costs and expenses of
such Servicer of servicing, collecting and administering such collections. The
Servicer, if other than BAX or an Affiliate thereof, shall, as soon as
practicable upon demand, deliver to the Seller all records in its possession
that evidence or relate to any indebtedness that is not a Pool Receivable, and
copies of records in its possession that evidence or relate to any indebtedness
that is a Pool Receivable.
(c) The Servicer's obligations hereunder shall terminate on the later of:
(i) the Facility Termination Date and (ii) the date on which all amounts
required to be paid to the Issuer, the Administrator and any other Indemnified
Party or Affected Person hereunder shall have been paid in full.
After such termination, if BAX or an Affiliate thereof was not the Servicer
on the date of such termination, the Servicer shall promptly deliver to the
Seller all books, records and related materials that the Seller previously
provided to the Servicer, or that have been obtained by the Servicer, in
connection with this Agreement.
Section 4.3. Establishment and Use of Certain Accounts. (a) Within 45 days
of the initial purchase hereunder, the Seller shall
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<PAGE>
enter into Lock-Box Agreements establishing the Lock-Box Accounts listed on
Schedule II with all of the Lock-Box Banks, and deliver original counterparts
thereof to the Administrator.
(b) The Servicer agrees to establish the Collection Account within 45 days
of the first purchase hereunder. The Collection Account shall be used to accept
the transfer of Collections of Pool Receivables from the Lock-Box Accounts
pursuant to Section 1.4(b) and for such other purposes described in the
Transaction Documents.
(c) Any amounts in the Collection Account may be invested by the Collection
Account Bank at Servicer's direction, in Permitted Investments, so long as
Issuer's interest in such Permitted Investments is perfected and such Permitted
Investments are subject to no Adverse Claims other than those of the Issuer
provided hereunder.
(d) Upon the occurrence of a Termination Event, the Administrator may at
any time thereafter give notice to each Lock-Box Bank and/or the Collection
Account Bank that the Administrator is exercising its rights under the Lock-Box
Agreements and/or the Collection Account Agreement, as applicable, to do any or
all of the following: (i) to have the exclusive ownership and control of the
Lock-Box Accounts and the Collection Account transferred to the Administrator
and to exercise exclusive dominion and control over the funds deposited therein,
(ii) to have the proceeds that are sent to the respective Lock-Box Accounts
and/or the Collection Account redirected pursuant to the Administrator's
instructions rather than deposited in the applicable account, and (iii) to take
any or all other actions permitted under the applicable Lock-Box Agreement
and/or the Collection Account Agreement. The Seller hereby agrees that if the
Administrator at any time takes any action set forth in the preceding sentence,
the Administrator shall have exclusive control of the proceeds (including
Collections) of all Pool Receivables and the Seller hereby further agrees to
take any other action that the Administrator may reasonably request to transfer
such control. Any proceeds of Pool Receivables received by the Seller or the
Servicer thereafter shall be sent immediately to the Administrator (or as
otherwise directed by the Administrator). The parties hereto hereby acknowledge
that if at any time the Administrator takes control of any Lock-Box Account
and/or the Collection Account, the Administrator shall not have any rights to
the funds therein in excess of the unpaid amounts due to the Administrator or
the Issuer (including its successors and assigns), and the Administrator shall
distribute or cause to be distributed such funds in accordance with Section
4.2(b) and Article I (in each case as if such funds were held by the Servicer
thereunder).
Section 4.4. Enforcement Rights. (a) At any time following the occurrence
of a Termination Event:
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(i) the Administrator may direct the Obligors that payment of all
amounts payable under any Pool Receivable is to be made directly to the
Administrator or its designee,
(ii) the Administrator may give notice of the Issuer's interest in
Pool Receivables to each Obligor, which notice shall direct that payments
be made directly to the Administrator or its designee, and
(iii) the Administrator may request the Servicer to, and upon such
request the Servicer shall: (A) assemble all of the records necessary or
desirable to collect the Pool Receivables and the Related Security, and
transfer or license to a successor Servicer the use of all software
necessary or desirable (to the extent that BAX may legally transfer or
allow the new Servicer to have access to such software without violating
the terms of any agreement between BAX and the provider of such licenses
or software which relate to the transfer or assignment thereof; it being
understood that if such transfer is not permissible, the Servicer shall
use its reasonable best efforts to assist the new Servicer in obtaining
any such necessary or desirable license or software) to collect the Pool
Receivables and the Related Security pursuant to Section 4.1(b), and make
the same available to the Administrator or its designee at a place selected
by the Administrator, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting Collections
in a manner acceptable to the Administrator and, promptly upon receipt,
remit all such cash, checks and instruments, duly endorsed or with duly
executed instruments of transfer, to the Administrator or its designee.
(b) The Seller hereby authorizes the Administrator, and irrevocably
appoints the Administrator as its attorney-in-fact with full power of
substitution and with full authority in the place and stead of the Seller,
which appointment is coupled with an interest, to take any and all steps in the
name of the Seller and on behalf of the Seller necessary or desirable, in the
determination of the Administrator, to collect any and all amounts or portions
thereof due under any and all Pool Assets, including endorsing the name of the
Seller on checks and other instruments representing Collections and enforcing
such Pool Assets. Notwithstanding anything to the contrary contained in this
subsection, none of the powers conferred upon such attorney-in-fact pursuant to
the preceding sentence shall subject such attorney-in-fact to any liability if
any action taken by it shall prove to be inadequate or invalid except for its
own gross negligence or wilful misconduct, nor shall they confer any
obligations upon such attorney-in-fact in any manner whatsoever.
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Section 4.5. Responsibilities of the Seller. (a) Anything herein to the
contrary notwithstanding, the Seller shall pay when due any taxes, including any
sales taxes payable in connection with the Pool Receivables and their creation
and satisfaction. The Administrator and the Issuer shall not have any obligation
or liability with respect to any Pool Asset, nor shall either of them be
obligated to perform any of the obligations of the Seller, BAX or an Originator
thereunder.
(b) BAX hereby irrevocably agrees that if at any time it shall cease to be
the Servicer hereunder, it shall act (if the then-current Servicer so requests
and for a reasonable fee for such services as agreed to between BAX and such new
Servicer, payable by such new Servicer solely out of the Servicing Fee) as the
data-processing agent of the Servicer and, in such capacity, BAX shall conduct
the data-processing functions of the administration of the Receivables and the
Collections thereon in substantially the same way that BAX conducted such
data-processing functions while it acted as the Servicer.
Section 4.6. Servicing Fee. (a) Subject to clause (b), the Servicer shall
be paid a fee equal to 0.50% per annum (the "Servicing Fee Rate") of the daily
average aggregate Outstanding Balance of the Pool Receivables. The Issuer's
Share of such fee shall be paid through the distributions contemplated by
Section 1.4(d), and the Seller's Share of such fee shall be paid by the Seller.
(b) If the Servicer ceases to be BAX or an Affiliate thereof, the servicing
fee shall be the greater of: (i) the amount calculated pursuant to clause (a),
and (ii) an alternative amount specified by the successor Servicer not to exceed
110% of the aggregate reasonable costs and expenses incurred by such successor
Servicer in connection with the performance of its obligations as Servicer.
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ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc. No amendment or waiver of any provision of
this Agreement or any other Transaction Document, or consent to any departure by
the Seller or the Servicer therefrom, shall be effective unless in a writing
signed by the Administrator, and, in the case of any amendment, by the other
parties thereto; and then such amendment, waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, however, that no such material amendment shall be effective until both
Moody's and Standard & Poor's have notified the Servicer and the Administrator
in writing that such action will not result in a reduction or withdrawal of the
rating of any Notes. No failure on the part of the Issuer or the Administrator
to exercise, and no delay in exercising any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The Administrator shall provide each Rating Agency with a copy of each
amendment to or waiver or consent under this Agreement promptly following the
effective date thereof.
Section 5.2. Notices, Etc. All notices and other communications hereunder
shall, unless otherwise stated herein, be in writing (which shall include
facsimile communication) and be sent or delivered to 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. Notices and communications by facsimile shall be
effective when sent (and shall be followed by hard copy sent by first class
mail), and notices and communications sent by other means shall be effective
when received.
Section 5.3. Assignability. (a) This Agreement and the Issuer's rights and
obligations herein (including ownership of the Purchased Interest or an interest
therein) shall be assignable, in whole or in part, by the Issuer and its
successors and assigns with the prior written consent of the Seller; provided,
however, that such consent shall not be unreasonably withheld; and provided
further, that no such consent shall be required if the assignment is made to
BNS, any Affiliate of BNS, any Purchaser or other Program Support Provider or
any Person that is: (i) in the business of issuing Notes and (ii) associated
with or administered by BNS or any Affiliate of BNS. The Administrator shall
provide written notice to each Rating Agency of any such assignment by the
Issuer pursuant to this Section 5.3(a).
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(b) The Issuer may at any time grant to one or more banks or other
institutions (each a "Purchaser") party to the Liquidity Agreement, or to any
other Program Support Provider, participating interests in the Purchased
Interest. In the event of any such grant by the Issuer of a participating
interest to a Purchaser or other Program Support Provider, the Issuer shall
remain responsible for the performance of its obligations hereunder. The Seller
agrees that each Purchaser or other Program Support Provider shall be entitled
to the benefits of Sections 1.7 and 1.8. The Seller shall have the right to
consent in advance to each Person that becomes a party to the Liquidity
Agreement as a Purchaser following the date hereof.
(c) This Agreement and the rights and obligations of the Administrator
hereunder shall be assignable, in whole or in part, by the Administrator and its
successors and assigns; provided, that unless: (i) such assignment is to an
Affiliate of BNS, (ii) it becomes unlawful for BNS to serve as the Administrator
or (iii) a Termination Event exists, the Seller has consented in writing, in
advance of any such assignment to such assignment, which consent shall not be
unreasonably withheld. The Administrator shall provide written notice to each
Rating Agency of any such assignment by it pursuant to this Section 5.3(c).
(d) Except as provided in Section 4.1(d), neither the Seller nor the
Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without the prior written consent of the Administrator.
(e) Without limiting any other rights that may be available under
applicable law, the rights of the Issuer may be enforced through it or by
its agents.
Section 5.4. Costs, Expenses and Taxes. (a) In addition to the rights of
indemnification granted under Section 3.1, the Seller agrees to pay on demand
all reasonable costs and expenses in connection with the preparation, execution,
delivery and administration (including periodic internal audits by the
Administrator of Pool Receivables) of this Agreement, the other Transaction
Documents and the other documents and agreements to be delivered hereunder (and
all reasonable costs and expenses in connection with any amendment, waiver or
modification of any thereof, to the extent such amendment, waiver or
modification was requested or required by the Seller, the Servicer, any
Originator or any Rating Agency), including: (i) Attorney Costs for the
Administrator, the Issuer and their respective Affiliates and agents with
respect thereto and with respect to advising the Administrator, the Issuer and
their respective Affiliates and agents as to their rights and remedies under
this Agreement and the other Transaction Documents, and (ii) all reasonable
costs and
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expenses (including Attorney Costs), if any, of the Administrator, the
Issuer and their respective Affiliates and agents in connection with the
enforcement of this Agreement and the other Transaction Documents.
(b) In addition, the Seller shall pay on demand any and all stamp and other
taxes and fees payable in connection with the execution, delivery, filing and
recording of this Agreement or the other documents or agreements to be delivered
hereunder, and agrees to save each Indemnified Party harmless from and against
any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
Section 5.5. No Proceedings; Limitation on Payments. Each of the Seller,
the Servicer, the Administrator, each assignee of the Purchased Interest or any
interest therein, hereby covenants and agrees that it will not institute
against, or join any other Person in instituting against, the Issuer any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding,
or other proceeding under any federal or state bankruptcy or similar law, for
one year and one day after the latest maturing Note issued by the Issuer is paid
in full. The provision of this Section 5.5 shall survive any termination of this
Agreement.
Section 5.6. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE
PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT OF ANY
PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE
STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE
BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES HERETO
IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION,
INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM
NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION
OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER
MEANS PERMITTED BY NEW YORK LAW.
Section 5.7. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which, when so
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executed, shall be deemed to be an original, and all of which, when taken
together, shall constitute one and the same agreement.
Section 5.8. Survival of Termination. The provisions of Sections 1.7, 1.8,
3.1, 3.2, 5.4, 5.5, 5.6, 5.9, 5.12 and 5.13 shall survive any termination of
this Agreement.
Section 5.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES THEIR
RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON
OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY
OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO
CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES
THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
Section 5.10. Entire Agreement. This Agreement and the other Transaction
Documents embody the entire agreement and understanding between the parties
hereto, and supersede all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof.
Section 5.11. Headings. The captions and headings of this Agreement and any
Exhibit, Schedule or Annex hereto are for convenience of reference only and
shall not affect the interpretation hereof or thereof.
Section 5.12. Liabilities. The obligations of the Issuer under the
Transaction Documents are solely the corporate obligations of the Issuer and the
Seller, as the case may be. Except in their respective separate capacities as
parties to any of the Transaction Documents, no recourse shall be had for any
obligation or claim arising out of or based upon any Transaction Document
against any stockholder, employee, officer, director or incorporator of the
Issuer or the Seller, as the case may be; provided, however, that this Section
shall not relieve any such Person of any liability it might otherwise have for
its own gross negligence or willful misconduct.
Section 5.13. Confidentiality. Unless otherwise required by applicable law,
each of the Seller and the Servicer agrees to
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maintain the confidentiality of this Agreement and the other Transaction
Documents (and all drafts thereof) in communications with third parties
and otherwise; provided, that this Agreement may be disclosed to:
(a) third parties to the extent such disclosure is made pursuant to
a written agreement of confidentiality in form and substance reasonably
satisfactory to the Administrator, and (b) the Seller's legal counsel
and auditors if they agree to hold it confidential. Unless otherwise required by
applicable law, each of the Administrator and the Issuer agrees to maintain the
confidentiality of non-public information regarding The Pittston Company and its
Subsidiaries; provided, that such information may be disclosed to: (i) third
parties to the extent such disclosure is made pursuant to a written agreement of
confidentiality in form and substance reasonably satisfactory to The Pittston
Company and only for use in connection with this transaction and the commercial
paper program of the Issuer, (ii) legal counsel and auditors of the Issuer or
the Administrator if they agree to hold it confidential and only for use in
connection with this transaction and the commercial paper program of the Issuer,
(iii) the rating agencies rating the Notes to the extent such information
relates to the Receivables Pool or the transactions contemplated by this
Agreement, or if not so related, upon obtaining the prior consent of The
Pittston Company (such consent not to be unreasonably withheld), (iv) any
Program Support Provider or potential Program Support Provider (if they agree,
in a manner and form reasonably acceptable to The Pittston Company, to hold it
confidential and to use such information only in connection with its
participation in this transaction and the Issuer's commercial paper program) to
the extent such information relates to the Receivables Pool or the transactions
contemplated by this Agreement, or if not so related, upon obtaining the prior
consent of The Pittston Company (such consent not to be unreasonably withheld),
(v) any placement agent placing the Notes (if they agree, in a manner and form
reasonably acceptable to The Pittston Company, to hold it confidential and to
use such information only in connection with its participation in this
transaction and the Issuer's commercial paper program) and (vi) any regulatory
authorities having jurisdiction over BNS, the Issuer, any Program Support
Provider or any Purchaser. The Pittston Company is an intended third-party
beneficiary of this Section 5.13.
[SIGNATURE PAGE TO FOLLOW]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
BAX FUNDING CORPORATION
By: /s/ James B. Hartough
--------------------------------
Name: James Hartough
Title: President
Address:
BAX Funding Corporation
16808 Armstrong Avenue
Irvine, California 92713
Attention: Daniel Crowley
Telephone: 949-752-4000
Facsimile: 949-260-2305
with a copy to:
BAX Funding Corporation
c/o The Pittston Company
1801 Bayberry Court
Richmond, Virginia 23226-8100
Attention: James Hartough, President
Telephone: 804-289-9622
Facsimile: 804-289-9760
BAX GLOBAL INC.
By: /s/ James B. Hartough
--------------------------------
Name: James Hartough
Title: Treasurer
Address:
BAX Global Inc.
16808 Armstrong Avenue
Irvine, California 92713
Attention: Daniel Crowley, Executive Vice
President and Chief Financial Officer
Telephone: 949-752-4000
Facsimile: 949-260-2305
with a copy to:
BAX Global Inc.
c/o The Pittston Company
Receivables Purchase Agreement
S-1
<PAGE>
LIBERTY STREET FUNDING CORP.
By: /s/ Bernard J. Angelo
----------------------------------------
Name: Bernard J. Angelo
-----------------------------------
Title: Vice President
-----------------------------------
Address:
Liberty Street Funding Corp.
c/o Global Securitization
Services, LLC
114 West 47th Street, Suite 1715
New York, New York 10036
Attention: Andrew L. Stidd
Telephone No.: (212) 302-5151
Facsimile No.: (212) 302-8767
With a copy to:
The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Attention: Michael Parker
Telephone No.: (212) 225-5061
Facsimile No.: (212) 225-5090
THE BANK OF NOVA SCOTIA,
as Administrator
By: /s/ J. Alan Edwards
----------------------------------------
Name: J. Alan Edwards
-------------------------------------
Title: Managing Director
-------------------------------------
Address:
The Bank of Nova Scotia
One Liberty Plaza
New York, New York 10006
Attention: Michael Parker
Telephone No.: (212) 225-5061
Facsimile No.: (212) 225-5090
Receivables Purchase Agreement
S-2
<PAGE>
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits, Schedules and Annexes),
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms defined).
Unless otherwise indicated, all Section, Annex, Exhibit and Schedule references
in this Exhibit are to Sections of and Annexes, Exhibits and Schedules to the
Agreement.
"Administration Account" means the account, account number 2158-13 of the
Administrator maintained at the office of The Bank of Nova Scotia, or such other
account as may be so designated in writing by the Administrator to the Servicer.
"Administrator" has the meaning set forth in the preamble to the Agreement.
"Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement; it being understood
that any thereof in favor of the Issuer or the Administrator (for the benefit of
the Issuer) shall not constitute an Adverse Claim.
"Affected Person" has the meaning set forth in Section 1.7 of the
Agreement.
"Affiliate" means, as to any Person: (a) any Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person, or (b) who is a director or officer: (i) of such Person or (ii) of
any Person described in clause (a), except that, with respect to the Issuer,
Affiliate shall mean the holder(s) of its capital stock. For purposes of this
definition, control of a Person shall mean the power, direct or indirect to
direct or cause the direction of the management and policies of such Person, in
either case whether by ownership of securities, contract, proxy or otherwise.
"Agreement" has the meaning set forth in the preamble.
"Alternate Rate" for any Yield Period for any Portion of Capital of the
Purchased Interest (to the extent such Portion of Capital is not being funded at
such time by the issuance of Notes) means an interest rate per annum equal to
1.125% per annum above the Eurodollar Rate for such Yield Period; provided,
however, that in the case of:
(i) any Yield Period on or before the first day of which the
Administrator shall have been notified by the Issuer, a
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Purchaser or any other Program Support Provider that the introduction
of or any change in or in the interpretation of any law or regulation
makes it unlawful, or any central bank or other Governmental Authority
asserts that it is unlawful, for the Issuer, such Purchaser or other
Program Support Provider, as applicable, to fund any Portion of
Capital based on the Eurodollar Rate (and the Issuer, such Purchaser or
other Program Support Provider shall not have subsequently notified the
Administrator that such circumstances no longer exist),
(ii) any Yield Period of one to (and including) 29 days,
(iii) any Yield Period as to which the Administrator does not receive
notice of a request for funding pursuant to Section 1.2(a) of the Agreement
before 2:00 p.m. (New York City time) on the third Business Day preceding
the first day of the proposed Yield Period, or
(iv) any Yield Period relating to a Portion of Capital that is less
than $1,000,000,
the "Alternate Rate" for each such Yield Period shall be an interest rate per
annum equal to the Base Rate in effect on each day of such Yield Period. The
"Alternate Rate" for any day while a Termination Event exists shall be an
interest rate equal to 2.0% per annum above the Base Rate in effect on such day.
"Attorney Costs" means and includes all reasonable fees and disbursements
of any law firm or other external counsel.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978 (11
U.S.C.'SS'101, et seq.), as amended from time to time.
"Base Rate" means, for any day, a fluctuating interest rate per annum as
shall be in effect from time to time, which rate shall be at all times equal to
the higher of:
(a) the rate of interest in effect for such day as publicly announced
from time to time by BNS in New York, New York as its "reference rate".
Such "reference rate" is set by BNS based upon various factors, including
BNS's costs and desired return, general economic conditions and other
factors, and is used as a reference point for pricing some loans, which may
be priced at, above or below such announced rate or
(b) 0.50% per annum above the latest Federal Funds Rate.
"Benefit Plan" means any employee benefit pension plan as defined in
Section 3(2) of ERISA in respect of which the Seller,
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<PAGE>
any Originator, BAX or any ERISA Affiliate is, or at any time during the
immediately preceding six years was, an "employer" as defined in Section 3(5)
of ERISA.
"BNS" has the meaning set forth in the preamble to the Agreement
"Business Day" means any day (other than a Saturday or Sunday) on which:
(a) banks are not authorized or required to close in New York City, New York and
(b) if this definition of "Business Day" is utilized in connection with the
Eurodollar Rate, dealings are carried out in the London interbank market.
"Capital" means the amount paid to the Seller in respect of the Purchased
Interest by the Issuer pursuant to the Agreement, as reduced from time to time
by Collections distributed and applied on account of such Capital pursuant to
Section 1.4(d) of the Agreement; provided, that if such Capital shall have been
reduced by any distribution, and thereafter all or a portion of such
distribution is rescinded or must otherwise be returned for any reason, such
Capital shall be increased by the amount of such rescinded or returned
distribution as though it had not been made.
"Change in Control" means (a) that BAX ceases to own, directly or
indirectly, 100% of the capital stock of the Seller free and clear of all
Adverse Claims or (b) that The Pittston Company ceases to own, directly or
indirectly, a majority of the capital stock of BAX or any Originator.
"Closing Date" means December 15, 2000.
"Collection Account" means that certain bank account numbered 323181317
maintained at The Chase Manhattan Bank in New York, New York which is (i)
identified as the "Liberty Street/BAX Funding Corporation Collection Account",
(ii) in the Seller's name, (iii) pledged, on a first-priority basis, to the
Issuer pursuant to Section 1.2(d), and (iv) is governed by the Collection
Account Agreement.
"Collection Account Agreement" means that certain letter agreement dated as
of the date hereof among the Seller, the Servicer, the Administrator and the
Collection Account Bank, as the same may be amended, supplemented, amended and
restated, or otherwise modified from time to time in accordance with the
Agreement.
"Collection Account Bank" means each bank maintaining a Collection Account.
"Collections" means, with respect to any Pool Receivable: (a) all funds
that are received by any Originator, BAX, the Seller or
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<PAGE>
the Servicer in payment of any amounts owed in respect of such Receivable
(including purchase price, finance charges, interest and all other charges),
or applied to amounts owed in respect of such Receivable (including insurance
payments and net proceeds of the sale or other disposition of repossessed
goods or other collateral or property of the related Obligor or any other
Person directly or indirectly liable for the payment of such Pool Receivable
and available to be applied thereon), (b) all Deemed Collections and
(c) all other proceeds of such Pool Receivable.
"Company Note" has the meaning set forth in Section 3.1 of the Sale
Agreement.
"Concentration Percentage" means: (a) for any Group A Obligor, 6%, (b) for
any Group B Obligor, 4%, (c) for any Group C Obligor, 3% and (d) for any Group D
Obligor, 2%; provided, however, that the Issuer may, with prior written consent
from the Administrator, and if the Rating Agency Condition is satisfied, approve
higher Concentration Percentages for selected Obligors.
"Concentration Reserve" means, at any time the aggregate Capital at such
time multiplied by (a) the Concentration Reserve Percentage divided by (b) 1
minus the Concentration Reserve Percentage at such time.
"Concentration Reserve Percentage" means, at any time, the largest of: (a)
the sum of four largest Group D Obligor Percentages, (b) the sum of the two
largest Group C Obligor Percentages and (c) the largest Group B Obligor
Percentage.
"Contract" means, with respect to any Receivable, any and all contracts,
instruments, agreements, leases, invoices, notes or other writings pursuant to
which such Receivable arises or that evidence such Receivable or under which an
Obligor becomes or is obligated to make payment in respect of such Receivable.
"CP Rate" means, for any Yield Period for any Portion of Capital, the per
annum rate equivalent to the weighted average cost (as determined by the
Administrator and which shall include commissions of placement agents and
dealers, incremental carrying costs incurred with respect to Notes maturing on
dates other than those on which corresponding funds are received by the Issuer,
other borrowings by the Issuer (other than under any Program Support Agreement)
and any other costs associated with the issuance of Notes) of or related to the
issuance of Notes that are allocated, in whole or in part, by the Issuer or the
Administrator to fund or maintain such Portion of Capital (and which may be also
allocated in part to the funding of other assets of the Issuer); provided,
however, that if any component of such rate is a discount rate, in calculating
the "CP Rate" for such Portion of Capital for such Yield Period, the Issuer
shall for such component use the rate
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resulting from converting such discount rate to an interest bearing equivalent
rate per annum. Notwithstanding the foregoing, the "CP Rate" for any day while
a Termination Event exists, shall be an interest rate equal to 2% above the
Base Rate in effect on such day.
"Credit and Collection Policy" means, as the context may require, those
receivables credit and collection policies and practices of each Originator in
effect on the date of the Agreement and described in Schedule I to the
Agreement, as modified in compliance with the Agreement.
"Days' Sales Outstanding" means, for any calendar month, an amount computed
as of the last day of such calendar month equal to: (a) the average of the
Outstanding Balance of all Pool Receivables as of the last day of each of the
three most recent calendar months ended on the last day of such calendar month
divided by (b)(ii) the aggregate amount of new Receivables generated by each
Originator during the three calendar months ended on or before the last day of
such calendar month divided by (ii) 90.
"Debt" of any Person means, without duplication, the sum of the following
determined and calculated in accordance with GAAP: (a) indebtedness for borrowed
money, (b) obligations evidenced by bonds, debentures, notes or other similar
instruments, (c) obligations to pay the deferred purchase price of property or
services purchased by such Person (other than trade debt incurred in the
ordinary course of business and due within six months of the incurrence thereof)
which would appear as liabilities on a balance sheet of such Person, (d) the
principal portion of all obligations as lessee under leases that shall have been
or should be, in accordance with generally accepted accounting principles,
recorded as capital leases, and (e) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the kinds referred to in clauses
(a) through (d).
"Deemed Collections" has the meaning set forth in Section 1.4(e)(ii) of the
Agreement.
"Default Ratio" means the ratio (expressed as a percentage and rounded to
the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of the
last day of each calendar month by dividing: (a) the sum of (i) the aggregate
Outstanding Balance of all Pool Receivables that became Defaulted Receivables
during such month, by (b) the aggregate credit sales made by the Originators
during the month that is three calendar months before such month.
"Defaulted Receivable" means a Receivable:
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(a) as to which any payment, or part thereof, remains unpaid for more
than 90 days from the Shipping Date for such Receivable, or
(b) without duplication (i) as to which an Event of Bankruptcy shall
have occurred with respect to the Obligor thereof or any other Person
obligated thereon or owning any Related Security with respect thereto, or
(ii) which has been, or, consistent with the Credit and Collection Policy
would be, written off the Seller's books as uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage and rounded
to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed as of
the last day of each calendar month by dividing: (a) the aggregate Outstanding
Balance of all Pool Receivables that were Delinquent Receivables on such day by
(b) the Net Receivables Pool Balance on such day.
"Delinquent Receivable" means a Receivable (other than a Defaulted
Receivable) as to which any payment, or part thereof, remains unpaid for more
than 60 days from the Shipping Date for such Receivable.
"Dilution Horizon" means, for any calendar month, the ratio (expressed as a
percentage and rounded to the nearest 1/100th of 1%, with 5/1000th of 1% rounded
upward) computed as of the last day of such calendar month of: (a) the aggregate
credit sales made by the Originators during the most recent one calendar month
to (b) the aggregate Outstanding Balance of the Eligible Receivables at the last
day of the most recent calendar month.
"Dilution Ratio" means the ratio (expressed as a percentage and rounded to
the nearest 1/100th of 1%, with 5/1000th of 1% rounded upward), computed as of
the last day of each calendar month by dividing: (a) the aggregate amount of
payments made or owed by the Seller pursuant to Section 1.4(e)(i) of the
Agreement during such calendar month by (b) the aggregate credit sales made by
all the Originators during the calendar month that is one month prior to such
calendar month.
"Dilution Reserve" means, on any day, an amount equal to: (a) to the extent
that The Pittston Company has a long-term senior unsecured debt rating of at
least "BBB-" by Standard & Poor's and "Baa3" by Moody's, 0%, or (b) if The
Pittston Company does not have the debt rating described in clause (a), above,
(i) the Capital at the close of business of the Servicer on such date multiplied
by (ii) (A) the Dilution Reserve Percentage on such date, divided by (B) 1 minus
the Dilution Reserve Percentage on such date.
"Dilution Reserve Percentage" means on any date, the greater of: (a) 3% and
(b) the product of (i) the Dilution Horizon
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<PAGE>
multiplied by (ii) the sum of (x) 2 times the average of the Dilution Ratios for
the twelve most recent calendar months and (y) the Spike Factor.
"Discount" means:
(a) for the Portion of Capital for any Yield Period to the extent the
Issuer will be funding such Portion of Capital during such Yield Period
through the issuance of Notes:
CPR x C x ED/360 + TF
(b) for the Portion of Capital for any Yield Period to the extent the
Issuer will not be funding such Portion of Capital during such Yield Period
through the issuance of Notes:
AR x C x ED/Year + TF
where:
<TABLE>
<S> <C>
AR = the Alternate Rate for the Portion of Capital for
such Yield Period,
C = the relevant Portion of Capital during such Yield
Period,
CPR = the CP Rate for the Portion of Capital,
ED = the actual number of days during such Yield Period,
Year = if such Portion of Capital is funded based upon:
(i) the Eurodollar Rate, 360 days, and
(ii) the Base Rate, 365 or 366 days, as applicable,
and
TF = the Termination Fee, if any, for the Portion of
Capital for such Yield Period;
</TABLE>
provided, however, that no provision of the Agreement shall require the payment
or permit the collection of Discount in excess of the maximum permitted by
applicable law; and provided further, that Discount for the Portion of Capital
shall not be considered paid by any distribution to the extent that at any time
all or a portion of such distribution is rescinded or must otherwise be returned
for any reason.
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<PAGE>
"Eligible Receivable" means, at any time, a Pool Receivable:
(a) the Obligor of which is (i) a United States resident; provided,
however, if the Obligor of such Receivable is a resident of a jurisdiction
other than the United States (and, solely to the extent that (1) the
inclusion of any Receivables of such Obligor in the Net Receivables Pool
Balance has been consented to, in writing, by the Administrator prior to
such inclusion; it being understood that by signing the Agreement on the
date hereof, the Administrator shall, subject to the concentration
limitation set forth in this proviso and the remaining requirements of this
parenthetical, be deemed to have consented in writing for purposes of this
parenthetical, to the inclusion of Receivables in the Net Receivables Pool
Balance, the Obligors of which are residents of either Mexico or Canada and
(2) the Administrator has received reasonably satisfactory evidence that
the Contract relating to any such Receivable does not prohibit, restrict or
otherwise require the consent of the related Obligor in order for the
Originator thereof to freely assign such Receivable as contemplated by the
Transaction Documents), the aggregate Outstanding Balance of all Pool
Receivables of such Obligor that are Eligible Receivables when added to the
aggregate Outstanding Balance of all other Eligible Receivables of Obligors
that are not residents of the United States, shall not exceed 10% of the
aggregate outstanding balance of all Eligible Receivables (not counting any
otherwise Eligible Receivables the Obligors of which are not residents of
the United States) at such time, (ii) not a government or a governmental
subdivision, affiliate or agency; provided, however, if the Obligor of such
Receivable is a government or a governmental subdivision, affiliate or
agency, the aggregate Outstanding Balance of all Pool Receivables of such
Obligor that are Eligible Receivables when added to the aggregate
Outstanding Balance of all other Eligible Receivables of Obligors that are
governments or a governmental subdivisions, affiliates or agencies shall
not exceed 5% of the aggregate outstanding balance of all Eligible
Receivables (not counting any otherwise Eligible Receivables the Obligors
of which are not governments or a governmental subdivisions, affiliates or
agencies) at such time, (iii) not subject to any action of the type
described in paragraph (f) of Exhibit V to the Agreement and (iv) not an
Affiliate of BAX or any Affiliate of BAX,
(b) that is denominated and payable only in U.S. dollars in the United
States,
(c) that does not have a stated maturity which is more than 45 days
after the Shipping Date of such Receivable; provided, however, that the
aggregate Outstanding Balance of all Receivables that have payment terms
that are greater than
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15 days after the Shipping Date for such Receivable, shall not exceed 10%
of the aggregate outstanding balance of all Eligible Receivables (not
counting any otherwise Eligible Receivables with payment terms greater
than 15 days after the Shipping Date thereof),
(d) that arises under a duly authorized Contract for the sale and
delivery of goods and services in the ordinary course of each Originator's
business,
(e) that arises under a duly authorized Contract that is in full force
and effect and that is a legal, valid and binding obligation of the related
Obligor, enforceable against such Obligor in accordance with its terms,
(f) that conforms in all material respects with all applicable laws,
rulings and regulations in effect,
(g) that is not the subject of any asserted dispute, offset, hold back
defense, Adverse Claim or other claim,
(h) that satisfies all applicable requirements of the applicable
Credit and Collection Policy,
(i) that has not been modified, waived or restructured since its
creation, except as permitted pursuant to Section 4.2 of the Agreement,
(j) in which the Seller owns good and marketable title, free and clear
of any Adverse Claims, and that is freely assignable by the Seller,
(k) for which the Issuer shall have a valid and enforceable undivided
percentage ownership or security interest, to the extent of the Purchased
Interest, and a valid and enforceable first priority perfected security
interest therein and in the Related Security and Collections with respect
thereto, in each case free and clear of any Adverse Claim,
(l) that constitutes an account as defined in the UCC, and that is not
evidenced by instruments or chattel paper,
(m) that is not a Defaulted Receivable,
(n) for which neither the Originator thereof, the Seller nor the
Servicer has established any offset arrangements with the related Obligor,
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(o) for which Defaulted Receivables of the related Obligors identified
on the Monthly Report do not exceed 40% of the Outstanding Balance of all
such Obligor's Receivables,
(p) that represents amounts earned and payable by the Obligor that are
not subject to the performance of additional services by the Originator
thereof, and
(q) the obligation with respect to which represents all or part of the
sales price of merchandise, insurance or services within the meaning of
Section 3(c)(5) of the Investment Company Act of 1940, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"ERISA Affiliate" means: (a) any corporation that is a member of the same
controlled group of corporations (within the meaning of Section 414(b) of the
Internal Revenue Code) as the Seller, any Originator or BAX, (b) a trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Seller, any Originator
or BAX, or (c) a member of the same affiliated service group (within the meaning
of Section 414(m) of the Internal Revenue Code) as the Seller, any Originator,
any corporation described in clause (a) or any trade or business described in
clause (b).
"ERISA Notice" means any of the following notices: (i) any unfavorable
determination letter from the Internal Revenue Service regarding the
qualification of a Benefit Plan under Section 401(a) of the Code (along with a
copy thereof) which would have a Material Adverse Effect, (ii) all notices
received by the Servicer or its Affiliates or any ERISA Affiliate of the Pension
Benefit Guaranty Corporation's intent to terminate any pension plan or to have a
trustee appointed to administer any pension plan, (iii) all notices received by
any of the Servicer or its Affiliates or any ERISA Affiliate from a
multiemployer plan sponsor concerning the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA which would have a Material Adverse
Effect, (iv) the Servicer or its Affiliates obtaining knowledge or reason to
know that the Servicer or its Affiliates or any ERISA Affiliate has filed or
intends to file a notice of intent to terminate any pension plan under a
distress termination within the meaning of Section 4041(c) of ERISA, and (v) the
occurrence of a Reportable Event (within the meaning of Section 4043 of ERISA),
unless notice of any such Reportable Event has been waived by regulation.
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"Eurodollar Rate" means, for any Yield Period, an interest rate per annum
(rounded upward to the nearest 1/16th of 1%) determined pursuant to the
following formula:
LIBOR
----------------------------------
100% - Eurodollar Rate Reserve Percentage
where "Eurodollar Rate Reserve Percentage" means, for any Yield Period, the
maximum reserve percentage (expressed as a decimal, rounded upward to the
nearest 1/100th of 1%) in effect on the date LIBOR for such Yield Period is
determined under regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to
"Eurocurrency" funding (currently referred to as "Eurocurrency liabilities")
having a term comparable to such Yield Period.
"Event of Bankruptcy" means (a) any case, action or proceeding before any
court or other governmental authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors or (b) any general assignment for the benefit of creditors of a Person,
composition, marshalling of assets for creditors of a Person, or other similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors; in each of cases (a) and (b) undertaken under U.S. Federal, state
or foreign law, including the U.S. Bankruptcy Code.
"Excess Concentration" means the sum of the amounts by which the
Outstanding Balance of Eligible Receivables of each Obligor then in the
Receivables Pool exceeds an amount equal to: (a) the Concentration Percentage
for such Obligor multiplied by (b) the Outstanding Balance of all Eligible
Receivables then in the Receivables Pool.
"Facility Termination Date" means the earliest to occur of: (a) December
15, 2005,(b) the date determined pursuant to Section 2.2 of the Agreement, (c)
the date the Purchase Limit reduces to zero pursuant to Section 1.1(b) of the
Agreement and (d) the date that the commitments of all Purchasers terminate
under the Liquidity Agreement.
"Federal Funds Rate" means, for any day, the per annum rate set forth in
the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by
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the Federal Reserve Bank of New York (including any such successor, the
"Composite 3:30 p.m. Quotations") for such day under the caption "Federal
Funds Effective Rate." If on any relevant day the appropriate rate is not yet
published in either H.15(519) or the Composite 3:30 p.m. Quotations, the rate
for such day will be the arithmetic mean as determined by the Administrator of
the rates for the last transaction in overnight Federal funds arranged before
9:00 a.m. (New York time) on that day by each of three leading brokers of
Federal funds transactions in New York City selected by the Administrator.
"Federal Reserve Board" means the Board of Governors of the Federal Reserve
System, or any entity succeeding to any of its principal functions.
"Fee Letter" has the meaning set forth in Section 1.5 of the Agreement.
"Fees" means the fees payable by the Seller to the Issuer (or the
Administrator on behalf of the Issuer) pursuant to the Fee Letter.
"GAAP" means, subject to the provisions set forth in Section 1.10 of the
Agreement, generally accepted accounting principles in the United States, as
recognized by the American Institute of Certified Public Accountants and the
Financial Accounting Standards Board, consistently applied and maintained on a
consistent basis throughout the period indicated.
"Governmental Authority" means any nation or government, any state or other
political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including any court, and any Person owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Group A Obligor" means any Obligor with a short-term rating of at least:
(a) "A-1" by Standard & Poor's, or if such Obligor does not have a short-term
rating from Standard & Poor's, a rating of "A+" or better by Standard & Poor's
on its long-term senior unsecured and uncredit-enhanced debt securities, and (b)
"P-1" by Moody's, or if such Obligor does not have a short-term rating from
Moody's, "A1" or better by Moody's on its long-term senior unsecured and
uncredit-enhanced debt securities.
"Group B Obligor" means an Obligor, not a Group A Obligor, with a
short-term rating of at least: (a) "A-2" by Standard & Poor's, or if such
Obligor does not have a short-term rating from Standard & Poor's, a rating of
"BBB+" to "A" by Standard & Poor's on its long-term senior unsecured and
uncredit-enhanced debt
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securities, and (b) "P-2" by Moody's, or if such Obligor does not have a
short-term rating from Moody's, "Baa1" to "A2" by Moody's on its long-term
senior unsecured and uncredit-enhanced debt securities.
"Group B Obligor Percentage" means, at any time, for each Group B Obligor,
the percentage equivalent of: (a) the aggregate Outstanding Balance of the
Eligible Receivables of such Group B Obligor less any Excess Concentrations
of such Obligor, divided by (b) the aggregate Outstanding Balance of all
Eligible Receivables at such time.
"Group C Obligor" means an Obligor, not a Group A Obligor or Group B
Obligor, with a short-term rating of at least: (a) "A-3" by Standard & Poor's,
or if such Obligor does not have a short-term rating from Standard & Poor's, a
rating of "BBB-" to "BBB" by Standard & Poor's on its long-term senior unsecured
and uncredit-enhanced debt securities, and (b) "P-3" by Moody's, or if such
Obligor does not have a short-term rating from Moody's, "Baa3" to "Baa2" by
Moody's on its long-term senior unsecured and uncredit-enhanced debt securities.
"Group C Obligor Percentage" means, at any time, for each Group C Obligor,
the percentage equivalent of: (a) the aggregate Outstanding Balance of the
Eligible Receivables of such Group C Obligor less any Excess Concentrations of
such Obligor, divided by (b) the aggregate Outstanding Balance of all Eligible
Receivables at such time.
"Group D Obligor" means any Obligor that is not a Group A Obligor, Group B
Obligor or Group C Obligor.
"Group D Obligor Percentage" means, at any time, for each Group D Obligor:
(a) the aggregate Outstanding Balance of the Eligible Receivables of such Group
D Obligor less any Excess Concentrations of such Obligor, divided by (b) the
aggregate Outstanding Balance of all Eligible Receivables at such time.
"Indemnified Amounts" has the meaning set forth in Section 3.1 of the
Agreement.
"Indemnified Party" has the meaning set forth in Section 3.1 of the
Agreement.
"Independent Director" has the meaning set forth in paragraph 3(c) of
Exhibit IV to the Agreement.
"Insolvency Proceeding" means: (a) any case, action or proceeding before
any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b)
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any general assignment for the benefit of creditors, composition, marshaling
of assets for creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors, in each
case undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as amended
from time to time, and any successor statute of similar import, together with
the regulations thereunder, in each case as in effect from time to time.
References to sections of the InternalRevenue Code also refer to any successor
sections.
"Issuer" has the meaning set forth in the preamble to the Agreement.
"Issuer's Share" of any amount means such amount multiplied by the
Purchased Interest at the time of determination.
"LIBOR" means the rate of interest per annum determined by the
Administrator to be the arithmetic mean (rounded upward to the nearest 1/16th of
1%) of the rates of interest per annum notified to the Administrator by the
Reference Bank as the rate of interest at which dollar deposits in the
approximate amount of the Portion of Capital to be funded at the Eurodollar Rate
during such Yield Period would be offered by major banks in the London interbank
market to such Reference Bank at its request at or about 11:00 a.m. (London
time) on the second Business Day before the commencement of such Yield Period.
"Liquidity Agent" means BNS in its capacity as the Liquidity Agent pursuant
to the Liquidity Agreement.
"Liquidity Agreement" means the Liquidity Asset Purchase Agreement, dated
as of December 15, 2000 between the Purchasers from time to time party thereto,
the Issuer and BNS, as Administrator and Liquidity Agent, as the same may be
further amended, supplemented or otherwise modified from time to time.
"Lock-Box Account" means an account maintained at a bank or other financial
institution for the purpose of receiving Collections.
"Lock-Box Agreement" means an agreement, in form and substance satisfactory
to the Administrator, among the Seller, the Servicer, the Administrator and a
Lock-Box Bank.
"Lock-Box Bank" means any of the banks or other financial institutions
holding one or more Lock-Box Accounts.
"Loss Reserve" means, on any date, an amount equal to (a) the Capital at
the close of business of the Servicer on such date
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multiplied by (b)(i) the Loss Reserve Percentage on such date divided by (ii) 1
minus the Loss Reserve Percentage on such date.
"Loss Reserve Percentage" means, on any date, the greater of: (a) 12% and
(b) (i) the product of (x) 2 times the highest average of the Default Ratios for
any three consecutive calendar months during the twelve most recent calendar
months multiplied by (y) the sum of the aggregate credit sales made during the
two most recent calendar months, plus one-half of the aggregate credit sales
made during the third most recent calendar months divided by (ii) the Net
Receivables Pool Balance on such date.
"Loss-to-Liquidation Ratio" means the ratio (expressed as a percentage and
rounded to the nearest 1/100 of 1%, with 5/1000th of 1% rounded upward) computed
as of the last day of each calendar month by dividing: (a) the aggregate
Outstanding Balance of all Pool Receivables that were written off the Seller's
books as uncollectible during such month, by (b) the aggregate amount of
Collections (other than Deemed Collections) received during such month.
"Material Adverse Effect" means, relative to any Person with respect to any
event or circumstance, a material adverse effect on:
(a) the assets, financial condition or results of operations of any
such Person taken as a whole that would impair its ability to perform its
obligations under the Agreement or any other Transaction Document to which
it is a party,
(b) the rights or remedies of the Seller, Issuer or Administrator
under the Agreement or any other Transaction Document,
(c) the validity or enforceability of any other Transaction Document,
or the validity, enforceability or collectibility of the Pool Receivables,
or
(d) the status, perfection, enforceability or priority of the Issuer's
or the Seller's interest in the Pool Assets.
"Monthly Report" means a report, in substantially the form of Annex A to
the Agreement, furnished to the Administrator pursuant to the Agreement.
"Monthly Settlement Date" means the first Business Day of each calendar
month.
"Moody's" means Moody's Investors Service, Inc.
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<PAGE>
"Net Receivables Pool Balance" means, at any time: (a) the Outstanding
Balance of Eligible Receivables then in the Receivables Pool minus (b) the
Excess Concentration.
"Notes" means short-term promissory notes issued, or to be issued, by the
Issuer to fund its investments in accounts receivable or other financial assets.
"Obligor" means, with respect to any Receivable, the Person obligated to
make payments pursuant to the Contract relating to such Receivable other than
an agent or Affiliate of the related Originator.
"Originator" has the meaning set forth in the Sale Agreement.
"Originator Assignment Certificate" means each assignment, in substantially
the form of Exhibit C to the Sale Agreement, evidencing Seller's ownership of
the Receivables generated by each Originator, as the same may be amended,
supplemented, amended and restated, or otherwise modified from time to time in
accordance with the Sale Agreement.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Payment Date" has the meaning set forth in Section 2.1 of the Sale
Agreement.
"Permitted Investments" means certificates of deposit that are not
represented by instruments, have a maturity of one week or less and are issued
by the Collection Account Bank (with respect to the investment of funds in the
Collection Account) or The Bank of Nova Scotia; provided, however, that the
Administrator (on behalf of Issuer) may, from time to time, upon seven Business
Days' prior written notice to Servicer, remove from the scope of "Permitted
Investments" certificates of deposit of any such bank(s) and specify to be
within such scope, certificates of deposit of any other bank.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.
"Pool Assets" has the meaning set forth in Section 1.2(d) of the Agreement.
"Pool Receivable" means a Receivable in the Receivables Pool.
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"Portion of Capital" means, at any time, any portion of the Capital being
funded or maintained by the Issuer by reference to a particular interest rate
basis. In addition, at any time when the Capital of the Purchased Interest is
not divided into two or more portions, "Portion of Capital" means 100% of the
Capital.
"Program Support Agreement" means and includes the Liquidity Agreement and
any other agreement entered into by any Program Support Provider providing for:
(a) the issuance of one or more letters of credit for the account of the Issuer,
(b) the issuance of one or more surety bonds for which the Issuer is obligated
to reimburse the applicable Program Support Provider for any drawings
thereunder, (c) the sale by the Issuer to any Program Support Provider of the
Purchased Interest (or portions thereof) and/or (d) the making of loans and/or
other extensions of credit to the Issuer in connection with the Issuer's
Receivables-securitization program contemplated in the Agreement, together with
any letter of credit, surety bond or other instrument issued thereunder (but
excluding any discretionary advance facility provided by the Administrator).
"Program Support Provider" means and includes any Purchaser and any other
Person (other than any customer of the Issuer) now or hereafter extending credit
or having a commitment to extend credit to or for the account of, or to make
purchases from, the Issuer pursuant to any Program Support Agreement.
"Purchase and Sale Indemnified Amounts" has the meaning set forth in
Section 9.1 of the Sale Agreement.
"Purchase and Sale Indemnified Party" has the meaning set forth in Section
9.1 of the Sale Agreement.
"Purchase and Sale Termination Date" has the meaning set forth in Section
1.4 of the Sale Agreement.
"Purchase and Sale Termination Event" has the meaning set forth in Section
8.1 of the Sale Agreement.
"Purchase Facility" has the meaning set forth in Section 1.1 of the Sale
Agreement.
"Purchase Limit" means $90,000,000, as such amount may be reduced pursuant
to Section 1.1(b) of the Agreement. References to the unused portion of the
Purchase Limit shall mean, at any time, the Purchase Limit minus the then
outstanding Capital.
"Purchase Price" has the meaning set forth in Section 2.1 of the Sale
Agreement.
"Purchase Report" has the meaning set forth in Section 2.1 of the Sale
Agreement.
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<PAGE>
"Purchased Interest" means, at any time, the undivided percentage ownership
interest in: (a) each and every Pool Receivable now existing or hereafter
arising, (b) all Related Security with respect to such Pool Receivables and (c)
all Collections with respect to, and other proceeds of, such Pool Receivables
and Related Security. Such undivided percentage interest shall be computed as:
Capital + Total Reserves
------------------------------
Net Receivables Pool Balance
The Purchased Interest shall be determined from time to time pursuant to Section
1.3 of the Agreement.
"Purchaser" has the meaning set forth in Section 5.3(b) of the Agreement.
"Rating Agency" means each of Moody's, Standard & Poor's and any other
nationally recognized rating agency then rating the Issuer's Notes.
"Rating Agency Condition" means, with respect to any event or occurrence,
receipt by the Issuer of written confirmation from Standard & Poor's and Moody's
that such event or occurrence shall not cause the rating on the then outstanding
Notes to be downgraded or withdrawn.
"Receivable" means any indebtedness and other obligations owed to any
Originator or the Seller or any right of the Seller or such Originator to
payment from or on behalf of an Obligor, whether constituting an account,
chattel paper, instrument or general intangible, arising in connection with the
sale of goods or the rendering of services by such Originator or Seller, and
includes, without limitation, the obligation to pay any finance charges, fees
and other charges with respect thereto. Indebtedness and other obligations
arising from any one transaction, including, without limitation, indebtedness
and other obligations represented by an individual invoice or agreement, shall
constitute a Receivable separate from a Receivable consisting of the
indebtedness and other obligations arising from any other transaction.
"Receivables Pool" means, at any time, all of the then outstanding
Receivables purchased or purported to be purchased by the Seller or contributed
to the Seller pursuant to the Sale Agreement prior to the Facility Termination
Date.
"Reference Bank" means BNS.
"Related Rights" has the meaning set forth in Section 1.1 of the Sale
Agreement.
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<PAGE>
"Related Security" means, with respect to any Receivable:
(a) all of the Seller's and each Originator's interest in any goods
(including returned goods), and documentation of title evidencing the
shipment or storage of any goods (including returned goods), relating to
any sale giving rise to such Receivable,
(b) all instruments and chattel paper that may evidence such
Receivable,
(c) all other security interests or liens and property subject thereto
from time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise, together
with all UCC financing statements or similar filings relating thereto, and
(d) all of the Seller's and each Originator's rights, interests and
claims under the Contracts and all guaranties, indemnities, insurance and
other agreements (including the related Contract) or arrangements of
whatever character from time to time supporting or securing payment of such
Receivable or otherwise relating to such Receivable, whether pursuant to
the Contract related to such Receivable or otherwise.
"Responsible Officer" shall mean, with respect to any Person, the chairman,
the chief executive officer, the chief financial officer, the president, the
controller, the secretary, the treasurer, or any other officer or designee of
such Person customarily performing functions similar to those performed by any
of the above-designated officers and also, with respect to a particular matter
any other officer or designee to whom such matter is referred because of such
officer's or designee's knowledge of and familiarity with the particular
subject.
"Sale Agreement" means the Purchase and Sale Agreement, dated as of
December 15, 2000, between the Seller and the Originators that are or become a
party thereto pursuant to the terms thereof, as such agreement may be amended,
amended and restated, supplemented or otherwise modified from time to time.
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller's Share" of any amount means the greater of: (a) $0 and (b) such
amount minus the Issuer's Share.
"Servicer" has the meaning set forth in the preamble to the Agreement.
"Servicing Fee" shall mean the fee referred to in Section 4.6 of the
Agreement.
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<PAGE>
"Servicing Fee Rate" shall mean the rate referred to in Section 4.6 of the
Agreement.
"Servicing Fee Reserve" for the purchased interest at any time means the
sum of (a) the then accrued and unpaid Servicing Fee relating to the Purchased
Interest plus (b) the product of (i) the Outstanding Balance of Pool Receivables
at such time, times (ii) the product of (x) the Servicing Fee Rate multiplied by
(y) a fraction, the numerator of which is 1.5 times the Days' Sales Outstanding
(calculated on the last day of the most recent preceding calendar month) and the
denominator of which is 360.
"Settlement Date" means (a) with respect to any Portion of Capital, the
last day of the Yield Period for such Portion of Capital and (b) with respect to
any fees payable under the Agreement, the Monthly Settlement Date.
"Shipping Date" means, with respect to any Receivable, the date on which
the goods and/or services pursuant to which such Receivable arose, are shipped
by the applicable Originator thereof.
"Solvent" means, with respect to any Person at any time, a condition under
which:
(i) the fair value and present fair saleable value of such Person's
total assets is, on the date of determination, greater than such Person's
total liabilities (including contingent and unliquidated liabilities) at
such time;
(ii) the fair value and present fair saleable value of such Person's
assets is greater than the amount that will be required to pay such
Person's probable liability on its existing debts as they become absolute
and matured ("debts," for this purpose, includes all legal liabilities,
whether matured or unmatured, liquidated or unliquidated, absolute, fixed,
or contingent);
(iii) such Person is and shall continue to be able to pay all of its
liabilities as such liabilities mature; and
(iv) such Person does not have unreasonably small capital with which
to engage in its current and in its anticipated business.
For purposes of this definition:
(A) the amount of a Person's contingent or unliquidated liabilities at
any time shall be that amount which, in light
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<PAGE>
of all the facts and circumstances then existing, represents the amount
which can reasonably be expected to become an actual or matured liability;
(B) the "fair value" of an asset shall be the amount which may be
realized within a reasonable time either through collection or sale of such
asset at its regular market value;
(C) the "regular market value" of an asset shall be the amount which a
capable and diligent business person could obtain for such asset from an
interested buyer who is willing to Purchase such asset under ordinary
selling conditions; and
(D) the "present fair saleable value" of an asset means the amount
which can be obtained if such asset is sold with reasonable promptness
in an arm's-length transaction in an existing and not theoretical market.
"Spike Factor" means, for any calendar month, the positive difference, if
any, between: (a) the highest Dilution Ratio for any calendar month during the
twelve most recent calendar months and (b) the arithmetic average of the
Dilution Ratios for such twelve months.
"Standard & Poor's" means Standard & Poor's, a division of The McGraw-Hill
Companies, Inc.
"Subsidiary" means, as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock of each class or
other interests having ordinary voting power (other than stock or other
interests having such power only by reason of the happening of a contingency) to
elect a majority of the Board of Directors or other managers of such entity are
at the time owned, or management of which is otherwise controlled: (a) by such
Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and
one or more Subsidiaries of such Person.
"Termination Day" means: (a) each day on which the conditions set forth in
Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day that
occurs on or after the Facility Termination Date.
"Termination Event" has the meaning specified in Exhibit V to the
Agreement.
"Termination Fee" means, for any Yield Period, the amount, if any, by
which: (a) the additional Discount (calculated without taking into account any
Termination Fee or any shortened duration of such Yield Period pursuant to the
definition thereof) that would have accrued during such Yield Period on the
reductions of Capital
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relating to such Yield Period had such reductions not been made, exceeds
(b) the income, if any, received by the Issuer from investing the proceeds
of such reductions of Capital, as determined by the Administrator, which
determination shall be binding and conclusive for all purposes, absent
manifest error.
"Total Reserves" means, at any time the sum of : (a) the Yield Reserve,
plus (b) Servicing Fee Reserve, plus (c) the greater of (i) the sum of (A) the
Loss Reserve plus (B) the Dilution Reserve and (ii) the Concentration Reserve.
"Transaction Documents" means the Agreement, the Lock-Box Agreement(s), the
Collection Account Agreement, the Fee Letter, the Sale Agreement and all other
certificates, instruments, UCC financing statements, reports, notices,
agreements and documents executed or delivered under or in connection with the
Agreement, in each case as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect in
the applicable jurisdiction.
"Unmatured Purchase and Sale Termination Event" means any event which, with
the giving of notice or lapse of time, or both, would become a Purchase and Sale
Termination Event.
"Unmatured Termination Event" means an event that, with the giving of
notice or lapse of time, or both, would constitute a Termination Event.
"Yield Period" means, with respect to each Portion of Capital: (a) with
respect to any Portion of Capital funded by the issuance of Notes, (i) initially
the period commencing on (and including) the date of the initial purchase or
funding of such Portion of Capital and ending on (and including) the last day of
the current calendar month, and (ii) thereafter, each period commencing on (and
including) the first day after the last day of the immediately preceding Yield
Period for such Portion of Capital and ending on (and including) the last day of
the current calendar month; and (b) with respect to any Portion of Capital not
funded by the issuance of Notes, (i) initially the period commencing on (and
including) the date of the initial purchase or funding of such Portion of
Capital and ending such number of days (including a period of one day) as the
Administrator shall select, and (ii) thereafter, each period commencing on the
last day of the immediately preceding Yield Period and ending on such number of
days (including a period of one day) as the Administrator shall select;
provided, that
(i) any Yield Period (other than of one day) which would otherwise end
on a day which is not a Business Day shall be
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extended to the next succeeding Business Day; provided, however, if
Discount in respect of such Yield Period is computed by reference to the
Eurodollar Rate, and such Yield Period would otherwise end on a day which
is not a Business Day, and there is no subsequent Business Day in the
same calendar month as such day, such Yield Period shall end on the next
preceding Business Day;
(ii) in the case of any Yield Period of one day, (A) if such Yield
Period is the initial Yield Period for a purchase hereunder (other than a
reinvestment), such Yield Period shall be the day of such purchase; (B) any
subsequently occurring Yield Period which is one day shall, if the
immediately preceding Yield Period is more than one day, be the last day of
such immediately preceding Yield Period, and, if the immediately preceding
Yield Period is one day, be the day next following such immediately
preceding Yield Period; and (C) if such Yield Period occurs on a day
immediately preceding a day which is not a Business Day, such Yield Period
shall be extended to the next succeeding Business Day; and
(iii) in the case of any Yield Period for any Portion of Capital which
commences before the Facility Termination Date and would otherwise end on a
date occurring after the Facility Termination Date, such Yield Period shall
end on such Facility Termination Date and the duration of each Yield Period
which commences on or after the Facility Termination Date shall be of such
duration as shall be selected by the Administrator.
"Yield Reserve" means, at any time:
( BR x 1.5(DSO) x Capital)
----
360
where:
BR = the Base Rate in effect at such time, and
DSO = Days' Sales Outstanding.
Other Terms. All accounting terms not specifically defined herein shall be
construed in accordance with GAAP. All terms used in Article 9 of the UCC in the
State of New York, and not specifically defined herein, are used herein as
defined in such Article 9. Unless the context otherwise requires, "or" means
"and/or," and "including" (and with correlative meaning "include" and
"includes") means including without limiting the generality of any description
preceding such term.
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EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The Initial Purchase under
this Agreement is subject to the following conditions precedent that the
Administrator shall have received on or before the date of such purchase, each
in form and substance (including the date thereof) satisfactory to the
Administrator:
(a) A counterpart of the Agreement and the other Transaction Documents
executed by the parties thereto.
(b) Certified copies of: (i) the resolutions of the Board of Directors of
each of the Seller, the Originators and BAX authorizing the execution, delivery
and performance by the Seller, each Originator and BAX, as the case may be, of
the Agreement and the other Transaction Documents to which it is a party; (ii)
all documents evidencing other necessary corporate action and governmental
approvals, if any, with respect to the Agreement and the other Transaction
Documents and (iii) the certificate of incorporation and by-laws of the Seller,
each Originator and BAX.
(c) A certificate of the Secretary or Assistant Secretary of the Seller,
each Originator and BAX certifying the names and true signatures of its officers
who are authorized to sign the Agreement and the other Transaction Documents.
Until the Administrator receives a subsequent incumbency certificate from the
Seller, each Originator or BAX, as the case may be, the Administrator shall be
entitled to rely on the last such certificate delivered to it by the Seller,
such Originator or BAX, as the case may be.
(d) Acknowledgment copies, or time stamped receipt copies, of proper
financing statements, duly filed on or before the date of such initial purchase
under the UCC of all jurisdictions that the Administrator may deem necessary or
desirable in order to perfect the interests of the Seller and the Issuer
contemplated by the Agreement and the Sale Agreement.
(e) Acknowledgment copies, or time-stamped receipt copies, of proper
financing statements, if any, necessary to release all security interests and
other rights of any Person in the Receivables, Contracts or Related Security
previously granted by any Originator or the Seller.
(f) Completed UCC search reports, dated on or shortly before the date of
the initial purchase hereunder, listing the financing statements filed in all
applicable jurisdictions referred to in subsection (e) above that name any
Originator or the Seller as debtor, together with copies of such other financing
statements,
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and similar search reports with respect to judgment liens, federal tax liens and
liens of the Pension Benefit Guaranty Corporation in such jurisdictions, as the
Administrator may request, showing no Adverse Claims on any Pool Assets.
(g) within 45 days of the initial purchase under the Agreement, copies of
the executed (i) Lock-Box Agreements with each Lock-Box Bank and (ii) the
Collection Account Agreement with the Collection Account Bank.
(h) Favorable opinions, in form and substance reasonably satisfactory to
the Administrator, of (i) general counsel for Seller, Servicer and each
Originator with respect to various corporate matters and (ii) Hunton & Williams,
as special counsel to the Seller, Servicer and each Originator with respect to
various corporate, UCC and bankruptcy matters as requested by the Administrator.
(i) Satisfactory results of a review (performed by representatives of the
Administrator) of the Servicer's collection, operating and reporting systems,
the Credit and Collection Policy of each Originator, historical receivables data
and accounts, including satisfactory results of a review of the Servicer's
operating location(s) and satisfactory review and approval of the Eligible
Receivables in existence on the date of the initial purchase under the
Agreement.
(j) A pro forma Monthly Report representing the performance of the
Receivables Pool for the calendar month before closing.
(k) Evidence of payment by the Seller of all accrued and unpaid fees
(including those contemplated by the Fee Letter), costs and expenses to the
extent then due and payable on the date thereof, including any such costs, fees
and expenses arising under or referenced in Section 5.4 of the Agreement and the
Fee Letter.
(l) The Fee Letter duly executed by the Seller and the Servicer.
(m) Good standing certificates with respect to each of the Seller, the
Originators and the Servicer issued by the Secretary of State (or similar
official) of the state of each such Person's organization and principal place of
business.
(n) Letters from each of the rating agencies then rating the Notes
confirming the rating of such Notes after giving effect to the transaction
contemplated by the Agreement.
(o) The Liquidity Agreement duly executed by the parties thereto.
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<PAGE>
(p) A file (computer generated or otherwise) containing all information
with respect to the Receivables as the Administrator or the Issuer may
reasonably request.
(q) Such other approvals, opinions or documents as the Administrator or the
Issuer may reasonably request.
2. Conditions Precedent to All Purchases and Reinvestments. Each purchase
(including the initial purchase) and each reinvestment shall be subject to the
further conditions precedent that:
(a) in the case of each purchase, the Servicer shall have delivered to the
Administrator on or before such purchase, in form and substance satisfactory to
the Administrator, a completed pro forma Monthly Report to reflect the level of
Capital and related reserves after such subsequent purchase; and
(b) on the date of such purchase or reinvestment the following statements
shall be true (and acceptance of the proceeds of such purchase or reinvestment
shall be deemed a representation and warranty by the Seller that such statements
are then true):
(i) the representations and warranties contained in Exhibit III to the
Agreement are true and correct in all material respects on and as of the
date of such purchase or reinvestment as though made on and as of such
date;
(ii) no event has occurred and is continuing, or would result from
such purchase or reinvestment, that constitutes a Termination Event or an
Unmatured Termination Event; and
(iii) the Purchased Interest does not exceed 100%.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Seller. The Seller represents and
warrants as follows:
(a) The Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of California, and is duly qualified
to do business and is in good standing as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse
Effect.
(b) The execution, delivery and performance by the Seller of the Agreement
and the other Transaction Documents to which it is a party, including its use of
the proceeds of purchases and reinvestments: (i) are within its corporate
powers; (ii) have been duly authorized by all necessary corporate action; (iii)
do not contravene or result in a default under or conflict with: (A) its charter
or by-laws, (B) any law, rule or regulation applicable to it, (C) any material
indenture, loan agreement, mortgage, deed of trust or other agreement or
instrument to which it is a party or by which it is bound, or (D) any order,
writ, judgment, award, injunction or decree binding on or affecting it or any of
its property; and (iv) do not result in or require the creation of any Adverse
Claim upon or with respect to any of its properties pursuant to the terms of any
material indenture, loan agreement, mortgage, deed of trust or other agreement
or instrument, other than the UCC filings referred to in Exhibit II to the
Agreement. The Agreement and the other Transaction Documents to which it is a
party have been duly executed and delivered by the Seller.
(c) No authorization, license, approval or other action by, and no notice
to or filing with, any Governmental Authority or other Person is required for
the due execution, delivery and performance by the Seller of the Agreement or
any other Transaction Document to which it is a party, other than the UCC
filings referred to in Exhibit II to the Agreement, all of which shall have been
filed on or before the date of the first purchase hereunder.
(d) Each of the Agreement and the other Transaction Documents to which the
Seller is a party constitutes its legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with its terms, except as
such enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar state or federal debtor relief laws from time to time in
effect which affect the enforcement of creditors' rights in general and the
availability of equitable remedies.
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(e) There is no pending or, to Seller's best knowledge, threatened action
or proceeding affecting Seller or any of its properties before any Governmental
Authority or arbitrator which would be reasonably likely to have a Material
Adverse Effect.
(f) No proceeds of any purchase or reinvestment will be used by the Seller
to acquire any equity security of a class that is registered pursuant to Section
12 of the Securities Exchange Act of 1934.
(g) The Seller is the legal and beneficial owner of the Pool Receivables
and Related Security, free and clear of any Adverse Claim. Upon each purchase or
reinvestment, the Issuer shall acquire a valid and enforceable perfected
undivided percentage ownership or security interest, to the extent of the
Purchased Interest, in each Pool Receivable then existing or thereafter arising
and in the Related Security, Collections and other proceeds with respect
thereto, free and clear of any Adverse Claim. The Agreement creates a security
interest in favor of the Issuer in the Pool Assets, and the Issuer has a first
priority perfected security interest in the Pool Assets, free and clear of any
Adverse Claims. No effective financing statement or other instrument similar in
effect covering any Pool Asset is on file in any recording office, except those
filed in favor of the Seller pursuant to the Sale Agreement and the Issuer
relating to the Agreement.
(h) Each Monthly Report (if prepared by the Seller or one of its Affiliates
on its behalf, or to the extent that information contained therein is supplied
by the Seller or an Affiliate), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by a
Responsible Officer of the Seller to the Administrator in connection with the
Agreement or any other Transaction Document to which it is a party is or will be
complete and accurate in all material respects as of its date or as of the date
so furnished.
(i) The Seller's principal place of business and chief executive office (as
such terms are used in the UCC) and the office where it keeps its records
concerning the Receivables are located at the address referred to in Section
1(b) of Exhibit IV to the Agreement.
(j) The names and addresses of all the Lock-Box Banks, together with the
account numbers of the Lock-Box Accounts at such Lock-Box Banks, are specified
in Schedule II to the Agreement (or at such other Lock-Box Banks and/or with
such other Lock-Box Accounts as have been notified to the Administrator in
accordance with the Agreement) and all Lock-Box Accounts are subject to Lock-Box
Agreements.
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(k) The Seller is not in violation of any order of any court, arbitrator or
Governmental Authority binding on or affecting it or any of its properties which
would be reasonably likely to have a Material Adverse Effect.
(l) No proceeds of any purchase or reinvestment will be used by the Seller
for any purpose that violates any applicable law, rule or regulation, including
Regulations T, U or X of the Federal Reserve Board.
(m) Each Pool Receivable included as an Eligible Receivable in the
calculation of the Net Receivables Pool Balance is an Eligible Receivable.
(n) No event has occurred and is continuing, or would result from a
purchase in respect of, or reinvestment in respect of, the Purchased Interest or
from the application by the Seller of the proceeds therefrom, that constitutes a
Termination Event or an Unmatured Termination Event.
(o) The Seller has complied in all material respects with the Credit and
Collection Policy of each Originator with regard to each Receivable originated
by such Originator.
(p) The Seller has complied in all material respects with all of the terms,
covenants and agreements contained in the Agreement and the other Transaction
Documents that are applicable to it.
(q) The Seller's complete corporate name is set forth in the preamble to
the Agreement, and it does not use and has not during the last five years used
any other corporate name, trade name, doing-business name or fictitious name,
except as set forth on Schedule III to the Agreement and except for names first
used after the date of the Agreement and set forth in a notice delivered to the
Administrator pursuant to Section 1(k)(iv) of Exhibit IV to the Agreement.
(r) The Seller is not an "investment company," or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended. In addition, the Seller is not a "holding company," a
"subsidiary company" of a "holding company" or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company" within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
(s) Each Pool Receivable, which has at any time been included in the Net
Receivables Pool Balance, of an Obligor, which is not a resident of the United
States, is not (and shall not at any time be) subject to any currency controls
imposed by any Governmental Authority under the laws of which such Obligor is
organized or a
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political subdivision thereof, which currency controls restrict the ability of
such Obligor to pay its obligations in connection with such Pool Receivable.
2. Representations and Warranties of the Servicer. The Servicer, represents
and warrants as follows:
(a) The Servicer is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of its organization, and is duly
qualified to do business and is in good standing as a foreign corporation in
every jurisdiction where the nature of its business requires it to be so
qualified, except where the failure to be so qualified would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Servicer of the
Agreement and the other Transaction Documents to which it is a party, including
the Servicer's use of the proceeds of purchases and reinvestments: (i) are
within its corporate powers; (ii) have been duly authorized by all necessary
corporate action; (iii) do not contravene or result in a default under or
conflict with: (A) its charter or by-laws, (B) any law, rule or regulation
applicable to it, (C) any material indenture, loan agreement, mortgage, deed of
trust or other material agreement or instrument to which it is a party or by
which it is bound, or (D) any order, writ, judgment, award, injunction or decree
binding on or affecting it or any of its property; and (iv) do not result in or
require the creation of any Adverse Claim upon or with respect to any of its
properties pursuant to the terms of any material indenture, loan agreement,
mortgage, deed of trust or other material agreement or instrument. The Agreement
and the other Transaction Documents to which the Servicer is a party have been
duly executed and delivered by the Servicer.
(c) No authorization, license, approval or other action by, and no notice
to or filing with any Governmental Authority or other Person, is required for
the due execution, delivery and performance by the Servicer of the Agreement or
any other Transaction Document to which it is a party that would have a Material
Adverse Effect.
(d) Each of the Agreement and the other Transaction Documents to which
the Servicer is a party constitutes the legal, valid and binding obligation of
the Servicer enforceable against the Servicer in accordance with its terms,
except as such enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar state or federal debtor relief laws from
time to time in effect which affect the enforcement of creditors' rights in
general and the availability of equitable remedies.
(e) The consolidated balance sheets of The Pittston Company and its
Subsidiaries at December 31, 1999, and the related consolidated statements of
operations, cash flows, and
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shareholders' equity and other comprehensive income for the fiscal year then
ended, copies of which have been furnished to the Administrator, fairly present
the consolidated financial condition of The Pittston Company and its
Subsidiaries at such date and the consolidated results of the operations of The
Pittston Company and its Subsidiaries for the period ended on such date, all in
accordance with GAAP consistently applied, and since December 31, 1999 there has
been no event or circumstances which have had a Material Adverse Effect.
(f) Except as disclosed in the most recent audited financial statements of
The Pittston Company furnished to the Administrator, there is no pending or, to
the knowledge of a Responsible Officer of The Pittston Company or the Servicer,
threatened action or proceeding affecting it or any of its Subsidiaries before
any Governmental Authority or arbitrator that would have a Material Adverse
Effect.
(g) Each Monthly Report (if prepared by the Servicer or one of its
Affiliates on its behalf, or to the extent that information contained therein is
supplied by the Servicer or an Affiliate), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished at any
time by a Responsible Officer of the Servicer to the Administrator in connection
with the Agreement is or will be complete and accurate in all material respects
as of its date or (except as otherwise disclosed to the Administrator at such
time) as of the date so furnished.
(h) The Servicer is not in violation of any order of any court, arbitrator
or Governmental Authority binding or affecting it or any of its properties,
which violation would have a Material Adverse Effect.
(i) The Servicer has complied in all material respects with the Credit and
Collection Policy of each Originator with regard to each Receivable originated
by such Originator.
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<PAGE>
EXHIBIT IV
COVENANTS
1. Covenants of the Seller. Until the latest of the Facility Termination
Date, the date on which no Capital of or Discount in respect of the Purchased
Interest shall be outstanding or the date all other amounts owed by the Seller
under the Agreement to the Issuer, the Administrator and any other Indemnified
Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Seller shall comply in all material
respects with all applicable laws, rules, regulations and orders, and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges, except to the extent that the failure so to comply with such laws,
rules and regulations or the failure so to preserve and maintain such rights,
franchises, qualifications and privileges would not have a Material Adverse
Effect.
(b) Offices, Records and Books of Account, Etc. The Seller: (i) shall keep
its principal place of business and chief executive office (as such terms or
similar terms are used in the UCC) and the office where it keeps its records
concerning the Receivables at the address of the Seller set forth under its name
on the signature page to the Agreement or, pursuant to clause (k)(iv) of this
Section 1 below, at any other locations in jurisdictions where all actions
reasonably requested by the Administrator to protect and perfect the interest of
the Issuer in the Receivables and related items (including the Pool Assets) have
been taken and completed and (ii) shall provide the Administrator with at least
30 days' prior written notice before making any change in the Seller's name or
making any other change in the Seller's identity or corporate structure
(including a Change in Control) that could render any UCC financing statement
filed in connection with this Agreement "seriously misleading" as such term (or
similar term) is used in the UCC; each notice to the Administrator pursuant to
this sentence shall set forth the applicable change and the effective date
thereof. The Seller also will maintain and implement (or cause the Servicer to
maintain and implement) administrative and operating procedures (including an
ability to recreate records evidencing Receivables and related Contracts in the
event of the destruction of the originals thereof), and keep and maintain (or
cause the Servicer to keep and maintain) all documents, books, records, computer
tapes and disks and other information reasonably necessary or advisable for the
collection of all Receivables (including records adequate to permit the daily
identification of each Receivable and all Collections of and adjustments to each
existing Receivable).
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(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Seller shall (and shall cause the Servicer to) fully comply in all
material respects with the applicable Credit and Collection Policies with regard
to each Receivable and the related Contract.
(d) Ownership Interest, Etc. The Seller shall (and shall cause the Servicer
to), at its expense, take all action necessary or desirable to establish and
maintain a valid and enforceable undivided percentage ownership or security
interest, to the extent of the Purchased Interest, in the Pool Receivables, the
Related Security and Collections with respect thereto, and a first priority
perfected security interest in the Pool Assets, in each case free and clear of
any Adverse Claim, in favor of the Issuer, including taking such action to
perfect, protect or more fully evidence the interest of the Issuer as the
Issuer, through the Administrator, may reasonably request.
(e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of
law or otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to, any or all of its right, title or
interest in, to or under any Pool Assets (including the Seller's undivided
interest in any Receivable, Related Security or Collections, or upon or with
respect to any account to which any Collections of any Receivables are sent), or
assign any right to receive income in respect of any items contemplated by this
paragraph.
(f) Extension or Amendment of Receivables. Except as provided in the
Agreement, the Seller shall not, and shall not permit the Servicer to, extend
the maturity or adjust the Outstanding Balance or otherwise modify the terms of
any Pool Receivable, or amend, modify or waive any term or condition of any
related Contract.
(g) Change in Credit and Collection Policy. The Seller shall not make (or
permit any Originator to make) any material change in the character of its
business or in any Credit and Collection Policy, or any change in any Credit and
Collection Policy that would adversely affect the collectibility of the
Receivables Pool or the enforceability of any related Contract or the ability of
the Seller or Servicer to perform its obligations under any related Contract or
under the Agreement.
(h) Audits. (i) The Seller shall (and shall cause each Originator to)(a)
prior to the occurrence of a Termination Event or an Unmatured Termination
Event, from time to time (but no more frequently than annually) during regular
business hours as reasonably requested in advance by the Administrator or (b) at
any time on and after the occurrence and continuance of a Termination Event or
an Unmatured Termination Event or, if in the opinion of the Administrator
reasonable grounds for insecurity exist with
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<PAGE>
respect to the collectibility of the Pool Receivables or with respect to the
Seller's performance or ability to perform its obligations under the Agreement,
permit the Administrator, or its agents or representatives: (A) to examine and
make copies of and abstracts from all books, records and documents (including
computer tapes and disks) in the possession or under the control of the Seller
(or any Originator) relating to Receivables and the Related Security, including
the related Contracts, and (B) to visit the offices and properties of the Seller
and each Originator for the purpose of examining such materials described in
clause (i)(A) above, and to discuss matters relating to Receivables and the
Related Security or the Seller's, the Servicer's or such Originator's
performance under the Transaction Documents or under the Contracts with any of
the officers, employees, agents or contractors of the Seller, the Servicer or
such Originator having knowledge of such matters; and (ii) without limiting the
provisions of clause (i) next above, from time to time during regular business
hours, upon five Business Days prior written notice from the Administrator,
permit certified public accountants or other auditors acceptable to the
Administrator to conduct a review of the Seller's or any Originator's books and
records, at the Seller's or such Originator's expense (as the case may be), with
respect to the Receivables. Each of the parties hereto hereby agrees that (x) in
the absence of a Termination Event or an Unmatured Termination Event, audits of
the type described in clause (ii) of this paragraph (h) shall be conducted only
as reasonably necessary, as determined in the sole discretion of the
Administrator, and all reasonable costs and expenses of any such audit,
examination or review performed or otherwise prepared pursuant to this paragraph
(h) shall be paid by the Seller and (y) each party receiving information with
respect to this paragraph (h) shall be subject to the standard of
confidentiality provided for such information as set forth in Section 5.13 of
the Agreement.
(i) Change in Lock-Box Banks, Lock-Box Accounts and Payment Instructions to
Obligors. The Seller shall not, and shall not permit the Servicer or any
Originator to, (x) add or terminate any bank as a Lock-Box Bank or any account
as a Lock-Box Account from those listed in Schedule II to the Agreement, or make
any change in its instructions to Obligors regarding payments to be made to the
Seller, such Originator, the Servicer or any Lock-Box Account (or related post
office box), or (y) add or terminate any bank as the Collection Account Bank or
any account as the Collection Account unless, in either case, the Administrator
shall have received copies of all agreements and documents (including Lock-Box
Agreements and/or a Collection Account Agreement, as applicable) that it may
request in connection therewith.
(j) Deposits to Lock-Box Accounts. The Seller shall (or shall cause the
Servicer to): (i) instruct all Obligors to make payments of all Receivables (or
cause all payments on Receivables to be
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made) to one or more Lock-Box Accounts or to post office boxes to which only
Lock-Box Banks have access (and shall instruct the Lock-Box Banks to cause all
items and amounts relating to such Receivables received in such post office
boxes to be removed and deposited into a Lock-Box Account on a daily basis), and
(ii) deposit, or cause to be deposited, any Collections received by it, the
Servicer or any Originator into Lock-Box Accounts not later than one Business
Day after receipt thereof. Each Lock-Box Account and the Collection Account
shall at all times be subject to a Lock-Box Agreement and a Collection Account
Agreement, as applicable. The Seller will not (and will not permit the Servicer
to) deposit or otherwise credit, or cause or permit to be so deposited or
credited, to any Lock-Box Account or the Collection Account cash or cash
proceeds other than Collections.
(k) Reporting Requirements. The Seller will provide to the Administrator
(in multiple copies, if requested by the Administrator) the following:
(i) as soon as available and in any event within 120 days after the
end of each fiscal year of the Seller, a copy of unaudited financial
statements of the Seller for such year certified as to accuracy by a
financial officer, treasurer or accounting officer of the Seller;
(ii) as soon as possible and in any event within five Business Days
after the occurrence of each Termination Event or Unmatured Termination
Event, a statement of the chief financial officer of the Seller setting
forth details of such Termination Event or Unmatured Termination Event and
the action that the Seller has taken and proposes to take with respect
thereto;
(iii) promptly after the filing or receiving thereof, copies of all
reports and notices that the Seller or any Affiliate files under ERISA with
the Internal Revenue Service, the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or that the Seller or any Affiliate receives
from any of the foregoing or from any multiemployer plan (within the
meaning of Section 4001(a)(3) of ERISA) to which the Seller or any of its
Affiliates is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal liability
or an event or condition that could, in the aggregate, result in the
imposition of liability on the Seller and/or any such Affiliate;
(iv) at least fifteen days before any change in the Seller's name or
any other change requiring the amendment of UCC financing statements, a
notice setting forth such changes and the effective date thereof;
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(v) promptly after the Seller obtains knowledge thereof, notice of
any: (A) material litigation, investigation or proceeding that may exist at
any time between the Seller and any Person which would reasonably be
expected to have a Material Adverse Effect or (B) material litigation or
proceeding relating to any Transaction Document;
(vi) promptly after the occurrence thereof, notice of a material
adverse change in the business, operations, property or financial or other
condition of the Seller, the Servicer or any Originator which (a) in the
case of the Seller, would reasonably be expected to have a Material Adverse
Effect and (b) in the case of the Servicer or any Originator, would have a
Material Adverse Effect; and
(vii) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Seller or any of
its Affiliates as the Administrator may from time to time reasonably
request.
(l) Certain Agreements. Without the prior written consent of the
Administrator, the Seller will not (and will not permit any Originator to)
amend, modify, waive, revoke or terminate any Transaction Document to which it
is a party or any provision of Seller's certificate of incorporation or by-laws.
(m) Restricted Payments. (i) Except pursuant to clause (ii) below, the
Seller will not: (A) purchase or redeem any shares of its capital stock, (B)
declare or pay any dividend or set aside any funds for any such purpose, (C)
prepay, purchase or redeem any Debt, (D) lend or advance any funds or (E) repay
any loans or advances to, for or from any of its Affiliates (the amounts
described in clauses (A) through (E) being referred to as "Restricted
Payments").
(ii) Subject to the limitations set forth in clause (iii) below, the
Seller may make Restricted Payments so long as such Restricted Payments are
made only in one or more of the following ways: (A) the Seller may make
cash payments (including prepayments) on the Company Notes in accordance
with its terms, and (B) if no amounts are then outstanding under the
Company Notes, the Seller may declare and pay dividends.
(iii) The Seller may make Restricted Payments only out of the funds it
receives pursuant to Sections 1.4(b)(ii) and (iv) of the Agreement.
Furthermore, the Seller shall not pay, make or declare: (A) any dividend
if, after giving effect thereto, the Seller's tangible net worth would be
less than $1,500,000, or (B) any Restricted Payment (including any
dividend) if, after giving effect thereto, any Termination Event or
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<PAGE>
Unmatured Termination Event shall have occurred and be continuing.
(n) Other Business. The Seller will not: (i) engage in any business other
than the transactions contemplated by the Transaction Documents; (ii) create,
incur or permit to exist any Debt of any kind (or cause or permit to be issued
for its account any letters of credit or bankers' acceptances) other than
pursuant to this Agreement or the Company Notes; or (iii) form any Subsidiary or
make any investments in any other Person; provided, however, that the Seller
shall be permitted to incur minimal obligations to the extent necessary for the
day-to-day operations of the Seller (such as expenses for stationery, audits,
maintenance of legal status, etc.).
(o) Use of Seller's Share of Collections. The Seller shall apply the
Seller's Share of Collections to make payments in the following order of
priority: (i) the payment of its expenses (including all obligations payable to
the Issuer, the Servicer and the Administrator under the Agreement and under the
Fee Letter); (ii) the payment of accrued and unpaid interest on the Company
Notes; and (iii) other legal and valid corporate purposes.
(p) Tangible Net Worth. The Seller will not permit its tangible net worth,
at any time, to be less than $1,500,000.
2. Covenants of the Servicer. Until the latest of the Facility Termination
Date, the date on which no Capital of or Discount in respect of the Purchased
Interest shall be outstanding or the date all other amounts owed by the Seller
under the Agreement to the Issuer, the Administrator and any other Indemnified
Party or Affected Person shall be paid in full:
(a) Compliance with Laws, Etc. The Servicer and, to the extent that it
ceases to be the Servicer, BAX shall comply (and shall cause each Originator to
comply) in all material respects with all applicable laws, rules, regulations
and orders, and preserve and maintain its corporate existence, rights,
franchises, qualifications and privileges, except to the extent that the failure
so to comply with such laws, rules and regulations or the failure so to preserve
and maintain such existence, rights, franchises, qualifications and privileges
would not have a Material Adverse Effect.
(b) Records and Books of Account, Etc. The Servicer and, to the extent that
it ceases to be the Servicer, BAX, also will (and will cause each Originator to)
maintain and implement administrative and operating procedures (including an
ability to recreate records evidencing Receivables and related Contracts in the
event of the destruction of the originals thereof), and keep and maintain all
documents, books, records, computer tapes and
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disks and other information reasonably necessary or advisable for the collection
of all Receivables (including records adequate to permit the daily
identification of each Receivable and all Collections of and adjustments to each
existing Receivable).
(c) Change in Credit and Collection Policy. The Servicer and, to the extent
that it ceases to be the Servicer, BAX, shall not make (and shall not permit any
Originator to make) any change in the character of its business or in any Credit
and Collection Policy, or any change in any Credit and Collection Policy that
would have a Material Adverse Effect on the collectibility of the Receivables
Pool or the enforceability of any related Contract or the ability of the Seller
or Servicer to perform its obligations under any related Contract or under the
Agreement.
(d) Audits. (i) The Servicer and, to the extent that it ceases to be the
Servicer, BAX, shall (and shall cause each Originator to)(a) prior to the
occurrence and continuance of a Termination Event or an Unmatured Termination
Event, from time to time (but no more frequently than annually) during regular
business hours as reasonably requested in advance by the Administrator or (b) at
any time on and after the occurrence of a Termination Event or an Unmatured
Termination Event or, if in the opinion of the Administrator reasonable grounds
for insecurity exist with respect to the collectibility of the Pool Receivables
or with respect to the Servicer's performance or ability to perform its
obligations under the Agreement, permit the Administrator, or its agents or
representatives: (A) to examine and make copies of and abstracts from all books,
records and documents (including computer tapes and disks) in its possession or
under its control relating to Receivables and the Related Security, including
the related Contracts, and (B) to visit its offices and properties for the
purpose of examining such materials described in clause (i)(A) above, and to
discuss matters relating to Receivables and the Related Security or its
performance hereunder or under the Contracts with any of its officers,
employees, agents or contractors having knowledge of such matters; and (ii)
without limiting the provisions of clause (i) next above, from time to time
during regular business hours, upon five Business Days prior written notice from
the Administrator, permit certified public accountants or other auditors
acceptable to the Administrator to conduct, at Servicer's expense, a review of
the Servicer's books and records with respect to the Receivables. Each of the
parties hereto hereby agrees that (x) in the absence of a Termination Event or
an Unmatured Termination Event, audits of the type described in clause (ii) of
this paragraph (d) shall be conducted only as reasonably necessary, as
determined in the sole discretion of the Administrator, and all reasonable costs
and expenses of any such audit, examination or review performed or otherwise
prepared pursuant to this paragraph (d) shall be paid by the Servicer and (y)
each party receiving information with respect to this paragraph
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(d) shall be subject to the standard of confidentiality provided for such
information as set forth in Section 5.13 of the Agreement.
(e) Deposits to Lock-Box Accounts. The Servicer shall: (i) instruct all
Obligors to make payments of all Receivables (or cause all payments on
Receivables to be made) to one or more Lock-Box Accounts or to post office boxes
to which only Lock-Box Banks have access (and shall instruct the Lock-Box Banks
to cause all items and amounts relating to such Receivables received in such
post office boxes to be removed and deposited into a Lock-Box Account on a daily
basis); and (ii) deposit, or cause to be deposited, any Collections received by
it into Lock-Box Accounts not later than one Business Day after receipt thereof.
Each Lock-Box Account and the Collection Account shall at all times be subject
to a Lock-Box Agreement and a Collection Account Agreement, as applicable. The
Servicer will not deposit or otherwise credit, or cause or permit to be so
deposited or credited, to any Lock-Box Account or the Collection Account cash or
cash proceeds other than Collections.
(f) Reporting Requirements. The Servicer shall provide to the Administrator
(in multiple copies, if requested by the Administrator) the following:
(i) As soon as available and in any event within 60 days after the end
of each of the first three quarters of each fiscal year of The Pittston
Company, (a) copies of the unaudited consolidated balance sheet of The
Pittston Company and its Subsidiaries at the end of such quarter, together
with unaudited statements of operations and cash flows for such quarter and
the portion of the fiscal year through such quarter, prepared in accordance
with GAAP (except for the omission of notes and subject to year-end
adjustments) and certified by a financial officer, treasurer or an
accounting officer of The Pittston Company, (b) a letter from a financial
officer, treasurer or an accounting officer of the Servicer certifying to
the best knowledge of such officer, that neither a Termination Event nor an
Unmatured Termination Event has occurred and is continuing;
(ii) As soon as available and in any event within 120 days after the
end of each fiscal year of the Servicer, (a) a copy of the consolidated
balance sheet of The Pittston Company and its Subsidiaries at the end of
such fiscal year, together with the related statements of operations, cash
flows, and shareholders' equity and other comprehensive income for such
fiscal year, each prepared in accordance with GAAP applied consistently
throughout the periods reflected therein, and (b) a letter from a financial
officer, treasurer or an accounting officer of the Servicer certifying to
the best knowledge of such officer, that neither a Termination Event nor an
Unmatured Termination Event has occurred and is
IV-8
<PAGE>
continuing, in each case as at the end of each such fiscal year and the
date of delivery of such letter;
(iii) as soon as available and in any event not later than the tenth
Business Day after the last day of each calendar month, a Monthly Report as
of the last day of such month or, within five Business Days of a request by
the Administrator, a Monthly Report for such periods as is specified by the
Administrator (including on a semi-monthly, weekly or daily basis);
(iv) promptly after the sending or filing thereof, copies of all
reports that the Servicer sends to any of its security holders, and copies
of all reports and registration statements that the Servicer or any
Subsidiary files with the Securities and Exchange Commission or any
national securities exchange;
(v) promptly after the filing or receiving thereof, copies of any
ERISA Notices that the Servicer or any of its Affiliates files or that such
Person or any of its Affiliates receives from any of the foregoing or from
any multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA)
to which such Person or any of its Affiliate is or was, within the
preceding five years, a contributing employer, in each case in respect of
the assessment of withdrawal liability or an event or condition that could,
in the aggregate, result in the imposition of liability on the Servicer
and/or any such Affiliate;
(vi) promptly after the Servicer obtains knowledge thereof, notice of:
(A) the commencement of any proceedings by or before any Governmental
Authority and all actions and proceedings in any court or before any
arbitrator against the Servicer or any of its Subsidiaries which would have
a Material Adverse Effect; or (B) litigation or proceeding relating to any
Transaction Document;
(vii) As soon as available and in any event within 120 days after the
end of each fiscal year of Servicer beginning with the fiscal year ending
December 31, 2001, the Servicer shall, at the Servicer's expense, cause a
firm of independent public accountants acceptable to the Administrator, to
furnish a report to the Administrator, setting forth the results of
agreed-upon procedures performed by the accountants for such fiscal year.
The agreed-upon procedures will include the following: (i) a comparison and
reconciliation of the information contained in a sample of three of the
Monthly Reports delivered during such fiscal year with the information
contained in the Servicer's records and computer systems for such periods,
(ii) a recalculation or verification of the Net Receivables Pool Balance as
of the end of each Yield Period as
IV-9
<PAGE>
reflected in the three Monthly Reports sampled in (i) above, (iii)
determining, through inquiry and examination of supporting documentation
for a sample of invoices, that the treatment of the Receivables by the
Servicer as Eligible Receivables meets the definition thereof contained in
Exhibit I of the Agreement, and (iv) procedures to support the validity,
accuracy, and aging of the Receivables as reflected in the Servicer's
records, using a scope consistent with that employed by the accountants to
enable them to express an opinion on the consolidated financial statements
of The Pittston Company. The Servicer shall not be required to cause such
independent public accountants to furnish such report following the
Facility Termination Date or any Termination Event where the Issuer and the
Administrator have received all Collections and all other amounts due under
the Agreement; and
(viii) such other information in respect of the Receivables or the
condition or operations, financial or otherwise, of BAX or any of its
Affiliates as the Administrator may from time to time reasonably request.
3. Separate Existence. The Seller hereby acknowledges that the Purchasers,
the Issuer and the Administrator are entering into the transactions contemplated
by this Agreement and the other Transaction Documents in reliance upon the
Seller's identity as a legal entity separate from its Affiliates or any other
Person. Therefore, from and after the date hereof, the Seller shall take all
steps specifically required by the Agreement or reasonably required by the
Administrator to continue the Seller's identity as a separate legal entity and
to make it apparent to third Persons that the Seller is an entity with assets
and liabilities distinct from those of any other Person, and is not a division
of BAX, its Affiliates or any other Person. Without limiting the generality of
the foregoing and in addition to and consistent with the other covenants set
forth herein, the Seller shall take such actions as shall be required in order
that:
(a) The Seller will be a limited purpose corporation whose primary
activities are restricted in its articles of incorporation to: (i)
purchasing or otherwise acquiring from the Originators, owning, holding,
granting security interests or selling interests in Pool Assets, (ii)
entering into agreements for the selling and servicing of the Receivables
Pool, and (iii) conducting such other activities as it deems necessary or
appropriate to carry out its primary activities;
(b) The Seller shall not engage in any business or activity, or incur
any indebtedness or liability, other than as expressly permitted by the
Transaction Documents;
IV-10
<PAGE>
(c) At least one member of the Seller's Board of Directors (the
"Independent Director") shall be an individual who is not a direct,
indirect or beneficial stockholder, officer, director, employee, affiliate,
associate or supplier of BAX or any of its Affiliates. The articles of
incorporation of the Seller shall provide that: (i) the Seller's Board of
Directors shall not approve, or take any other action to cause the filing
of, a voluntary bankruptcy petition with respect to the Seller unless the
Independent Director shall approve the taking of such action in writing
before the taking of such action, and (ii) such provision cannot be amended
without the prior written consent of the Independent Director;
(d) The Independent Director shall not at any time serve as a trustee
in bankruptcy for the Seller, BAX or any Affiliate thereof;
(e) Any employee, consultant or agent of the Seller will be
compensated from the Seller's funds for services provided to the Seller.
The Seller will not engage any agents other than its attorneys, auditors
and other professionals, and a servicer and any other agent contemplated by
the Transaction Documents for the Receivables Pool, which servicer will be
fully compensated for its services by payment of the Servicing Fee, and a
manager, which manager will be fully compensated from the Seller's funds;
(f) The Seller will contract with the Servicer to perform for the
Seller all operations required on a daily basis to service the Receivables
Pool. The Seller will pay the Servicer the Servicing Fee pursuant hereto.
The Seller will not incur any material indirect or overhead expenses for
items shared with BAX (or any other Affiliate thereof) that are not
reflected in the Servicing Fee. To the extent, if any, that the Seller (or
any Affiliate thereof) shares items of expenses not reflected in the
Servicing Fee or the manager's fee, such as legal, auditing and other
professional services, such expenses will be allocated to the extent
practical on the basis of actual use or the value of services rendered, and
otherwise on a basis reasonably related to the actual use or the value of
services rendered; it being understood that BAX shall pay all expenses
relating to the preparation, negotiation, execution and delivery of the
Transaction Documents, including legal, rating agency and other fees;
(g) The Seller's operating expenses will not be paid by BAX or any
other Affiliate thereof;
(h) All of the Seller's business correspondence and other
communications shall be conducted in the Seller's own name and on its own
separate stationery;
IV-11
<PAGE>
(i) The Seller's books and records will be maintained separately from
those of BAX and any other Affiliate thereof;
(j) All financial statements of BAX or any Affiliate thereof that are
consolidated to include Seller will contain a disclosure describing this
transaction that will indicate that (i) all of the Seller's assets are
owned by the Seller and (ii) the Seller is a separate entity with creditors
who have interests in the Seller's assets.
(k) The Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of BAX or any
Affiliate thereof;
(l) The Seller will strictly observe corporate formalities in its
dealings with BAX or any Affiliate thereof, and funds or other assets of
the Seller will not be commingled with those of BAX or any Affiliate
thereof except as permitted by the Agreement in connection with servicing
the Pool Receivables. The Seller shall not maintain joint bank accounts or
other depository accounts to which BAX or any Affiliate thereof (other than
BAX in its capacity as the Servicer) has independent access. The Seller is
not named, and has not entered into any agreement to be named, directly or
indirectly, as a direct or contingent beneficiary or loss payee on any
insurance policy with respect to any loss relating to the property of BAX
or any Subsidiary or other Affiliate of BAX. The Seller will pay to the
appropriate Affiliate the marginal increase or, in the absence of such
increase, the market amount of its portion of the premium payable with
respect to any insurance policy that covers the Seller and such Affiliate;
and
(m) The Seller will maintain arm's-length relationships with BAX (and
any Affiliate thereof). Any Person that renders or otherwise furnishes
services to the Seller will be compensated by the Seller at market rates
for such services it renders or otherwise furnishes to the Seller. Neither
the Seller nor BAX will be or will hold itself out to be responsible for
the debts of the other or the decisions or actions respecting the daily
business and affairs of the other. The Seller and BAX will immediately
correct any known misrepresentation with respect to the foregoing, and they
will not operate or purport to operate as an integrated single economic
unit with respect to each other or in their dealing with any other entity.
(n) BAX shall not pay the salaries of Seller's employees, if any.
IV-12
<PAGE>
EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a)(i) the Seller, any Originator or the Servicer shall fail to make when
due any payment or deposit to be made by it under the Agreement or (ii) except
as otherwise specifically provided in this Exhibit V, the Seller, any Originator
or the Servicer shall fail to perform or observe any other term, covenant or
agreement under the Agreement or any other Transaction Document and such failure
shall continue unremedied for a period of 30 days;
(b) The Servicer shall fail to transfer to any successor Servicer when
required any rights pursuant to the Agreement that such Servicer then has as
Servicer;
(c) any representation or warranty made or deemed made by the Seller, the
Servicer or any Originator (or any of their respective officers) under or in
connection with the Agreement or any other Transaction Document, or any
information or report delivered by any Responsible Officer of the Seller, the
Servicer or such Originator pursuant to the Agreement or any other Transaction
Document, shall prove to have been incorrect or untrue in any material respect
when made or deemed made or delivered;
(d) the Seller or the Servicer shall fail to deliver the Monthly Report
pursuant to the Agreement, and such failure shall remain unremedied for five
days;
(e) the Agreement or any purchase or reinvestment pursuant to the Agreement
shall for any reason: (i) cease to create, or the Purchased Interest shall for
any reason cease to be, a valid and enforceable perfected undivided percentage
ownership or security interest to the extent of the Purchased Interest in each
Pool Receivable, the Related Security and Collections with respect thereto, free
and clear of any Adverse Claim, or (ii) cease to create with respect to the Pool
Assets, or the interest of the Issuer with respect to such Pool Assets shall
cease to be, a valid and enforceable first priority perfected security interest,
free and clear of any Adverse Claim;
(f) the Seller, the Servicer (and, if BAX is not then the Servicer, BAX) or
any Originator shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Seller, the Servicer (and if
BAX is not then the Servicer, BAX) or any Originator seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up,
V-1
<PAGE>
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of an order for relief or the
appointment of a receiver, trustee, custodian or other similar official for it
or for any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), either such
proceeding shall remain undismissed or unstayed for a period of 60 days, or the
entry of an order granting the requested relief shall be entered; or the Seller,
the Servicer (and if BAX is not then the Servicer, BAX) or any Originator shall
take any corporate action to authorize any of the actions set forth above in
this paragraph;
(g)(i)(A) the Default Ratio shall exceed 9%, (B) the Delinquency Ratio
shall exceed 14%, (C) the Dilution Ratio shall exceed 6% or (D) the
Loss-to-Liquidation Ratio shall exceed 1.5% or (ii) the average for three
consecutive calendar months of: (A) the Default Ratio shall exceed 7.5% or (B)
the Delinquency Ratio shall exceed 11%, (C) the Dilution Ratio shall exceed 4.5%
or (D) the Loss-to-Liquidation Ratio shall exceed 1.0%.
(h) a Change in Control shall occur,
(i) at any time, the Purchased Interest shall exceed 100%,
(j) any acceleration of any of the obligations of The Pittston Company or
any of its subsidiaries arising under that certain Credit Agreement dated as of
October 3, 2000 (as amended, supplemented or otherwise modified from time to
time), among The Pittston Company, certain of its Subsidiaries, the lenders
named therein and Bank of America, National Association, as administrative
agent;
(k) either: (i) a contribution failure shall occur with respect to any
Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA,
(ii) the Internal Revenue Service shall file a notice of lien asserting a claim
pursuant to the Internal Revenue Code with regard to any of the assets of
Seller, any Originator, the Servicer (and, if BAX is not then the Servicer, BAX)
or any ERISA Affiliate, or (iii) the Pension Benefit Guaranty Corporation shall
file a notice of lien asserting a claim pursuant to ERISA with regard to any
assets of the Seller, such Originator, (and, if BAX is not then the Servicer,
BAX) or any ERISA Affiliate.
V-2
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>6
<FILENAME>0006.txt
<DESCRIPTION>EXHIBIT 10(V)(II)
<TEXT>
<PAGE>
PURCHASE AND SALE AGREEMENT
Dated as of December 15, 2000
among
THE ORIGINATORS NAMED HEREIN
BAX FUNDING CORPORATION
and
BAX GLOBAL INC.
as the initial Servicer
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I AGREEMENT TO PURCHASE AND SELL
1.1. Agreement to Purchase and Sell..............................................................................2
1.2. Timing of Purchases.........................................................................................3
1.3. Consideration for Purchases.................................................................................3
1.4. Purchase and Sale Termination Date..........................................................................3
1.5. Intention of the Parties....................................................................................3
ARTICLE II CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price...............................................................................4
ARTICLE III CONTRIBUTION OF RECEIVABLES;PAYMENT OF PURCHASE PRICE
3.1. Contribution of Receivables.................................................................................5
3.2. Initial Purchase Price Payment..............................................................................5
3.3. Subsequent Purchase Price Payments..........................................................................5
3.4. Settlement as to Specific Receivables.......................................................................5
3.5. Reconveyance of Receivables.................................................................................7
ARTICLE IV CONDITIONS OF PURCHASES
4.1. Conditions Precedent to Initial Purchase....................................................................7
4.2. Certification as to Representations and Warranties..........................................................9
4.3. Addition of Originators.....................................................................................9
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE ORIGINATORS
5.1. Organization and Good Standing.............................................................................10
5.2. Due Qualification..........................................................................................10
5.3. Power and Authority; Due Authorization.....................................................................10
5.4. Valid Sale or Contribution; Binding Obligations............................................................10
5.5. No Violation...............................................................................................10
5.6. Proceedings................................................................................................11
5.7. Bulk Sales Act.............................................................................................11
5.8. Government Approvals.......................................................................................11
5.9. Financial Condition........................................................................................11
5.10. Margin Regulations........................................................................................11
5.11. Quality of Title..........................................................................................12
5.12. Accuracy of Information...................................................................................12
5.13. Offices...................................................................................................12
5.14. Trade Names...............................................................................................13
5.15. Taxes.....................................................................................................13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
5.16. Licenses and Labor Controversies..........................................................................13
5.17. Compliance with Applicable Laws...........................................................................13
5.18. Reliance on Separate Legal Identity.......................................................................13
5.19. Purchase Price............................................................................................13
ARTICLE VI COVENANTS OF THE ORIGINATORS
6.1. Affirmative Covenants......................................................................................14
6.2. Reporting Requirements.....................................................................................16
6.3. Negative Covenants.........................................................................................16
ARTICLE VII ADDITIONAL RIGHTS AND OBLIGATIONS INRESPECT OF THE RECEIVABLES
7.1. Rights of the Company......................................................................................18
7.2. Responsibilities of Each Originator........................................................................18
7.3. Further Action Evidencing Purchases........................................................................18
7.4. Application of Collections.................................................................................19
ARTICLE VIII PURCHASE AND SALE TERMINATION EVENTS
8.1. Purchase and Sale Termination Events.......................................................................19
8.2. Remedies...................................................................................................20
ARTICLE IX INDEMNIFICATION
9.1. Indemnities by the Originators.............................................................................21
ARTICLE X MISCELLANEOUS
10.1. Amendments, etc...........................................................................................22
10.2. Notices, etc..............................................................................................23
10.3. No Waiver; Cumulative Remedies............................................................................23
10.4. Binding Effect; Assignability.............................................................................23
10.5. Governing Law.............................................................................................23
10.6. Costs, Expenses and Taxes.................................................................................23
10.7. Submission to Jurisdiction................................................................................24
10.8. Waiver of Jury Trial......................................................................................24
10.9. Captions and Cross References; Incorporation by Reference.................................................24
10.10. Execution in Counterparts................................................................................25
10.11. Acknowledgment and Agreement.............................................................................25
</TABLE>
ii
<PAGE>
SCHEDULES
SCHEDULE 5.13 Office Locations
SCHEDULE 5.14 Trade Names
EXHIBITS
EXHIBIT A Form of Purchase Report
EXHIBIT B Form of Company Note
EXHIBIT C Form of Joinder Agreement
iii
<PAGE>
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (as amended, supplemented or modified
from time to time, this "Agreement"), dated as of December 15, 2000, is among
BAX GLOBAL INC. ("BAX"), a Delaware corporation, as initial Servicer (in such
capacity, the "Servicer") and as an Originator (BAX, and together with each of
the other Person that from time to time becomes an Originator pursuant to
Section 4.3 hereof, collectively, the "Originators" and each, individually, an
"Originator") and BAX FUNDING CORPORATION, a California corporation (the
"Company"), as purchaser and contributee.
Definitions
Unless otherwise indicated, certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I to the Receivables Purchase
Agreement of even date herewith (as amended, supplemented or otherwise modified
from time to time, the "Receivables Purchase Agreement"), among the Company,
BAX, as initial Servicer, LIBERTY STREET FUNDING CORP. (the "Issuer"), and THE
BANK OF NOVA SCOTIA, as Administrator (together with its successors and assigns,
the "Administrator").
Background
1. The Company is a special purpose corporation, all of the capital
stock of which is wholly-owned by BAX.
2. In order to finance their respective businesses, the Originators
wish to sell certain Receivables and Related Rights from time to time to the
Company, and the Company is willing, on the terms and subject to the conditions
set forth herein, to purchase such Receivables and Related Rights from such
Originators.
3. The Company intends to sell to Issuer an undivided variable
percentage interest in its Receivables and Related Rights pursuant to the
Receivables Purchase Agreement in order to finance its purchases of certain
Receivables and Related Rights hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
<PAGE>
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
1.1. Agreement to Purchase and Sell. On the terms and subject to the
conditions set forth in this Agreement (including Article IV), and in
consideration of the Purchase Price, each Originator agrees to sell to the
Company, and does hereby sell to the Company, and the Company agrees to purchase
from such Originator, and does hereby purchase from such Originator, without
recourse and without regard to collectibility, all of such Originator's right,
title and interest in and to:
(a) each Receivable of such Originator that existed and was
owing to such Originator as of the close of such Originator's business
on December 15, 2000 (the "Closing Date") (other than the Receivables
and Related Rights contributed by BAX to the Company pursuant to
Section 3.1 (the "Contributed Receivables"));
(b) each Receivable created or originated by such Originator
from the close of such Originator's business on the Closing Date to and
including the Purchase and Sale Termination Date;
(c) all rights to, but not the obligations under, all Related
Security;
(d) all monies due or to become due with respect to any of the
foregoing;
(e) all books and records related to any of the foregoing; and
(f) all proceeds thereof (as defined in the applicable UCC)
received on or after the date hereof including, without limitation, all
funds which either are received by such Originator, the Company or the
Servicer from or on behalf of the Obligors in payment of any amounts
owed (including, without limitation, finance charges, interest and all
other charges) in respect of Receivables, or are applied to such
amounts owed by the Obligors (including, without limitation, insurance
payments, if any, that such Originator or the Servicer (if other than
Originator) applies in the ordinary course of its business to amounts
owed in respect of any Receivable).
All purchases and contributions hereunder shall be made without recourse, but
shall be made pursuant to and in reliance upon the representations, warranties
and covenants of each Originator set forth in this Agreement and each other
Transaction Document. The Company's foregoing commitment to purchase such
Receivables and the proceeds and rights described in subsections (c) through (f)
of this Section 1.1 (collectively, the "Related Rights") is herein called the
"Purchase Facility."
2
<PAGE>
1.2. Timing of Purchases.
(a) Closing Date Purchases. Each Originator's entire right, title and
interest in (i) each Receivable that existed and was owing to Originator as of
the close of such Originator's business on the Closing Date, (other than the
Contributed Receivables), and (ii) all Related Rights with respect thereto shall
be deemed to have been sold to the Company on the Closing Date.
(b) Regular Purchases. After the Closing Date, each Receivable created
or originated by each Originator and described in Section 1.1(b) hereof and all
Related Rights shall be purchased and owned by the Company (without any further
action) upon the creation or origination of such Receivable.
(c) Foreign Receivables. Notwithstanding anything in this Agreement to
the contrary, no Receivable, the Obligor of which is a resident of a
jurisdiction other than the United States, Canada or Mexico, shall be sold,
transferred or otherwise assigned by any Originator to the Company hereunder
unless and until Company shall have notified such Originator in writing that
such Receivable is acceptable for purchase hereunder.
1.3. Consideration for Purchases. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to make all Purchase
Price payments to the respective Originators, and to reflect all contributions,
in accordance with Article III.
1.4. Purchase and Sale Termination Date. The "Purchase and Sale
Termination Date" shall be the earlier to occur of (a) the date of the
termination of this Agreement pursuant to Section 8.2 and (b) the Payment Date
immediately following the day on which the Servicer shall have given notice to
the Company that the Originators desire to terminate this Agreement.
As used herein, "Payment Date" means (i) the Closing Date and (ii) each
Business Day thereafter that the Originators are open for business.
1.5. Intention of the Parties. It is the express intent of the parties
hereto that the transfers of the Receivables and Related Rights by each
Originator to the Company, as contemplated by this Agreement be, and be treated
as, sales or contributions, as applicable, and not as loans secured by the
Receivables and Related Rights. If, however, notwithstanding the intent of the
parties, such transfers are deemed to be loans, such Originator hereby grants to
the Company a first priority security interest in all of such Originator's
right, title and interest in and to the Receivables and the Related Rights now
existing and hereafter created, all monies due or to become due and all amounts
received with respect thereto, and all proceeds thereof, to secure all of such
Originator's obligations hereunder.
3
<PAGE>
ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price. On the tenth Business Day after
the last day of each calendar month (the "Servicer Report Date"), the Servicer
shall deliver to the Company, the Administrator and each Originator a report in
substantially the form of Exhibit A (each such report being herein called a
"Purchase Report") with respect to the matters set forth therein and the
Company's purchases of Receivables from each Originator
(a) that are to be made on the Closing Date (in the case of
the Purchase Report to be delivered on the Closing Date), or
(b) that were made during the period commencing on the
Servicer Report Date immediately preceding such Servicer Report Date to
(but not including) such Servicer Report Date (in the case of each
subsequent Purchase Report).
The "Purchase Price" (to be paid to each Originator in accordance with the terms
of Article III) for the Receivables and the Related Rights that are purchased
hereunder shall be determined in accordance with the following formula:
PP = OB X FMVD
where:
PP = Purchase Price for each Receivable as calculated on
the relevant Payment Date.
OB = the Outstanding Balance of such Receivable.
FMVD = Fair Market Value Discount, as measured on such
Payment Date, which is equal to the quotient
(expressed as percentage) of (a) one divided by
(b) the sum of (i) one, plus (ii) the product of
(A) the Prime Rate on such Payment Date, and (B) a
fraction, the numerator of which is the Days'
Sales Outstanding (calculated as of the last day
of the calendar month next preceding such Payment
Date) and the denominator of which is 365.
"Prime Rate" means a per annum rate equal to the "prime rate" as
published in the "Money Rates" section of The Wall Street Journal or such other
publication as determined by the Administrator in its sole discretion.
4
<PAGE>
ARTICLE III
CONTRIBUTION OF RECEIVABLES;
PAYMENT OF PURCHASE PRICE
3.1. Contribution of Receivables. On the Closing Date, BAX shall, and
hereby does, contribute to the capital of the Company, Receivables and Related
Rights with respect thereto consisting of each Receivable of BAX that existed
and was owing to BAX on the Closing Date, beginning with the oldest of such
Receivables and continuing chronologically thereafter, and all or an undivided
interest in the most recent of such contributed Receivables such that the
aggregate Outstanding Balance of all such contributed Receivables shall be equal
to $1,500,000.
3.2. Initial Purchase Price Payment. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to pay to each
Originator the Purchase Price for the purchase of Receivables to be made on the
Closing Date (other than Contributed Receivables), partially in cash in the
amount of the proceeds of the purchase made by the Issuer on the Closing Date
under the Receivables Purchase Agreement, and partially by issuing a promissory
note in the form of Exhibit B to such Originator with an initial principal
balance equal to the remaining Purchase Price (as each such promissory note may
be amended, supplemented, indorsed or otherwise modified from time to time,
together with all promissory notes issued from time to time in substitution
therefor or renewal thereof in accordance with the Transaction Documents, being
herein called the "Company Note").
3.3. Subsequent Purchase Price Payments. On each Business Day falling
after the Closing Date and on or prior to the Purchase and Sale Termination
Date, on the terms and subject to the conditions set forth in this Agreement,
the Company shall pay to each Originator the Purchase Price for the Receivables
sold by such Originator to the Company on such Business Day, in cash, to the
extent provided under the terms of the Receivables Purchase Agreement, and to
the extent any of such Purchase Price remains unpaid, such remaining portion of
such Purchase Price shall be paid by means of an automatic increase to the
outstanding principal amount of the Company Note issued to such Originator.
Servicer shall make all appropriate record keeping entries with respect
to the Company Notes or otherwise to reflect the foregoing payments and to
reflect adjustments pursuant to Section 3.4, and Servicer's books and records
shall constitute rebuttable presumptive evidence of the principal amount of and
accrued interest on any Company Note at any time. Furthermore, Servicer shall
hold the Company Notes for the benefit of the Originators, and all payments
under the Company Notes shall be made to the Servicer for the account of the
applicable payee thereof. Each Originator hereby irrevocably authorizes Servicer
to mark the Company Notes "CANCELLED" and to return such Company Notes to the
Company upon the final payment thereof after the occurrence of the Purchase and
Sale Termination Date.
3.4. Settlement as to Specific Receivables and Dilution.
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(a) If on the day of purchase or contribution of any Receivable from
any Originator hereunder, any of the representations or warranties set forth in
Section 5.4 or 5.11 of such Originator is not true with respect to such
Receivable or as a result of any action or inaction of such Originator, on any
day any of such representations or warranties set forth in Section 5.4 or 5.11
is no longer true with respect to such a Receivable (other than a representation
or warranty set forth in Section 5.11(c) which is no longer true as a result of
an Obligor's payment obligation being discharged in bankruptcy), then the
Purchase Price (or in the case of a Contributed Receivable, the Outstanding
Balance of such Receivable (the "Contributed Value")) with respect to such
Receivables shall be reduced by an amount equal to the Outs