UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended March 31, 2009 |
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or |
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o |
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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: 0-10653
UNITED STATIONERS INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
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36-3141189 |
(State or Other Jurisdiction of |
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(I.R.S. Employer |
Incorporation or Organization) |
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Identification No.) |
One Parkway North Boulevard
Suite 100
Deerfield, Illinois 60015-2559
(847) 627-7000
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrants
Principal Executive Offices)
Indicate by check mark whether 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 (or for such shorter period that registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 and Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer x |
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Accelerated filer o |
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Non-accelerated filer o |
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Smaller reporting company o |
(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
On May 1, 2009, the registrant had outstanding 23,708,340 shares of common stock, par value $0.10 per share.
UNITED STATIONERS
INC.
FORM 10-Q
For the Quarterly Period Ended March 31, 2009
2
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(Unaudited)
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As of March 31, 2009 |
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As of December 31, 2008 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
13,916 |
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$ |
10,662 |
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Accounts receivable and retained interest in receivables sold, less allowance for doubtful accounts of $35,686 in 2009 and $32,544 in 2008 |
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573,433 |
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610,210 |
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Inventories |
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572,201 |
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680,516 |
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Other current assets |
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21,656 |
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33,857 |
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Total current assets |
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1,181,206 |
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1,335,245 |
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Property, plant and equipment, at cost |
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411,889 |
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411,152 |
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Less - accumulated depreciation and amortization |
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267,276 |
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258.138 |
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Net property, plant and equipment |
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144,613 |
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153,014 |
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Intangible assets, net |
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66,741 |
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67,982 |
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Goodwill |
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314,222 |
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314,441 |
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Other |
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10,932 |
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10,834 |
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Total assets |
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$ |
1,717,714 |
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$ |
1,881,516 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Accounts payable |
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$ |
318,913 |
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$ |
341,084 |
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Accrued liabilities |
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142,555 |
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186,530 |
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Total current liabilities |
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461,468 |
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527,614 |
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Deferred income taxes |
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2,066 |
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Long-term debt |
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552,500 |
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663,100 |
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Other long-term liabilities |
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112,207 |
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125,164 |
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Total liabilities |
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1,128,241 |
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1,315,878 |
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Stockholders equity: |
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Common stock, $0.10 par value; authorized - 100,000,000 shares, issued - 37,217,814 in 2009 and 2008 |
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3,722 |
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3,722 |
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Additional paid-in capital |
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380,851 |
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382,721 |
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Treasury stock, at cost - 13,510,522 shares in 2009 and 13,687,843 shares in 2008 |
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(708,111 |
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(712,944 |
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Retained earnings |
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970,610 |
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957,089 |
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Accumulated other comprehensive loss |
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(57,599 |
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(64,950 |
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Total stockholders equity |
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589,473 |
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565,638 |
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Total liabilities and stockholders equity |
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$ |
1,717,714 |
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$ |
1,881,516 |
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See notes to condensed consolidated financial statements.
3
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per
share data)
(Unaudited)
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For the Three Months Ended |
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March 31, |
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2009 |
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2008 |
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Net sales |
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$ |
1,121,307 |
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$ |
1,252,474 |
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Cost of goods sold |
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956,971 |
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1,068,173 |
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Gross profit |
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164,336 |
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184,301 |
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Operating expenses: |
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Warehousing, marketing and administrative expenses |
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135,452 |
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139,895 |
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Operating income |
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28,884 |
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44,406 |
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Interest expense, net |
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7,180 |
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7,301 |
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Other expense, net |
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204 |
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2,241 |
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Income before income taxes |
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21,500 |
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34,864 |
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Income tax expense |
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7,979 |
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13,548 |
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Net income |
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$ |
13,521 |
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$ |
21,316 |
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Net income per share - basic: |
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Net income per common share - basic |
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$ |
0.57 |
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$ |
0.89 |
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Average number of common shares outstanding - basic |
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23,707 |
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23,940 |
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Net income per share - diluted: |
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Net income per common share - diluted |
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$ |
0.57 |
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$ |
0.88 |
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Average number of common shares outstanding - diluted |
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23,810 |
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24,313 |
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See notes to condensed consolidated financial statements.
4
UNITED STATIONERS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars
in thousands)
(Unaudited)
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For the Three Months Ended |
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March 31, |
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2009 |
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2008 |
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Cash Flows From Operating Activities: |
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Net income |
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$ |
13,521 |
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$ |
21,316 |
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Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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10,588 |
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11,215 |
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Share-based compensation |
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2,884 |
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2,263 |
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Gain on the disposition of property, plant and equipment |
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(19 |
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Amortization of capitalized financing costs |
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218 |
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310 |
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Excess tax benefits related to share-based compensation |
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(10 |
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(346 |
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Deferred income taxes |
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(3,071 |
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(6,400 |
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Changes in operating assets and liabilities, excluding the effects of acquisitions: |
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Decrease (increase) in accounts receivable and retained interest in receivables sold, net |
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36,384 |
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(14,862 |
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Decrease in inventory |
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108,053 |
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74,840 |
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Decrease in other assets |
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11,480 |
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9,661 |
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Decrease in accounts payable |
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(13,964 |
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(50,150 |
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Decrease in checks in-transit |
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(8,347 |
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(31,503 |
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Decrease in accrued liabilities |
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(41,842 |
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(41,684 |
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(Decrease) increase in other liabilities |
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(67 |
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7,495 |
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Net cash provided by (used in) operating activities |
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115,808 |
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(17,845 |
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Cash Flows From Investing Activities: |
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Capital expenditures |
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(1,985 |
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(8,007 |
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Proceeds from the disposition of property, plant and equipment |
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21 |
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Net cash used in investing activities |
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(1,964 |
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(8,007 |
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Cash Flows From Financing Activities: |
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Net (repayments) borrowings under Revolving Credit Facility |
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(110,600 |
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90,900 |
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Net proceeds from the exercise of stock options |
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67 |
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1,015 |
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Acquisition of treasury stock, at cost |
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(67,505 |
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Excess tax benefits related to share-based compensation |
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10 |
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346 |
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Payment of debt issuance costs |
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(51 |
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Net cash (used in) provided by financing activities |
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(110,574 |
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24,756 |
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Effect of exchange rate changes on cash and cash equivalents |
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(16 |
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1 |
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Net change in cash and cash equivalents |
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3,254 |
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(1,095 |
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Cash and cash equivalents, beginning of period |
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10,662 |
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21,957 |
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Cash and cash equivalents, end of period |
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$ |
13,916 |
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$ |
20,862 |
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Other Cash Flow Information: |
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Income tax payments (refunds), net |
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$ |
789 |
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$ |
(208 |
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Interest paid |
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6,413 |
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7,329 |
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Loss on the sale of accounts receivable |
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429 |
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3,030 |
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See notes to condensed consolidated financial statements.
5
UNITED STATIONERS INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying Condensed Consolidated Financial Statements are unaudited, except for the Condensed Consolidated Balance Sheet as of December 31, 2008, which was derived from the December 31, 2008 audited financial statements. The Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. Accordingly, the reader of this Quarterly Report on Form 10-Q should refer to the Companys Annual Report on Form 10-K for the year ended December 31, 2008 for further information.
In the opinion of the management of the Company (as hereafter defined), the Condensed Consolidated Financial Statements for the interim periods presented include all adjustments necessary to fairly present the Companys results for such interim periods and its financial position as of the end of said periods. Certain interim estimates of a normal, recurring nature are recognized throughout the year, relating to accounts receivable, supplier allowances, inventory, customer rebates, price changes and product mix. The Company evaluates these estimates periodically and makes adjustments where facts and circumstances dictate.
The accompanying Condensed Consolidated Financial Statements represent United Stationers Inc. (USI) with its wholly owned subsidiary United Stationers Supply Co. (USSC), and USSCs subsidiaries (collectively, United or the Company). The Company is the largest broad line wholesale distributor of business products in North America, with net sales for the trailing 12 months of $4.9 billion. The Company operates in a single reportable segment as a national wholesale distributor of business products. The Company offers more than 100,000 items from over 1,000 manufacturers. These items include a broad spectrum of technology products, traditional business products, office furniture, janitorial and breakroom supplies, and industrial supplies. In addition, the Company also offers private brand products. The Company primarily serves commercial and contract office products dealers. The Company sells its products through a national distribution network of 67 distribution centers to approximately 30,000 resellers, who in turn sell directly to end-consumers.
Common Stock Repurchase
As of March 31, 2009, the Company had $100.9 million remaining of Board authorizations to repurchase USI common stock. There were no share repurchases in the first quarter of 2009. During the three-month period ended March 31, 2008, the Company repurchased 1,233,832 shares of common stock at a cost of $67.5 million. A summary of total shares repurchased under the Companys share repurchase authorizations is as follows (dollars in millions, except share data):
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Share Repurchases
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Cost |
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Shares |
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Authorizations: |
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2008 Authorizations ($100.0 million remaining) |
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$ |
100.0 |
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2007 Authorizations ($0.9 million remaining) |
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400.0 |
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2002 to 2006 Authorizations (completed) |
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325.0 |
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Repurchases: |
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2008 repurchases |
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$ |
(67.5 |
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1,233,832 |
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2007 repurchases |
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(383.3 |
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6,561,416 |
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2002 to 2006 repurchases |
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(273.3 |
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6,352,578 |
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Total repurchases |
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(724.1 |
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14,147,826 |
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Remaining repurchase authorized at March 31, 2009 |
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$ |
100.9 |
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Depending on market and business conditions and other factors, the Company may continue or suspend purchasing its common stock at any time without notice.
Acquired shares are included in the issued shares of the Company and treasury stock, but are not included in average shares outstanding when calculating earnings per share data. During the first quarter of 2009 and 2008, the Company reissued 178,780 and 58,215 shares, respectively, of treasury stock to fulfill its obligations under its equity incentive plans.
6
2. Summary of Significant Accounting Policies
Principles of Consolidation
The Condensed Consolidated Financial Statements include the accounts of the Company. All intercompany accounts and transactions have been eliminated in consolidation. For all acquisitions, account balances and results of operations are included in the Condensed Consolidated Financial Statements as of the date acquired.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. Actual results could differ from these estimates.
Various assumptions and other factors underlie the determination of significant accounting estimates. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, current and expected economic conditions, product mix, and in some cases, actuarial techniques. The Company periodically reevaluates these significant factors and makes adjustments where facts and circumstances dictate. Historically, actual results have not significantly deviated from estimates.
Supplier Allowances
Supplier allowances (fixed or variable) are common practice in the business products industry and have a significant impact on the Companys overall gross margin. Gross margin is determined by, among other items, file margin (determined by reference to invoiced price), as reduced by customer discounts and rebates as discussed below, and increased by supplier allowances and promotional incentives. Receivables related to supplier allowances totaled $43.6 million and $91.8 million as of March 31, 2009 and December 31, 2008, respectively. These receivables are included in Accounts receivable in the Condensed Consolidated Balance Sheets.
In the first quarter of 2009, approximately 20% of the Companys estimated annual supplier allowances and incentives were fixed, based on supplier participation in various Company advertising and marketing publications. Fixed allowances and incentives are taken to income through lower cost of goods sold as inventory is sold.
The remaining 80% of the Companys annual supplier allowances and incentives in the first quarter of 2009 were variable, based on the volume and mix of the Companys product purchases from suppliers. These variable allowances are recorded based on the Companys annual inventory purchase volumes and product mix and are included in the Companys financial statements as a reduction to cost of goods sold, thereby reflecting the net inventory purchase cost. Supplier allowances and incentives attributable to unsold inventory are carried as a component of net inventory cost. The potential amount of variable supplier allowances often differs based on purchase volumes by supplier and product category. As a result, changes in the Companys sales volume (which can increase or reduce inventory purchase requirements) and changes in product sales mix (especially because higher-margin products often benefit from higher supplier allowance rates) can create fluctuations in variable supplier allowances.
Customer Rebates
Customer rebates and discounts are common practice in the business products industry and have a significant impact on the Companys overall sales and gross margin. Such rebates are reported in the Condensed Consolidated Financial Statements as a reduction of sales. Customer rebates of $35.9 million and $62.1 million as of March 31, 2009 and December 31, 2008, respectively, are included as a component of Accrued liabilities in the Condensed Consolidated Balance Sheets.
Customer rebates include volume rebates, sales growth incentives, advertising allowances, participation in promotions and other miscellaneous discount programs. These rebates are paid to customers monthly, quarterly and/or annually. Estimates for volume rebates and growth incentives are based on estimated annual sales volume to the Companys customers. The aggregate amount of customer rebates depends on product sales mix and customer mix changes. Reported results reflect managements current estimate of such rebates. Changes in estimates of sales volumes, product mix, customer mix or sales patterns, or actual results that vary from such estimates, may impact future results.
7
Revenue Recognition
Revenue is recognized when a service is rendered or when title to the product has transferred to the customer. Management records an estimate for future product returns related to revenue recognized in the current period. This estimate is based on historical product return trends and the gross margin associated with those returns. Management also records customer rebates that are based on estimated annual sales volume to the Companys customers. Annual rebates earned by customers include growth components, volume hurdle components, and advertising allowances.
Shipping, handling and fuel costs billed to customers are treated as revenues and recognized at the time title to the product has transferred to the customer. Freight costs for inbound and outbound shipments are included in the Companys financial statements as a component of cost of goods sold and not netted against shipping and handling revenues. Net sales do not include sales tax charged to customers.
Valuation of Accounts Receivable
The Company makes judgments as to the collectability of accounts receivable based on historical trends and future expectations. Management estimates an allowance for doubtful accounts, which addresses the collectability of trade accounts receivable. This allowance adjusts gross trade accounts receivable downward to its estimated collectible or net realizable value. To determine the allowance for doubtful accounts, management reviews specific customer risks and the Companys accounts receivable aging. Uncollectible receivable balances are written off against the allowance for doubtful accounts when it is determined that the receivable balance is uncollectible.
Insured Loss Liability Estimates
The Company is primarily responsible for retained liabilities related to workers compensation, vehicle, property and general liability and certain employee health benefits. The Company records expense for paid and open claims and an expense for claims incurred but not reported based on historical trends and on certain assumptions about future events. The Company has an annual per-person maximum cap, provided by a third-party insurance company, on certain employee medical benefits. In addition, the Company has both a per-occurrence maximum loss and an annual aggregate maximum cap on workers compensation claims.
Leases
The Company leases real estate and personal property under operating leases. Certain operating leases include incentives from landlords including landlord build-out allowances, rent escalation clauses and rent holidays or periods in which rent is not payable for a certain amount of time. The Company accounts for landlord build-out allowances as deferred rent at the time of possession and amortizes this deferred rent on a straight-line basis over the term of the lease. The Company also recognizes leasehold improvements associated with the build-out allowances and amortizes these improvements over the shorter of (1) the term of the lease or (2) the expected life of the respective improvements.
The Company accounts for rent escalation and rent holidays as deferred rent at the time of possession and amortizes this deferred rent on a straight-line basis over the term of the lease. As of March 31, 2009, the Company is not a party to any capital leases.
Inventories
Inventory valued under the last-in, first-out (LIFO) accounting method constitute approximately 80% and 81% of total inventory as of March 31, 2009 and December 31 2008 , respectively. LIFO results in a better matching of costs and revenues. The remaining inventory is valued under the first-in, first-out (FIFO) accounting method. Inventory valued under the FIFO and LIFO accounting methods is recorded at the lower of cost or market. If the Company had valued its entire inventory under the lower of FIFO cost or market, inventory would have been $ 88.4 million and $ 84.7 million higher than reported as of March 31, 2009 and December 31, 2008, respectively. The increase in the LIFO reserve, which increased cost of sales by $ 3.7 million, included a $7.7 million offset for estimated inventory decrements.
The Company also records adjustments to inventory for shrinkage. Inventory that is obsolete, damaged, defective or slow moving is recorded to the lower of cost or market. These adjustments are determined using historical trends and are adjusted, if necessary, as new information becomes available.
8
Cash and Cash Equivalents
An unfunded check balance (payments in-transit) exists for the Companys primary disbursement accounts. Under the Companys cash management system, the Company utilizes available borrowings, on an as-needed basis, to fund the clearing of checks as they are presented for payment. As of March 31, 2009 and December 31, 2008, outstanding checks totaling $30.9 million and $39.2 million, respectively, were included in Accounts payable in the Condensed Consolidated Balance Sheets. All highly liquid debt instruments with an original maturity of three months or less are considered cash equivalents. Cash equivalents are stated at cost, which approximates fair value.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Depreciation and amortization are determined by using the straight-line method over the estimated useful lives of the assets. The estimated useful life assigned to fixtures and equipment is from two to 10 years; the estimated useful life assigned to buildings does not exceed 40 years; leasehold improvements are amortized over the lesser of their useful lives or the term of the applicable lease. Repairs and maintenance costs are charged to expense as incurred.
Software Capitalization
The Company capitalizes internal use software development costs in accordance with the American Institute of Certified Public Accountants Statement of Position No. 98-1, Accounting for Costs of Computer Software Developed or Obtained for Internal Use. Amortization is recorded on a straight-line basis over the estimated useful life of the software, generally not to exceed seven years. Capitalized software is included in Property, plant and equipment, at cost on the Condensed Consolidated Balance Sheets as of March 31, 2009 and December 31, 2008. The total costs are as follows (in thousands):
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As of
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As of
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Capitalized software development costs |
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$ |
51,774 |
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$ |
57,706 |
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Write-off of capitalized software development costs |
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(6,735 |
) |
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Accumulated amortization |
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(37,858 |
) |
(36,498 |
) |
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Net capitalized software development costs |
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$ |
13,916 |
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$ |
14,473 |
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Derivative Financial Instruments
The Companys risk management policies allow for the use of derivative financial instruments to prudently manage foreign currency exchange rate and interest rate exposure. The policies do not allow such derivative financial instruments to be used for speculative purposes. At this time, the Company primarily uses interest rate swaps, which are subject to the management, direction and control of our financial officers. Risk management practices, including the use of all derivative financial instruments, are presented to the Board of Directors for approval.
All derivatives are recognized on the balance sheet date at their fair value. All derivatives in a net receivable position are included in Other assets, and those in a net liability position are included in Other long-term liabilities. The interest rate swaps that the Company has entered into are classified as cash flow hedges in accordance with the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 133 as they are hedging a forecasted transaction or the variability of cash flow to be paid by the Company. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge are recorded in other comprehensive income, net of tax, until earnings are affected by the forecasted transaction or the variability of cash flow, and then are reported in current earnings.
The Company formally documents all relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as cash flow hedges to specific forecasted transactions or variable cash flows.
The Company formally assesses, at both the hedges inception and on an ongoing basis, whether the derivatives used in hedging transactions are highly effective in offsetting changes in cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge then hedge accounting is discontinued prospectively in accordance with SFAS No. 133. At this time, this has not occurred as all cash flow hedges contain no ineffectiveness. See Note 13, Derivative Financial Instruments, for further detail.
9
Income Taxes
The Company accounts for income taxes using the liability method in accordance with SFAS No. 109, Accounting for Income Taxes. The Company estimates actual current tax expense and assesses temporary differences that exist due to differing treatments for tax and financial statement purposes. These temporary differences result in the recognition of deferred tax assets and liabilities. A provision has not been made for deferred U.S. income taxes on the undistributed earnings of the Companys foreign subsidiaries as these earning have historically been permanently invested. The Company accounts for interest and penalties related to uncertain tax positions as a component of income tax expense.
Foreign Currency Translation
The functional currency for the Companys foreign operations is the local currency. Assets and liabilities of these operations are translated into U.S. currency at the rates of exchange at the balance sheet date. The resulting translation adjustments are included in accumulated other comprehensive loss, a separate component of stockholders equity. Income and expense items are translated at average monthly rates of exchange. Realized gains and losses from foreign currency transactions were not material.
New Accounting Pronouncements
In February 2008, the FASB issued FASB Staff Position (FSP) 157-2 which delays the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually), until fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. Effective January 1, 2009, the Company adopted SFAS No. 157 for nonfinancial assets and liabilities recognized at fair value on a non-recurring basis. This adoption did not have a material impact on the Companys consolidated financial position, results of operations or cash flows. See Note 14, Fair Value Measurements, for information and related disclosures regarding the Companys fair value measurements.
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations (SFAS No. 141(R)) , which is a revision to SFAS No. 141, Business Combinations , originally issued in June 2001. The revised statement retains the fundamental requirements of SFAS No. 141 but also defines the acquirer and establishes the acquisition date as the date that the acquirer achieves control. The main features of SFAS No. 141(R) are that it requires an acquirer to recognize the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their fair values as of that date, with limited exceptions noted in the Statement. SFAS No. 141(R) requires the acquirer to recognize goodwill as of the acquisition date. Finally, the new Statement makes a number of other significant amendments to other Statements and other authoritative guidance including requiring research and development costs acquired to be capitalized separately from goodwill and requiring the expensing of transaction costs directly related to an acquisition. This new Statement is effective for acquisitions on or after the beginning of the first fiscal year beginning on or after December 15, 2008. The adoption of SFAS No. 141(R) on January 1, 2009 did not have a material impact on the Companys financial position and/or its results of operations.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51 (SFAS No. 160) , which requires, among other items, that ownership interest in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parents equity. The Statement also requires that the amount of consolidated net income attributable to the parent and to the noncontrolling interest be clearly identified and presented on the face of the consolidated statement of income. Finally, SFAS No. 160 requires that entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners. This Statement is effective for fiscal years beginning on or after December 15, 2008. The adoption of SFAS No. 160 did not have an impact on the Companys financial position and/or its results of operations.
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities (SFAS No. 161), which amends and expands the disclosure requirements of SFAS No. 133 with the intent to provide users of financial statements with an enhanced understanding of an entitys derivative and hedging activities. Specifically, SFAS No. 161 requires further disclosure on the following: 1) how and why an entity uses derivative instruments; 2) how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and 3) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. In order to meet these requirements, SFAS No. 161 requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses on derivative instruments, and disclosures about credit risk-related contingent features in derivative agreements. This Statement is effective for fiscal years beginning after November 15, 2008. The adoption of SFAS No. 161 on January 1, 2009 did not have a material impact on the Companys financial position and/or its results of operations. Disclosure requirements of SFAS No. 161 are included in Note 13, Derivative Financial Instruments.
10
In April 2008, the FASB issued FASB Staff Position (FSP) 142-3, Determination of the Useful Life of Intangible Assets (FSP 142-3), which amends SFAS No. 142, Goodwill and Other Intangible Assets in an effort to better align the useful life of a recognized intangible asset for provisions of SFAS No. 142 to the period of expected future cash flows, as used to determine the assets fair value, in accordance with SFAS No. 141 (revised 2007), Business Combinations . The Statement is effective for fiscal years beginning after December 15, 2008 and requires disclosure of an entitys intent and ability to renew and/or extend the useful life of recognized intangibles as well as its accounting treatment of related costs (see Note 4, Goodwill and Intangible Assets). In addition, the Statement also requires that entities develop useful life renewal or extension assumptions, either upon its own historical experience or, in such an absence, that which market participants would use, and to incorporate those assumptions into the entitys determination of newly acquired intangible asset fair values. The adoption of FSP 142-3 did not have an impact on the Companys financial position and/or its results of operations.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles ( SFAS No. 162 ). The new standard is intended to improve financial reporting by identifying a consistent framework, or hierarchy, for selecting accounting principles to be used in preparing financial statements that are presented in conformity with U.S. generally accepted accounting principles (GAAP) for nongovernmental entities. The new standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The adoption of SFAS 162 did not have a material impact on the Companys financial position and/or its results of operations.
In June 2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities , which states that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are considered participating securities and shall be included in the computation of earnings per share pursuant to the two-class method. The two-class method is an earnings allocation formula that treats a participating security as having rights to earnings that would otherwise have been available to common shareholders. The provisions of this FSP are retrospective. The adoption of this FSP did not have a material impact on the Companys financial position and/or its results of operations.
In March 2009, the FASB issued FSP No. 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly . The FSP requires entities to evaluate the significance and relevance of market factors for fair value inputs to determine if, due to reduced volume and market activity, the factors are still relevant and substantive measures of fair value. The FSP is effective for interim and annual reporting periods ending after June 15, 2009, and the Company does not believe the adoption will have a material effect on its financial position and/or results of operations.
In April 2009, the FASB issued FSP No. 107-1, Interim Disclosures about Fair Value of Financial Instruments . The FSP requires disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting , to require those disclosures in summarized financial information at interim reporting periods. The FSP is effective for interim reporting periods ending after June 15, 2009. The Company does not believe the adoption will have a material effect on its financial position and/or results of operations.
3. Share-Based Compensation
Overview
As of March 31, 2009, the Company has two active equity compensation plans. A description of these plans is as follows:
Amended and Restated 2004 Long-Term Incentive Plan (LTIP)
In March 2004, the Companys Board of Directors adopted the LTIP to, among other things, attract and retain managerial talent, further align the interest of key associates to those of the Companys stockholders and provide competitive compensation to key associates. Award vehicles include stock options, stock appreciation rights, full value awards, cash incentive awards and performance-based awards. Key associates and non-employee directors of the Company are eligible to become participants in the LTIP, except that non-employee directors may not be granted incentive stock options. The Company granted 182,781 shares of restricted stock and 206,474 restricted stock units (RSUs) under the LTIP during the first quarter of 2009. The Company did not grant stock options under the LTIP during 2009.
11
Nonemployee Directors Deferred Stock Compensation Plan
Pursuant to the United Stationers Inc. Nonemployee Directors Deferred Stock Compensation Plan, non-employee directors may defer receipt of all or a portion of their retainer and meeting fees. Fees deferred are credited quarterly to each participating director in the form of stock units based on the fair market value of the Companys common stock on the quarterly deferral date. Each stock unit account generally is distributed and settled in whole shares of the Companys common stock on a one-for-one basis, with a cash-out of any fractional stock unit interests, after the participant ceases to serve as a Company director.
Accounting For Share-Based Compensation
The Company recorded a pre-tax charge of $2.9 million ($1.8 million after-tax), or $0.08 per basic and diluted share, for share-based compensation for the first quarter of 2009. The Company recorded a pre-tax charge of $2.3 million ($1.4 million after-tax), or $0.06 per basic and diluted share, for share-based compensation for the three months ended March 31, 2008.
The following tables summarize the intrinsic value of options outstanding, exercisable, and exercised for the applicable periods listed below:
Intrinsic Value of Options
(in thousands of dollars)
|
|
Outstanding |
|
Exercisable |
|
||
|
|
|
|
|
|
||
As of March 31, 2009 |
|
$ |
679 |
|
$ |
679 |
|
As of March 31, 2008 |
|
13,581 |
|
12,625 |
|
||
Intrinsic Value of Options Exercised
(in thousands of dollars)
|
|
For the three months ended |
|
|
|
|
|
|
|
March 31, 2009 |
|
$ |
26 |
|
March 31, 2008 |
|
1,026 |
|
|
The following tables summarize the intrinsic value of restricted shares outstanding and vested for the applicable periods listed below:
Intrinsic Value of Restricted Shares
(in thousands of dollars)
Outstanding |
|
|
|
|
|
|
|
|
|
As of March 31, 2009 |
|
$ |
17,738 |
|
As of March 31, 2008 |
|
8,119 |
|
|
Intrinsic Value of Restricted Shares Vested
(in thousands of dollars)
For the three months ended |
|
|
|
|
|
|
|
|
|
March 31, 2009 |
|
$ |
126 |
|
March 31, 2008 |
|
|
|
|
As of March 31, 2009, there was $22.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted. This cost is expected to be recognized over a weighted-average period of 2.2 years.
SFAS No. 123(R), Share-Based Payment (SFAS No. 123(R)) , requires that cash flows resulting from the tax benefits from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) be classified as financing cash flows. For the three months ended March 31, 2009 this amount was not significant while for the three months ended March 31, 2008, the $0.3 million of excess tax benefits classified as financing cash inflows on the Consolidated Statement of Cash Flows would have been classified as operating cash inflows if the Company had not adopted SFAS No. 123(R).
12
Historically, the majority of awards issued under these plans were stock options with service-type conditions. The Company began utilizing restricted stock awards with service-type conditions in its annual award grant in September 2007 and restricted stock unit awards with service-type and performance-based conditions in March 2009.
Stock Options
The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model that uses various assumptions including the expected stock price volatility, risk-free interest rate, and expected life of the option. Stock options generally vest in annual increments over three years and have a term of 10 years. Compensation costs for all stock options are recognized, net of estimated forfeitures, on a straight-line basis as a single award typically over the vesting period. The Company estimates expected volatility based on historical volatility of the price of its common stock. The Company estimates the expected term of share-based awards by using historical data relating to option exercises and employee terminations to estimate the period of time that options granted are expected to be outstanding. The interest rate for periods during the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. As of March 31, 2009, there was $3.8 million of total unrecognized compensation cost related to non-vested stock option awards granted. There were no stock options granted during the first three months of 2009 or in 2008.
The following table summarizes the transactions, excluding restricted stock and restricted stock unit awards, under the Companys equity compensation plans for the three months ended March 31, 2009:
Stock Options Only |
|
Shares |
|
Weighted
|
|
Weighted
|
|
Aggregate
|
|
||
Options outstanding - December 31, 2008 |
|
2,614,005 |
|
$ |
44.63 |
|
|
|
|
|
|
Granted |
|
|
|
|
|
|
|
|
|
||
Exercised |
|
(4,300 |
) |
23.06 |
|
|
|
|
|
||
Canceled |
|
(12, 273 |
) |
52.31 |
|
|
|
|
|
||
Options outstanding March 31, 2009 |
|
2,597,432 |
|
$ |
44.63 |
|
6.1 |
|
$ |
679 |
|
|
|
|
|
|
|
|
|
|
|
||
Number of options exercisable |
|
2,117,324 |
|
$ |
42.52 |
|
5.6 |
|
$ |
679 |
|
Restricted Stock and Restricted Stock Units
During the first quarter of 2009, the Company granted 182,781 shares of restricted stock awards and 206,474 restricted stock units (RSUs). The restricted stock granted vests three years from the date of the grant. The RSUs granted vest on December 31, 2011, with annual performance conditions based on a predetermined internal financial performance metric that impacts the number of shares earned. The Company granted 23,500 shares of restricted stock and 24,000 RSUs during the three months ended March 31, 2008. The majority of the RSUs granted in 2008 vest in four years from the grant date with annual performance conditions based on a predetermined internal financial performance metric that impacts the number of shares earned. As of March 31, 2009, there was $19.0 million of total unrecognized compensation cost related to non-vested restricted stock awards and RSUs granted. A summary of the status of the Companys restricted stock award and RSU grants and changes during the first quarter of 2009 is as follows:
Restricted Shares Only |
|
Shares |
|
Weighted
|
|
Weighted
|
|
Aggregate
|
|
||
Shares outstanding - December 31, 2008 |
|
257,054 |
|
$ |
52.74 |
|
|
|
|
|
|
Granted |
|
389,255 |
|
26.55 |
|
|
|
|
|
||
Vested |
|
(4,331 |
) |
41.23 |
|
|
|
|
|
||
Canceled |
|
(10,276 |
) |
41.98 |
|
|
|
|
|
||
Nonvested March 31, 2009 |
|
631,702 |
|
$ |
36.26 |
|
2.5 |
|
$ |
17,738 |
|
4. Goodwill and Intangible Assets
As of March 31, 2009 and December 31, 2008, the Companys Condensed Consolidated Balance Sheets reflects $314.2 million and $314.4 million, respectively, of goodwill and $66.7 million and $68.0 million in net intangible assets for the same respective periods.
13
The net intangible assets consist primarily of customer lists and non-compete agreements purchased as part of past acquisitions. The Company has no intention to renew or extend the terms of acquired intangible assets and accordingly, did not incur any related costs during the first quarter of 2009. Amortization of intangible assets totaled $1.2 million for each three months ended March 31, 2009 and 2008. Accumulated amortization of intangible assets as of March 31, 2009 and December 31, 2008 totaled $12.6 million and $11.4 million, respectively.
5. 2009 Severance Charge
On January 27, 2009, the Company announced a plan to eliminate staff positions through an involuntary separation plan. The severance charge included workforce reductions of 250 associates. The Company recorded a pre-tax charge of $3.4 million in the first quarter of 2009 for estimated severance pay and benefits, prorated bonuses, and outplacement costs. This charge is included in Warehousing, marketing and administrative expenses on the Companys Statements of Income. Cash outlays associated with the severance charge in the first quarter of 2009 totaled $1.1 million. As of March 31, 2009, the Company had accrued liabilities for the severance charge of $2.3 million.
6. Comprehensive Income
Comprehensive income is a component of stockholders equity and consists of the following components (in thousands):
|
|
For the Three Months Ended |
|
||||
|
|
March 31, |
|
||||
|
|
2009 |
|
2008 |
|
||
|
|
|
|
|
|
||
Net income |
|
$ |
13,521 |
|
$ |
21,316 |
|
Unrealized currency translation adjustment |
|
(654 |
) |
330 |
|
||
Unrealized gain (loss) on interest rate swaps, net of tax |
|
566 |
|
(8,632 |
) |
||
Minimum pension liability adjustments, net of tax |
|
7,439 |
|
293 |
|
||
Minimum postretirement liability adjustments, net of tax |
|
|
|
181 |
|
||
Total comprehensive income |
|
$ |
20,872 |
|
$ |
13,488 |
|
7. Earnings Per Share
Basic earnings per share (EPS) are computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if dilutive securities were exercised into common stock. Stock options, restricted stock and restricted stock units are considered dilutive securities. Stock options to purchase 0.1 million and 0.4 million shares of common stock were outstanding at March 31, 2009 and March 31, 2008, respectively, but were not included in the computation of diluted earnings per share because the options exercise prices were greater than the average market price of the common shares and, therefore, the effect would be antidilutive. The following table sets forth the computation of basic and diluted earnings per share (in thousands, except per share data):
|
|
For the Three Months Ended |
|
||||
|
|
March 31, |
|
||||
|
|
2009 |
|
2008 |
|
||
Numerator: |
|
|
|
|
|
||
Net income |
|
$ |
13,521 |
|
$ |
21,316 |
|
|
|
|
|
|
|
||
Denominator: |
|
|
|
|
|
||
Denominator for basic earnings per share - weighted average shares |
|
23,707 |
|
23,940 |
|
||
|
|
|
|
|
|
||
Effect of dilutive securities: |
|
|
|
|
|
||
Employee stock options and restricted stock |
|
103 |
|
373 |
|
||
|
|
|
|
|
|
||
Denominator for diluted earnings per share - Adjusted weighted average shares and the effect of dilutive securities |
|
23,810 |
|
24,313 |
|
||
|
|
|
|
|
|
||
Net income per share: |
|
|
|
|
|
||
Net income per share - basic |
|
$ |
0.57 |
|
$ |
0.89 |
|
Net income per share - diluted |
|
$ |
0.57 |
|
$ |
0.88 |
|
14
8. Off-Balance Sheet Financing
General
On March 28, 2003, USSC entered into a third-party receivables securitization program with JP Morgan Chase Bank, as trustee (the Prior Receivables Securitization Program or the Prior Program). On November 10, 2006, the Company entered into an amendment to its revolving credit agreement which, among other things, increased the permitted size of the Prior Receivables Securitization Program to $350 million, a $75 million increase from the $275 million limit under the prior credit agreement. During the first quarter of 2007, the Company increased its commitments for third party purchases of receivables, and the maximum funding available under the Prior Program became $250 million. On March 2, 2009, in preparation for entering into a new securitization program (see Note 9, Debt for more information on the new program), USIs subsidiaries United Stationers Financial Services (USFS) and USS Receivables Company, Ltd. (USSR) terminated the Prior Program. The Prior Program typically had been the Companys preferred source of floating rate financing, primarily because it generally carried a lower cost than other traditional borrowings.
Under the Prior Program, USSC sold, on a revolving basis, its eligible trade accounts receivable (except for certain excluded accounts receivable, which initially included all accounts receivable of Lagasse, Inc. and foreign operations) to USSR. USSR, in turn, ultimately transferred the eligible trade accounts receivable to a trust. The trust then sold investment certificates, which represented an undivided interest in the pool of accounts receivable owned by the trust, to third-party investors. Affiliates of J.P. Morgan Chase Bank, PNC Bank and Fifth Third Bank acted as funding agents. The funding agents, or their affiliates, provided standby liquidity funding to support the sale of the accounts receivable by USSR under 364-day liquidity facilities. The Prior Program provided for the possibility of other liquidity facilities that may have been provided by other commercial banks rated at least A-1/P-1.
Financial Statement Presentation
The Prior Program was accounted for as a sale in accordance with SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. Trade accounts receivable sold under the Prior Program were excluded from accounts receivable in the Consolidated Financial Statements. As of December 31, 2008, the Company sold $23 million of interests in trade accounts receivable. Accordingly, trade accounts receivable of $23 million as of December 31, 2008 were excluded from the Consolidated Financial Statements. As discussed below, the Company retained an interest in the trust based on funding levels determined by USSR. The Companys retained interest in the trust is included in the Condensed Consolidated Balance Sheets under the caption, Accounts receivable and retained interest in receivables sold For further information on the Companys retained interest in the trust, see the caption Retained Interest below.
The Company recognized certain costs and/or losses related to the Prior Program. Costs related to the Prior Program varied on a daily basis and generally were related to certain short-term interest rates. The annual interest rate on the certificates issued under the Prior Program for the first two months of 2009 ranged between 0.6% and 2.3%. In addition to the interest on the certificates, the Company paid certain bank fees related to the program. Losses recognized on the sale of accounts receivable, which represent the interest and bank fees that are the financial cost of funding under the Prior Program including amortization of previously capitalized bank fees and excluding servicing revenues, totaled $0.2 million for the three months ended March 31, 2009, compared with $2.2 million for the same period of 2008. Proceeds from the collections under the Prior Program for the first quarter of 2009 and 2008 totaled $0.6 billion and $1.0 billion, respectively. All costs and/or losses related to the Prior Program are included in the Condensed Consolidated Statements of Income under the caption Other Expense, net.
The Company maintained responsibility for servicing the sold trade accounts receivable and those transferred to the trust. No servicing asset or liability was recorded because the fees received for servicing the receivables approximated the related costs.
15
Retained Interest
USSR determined the level of funding achieved by the sale of trade accounts receivable under the Prior Program, subject to a maximum amount. It retained a residual interest in the eligible receivables transferred to the trust, such that amounts payable in respect of the residual interest would be distributed to USSR upon payment in full of all amounts owed by USSR to the trust (and by the trust to its investors). The Companys net retained interest on $350.9 million of trade receivables in the trust as of December 31, 2008 was $327.9 million. The Companys retained interest in the trust is included in the Consolidated Financial Statements under the caption, Accounts receivable and retained interest in receivables sold.
The Company measured the fair value of its retained interest throughout the term of the Prior Program using a present value model incorporating the following two key economic assumptions: (1) an average collection cycle of approximately 45 days; and (2) an assumed discount rate of 3% per annum, which approximated the Companys interest cost on the Prior Program. In addition, the Company estimated and recorded an allowance for doubtful accounts related to the Companys retained interest. Considering the above noted economic factors and estimates of doubtful accounts, the book value of the Companys retained interest approximated fair value at year-end 2008. A 10% or 20% adverse change in the assumed discount rate or average collection cycle would not have a material impact on the Companys financial position or results of operations. Accounts receivable sold to the trust and written off during first quarter of 2009 were not material.
9. Debt
USI is a holding company and, as a result, its primary sources of funds are cash generated from operating activities of its direct operating subsidiary, USSC, and from borrowings by USSC. The 2007 Credit Agreement (as defined below), the 2007 Master Note Purchase Agreement (as defined below) and the 2009 Receivables Securitization Program (as defined below) contain restrictions on the ability of USSC to transfer cash to USI.
Long-term debt consisted of the following amounts (in thousands):
|
|
As of March 31, 2009 |
|
As of
|
|
||
2007 Credit Agreement - Revolving Credit Facility |
|
$ |
210,700 |
|
$ |
321,300 |
|
2007 Credit Agreement - Term Loan |
|
200,000 |
|
200,000 |
|
||
2007 Master Note Purchase Agreement (Private Placement) |
|
135,000 |
|
135,000 |
|
||
Industrial development bond, at market-based interest rates, maturing in 2011 |
|
6,800 |
|
6,800 |
|
||
Total |
|
$ |
552,500 |
|
$ |
663,100 |
|
As of March 31, 2009, 100% of the Companys outstanding debt was priced at variable interest rates based primarily on the applicable bank prime rate, the London InterBank Offered Rate (LIBOR) or the applicable commercial paper rates related to the 2009 Receivables Securitization Program (the 2009 Program). While the Company had primarily all of its outstanding debt based on LIBOR at March 31, 2009, the Company has hedged $435.0 million of this debt with three separate interest rate swaps further discussed in Note 2, Summary of Significant Accounting Policies; and Note 13, Derivative Financial Instruments, to the Consolidated Financial Statements. As of March 31, 2009, the overall weighted average effective borrowing rate of the Companys debt was 4.4%. At March 31, 2009 funding levels, a 50 basis point movement in interest rates would result in an annualized increase or decrease in interest expense of approximately $0.6 million, on a pre-tax basis, and ultimately upon cash flows from operations.
2009 Receivables Securitization Program
On March 3, 2009, USI entered into a $150 million accounts receivables securitization program (the 2009 Receivables Securitization Program or the 2009 Program) that replaced the Prior Receivables Securitization Program that USI terminated on March 2, 2009 (the Prior Receivables Securitization Program or the Prior Program). The parties to the 2009 Program are USI, USSC, USFS, United Stationers Receivables, LLC (USR), Bank of America, National Association (Bank of America), PNC Bank, National Association (PNC), Enterprise Funding Company LLC (Enterprise), and Market Street Funding LLC (Market Street and, together with Bank of America, PNC and Enterprise, the Investors). Enterprise is a multi-seller asset-backed commercial paper conduit administered by Bank of America. Market Street is a multi-seller asset-backed commercial paper conduit administered by PNC. In connection with the 2009 Receivables Securitization Program, the parties entered into a number of agreements as of March 3, 2009, including:
· a Transfer and Administration Agreement among USSC, USFS, USR, Bank of America, PNC, Enterprise, and Market Street;
· a Receivables Sale Agreement between USSC and USFS;
16
· a Receivables Purchase Agreement between USFS and USR; and
· a Performance Guaranty executed by USI in favor of USR.
Pursuant to the Receivables Sale Agreement, USSC sells to USFS on an on-going basis all the customer accounts receivable and related rights originated by USSC. Pursuant to the Receivables Purchase Agreement, USFS sells to USR, on an on-going basis, all the accounts receivable and related rights purchased from USSC, as well as the accounts receivable and related rights USFS acquired from its subsidiary USSR upon the termination of the Prior Program. Pursuant to the Transfer and Administration Agreement, USR then sells the receivables and related rights to Bank of America, as agent on behalf of Enterprise and Market Street. The maximum investment to USR at any one time outstanding under the 2009 Program may not exceed $150 million. USFS will retain servicing responsibility over the receivables. USR is a wholly-owned, bankruptcy remote special purpose subsidiary of USFS. The assets of USR are not available to satisfy the creditors of any other person, including USFS, USSC or USI, until all amounts outstanding under the facility are repaid and the 2009 Program has been terminated. The maturity date of the 2009 Program is November 23, 2013, subject to the Investors renewing their commitments as liquidity providers supporting the 2009 Program, which expire on November 23, 2009.
The receivables sold to Bank of America will remain on USIs consolidated balance sheet, and amounts advanced to USR by Enterprise, Market Street, Bank of America, PNC or any successor Investor will be recorded as debt on USIs consolidated balance sheet. The cost of such debt will be recorded as interest expense on USIs income statement. As of March 31, 2009, $412.6 million of receivables have been sold and no amounts have been advanced to USR.
The Transfer and Administration Agreement prohibits the Company from exceeding a Leverage Ratio of 3.25 to 1.00 and imposes other restrictions on the Companys ability to incur additional debt. This agreement also contains additional covenants, requirements and events of default that are customary for this type of agreement, including the failure to make any required payments when due.
Credit Agreement and Other Debt
On July 5, 2007, USI and USSC entered into a Second Amended and Restated Five-Year Revolving Credit Agreement with PNC Bank, National Association and U.S. Bank National Association, as Syndication Agents, KeyBank National Association and LaSalle Bank, National Association, as Documentation Agents, and JPMorgan Chase Bank, National Association, as Agent (as amended on December 21, 2007, the 2007 Credit Agreement). The 2007 Credit Agreement provides a Revolving Credit Facility with a committed principal amount of $425 million and a Term Loan in the principal amount of $200 million. Interest on both the Revolving Credit Facility and the Term Loan is based on the three-month LIBOR plus an interest margin based upon the Companys debt to EBITDA ratio (or Leverage Ratio, as defined in the 2007 Credit Agreement). The Revolving Credit Facility expires on July 5, 2012, which is also the maturity date of the Term Loan.
On October 15, 2007, USI and USSC entered into a Master Note Purchase Agreement (the 2007 Note Purchase Agreement) with several purchasers. The 2007 Note Purchase Agreement allows USSC to issue up to $1 billion of senior secured notes, subject to the debt restrictions contained in the 2007 Credit Agreement. Pursuant to the 2007 Note Purchase Agreement, USSC issued and sold $135 million of floating rate senior secured notes due October 15, 2014 at par in a private placement (the Series 2007-A Notes). Interest on the Series 2007-A Notes is payable quarterly in arrears at a rate per annum equal to three-month LIBOR plus 1.30%, beginning January 15, 2008. USSC may issue additional series of senior secured notes from time to time under the 2007 Note Purchase Agreement but has no specific plans to do so at this time. USSC used the proceeds from the sale of these notes to repay borrowings under the 2007 Credit Agreement.
USSC has entered into several interest rate swap transactions to mitigate its floating rate risk on a portion of its total long-term debt. See Note 13, Derivative Financial Instruments, for further details on these swap transactions and their accounting treatment.
The 2007 Credit Agreement also provides for the issuance of letters of credit in an aggregate amount of up to a sublimit of $90 million and provides a sublimit for swingline loans in an aggregate outstanding principal amount not to exceed $30 million at any one time. These amounts, as sublimits, do not increase the maximum aggregate principal amount, and any undrawn issued letters of credit and all outstanding swingline loans under the facility reduce the remaining availability under the 2007 Credit Agreement. As of March 31, 2009 and December 31, 2008, the Company had outstanding letters of credit under the 2007 Credit Agreement of $19.4 million and $19.5 million, respectively. Approximately, $7.0 million of these letters of credit were used to guarantee the industrial development bond. The industrial development bond had $6.8 million outstanding as of March 31, 2009 and carried market-based interest rates.
Obligations of USSC under the 2007 Credit Agreement and the 2007 Note Purchase Agreement are guaranteed by USI and certain of USSCs domestic subsidiaries. USSCs obligations under these agreements and the guarantors obligations under the guaranties are secured by liens on substantially all Company assets, including accounts receivable, chattel paper, commercial tort claims, documents, equipment, fixtures, instruments, inventory, investment property, pledged deposits and all other tangible and intangible personal property (including proceeds) and certain real property, but excluding accounts receivable (and related credit support) subject to any accounts receivable securitization program permitted under the 2007 Credit Agreement. Also securing these obligations are first priority pledges of all of the capital stock of USSC and the domestic subsidiaries of USSC.
17
The 2007 Credit Agreement and 2007 Note Purchase Agreement prohibit the Company from exceeding a Leverage Ratio of 3.25 to 1.00 and impose other restrictions on the Companys ability to incur additional debt. Those agreements also contain additional covenants, and requirements and events of default that are customary for those types of agreements, including the failure to pay principal or interest when due. The 2007 Credit Agreement, 2007 Note Purchase Agreement and the Transfer and Administration Agreement all contain cross-default provisions. As a result, if a termination event occurs under any of those agreements, the lenders under all of the agreements may cease to make additional loans, accelerate any loans then outstanding and/or terminate the agreements to which they are party.
10. Retirement Plans
Pension and Postretirement Health Care Benefit Plans
The Company maintains pension plans covering a majority of its employees. In addition, the Company has a postretirement health care benefit plan covering substantially all retired non-union employees and their dependents. For more information on the Companys retirement plans, see Notes 12 and 13 to the Companys Consolidated Financial Statements for the year ended December 31, 2008. A summary of net periodic benefit cost related to the Companys pension and postretirement health care benefit plans for the three months ended March 31, 2009 and 2008 is as follows (dollars in thousands):
|
|
Pension Benefits |
|
||||
|
|
For the Three Months Ended March 31, |
|
||||
|
|
2009 |
|
2008 |
|
||
Service cost - benefit earned during the period |
|
$ |
392 |
|
$ |
1,473 |
|
Interest cost on projected benefit obligation |
|
2,010 |
|
1,932 |
|
||
Expected return on plan assets |
|
(1,718 |
) |
(2,197 |
) |
||
Amortization of prior service cost |
|
28 |
|
51 |
|
||
Amortization of actuarial loss |
|
884 |
|
148 |
|
||
Net loss |
|
1,596 |
|
1,407 |
|
||
Curtailment loss |
|
182 |
|
|
|
||
Net periodic pension cost |
|
$ |
1,778 |
|
$ |
1,407 |
|
|
|
|
|
|
|
||
|
|
Postretirement Health Care Benefits |
|
||||
|
|
For the Three Months Ended March 31, |
|
||||
|
|
2009 |
|
2008 |
|
||
Service cost - benefit earned during the period |
|
$ |
56 |
|
$ |
60 |
|
Interest cost on projected benefit obligation |
|
55 |
|
52 |
|
||
Amortization of actuarial gain |
|
(80 |
) |
(72 |
) |
||
Net periodic postretirement health care benefit cost |
|
$ |
31 |
|
$ |
40 |
|
Effective March 1, 2009, the Company froze pension service benefits for employees not covered by collective bargaining agreements. As a result, the Company incurred a curtailment loss of $0.2 million in the first quarter of 2009. The Company also reduced the Pension Benefit Obligation (PBO) by $11.9 million as a result of this action. The PBO reduction led to an $11.9 million reduction in the Accrued pension benefits liability and a corresponding increase in accumulated other comprehensive income, net of tax.
The Company did not make cash contributions to its pension plans during the first quarters of 2009 and 2008. The Company expects to contribute $3.8 million to its non-union pension plan in 2009.
Defined Contribution Plan
The Company has a defined contribution plan covering certain salaried employees and non-union hourly paid employees (the Plan). The Plan permits employees to defer a portion of their pre-tax and after-tax salary as contributions to the Plan. The Plan also provides for discretionary Company contributions and Company contributions matching employees salary deferral contributions, at the discretion of the Board of Directors. The Company recorded an expense of $1.3 million for the Company match of employee contributions to the Plan during the first quarter ended March 31, 2009. During the same period last year, the Company recorded $1.4 million for the same match. Effective May 1, 2009, the Company temporarily suspended this Company match of employee contributions to the Plan for all exempt associates.
18
11. Other Long-Term Assets and Long-Term Liabilities
Other long-term assets and long-term liabilities as of March 31, 2009 and December 31, 2008 were as follows (in thousands):
|
|
As of
|
|
As of
|
|
||
Other Long-Term Assets, net: |
|
|
|
|
|
||
Investment in deferred compensation |
|
$ |
2,894 |
|
$ |
3,118 |
|
Long-term accounts receivable |
|
5,450 |
|
5,261 |
|
||
Capitalized financing costs |
|
2,498 |
|
2,116 |
|
||
Other |
|
90 |
|
339 |
|
||
Total other long-term assets, net |
|
$ |
10,932 |
|
$ |
10,834 |
|
|
|
|
|
|
|
||
Other Long-Term Liabilities: |
|
|
|
|
|
||
Accrued pension benefits liability |
|
$ |
47,386 |
|
$ |
59,183 |
|
Deferred rent |
|
14,917 |
|
14,740 |
|
||
Accrued postretirement benefits liability |
|
3,814 |
|
3,810 |
|
||
Deferred directors compensation |
|
3,083 |
|
3,118 |
|
||
Restructuring and exit costs reserves |
|
304 |
|
651 |
|
||
Interest rate swap liability |
|
33,741 |
|
34,652 |
|
||
Long-term income tax liability |
|
7,057 |
|
6,856 |
|
||
Other |
|
1,905 |
|
2,154 |
|
||
Total other long-term liabilities |
|
$ |
112,207 |
|
$ |
125,164 |
|
12. Accounting for Uncertainty in Income Taxes
At December 31, 2008, the Company had $8.0 million in gross unrecognized tax benefits. At March 31, 2009, the gross unrecognized tax benefits decreased to $7.8 million due to expiring statutes of limitation, offset by uncertain tax positions related to the current year. The entire amount of these gross unrecognized tax benefits would, if recognized, decrease the Companys effective tax rate.
The Company recognizes net interest and penalties related to unrecognized tax benefits in income tax expense. The gross amount of interest and penalties reflected in the Consolidated Statement of Income for the quarter ended March 31, 2009 was not material. The Condensed Consolidated Balance Sheets at March 31, 2009 and December 31, 2008 include $1.7 million accrued for the potential payment of interest and penalties.
As of March 31, 2009, the Companys U.S. Federal income tax returns for 2005 and subsequent years remained subject to examination by tax authorities. In addition, the Companys state income tax returns for 2001 and subsequent years remain subject to examination by state and local income tax authorities.
Due to the potential for resolution of ongoing examinations and the expiration of various statutes of limitation, it is reasonably possible that the Companys gross unrecognized tax benefits balance may change within the next twelve months by a range of zero to $3.7 million. These unrecognized tax benefits are currently accrued for in the Condensed Consolidated Balance Sheets.
13. Derivative Financial Instruments
Interest rate movements create a degree of risk to the Companys operations by affecting the amount of interest payments. Interest rate swap agreements are used to manage the Companys exposure to interest rate changes. The Company designates its floating-to-fixed interest rate swaps as cash flow hedges of the variability of future cash flows at the inception of the swap contract to support hedge accounting.
On November 6, 2007, USSC entered into an interest rate swap transaction (the November 2007 Swap Transaction) with U.S. Bank National Association as the counterparty. USSC entered into the November 2007 Swap Transaction to mitigate USSCs floating rate risk on an aggregate of $135 million of LIBOR based interest rate risk. Under the terms of the November 2007 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $135 million at a fixed rate of 4.674%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The November 2007 Swap Transaction has an effective date of January 15, 2008 and a termination date of January 15, 2013. Notwithstanding the terms of the November 2007 Swap Transaction, USSC is ultimately obligated for all amounts due and payable under its credit agreements.
19
Subsequently, on December 20, 2007, USSC entered into another interest rate swap transaction (the December 2007 Swap Transaction) with Key Bank National Association as the counterparty. USSC entered into the December 2007 Swap Transaction to mitigate USSCs floating rate risk on an aggregate of $200 million of LIBOR based interest rate risk. Under the terms of the December 2007 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $200 million at a fixed rate of 4.075%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The December 2007 Swap Transaction has an effective date of December 21, 2007 and a termination date of June 21, 2012. Notwithstanding the terms of the December 2007 Swap Transaction, USSC is ultimately obligated for all amounts due and payable under its credit agreements.
On March 13, 2008, USSC entered into an interest rate swap transaction (the March 2008 Swap Transaction) with U.S. Bank National Association as the counterparty. USSC entered into the March 2008 Swap Transaction to mitigate USSCs floating rate risk on an aggregate of $100 million of LIBOR based interest rate risk. Under the terms of the March 2008 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $100 million at a fixed rate of 3.212%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The March 2008 Swap Transaction had an effective date of March 31, 2008 and a termination date of June 29, 2012. Notwithstanding the terms of the March 2008 Swap Transaction, USSC is ultimately obligated for all amounts due and payable under its credit agreements.
These hedged transactions described above qualify as cash flow hedges under FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). This Statement requires companies to recognize all of its derivative instruments as either assets or liabilities in the statement of financial position at fair value. The Company does not offset fair value amounts recognized for interest rate swaps executed with the same counterparty.
For derivative instruments that are designated and qualify as a cash flow hedge (for example, hedging the exposure to variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction in the same period or periods during which the hedged transaction affects earnings (for example, in interest expense when the hedged transactions are interest cash flows associated with floating-rate debt).
The Company has entered into these interest rate swap agreements, described above, that effectively convert a portion of its floating-rate debt to a fixed-rate basis. This then reduces the impact of interest rate changes on future interest expense. By using such derivative financial instruments, the Company exposes itself to credit risk and market risk. Credit risk is the risk that the counterparty to the interest rate swap agreements (as noted above) will fail to perform under the terms of the agreements. The Company attempts to minimize the credit risk in these agreements by only entering into transactions with credit worthy counterparties like the two counterparties above. The market risk is the adverse effect on the value of a derivative financial instrument that results from a change in interest rates.
Approximately 79% ($435 million) of the Companys outstanding long-term debt had its interest payments designated as the hedged forecasted transactions to interest rate swap agreements at March 31, 2009.
The interest rate swap agreements accounted for as cash flow hedges that were outstanding and recorded at fair value on the statement of financial position as of March 31, 2009 were as follows (in thousands):
As of
|
|
Notional
|
|
Receive |
|
Pay |
|
Maturity Date |
|
Fair Value Net
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||
November 2007 Swap Transaction |
|
$ |
135,000 |
|
Floating 3-month LIBOR |
|
4.674 |
% |
January 15, 2013 |
|
$ |
(14,032 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
||
December 2007 Swap Transaction |
|
200,000 |
|
Floating 3-month LIBOR |
|
4.075 |
% |
June 21, 2012 |
|
(14,958 |
) |
||
|
|
|
|
|
|
|
|
|
|
|
|
||
March 2008 Swap Transaction |
|
100,000 |
|
Floating 3-month LIBOR |
|
3.212 |
% |
June 29, 2012 |
|
(4,751 |
) |
||
(1) These interest rate derivatives qualify for hedge accounting. Therefore, the fair value of each interest rate derivative is included in the Companys Consolidated Balance Sheets as a component of Other long-term liabilities with an offsetting component in Stockholders Equity as part of Accumulated Other Comprehensive Loss. Fair value adjustments of the interest rate swaps will be deferred and recognized as an adjustment to interest expense over the remaining term of the hedged instrument.
The Companys agreements with its derivative counterparties provide that if an event of default occurs on any Company debt of $25 million or more, the counterparties can terminate the swap agreements. If an event of default had occurred and the counterparties had exercised their early termination rights under the swap agreements as of March 31, 2009, the Company would have been required to pay the aggregate fair value net liability of $33.7 million plus accrued interest to the counterparties.
20
These interest rate swap agreements contain no ineffectiveness; therefore, all gains or losses on these derivative instruments are reported as a component of other comprehensive income (OCI) and reclassified into earnings as interest expense in the same period or periods during which the hedged transaction affects earnings. The following table depicts the effect of these derivative instruments on the statement of income for the quarter ended March 31, 2009.
For the Three Months Ended March 31, 2009 |
|
Amount of
|
|
Location of Gain (Loss)
|
|
Amount of Gain
|
|
||
|
|
|
|
|
|
|
|
||
November 2007 Swap Transaction |
|
$ |
(8,694 |
) |
Interest expense, net |
|
$ |
331 |
|
|
|
|
|
|
|
|
|
||
December 2007 Swap Transaction |
|
(9,268 |
) |
Interest expense, net |
|
225 |
|
||
|
|
|
|
|
|
|
|
||
March 2008 Swap Transaction |
|
(2,943 |
) |
Interest expense, net |
|
10 |
|
||
14. Fair Value Measurements
The Company measures certain financial assets and liabilities at fair value on a recurring basis, including:
· the retained interest in accounts receivables sold under the Prior Receivables Securitization Program based on company determined inputs including an average collection cycle and assumed discount rate (see Note 8, Off-Balance Sheet Financing for further information and a detailed description of this asset); and
· interest rate swap liabilities related to interest rate swap derivatives based on the mark-to-market position of the Companys interest rate swap positions and other observable interest rates (see Note 13, Derivative Financial Instruments, for more information on these interest rate swaps).
SFAS No. 157 establishes a fair value hierarchy for those instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and the Companys own assumptions (unobservable inputs). The hierarchy consists of three levels:
· Level 1 Quoted market prices in active markets for identical assets or liabilities;
· Level 2 Inputs other than Level 1 inputs that are either directly or indirectly observable; and
· Level 3 Unobservable inputs developed using estimates and assumptions developed by the Company which reflect those that a market participant would use.
Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter. The following table summarizes the financial instruments measured at fair value in the accompanying Condensed Consolidated Balance Sheet as of March 31, 2009 (in thousands):
|
|
Fair Value Measurements as of March 31, 2009 |
|
||||||||||
|
|
|
|
Quoted Market
|
|
Significant Other
|
|
Significant
|
|
||||
|
|
Total |
|
Level 1 |
|
Level 2 |
|
Level 3 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
Liabilities |
|
|
|
|
|
|
|
|
|
||||
Interest rate swap liability |
|
$ |
33,741 |
|
$ |
|
|
$ |
33,741 |
|
$ |
|
|
21
On March 2, 2009 in preparation for entering into a new securitization program (see Note 9, Debt for more information on the new program), USIs subsidiaries United Stationers Financial Services (USFS) and USS Receivables Company, Ltd (USSR) terminated the Prior Receivables Securitization Program. As a result, the retained interest in receivables sold less allowance for doubtful accounts, measured at fair value in accordance with SFAS No. 140, was reduced from $327.9 million at December 31, 2008 to zero at March 31, 2009. The change in this Level 3 asset measured at fair value on a recurring basis for the three months ended March 31, 2009 (in thousands) is as follows:
|
|
Retained Interest |
|
|
|
|
in Receivables Sold, Net |
|
|
|
|
|
|
|
Balance as of December 31, 2008 |
|
$ |
327,860 |
|
Net payments/sales |
|
(326,741 |
) |
|
Realized losses |
|
(1,119 |
) |
|
Balance as of March 31, 2009 |
|
$ |
|
|
The realized losses associated with Level 3 assets relate to that portion of the Companys bad debt expense related to the retained interest in receivables sold. This expense is reflected in the Companys Condensed Consolidated Statements of Income under the caption Warehousing, marketing and administrative expenses.
The carrying amount of accounts receivable at March 31, 2009, including $412.6 million of receivables sold under the New Receivables Securitization Program, approximates fair value because of the short-term nature of this item.
SFAS No. 157 requires separate disclosure of assets and liabilities measured at fair value on a recurring basis, as noted above, from those measured at fair value on a nonrecurring basis. As of March 31, 2009, no assets or liabilities are measured at fair value on a nonrecurring basis.
ITEM 2. |
|
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act. Forward-looking statements often contain words such as expects, anticipates, estimates, intends, plans, believes, seeks, will, is likely, scheduled, positioned to, continue, forecast, predicting, projection, potential or similar expressions. Forward-looking statements include references to goals, plans, strategies, objectives, projected costs or savings, anticipated future performance, results or events and other statements that are not strictly historical in nature. These forward-looking statements are based on managements current expectations, forecasts and assumptions. This means they involve a number of risks and uncertainties that could cause actual results to differ materially from those expressed or implied here. These risks and uncertainties include, without limitation, those set forth in Item 1A. Risk Factors in the Companys Annual Report on Form 10-K for the year-ended December 31, 2008.
Readers should not place undue reliance on forward-looking statements contained in this Quarterly Report on Form 10-Q. The forward-looking information herein is given as of this date only, and the Company undertakes no obligation to revise or update it.
Overview and Recent Results
The Company is North Americas largest broad line wholesale distributor of business products, with 2008 net sales of approximately $5.0 billion. The Company sells its products through a national distribution network of 67 distribution centers to approximately 30,000 resellers, who in turn sell directly to end consumers.
As reported in the Companys press release dated April 30, 2009, month-to-date sales in April show a slight decline from the first quarter sales trends after adjusting for the negative impact of the Easter holiday which fell in April of this year as opposed to March of last year.
Key Company and Industry Trends
The following is a summary of selected trends, events or uncertainties that the Company believes may have a significant impact on its future performance.
· Continued challenging market conditions in the first quarter of 2009, driven by weakness in employment trends and manufacturing, had a negative effect on the Companys sales. Total Company sales for the first quarter of 2009 were $1.12 billion, a decline of 9% per selling day. Sales were down in all product categories, except for janitorial/breakroom which remained at prior year levels. The recession has had the harshest impact on furniture sales which showed the steepest decline at 31% per selling day and industrial sales which declined 19% per selling day.
22
· The Company has set an objective to reduce costs as quickly as possible to align them with lower sales. As a result of the workforce reduction announced January 27, 2009, the Company incurred a charge of $3.4 million in the first quarter. The Company has also taken other aggressive steps to manage costs. These include the actions taken that target labor cost, discretionary spending, variable costs, as well as productivity improvements.
· Gross margin as a percent of sales for the first quarter of 2009 was 14.7%, flat with the first quarter of 2008. Gross margin in the first quarter was negatively affected by the sales decline and reduced purchase volumes which led to lower supplier allowances, as well as the de-leveraging effect of lower sales on occupancy costs. These declines were offset by higher inflation (net of LIFO impact), lower fuel costs and the impact of War on Waste (WOW 2 ) projects on gross margin.
· Total operating expenses as a percent of sales for the first quarter of 2009 were 12.1 % compared to 11.2% for the same quarter of the prior year. Excluding the $3.4 million severance charge noted above, operating expenses declined 5.6% to $132.0 million from $139.9 million. Operating expenses were down as a result of the cost reduction actions taken in the first quarter of 2009, partially offset by an increase in bad debt provisions. Operating expense as a percent of sales increased due to the deleveraging effect of lower sales and an increase in bad debts.
· Net cash provided by operating activities for the first quarter of 2009 was $115.8 million versus a use of $17.8 million at this time last year. Excluding the impact of accounts receivable sold, net cash provided by operating activities for the latest quarter was $138.8 million versus $45.2 million in the 2008 quarter. This increase in adjusted operating cash flows reflects a decrease in working capital as a result of managements emphasis on aligning working capital with sales.
· During the first quarter of 2009, the Company entered into a new $150 million accounts receivable securitization program that was structured to maintain the related accounts receivable and debt on its balance sheet. In contrast, the previous securitization facility was structured for off-balance sheet treatment.
· Outstanding debt totaled $552.5 million at March 31, 2009 versus adjusted outstanding debt, including accounts receivable sold, of $726.9 million at March 31, 2008. The $174.4 million reduction in adjusted debt was the result of the Companys strong operating cash flows and brought the Companys debt-to-total capitalization to 48.4% from 58.1%.
· No shares were repurchased in the first quarter of 2009. As of May 1, 2009, the Company has $100.9 million remaining of existing share repurchase authorization from the Board of Directors.
For a further discussion of selected trends, events or uncertainties the Company believes may have a significant impact on its future performance, readers should refer to Key Company and Industry Trends under Item 7 Managements Discussion and Analysis of Financial Condition and Results of Operations in the Companys Annual Report on Form 10-K for the year-ended December 31, 2008.
Stock Repurchase Program
No shares were repurchased in the first quarter of 2009. During the first quarter of 2008, the Company repurchased 1.2 million shares at an aggregate cost of $67.5 million. At March 31, 2009, the Company had $100.9 million remaining of existing share repurchase authorization from the Board of Directors.
Critical Accounting Policies, Judgments and Estimates
During the first quarter of 2009, there were no significant changes to the Companys critical accounting policies, judgments or estimates from those disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2008.
23
Results of Operations
The following table presents the Condensed Consolidated Statements of Income as a percentage of net sales:
|
|
Three Months Ended |
|
||
|
|
March 31, |
|
||
|
|
2009 |
|
2008 |
|
|
|
|
|
|
|
Net sales |
|
100.0 |
% |
100.0 |
% |
Cost of goods sold |
|
85.3 |
|
85.3 |
|
Gross margin |
|
14.7 |
|
14.7 |
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
Warehousing, marketing and administrative expenses |
|
12.1 |
|
11.2 |
|
|
|
|
|
|
|
Operating income |
|
2.6 |
|
3.5 |
|
|
|
|
|
|
|
Interest expense, net |
|
0.7 |
|
0.5 |
|
Other expense, net |
|
0.0 |
|
0.2 |
|
Income before income taxes |
|
1.9 |
|
2.8 |
|
Income tax expense |
|
0.7 |
|
1.1 |
|
|
|
|
|
|
|
Net income |
|
1.2 |
% |
1.7 |
% |
The following tables present Adjusted Operating Income and Earnings Per Share for the three-month periods ended March 31, 2009 and 2008 (in thousands, except per share data). The tables show Adjusted Operating Income and Earnings per Share excluding the effects of the first quarter 2009 severance charge. Generally Accepted Accounting Principles (GAAP) require that the effect of this item be included in the Condensed Consolidated Statements of Income. The Company believes that excluding this item is an appropriate comparison of its ongoing operating results to last year and that it is helpful to provide readers of its financial statements with a reconciliation of this item to its Condensed Consolidated Statements of Income reported in accordance with GAAP.
|
|
For the three months ended March 31, |
|
||||||||
|
|
2009 |
|
2008 |
|
||||||
|
|
|
|
% to |
|
|
|
% to |
|
||
|
|
Amount |
|
Net Sales |
|
Amount |
|
Net Sales |
|
||
|
|
|
|
|
|
|
|
|
|
||
Sales |
|
$ |
1,121,307 |
|
100.00 |
% |
$ |
1,252,474 |
|
100.00 |
% |
|
|
|
|
|
|
|
|
|
|
||
Gross profit |
|
$ |
164,336 |
|
14.66 |
% |
$ |
184,301 |
|
14.71 |
% |
|
|
|
|
|
|
|
|
|
|
||
Operating expenses |
|
$ |
135,452 |
|
12.08 |
% |
$ |
139,895 |
|
11.17 |
% |
Severance charge |
|
(3,354 |
) |
0.30 |
% |
|
|
0.00 |
% |
||
Adjusted operating expenses |
|
$ |
132,098 |
|
11.78 |
% |
$ |
139,895 |
|
11.17 |
% |
|
|
|
|
|
|
|
|
|
|
||
Operating income |
|
$ |
28,884 |
|
2.58 |
% |
$ |
44,406 |
|
3.54 |
% |
Operating expense item noted above |
|
3,354 |
|
0.00 |
% |
|
|
0.00 |
% |
||
Adjusted operating income |
|
$ |
32,238 |
|
2.88 |
% |
$ |
44,406 |
|
3.54 |
% |
|
|
|
|
|
|
|
|
|
|
||
Net income per share - diluted |
|
$ |
0.57 |
|
|
|
$ |
0.88 |
|
|
|
Per share operating expense item noted above |
|
0.09 |
|
|
|
|
|
|
|
||
Adjusted net income per share - diluted |
|
$ |
0.66 |
|
|
|
$ |
0.88 |
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Weighted average number of common shares - diluted |
|
23,810 |
|
|
|
24,313 |
|
|
|
24
Results of OperationsThree Months Ended March 31, 2009 Compared with the Three Months Ended March 31, 2008
Net Sales. Net sales for the first quarter of 2009 were $1.12 billion, down 9.1% per selling day compared with sales of $1.25 billion for the same three-month period of 2008, with one less selling day in the current quarter. The following table summarizes net sales by product category for the three-month periods ended March 31, 2009 and 2008 (in millions):
|
|
Three Months Ended March 31, |
|
||||
|
|
2009 |
|
2008 (1) |
|
||
Technology products |
|
$ |
390 |
|
$ |
426 |
|
Traditional office products (including cut-sheet paper) |
|
315 |
|
348 |
|
||
Janitorial and breakroom supplies |
|
249 |
|
253 |
|
||
Office furniture |
|
88 |
|
130 |
|
||
Industrial supplies |
|
58 |
|
72 |
|
||
Freight revenue |
|
20 |
|
22 |
|
||
Other |
|
1 |
|
1 |
|
||
Total net sales |
|
$ |
1,121 |
|
$ |
1,252 |
|
(1) Certain prior period amounts have been reclassified to conform to the current presentation. Such reclassifications included: i) freight revenue from ORS Nasco is now included in the freight revenue line item rather than in the Industrial supplies product category, and ii) changes between several product categories due to several specific products being reclassified to different categories. These changes did not impact the Consolidated Statements of Income.
Sales in the technology products category in the first quarter of 2009 declined by approximately 7% per selling day versus the first quarter of 2008. This category, which continues to represent the largest percentage of the Companys consolidated net sales, accounted for approximately 35% of net sales for the first quarter of 2009. The more discretionary products including printers, computer accessories and visual communication products saw significant declines while everyday consumables such as inkjet and laser printer cartridges continued to outperform the overall category.
Sales of traditional office supplies in the first quarter of 2009 declined by approximately 8% per selling day versus the first quarter of 2008. Traditional office supplies represented approximately 28% of the Companys consolidated net sales for the first quarter of 2009. The decline in this category reflected declines in durable products such as business machines, boards and desk accessories, while cut-sheet paper sales, which typically earn lower margins, grew modestly.
Sales in the janitorial and breakroom supplies product category remained relatively flat, rising 0.3% per selling day in the first quarter of 2009 compared to the first quarter of 2008. This category accounted for approximately 22% of the Companys first quarter of 2009 consolidated net sales. Growth in OfficeJan sales, and ongoing success in converting direct sales to wholesale, helped offset an overall soft market even for this highly consumable category.
Office furniture sales in the first quarter of 2009 decreased by approximately 31% per selling day compared to the same three-month period of 2008. Office furniture accounted for 8% of the Companys first quarter of 2009 consolidated net sales. Furniture continues to be hard-hit by the recession and sales declines were in line with the published results of the Companys major furniture suppliers in their transactional furniture segments. The Companys Alera private brand continued to outperform the balance of the Companys overall furniture category.
Industrial supplies sales in the first quarter of 2009 declined 19% per selling day compared to the same prior year period. Sales of industrial supplies accounted for 5% of the Companys net sales for the first quarter of 2009. This decline reflected the sudden and sharp drop in United States manufacturing, pipeline, and commercial construction activity, combined with de-stocking in the distributor channel.
The remaining 2% of the Companys first quarter 2009 net sales were composed of freight and other revenues.
Gross Profit and Gross Margin Rate. Gross profit (gross margin dollars) for the first quarter of 2009 was $164.3 million, compared to $184.3 million in the first quarter of 2008. Despite the sales and margin dollars reductions, the Companys first quarter gross margin rate of 14.7% was flat to the prior year quarter. Margin benefited from higher inflation, net of LIFO expense, which added about 60 basis points (bps), and lower freight costs of 26 bps. This was offset by lower supplier allowances and purchase discounts of 60 bps driven by mix, volume, and management focus on reducing inventory levels. The de-leveraging impact of lower sales also negatively impacted the margin rate by 20 bps related to occupancy costs, which are primarily fixed.
25
Operating Expenses. Operating expenses for the first quarter of 2009 totaled $135.4 million, or 12.1% of net sales, compared with $139.9 million, or 11.2% of net sales in the first quarter of 2008. Included in the first quarter 2009 amount is $3.4 million or 0.3% of net sales for severance costs. Adjusting for this, operating expenses were down 5.6% to $132.0 million or 11.8% of sales in the first quarter 2009. The increase in operating expenses as a percentage of sales was due to higher bad debt provisions of 20 bps resulting from increased receivables aging and slower collections. The remainder of the operating expense ratio variance relates to the deleveraging of employee related costs of 45 bps. Such costs declined by $5.3 million in the quarter compared to the first quarter of 2008 due to various cost reduction actions and staff reductions that took place in the first quarter of 2009.
Interest Expense, net. Interest expense for the first quarter of 2009 was $7.2 million, compared with $7.3 million for the same period in 2008. Interest expense for the first quarter of 2009 remained relatively flat with the prior year as higher average borrowings during the quarter were offset by reduced interest rates. During the first quarter of 2009, the Company terminated its then existing Prior Receivables Securitization Program (the Prior Program) which led to an increase in borrowings under the Companys revolving credit facility. This increase in debt as opposed to financing from receivables sold also contributed to the year-over-year increase in interest expense as the costs incurred under the Prior Program were recorded under Other Expense, net.
Other Expense, net. Other expense for the first quarter of 2009 was $0.2 million, compared with $2.2 million in the first quarter of 2008. Other expense for both the first quarter of 2009 and 2008 primarily represents costs associated with the sale of certain trade accounts receivable through the Prior Program. During the first quarter of 2009, the Company entered into a new accounts receivable securitization program (the 2009 Receivables Securitization Program or the 2009 Program) that was structured to maintain the related accounts receivable and debt on its balance sheet with costs of 2009 Program now included within Interest Expense, net. In contrast, the previous securitization facility was structured for off-balance sheet treatment with costs included in Other Expense, net.
Income Taxes. Income tax expense was $8.0 million for the first quarter of 2009, compared with $13.5 million for the same period in 2008. The Companys effective tax rate for the first quarter of 2009 and 2008 was 37.1% and 38.9%, respectively. The decline reflects a favorable mix of income between states and lower tax contingencies partially offset by unfavorable changes to tax law in certain states.
Net Income. Net income for the first quarter of 2009 totaled $13.5 million, or $0.57 per diluted share, compared with net income of $21.3 million, or $0.88 per diluted share for the same three-month period in 2008. Adjusted for the impact of the $3.4 million severance charge, first quarter 2009 diluted earnings per share were $0.66.
Liquidity and Capital Resources
Debt
The Companys outstanding debt under GAAP, together with funds generated from the sale of receivables under the Companys off-balance sheet Receivables Securitization Programs, consisted of the following amounts (in thousands):
|
|
As of |
|
As of |
|
||
|
|
March 31, 2009 |
|
December 31, 2008 |
|
||
2007 Credit Agreement - Revolving Credit Facility |
|
$ |
210,700 |
|
$ |
321,300 |
|
2007 Credit Agreement - Term Loan |
|
200,000 |
|
200,000 |
|
||
2007 Master Note Purchase Agreement |
|
135,000 |
|
135,000 |
|
||
Industrial development bond, at market-based interest rates, maturing in 2011 |
|
6,800 |
|
6,800 |
|
||
Debt under GAAP |
|
552,500 |
|
663,100 |
|
||
Accounts receivable sold (1) |
|
|
|
23,000 |
|
||
Total outstanding debt under GAAP and accounts receivable sold (adjusted debt) |
|
552,500 |
|
686,100 |
|
||
Stockholders equity |
|
589,473 |
|
565,638 |
|
||
Total capitalization |
|
$ |
1,141,973 |
|
$ |
1,251,738 |
|
|
|
|
|
|
|
||
Adjusted debt-to-total capitalization ratio |
|
48.4 |
% |
54.8 |
% |
(1) See discussion below under Off-Balance Sheet Arrangements - Prior Receivables Securitization Program
26
The most directly comparable financial measure to adjusted debt that is calculated and presented in accordance with GAAP is total debt (as provided in the above table as Debt under GAAP). Under GAAP, accounts receivable sold under the Companys Prior Receivables Securitization Program are required to be reflected as a reduction in accounts receivable and not reported as debt. Internally, the Company considers accounts receivables sold to be a financing mechanism. The Company therefore believes it is helpful to provide readers of its financial statements with a measure (adjusted debt) that adds accounts receivable sold to debt and calculates adjusted debt-to-total capitalization on the same basis as an additional liquidity measure. A reconciliation of these non-GAAP measures is provided in the table above. Adjusted debt and the adjusted debt-to-total-capitalization ratio are provided as additional liquidity measures.
In accordance with GAAP, total debt outstanding at March 31, 2009 decreased by $110.6 million to $552.5 million from the balance at December 31, 2008. This resulted from a decrease in borrowings under the Revolving Credit Facility of the 2007 Credit Agreement. Adjusted debt as of March 31, 2009 decreased by $133.6 million from the balance at December 31, 2008 as a result of this decrease in borrowings under the Revolving Credit Facility and a $23 million decrease in the amount sold under the Companys Prior Receivables Securitization Program. These reductions were made possible by increased operating cash flows in the quarter.
At March 31, 2009, the Companys adjusted debt-to-total capitalization ratio was 48.4%, compared to 54.8% at December 31, 2008.
Operating cash requirements and capital expenditures are funded from operating cash flow and available financing. Financing available from debt and the sale of accounts receivable as of March 31, 2009, is summarized below (in millions):
Availability
Maximum financing available under: |
|
|
|
|
|
||
2007 Credit Agreement - Revolving Credit Facility |
|
$ |
425.0 |
|
|
|
|
2007 Credit Agreement Term Loan |
|
200.0 |
|
|
|
||
2007 Master Note Purchase Agreement |
|
135.0 |
|
|
|
||
2009 Receivables Securitization Program (1) |
|
150.0 |
|
|
|
||
Industrial Development Bond |
|
6.8 |
|
|
|
||
Maximum financing available |
|
|
|
$ |
916.8 |
|
|
|
|
|
|
|
|
||
Amounts utilized: |
|
|
|
|
|
||
2007 Credit Agreement - Revolving Credit Facility |
|
210.7 |
|
|
|
||
2007 Credit Agreement Term Loan |
|
200.0 |
|
|
|
||
2007 Master Note Purchase Agreement |
|
135.0 |
|
|
|
||
2009 Receivables Securitization Program (1) |
|
|
|
|
|
||
Outstanding letters of credit |
|
19.4 |
|
|
|
||
Industrial Development Bond |
|
6.8 |
|
|
|
||
Total financing utilized |
|
|
|
571.9 |
|
||
Available financing, before restrictions |
|
|
|
344.9 |
|
||
Restrictive covenant limitation |
|
|
|
45.7 |
|
||
Available financing as of March 31, 2009 |
|
|
|
$ |
299.2 |
|
|
(1) The 2009 Receivables Securitization Program provides for maximum funding available of the lesser of $150 million or the total amount of eligible receivables.
The Credit Agreement, 2007 Note Purchase Agreement and Transfer and Administration Agreement prohibit the Company from exceeding a Leverage Ration of 3.25 to 1.00 and impose other restrictions on the Companys ability to incur additional debt. These agreements also contain additional covenants, requirements and events of default that are customary for these types of agreements, including the failure to make any required payments when due. The 2007 Credit Agreement 2007 Note Purchase Agreement and the Transfer and Administration Agreement all contain cross-default provisions. As a result if an event of default occurs under any of those agreements the lenders under all of the agreements may cease to make additional loans, accelerate any loans then outstanding and/or terminate the agreements to which they are party.
The Company believes that its operating cash flow and financing capacity, as described, provide adequate liquidity for operating the business for the foreseeable future.
Contractual Obligations
During the first quarter of 2009, there were no significant changes in contractual obligations from those disclosed in the Companys Form 10-K for the year ended December 31, 2008 .
27
Credit Agreement and Other Debt
On March 3, 2009, USI entered into a $150 million accounts receivables securitization program (the 2009 Receivables Securitization Program or the 2009 Program) that replaced the securitization program that USI terminated on March 2, 2009 (the Prior Receivables Securitization Program or the Prior Program). The parties to the 2009 Program are USI, USSC, USFS, and United Stationers Receivables, LLC (USR), and Bank of America, National Association (Bank of America), PNC Bank, National Association (PNC), Enterprise Funding Company LLC (Enterprise), and Market Street Funding LLC (Market Street and, together with Bank of America, PNC and Enterprise, the Investors). In connection with the 2009 Program, the parties entered into a number of agreements as of March 3, 2009, including:
· a Transfer and Administration Agreement among USSC, USFS, USR, Bank of America, PNC, Enterprise, and Market Street;
· a Receivables Sale Agreement between USSC and USFS;
· a Receivables Purchase Agreement between USFS and USR; and
· a Performance Guaranty executed by USI in favor of USR.
Pursuant to the Receivables Sale Agreement, USSC sells to USFS, on an on-going basis, all the customer accounts receivable and related rights originated by USSC. Pursuant to the Receivables Purchase Agreement, USFS sells to USR, on an on-going basis, all the accounts receivable and related rights purchased from USSC, as well as the accounts receivable and related rights USFS acquired from its subsidiary USSR upon the termination of the Prior Program. Pursuant to the Transfer and Administration Agreement, USR then sells the receivables and related rights to Bank of America, as agent on behalf of Enterprise and Market Street. The maximum investment to USR at any one time outstanding under the 2009 Program may not exceed $150 million. USFS will retain servicing responsibility over the receivables. USR is a wholly-owned, bankruptcy remote special purpose subsidiary of USFS. The assets of USR are not available to satisfy the creditors of any other person, including USFS, USSC or USI, until all amounts outstanding under the facility are repaid and the 2009 Program has been terminated. The maturity date of the 2009 Program is November 23, 2013, subject to the Investors renewing their commitments as liquidity providers supporting the 2009 Program, which expire on November 23, 2009.
The receivables sold to Bank of America will remain on USIs consolidated balance sheet, and amounts advanced to USR by Enterprise, Market Street, Bank of America, PNC or any successor Investor will be recorded as debt on USIs consolidated balance sheet. The cost of such debt will be recorded as interest expense on USIs income statement. As of March 31, 2009, $412.6 million of receivables have been sold and no amounts have been advanced to USR.
On July 5, 2007, USI and USSC entered into a Second Amended and Restated Five-Year Revolving Credit Agreement with PNC Bank, National Association and U.S. Bank National Association, as Syndication Agents, KeyBank National Association and LaSalle Bank, National Association, as Documentation Agents, and JPMorgan Chase Bank, National Association, as Agent (as amended on December 21, 2007, the 2007 Credit Agreement). The 2007 Credit Agreement provides a Revolving Credit Facility with a committed principal amount of $425 million and a Term Loan in the principal amount of $200 million. Interest on both the Revolving Credit Facility and the Term Loan is based on the three-month LIBOR plus an interest margin based upon the Companys debt to EBITDA ratio (or Leverage Ratio, as defined in the 2007 Credit Agreement). The 2007 Credit Agreement prohibits the Company from exceeding a Leverage Ratio of 3.25 to 1.00 and imposes other restrictions on the Companys ability to incur additional debt. The Revolving Credit Facility expires on July 5, 2012, which is also the maturity date of the Term Loan.
On October 15, 2007, USI and USSC entered into a Master Note Purchase Agreement (the 2007 Note Purchase Agreement) with several purchasers. The 2007 Note Purchase Agreement allows USSC to issue up to $1 billion of senior secured notes, subject to the debt restrictions contained in the 2007 Credit Agreement. Pursuant to the 2007 Note Purchase Agreement, USSC issued and sold $135 million of floating rate senior secured notes due October 15, 2014 at par in a private placement (the Series 2007-A Notes). Interest on the Series 2007-A Notes is payable quarterly in arrears at a rate per annum equal to three-month LIBOR plus 1.30%, beginning January 15, 2008. USSC may issue additional series of senior secured notes from time to time under the 2007 Note Purchase Agreement but has no specific plans to do so at this time. USSC used the proceeds from the sale of these notes to repay borrowings under the 2007 Credit Agreement.
On November 6, 2007, USSC entered into an interest rate swap transaction (the November 2007 Swap Transaction) with U.S. Bank National Association as the counterparty. USSC entered into the November 2007 Swap Transaction to mitigate USSCs floating rate risk on an aggregate of $135 million of LIBOR based interest rate risk. Under the terms of the November 2007 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $135 million at a fixed rate of 4.674%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The November 2007 Swap Transaction has an effective date of January 15, 2008 and a termination date of January 15, 2013.
28
On December 20, 2007, USSC entered into an interest rate swap transaction (the December 2007 Swap Transaction) with Key Bank National Association as the counterparty. USSC entered into the December 2007 Swap Transaction to mitigate USSCs floating rate risk on an aggregate of $200 million of LIBOR based interest rate risk. Under the terms of the December 2007 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $200 million at a fixed rate of 4.075%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The December 2007 Swap Transaction has an effective date of December 21, 2007 and a termination date of June 21, 2012.
On March 13, 2008, USSC entered into an interest rate swap transaction (the March 2008 Swap Transaction) with U.S. Bank National Association as the counterparty. USSC entered into the March 2008 Swap Transaction to mitigate USSCs floating rate risk on an aggregate of $100 million of LIBOR based interest rate risk. Under the terms of the March 2008 Swap Transaction, USSC is required to make quarterly fixed rate payments to the counterparty calculated based on a notional amount of $100 million at a fixed rate of 3.212%, while the counterparty is obligated to make quarterly floating rate payments to USSC based on the three-month LIBOR on the same referenced notional amount. The March 2008 Swap Transaction had an effective date of March 31, 2008 and a termination date of June 29, 2012.
The Company had outstanding letters of credit under the 2007 Credit Agreement and its predecessor agreement of $19.4 million and $19.5 million as of March 31, 2009 and December 31, 2008, respectively.
At March 31, 2009 funding levels (including amounts sold under the 2009 Receivables Securitization Program), a 50 basis point movement in interest rates would result in an annualized increase or decrease of approximately $0.6 million in interest expense and loss on the sale of certain accounts receivable, on a pre-tax basis, and ultimately upon cash flows from operations.
As of March 31, 2009, the Company had an industrial development bond outstanding with a balance of $6.8 million. This bond is scheduled to mature in 2011 and carries market-based interest rates.
Off-Balance Sheet Arrangements Prior Receivables Securitization Program
USSC maintained a third-party receivables securitization program (the Prior Receivables Securitization Program or the Prior Program). On November 10, 2006, the Company entered into an amendment to its revolving credit agreement, which, among other things, increased the permitted size of the Prior Receivables Securitization Program to $350 million, a $75 million increase from the $275 million limit under the prior credit agreement. During the first quarter of 2007, the Company increased its commitments to the maximum available of $250 million. On March 2, 2009, in preparation for entering into a new securitization program, USIs subsidiaries United Stationers Financial Services (USFS) and USS Receivables Company, Ltd. (USSR) terminated the Prior Receivables Securitization Program. Under the Prior Program, USSC sold, on a revolving basis, its eligible trade accounts receivable (except for certain excluded accounts receivable, which initially include all accounts receivable of Lagasse, Inc. and foreign operations) to USSR. USSR, in turn, ultimately transferred the eligible trade accounts receivable to a trust. The trust then sold investment certificates, which represented an undivided interest in the pool of accounts receivable owned by the trust, to third-party investors. As of December 31, 2008, the Company sold $23 million of interests in trade accounts receivable.
Cash Flows
Cash flows for the Company for the three-month periods ended March 31, 2009 and 2008 are summarized below (in thousands):
|
|
For the Three Months Ended |
|
||||
|
|
March 31, |
|
||||
|
|
2009 |
|
2008 |
|
||
|
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
$ |
115,808 |
|
$ |
(17,845 |
) |
Net cash used in investing activities |
|
(1,964 |
) |
(8,007 |
) |
||
Net cash (used in) provided by financing activities |
|
(110,574 |
) |
24,756 |
|
||
29
Cash Flow From Operations
Net cash provided by operating activities for the three months ended March 31, 2009 totaled $115.8 million, compared with net cash used in operating activities of $17.8 million in the same three-month period of 2008. After excluding the impacts of accounts receivable sold under the Prior Receivables Securitization Program (see table below), the Companys operating cash flows were $138.8 million and $45.2 million for the three months ended March 31, 2009 and 2008, respectively.
Adjusted operating cash flows for the first quarter of 2009 were favorably affected by two items. First, a decline in inventories from December 31, 2008 of $108.1 million, as opposed to a decline of $74.8 million in the first quarter of 2008, resulted in a $33.3 million improvement in the first quarter of 2009 compared to 2008. Inventories were down by about 11 percent versus the prior year quarter-end and 16 percent lower than year-end 2008. The Company maintained very high service levels for customers, and made opportunistic investment buys, while bringing inventories down as sales declined. Second, accounts payable balances were also unusually low at year-end 2008 resulting in less cash outflow for payables in the first quarter of 2009 versus the payment of $81.7 million in accounts payable in the first quarter of 2008. Year-end 2008 payables balances were unusually low due to the timing of inventory investment buys in the fourth quarter of 2008. This shift in timing of inventory investment buys coupled with lower purchasing activity in the first quarter of 2009 versus the same period last year resulted in less outflows of cash for payables and checks in-transit of $59.4 million.
Internally, the Company views accounts receivable sold through its Prior Receivables Securitization Program (the Prior Program) and the 2009 Receivables Securitization Program (the 2009 Program), or collectively, the Programs, to be a financing mechanism based on the following considerations and reasons:
· During the first quarter of 2009, the company entered into the 2009 Program that was structured to maintain the related accounts receivable and debt on its balance sheet, with costs of the 2009 Program now included within Interest Expense, net. In contrast, the Prior Program was structured for off-balance sheet treatment with costs included in Other Expense, net;
· The Prior Program historically was the Companys preferred source of floating rate financing, primarily because it had generally carried a lower cost than other traditional borrowings;
· The 2009 Program is an alternate source of floating rate financing, that generally carries a lower cost than other traditional borrowings;
· The Programs characteristics are similar to those of traditional debt, including being securitized, having an interest component and being viewed as traditional debt by the Programs financial providers in determining capacity to support and service debt;
· The terms of the Programs are structured similarly to those in many revolving credit facilities, including provisions addressing maximum commitments, costs of borrowing, financial covenants and events of default;
· As with debt, the Company elects, in accordance with the terms of the Programs, how much is funded through the Programs at any given time;
· Provisions of the 2007 Credit Agreement and the 2007 Note Purchase Agreement aggregate true debt (including borrowings under the Credit Facility) together with the balance of accounts receivable sold under the Programs into the concept of Consolidated Funded Indebtedness. This effectively treats the Programs as debt for purposes of requirements and covenants under those agreements; and
· For purposes of managing working capital requirements, the Company evaluates working capital before any sale of accounts receivables sold through the Programs to assess accounts receivable requirements and performance, on measures such as days outstanding and working capital efficiency.
30
Net cash provided by operating activities excluding the effects of receivables sold and net cash used in financing activities including the effects of receivables sold for the three months ended March 31, 2009 and 2008 are provided below as an additional liquidity measure (in thousands):
|
|
For the Three Months Ended
|
|
||||
|
|
2008 |
|
2007 |
|
||
|
|
|
|
|
|
||
Cash Flows From Operating Activities: |
|
|
|
|
|
||
Net cash provided by (used in) operating activities |
|
$ |
115,808 |
|
$ |
(17,845 |
) |
Excluding the change in accounts receivable |
|
23,000 |
|
63,000 |
|
||
Net cash provided by operating activities excluding the effects of receivables sold |
|
$ |
138,808 |
|
$ |
45,155 |
|
|
|
|
|
|
|
||
Cash Flows From Financing Activities: |
|
|
|
|
|
||
Net cash (used in) provided by financing activities |
|
$ |
(110,574 |
) |
$ |
24,756 |
|
Including the change in accounts receivable sold |
|
(23,000 |
) |
(63,000 |
) |
||
Net cash used in financing activities including the effects of receivables sold |
|
$ |
(133,574 |
) |
$ |
(38,244 |
) |
Cash Flow From Investing Activities
Net cash used in investing activities for the first three months of 2009 was $2.0 million, compared to net cash used in investing activities of $8.0 million for the three months ended March 31, 2008. The decline primarily relates to the timing of capital projects. For 2009, the Company expects gross capital expenditures to be approximately $15 - $20 million.
Cash Flow From Financing Activities
Net cash used in financing activities for the three months ended March 31, 2009 totaled $110.6 million, compared with a source of $24.8 million in the prior year period. Strong operating cash flows in the first quarter of 2009 led to repayment of debt of $110.6 million while $90.9 million was borrowed in the first quarter of 2008. Cash outflows in the first quarter of 2008 also included $67.5 million of share repurchases.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is subject to market risk associated principally with changes in interest rates and foreign currency exchange rates. There were no material changes to the Companys exposures to market risk during the first quarter of 2009 from those disclosed in the Companys Annual Report on Form 10-K for the year ended December 31, 2008.
ITEM 4. CONTROLS AND PROCEDURES.
Attached as exhibits to this Quarterly Report are certifications of the Companys President and Chief Executive Officer (CEO) and Senior Vice President and Chief Financial Officer (CFO), which are required in accordance with Rule 13a-14 under the Exchange Act. This Controls and Procedures section includes information concerning the controls and controls evaluation referred to in such certifications.
31
Inherent Limitations on Effectiveness of Controls
The Companys management, including the CEO and CFO, does not expect that the Companys Disclosure Controls or its internal control over financial reporting will prevent or detect all error or all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control systems objectives will be met. The design of a control system must reflect the existence of resource constraints. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the fact that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by managerial override. The design of any system of controls is based, in part, on certain assumptions about the likelihood of future events, and no design is likely to succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of the effectiveness of controls to future periods are subject to risks, including that controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.
Disclosure Controls and Procedures
At the end of the period covered by this Quarterly Report the Companys management performed an evaluation, under the supervision and with the participation of the Companys CEO and CFO, of the effectiveness of the Companys disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Such disclosure controls and procedures (Disclosure Controls) are controls and other procedures designed to provide reasonable assurance that information required to be disclosed in the Companys reports filed under the Exchange Act, such as this Quarterly Report, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to the Companys management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Managements quarterly evaluation of Disclosure Controls includes an evaluation of some components of the Companys internal control over financial reporting, and internal control over financial reporting is also separately evaluated on an annual basis.
Based on this evaluation, the Companys management (including its CEO and CFO) concluded that as of March 31, 2009, the Companys Disclosure Controls were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes to the Companys internal control over financial reporting that occurred during the first quarter of 2009 that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
The Company is involved in legal proceedings arising in the ordinary course of or incidental to its business. The Company is not involved in any legal proceedings that it believes will result, individually or in the aggregate, in a material adverse effect upon its financial condition or results of operations.
For information regarding risk factors, see Risk Factors in Item 1A of Part I of the Companys Form 10-K for the year ended December 31, 2008. There have been no material changes to the risk factors described in such Form 10-K.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
Common Stock Purchase
The Company did not repurchase any common stock during the first quarter of 2009. As of March 31, 2009, the Companys remaining authorized dollar values for common stock repurchases remained at $100.9 million, unchanged since December 31, 2008.
32
(a) Exhibits
This Quarterly Report on Form 10-Q includes as exhibits certain documents that the Company has previously filed with the SEC. Such previously filed documents are incorporated herein by reference from the respective filings indicated in parentheses at the end of the exhibit descriptions (all made under the Companys file number of 0-10653). Each of the management contracts and compensatory plans or arrangements included below as an exhibit is identified as such by a double asterisk at the end of the related exhibit description.
Exhibit No. |
|
Description |
3.1 |
|
Second Restated Certificate of Incorporation of the Company, dated as of March 19, 2002 (Exhibit 3.1 to the Companys Annual Report on Form 10-K for the year ended December 31, 2001, filed on April 1, 2002 (the 2001 Form 10-K)) |
|
|
|
3.2 |
|
Amended and Restated Bylaws of the Company, dated as of October 10, 2007 (Exhibit 3.1 to the Companys Current Report on Form 8-K, filed on October 12, 2007) |
|
|
|
4.1 |
|
Rights Agreement, dated as of July 27, 1999, by and between the Company and BankBoston, N.A., as Rights Agent (Exhibit 4.1 to the Companys 2001 Form 10-K) |
|
|
|
4.2 |
|
Amendment to Rights Agreement, effective as of April 2, 2002, by and among the Company, Fleet National Bank (f/k/a BankBoston, N.A. and EquiServe Trust Company, N.A.) (Exhibit 4.1 to the Companys Form 10-Q for the Quarter ended March 31, 2002, filed on May 15, 2002) |
|
|
|
10.1* |
|
Transfer and Administration Agreement, dated as of March 3, 2009, by and among United Stationers Receivables, LLC (USR), United Stationers Supply Co. (USSC), United Stationers Financial Services LLC (USFS), Enterprise Funding Company LLC, Market Street Funding LLC, Bank of America, National Association, PNC Bank, National Association and the other alternate investors from time to time parties thereto |
|
|
|
10.2* |
|
Receivables Sale Agreement, dated as of March 3, 2009, by and between USSC and USFS |
|
|
|
10.3* |
|
Receivables Purchase Agreement, dated as of March 3, 2009, by and between USFS and USR |
|
|
|
10.4* |
|
Performance Guarantee, dated as of March 3, 2009, by and among the Company and in favor of USR |
|
|
|
10.5 |
|
United Stationers Inc. Nonemployee Directors Deferred Stock Compensation Plan, effective January 1, 2009 ** (Exhibit 10.33 to the Companys Annual Report on Form 10-K for the year ended December 31, 2008, filed on February 27, 2009 (the 2009 Form 10-K)) |
|
|
|
10.6 |
|
United Stationers Supply Co. Amended and Restated Deferred Compensation Plan, effective as of January 1, 2009** (Exhibit 10.34 to the 2009 Form 10-K) |
|
|
|
10.7 |
|
Medical Executive Reimbursement Program, as in effect as of January 1, 2009** (Exhibit 10.35 to the 2009 Form 10-K) |
|
|
|
10.8 |
|
United Stationers Inc. and Subsidiaries Amended and Restated Management Incentive Plan, effective January 1, 2009** (Exhibit 10.42 to the 2009 Form 10-K) |
|
|
|
10.9 |
|
United Stationers Inc. Amended and Restated 2004 Long-Term Incentive Plan effective as of January 1, 2009 (LTIP)** (Exhibit 10-43 to the 2009 Form 10-K) |
|
|
|
10.10* |
|
Form of Restricted Stock Unit Award Agreement for grants of restricted stock unit awards to employees under the LTIP ** |
33
31.1* |
|
Certification of Chief Executive Officer, dated as of May 7, 2009, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2* |
|
Certification of Chief Financial Officer, dated as of May 7, 2009, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
32.1* |
|
Certification of Chief Executive Officer and Chief Financial Officer, dated as of May 7, 2009, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
* - Filed herewith
34
Pursuant to the requirements 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.
|
UNITED STATIONERS INC. |
|
(Registrant) |
|
|
|
/s/ VICTORIA J. REICH |
Date: May 7, 2009 |
Victoria J. Reich |
|
Senior Vice President and Chief Financial Officer
(Duly
|
35
Exhibit 10.1
EXECUTION COPY
TRANSFER AND ADMINISTRATION AGREEMENT
by and among
UNITED STATIONERS RECEIVABLES, LLC,
UNITED STATIONERS SUPPLY CO.,
as Originator,
UNITED STATIONERS FINANCIAL SERVICES LLC,
as Seller and Servicer,
ENTERPRISE FUNDING COMPANY LLC,
as a Conduit Investor,
MARKET STREET FUNDING LLC,
as a Conduit Investor,
BANK OF AMERICA, NATIONAL ASSOCIATION,
as Agent, as a Class Agent and as an Alternate Investor,
PNC BANK, NATIONAL ASSOCIATION,
as a Class Agent and as an Alternate Investor,
and
THE OTHER ALTERNATE INVESTORS
FROM TIME TO TIME PARTIES HERETO
Table of Contents
|
|
|
Page |
|||
|
|
|
|
|||
Article I |
Definitions |
|
1 |
|||
Section 1.1 |
Certain Defined Terms |
|
1 |
|||
Section 1.2 |
Other Terms |
|
21 |
|||
Section 1.3 |
Computation of Time Periods; Calculations |
|
21 |
|||
|
|
|
|
|||
Article II |
Purchases and Settlements |
|
22 |
|||
Section 2.1 |
Transfer of Affected Assets; Intended Characterization |
|
22 |
|||
Section 2.2 |
Purchase Price |
|
23 |
|||
Section 2.3 |
Investment Procedures |
|
23 |
|||
Section 2.4 |
IS SPECIFIED IN SCHEDULE I, WHICH IS INCORPORATED HEREIN BY REFERENCE |
|
26 |
|||
Section 2.5 |
Yield, Fees and Other Costs and Expenses |
|
26 |
|||
Section 2.6 |
Deemed Collections |
|
26 |
|||
Section 2.7 |
Reductions in Net Investment; Payments and Computations, Etc. |
|
27 |
|||
Section 2.8 |
Reports |
|
27 |
|||
Section 2.9 |
Collection Account |
|
28 |
|||
Section 2.10 |
Sharing of Payments, Etc. |
|
28 |
|||
Section 2.11 |
Right of Setoff |
|
29 |
|||
|
|
|
|
|||
Article III |
Additional Alternate Investor Provisions |
|
29 |
|||
Section 3.1 |
Assignment to Alternate Investors |
|
29 |
|||
Section 3.2 |
Downgrade of Alternate Investor |
|
31 |
|||
Section 3.3 |
Non-Renewing Alternate Investors |
|
33 |
|||
Section 3.4 |
New Alternate Investors and Liquidity Banks |
|
34 |
|||
|
|
|
|
|||
Article IV |
Representations and Warranties |
|
34 |
|||
Section 4.1 |
Representations and Warranties of the Originator, the SPV, the Seller and the Servicer |
|
34 |
|||
Section 4.2 |
Additional Representations and Warranties of the Servicer |
|
41 |
|||
|
|
|
|
|||
Article V |
Conditions Precedent |
|
41 |
|||
Section 5.1 |
Conditions Precedent to Closing |
|
41 |
|||
Section 5.2 |
Conditions Precedent to All Investments and Reinvestments |
|
45 |
|||
|
|
|
|
|||
Article VI |
Covenants |
|
46 |
|||
Section 6.1 |
Affirmative Covenants of the SPV and Servicer |
|
46 |
|||
Section 6.2 |
Negative Covenants of the SPV and Servicer |
|
51 |
|||
Section 6.3 |
IS SPECIFIED IN SCHEDULE 6.3, WHICH IS INCORPORATED HEREIN BY REFERENCE |
|
53 |
|||
|
|
|
|
|||
Article VII |
Administration and Collections |
|
53 |
|||
Section 7.1 |
Appointment of Servicer |
|
53 |
|||
Section 7.2 |
Duties of Servicer. |
|
55 |
|||
i
Section 7.3 |
Blocked Account Arrangements |
|
56 |
|
Section 7.4 |
Enforcement Rights After Designation of New Servicer |
|
56 |
|
Section 7.5 |
Servicer Default |
|
57 |
|
Section 7.6 |
Servicing Fee |
|
58 |
|
Section 7.7 |
Protection of Ownership Interest of the Investors |
|
58 |
|
|
|
|
|
|
Article VIII |
Termination Events |
|
59 |
|
Section 8.1 |
Termination Events |
|
59 |
|
Section 8.2 |
Termination |
|
62 |
|
|
|
|
|
|
Article IX |
Indemnification; Expenses; Related Matters |
|
62 |
|
Section 9.1 |
Indemnities by the SPV and the Servicer |
|
62 |
|
Section 9.2 |
Indemnity for Taxes, Reserves and Expenses |
|
65 |
|
Section 9.3 |
Taxes |
|
67 |
|
Section 9.4 |
Other Costs and Expenses; Breakage Costs |
|
67 |
|
Section 9.5 |
[Reserved] |
|
68 |
|
Section 9.6 |
Indemnities by the Servicer |
|
68 |
|
Section 9.7 |
Accounting Based Consolidation Event |
|
68 |
|
|
|
|
|
|
Article X |
The Agent |
|
69 |
|
Section 10.1 |
Appointment and Authorization of Agent |
|
69 |
|
Section 10.2 |
Delegation of Duties |
|
69 |
|
Section 10.3 |
Liability of Agent |
|
69 |
|
Section 10.4 |
Reliance by Agent |
|
70 |
|
Section 10.5 |
Notice of Termination Event, Potential Termination Event or Servicer Default |
|
70 |
|
Section 10.6 |
Credit Decision; Disclosure of Information by the Agent |
|
71 |
|
Section 10.7 |
Indemnification of the Agent |
|
71 |
|
Section 10.8 |
Agent in Individual Capacity |
|
72 |
|
Section 10.9 |
Resignation of Agent |
|
72 |
|
Section 10.10 |
Payments by the Agent |
|
72 |
|
Section 10.11 |
Appointment and Authorization of Class Agents |
|
73 |
|
Section 10.12 |
Delegation of Duties |
|
73 |
|
Section 10.13 |
Reliance by Class Agents |
|
73 |
|
Section 10.14 |
Notice of Termination Event, Potential Termination Event or Servicer Default |
|
74 |
|
Section 10.15 |
Credit Decision; Disclosure of Information by the Class Agents |
|
74 |
|
Section 10.16 |
Indemnification of the Class Agent |
|
75 |
|
Section 10.17 |
Class Agent in Individual Capacity |
|
75 |
|
Section 10.18 |
Resignation of Class Agent |
|
76 |
|
Section 10.19 |
Liability of Agent and the Class Agents |
|
76 |
|
|
|
|
|
|
Article XI |
Miscellaneous |
|
76 |
|
Section 11.1 |
Term of Agreement. |
|
76 |
|
Section 11.2 |
Waivers; Amendments |
|
77 |
|
Section 11.3 |
Notices; Payment Information |
|
77 |
|
ii
Section 11.4 |
Governing Law; Submission to Jurisdiction; Appointment of Service Agent |
|
78 |
Section 11.5 |
Integration |
|
79 |
Section 11.6 |
Severability of Provisions |
|
79 |
Section 11.7 |
Counterparts; Facsimile Delivery |
|
79 |
Section 11.8 |
Successors and Assigns; Binding Effect |
|
79 |
Section 11.9 |
Waiver of Confidentiality |
|
82 |
Section 11.10 |
Confidentiality Agreement |
|
82 |
Section 11.11 |
No Bankruptcy Petition Against the Conduit Investors |
|
83 |
Section 11.12 |
No Recourse Against Conduit Investors |
|
83 |
Schedules
Schedule I |
Yield and Rate Periods |
Schedule II |
Specified Ineligible Receivables |
Schedule III |
Settlement Procedures |
Schedule 4.1(g) |
List of Actions and Suits |
Schedule 4.1(i) |
Location of Certain Offices and Records |
Schedule 4.1(j) |
List of Subsidiaries, Divisions and Tradenames; FEIN |
Schedule 4.1(r) |
List of Blocked Account Banks and Blocked Accounts |
Schedule 4.1(bb) |
Disclosure Representations and Covenants |
Schedule 6.3 |
Financial Covenants |
Schedule 11.3 |
Address and Payment Information |
Exhibits
Exhibit A |
Form of Assignment and Assumption Agreement |
Exhibit B |
[Reserved] |
Exhibit C |
Credit and Collection Policies and Practices |
Exhibit D |
Form of Investment Request |
Exhibit E |
Form of Blocked Account Agreement |
Exhibit F |
Form of Servicer Report |
Exhibit G |
Form of SPV Secretarys Certificate |
Exhibit H |
Forms of Originator/Servicer/Seller Secretarys Certificate |
Exhibit I |
Form of Opinion of Counsel for the SPV, Originator, Seller and Servicer |
Exhibit J |
Scope of Agreed Upon Procedures |
Exhibit K |
Form of Compliance Certificate |
iii
TRANSFER AND ADMINISTRATION AGREEMENT
This TRANSFER AND ADMINISTRATION AGREEMENT (as amended, modified, supplemented, restated or replaced, this Agreement ), dated as of March 3, 2009, by and among United Stationers Receivables, LLC, an Illinois limited liability company (the SPV ), United Stationers Supply Co., an Illinois corporation (the Originator ), United Stationers Financial Services LLC, an Illinois limited liability company (the Seller ) and as Servicer, Enterprise Funding Company LLC, a Delaware limited liability company ( Enterprise Funding ), as a Conduit Investor, Market Street Funding LLC, a Delaware limited liability company ( Market Street , each of Enterprise Funding and Market Street a Conduit Investor and, collectively, the Conduit Investors ), Bank of America, National Association, a national banking association ( Bank of America ), as Agent, as a Class Agent and as an Alternate Investor, PNC Bank, National Association ( PNC Bank ), as a Class Agent and as an Alternate Investor, and the financial institutions from time to time parties hereto as Alternate Investors.
As used in this Agreement, 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):
Accounting Based Consolidation Event : Solely to the extent such entity is not consolidated with such Indemnified Party on or prior to the date hereof, the consolidation, for financial and/or regulatory accounting purposes, of all or any portion of the assets and liabilities of any Conduit Investor that is the subject of this Agreement or any other Transaction Document with all or any portion of the assets and liabilities of the Agent or any Alternate Investor in such Conduit Investors Class or any of their Affiliates as the result of the occurrence of any change after the date hereof in accounting standards or the issuance of any pronouncement, interpretation or release, by any accounting body or any other governmental body charged with the promulgation or administration of accounting standards, including the Financial Accounting Standards Board, the International Accounting Standards Board, the American Institute of Certified Public Accountants, the Federal Reserve Board of Governors and the Securities and Exchange Commission.
Additional Costs : As defined in Section 9.2(d) .
Adverse Claim : Except for Permitted Liens, any lien, security interest, charge or encumbrance, or other right or claim in, of or on any Persons assets or properties in favor of any other Person.
Advertising Receivable : Any Receivable which arises from the Originators business of selling catalogs and related advertising materials to its customers, which Receivables are indicated as advertising on the Originators receivables aging books and records.
Affected Assets : Collectively, (i) the Receivables, (ii) the Related Security, (iii) all rights and remedies of the SPV under the Second Tier Agreement, together with all financing statements
filed by the SPV against the Originator and the Seller in connection therewith, (iv) all Blocked Accounts and all funds and investments therein and all Blocked Account Agreements, and (v) all proceeds of the foregoing.
Affiliate : As to any Person, any other Person which, directly or indirectly, owns, is in control of, is controlled by, or is under common control with, such Person, in each case whether beneficially, or as a trustee, guardian or other fiduciary. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the other Person, whether through the ownership of voting securities or membership interests, by contract, or otherwise.
Agent : Bank of America, in its capacity as agent for the Investors, and any successor thereto appointed pursuant to Article X .
Agent-Related Persons : The Agent, or any Class Agent, as the case may be, together with its Affiliates, and the officers, directors, employees, agents and attorneys-in-fact of such Persons and their respective Affiliates.
Aggregate Unpaids : At any time, an amount equal to the sum of (i) the aggregate unpaid Yield accrued and to accrue to maturity with respect to all Rate Periods at such time, (ii) the Net Investment at such time and (iii) all other amounts owed (whether or not then due and payable) hereunder and under the other Transaction Documents by the SPV, the Seller and the Originator to the Agent, the Class Agents, the Investors or the Indemnified Parties at such time.
Agreement : As defined in the Preamble .
Alternate Investor Percentage : At any time with respect to any Alternate Investor, the percentage equivalent of a fraction the numerator of which is equal to the Commitment of such Alternate Investor on such day and the denominator of which is equal to the related Class Facility Limit on such day.
Alternate Investors : With respect to (a) the Enterprise Funding Class, Bank of America and each other financial institution identified as a member of the Enterprise Funding Class on the signature pages hereof and any other financial institution that shall become a party to this Agreement pursuant to Section 11.8 and who are identified as a being a member of the Enterprise Funding Class, (b) the Market Street Class, PNC Bank and each other financial institution identified as a member of the Market Street Class on the signature pages hereof and any other financial institution that shall become a party to this Agreement pursuant to Section 11.8 and who are identified as a being a member of the Market Street Class and (c) any other Class, each financial institution identified as a member of such Class on the signature pages hereof and any other financial institution that shall become a party to this Agreement pursuant to Section 11.8 and who are identified as a being a member of such Class.
Alternate Rate : As defined in Section 2.4 .
Asset Interest : As defined in Section 2.1(b) .
2
Assignment Amount : With respect to an Alternate Investor at the time of any assignment pursuant to Section 3.1 , an amount equal to the least of (i) such Alternate Investors Alternate Investor Percentage of the portion of the related Class Net Investment requested by the related Conduit Investor to be assigned at such time; (ii) such Alternate Investors unused Commitment (minus the unrecovered principal amount of such Alternate Investors investments in the Asset Interest pursuant to the Program Support Agreement to which it is a party); and (iii) in the case of an assignment on or after the Conduit Investment Termination Date, such Alternate Investors Alternate Investor Percentage of the Investor Percentage of the related Conduit Investor of the sum of (A) the aggregate Unpaid Balance of the Receivables (other than Defaulted Receivables), plus (B) all Collections received by the Servicer but not yet remitted by the Servicer to the Agent, plus (C) any amounts in respect of Deemed Collections required to be paid by the SPV at such time.
Assignment and Assumption Agreement : An Assignment and Assumption Agreement substantially in the form of Exhibit A .
Assignment Date : As defined in Section 3.1(a) .
Bank of America : As defined in the Preamble .
Bankruptcy Code : The Bankruptcy Reform Act of 1978, 11 U.S.C. §§ 101 et seq.
Base Rate : As defined in Section 2.4 .
Blocked Account : Any account maintained by the SPV at a Blocked Account Bank into which Collections are received or deposited, as set forth in Schedule 4.1(s) , or any account added as a Blocked Account pursuant to and in accordance with Section 4.1(s) and which, if not maintained at and in the name of the Agent, is subject to a Blocked Account Agreement.
Blocked Account Agreement : An agreement among the SPV, the Agent and a Blocked Account Bank in substantially the form of Exhibit E or in form and substance reasonably satisfactory to the Agent.
Blocked Account Bank : Each of the banks set forth in Schedule 4.1(s) , as such Schedule 4.1(s) may be modified pursuant to Section 4.1(s) .
Business Day : Any day excluding Saturday, Sunday and any day on which banks in New York, New York and Charlotte, North Carolina, are authorized or required by law to close, and, when used with respect to the determination of any Offshore Rate or any notice with respect thereto, any such day which is also a day for trading by and between banks in United States dollar deposits in the London interbank market.
Capitalized Lease : Of a Person, means any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.
Charged-off Receivable : Any Receivable that is, or should have been, charged-off in accordance with the Credit and Collection Policy.
3
Class : Each group of Investors consisting of the related Class Agent, one or more related Conduit Investors and the related Alternate Investors, and their respective successors and permitted assigns. Initially, there are 2 classes, the Enterprise Funding Class and the Market Street Class.
Class Agent : With respect to (i) the Enterprise Funding Class, Bank of America and its successors and permitted assigns and (ii) the Market Street Class, PNC Bank and its successors and permitted assigns, and (iii) any other Class, the Person specified in any supplement to this Agreement as the class agent for such Class and such Persons successors and permitted assigns.
Class Facility Limit : With respect to the Enterprise Funding Class, $102,000,000, (ii) with respect to the Market Street Class, $51,000,000 and (iii) with respect to any other Class, the amount specified in any supplement to this Agreement as the Class Facility Limit for such Class; provided, however, that the Class Facility Limit with respect to any Class shall not at any time exceed the aggregate Commitments for the related Alternate Investors.
Class Maximum Net Investment : At any time for any Class, an amount equal to the related Class Facility Limit divided by 1.02.
Class Net Investment : At any time with respect to any Class, the excess, if any of (a) the sum, without duplication, of (i) the cash amounts paid by the related Class Agent on behalf of the Investors in the related Class to the SPV pursuant to Sections 2.2 and 2.3 and (ii) the amount of any funding under a Program Support Agreement related to such Class that is allocated to the Interest Component related to such Class at the time of such funding over (b) the aggregate amount of Collections theretofore received and applied by such Class Agent to reduce the related Class Net Investment pursuant to Section 2.12 ; provided that the Class Net Investment of a Class shall be restored and reinstated in the amount of any Collections so received and applied if at any time the distribution of such Collections is rescinded or must otherwise be returned for any reason; provided further , that the Class Net Investment of a Class shall be increased by the amount described in Section 3.1(b) as described therein.
Class Pro Rata Share : With respect to any Class on any date, the percentage equivalent of a fraction, the numerator of which is the related Class Facility Limit as of such date and the denominator of which is the Facility Limit as of such date.
Class Termination Date : For any Class, unless the related Class Agent elects otherwise, the date of termination of the commitment of any Program Support Provider under a Program Support Agreement with respect to such Class, it being understood that as of the Closing Date, the commitment termination dates for the Liquidity Agreements for each Class are the Commitment Termination Date.
Closing Date : March 3, 2009.
Code : The Internal Revenue Code of 1986, as amended.
Collateral Agent : Bank of America, as collateral agent for any Program Support Provider, the holders of Commercial Paper and certain other parties.
Collection Account : As defined in Section 2.9 .
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Collections : With respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including (i) all scheduled interest and principal payments, and any applicable late fees, in any such case, received and collected on such Receivable, (ii) all proceeds received by virtue of the liquidation of such Receivable, net of necessary and reasonable expenses incurred in connection with such liquidation, (iii) all proceeds received (net of any such proceeds which are required by law to be paid to the applicable Obligor) under any damage, casualty or other insurance policy with respect to such Receivable, (iv) all cash proceeds of the Related Security related to or otherwise attributable to such Receivable, (v) any repurchase payment received with respect to such Receivable pursuant to any applicable recourse obligation of the Servicer, the Seller or the Originator under this Agreement or any other Transaction Document and (vi) all Deemed Collections received with respect to such Receivable.
Commercial Paper : The promissory notes issued or to be issued by any Conduit Investor (or its related commercial paper issuer if any Conduit Investor does not itself issue commercial paper) in the commercial paper market.
Commitment : With respect to each Alternate Investor, as the context requires, (i) the commitment of such Alternate Investor to make Investments and to pay Assignment Amounts in accordance herewith in an amount not to exceed the amount described in the following clause (ii) , and (ii) the dollar amount set forth opposite such Alternate Investors signature on the signature pages hereof under the heading Commitment (or in the case of an Alternate Investor which becomes a party hereto pursuant to an Assignment and Assumption Agreement, as set forth in such Assignment and Assumption Agreement), minus the dollar amount of any Commitment or portion thereof assigned by such Alternate Investor pursuant to an Assignment and Assumption Agreement, plus the dollar amount of any increase to such Alternate Investors Commitment consented to by such Alternate Investor prior to the time of determination; provided , however , that, except as otherwise provided in Section 3.3(b), in the event that the Facility Limit is reduced, the Commitment of each Alternate Investor shall be reduced by a pro rata amount of such reduction.
Commitment Termination Date : November 23, 2009, or such later date to which the Commitment Termination Date may be extended by the SPV, the Agent, the Class Agents and some or all of the Alternate Investors (in their sole discretion).
Concentration Factor : On any day, the product of (a) 5 and (b) the percentage set forth in the definition of Concentration Limit for Non-Investment Grade Obligors.
Concentration Limit : The aggregate amount of Receivables with respect to a single Obligor and such Obligors Subsidiaries and Affiliates that constitute more than 4.05% of the aggregate amount of Eligible Receivables; provided, however, that individual Obligor concentration limits may exceed 4.05%, subject to specific Obligor ratings as set forth below:
S&P / Moodys |
|
Concentration Limits |
|
|
|
|
|
AA-/Aa3 or better |
|
10.0 |
% |
|
|
|
|
A/A2 or better |
|
10.0 |
% |
|
|
|
|
BBB+/Baa1 or better |
|
9.0 |
% |
|
|
|
|
BBB-/Baa3 or better |
|
6.75 |
% |
|
|
|
|
Non-Investment Grade Obligors |
|
4.05 |
% |
5
provided, further, that (i) if any Obligor is rated by both Moodys and S&P, the rating for determining the applicable Concentration Limit will be the lower of the two ratings and (ii) if any Obligor is not rated by either S&P or Moodys, the applicable Concentration Limit shall be the Concentration Limit applicable to Non-Investment Grade Obligors.
Conduit Assignee : With respect to any Class, any special purpose entity that finances its activities directly or indirectly through asset backed commercial paper and is administered by the Class Agent for such Class and designated by such Class Agent from time to time to accept an assignment from the related Conduit Investor of all or a portion of the portion of the related Class Net Investment funded by such Conduit Investor.
Conduit Investment Termination Date : With respect to any Conduit Investor, the date of the delivery by such Conduit Investor to the SPV of written notice that such Conduit Investor elects, in its sole discretion, to commence the amortization of the related Class Net Investment funded by it or otherwise liquidate its interest in the Asset Interest.
Conduit Investors : Enterprise Funding, Market Street, any other special purpose entity that finances its activities directly or indirectly through asset backed commercial paper that becomes a party to this Agreement in accordance with the terms hereof and any Conduit Assignee of any of the foregoing.
Contract : In relation to any Receivable, any and all contracts, instruments, agreements, leases, invoices, notes, or other writings pursuant to which such Receivable arises or which evidence such Receivable or under which an Obligor becomes or is obligated to make payment in respect of such Receivable.
Contractual Dilution : With respect to any Receivable and any Obligor, the portion of the Unpaid Balance of such Receivable that is subject to reduction as a result of any rebate, discount or other reduction pursuant to any provision of the related Contract or otherwise pursuant to any program of the Originator or the Seller that is in effect on or before the date such Receivable is acquired by the SPV, regardless of whether the Originator, the Seller, the SPV or the Servicer has accrued or established a reserve therefor. For the avoidance of doubt, (i) any reference in this Agreement or any other Transaction Document to the amount of any Contractual Dilution shall be to the greater of the reduction that may apply to such Receivable and the accrual or reserve established by the Originator, the Seller, the Servicer or the SPV, as applicable, in respect of any such reduction and (ii) Contractual Dilutions do not include any reduction in the Unpaid Balance of any Receivable to the extent such reduction is a Dilution.
CP Rate : As defined in Section 2.4 .
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Credit and Collection Policy : The Originators credit and collection policy or policies and practices, relating to Contracts and Receivables as in effect on the Closing Date and set forth in Exhibit C , as modified, from time to time, in compliance with Sections 6.1(a)(vii) and 6.2(c) .
Days Sales Outstanding : For any Monthly Period means the number of calendar days equal to the product of (a) 91 and (b) the amount obtained by dividing (i) the aggregate Unpaid Balance of Receivables as of the last day of the immediately preceding Monthly Period by (ii) the aggregate amount of sales by the Originator giving rise to Receivables during the three (3) consecutive Monthly Periods immediately preceding such monthly Report Date.
Deemed Collections : Any Collections on any Receivable deemed to have been received pursuant to Sections 2.6 .
Default Rate : On any day, a rate per annum equal to the Base Rate plus 2.00%.
Default Ratio : For any Monthly Period, the ratio (expressed as a percentage) computed as of the related Month End Date next preceding the first day of such Monthly Period by dividing (i) the sum of (a) the aggregate Unpaid Balance of all Receivables which are 61-90 days past due as of such Month End Date and (b) the aggregate Unpaid Balance of all Receivables which became Charged-off Receivables during such Monthly Period, by (ii) the aggregate amount of sales by Originator giving rise to Receivables for the 3 rd preceding month.
Defaulted Receivable : Without double counting for any Charged-off Receivable, a Receivable (i) as to which any payment, or part thereof, remains unpaid for more than 60 days from the original due date for such Receivable; (ii) as to which an Event of Bankruptcy has occurred and is continuing with respect to the Obligor thereof; (iii) which has been identified by the SPV, the Originator or the Servicer as uncollectible; or (iv) which, consistent with the Credit and Collection Policy, should be written off as uncollectible; provided , however, a Receivable that is a Charged-off Receivable shall not be a Defaulted Receivable.
Defaulting Alternate Investor : As defined in Section 2.3(f) .
Delinquency Ratio : For any Monthly Period, the ratio (expressed as a percentage) computed as of the related Month End Date next preceding the first day of such Monthly Period by dividing (i) the aggregate Unpaid Balance of all Delinquent Receivables and Disputed Receivables at such time, by (ii) the aggregate Unpaid Balance of all Receivables at such time.
Delinquent Receivable : A Receivable: (i) as to which any payment, or part thereof, remains unpaid for more than sixty (60) days from the original due date for such Receivable and (ii) which is not a Disputed Receivable.
Dilution : With respect to any Receivable on any date, an amount equal to the sum, without duplication, of the aggregate reduction effected on such day in the Unpaid Balance of such Receivable attributable to any non-cash items including credits, rebates, billing errors, sales or similar taxes, cash discounts, volume discounts, allowances, disputes (it being understood that a Receivable is subject to dispute only if and to the extent that, in the reasonable good faith judgment of the Originator (which shall be exercised in the ordinary course of business) the Obligors obligation in respect of such Receivable is reduced on account of any performance
7
failure on the part of the Originator), set-offs, counterclaims, chargebacks, returned or repossessed goods, sales and marketing discounts, warranties, any unapplied credit memos and other adjustments that are made in respect of Obligors; provided , that Contractual Dilutions, Charged-off Receivables, Disputed Receivables, Advertising Receivables and other write-offs related to an Obligors bad credit shall not constitute Dilutions.
Dilution Horizon Ratio : For any Monthly Period, the ratio (expressed as a percentage) computed as of the related Month End Date immediately preceding the first day of such Monthly Period by dividing (a) the aggregate amount of sales by Originator giving rise to Receivables for the most recent 2 months, by (ii) the aggregate Unpaid Balance of all Eligible Receivables as of such Month End Date.
Dilution Ratio : For any Monthly Period, the ratio (expressed as a percentage) computed as of the Month End Date immediately preceding the first day of such Monthly Period by dividing (a) the aggregate Dilutions incurred during the month ended on such Month End Date by (b) the aggregate amount of sales by the Originator giving rise to Receivables in the month that occurs prior to the month ended on such Month End Date.
Dilution Reserve Ratio : For any Monthly Period, the sum of (a) the product of (i) the Stress Factor and (ii) the Expected Dilution Ratio and (b) the product of (i) the excess, if any, of the Dilution Spike over the Expected Dilution Ratio, (ii) the Dilution Spike divided by the Expected Dilution Ratio multiplied by (c) the Dilution Horizon Ratio, in each case, for such Monthly Period.
Dilution Spike : For any Monthly Period, the highest one-month Dilution Ratio for the twelve months ending on the Month End Date next preceding the first day of such Monthly Period.
Disputed Receivable : A Receivable (other than a Delinquent Receivable, a Defaulted Receivable or a Receivable subject to a Contractual Dilution), as to which, in the reasonable good faith judgment of the Originator, the Seller or the Servicer (which shall be exercised in the ordinary course of business), the Unpaid Balance thereof has been reduced (or should be reduced) on account of any performance failure on the part of the Originator, the Seller or the Servicer. For the avoidance of doubt, (i) any reference in this Agreement or any other Transaction Document to the amount of any Disputed Receivable shall be to the greater of the reduction that may apply to such Receivable and the accrual or reserve established by the Originator, the Seller, the Servicer or the SPV, as applicable, in respect of any such reduction and (ii) Disputed Receivable does not include any reduction in the Unpaid Balance of any Receivable to the extent such reduction is a Dilution.
Dollar or $ : The lawful currency of the United States.
Downgrade Collateral Account : As defined in Section 3.2(a) .
Downgrade Draw : As defined in Section 3.2(a) .
Eligible Investments : Highly rated short-term debt or the other highly rated liquid investments in which the Conduit Investors are permitted to invest cash pursuant to their respective commercial paper program documents.
8
Eligible Receivable : At any time, any Receivable:
(i) which was originated by the Originator in the ordinary course of its business;
(ii) (A) which, arises pursuant to a Contract with respect to which each of the Originator and the SPV has performed all obligations required to be performed by it thereunder, including shipment of the merchandise and/or the performance of the services purchased thereunder; (B) which has been billed to the relevant Obligor; and (C) which according to the Contract related thereto, is required to be paid in full within 51 days of the original billing date therefor;
(iii) which satisfies all applicable requirements of the Credit and Collection Policy;
(iv) which has been sold or contributed to the SPV pursuant to (and in accordance with) the Second Tier Agreement, and by the Originator to the Seller pursuant to (and in accordance with) the First Tier Agreement (other than the Receivables acquired by the Seller in respect of the termination of the existing receivables securitization on or prior to the date of the initial funding hereunder) which does not arise from the sale of any inventory subject to any Adverse Claim unless such Receivable has upon the transfer thereof been released from such Adverse Claim and to which the SPV has good and marketable title, free and clear of all Adverse Claims;
(v) the Obligor of which is a United States resident, is not an Affiliate or employee of any of the parties hereto, and is not an Official Body;
(vi) as to which amount due on such Receivable has not been extended;
(vii) the Obligor of which has been directed to make all payments to a Blocked Account;
(viii) which under the related Contract and applicable Law is assignable without the consent of, or notice to, the Obligor thereunder unless such consent has been obtained and is in effect or such notice has been given;
(ix) which, together with the related Contract, is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor enforceable against such Obligor in accordance with its terms and is not subject to any litigation, dispute, offset, counterclaim or other defense;
(x) which is denominated and payable only in Dollars in the United States;
(xi) which is neither a Defaulted Receivable nor a Charged-off Receivable;
(xii) which is not due from an Obligor which is more than 60 days past due on more than twenty-five percent (25%) of the aggregate Unpaid Balances of Receivables of which it is the Obligor;
9
(xiii) which has not been compromised, adjusted or modified (including by the extension of time for payment or the granting of any discounts, allowances or credits); provided , however , that only such portion of such Receivable that is the subject of such compromise, adjustment or modification shall be deemed to be ineligible pursuant to the terms of this clause (xiii) ;
(xiv) which is an account and is not evidenced by an instrument within the meaning of Article 9 of the UCC of all applicable jurisdictions;
(xv) which is an eligible asset as defined in Rule 3a-7 under the Investment Company Act of 1940;
(xvi) which, together with the Contract related thereto, does not contravene in any material respect any Laws applicable thereto (including Laws relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy);
(xvii) the assignments of which under the First Tier Agreement by the Originator to the Seller, the Second Tier Agreement by the Seller to the SPV and hereunder by the SPV to the Agent do not violate, conflict or contravene any applicable Law or any contractual or other restriction, limitation or encumbrance;
(xviii) which (together with the Related Security related thereto) has been the subject of either a valid transfer and assignment from, or the grant of a first priority perfected security interest therein by, the SPV to the Agent, on behalf of the Investors, of all of the SPVs right, title and interest therein (unless repurchased by the SPV at an earlier date pursuant to this Agreement)
(ixx) which is not a Specified Ineligible Receivable, an Advertising Receivable or a Set Aside Receivable; and
(xx) which has been sold or contributed to the Seller pursuant to the First Tier Agreement in a true sale or true contribution transaction and which has been subsequently sold or contributed by the Seller to the SPV in a true sale or true contribution transaction.
Enterprise Funding : As defined in the Preamble.
Enterprise Funding Class : The Class initially consisting of Enterprise Funding and Bank of America (in its capacities as a Class Agent and an Alternate Investor) and their respective successors and assigns.
ERISA : The U.S. Employee Retirement Income Security Act of 1974, as amended and any regulations promulgated and rulings issued thereunder.
ERISA Affiliate : With respect to any Person, any corporation, partnership, trust, sole proprietorship or trade or business which, together with such Person, is treated as a single
10
employer under Section 414(b) or (c) of the Code or, with respect to any liability for contributions under Section 302(c) of ERISA, Section 414(m) or Section 414(o) of the Code.
Eurocurrency Liabilities : As defined in Section 2.4 .
Event of Bankruptcy : With respect to any Person or Performance Guarantor, (i) that such Person or Performance Guarantor (A) shall generally not pay its debts as such debts become due or (B) shall admit in writing its inability to pay its debts generally or (C) shall make a general assignment for the benefit of creditors; (ii) any proceeding shall be instituted by or against such Person or Performance Guarantor seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property; or (iii) such Person or Performance Guarantor shall take any corporate, partnership or other similar appropriate action to authorize any of the actions set forth in the preceding clauses (i) or (ii) .
Exception Funding Period : As defined in Section 5.2 .
Excluded Taxes : As defined in Section 9.3 .
Expected Dilution Ratio : For any Monthly Period, the average of the Dilution Ratios for the twelve months ending on the Month End Date next preceding the first day of such Monthly Period.
Facility Fee : (i) With respect to the Enterprise Funding, the fee payable by the SPV to Bank of America, the terms of which are set forth in the related Fee Letter; (ii) with respect to the Market Street Class, the fee payable by the SPV to PNC Bank, the terms of which are set forth in the related Fee Letter; and (iii) with respect to any other Class, the fee specified in any supplement to this Agreement or any separate fee letter as the facility fee payable by the SPV to the related Class Agent.
Facility Limit : As of any date, the sum of the Class Facility Limits as of such date, which amount shall not exceed $153,000,000.
Federal Funds Rate : As defined in Section 2.4 .
Fee Letter : As the context may require, any or all of: (i) with respect to the Enterprise Funding Class, a confidential letter agreement, among the SPV, the Originator, the Servicer, Enterprise Funding, and the related Class Agent with respect to the fees to be paid by the SPV, the Servicer and the Originators; (ii) with respect to the Market Street Class, a confidential letter agreement, among the SPV, the Originator, the Servicer, Market Street, and the related Class Agent with respect to the fees to be paid by the SPV, the Servicer and the Originators; and (iii) with respect to any other Class, a confidential letter agreement with respect to the fees to be paid by the SPV, the Servicer and the Originators.
11
Final Payout Date : The date, after the Termination Date, on which the Net Investment has been reduced to zero, all accrued Servicing Fees have been paid in full and all other Aggregate Unpaids have been paid in full in cash.
First Tier Agreement : The sale agreement dated as of the date hereof between the Originator and the Seller, as amended, modified, supplemented, restated or replaced from time to time.
Fitch : Fitch Ratings, Inc. or any successor that is a nationally recognized statistical rating organization.
GAAP : Generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board in effect from time to time.
Guaranty : With respect to any Person, any agreement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes liable upon, the obligation of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person or otherwise assures any other creditor of such other Person against loss, including any comfort letter, operating agreement or take-or-pay contract and shall include the contingent liability of such Person in connection with any application for a letter of credit.
Indebtedness : Without duplication, with respect to any Person such Persons (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property other than accounts payable arising in the ordinary course of such Persons business on terms customary in the trade, (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or products of property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances (including bankers acceptances), or other instruments, (v) Capitalized Lease obligations, (vi) obligations for which such Person is obligated pursuant to a Guaranty, (vii) reimbursement obligations with respect to any letters of credit and (viii) any other liabilities which would be treated as indebtedness in accordance with GAAP.
Indemnified Amounts : As defined specified in Section 9.1 .
Indemnified Parties : As defined in Section 9.1 .
Intercreditor Agreement : The Intercreditor Agreement, dated as of October 15, 2007, by and among JPMorgan Chase Bank, N.A., the Noteholders (as defined therein) and the Lenders (as defined therein) and acknowledged by the Performance Guarantor and the Originator.
Interest Component : At any time of determination, the aggregate Yield accrued and to accrue through the end of the current Rate Period for the Portion of Investment accruing Yield calculated by reference to the CP Rate at such time (determined for such purpose using the CP Rate most recently determined by the related Class Agent).
Investment : As defined in Section 2.2(a) .
12
Investment Date : As defined in Section 2.3(a) .
Investment Deficit : As defined in Section 2.3(f) .
Investment Request : Each request substantially in the form of Exhibit D .
Investor : The Conduit Investors and/or the Alternate Investors, as the context may require.
Investor Percentage : At any time with respect to any Investor, the percentage equivalent of a fraction the numerator of which is equal to the portion of the Net Investment owned by such Investor on such day and the denominator of which is equal to the Net Investment on such day.
Law : Any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree, judgment or award of any Official Body.
Liquidity Agreement : For any Class, any agreement entered into by any related Conduit Investor (or any commercial paper issuer that finances such Conduit) providing for the sale by such Conduit Investor (or any commercial paper issuer that finances such Conduit) of interests in its investment in the Asset Interest and the portion of the Class Net Investment funded by such Conduit Investor (or any commercial paper issuer that finances such Conduit) (or portions thereof), or the making of loans or other extensions of credit to such Conduit Investor (or any commercial paper issuer that finances such Conduit) secured by security interests such Conduit Investors (or any commercial paper issuer that finances such Conduit) interest in the Asset Interest and the portion of the Class Net Investment funded by such Conduit Investor, to support all or part of such Conduit Investors (or any commercial paper issuer that finances such Conduit) payment obligations under its Commercial Paper or to provide an alternate means of funding such Conduit Investors investments in accounts receivable or other financial assets, in each case as amended, modified, supplemented, restated or replaced from time to time.
Liquidity Bank : Includes the various financial institutions that are, or may become, parties to a Liquidity Agreement, as a purchaser or lender thereunder.
Loss Horizon Ratio : For any Monthly Period, the ratio, expressed as a percentage, of (a) the aggregate amount of sales by Originator giving rise to Receivables for the most recent 5 months preceding the related Month End Date, divided by (b) the aggregate Unpaid Balance of all Eligible Receivables as of such recent Month End Date.
Loss Reserve Ratio : For any Monthly Period, the product of (i) Stress Factor, (ii) the highest three-month average Default Ratio during the most recent 12 month period, and (iii) the Loss Horizon Ratio for such Monthly Period.
Majority Investors : At any time, those Alternate Investors which hold Commitments aggregating in excess of 2/3 of the Facility Limit as of such date; provided that at any time when there is 2 or fewer Conduit Investors, shall mean 100% of the Alternate Investors.
Market Street : As defined in the Preamble .
13
Market Street Class : The Class consisting initially of Market Street and PNC Bank (in its capacities as a Class Agent and an Alternate Investor) and their respective successors and assigns.
Master Note Purchase Agreement : The Master Note Purchase Agreement, dated as of October 15, 2007, by and among the Performance Guarantor, the Originator and the Purchasers (as defined therein).
Material Adverse Effect : With respect to any Person, any event or condition which is reasonably likely to have a material adverse effect on (i) the collectibility of the Receivables, (ii) the condition (financial or otherwise), businesses or properties of the SPV, the Servicer or the Originator, (iii) the ability of the SPV, the Servicer or the Originator to perform its respective obligations under the Transaction Documents to which it is a party, or (iv) the status, perfection or priority of the security interests of the Agent, any Class Agent or any Investors under the Transaction Documents.
Material Subsidiary : At any time, shall mean Lagasse, Inc and ORS Nasco, Inc.
Maturity Date : November 23, 2013.
Maximum Net Investment : At any time, an amount equal to the Facility Limit divided by 1.02.
Minimum Reserve Ratio : For any Monthly Period, the sum of (a) the Concentration Factor for such Monthly Period and (b) the product of the (i) the Expected Dilution Ratio for such Monthly Period and (ii) the Dilution Horizon Ratio for such Monthly Period.
Month End Date : The last day of each calendar month.
Monthly Period : The period from the Closing Date to and including the first Month End Date after the Closing Date and each subsequent calendar month until the Final Payout Date.
Moodys : Moodys Investors Service, Inc., or any successor that is a nationally recognized statistical rating organization.
Multiemployer Plan : As defined in Section 4001(a)(3) of ERISA.
Net Investment : At any time, the sum of the Class Net Investments on such day.
Net Pool Balance : At any time, (i) the aggregate Unpaid Balances of Eligible Receivables at such time, minus (ii) the sum of (a) the aggregate amount of the portion of the Unpaid Balances of Eligible Receivables in excess of the applicable Concentration Limits, (b) the then-current aggregate amount of Contractual Dilutions related to all Eligible Receivables, (c) the then-current aggregate amount of all sales and other taxes included in the Unpaid Balances of all Eligible Receivables, (d) the then-current amount of reductions to the Unpaid Balance of all Receivable that are Disputed Receivables and (e) the aggregate amount of all offsetting specific reserves established by any of the Originator, the Seller, the Servicer and the SPV in respect of all Eligible Receivables that are Reserve Receivables.
14
Non-Defaulting Alternate Investor : As defined in Section 2.3(f) .
Obligor : With respect to any Receivable, the Person obligated to make payments in respect of such Receivable pursuant to a Contract.
Official Body : Any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of any such government or political subdivision, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
Offshore Rate : As defined in Section 2.4 .
Opinion : That certain opinion of Mayer Brown LLP, special counsel to the SPV, the Seller, the Performance Guarantor and the Originator, dated the Closing Date and delivered with respect to the transactions contemplated by this Agreement and covering certain bankruptcy and insolvency matters i.e. true sale and nonconsolidation.
Originator : As defined in the Preamble .
Other SPV : Any Person other than the SPV that has entered into a receivables purchase agreement, loan and security agreement, note purchase agreement, transfer and administration agreement or any other similar agreement with the Conduit Investors.
Pension Plan : An employee pension benefit plan as defined in Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a Multiemployer Plan) and to which the Originator, the SPV or an ERISA Affiliate of either has, or is reasonably expected to have, any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA or by reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.
Performance Guarantee : The Performance Guarantee Agreement, dated as of the date hereof, by the Performance Guarantor and the SPV, as amended, modified, supplemented, restated or replaced from time to time.
Performance Guarantor : United Stationers, Inc, an Delaware corporation.
Permitted Investment Date : Any Business Day prior to the Termination Date.
Permitted Liens : Any of (i) the liens of the Agent, on behalf of the Investors, created pursuant to the Transaction Documents and (ii) liens created with the consent of the Agent and Majority Investors.
Person : An individual, partnership, limited liability company, corporation, joint stock company, trust (including a business trust), unincorporated association, joint venture, firm, enterprise, Official Body or any other entity.
15
Pledge Agreement : The Pledge Agreement, dated as of May 21, 2003, by and among the Originator, the Performance Guarantor and other Subsidiaries of the Performance Guarantor (as set forth on the signature page thereto) and Bank One, NA.
PNC Bank : As defined in the Preamble .
Portion of Investment : As defined in Section 2.4(a) .
Potential Termination Event : An event which but for the lapse of time or the giving of notice, or both, would constitute a Termination Event.
Principal Collections : For any Monthly Period, (i) all Collections received during such Monthly Period other than finance charges and (ii) all payments received on Eligible Investments for such Monthly Period.
Pro Rata Share : For any Alternate Investor, the Commitment of such Alternate Investor, divided by the sum of the Commitments of all Alternate Investors (or, if the Commitments shall have been terminated, its pro rata share of the Alternate Investor Percentage of the related Class Net Investment).
Program Fee : As defined in the Fee Letter.
Program Support Agreement : Any agreement, including any Liquidity Agreement, entered into by any Program Support Provider providing for the issuance of one or more letters of credit for the account of a Conduit Investor (or any related commercial paper issuer that finances the Conduit Investor), the issuance of one or more surety bonds for which any Conduit Investor (or such related issuer) is obligated to reimburse the applicable Program Support Provider for any drawings thereunder, the sale by any Conduit Investor (or such related issuer) to any Program Support Provider of the Asset Interest (or portions thereof or participations therein) and/or the making of loans and/or other extensions of credit to any Conduit Investor (or such related issuer) in connection with such Conduit Investors commercial paper program, together with any letter of credit, surety bond or other instrument issued thereunder.
Program Support Provider : Any Person, including any Liquidity Bank, now or hereafter extending credit or having a commitment to extend credit to or for the account of, or to make purchases from, any Conduit Investor (or any related commercial paper issuer that finances the Conduit Investor) or issuing a letter of credit, surety bond or other instrument to support any obligations arising under or in connection with such Conduit Investors (or such related issuers) commercial paper program.
Purchase Termination Date : As defined in Section 8.1 of the Second Tier Agreement.
Rate Period : As defined in Section 2.4 .
Rate Type : As defined in Section 2.4 .
Rating Agencies : Collectively, Fitch, Moodys and S&P.
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Receivable : Any indebtedness and other obligations owed by any Obligor to the Originator (without giving effect to any transfer under the First Tier Agreement and Second Tier Agreement) under a Contract or any right of the SPV 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 or lease of goods or the rendering of services, in either case, by the Originator, and includes the obligation to pay any finance charges, fees and other charges with respect thereto.
Recipient : As defined in Section 2.10 .
Records : All Contracts and other documents, purchase orders, invoices, agreements, books, records and any other media, materials or devices for the storage of information (including tapes, disks, punch cards, computer programs and databases and related property) maintained by the SPV, the Originator or the Servicer with respect to the Receivables, any other Affected Assets or the Obligors.
Reinvestment : As defined in Section 2.2(b) .
Reinvestment Period : The period commencing on the Closing Date and ending on the Termination Date.
Related Security : With respect to any Receivable, all of the Originators (without giving effect to any transfer under the First Tier Agreement and the Second Tier Agreement) or the SPVs rights, title and interest in, to and under:
(i) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements and other filings signed by an Obligor relating thereto;
(ii) the Contract and all guarantees, indemnities, warranties, insurance (and proceeds and premium refunds thereof) or other agreements or arrangements of any kind from time to time supporting or securing payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise;
(iii) all Records related to such Receivable; and
(iv) all Collections on and other proceeds of any of the foregoing.
Reportable Event : Any event, transaction or circumstance which is required to be reported with respect to any Pension Plan under Section 4043 of ERISA and the applicable regulations thereunder.
Reporting Date : As defined in Section 2.8 .
Required Downgrade Assignment Period : As defined in Section 3.2(a) .
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Required Notice Days : With respect to any reduction of the Net Investment pursuant to the provisions of Section 2.7(a) or Section 2.13 , (i) two (2) Business Days in the case of a reduction of Net Investment of less than $10,000,000 and (ii) five (5) Business Days in the case of a reduction of Net Investment of at least $20,000,000.
Required Reserves : At any time other than during an Exception Funding Period, the sum of (i) the Net Pool Balance on such date of calculation multiplied by the greater of (a) the sum of the Loss Reserve Ratio on such date of calculation and the Dilution Reserve Ratio on such date of calculation; and (b) the Minimum Reserve Ratio on such date of calculation; (ii) the Yield Reserve on such date of calculation; and (iii) the Servicing Fee Reserve on such date of calculation (such sum, the Standard Reserves ). At any time during an Exception Funding Period, the greater of (i) the Standard Reserves on such date of calculation and (ii) 50% of the Net Pool Balance on such date of calculation.
Reserve Receivable : Any Receivable for which the Originator, the Seller, the Servicer or the SPV has established an offsetting specific reserve for such Receivable or the related Obligor.
Responsible Officer : With respect any Person, the Chairman of the Board, President, Chief Financial Officer, any Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary of such Person.
Restricted Payments : As defined in Section 6.2(k) .
Revolving Credit Agreement : As defined in Section 6.3 .
Sale Termination Date : As defined in Section 8.1 of the First Tier Agreement.
Second Tier Agreement : The purchase agreement dated as of the date hereof between the Seller and SPV, as amended, modified, supplemented, restated or replaced from time to time.
Seller : As defined in the Preamble .
Servicer : As defined in Section 7.1 .
Servicer Default : As defined in Section 7.5 .
Servicer Report : A report, in substantially the form attached hereto as Exhibit F or in such other form as is mutually agreed to by the SPV, the Servicer and the Agent, furnished by the Servicer pursuant to Section 2.8 .
Servicing Fee : The fees payable to the Servicer from Collections, in an amount equal to either (a) at any time when the Servicer is the Seller or any of its Affiliates, the Servicing Fee Rate on (i) the sum of (x) the Unpaid Balance of Receivables as of the last day of the current calendar month, plus (y) the Unpaid Balance of Receivables as of the last day of the immediately preceding calendar month, divided by (ii) 2, or (b) at any time when the Servicer is not the Seller or any of its Affiliates, the amount agreed between such Servicer and the Agent, payable in arrears on each Settlement Date from Collections pursuant to, and subject to the priority of payments set forth in, Section 2.12 . With respect to any Portion of Investment, the Servicing Fee
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allocable thereto shall be equal to the Servicing Fee determined as set forth above, times a fraction, the numerator of which is the amount of such Portion of Investment and the denominator of which is the Net Investment.
Servicing Fee Rate : 1.0% per annum
Servicing Fee Reserve : At any time, an amount equal to the product of (i) the Servicing Fee Rate (ii) a fraction having Days Sales Outstanding as the numerator, and 360 as the denominator and (iii) the aggregate Unpaid Balance of all Receivables on such date of calculation.
Set-Aside Receivable : Any Receivable with respect to which the Originator, the Seller or the Servicer at any time evidences the payment obligation of the related Obligor by a note or other instrument and agrees to any extended payment date.
Settlement Date : (i) Prior to the Termination Date, the 20 th day of each calendar month (or, if such day is not a Business Day, the immediately succeeding Business Day) or such other day as the SPV and the Agent may from time to time mutually agree, and (ii) for any Portion of Investment for any Class on and after the Termination Date, each day selected from time to time by the related Class Agent (it being understood that the Class Agents may select such Settlement Dates to occur as frequently as daily) or, in the absence of any such selection, the date which would be the Settlement Date for such Portion of Investment pursuant to clause (i) of this definition.
S&P : Standard & Poors Ratings Services, a division of The McGraw-Hill Companies, Inc., or any successor that is a nationally recognized statistical rating organization.
Specified Ineligible Receivable : (i) On and after the Closing Date, each Receivable the Obligor of which is listed on Schedule II hereto and (ii) from time to time after the Closing Date, each Receivable, the Obligor of which is identified by the Servicer to the Class Agents in writing (it being understood that for purposes of this clause (ii), the Servicer shall not designate as Specified Ineligible Receivables, the Receivables of more than two Obligors per year). Any designation by the Servicer of a Receivable as a Specified Ineligible Receivable shall be effective beginning with the Monthly Period immediately following the date of such designation. Any Receivable that has been designated as an Specified Ineligible Receivable shall not become an Eligible Receivable without the prior written consent of the Agent.
SPV : United Stationers Receivables, LLC, an Illinois limited liability company.
Stress Factor : 2.75.
Sub-Servicer : As defined in Section 7.1(d) .
Subsidiary : With respect to any Person, any corporation or other Person (i) of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other Persons performing similar functions are at the time directly or indirectly owned by such Person or (ii) that is directly or indirectly controlled by such Person within the meaning of control under Section 15 of the Securities Act of 1933.
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Taxes : As defined in Section 9.3 .
Termination Date : The earliest of (i) the latest occurring Class Termination Date, (ii) the day upon which the Termination Date is declared or automatically occurs pursuant to Section 8.2 , (iii) the Commitment Termination Date, (iv) the Sale Termination Date, (v) the Purchase Termination Date, and (vi) and the Maturity Date.
Termination Event : As defined in Section 8.1 .
Transaction Costs : As defined in Section 9.4(a) .
Transaction Documents : Collectively, this Agreement, the First Tier Agreement, the Second Tier Agreement, the Fee Letter, the Blocked Account Agreements, and all of the other instruments, documents and other agreements executed and delivered by the Servicer, the Originator or the SPV in connection with any of the foregoing.
Trigger Delinquency Ratio : For any Monthly Period, the ratio (expressed as a percentage) computed as of the related Month End Date next preceding the first date of such Monthly Period by dividing (i) the aggregate Unpaid Balance of all Receivables (other than Specified Ineligible Receivables) which are Delinquent Receivables (other than Specified Ineligible Receivables which are Delinquent Receivables) plus Disputed Receivables (other than Specified Ineligible Receivables which are Disputed Receivables), by (ii) the aggregate Unpaid Balance of all Receivables (other than Specified Ineligible Receivables) at such time.
Trigger Default Ratio : For any Monthly Period, the ratio (expressed as a percentage) computed as of the related Month End Date next preceding the first date of such Monthly Period by dividing (i) the sum of (a) the aggregate Unpaid Balance of all Receivables (other than Specified Ineligible Receivables) which are 61-90 days past due as of such Month End Date and (b) the aggregate Unpaid Balance of all Receivables which became Charged-off Receivables during such Monthly Period (other than Specified Ineligible Receivables which are Defaulted Receivables), by (ii) the aggregate amount of sales by Originator giving rise to Receivables for the 3 rd most preceding month.
Trigger Dilution Ratio : For any Monthly Period, the ratio (expressed as a percentage) computed as of the related Month End Date next preceding the first date of such Monthly Period by dividing (i) the aggregate reduction in the original balance of all Receivables attributable to Dilutions during such month, by (ii) the aggregate amount of sales by the Originator in the most recent prior month.
UCC : The Uniform Commercial Code as in effect in the applicable jurisdiction or jurisdictions.
Unpaid Balance : Of any Receivable means at any time the unpaid principal amount thereof.
U.S. or United States : The United States of America.
Yield : As defined in Section 2.4 .
Yield Payment Date : The last day of each Rate Period.
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Yield Reserve : At any time, an amount equal to (a) the product of (i) 2.5 multiplied by the Days Sales Outstanding as of such day and (ii) the Default Rate in effect as of such day, divided by (b) 360, as applicable, multiplied by the Net Pool Balance.
All terms defined directly or by incorporation herein shall have the defined meanings when used in any certificate or other document delivered pursuant hereto unless otherwise defined therein. For purposes of this Agreement and all such certificates and other documents, unless the context otherwise requires: (a) accounting terms not otherwise defined herein, and accounting terms partly defined herein to the extent not defined, shall have the respective meanings given to them under, and shall be construed in accordance with, GAAP; (b) 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; (c) references to any amount as on deposit or outstanding on any particular date means such amount at the close of business on such day; (d) the words hereof, herein and hereunder and words of similar import refer to this Agreement (or the certificate or other document in which they are used) as a whole and not to any particular provision of this Agreement (or such certificate or document); (e) references to any Section, Schedule or Exhibit are references to Sections, Schedules and Exhibits in or to this Agreement (or the certificate or other document in which the reference is made) and references to any paragraph, subsection, clause or other subdivision within any Section or definition refer to such paragraph, subsection, clause or other subdivision of such Section or definition; (f) the term including means including without limitation; (g) references to any Law refer to that Law as amended from time to time and include any successor Law; (h) references to any agreement refer to that agreement as from time to time amended or supplemented or as the terms of such agreement are waived or modified in accordance with its terms; (i) references to any Person include that Persons successors and permitted assigns; and (j) headings are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.
(a) Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word from means from and including, the words to and until each means to but excluding, and the word within means from and excluding a specified date and to and including a later specified date.
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Subject to the terms and conditions hereof, including Article V , in consideration for the sale, assignment and transfer of the Affected Assets by the SPV to the Agent (on behalf of the Conduit Investors and/or the Alternate Investors, as applicable) hereunder:
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Notwithstanding any limitation on recourse herein, the SPV shall pay, as and when due in accordance with this Agreement, all fees hereunder and under the Fee Letters, Yield, all amounts payable pursuant to Article IX , if any, and the Servicing Fees. On each Settlement Date, to the extent not paid pursuant to Section 2.12 for any reason, the SPV shall pay to each Class Agent, on behalf of the Conduit Investors or the Alternate Investors, as applicable, an amount equal to the accrued and unpaid Yield for the related Rate Period. Nothing in this Agreement shall limit in any way the obligations of the SPV to pay the amounts set forth in this Section 2.5 .
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By no later than 4:00 p.m. (New York City time) on the 15 th day of each calendar month, or if such day is not a Business Day then on the next succeeding Business Day (and, after the occurrence of a Termination Event, within two (2) Business Days after a request from the Agent or any Class Agent) (each, a Reporting Date ), Servicer shall prepare and forward to the Agent and each Class Agent a Servicer Report, certified by the Originator, the Seller and the Servicer. Prior to the Closing Date and once a calendar year, the Servicer, at its expense, will cause to be prepared a report by an accounting firm or other firm specializing in due diligence matters, which firm shall be satisfactory to the Agent, setting forth the results of such firms application of the agreed upon procedures set forth on Exhibit J .
The Agent may require the Servicer to prepare more frequent reports. Upon receipt of such request for more frequent reporting, the Servicer shall provide to the Agent and each Class
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Agent all reports regarding the Receivables and Collections that are available to the Servicer in accordance with its then current accounts receivable system without the Servicer manually preparing such reports. The Agent acknowledges that such additional reports may not include all of the information provided in the monthly Servicer Reports.
The Agent shall establish in its name on the day of the initial Investment hereunder and shall maintain a segregated account (the Collection Account ), bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Agent, on behalf of the Investors. The Agent shall have exclusive dominion and control over the Collection Account and all monies, instruments and other property from time to time in the Collection Account. On and after the occurrence of a Termination Event or a Potential Termination Event, the Servicer shall remit within two Business Days of receipt to the Collection Account all Collections received. Funds on deposit in the Collection Account (other than investment earnings) shall be invested by the Agent, in the name of the Agent, in Eligible Investments that will mature so that such funds will be available so as to permit amounts in the Collection Account to be paid and applied on the next Settlement Date and otherwise in accordance with the provisions of Section 2.12 ; provided that such funds shall not reduce the Net Investment or accrued Yield hereunder until so applied under Section 2.12 . On each Settlement Date, all interest and earnings (net of losses and investment expenses) on funds on deposit in the Collection Account shall be applied as Collections in accordance with Section 2.12 . On the Final Payout Date, any funds remaining on deposit in the Collection Account shall be paid to the SPV.
If any Investor (for purposes of this Section only, being a Recipient ) shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of the portion of the Asset Interest owned by it (other than pursuant to the Fee Letter, Section 3.3(b) or Article IX and other than as a result of the differences in the timing of the applications of Collections pursuant to Section 2.12 and other than a result of the different methods for calculating Yield) in excess of its ratable share of payments on account of the Asset Interest obtained by the Investors entitled thereto, such Recipient shall forthwith purchase from the Investors entitled to a share of such amount participations in the portions of the Asset Interest owned by such Persons as shall be necessary to cause such Recipient to share the excess payment ratably with each such other Person entitled thereto; provided , however , that if all or any portion of such excess payment is thereafter recovered from such Recipient, such purchase from each such other Person shall be rescinded and each such other Person shall repay to the Recipient the purchase price paid by such Recipient for such participation to the extent of such recovery, together with an amount equal to such other Persons ratable share (according to the proportion of (a) the amount of such other Persons required payment to (b) the total amount so recovered from the Recipient) of any interest or other amount paid or payable by the Recipient in respect of the total amount so recovered.
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Without in any way limiting the provisions of Section 2.10 , each Class Agent and each Investor is hereby authorized (in addition to any other rights it may have) at any time after the occurrence of the Termination Date due to the occurrence of a Termination Event or during the continuance of a Potential Termination Event to set-off, appropriate and apply (without presentment, demand, protest or other notice which are hereby expressly waived) any deposits and any other indebtedness held or owing by such Class Agent or such Investor to, or for the account of, the SPV against the amount of the Aggregate Unpaids owing by the SPV to such Person or to the Agent on behalf of such Person (even if contingent or unmatured).
THE REMAINDER OF ARTICLE II IS SPECIFIED IN SCHEDULE III (SETTLEMENT PROCEDURES), WHICH PROVISIONS ARE INCORPORATED HEREIN BY REFERENCE.
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Notwithstanding anything to the contrary herein contained, (i) any Alternate Investor may assign any portion or all of its Commitment and its investment in the related Class Net Investment to any other Person, (ii) any Liquidity Bank may assign any portion or all of its commitment under its Liquidity Agreement and its investment in the related Class Net Investment to any other Person and (iii) each Conduit Investor may add new Liquidity Banks to its Liquidity Agreement relating to the Transactions contemplated hereby; provided , however, in the case of clauses (i), (ii) and (iii) if such assignment or addition occurs prior to the occurrence of any Termination Event, and the assignee or new Liquidity Bank is not at the time a party to this Agreement, the consent of the SPV to such assignment shall be required (such consent not to be unreasonably withheld or delayed); provided , however , such consent of the SPV shall not be required in the case of an assignment to Bank of America or an Affiliate of Bank of America or to PNC Bank or an Affiliate of PNC Bank (or, for the avoidance of doubt, in the case of a sale of a participation interest that does not affect the rights or obligations of such Alternate Investor hereunder and does not permit such participant to vote on any matters hereunder).
Each of the Originator, the SPV, the Seller and the Servicer represents and warrants to the Agent, the Class Agents and the Investors, as to itself, that, on the Closing Date and on each Investment Date and Reinvestment Date:
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The Servicer represents and warrants on the Closing Date and on each Investment Date and Reinvestment Date to the Agent, the Class Agents and the Investors, which representation and warranty shall survive the execution and delivery of this Agreement, that each of the representations and warranties of the Servicer (whether made by the Servicer in its capacity as the Seller or as the Servicer) contained in any Transaction Document is true, complete and correct on such date (unless such statement specifically applies to an earlier date) and, if made by the Servicer in its capacity as the Seller or other applicable capacity, applies with equal force to the Servicer in its capacity as the Servicer, and the Servicer hereby makes each such representation and warranty to, and for the benefit of, the Agent, the Class Agents and the Investors as if the same were set forth in full herein.
The occurrence of the Closing Date and the effectiveness of the Commitments hereunder shall be subject to the conditions precedent that (i) the SPV or the Originator shall have paid in full (A) all amounts required to be paid by either of them on or prior to the Closing Date pursuant to the Fee Letter and (B) the fees and expenses described in clause (i) of Section 9.4 and invoiced prior to the Closing Date, and (ii) the Agent shall have received, for itself and each of the Investors and the Agents counsel, an original (unless otherwise indicated) of each of the following documents, each in form and substance satisfactory to the Agent.
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Each Investment and Reinvestment hereunder (including the initial Investment) shall be subject to the conditions precedent that (a) the Closing Date shall have occurred, (b) if the Agent shall have requested, in accordance with any provision of this Agreement, any additional information, report, document or filing, it has received such information, report or document or such filing as been made, and (c) on the date of such Investment and Reinvestment the following statements shall be true (and the SPV by accepting the amount of such Investment or Reinvestment shall be deemed to have certified that):
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No Investments or Reinvestments shall be made until all of the above conditions have been satisfied or waived by each Class Agent and, if the conditions to the continued Investment or Reinvestment that were not satisfied include those set forth in any of the clauses (vii), (viii), (ix) or (x) then a new Servicer Report has been received by the Class Agents, which Servicer Report indicates that such conditions have been satisfied. Following the occurrence and continuance of a failure to satisfy one or more of the above conditions, the Collections received shall be applied on the next Settlement Date in accordance with the provisions of Section 2.12 ; provided , however , that solely during the failure to satisfy the conditions set forth in clauses (vii), (viii) and (ix) of this Section 5.2 (and for as long as such ratios have not exceeded the respective levels set forth in the Termination Events therefor), once a Servicer Report has been received by each of the Class Agents indicating that the Net Investment has been reduced to or below $50,000,000, Investments and Reinvestments shall resume (such period of time being an Exception Funding Period ) to the extent that (1) the Net Investment does not exceed $50,000,000 and (2) all other conditions (other than clauses (vii), (viii) and (ix) of this Section 5.2) to such Investment or Reinvestment are satisfied; provided , further , that no Investments or Reinvestments shall be made during an Exception Funding Period unless (x) all representations and warranties are true and correct and (y) the Servicer has delivered a Servicer Report (as of the date reporting period covered by such report) showing that after giving effect to such requested Investment or Reinvestment, the sum of the Net Investment and the Required Reserves do not exceed the Net Pool Balance (as of the date reporting period covered by such report).
Any Exception Funding Period shall terminate upon delivery to each Class Agent by the Servicer of a Servicer Report evidencing that the conditions described in clauses (vii), (viii) and (ix) of this Section 5.2 have been satisfied.
At all times from the date hereof to the Final Payout Date, unless the Class Agents shall otherwise consent in writing:
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At all times from the date hereof to the Final Payout Date, unless the Agent and each Class Agent shall otherwise consent in writing:
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Prior to the initial purchase hereunder the Servicer and SPV shall enter into Blocked Account Agreements with all of the Blocked Account Banks, and deliver original counterparts thereof to the Agent. Upon the occurrence of a Termination Event or a Potential Termination Event, the Agent may at any time thereafter give notice to each Blocked Account Bank that the Agent is exercising its rights under the Blocked Account Agreements to do any or all of the following: (a) to have the exclusive ownership and control of the Blocked Account Accounts transferred to the Agent and to exercise exclusive dominion and control over the funds deposited therein, (b) to have the proceeds that are sent to the respective Blocked Accounts be redirected pursuant to its instructions rather than deposited in the applicable Blocked Account, and (c) to take any or all other actions permitted under the applicable Blocked Account Agreement. Each of the Servicer and SPV hereby agrees that if the Agent, at any time, takes any action set forth in the preceding sentence, the Agent shall have exclusive control of the proceeds (including Collections) of all Receivables and each of the Servicer and SPV hereby further agrees to take any other action that the Agent may reasonably request to transfer such control. Any proceeds of Receivables received by the Seller, as Servicer or otherwise, or the SPV thereafter shall be sent immediately to the Agent. The parties hereto hereby acknowledge that if at any time the Agent takes control of any Blocked Account, the Agent shall not have any rights to the funds therein in excess of the unpaid amounts due to SPV, the Agent and the Investors or any other Person hereunder and the Agent shall distribute or cause to be distributed such funds in accordance with Section 7.2(b) (including the proviso thereto) and Article II (in each case as if such funds were held by the Servicer thereunder); provided , however , that the Agent shall not be under any obligation to remit any such funds to the Seller or any other Person unless and until the Agent has received from the Seller or such Person evidence satisfactory to the Agent that the Seller or such Person is entitled to such funds hereunder and under applicable Law.
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The occurrence of any one or more of the following events shall constitute a Servicer Default :
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The Servicer shall be paid a Servicing Fee in accordance with Schedule III and subject to the priorities therein. If the Servicer is not the SPV or the Seller or an Affiliate of the SPV or the Seller, the Servicer, by giving three (3) Business Days prior written notice to the Class Agents, may revise the percentage used to calculate the Servicing Fee so long as the revised percentage will not result in a Servicing Fee that exceeds 110% of the reasonable and appropriate out-of-pocket costs and expenses of such Servicer incurred in connection with the performance of its obligations hereunder as documented to the reasonable satisfaction of the Class Agents; provided , however , that at any time after the sum of (1) the Net Investment and (2) the Required Reserves exceeds the Net Pool Balance, any compensation to the Servicer in excess of the Servicing Fee initially provided for herein shall be an obligation of the SPV and shall not be payable, in whole or in part, from Collections allocated to the Investors.
Each of the Originator, the Seller and the SPV agrees that it shall, from time to time, at its expense, promptly execute and deliver all instruments and documents and take all actions as may be necessary or as the Agent may reasonably request in order to perfect or protect the Asset Interest or to enable the Agent or the Investors to exercise or enforce any of their respective rights hereunder. Without limiting the foregoing, each of the Originator and the SPV shall, upon the request of the Agent or any of the Investors, in order to accurately reflect this purchase and sale transaction, (a) execute and file such financing or continuation statements or amendments thereto or assignments thereof (as otherwise permitted to be executed and filed pursuant hereto) as may be requested by the Agent or any of the Investors and (b) mark its respective master data
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processing records and other documents with a legend describing the conveyance to the to the Agent, for the benefit of the Investors, of the Asset Interest. Each of the Originator, the Seller and the SPV (i) shall, upon request of the Agent or any of the Investors, obtain such additional search reports as the Agent or any of the Investors shall request and (ii) hereby authorize the Agent to file continuation statements and amendments thereto and assignments thereof without further consent or action by any of the Originator, the Seller or the SPV. Carbon, photographic or other reproduction of this Agreement or any financing statement shall be sufficient as a financing statement. Neither the Originator nor the SPV shall change its respective name, identity, corporate structure, jurisdiction of formation unless it shall have: (i) given the Agent at least thirty (30) days prior notice thereof and (ii) prepared at the SPVs expense and delivered to the Agent all financing statements, instruments and other documents necessary to preserve and protect the Asset Interest or requested by the Agent in connection with such change or relocation, including an opinion of counsel that after giving effect to such change, the Agents interest in the Receivables and the Related Security shall continue unaffected by such change. All filings under the UCC or otherwise shall be made at the expense of the SPV.
The occurrence of any one or more of the following events shall constitute a Termination Event :
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If a Termination Event occurs, the Agent shall have all rights of a secured party under the UCC and, by notice to the SPV and the Servicer, may declare the Termination Date to occur, at which time all Collections shall be applied in accordance with the provisions of Section 2.12 and the Net Investment will accrue interest at the Default Rate.
Upon the occurrence of any Termination Event, the Class Agents may, or at the direction of the Majority Investors shall, by notice to the SPV and the Servicer, declare the Termination Date to have occurred; provided , however , that in the case of any event described in Section 8.1(d) , 8.1(e) , 8.1(g) , 8.1(o) , 8.1(s) or 8.1(t) , the Termination Date shall be deemed to have occurred automatically upon the occurrence of such event. Upon any such declaration or automatic occurrence, the Agent shall have, in addition to all other rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCC of the applicable jurisdiction and other applicable laws, all of which rights shall be cumulative. Upon the occurrence of the Termination Date, no Investments or Reinvestments shall be made by any Investors and all Collections shall be applied as set forth in Section 2.12 .
Without limiting any other rights which the Indemnified Parties may have hereunder or under applicable Law, the SPV hereby agrees to indemnify the Investors, the Agent, each Class Agent, the Collateral Agent, the Program Support Providers and their respective officers, directors, employees, counsel and other agents (collectively, Indemnified Parties ) from and against any and all damages, losses, claims, liabilities, costs and expenses, including reasonable
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attorneys fees (which such attorneys may be employees of the Program Support Providers, the Agent, the Collateral Agent or the Class Agents, as applicable) and disbursements (all of the foregoing being collectively referred to as Indemnified Amounts ) awarded against or incurred by any of them in any action or proceeding between the SPV and any of the Indemnified Parties or between any of the Indemnified Parties and any third party or otherwise arising out of or as a result of this Agreement, the other Transaction Documents, the ownership or maintenance, either directly or indirectly, by the Agent or any Investor of the Asset Interest or any of the other transactions contemplated hereby or thereby, excluding, however, (x) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Indemnified Party, as finally determined by a court of competent jurisdiction, or (y) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables. Without limiting the generality of the foregoing, the SPV shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from:
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and the result of any of the foregoing is to increase the cost to or to reduce the amount of any sum received or receivable by such Indemnified Party with respect to this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Asset Interest, the Receivables, the obligations hereunder, the funding of any purchases hereunder or a Program Support Agreement, by an amount deemed by such Indemnified Party to be material, then, within ten (10) days after demand in writing by such Indemnified Party through the Agent, the SPV shall pay to the Agent, for the benefit of such Indemnified Party, such additional amount or amounts as will compensate such Indemnified Party for such increased cost or reduction.
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All payments and distributions made hereunder by the SPV or the Servicer (each, a payor ) to any Investor or the Agent (each, a recipient ) shall be made free and clear of and without deduction for any present or future income, excise, stamp or franchise taxes and any other taxes, fees, duties, withholdings or other charges of any nature whatsoever imposed by any taxing authority on any recipient (or any assignee of such parties) (such non-excluded items being called Taxes ), but excluding franchise taxes and taxes imposed on or measured by the recipients net income or gross receipts ( Excluded Taxes ). In the event that any withholding or deduction from any payment made by the payor hereunder is required in respect of any Taxes, then such payor shall:
Moreover, if any Taxes are directly asserted against any recipient with respect to any payment received by such recipient hereunder, the recipient may pay such Taxes and the payor will promptly pay such additional amounts (including any penalties, interest or expenses) as shall be necessary in order that the net amount received by the recipient after the payment of such Taxes (including any Taxes on such additional amount) shall equal the amount such recipient would have received had such Taxes not been asserted.
If the payor fails to pay any Taxes when due to the appropriate taxing authority or fails to remit to the recipient the required receipts or other required documentary evidence, the payor shall indemnify the recipient for any incremental Taxes, interest, or penalties that may become payable by any recipient as a result of any such failure.
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Without limiting any other rights which the Agent or the Investors or the other Indemnified Parties may have hereunder or under applicable law, the Servicer hereby agrees to indemnify the Indemnified Parties 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 any Servicer Report as of the specified date of such information to be true and correct as of the date of such Servicer Report, or the failure of any other information provided to any Indemnified Party by, or on behalf of, the Servicer to be true and correct as of the specified date of such information, (b) the failure of any representation, warranty or statement made or deemed made by the Servicer (or any of its officers) under or in connection with this Agreement to have been true and correct as of the date made or deemed made, (c) the failure by the Servicer to comply with any applicable Law with respect to any Receivable or the related Contract, (d) any dispute, claim, offset or defense of the Obligor to the payment of any Receivable resulting from or related to the collection activities in respect of such Receivable, or (e) any failure of the Servicer to perform its duties or obligations in accordance with the provisions hereof.
If an Accounting Based Consolidation Event shall at any time occur, then, within ten (10) days after demand in writing by the Indemnified Party affected thereby, through the related Class Agent, the SPV shall pay to the relevant Class Agent, for the benefit of such Indemnified Party, such amounts as such Indemnified Party reasonably determines will compensate or reimburse the Indemnified Party for any resulting (i) fee, expense or increased cost charged to, incurred or otherwise suffered by such Indemnified Party or (ii) regulatory capital charge, internal capital charge or other imputed cost determined by such Indemnified Party to be allocable to the
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transactions contemplated under this Agreement or any Transaction Document in connection therewith. Amounts under this Section 9.7 may be demanded at any time without regard to the timing of issuance of any financial statement by any Indemnified Party.
Each Investor hereby irrevocably appoints, designates and authorizes the Agent to take such action on its behalf under the provisions of this Agreement and each other Transaction Document and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and any other Transaction Document, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Transaction Document, the Agent shall not have any duties or responsibilities, except those expressly set forth in this Agreement, nor shall the Agent have or be deemed to have any fiduciary relationship with any Investor, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Transaction Document or otherwise exist against the Agent. Without limiting the generality of the foregoing sentence, the use of the term agent in this Agreement with reference to the Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
The Agent may execute any of its duties under this Agreement or any other Transaction Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects with reasonable care.
No Agent-Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Transaction Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any Investor for any recital, statement, representation or warranty made by the SPV, the Originator or the Servicer, or any officer thereof, contained in this Agreement or in any other Transaction Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent under or in connection with, this Agreement or any other Transaction Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Transaction Document, or for any failure of the SPV, the Originator, the Servicer or any other party to any Transaction Document to perform its obligations hereunder or thereunder. No Agent-Related Person shall be under any obligation to any Investor to ascertain or to inquire as
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to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Transaction Document, or to inspect the properties, books or records of the SPV, the Originator or the Servicer or any of their respective Affiliates.
The Agent shall not be deemed to have knowledge or notice of the occurrence of a Potential Termination Event, a Termination Event or a Servicer Default, unless the Agent has received written notice from any Class Agent, any Investor, the Servicer or the SPV referring to this Agreement, describing such Potential Termination Event, Termination Event or Servicer Default and stating that such notice is a Notice of Termination Event or Potential Termination Event or Notice of Servicer Default, as applicable. The Agent will notify the Class Agents and the Investors of its receipt of any such notice. The Agent shall (subject to Section 10.4 ) take such action with respect to such Potential Termination Event, Termination Event or Servicer Default as may be requested by the Majority Investors or the Class Agents, provided, however , that, unless and until the Agent shall have received any such request, the Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Potential Termination Event, Termination Event or Servicer Default as it shall deem advisable or in the best interest of the Investors.
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Each Investor acknowledges that none of the Agent-Related Persons has made any representation or warranty to it, and that no act by the Agent hereinafter taken, including any consent to and acceptance of any assignment or review of the affairs of the SPV, the Servicer, the Originator or any of their respective Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Investor as to any matter, including whether the Agent-Related Persons have disclosed material information in their possession. Each Investor, including any Investor by assignment, represents to the Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the SPV, the Servicer, the Originator or their respective Affiliates, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the SPV hereunder. Each Investor also represents that it shall, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Transaction Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the SPV, the Servicer or the Originator. Except for notices, reports and other documents expressly herein required to be furnished to the Investors by the Agent herein, the Agent shall not have any duty or responsibility to provide any Investor with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the SPV, the Servicer, the Originator or their respective Affiliates which may come into the possession of any of the Agent-Related Persons.
Whether or not the transactions contemplated hereby are consummated, the Alternate Investors shall indemnify upon demand each Agent-Related Person (to the extent not reimbursed by or on behalf of the SPV and without limiting the obligation of the SPV to do so), pro rata , and hold harmless each Agent-Related Person from and against any and all Indemnified Amounts incurred by it; provided , however , that no Alternate Investor shall be liable for the payment to any Agent-Related Person of any portion of such Indemnified Amounts resulting from such Persons gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction; provided , however , that no action taken in accordance with the directions of the Majority Investors shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Alternate Investor shall reimburse the Agent upon demand for its ratable share of any costs or out-of-pocket expenses (including attorneys fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Transaction Document, or any document contemplated by or referred to herein, to the extent that the Agent is not reimbursed for such expenses by or on behalf of the SPV. The undertaking in this Section shall survive payment on the Final Payout Date and the resignation or replacement of the Agent.
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Bank of America (and any successor acting as Agent) and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with any of the SPV, the Originator and the Servicer or any of their Subsidiaries or Affiliates as though Bank of America were not the Agent or an Alternate Investor hereunder and without notice to or consent of the Investors. The Investors acknowledge that, pursuant to such activities, Bank of America or its Affiliates may receive information regarding the SPV, the Originator, the Servicer or their respective Affiliates (including information that may be subject to confidentiality obligations in favor of such Person) and acknowledge that the Agent shall be under no obligation to provide such information to them. With respect to its Commitment, Bank of America (and any successor acting as Agent) in its capacity as an Alternate Investor hereunder shall have the same rights and powers under this Agreement as any other Alternate Investor and may exercise the same as though it were not the Agent or an Alternate Investor, and the term Alternate Investor or Alternate Investors shall, unless the context otherwise indicates, include the Agent in its individual capacity.
The Agent may resign as Agent upon thirty (30) days notice to the Investors. If the Agent resigns under this Agreement, the Majority Investors shall appoint from among the Alternate Investors a successor agent for the Investors. If no successor agent is appointed prior to the effective date of the resignation of the Agent, the Agent may appoint, after consulting with the Investors a successor agent from among the Alternate Investors. Upon the acceptance of its appointment as successor agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Agent and the term Agent shall mean such successor agent and the retiring Agents appointment, powers and duties as Agent shall be terminated. After any retiring Agents resignation hereunder as Agent, the provisions of this Section 10.9 and Sections 10.3 and 10.7 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Agent under this Agreement. If no successor agent has accepted appointment as Agent by the date which is thirty (30) days following a retiring Agents notice of resignation, the retiring Agents resignation shall nevertheless thereupon become effective and the Alternate Investors shall perform all of the duties of the Agent hereunder until such time, if any, as the Majority Investors appoint a successor agent as provided for above.
Unless specifically allocated to an Alternate Investor pursuant to the terms of this Agreement, all amounts received by the Agent on behalf of the Alternate Investors shall be paid by the Agent to the related Class Agent (for distribution by such Class Agent to the related Alternate Investors), pro rata in accordance with their respective Class Pro Rata Shares on the Business Day received by the Agent, unless such amounts are received after 12:00 noon (New York City time) on such Business Day, in which case the Agent shall use its reasonable efforts to pay such amounts to the related Class Agents on such Business Day, but, in any event, shall pay such amounts to the related Class Agents not later than the following Business Day.
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Each Investor hereby irrevocably appoints, designates and authorizes the related Class Agent to take such action on its behalf under the provisions of this Agreement and each other Transaction Document and to exercise such powers and perform such duties as are expressly delegated to the Agent by the terms of this Agreement and any other Transaction Document, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary contained elsewhere in this Agreement or in any other Transaction Document, the Class Agents shall not have any duties or responsibilities, except those expressly set forth in this Agreement, nor shall the Class Agents have or be deemed to have any fiduciary relationship with any Investor, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Transaction Document or otherwise exist against the Class Agents. Without limiting the generality of the foregoing sentence, the use of the term agent in this Agreement with reference to the Class Agents is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable Law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.
Each Class Agent may execute any of its duties under this Agreement or any other Transaction Document by or through agents, employees or attorneys in fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. No Class Agent shall be responsible for the negligence or misconduct of any agent or attorney in fact that it selects with reasonable care.
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No Class Agent shall be deemed to have knowledge or notice of the occurrence of a Potential Termination Event, a Termination Event or a Servicer Default, unless such Class Agent has received written notice from the Agent, any Investor, the Servicer or the SPV referring to this Agreement, describing such Potential Termination Event, Termination Event or Servicer Default and stating that such notice is a Notice of Termination Event or Potential Termination Event or Notice of Servicer Default, as applicable. Each Class Agent will notify the related Investors of its receipt of any such notice. Each Class Agent shall (subject to Section 10.5 ) take such action with respect to such Potential Termination Event, Termination Event or Servicer Default as may be requested by a majority of related Investors, provided, however, that, unless and until such Class Agent shall have received any such request, such Class Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Potential Termination Event, Termination Event or Servicer Default as it shall deem advisable or in the best interest of the related Investors.
Each Investor acknowledges that none of the Agent Related Persons has made any representation or warranty to it, and that no act by the related Class Agent hereinafter taken, including any consent to and acceptance of any assignment or review of the affairs of the SPV, the Servicer, any Originator or any of their respective Affiliates, shall be deemed to constitute any representation or warranty by any Agent-Related Person to any Investor as to any matter, including whether the Agent Related Persons have disclosed material information in their possession. Each Investor, including any Investor by assignment, represents to the related Class Agent that it has, independently and without reliance upon any Agent-Related Person and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, prospects, operations, property, financial and other condition and creditworthiness of the SPV, the Servicer, the Originators or their respective Affiliates, and all applicable bank regulatory laws relating to the transactions contemplated hereby, and made its own decision to enter into this Agreement and to extend credit to the SPV hereunder. Each Investor also represents that it shall, independently and without reliance upon any Agent-Related Person and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the other Transaction Documents, and to make such investigations as it deems necessary to inform itself as to the business, prospects, operations, property, financial and other condition and creditworthiness of the SPV, the Servicer or the Originators. Except for notices, reports and other documents expressly herein required to be furnished to the Investors by the related Class Agent herein, such Class Agent shall not have any duty or responsibility to provide any Investor with any credit or other information concerning the business, prospects, operations, property, financial and other condition or creditworthiness of the SPV, the Servicer,
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the Originators or their respective Affiliates which may come into the possession of any of the Agent Related Persons.
Whether or not the transactions contemplated hereby are consummated, the Alternate Investors shall indemnify upon demand each Agent Related Person (to the extent not reimbursed by or on behalf of the SPV and without limiting the obligation of the SPV to do so), pro rata , and hold harmless each Agent Related Person from and against any and all Indemnified Amounts incurred by it; provided, however, that no Alternate Investor shall be liable for the payment to any Agent Related Person of any portion of such Indemnified Amounts resulting from such Persons gross negligence or willful misconduct, as finally determined by a court of competent jurisdiction; provided, however, that no action taken in accordance with the directions of the Majority Investors shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section. Without limitation of the foregoing, each Alternate Investor shall reimburse the related Class Agent upon demand for its ratable share of any costs or out of pocket expenses (including attorneys fees) incurred by such Class Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, any other Transaction Document, or any document contemplated by or referred to herein, to the extent that such Class Agent is not reimbursed for such expenses by or on behalf of the SPV. The undertaking in this Section shall survive payment on the Final Payout Date and the resignation or replacement of the Class Agents.
Bank of America (and any successor acting as Class Agent for the Enterprise Funding Class) and its Affiliates, PNC Bank (and any successor acting as a Class Agent for the Market Street Class) and its Affiliates and any other Class Agent who becomes a party to this Agreement (and any successor acting as a Class Agent for any such Class) and its Affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with any of the SPV, the Originators and the Servicer or any of their Subsidiaries or Affiliates as though Bank of America or PNC Bank were not Class Agents or an Alternate Investor hereunder and without notice to or consent of the Investors. The Investors acknowledge that, pursuant to such activities, the Class Agents or their respective Affiliates may receive information regarding the SPV, the Originators, the Servicer or their respective Affiliates (including information that may be subject to confidentiality obligations in favor of such Person) and acknowledge that the Class Agents shall be under no obligation to provide such information to them. With respect to its Commitment, the Class Agents, respectively, (and any successor acting as Class Agent) in its capacity as an Alternate Investor hereunder shall have the same rights and powers under this Agreement as any other Alternate Investor and may exercise the same as though it were not the Class Agent or an Alternate Investor, and the term Alternate Investor or Alternate Investors shall, unless the context otherwise indicates, include the Class Agents in each in its individual capacity.
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Each Class Agent may resign as Class Agent upon thirty (30) days notice to the related Investors. If a Class Agent resigns under this Agreement, the majority of related Investors shall appoint from among the related Alternate Investors a successor agent for the related Investors. If no successor agent is appointed prior to the effective date of the resignation of any Class Agent, such Class Agent may appoint, after consulting with the related Investors a successor agent from among the related Alternate Investors. Upon the acceptance of its appointment as successor Class Agent hereunder, such successor agent shall succeed to all the rights, powers and duties of the retiring Class Agent and the term Class Agent shall mean such successor Class Agent and the retiring Class Agents appointment, powers and duties as Class Agent shall be terminated. After any retiring Class Agents resignation hereunder as a Class Agent, the provisions of Section 10.10 and Sections 10.16 and 10.18 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Class Agent under this Agreement. If no successor agent has accepted appointment as Class Agent by the date which is thirty (30) days following a retiring Class Agents notice of resignation, the retiring Class Agents resignation shall nevertheless thereupon become effective and the Alternate Investors shall perform all of the duties of the Class Agent hereunder until such time, if any, as the majority of related Investors appoint a successor agent as provided for above.
No Agent Related Person shall (a) be liable for any action taken or omitted to be taken by any of them under or in connection with this Agreement or any other Transaction Document or the transactions contemplated hereby (except for its own gross negligence or willful misconduct), or (ii) be responsible in any manner to any Investor for any recital, statement, representation or warranty made by the SPV, any Originator or the Servicer, or any officer thereof, contained in this Agreement or in any other Transaction Document, or in any certificate, report, statement or other document referred to or provided for in, or received by the Agent or any Class Agent under or in connection with, this Agreement or any other Transaction Document, or the validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Transaction Document, or for any failure of the SPV, any Originator, the Servicer or any other party to any Transaction Document to perform its obligations hereunder or thereunder. No Agent Related Person shall be under any obligation to any Investor to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Agreement or any other Transaction Document, or to inspect the properties, books or records of the SPV, the Originators or the Servicer or any of their respective Affiliates.
This Agreement shall terminate on the Final Payout Date; provided , however , that (a) the rights and remedies of the Agent, the Investors and the Class Agents with respect to any representation and warranty made or deemed to be made by the SPV on or prior to the Final
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Payout Date pursuant to this Agreement, (b) the indemnification and payment provisions of Article IX , (c) the provisions of Section 10.7 and Section 10.16 and (d) the agreements set forth in Sections 11.11 and 11.12 , shall be continuing and shall survive any termination of this Agreement.
Except as provided below, all communications and notices provided for hereunder shall be in writing (including facsimile or electronic transmission or similar writing) and shall be given to the other party at its address or facsimile number set forth in Schedule 11.3 or at such other address or facsimile number as such party may hereafter specify for the purposes of notice to such party. Each such notice or other communication shall be effective (a) if given by
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facsimile, when such facsimile is transmitted to the facsimile number specified in this Section 11.3 and confirmation is received, (b) if given by mail, three (3) Business Days following such posting, if postage prepaid, and if sent via U.S. certified or registered mail, (c) if given by overnight courier, one (1) Business Day after deposit thereof with a national overnight courier service, or (d) if given by any other means, when received at the address specified in this Section 11.3 , provided that an Investment Request shall only be effective upon receipt by the applicable Class Agent. The SPV agrees to deliver promptly to the Investors or the Class Agents, as applicable a written confirmation of each telephonic notice signed by an authorized officer of SPV. However, the absence of such confirmation shall not affect the validity of such notice. If the written confirmation differs in any material respect from the action taken by the Investors or the Class Agents, as applicable, the records of the Investors or the Class Agents, as applicable shall govern.
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This Agreement contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire Agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings.
If any one or more of the provisions of this Agreement shall for any reason whatsoever be held invalid, then such provisions shall be deemed severable from the remaining provisions of this Agreement and shall in no way affect the validity or enforceability of such other provisions.
This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Delivery by facsimile of an executed signature page of this Agreement shall be effective as delivery of an executed counterpart hereof.
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Each of the SPV, the Servicer, the Seller and the Originator hereby consents to the disclosure of any non-public information with respect to it received by the Agent, any Investor or the Class Agents to any other Investor or potential Investor, the Agent, any nationally recognized statistical rating organization rating any Conduit Investors Commercial Paper, any dealer or placement agent of or depositary for such Conduit Investors Commercial Paper, any Class Agent, any Collateral Agent, any Program Support Provider or any of such Persons counsel or accountants in relation to this Agreement or any other Transaction Document if such Persons are informed of the confidential nature of such information.
Each of the SPV, the Servicer, the Seller and the Originator hereby agrees that it will not disclose the contents of this Agreement or any other Transaction Document or any other proprietary or confidential information of or with respect to any Investor, the Agent, any Class Agent, any Collateral Agent or any Program Support Provider to any other Person except (a) its auditors and attorneys, employees or financial advisors (other than any commercial bank) and any nationally recognized statistical rating organization, provided such auditors, attorneys,
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employees, financial advisors or rating agencies are informed of the highly confidential nature of such information or (b) as otherwise required by applicable law (including securities laws and SEC filings) or order of a court of competent jurisdiction.
Each of the SPV, the Servicer, the Seller and the Originator hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all outstanding Commercial Paper or other rated indebtedness of any Conduit Investor (or its related commercial paper issuer), it will not institute against, or join any other Person in instituting against, any Conduit Investor any proceeding of a type referred to in the definition of Event of Bankruptcy.
Notwithstanding anything to the contrary contained in this Agreement, the obligations of each Conduit Investor under this Agreement and all other Transaction Documents are solely the corporate obligations of such Conduit Investor and shall be payable solely to the extent of funds received from the SPV in accordance herewith or from any party to any Transaction Document in accordance with the terms thereof in excess of funds necessary to pay matured and maturing Commercial Paper.
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In Witness Whereof, the parties hereto have executed and delivered this Agreement as of the date first written above.
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Commitment $102,000,000
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BANK OF AMERICA, NATIONAL
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SCHEDULE I
Section 2.4 of this Agreement shall be read in its entirety as follows:
Section 2.4 Determination of Yield and Rate Periods . (a) From time to time, for purposes of determining the Rate Periods applicable to the different portions of the related Class Net Investment and of calculating Yield with respect thereto, each Class Agent shall allocate its related Class Net Investment to one or more tranches (each a Portion of Investment ). At any time, each Portion of Investment shall have only one Rate Period and one Rate Type. For the avoidance of doubt, at any time when the related Class Net Investment is not divided into more than one portion, Portion of Investment means 100% of the related Class Net Investment.
(b) [Reserved].
(c) As used in this Section 2.4 , 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):
Alternate Rate : For any Rate Period for any Portion of Investment, an interest rate per annum equal to 1.75% per annum above the Offshore Rate for such Rate Period; provided , however , that in the case of:
(i) any Rate Period which commences on a date other than a Settlement Date or which commences prior to the Agent receiving at least three (3) Business Days notice thereof, or
(ii) any Rate Period relating to a Portion of Investment which is less than $2,000,000,
the Alternate Rate for each day in such Rate Period shall be an interest rate per annum equal to the Base Rate in effect on such day. The Alternate Rate for any date on or after the declaration or automatic occurrence of Termination Date pursuant to Section 8.2 shall be an interest rate equal to the Default Rate in effect on such day.
Base Rate : For any day a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate for such day, plus .50%, (b) the rate of interest in effect for such day as publicly announced from time to time by the Agent as its prime rate and (c) the Offshore Rate for such day, plus 1.75%. The prime rate is a rate set by the Agent based upon various factors including the Agents 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. Any change in the prime rate announced by the Agent shall take effect at the opening of business on the day specified in the public announcement of such change.
CP Rate : For any Conduit Investor and any Rate Period for any Portion of Investment, the per annum rate equivalent to the weighted average cost (as determined by the related Class Agent and which shall include commissions of placement agents and dealers, incremental carrying costs incurred with respect to Commercial Paper related to the Conduit Investor that is a member
I - 1
of such Class maturing on dates other than those on which corresponding funds are received by such Conduit Investor (or its related commercial paper issuer if the Conduit Investor does not itself issue commercial paper), other borrowings by such Conduit Investor (other than under any Program Support Agreement) and any other costs associated with the issuance of Commercial Paper related to the Conduit Investor that is a member of such Class) of or related to the issuance of Commercial Paper related to the Conduit Investor that is a member of such Class that is allocated, in whole or in part, by such Conduit Investor or the related Class Agent to fund or maintain such Portion of Investment (and which may be also allocated in part to the funding of other assets of such Conduit Investor); provided , however , that if any component of such rate is a discount rate, in calculating the CP Rate for such Conduit Investor for such Portion of Investment for such Rate Period, such Conduit Investor (or such related commercial paper issuer) shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum .
Federal Funds Rate : For any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate charged to the Agent on such day on such transactions as determined by it.
Offshore Rate : For any Rate Period for any Portion of Investment, a rate per annum determined by the Agent pursuant to the following formula:
Offshore Rate = |
Offshore Base Rate |
|
|
1.00 - Eurodollar Reserve Percentage |
Where,
Offshore Base Rate : For such Rate Period:
(i) the rate per annum (carried out to the fifth decimal place) equal to the rate determined by the Agent to be the offered rate that appears on the page of the Reuters Screen that displays an average British Bankers Association Interest Settlement Rate (such page currently being page number LIBOR01) for deposits in Dollars (for delivery on the first day of such Rate Period) with a term equivalent to such Rate Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Rate Period, or
(ii) in the event the rate referenced in the preceding subsection (a) does not appear on such page or service or such page or service shall cease to be available, the rate per annum (carried to the fifth decimal place) equal to the rate determined by the Agent to be the offered rate on such other page or other service that displays an average British Bankers Association Interest Settlement Rate for deposits in Dollars (for delivery on the
I - 2
first day of such Rate Period) with a term equivalent to such Rate Period, determined as of approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Rate Period, or
(iii) in the event the rates referenced in the preceding subsections (a) and (b) are not available, the rate per annum determined by the Agent as the rate of interest at which Dollar deposits (for delivery on the first day of such Rate Period) in same day funds in the approximate amount of the applicable Portion of Investment to be funded by reference to the Offshore Rate and with a term equivalent to such Rate Period would be offered by its London Branch to major banks in the offshore dollar market at their request at approximately 11:00 a.m. (London time) two Business Days prior to the first day of such Rate Period; and
Eurodollar Reserve Percentage : For any day during any Rate Period, the reserve percentage (expressed as a decimal, rounded upward to the next 1/100th of 1%) in effect on such day, whether or not applicable to any Investor, under regulations issued from time to time by the Board of Governors of the Federal Reserve System 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 ). The Offshore Rate shall be adjusted automatically as of the effective date of any change in the Eurodollar Reserve Percentage.
Rate Period : Unless otherwise mutually agreed by a Class Agent for any Portion of Investment funded by the related Class and the SPV, (a) with respect to any Portion of Investment funded by the issuance of Commercial Paper, (i) initially the period commencing on (and including) the date of the initial purchase or funding of such Portion of Investment 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 Rate Period for such Portion of Investment and ending on (and including) the last day of the current calendar month; and (b) with respect to any Portion of Investment not funded by the issuance of Commercial Paper, (i) initially the period commencing on (and including) the date of the initial purchase or funding of such Portion of Investment and ending on (but excluding) the next following Settlement Date, and (ii) thereafter, each period commencing on (and including) a Settlement Date and ending on (but excluding) the next following Settlement Date; provided , that
(A) any Rate Period with respect to any Portion of Investment (other than any Portion of Investment accruing Yield at the CP Rate) which would otherwise end on a day which is not a Business Day shall be extended to the next succeeding Business Day; provided , however , if Yield in respect of such Rate Period is computed by reference to the Offshore Rate, and such Rate 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 Rate Period shall end on the next preceding Business Day;
(B) in the case of any Rate Period for any Portion of Investment which commences before the Termination Date and would otherwise end on a date
I - 3
occurring after the Termination Date, such Rate Period shall end on such Termination Date and the duration of each Rate Period which commences on or after the Termination Date shall be of such duration as shall be selected by the related Class Agent; and
(C) any Rate Period in respect of which Yield is computed by reference to the CP Rate may be terminated at the election of the Class Agent for the Class funding the related Portion of Investment at any time, in which case such Portion of Investment shall be allocated by the related Class Agent to a new Rate Period commencing on (and including) the date of such termination and ending on (but excluding) the next following Settlement Date, and shall accrue Yield at the Alternate Rate.
Rate Type : The Offshore Rate, the Base Rate or the CP Rate.
Yield : For any Portion of Investment:
(i) during any Rate Period to the extent a Conduit Investor funds such Portion of Investment through the issuance of Commercial Paper (directly or indirectly through a related commercial paper issuer),
|
CPR x I x D |
|
|
360 |
|
(ii) funded by an Alternate Investor and for any Portion of Investment to the extent a Conduit Investor will not be funding such Portion of Investment through the issuance of Commercial Paper (directly or indirectly through a related commercial paper issuer),
|
AR x I x D |
|
|
360 |
|
where:
|
AR |
|
= |
|
the Alternate Rate for such Portion of Investment for such Rate Period, |
|
|
|
|
|
|
|
CPR |
|
= |
|
the CP Rate for such Portion of Investment for such Rate Period (as determined by the related Class Agent on or prior to the fifth Business Day of the calendar month next following such Rate Period), |
|
|
|
|
|
|
|
D |
|
= |
|
the actual number of days during such Rate Period, and |
|
|
|
|
|
|
|
I |
|
= |
|
the weighted average of such Portion of Investment during such Rate Period |
I - 4
; provided that no provision of the Agreement shall require the payment or permit the collection of Yield in excess of the maximum permitted by applicable law; and provided , further , that at all times after the declaration or automatic occurrence of the Termination Date pursuant to Section 8.2 , Yield for all Portion of Investment shall be determined as provided in clause (ii) of this definition.
(d) Offshore Rate Protection; Illegality . (i) If the Agent is unable to obtain on a timely basis the information necessary to determine the Offshore Rate for any proposed Rate Period, then
(A) the Agent shall forthwith notify the Investors and the SPV that the Offshore Rate cannot be determined for such Rate Period, and
(B) while such circumstances exist, the Investors, the Class Agents and the Agent shall not allocate any Portion of Investment or reallocate any Portion of Investment to a Rate Period with respect to which Yield is calculated by reference to the Offshore Rate.
(ii) If, with respect to any outstanding Rate Period, any Class Agent notifies the Agent that any of the Investors that comprise any of its Class is unable to obtain matching deposits in the London interbank market to fund its purchase or maintenance of such Portion of Investment or that the Offshore Rate applicable to such Portion of Investment will not adequately reflect the cost to the Person of funding or maintaining such Portion of Investment for such Rate Period, then (A) the Agent shall forthwith so notify the SPV and the Investors and (B) upon such notice and thereafter while such circumstances exist the Agent, the Class Agents and the Investors shall not allocate any Portion of Investment or reallocate any Portion of Investment, to a Rate Period with respect to which Yield is calculated by reference to the Offshore Rate and all Portions of Investment that have been allocated to a Rate Period to which the Offshore Rate applies shall be automatically allocated to a new Rate Period to which the Base Rate applies and the Rate Period to which such Offshore Rate applied terminated on such day.
(iii) Notwithstanding any other provision of this Agreement, if any Conduit Investor or any Alternate Investor, as applicable, shall notify the Agent that such Person has determined (or has been notified by any Program Support Provider) that the introduction of or any change in or in the interpretation of any Law makes it unlawful (either for such Conduit Investor, such Alternate Investor, or such Program Support Provider, as applicable), or any central bank or other Official Body asserts that it is unlawful, for such Conduit Investor, such Alternate Investor or such Program Support Provider, as applicable, to fund the purchases or maintenance of any Portion of Investment accruing Yield calculated by reference to the Offshore Rate, then (A) as of the effective date of such notice from such Person to the Agent, the obligation or ability of such Conduit Investor or such Alternate Investor, as applicable, to fund the making or maintenance of any Portion of Investment accruing Yield calculated by reference to the Offshore Rate shall be suspended until such Person notifies the Agent that the circumstances causing such suspension no longer exist and (B) each Portion of Investment made or maintained by such Person accruing Yield calculated by reference to
I - 5
the Offshore Rate shall be deemed to accrue Yield at the Base Rate from the effective date of such notice until the end of such Rate Period.
I - 6
SCHEDULE II
Specified Ineligible Receivables
II - 1
SCHEDULE III
(Settlement Procedures)
Sections 2.12 through 2.15 of the Agreement shall be read in their entirety as follows:
Section 2.12 Settlement Procedures . (a) Daily Procedure . The Servicer, on behalf of the SPV and for the benefit of the Agent, the Class Agents and the Investors, shall on a daily basis manage the Collections of Receivables received or deemed received by the SPV or the Servicer on such day in accordance with the provisions of this Agreement and in such a manner that the SPV shall have sufficient funds available (to the extent of the Collections of Receivables received or deemed received) at all times, including on each Settlement Date, to pay its obligations due on such day, including, without limitation, managing Investments, Reinvestments and Deemed Collections and setting aside an amount equal to the excess, if any, of (i) the greatest of: (A) if the SPV shall have elected to reduce the Net Investment under Section 2.13 , the amount of the proposed reduction, (B) the amount, if any, by which the sum of the Net Investment and Required Reserves shall exceed the Net Pool Balance (minus any portion of the Required Reserves attributable to such excess), together with the amount, if any, by which the Net Investment shall exceed the Maximum Net Investment, and (C) if such day is on or after the Termination Date, the Net Investment; over (ii) the aggregate of the amounts theretofore set aside for such purposes. To the extent and for so long as such Collections may not be reinvested pursuant to Section 2.2(b) , the Servicer shall hold such Collections in trust for the benefit of the Agent.
(b) Settlement Procedures.
(i) The Servicer shall deposit into each Class Agents account, on each Business Day selected by the SPV for a reduction of the Net Investment under Section 2.13 the related Class Pro Rata Share of the amount of Collections held for the Agent pursuant to Section 2.12(a)(ii) .
(ii) On any date on or prior to the Termination Date, if the sum of the Net Investment and Required Reserves exceeds the Net Pool Balance the Servicer shall immediately pay to each Class Agents account from amounts set aside pursuant to clause (ii) or clause (iii) of Section 2.12(a) an amount equal to the related Class Pro Rata Share of such excess ( minus any portion of the Class Pro Rata Share of Required Reserves attributable to such excess).
(iii) On each Settlement Date, the Servicer shall deposit to each Class Agents account:
(A) out of the amounts set aside pursuant to clause (i) of Section 2.12(a) and not theretofore deposited in accordance with Section 2.12(b) , an amount equal to the accrued and unpaid Yield, Servicing Fee, Program Fee and Facility Fee for the related Rate Period together with any other Aggregate Unpaids (other than Net Investment) then due to the related Class; and
III - 1
(B) out of the amount, if any, set aside pursuant to clause (ii) and (to the extent not theretofore reinvested) clause (iii) of Section 2.12(a) and not theretofore deposited to such Class Agents account pursuant to this Section 2.12(b) , an amount equal to related Class Pro Rata Share of the lesser of such amount and the Net Investment;
provided , however , that if the Agent gives its consent (which consent may be revoked at any time), the Servicer may retain amounts which would otherwise be deposited in respect of accrued and unpaid Servicing Fee, in which case no distribution shall be made in respect of such Servicing Fee under clause (c) below. Any amounts set aside pursuant to Section 2.12(a) in excess of the amount required to be deposited in the Class Agents accounts pursuant to this subsection (b) shall continue to be set aside and held in trust by the Servicer for application on the next succeeding Settlement Date(s).
(c) Order of Application . Upon receipt by a Class Agent on any Yield Payment Date of funds deposited pursuant to subsection (b)(iii)(A) , such Class Agent shall distribute them to the Investors in its Class, pro rata based on the amount of accrued and unpaid Yield owing to each of them, in payment of the accrued and unpaid Yield on the related Portions of Investment for the related Rate Period. Upon receipt by a Class Agent of funds deposited pursuant to any other provision of subsection (b) , such Class Agent shall distribute them to the Persons, for the purposes and in the order of priority set forth below:
(i) to the related Investors, pro rata based on the amount of accrued and unpaid Yield, Program Fee and Facility Fee owing to each of them, in payment of the accrued and unpaid Yield, Program Fee and Facility Fee on the Portions of Investment for the related Rate Period for such Class;
(ii) if the Seller or any Affiliate of the Originator is not then the Servicer, to the Servicer in payment of the related Class Pro Rata Share of the accrued and unpaid Servicing Fee payable on such Settlement Date;
(iii) to the related Investors, pro rata based on their respective interests in the Asset Interest (based upon the respective portions of the Class Net Investment owned by each of them) except as otherwise provided in Section 3.3(b) , in reduction of the related Class Net Investment;
(iv) to the Agent, itself, the related Investors or such other Person as may be entitled to such payment, in payment of the related Class Pro Rata Share of any other Aggregate Unpaids owed by the SPV hereunder to such Person (other than Net Investment, Yield and Servicing Fee); and
(v) if the Seller or any Affiliate of the Originator is the Servicer, to the Servicer in payment of the related Class Pro Rata Share of the accrued Servicing Fee payable on such Settlement Date, to the extent not paid pursuant to clause (ii) above or retained pursuant to subsection (b) above.
Section 2.13 Optional Reduction of Net Investment . The SPV may at any time elect to cause the reduction of the Net Investment as follows:
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(a) the SPV shall instruct the Servicer to (and the Servicer shall) set aside Collections and hold them in trust for the Agent under clause (ii) of Section 2.12(a) until the amount so set aside shall equal the desired amount of reduction; and
(b) on each Settlement Date occurring at least the Required Notice Days after the date of the SPVs notice, the Servicer shall pay to each Class Agent, in reduction of the Net Investment, the related Class Pro Rata Share of the amount of such Collections so held or, if less, the related Class Net Investment (it being understood that neither the Net Investment nor any Class Net Investment shall be deemed reduced by any amount set aside or held pursuant to this Section 2.13 unless and until, and then only to the extent that, such amount is finally paid to the related Class Agent as aforesaid); provided that, the amount of any such reduction shall be not less than $1,000,000.
Section 2.14 Application of Collections Distributable to SPV . Unless otherwise instructed by the SPV, the Servicer shall allocate and apply, on behalf of the SPV, Collections distributable to the SPV hereunder first , to the payment to the Seller of the purchase price of new Receivables in accordance with the Second Tier Agreement and/or to Reinvestments as described in Section 2.2(b) , second , to the payment or provision for payment of the SPVs operating expenses, as instructed by the SPV, third , to the repayment to the Seller of Advances (as defined in the Second Tier Agreement) pursuant to Section 3.2(b)(i) of the Second Tier Agreement, subject to Section 6.2(k) , fourth , to the payment of interest on Advances to the Seller pursuant to Section 3.2(b)(ii) of the Second Tier Agreement, subject to Section 6.2(k) and fifth , as directed from time to time by the SPV.
Section 2.15 Collections Held in Trust . So long as the SPV or the Servicer shall hold any Collections or Deemed Collections then or thereafter required to be paid by the SPV to the Servicer or by the SPV or the Servicer to the Agent, it shall hold such Collections in trust, and, if requested by the Agent after the occurrence and during the continuance of a Termination Event or Potential Termination Event, shall deposit such Collections within one Business Day of receipt thereof into the Collection Account. The Net Investment shall not be deemed reduced by any amount held in trust or in the Collection Account pursuant to Section 2.12 unless and until, and then only to the extent that, such amount is finally paid to the Agent in accordance with Section 2.12(b) .
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SCHEDULE 4.1(g)
List of Actions and Suits
None.
1
SCHEDULE 4.1(i)
Location of Certain Offices and Records
United Stationers Receivables, LLC
Jurisdiction of formation: Illinois
Principal Place of Business: One Parkway North Blvd., Deerfield, Illinois
President: Victoria J. Reich
Location of Records: One Parkway North Blvd., Deerfield, Illinois
United Stationers Supply Co.
Jurisdiction of formation: Illinois
Principal Place of Business: One Parkway North Blvd., Deerfield, Illinois
Chief Executive Officer: Richard W. Gochnauer
Location of Records: One Parkway North Blvd., Deerfield, Illinois
United Stationers Financial Services LLC
Jurisdiction of formation: Illinois
Principal Place of Business: One Parkway North Blvd., Deerfield, Illinois
President: Victoria J. Reich
Location of Records: One Parkway North Blvd., Deerfield, Illinois
1
SCHEDULE 4.1(j)
List of Subsidiaries, Divisions and Tradenames; FEIN
1) United Stationers Receivables, LLC
Subsidiaries: |
None |
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Divisions: |
None |
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Tradenames: |
None |
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Federal Employer Identification Number: |
26-4146967 |
|
2) United Stationers Supply Co.
3) United Stationers Financial Services LLC
Subsidiaries: |
USS Receivables Company, Ltd. |
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Divisions: |
None |
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Tradenames: |
None |
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Federal Employer Identification Number: |
36-4428313 |
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1
SCHEDULE 4.1(r)
List of Blocked Account Banks and Blocked Accounts
(1) |
The following lockboxes and accounts maintained with PNC Bank, National Association: |
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P.O. Box 3100-0284 Pasadena, CA 91110 |
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P.O. Box 7780-1724 Philadelphia, PA 19182-1724 |
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1708 Solutions Center Chicago, IL 60677-1007 |
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P.O. Box 67602 Dallas, TX 75267-6502 |
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Demand Deposit Account #2149466 |
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(2) |
The following lockbox and account maintained with U.S. Bank National Association: |
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Lockbox Number #952418 |
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Deposit Account Number #199380226746 |
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(3) |
The following account maintained with Fifth Third Bank: |
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Demand Deposit Account #7234544398 |
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(4) |
The following account maintained with The Northern Trust Company: |
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Account Number #3510068 |
1
SCHEDULE 4.1(bb)
Disclosure Representations and Covenants
OriginatorDisclosure Representations and Covenants
Disclosure of the Transactions
1. The transactions referred to in the Opinion (the Transactions ) have been or will be publicly disclosed as follows: (a) the Transactions will be addressed in notes relating to Performance Guarantors securitization activities in its financial statements (on which Originator is consolidated); and (b) UCC financing statements will be filed to perfect the transfer (the Transfer ) of receivables (the Receivables ) by Originator to United Stationers Financial Services LLC ( Seller ) pursuant to the receivables sale agreement referred to in the Opinion (the Receivables Sale Agreement ).
2. The footnotes that describe Performance Guarantors securitization activities (which include the Transactions) in Performance Guarantors consolidated financial statements (which will include Originator, Seller and the SPV) will describe Performance Guarantors securitization activities, will inform readers that securitized assets (such as the Receivables) are isolated in special purpose entities and support the securities issued by those entities.
3. The computer records of Seller, as servicer (in such capacity, the Servicer ) relating to the Receivables will be marked to reflect the Transfer.
4. Originator will not conceal any transfers contemplated by the agreements referred to on Schedule II to the Opinion (the Agreements ) from any interested party. Although obligors on the Receivables will not be affirmatively informed of the transfers of their obligations, Originator will not conceal the transfers from any obligor that inquires. Also, (other than certain rebates and allowances in respect of Receivables) the obligors are not expected to be material creditors of either Originator, Seller or the SPV.
Terms of the Transactions
5. In connection with the Transactions: (a) certain investors in the Receivables rely on the Receivables and the other assets of the Issuer in making their investment decision; (b) certain investors in the Receivables will rely on the Transfer being characterized as a true sale, so as to isolate the Receivables from Originators creditors; and (c) the indirect sale of the Receivables to the SPV and its creditors and their financing through the Transactions is beneficial to Originator because it, among other things, increases the liquidity of their assets and, to a lesser extent, diversifies the funding sources for Originators business.
6. The terms of the Receivables Sale Agreement and other transactions between Originator and Seller are (a) consistent with those of arms-length relationships and (b) fair and equitable to each of the parties.
1
7. Originator intends the Transfer to be a true sale by Originator to Seller that is absolute and irrevocable and that provides Seller with the full benefits of ownership of the Receivables. Originator will convey the Receivables as a result of the credit to Seller without recourse for uncollectibility of the Receivables as a result of the creditworthiness of the related Obligor and without any warranty of collectibility or any unconventional warranty.
8. To finance its purchase, Originator will transfer the Receivables to the Seller, which in turn will transfer the Receivables to the SPV.
9. The consideration received by Originator in the Transfer represents the fair market value of the Receivables.
10. Immediately prior to the Transfer, Originator owned the Receivables free and clear of any lien or other adverse claim.
11. Originators representations, warranties, covenants and indemnities in the Receivables Sale Agreement with respect to the Receivables: (a) cover matters ascertainable by Originator in the ordinary course of business and (b) are intended to ensure that Seller will receive the type of assets that it has bargained to purchase. Originator believes that such representations, warranties, covenants and indemnities do not cause Originator to retain or assume the risk of nonpayment or other material financial risks of the Receivables based in part on the belief that the matters covered are within Originators control, are unlikely to occur, or both. The representations, warranties and covenants are not intended to cover material liabilities that are reasonably likely to occur.
12. There are no agreements or understandings between the SPV, on one hand, and Originator or any of Originators other affiliates that are relevant to the Transactions other than the Agreements and any other agreements and understandings specifically referenced in the Agreements. In particular, there are no other agreements or understandings pursuant to which Originator or another of its other affiliates (a) is responsible for maintaining Sellers or the SPVs solvency or (b) provides recourse, guarantees or otherwise retains or assumes financial risks with respect to the Receivables.
Relationship Between Originator and the SPV
13. The SPV is a wholly-owned subsidiary of Seller which is a wholly owned subsidiary of Originator, and the SPV was formed for the special purpose of consummating the Transactions.
14. Originator intends to act in a manner that is consistent with the SPVs separate and distinct existence and will correct any known misunderstanding regarding its status as a separate entity.
15. Originator prepares and maintains separate corporate and financial records from the SPV that accurately reflect its assets, liabilities and financial affairs. Originators
2
believes its assets and liabilities can be readily and inexpensively segregated, ascertained and identified separate from those of the SPV. All transactions between Originator and the SPV, including monetary transactions, are and will be properly reflected in Originators books and records and Originator believes that each transaction will be on terms and conditions consistent with those of an arms length transaction.
16. Originator believes that the consolidation of Originators and the SPVs business operations would not result in any significant cost savings or in a significantly greater efficiency or profitability of such combined business operation.
17. Originator and the SPV do not intend to commingle their assets and liabilities, except that Seller, as Servicer of the Receivables: (a) may temporarily commingle collections pending identification and transfer to a collection account for the Transactions; and (b) will retain books and records pertaining to the Receivables. Originator does not maintain joint bank accounts or other the SPV accounts to which the SPV has independent access.
18. An integration of business functions between Originator and the SPV, if any, exists only to the extent summarized in this paragraph. The SPV is operated for the exclusive purpose of purchasing Receivables from Seller. The SPV will have no employees, and the SPVs day-to-day business operations with respect to the Receivables will be conducted through Seller, in its capacity as Servicer, pursuant to the Transfer and Administration Agreement and that under that agreement, Seller has limited rights, in its capacity as Servicer, to enter into modifications of Receivables on behalf of the SPV, and Seller is generally not permitted to resign as Servicer. Originator and the SPV may share some expenses, but these are not expected to be material and, in any event, will be allocated between the entities on a basis reasonably related to the cost of the services involved and each entitys actual use of such services. Obligors on the Receivables transferred to the SPV will not be notified that their Receivables have been transferred to the SPV.
19. The SPV is held out to the public as a separate entity apart from Originator, including as described under Part I: Description of the Transactions in the Opinion.
20. Originator maintains its own stationery and other business forms separate from the SPVs and conducts business in its own name (including, without limitation, its contracts and written communications).
21. Originator adheres in all material respects to corporate formalities in all transfers of assets and other transactions between Originator and the SPV. In general, Originator observes appropriate corporate formalities under applicable law.
22. Originator does not currently, and does not intend to, guaranty, and is not otherwise obligated to repay, the SPVs liabilities.
23. At closing, Originator will: (a) be solvent; (b) be adequately capitalized to conduct its business and affairs as a going concern, considering the size and nature of its business
3
and intended purposes and taking into account pending and threatened claims; and (c) intends to, and believes that it will be able to, pay its debts as they mature. As a result, Originator is intended to (and is reasonably believed to) be able to survive as a stand-alone entity.
24. Originator does not pay the SPVs expenses, except as specifically provided in the Agreements. Any allocations of direct, indirect or overhead expenses for items shared between Originator and the SPV are made among such entities to the extent practical on the basis of actual use or value of services rendered and otherwise on a basis reasonably related to actual use or the value of services rendered.
25. Originator has not held itself out, nor does it intend to do so in the future, as responsible for the SPVs debts.
4
SellerDisclosure Representations and Covenants
Disclosure of the Transactions
1. The transactions referred to in the Opinion (the Transactions ) have been or will be publicly disclosed as follows: (a) the Transactions will be addressed in notes relating to Performance Guarantors securitization activities in its financial statements (on which Seller is consolidated); and (b) UCC financing statements will be filed to perfect the transfer (the Transfer ) of receivables by the Originator to Seller pursuant to the receivables sales agreement referred to in the Opinion (the Receivables Sale Agreement ) and the transfer of the Receivables together with a portfolio of additional receivables previously acquired by Seller (the Receivables ) from Seller to United Stationers Receivables, LLC (the SPV ) pursuant to the receivables purchase agreement referred to in the Opinion (the Receivables Purchase Agreement ).
2. The computer records of Seller, as servicer (in such capacity, the Servicer ) relating to the Receivables will be marked to reflect the Transfer.
3. Seller will not conceal any transfers contemplated by the agreements referred to on Schedule II to the Opinion (the Agreements ) from any interested party. Although obligors on the Receivables will not be affirmatively informed of the transfers of their obligations, Seller will not conceal the transfers from any obligor that inquires. Also, (other than certain rebates and allowances in respect of Receivables) the obligors are not expected to be material creditors of either Seller or the SPV.
Terms of the Transactions
4. In connection with the Transactions: (a) certain investors in the Receivables rely on the Receivables and the other assets of the SPV in making their investment decision; (b) certain investors in the Receivables will rely on the Transfer being characterized as true sales, so as to isolate the Receivables from Sellers creditors; and (c) the sale of the Receivables to the SPV and their financing through the Transactions is beneficial to Seller and its creditors because it, among other things, increases the liquidity of their assets.
5. The terms of each of the Receivables Sale Agreement and other transactions between Originator and Seller and the Receivables Purchase Agreement and other transactions between Seller and the SPV are (a) consistent with those of arms-length relationships and (b) fair and equitable to each of the parties.
6. Seller intends the Transfer to be a true sale by Originator to Seller that is absolute and irrevocable and that provides Seller with the full benefits of ownership of the Receivables. Seller will receive the conveyance of the Receivables from Originator without recourse for uncollectibility of the Receivables as a result of the creditworthiness of the related Obligor and without any warranty of collectibility or any unconventional warranty.
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7. Seller intends the Transfer to be a true sale by Seller to the SPV that is absolute and irrevocable and that provides the SPV with the full benefits of ownership of the Receivables. Seller will convey the Receivables to the SPV without recourse for uncollectibility of the Receivables as a result of the creditworthiness of the related Obligor and without any warranty of collectibility or any unconventional warranty.
8. To finance its purchase, Seller will transfer the Receivables to the SPV, which will transfer the Receivables to Bank of America, National Association (for the benefit of certain investors).
9. The consideration received from Originator in the Transfer represents the fair market value of the Receivables.
10. Immediately prior to the Transfer, Seller owned the Receivables free and clear of any lien or other adverse claim.
11. Seller purchases the Receivables in good faith without knowledge of any adverse claim against, interest in, lien on, or defense to payment of, such assets (other than any adverse claim arising solely as a result of any action taken by Seller under the Agreements).
12. Originators representations, warranties, covenants and indemnities in the Receivables Sale Agreement with respect to the Receivables and Sellers representations, warranties, covenants and indemnities in the Receivables Purchase Agreement with respect to the Receivables: (a) cover matters ascertainable by Originator or Seller, as applicable, in the ordinary course of business and (b) are intended to ensure that Seller or the SPV, as applicable, will receive the type of assets that it has bargained to purchase. Seller believes that such representations, warranties, covenants and indemnities do not cause Originator or Seller, as applicable, to retain or assume the risk of nonpayment or other material financial risks of the Receivables based in part on the belief that the matters covered are within Originators or Sellers control, are unlikely to occur, or both. The representations, warranties and covenants are not intended to cover material liabilities that are reasonably likely to occur.
13. There are no agreements or understandings between the SPV or Seller or any of Sellers other affiliates that are relevant to the Transactions other than the Agreements and any other agreements and understandings specifically referenced in the Agreements. In particular, there are no other agreements or understandings pursuant to which Seller or another of its other affiliates (a) is responsible for maintaining Sellers or the SPVs solvency or (b) provides recourse, guarantees or otherwise retains or assumes financial risks with respect to the Receivables.
Relationship Between Seller and the SPV
14. The SPV is a wholly-owned subsidiary of Seller and was formed for the special purpose of consummating the Transactions.
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15. Seller intends to act in a manner that is consistent with the SPVs separate and distinct existence and will correct any known misunderstanding regarding its status as a separate entity.
16. Seller prepares and maintains separate corporate and financial records from the SPV that accurately reflect its assets, liabilities and financial affairs. Seller believes that its assets and liabilities can be readily and inexpensively segregated, ascertained and identified separate from those of the SPV. All transactions between Seller and the SPV, including monetary transactions, are and will be properly reflected in Sellers books and records and Seller believes that each transaction will be on terms and conditions consistent with those of an arms length transaction.
17. Seller believes the consolidation of Sellers and the SPVs business operations would not result in any significant cost savings or in a significantly greater efficiency or profitability of such combined business operation.
18. Seller and the SPV do not intend to commingle their assets and liabilities, except that Seller, as Servicer of the Receivables: (a) may temporarily commingle collections pending identification and transfer to a collection account for the Transactions; and (b) will retain books and records pertaining to the Receivables. Seller does not maintain joint bank accounts or other the SPV accounts to which the SPV has independent access.
19. An integration of business functions between Seller and the SPV, if any, exists only to the extent summarized in this paragraph. The SPV is operated for the exclusive purpose of purchasing Receivables from Seller. The SPV will have no employees, and the SPVs day-to-day business operations with respect to the Receivables will be conducted through Seller, in its capacity as Servicer, pursuant to the Transfer and Administration Agreement and that under that agreement, Seller has limited rights, in its capacity as Servicer, to enter into modifications of Receivables on behalf of the SPV, and Seller is generally not permitted to resign as Servicer. Seller and the SPV may share some expenses, but these are not expected to be material and, in any event, will be allocated between the entities on a basis reasonably related to the cost of the services involved and each entitys actual use of such services. Obligors on the Receivables transferred to the SPV will not be notified that their Receivables have been transferred to the SPV.
20. The SPV is held out to the public as a separate entity apart from Seller, including as described under Part I: Description of the Transactions in the Opinion.
21. Seller maintains its own stationery and other business forms separate from the SPVs and conducts business in its own name (including, without limitation, its contracts and written communications).
22. Seller adheres in all material respects to corporate formalities in all transfers of assets and other transactions between Seller and the SPV. In general, Seller observes appropriate corporate formalities under applicable law.
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23. Seller does not currently, and does not intend to, guaranty, and is not otherwise obligated to repay, the SPVs liabilities.
24. At closing, Seller will: (a) be solvent; (b) be adequately capitalized to conduct its business and affairs as a going concern, considering the size and nature of its business and intended purposes and taking into account pending and threatened claims; and (c) intends to, and believes that it will be able to, pay its debts as they mature. As a result, Seller is intended to (and is reasonably believed to) be able to survive as a stand-alone entity.
25. Seller does not pay the SPVs expenses, except as specifically provided in the Agreements. Any allocations of direct, indirect or overhead expenses for items shared between Seller and the SPV are made among such entities to the extent practical on the basis of actual use or value of services rendered and otherwise on a basis reasonably related to actual use or the value of services rendered.
26. Seller has not held itself out, nor does it intend to do so in the future, as responsible for the SPVs debts.
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SPVDisclosure Representations and Covenants
Disclosure of the Transactions
1. The transactions referred to in the Opinion (the Transactions ) have been or will be publicly disclosed by the SPV as follows: (a) the Transactions will be addressed in notes relating to Performance Guarantors securitization activities in its financial statements (on which the SPV is consolidated) and (b) UCC financing statements will be filed to perfect the transfer (the Transfer ) of receivables (the Receivables ) by the Originator to United Stationers Financial Services LLC ( Seller ) pursuant to the receivables sale agreement referred to in the Opinion (the Receivables Sale Agreement ) and subsequently the Receivables together with a portfolio of additional receivables previously acquired by Seller (the Receivables ) by Seller to the SPV pursuant to the receivables purchase agreement referred to in the Opinion (the Receivables Purchase Agreement ).
2. The SPV will not conceal any transfers contemplated by the agreements referred to on Schedule II to the Opinion (the Agreements ) from any interested party. Although obligors on the Receivables will not be affirmatively informed of the transfers of their obligations, the SPV will not conceal those transfers from any obligor that inquires. Also, (other than certain rebates and allowances in respect of Receivables) the obligors are not expected to be material creditors of the SPV.
Terms of the Transactions
3. In connection with the Transactions: (a) the Investors rely on the Receivables and the other assets of the SPV in making their investment decision and will rely on the Transfers being characterized as true sales, so as to isolate the Receivables from Performance Guarantors, Originators and Sellers creditors.
4. The terms of the transactions between the SPV and each of Performance Guarantor, Originator and Seller are (a) consistent with those of arms-length relationships and (b) fair and equitable to each of the parties.
5. The SPV intends the Transfer to be a true sale by Seller to the SPV that is absolute and irrevocable and that provides the SPV with the full benefits of ownership of the Receivables. The SPV will receive the conveyance of the Receivables from Seller without recourse for bad debt or uncollectibility of the Receivables and without any warranty of collectibility or any unconventional warranty.
6. The consideration received by Seller in the Transfer is the fair market value of the Receivables.
7. The SPV purchases the Receivables in good faith without knowledge of any adverse claim against, interest in, lien on, or defense to payment of, such assets (other than any adverse claim arising solely as a result of any action taken by the SPV under the Agreements).
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8. Sellers representations, warranties, covenants and indemnities in the Receivables Purchase Agreement with respect to the Receivables (a) cover matters ascertainable by Seller in the ordinary course of business and (b) are intended to ensure that the SPV will receive the type of assets that it has bargained to purchase. Such representations, warranties, covenants and indemnities do not cause Seller to retain or assume the risk of nonpayment or other material financial risks of the Receivables.
9. There are no agreements or understandings between the SPV and Seller or any of Sellers other affiliates that are relevant to the Transactions other than the Agreements and any other agreements and understandings specifically referenced in the Agreements. In particular, there are no other agreements or understandings pursuant to which Originator or another of its other affiliates (a) is responsible for maintaining the SPVs solvency or (b) provides recourse, guarantees or otherwise retains or assumes financial risks with respect to the Receivables.
Relationship Between the SPV and Performance Guarantor, Originator and Seller
10. The SPV is a wholly-owned subsidiary of Seller and was formed for the special purpose of consummating the Transactions and other similar transactions with respect to Sellers Receivables. The SPV will comply with all separateness covenants contained in the applicable Agreements, or in the SPVs limited liability company agreement.
11. The SPV intends to act in a manner that is consistent with the SPVs separate and distinct existence and will correct any known misunderstanding regarding its status as a separate entity.
12. The SPV prepares and maintains separate corporate and financial records (which will be subject to audit by independent public accountants) from Originator and Seller that accurately reflect its assets, liabilities and financial affairs. The SPV believes that its assets and liabilities can be readily and inexpensively segregated, ascertained and identified separate from those of Performance Guarantor, Originator and Seller. All transactions between the SPV on the one hand and Performance Guarantor, Originator or Seller on the other hand, including monetary transactions, are and will be properly reflected in the SPVs books and records and the SPV believes that each will be on terms and conditions consistent with those of an arms length transaction.
13. The consolidation of each of Performance Guarantors, Originators or Sellers and the SPVs business operations would not result in any significant cost savings or in a significantly greater efficiency or profitability of such combined business operation.
14. The SPV and each of Performance Guarantor, Originator and Seller will not commingle their assets and liabilities, except that Seller, as Servicer of the Receivables: (a) may temporarily commingle collections pending identification and transfer to a collection account for the Transactions; and (b) will retain books and records pertaining to the Receivables. The SPV does not otherwise maintain joint bank accounts or other the SPV accounts to which either of Originator or Seller has independent access.
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15. An integration of business functions between any of Performance Guarantor, Originator or Seller and the SPV, if any, exists only to the extent summarized in this paragraph. The SPV is operated for the exclusive purpose of purchasing Receivables from Seller. The SPV will have no employees, and the SPVs day-to-day business operations with respect to the Receivables will be conducted through Seller, in its capacity as Servicer, pursuant to the Transfer and Administration Agreement. Under that agreement, Seller has limited rights, in its capacity as Servicer, to enter into modifications of Receivables on behalf of the SPV, and Seller is generally not permitted to resign as Servicer. Each of Performance Guarantor, Originator, Seller and the SPV may share some expenses not reflected in Servicers fees, but these are not expected to be material and, in any event, will be allocated between the entities on a basis reasonably related to the cost of the services involved and each entitys actual use of such services. Obligors on the Receivables transferred to the SPV will not be notified that their Receivables have been transferred to the SPV.
16. The SPV is held out to the public as a separate entity apart from each of Originator and Seller, including as described under Part I: Description of the Transactions in the Opinion.
17. The SPV maintains its own stationery and other business forms separate from Originators and conducts business in its own name (including, without limitation, its contracts and written communications).
18. The SPV has its own office, which is located in premises that are primarily occupied by Originator but is separately demarcated and identified.
19. The SPV will adhere in all material respects to corporate formalities in all transfers of assets and other transactions between the SPV and each of Originator and Seller. In general, the SPV observes appropriate limited liability company formalities under applicable law.
20. The SPV will not guaranty, or otherwise become obligated to repay, either Originators or Sellers liabilities, except to the extent that the SPVs indemnities in the Agreements may be considered guaranties. To the extent that those indemnities cover either Originators or Sellers actions or failures to act, the SPV considers the likelihood that the SPV will incur liabilities under those indemnities to be remote and immaterial.
21. At closing, the SPV will: (a) be solvent; (b) be adequately capitalized to conduct its business and affairs as a going concern, considering the size and nature of its business and intended purposes and taking into account pending and threatened claims; and (c) intends to, and believes that it will be able to, pay its debts as they mature. As a result, the SPV is intended to (and is reasonably believed to) be able to survive as a stand-alone entity.
22. None of Performance Guarantor, Originator nor Seller pays the SPVs expenses, except as specifically provided in the Agreements. Any allocations of direct, indirect or overhead expenses for items shared between the SPV and Performance Guarantor,
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Originator or Seller, which are not expected to be material, are made among such entities to the extent practical on the basis of actual use or value of services rendered and otherwise on a basis reasonably related to actual use or the value of services rendered.
23. The SPV has not held itself out, nor does it intend to do so in the future, as responsible for either Performance Guarantors, Originators or Sellers debts.
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SCHEDULE 6.3
(Financial Covenants)
Section 6.3 of this Agreement shall be read in its entirety as follows:
Section 6.3 Financial Covenants . (a) During the term of this Agreement, unless the Agent shall otherwise consent in writing:
(i) Leverage Ratio . The Performance Guarantor and the Originator will not permit the ratio (the Leverage Ratio), determined as of the end of each of its fiscal quarters, of (i) Consolidated Funded Indebtedness to (ii) Consolidated EBITDA for the then most-recently ended four fiscal quarters to be greater than 3.25 to 1.00. The Leverage Ratio shall be calculated as of the last day of each fiscal quarter of the Performance Guarantor based upon (a) for Consolidated Funded Indebtedness, Consolidated Funded Indebtedness as of the last day of each such fiscal quarter and (b) for Consolidated EBITDA, the actual amount as of the last day of each fiscal quarter for the most recently ended four consecutive fiscal quarters; provided that the Leverage Ratio shall be calculated, with respect to Permitted Acquisitions, on a pro forma basis reasonably satisfactory to the Agent, broken down by fiscal quarter in the Performance Guarantors reasonable judgment;
(ii) Minimum Consolidated Net Worth . The Performance Guarantor and the Originator will at all times maintain positive Consolidated Net Worth which shall not be less than (i) $550,000,000 minus (ii) amounts expended by Performance Guarantor on or after July 1, 2007 in connection with repurchases or redemptions of its capital stock under Section 6.10 in the Revolving Credit Agreement plus (iii) 50% of Consolidated Net Income (if positive) earned in each fiscal quarter beginning with the fiscal quarter ending June 30, 2007, plus (iv) 50% of the net cash proceeds resulting from issuances of the Performance Guarantors or any Subsidiarys capital stock from and after the Restatement Effective Date; and
(iii) Capital Expenditures . The Performance Guarantor and the Originator will not, nor will they permit any Subsidiary to expend, for Consolidated Capital Expenditures in the acquisition of fixed assets in any fiscal year in the aggregate for the Performance Guarantor and its Subsidiaries, in excess of (i) $75,000,000 for the period from January 1, 2007 through December 31, 2007; and (ii) $75,000,000 for the period from January 1 through December 31 for each fiscal year thereafter, plus any amount permitted to be expended in the immediately preceding fiscal year (pursuant to the absolute dollar limitation for such preceding fiscal year and not pursuant to any carryover provision from a prior fiscal year) but not expended.
(b) As used in this Section 6.3 , 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):
Acquisition : Any transaction, or any series of related transactions, consummated on or after the Restatement Effective Date, by which the Performance Guarantor or any of its
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Subsidiaries (i) acquires any going concern business or all or substantially all of the assets of any Person, or division thereof, whether through purchase of assets, merger or otherwise or (ii) directly or indirectly acquires from one or more Persons (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage of voting power) of the outstanding ownership interests of any Person.
Affiliate : With respect to any Person, any other Person directly or indirectly controlling, controlled by or under common control with such Person.
Aggregate Commitment : The aggregate of the Commitments of all the Lenders, as increased or reduced from time to time pursuant to the terms hereof. The initial Aggregate Commitment is Four Hundred Twenty-Five Million and 00/100 Dollars ($425,000,000).
Agreement Accounting Principles : Generally accepted accounting principles as in effect in the United States from time to time.
Assignment Agreement : As defined in Section 12.3.1 of the Revolving Credit Agreement.
Capital Expenditures : Without duplication, any expenditures for any purchase or other acquisition of any asset which would be classified as a fixed or capital asset on a consolidated balance sheet of the Performance Guarantor and its Subsidiaries prepared in accordance with Agreement Accounting Principles, excluding (i) expenditures of insurance proceeds to rebuild or replace any asset after a casualty loss, (ii) leasehold improvement expenditures for which the Performance Guarantor or a Subsidiary is reimbursed by the lessor, sublessor or sublessee, (iii) expenditures of net cash proceeds of any asset sale permitted under Section 6.12 in the Revolving Credit Agreement, and (iv) with respect to any Permitted Acquisition, (a) the Purchase Price thereof and (b) any Capital Expenditures expended by the seller or entity to be acquired in any Permitted Acquisition prior to the date of such Permitted Acquisition.
Capitalized Lease : With respect to any Person, any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.
Capitalized Lease Obligations : With respect to any Person, the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with Agreement Accounting Principles.
Commitment : For each Lender, including, without limitation, each LC Issuer, such Lenders obligation to make Loans to, and participate in Facility LCs issued upon the application of, and each LC Issuers obligation to issue Facility LCs for the account of, the Originator in an aggregate amount not exceeding the amount set forth for such Lender on the Commitment Schedule or in an Assignment Agreement delivered pursuant to Section 12.3 in the Revolving Credit Agreement, as such amount may be modified from time to time pursuant to the terms thereof.
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Commitment Schedule : The Schedule identifying each Lenders Commitment as of the Restatement Effective Date attached hereto and identified as such.
Consolidated Capital Expenditures : With reference to any period, the Capital Expenditures of the Performance Guarantor and its Subsidiaries calculated on a consolidated basis for such period.
Consolidated EBITDA : With respect to any period, Consolidated Net Income for such period plus, to the extent deducted from revenues in determining Consolidated Net Income for such period, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) depreciation, (iv) amortization, (v) losses attributable to equity in Affiliates, (vi) non-cash charges related to employee compensation and (vii) any extraordinary non-cash or nonrecurring non-cash charges or losses, minus, to the extent included in Consolidated Net Income for such period, any extraordinary non-cash or nonrecurring non-cash gains, all calculated for the Performance Guarantor and its Subsidiaries on a consolidated basis.
Consolidated Funded Indebtedness : At any time, with respect to any Person, without duplication, the sum of (i) the aggregate dollar amount of Consolidated Indebtedness for borrowed money owing by such Person or for which such Person is liable which has actually been funded and is outstanding at such time, whether or not such amount is due or payable at such time (other than obligations in respect of Rate Management Transactions), plus (ii) the aggregate undrawn amount of all standby Letters of Credit at such time for which such Person or any of its Subsidiaries is the account party or is otherwise liable (other than standby Letters of Credit in an amount up to $10,000,000 issued to support workers compensation obligations of the Credit Parties and other than Letters of Credit supporting any other component of this definition), plus (iii) the aggregate principal component of Capitalized Lease Obligations owing by such Person and its Subsidiaries on a consolidated basis or for which such Person or any of its Subsidiaries is otherwise liable, plus (iv) all Off-Balance Sheet Liabilities of such Person and its Subsidiaries on a consolidated basis, plus (v) all Disqualified Stock of such Person and its Subsidiaries on a consolidated basis.
Consolidated Indebtedness : At any time, with respect to any Person, the Indebtedness of such Person and its Subsidiaries calculated on a consolidated basis as of such time.
Consolidated Interest Expense : With reference to any period, the interest expense of the Performance Guarantor and its Subsidiaries calculated on a consolidated basis for such period (net of interest income), including, without limitation, yield or any other financing costs resembling interest which are payable under any Receivables Purchase Facility.
Consolidated Net Income : With reference to any period, the net income (or loss) of the Performance Guarantor and its Subsidiaries calculated on a consolidated basis for such period and on a FIFO basis of inventory valuation.
Consolidated Net Worth : At any time, with respect to any Person, the consolidated stockholders equity of such Person and its Subsidiaries calculated on a consolidated basis and on a FIFO basis of inventory valuation as of such time.
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Contingent Obligation : With respect to any Person, any agreement, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take or pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership unless the underlying obligation is expressly made non-recourse to such general partner; provided, however, that the term Contingent Obligation shall not include endorsements of instruments for deposit or collection in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the lesser of (a) an amount equal to the stated or determinable amount of the primary obligation in respect of which such Contingent Obligation is made and (b) the maximum amount for which such guaranteeing person may be liable pursuant to the terms of the instrument embodying such Contingent Obligation, unless such primary obligation and the maximum amount for which such guaranteeing person may be liable are not stated or determinable, in which case the amount of the Contingent Obligation shall be such guaranteeing persons reasonably anticipated liability in respect thereof as determined by such Person in good faith.
Credit Party : Collectively, the Performance Guarantor, the Originator and each of the Guarantors.
Disqualified Stock : Any preferred or other capital stock that, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder thereof, in whole or in part, on or prior to the date that is ninety-one (91) days after the Facility Termination Date.
Domestic Subsidiary : Any Subsidiary of any Person that is not a Foreign Subsidiary.
Facility LC : As defined in Section 2.20.1 of the Revolving Credit Agreement.
Facility Termination Date : The earlier of (a) July 5, 2012 and (b) the date of termination in whole of the Aggregate Commitment pursuant to Section 2.5 of the Revolving Credit Agreement or the Commitments pursuant to Section 8.1 of the Revolving Credit Agreement.
Foreign Subsidiary : (i) Any Subsidiary of any Person that is not organized under the laws of a jurisdiction located in the United States of America and (ii) any Subsidiary of a Person described in clause (i) hereof that is organized under the laws of a jurisdiction located in the United States of America.
Guarantor : Each of the Performance Guarantors Domestic Subsidiaries (other than the Originator and any SPV) and all other Subsidiaries of the Performance Guarantor which become Guarantors in satisfaction of the provisions of Section 6.23 in the Revolving Credit Agreement, in each case, together with their respective permitted successors and assigns.
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Indebtedness : With respect to any Person, at any time, without duplication, such Persons (i) obligations for borrowed money which in accordance with Agreement Accounting Principles would be shown as a liability on the consolidated balance sheet of such Person, (ii) obligations representing the deferred purchase price of Property or services (other than current accounts payable arising in the ordinary course of such Persons business payable on terms customary in the trade and accrued expenses in connection with the provision of services incurred in the ordinary course of such Persons business), (iii) Indebtedness of others, whether or not assumed, secured by Liens or payable out of the proceeds or production from Property now or hereafter owned or acquired by such Person (provided that the amount of any such Indebtedness at any time shall be deemed to be the lesser of (a) such Indebtedness at such time and (b) the fair market value of such Property, as determined by such Person in good faith at such time), (iv) financial obligations which are evidenced by notes, bonds, debentures, acceptances, or other instruments, (v) obligations to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) Contingent Obligations of such Person in respect of any Indebtedness, (viii) reimbursement obligations under Letters of Credit, bankers acceptances, surety bonds and similar instruments, (ix) Off-Balance Sheet Liabilities, (x) Net Mark-to-Market Exposure under Rate Management Transactions and (xi) Disqualified Stock.
JPMorgan Chase : JPMorgan Chase Bank, National Association, in its individual capacity, and its successors.
LC Issuer : JPMorgan Chase (or any Subsidiary or Affiliate of JPMorgan Chase designated by JPMorgan Chase) or any of the other Lenders, as applicable, in its respective capacity as issuer of Facility LCs hereunder.
Lenders : The lending institutions listed on the signature pages of the Revolving Credit Agreement and their respective successors and assigns. Unless otherwise specified, the term Lenders includes the Swing Line Lender and the LC Issuers.
Letter of Credit : With respect to any Person, a letter of credit or similar instrument which is issued upon the application of such Person or upon which such Person is an account party or, without duplication, for which such Person has a reimbursement obligation.
Lien : Any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).
Net Mark-to-Market Exposure : With respect to any Person, as of any date of determination, the excess (if any) of all unrealized losses over all unrealized profits of such Person arising from Rate Management Transactions. Unrealized losses means the fair market value of the cost to such Person of replacing such Rate Management Transaction as of the date of determination (assuming the Rate Management Transaction were to be terminated as of that date), and unrealized profits means the fair market value of the gain to such Person of replacing such Rate Management Transaction as of the date of determination (assuming such Rate Management Transaction were to be terminated as of that date).
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Off-Balance Sheet Liability : With respect to any Person, without duplication, the principal component of (i) any Receivables Purchase Facility or any other repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person (other than the sale or disposition in the ordinary course of business of accounts or notes receivable in connection with the compromise or collection thereof consistent with customary industry practice (and not as part of any bulk sale or financing of receivables)) or (ii) any liability under any so-called synthetic lease or tax ownership operating lease transaction entered into by such Person; provided that Off-Balance Sheet Liabilities shall not include the principal component of the foregoing if such principal component (a) is otherwise reflected as a liability on such Persons consolidated balance sheet or (b) is deducted from revenues in determining such Persons consolidated net income but is not thereafter added back in calculating such Persons Consolidated EBITDA.
Permitted Acquisition : As defined in Section 6.13.5 of the Revolving Credit Agreement.
Person : Any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.
Property : With respect to any Person, any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.
Purchase Price : The total consideration and other amounts payable in connection with any Acquisition, including, without limitation, any portion of the consideration payable in cash, all Indebtedness incurred or assumed in connection with such Acquisition, but exclusive of the value of any capital stock or other equity interests of the Performance Guarantor, the Originator or any Subsidiary issued as consideration for such Acquisition.
Rate Management Transaction : Any transaction (including an agreement with respect thereto) now existing or hereafter entered into by the Performance Guarantor, the Originator or a Subsidiary which is a rate swap, basis swap, forward rate transaction, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, forward transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) or any combination thereof, whether linked to one or more interest rates, foreign currencies, commodity prices or equity prices.
Receivables Purchase Documents : Any series of receivables purchase or sale agreements, servicing agreements and other related agreements generally consistent with terms contained in comparable structured finance transactions pursuant to which the Performance Guarantor, the Originator or any of its Subsidiaries, in their respective capacities as sellers or transferors of any receivables, sell or transfer, directly or indirectly, to SPVs all of their respective right, title and interest in and to (but not their obligations under) certain receivables for further sale or transfer (or granting of Liens to other purchasers of or investors in such assets or interests therein (and the other documents, instruments and agreements executed in connection
6
therewith)), as any such agreements may be as amended, modified, supplemented, restated or replaced from time to time therefor.
Receivables Purchase Facility : Any securitization facility made available to the Performance Guarantor, the Originator or any of its Subsidiaries, pursuant to which receivables of the Performance Guarantor, the Originator or any of its Subsidiaries are transferred, directly or indirectly, to one or more SPVs, and thereafter to certain investors, pursuant to the terms and conditions of the Receivables Purchase Documents.
Restatement Effective Date : July 5, 2007.
Revolving Credit Agreement : The Second Amended and Restated Five-Year Revolving Credit Agreement, dated July 5, 2007, by and among the Originator, the Performance Guarantor, the Lenders from time to time parties thereto, PNC Bank, National Association, U.S. Bank National Association, KeyBank National Association, LaSalle Bank, National Association and JPMorgan Chase Bank, National Association as such agreement exists as of the Closing Date without giving effect to any amendment, modification, waiver, replacement or supplement thereto that is not consented to in writing by each Class Agent.
SPV : Any special purpose entity established for the purpose of purchasing receivables in connection with a receivables securitization transaction permitted under the terms of the Revolving Credit Agreement.
Subsidiary : With respect to any Person, (i) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a Subsidiary shall mean a Subsidiary of the Performance Guarantor.
Swing Line Lender : JPMorgan Chase or such other Lender which may succeed to its rights and obligations as Swing Line Lender pursuant to the terms of the Revolving Credit Agreement.
7
SCHEDULE 11.3
Address and Payment Information
If to the Conduit Investors:
(a) If to ENTERPRISE FUNDING:
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Enterprise Funding Company LLC |
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c/o Global Securitization Services, LLC |
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68 South Service Road, Suite 120 |
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Melville, New York 11747 |
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Telephone: |
(631) 587-4700 |
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Facsimile: |
(212) 302-8767 |
(with a copy to the related Class Agent)
Payment Information :
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Bank: |
Deutsche Bank (New York, NY) |
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Benf: |
DTBCA as Agent for Enterprise Funding |
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ABA: |
021 001 033 |
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A/C #: |
01 476 289 |
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Ref: |
Client Name / Wire Description |
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Attn: |
Orinthia Skeete |
(b) If to MARKET STREET:
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Market Street Funding LLC |
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c/o AMACAR Group, L.L.C. |
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6525 Morrison Boulevard, Suite 318 |
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Charlotte, North Carolina 28211 |
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Attention: |
Doris Hearn |
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Telephone: |
(704) 365-0569 |
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Facsimile: |
(704) 365-1362 |
(with a copy to the related Class Agent)
Payment Information :
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Bank: |
PNC Bank, National Association |
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ABA: |
043000096 |
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Credit: |
Market Street Funding LLC |
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A/C #: |
1002422076 |
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Ref: |
United Stationers Receivables LLC |
1
If to the SPV:
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United Stationers Receivables, LLC |
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One Parkway North Boulevard |
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Deerfield, Illinois 60015-2559 |
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Telephone: |
(847) 627-7000 |
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Facsimile: |
(847) 627-7001 |
Payment Information:
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The Northern Trust Company |
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ABA 071-000-152 |
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Account 3510068 |
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Re: Credit United Stationers Receivables, LLC |
If to the Originator:
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United Stationers Supply Co. |
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One Parkway North Boulevard |
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Deerfield, Illinois 60015-2559 |
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Telephone: |
(847) 627-7000 |
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Facsimile: |
(847) 627-7001 |
If to the Seller or Servicer:
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United Stationers Financial Services, LLC |
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One Parkway North Boulevard |
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Deerfield, Illinois 60015-2559 |
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Telephone: |
(847) 627-7000 |
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Facsimile: |
(847) 627-7001 |
If to the Agent:
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Bank of America, National Association, |
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as Agent |
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Bank of America Hearst Tower, 19th Floor |
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Charlotte, North Carolina 28255 |
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Attention: |
Banc of America Securities, LLC Global Asset Backed Securitization Group; Portfolio Management |
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Telephone: |
704/386-7922 |
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Facsimile: |
704/388-9169 |
2
Payment Information:
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Bank of America |
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ABA: 026009593 |
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Account #: 109360 0656600 |
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Ref: United Stationers Closing Fees |
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Attn: Sean Walsh |
3
Exhibit A
Form of Assignment and Assumption Agreement
Reference is made to the Transfer and Administration Agreement dated as of March 3, 2009 as it may be amended, modified, supplemented, restated or replaced from time to time (as so amended or modified, the Agreement ) by and among United Stationers Receivables, LLC, an Illinois limited liability company (the SPV ), United Stationers Supply Co., an Illinois corporation (the Originator ), United Stationers Financial Services LLC, an Illinois limited liability company (the Seller ) and as Servicer, Enterprise Funding Company LLC, a Delaware limited liability company ( Enterprise Funding ), as a Conduit Investor, Market Street Funding, LLC, a Delaware limited liability company ( Market Street , each of Enterprise Funding and Market Street a Conduit Investor and, collectively, the Conduit Investors), Bank of America, National Association, a national banking association ( Bank of America ), as Agent, as a Class Agent and as an Alternate Investor, PNC Bank, National Association ( PNC Bank ), as a Class Agent and as an Alternate Investor, and the financial institutions from time to time parties hereto as Alternate Investors. Terms defined in the Agreement are used herein with the same meaning.
[ ] (the Assignor ) and [ ] (the Assignee ) agree as follows:
1 . The Assignor hereby sells and assigns to the Assignee, without recourse and without representation and warranty, and the Assignee hereby purchases and assumes from the Assignor, an interest in and to all of the Assignors rights and obligations under the Agreement and the other Transaction Documents. Such interest expressed as a percentage of all rights and obligations of the Alternate Investors, shall be equal to the percentage equivalent of a fraction the numerator of which is $[ ] and the denominator of which is the Facility Limit. After giving effect to such sale and assignment, the Assignees Commitment will be as set forth on the signature page hereto.
2 . [In consideration of the payment of $[ ], being [ ]% of the existing Net Investment, and of $[ ], being [ ]% of the aggregate unpaid accrued Discount, receipt of which payment is hereby acknowledged, the Assignor hereby assigns to the Agent for the account of the Assignee, and the Assignee hereby purchases from the Assignor, a [ ]% interest in and to all of the Assignors right, title and interest in and to the Net Investment purchased by the undersigned on [ ], [20][ ] under the Agreement.]
3 . The Assignor (i) represents and warrants that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any Adverse Claim; (ii) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Agreement, any other Transaction Document or any other instrument or document furnished pursuant thereto or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Agreement or the Receivables, any other Transaction Document or any other instrument or document furnished pursuant thereto; and (iii) makes no representation or warranty
A - 1
and assumes no responsibility with respect to the financial condition of any of the SPV or the Servicer or the Originator or the performance or observance by any of the SPV or the Servicer or the Originator of any of its obligations under the Agreement, any other Transaction Document, or any instrument or document furnished pursuant thereto.
4 . The Assignee (i) confirms that it has received a copy of the Agreement, the First Tier Agreement and the Second Tier Agreement together with copies of the financial statements referred to in Section [ ] of the Agreement, to the extent delivered through the date of this Assignment and Assumption Agreement (the Assignment ), and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment; (ii) agrees that it will, independently and without reliance upon the Agent, any of its Affiliates, the Assignor or any other Alternate Investor and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement and any other Transaction Document; (iii) appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers and discretion under the Agreement and the other Transaction Documents as are delegated to the Agent by the terms thereof, together with such powers and discretion as are reasonably incidental thereto; (iv) agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Agreement are required to be performed by it as an Alternate Investor; and (v) specifies as its address for notices and its account for payments the office and account set forth beneath its name on the signature pages hereof[; and (vi) attaches the forms prescribed by the Internal Revenue Service of the United States of America certifying as to the Assignees status for purposes of determining exemption from United States withholding taxes with respect to all payments to be made to the Assignee under the Agreement or such other documents as are necessary to indicate that all such payments are subject to such rates at a rate reduced by an applicable tax treaty]. [To be included if the Assignee is organized under the laws of a jurisdiction outside the United States]
5 . The effective date for this Assignment shall be the later of (i) the date on which the Agent receives this Assignment executed by the parties hereto and receives the consent of [the SPV] and the Class Agents, on behalf of the Conduit Investors, and (ii) the date of this Assignment (the Effective Date ). Following the execution of this Assignment and the consent of [the SPV and] the Class Agents, on behalf of the Conduit Investors, this Assignment will be delivered to the Agent for acceptance and recording.
6 . Upon such acceptance and recording, as of the Effective Date, (i) the Assignee shall be a party to the Agreement and, to the extent provided in this Assignment, have the rights and obligations of an Alternate Investor thereunder and (ii) the Assignor shall, to the extent provided in this Assignment, relinquish its rights and be released from its obligations under the Agreement.
7 . Upon such acceptance and recording, from and after the Effective Date, the Agent shall make all payments under the Agreement in respect of the interest assigned hereby (including, without limitation, all payments in respect of such interest in Net Investment, Discount and fees) to the Assignee. The Assignor and Assignee shall make all appropriate adjustments in payments under the Agreement for periods prior to the Effective Date directly between themselves.
A - 2
8 . The Assignee shall not be required to fund hereunder an aggregate amount at any time outstanding in excess of $[ ] [This should match the commitment amount for this Alternate Investor] , minus the aggregate outstanding amount of any interest funded by the Assignee in its capacity as a participant under the Liquidity Provider Agreement.
9 . The Assignor agrees to pay the Assignee its pro rata share of fees in an amount equal to the product of (a) [ ] per annum and (b) the [Commitment] [Should match fees in Section [ ] of the Participation Agreement] during the period after the Effective Date for which such fees are owing and paid by the SPV pursuant to the Agreement. Amounts paid under this section shall be credited against amounts payable to the Assignee under Section [ ] of the Participation Agreement dated as of [date] by and between [Bank of America/PNC Bank] and [Alternate Investor] (and vice versa).
10 . THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
11 . This agreement contains the final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire Agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings.
12 . If any one or more of the covenants, agreements, provisions or terms of this agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, or terms of this agreement and shall in no way affect the validity or enforceability of the other provisions of this agreement.
13 . This agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery by facsimile of an executed signature page of this agreement shall be effective as delivery of an executed counterpart hereof.
14 . This agreement shall be binding on the parties hereto and their respective successors and assigns.
A - 3
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and Assumption Agreement to be executed by their respective officers thereunto duly authorized as of the date first above written
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[ASSIGNOR] |
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By: |
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Name: |
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Title: |
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[ASSIGNEE] |
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By: |
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Name: |
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Title: |
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A - 4
Address for notices and Account for payments:
For Credit Matters: |
For Administrative Matters: |
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[NAME] |
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[NAME] |
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Attention: |
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Attention: |
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Telephone: |
[( ) - ] |
Telephone: |
[( ) - ] |
Telefax: |
[( ) - ] |
Telefax: |
[( ) - ] |
Account for Payments:
NAME |
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ABA Number: |
[ - - ] |
Account Number: |
[ ] |
Attention: |
[ ] |
Re: [ ]
Consented to this [ ] day of Accepted this[ ] day of [ ], [20][ ] [ ], [20][ ]
[ ], as |
[ ], as Agent |
Class Agent |
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By: |
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By: |
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Name: |
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Name: |
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Title: |
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Title: |
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[SPV] |
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By: |
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Name: |
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Title: |
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A - 5
Exhibit B
[Reserved]
B - 1
Exhibit C
Credit and Collection Policies and Practices
The Originators Credit and Collection Policy or Policies and practices, relating to Contracts and Receivables, existing on the date hereof are as set forth in manuals that were delivered by the SPV prior to the Closing Date to the Agent.
C - 1
Exhibit D
Form of Investment Request
United Stationers Receivables, LLC (the SPV ), pursuant to Section 2.2(a) of the Transfer and Administration Agreement, dated as of March 3, 2009 (as amended, modified, supplemented, restated or replaced from time to time, the Agreement ), among the SPV, United Stationers Supply Co., an Illinois corporation (the Originator ), United Stationers Financial Services LLC, an Illinois limited liability company (the Seller ) and as Servicer, Enterprise Funding Company LLC, a Delaware limited liability company ( Enterprise Funding ), as a Conduit Investor, Market Street Funding, LLC, a Delaware limited liability company ( Market Street , each of Enterprise Funding and Market Street a Conduit Investor and, collectively, the Conduit Investors), Bank of America, National Association, a national banking association ( Bank of America ), as Agent, as a Class Agent and as an Alternate Investor, PNC Bank, National Association ( PNC Bank ), as a Class Agent and as an Alternate Investor, and the financial institutions from time to time parties hereto as Alternate Investors, hereby requests that the [Conduit Investors] [Alternate Investors] effect an Investment from it pursuant to the following instructions:
Investment Date: ]
Purchase Price: [ ](1)
Funding Period(s): ]
Account to be credited:
[bank name]
ABA No.[ ]
Account No. [ ]
Reference No.[ ]
Please credit the above-mentioned account on the Investment Date. Capitalized terms used herein and not otherwise defined herein have the meaning assigned to them in the Agreement.
The SPV hereby certifies as of the date hereof that the conditions precedent to such Investment set forth in Section 4.2 of the Agreement have been satisfied, and that all of the representations and warranties made in Section 3.1 of the Agreement are true and correct on and as of the Investment Date, both before and after giving effect to the Investment.
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[SPV] |
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Dated: |
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By: |
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Name: |
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Title: |
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(1) At least [$5,000,000] and in integral multiples of [$1,000,000] .
D - 1
Exhibit E
Form of Blocked Account Agreement
[Date]
[Name and Address of Blocked Account Bank]
Re: [Name of the SPV]
Blocked Account
No[s]. [ ]
Ladies and Gentlemen:
[ ] (the Owner ) hereby notifies you (the Bank ) that in connection with certain transactions involving its accounts receivable, it has transferred exclusive ownership and dominion of its [blocked] [lock-box] account no[s]. [ ] [and the related lock-boxes no[s].[ ] maintained with you (collectively the Accounts ) to Bank of America, National Association, a national banking association, as agent (the Agent ), and that the SPV will transfer exclusive control of the Accounts to the Agent effective upon delivery to you of the Notice of Effectiveness (as hereinafter defined). Each of the parties hereto agrees that, from and after the date you receive the Notice of Effectiveness, you will comply with instructions originated by the Agent directing disposition of the funds in the Accounts without further consent by the SPV.
In furtherance of the foregoing, the Owner and the Agent hereby instruct you, beginning on the date of your receipt of the Notice of Effectiveness substantially in the form attached hereto as Annex I and you agree, without further consent by the SPV (which consent the SPV hereby irrevocably waives): (i) to collect the monies, checks, instruments and other items of payment mailed to the Accounts; (ii) to deposit into the Accounts all such monies, checks, instruments and other items of payment or all funds collected with respect thereto (unless otherwise instructed by the Agent); and (iii) to transfer all funds deposited and collected in the Accounts pursuant to instructions given to you by the Agent from time to time.
You are hereby further instructed and you agree, without further consent by the SPV (which consent the SPV hereby irrevocably waives): (i) unless and until the Agent notifies you to the contrary at any time after your receipt of the Notice of Effectiveness, to make such transfers from the Accounts at such times and in such manner as the Owner, in its capacity as collection agent for the Agent, shall from time to time instruct to the extent such instructions are not inconsistent with the instructions set forth herein, and (ii) to permit the Owner (in its capacity as collection agent for the Agent) and the Agent to obtain upon request any information relating to the Accounts, including, without limitation, any information regarding the balance or activity of the Accounts.
E - 1
The SPV also hereby notifies you that, beginning on the date of your receipt of the Notice of Effectiveness and notwithstanding anything herein or elsewhere to the contrary, the Agent shall be irrevocably entitled to exercise, without further consent by the SPV, any and all rights in respect of or in connection with the Accounts, including, without limitation, the right to specify when payments are to be made out of or in connection with the Accounts. The Agent has a continuing interest in all of the checks and their proceeds and all monies and earnings, if any, thereon in the Accounts, and you shall be the Agents agent for the purpose of holding and collecting such property. The monies, checks, instruments and other items of payment mailed to, and funds and wire transfers deposited to, the Accounts will not be subject to deduction, set-off, bankers lien, or any other right in favor of any person other than the Agent (except that you may set off (i) all amounts due to you in respect of your customary fees and expenses for the routine maintenance and operation of the Accounts, and (ii) the face amount of any checks which have been credited to the Accounts but are subsequently returned unpaid because of uncollected or insufficient funds).
This Agreement may not be terminated at any time by the SPV or you without the prior written consent of the Agent. Neither this Agreement nor any provision hereof may be changed, amended, modified or waived orally but only by an instrument in writing signed by the Agent and the SPV.
You shall not assign or transfer your rights or obligations hereunder (other than to the Agent) without the prior written consent of the Agent and the SPV. Subject to the preceding sentence, this Agreement shall be binding upon each of the parties hereto and their respective successors and assigns, and shall inure to the benefit of, and be enforceable by, the Agent, each of the parties hereto and their respective successors and assigns.
You hereby represent that the person signing this Agreement on your behalf is duly authorized by you to so sign.
You agree to give the Agent and the SPV prompt notice if the Accounts become subject to any writ, garnishment, judgment, warrant of attachment, execution or similar process.
Any notice, demand or other communication required or permitted to be given hereunder shall be in writing and may be personally served or sent by facsimile or by courier service or by United States mail and shall be deemed to have been delivered when delivered in person or by courier service or by facsimile or three (3) Business Days after deposit in the United States mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, (i) the addresses of the parties hereto shall be as set forth below each partys name below, or, as to each party, at such other address as may be designated by such party in a written notice to the other party and the Agent and (ii) the address of the Agent shall be:
Bank of America, National Association |
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[231 South LaSalle Street, 16th Floor |
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Chicago, Illinois 60697 |
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Attention: |
Banc of America Securities, LLC |
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Asset Securitization Group; Portfolio Management |
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Telephone: |
312/828-6471 |
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Facsimile: |
312/923-0273] |
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E - 2
[Bank of America Corporate Center, 10th Floor |
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Charlotte, North Carolina 28255 |
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Attention: |
Banc of America Securities, LLC |
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Global Asset Backed Securitization Group; Portfolio Management |
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Telephone: |
704/386-7922 |
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Facsimile: |
704/388-9169] |
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, or at such other address as may be designated by the Agent in a written notice to each of the parties hereto.
Please agree to the terms of, and acknowledge receipt of, this notice by signing in the space provided below.
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Very truly yours, |
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[ SPV] |
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By: |
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BANK OF AMERICA, NATIONAL
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Attention: |
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Facsimile: |
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E - 3
ACKNOWLEDGED AND AGREED: |
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[NAME OF BLOCKED ACCOUNT BANK] |
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By: |
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Title: |
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Date: |
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[Address] |
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Attention: |
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Facsimile: |
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E - 4
ANNEX 1
TO BLOCKED ACCOUNT AGREEMENT
[FORM OF NOTICE OF EFFECTIVENESS]
DATED: [ ], [20][ ]
TO: [Name of Blocked Account Bank]
[Address]
ATTN: [ ]
Re: Blocked Account No[s]. [ ]
Ladies and Gentlemen:
We hereby give you notice that effective on the date you receive this letter, exclusive control of the above-referenced Blocked Account[s], as described in our letter agreement with you dated [ ], [20][ ] shall be exercised by the Agent. You are hereby instructed to comply immediately with the instructions set forth in [that letter agreement] [as set forth herein].
[Add instructions regarding disposition of proceeds in Accounts.]
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Very truly yours, |
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BANK OF AMERICA, NATIONAL
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By: |
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Name: |
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Title: |
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Attention: |
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Facsimile: |
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ACKNOWLEDGED AND AGREED: |
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[NAME OF BLOCKED ACCOUNT BANK] |
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By: |
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Address: |
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Attention: |
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Facsimile: |
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E - 5
Exhibit F
Form of Servicer Report
F - 1
Exhibit G
Form of SPV Secretarys Certificate
SECRETARYS CERTIFICATE
[ ], [20][ ]
I, [ ], the undersigned [ ] of [SPV] (the SPV ), a [ ] corporation, DO HEREBY CERTIFY that:
1 . Attached hereto as Annex A is a true and complete copy of the [ ] [Insert appropriate organizational document] of the SPV as in effect on the date hereof.
2 . Attached hereto as Annex B is a true and complete copy of the [By-laws] [Insert appropriate organizational document] of the SPV as in effect on the date hereof.
3 . Attached hereto as Annex C is a true and complete copy of the resolutions duly adopted by the Board of Managers of the SPV [adopted by consent] as of [ ], [20][ ], authorizing the execution, delivery and performance of each of the documents mentioned therein, which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect.
4 . The below-named persons have been duly qualified as and at all times since [ ], [20][ ], to and including the date hereof have been officers or representatives of the SPV holding the respective offices or positions below set opposite their names and are authorized to execute on behalf of the SPV the below-mentioned Transfer and Administration Agreement and all other Transaction Documents (as defined in such Transfer and Administration Agreement) to which the SPV is a party and the signatures below set opposite their names are their genuine signatures:
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[Remainder of Page Intentionally Left Blank]
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WITNESS my hand and seal of the SPV as of the day first above written.
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Secretary |
I, [ ] the undersigned, [Title] of the SPV, DO HEREBY CERTIFY that [ ] is the duly elected and qualified Secretary of the SPV and the signature above is his/her genuine signature.
WITNESS my hand as of the day first above written.
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Exhibit H
Form of [Originator/Servicer/Seller] Secretarys Certificate
SECRETARYS CERTIFICATE
[ ], [20][ ]
I, [ ], the undersigned [ ] of [Originator/Servicer/Seller] (the [ Originator/Servicer/Seller ]), a [ ] corporation, DO HEREBY CERTIFY that:
1 . Attached hereto as Annex A is a true and complete copy of the [ ] [Insert appropriate organizational document] of the [Originator/Servicer/Seller] as in effect on the date hereof.
2 . Attached hereto as Annex B is a true and complete copy of the [By-laws] [Insert appropriate organizational document] of the [Originator/Servicer/Seller] as in effect on the date hereof.
3 . Attached hereto as Annex C is a true and complete copy of the resolutions duly adopted by the Board of Directors of the [Originator/Servicer/Seller] [adopted by consent] as of [ ], [20][ ], authorizing the execution, delivery and performance of each of the documents mentioned therein, which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect.
4 . The below-named persons have been duly qualified as and at all times since [ ], [20][ ], to and including the date hereof have been officers or representatives of the [Originator/Servicer/Seller] holding the respective offices or positions below set opposite their names and are authorized to execute on behalf of the [Originator/Servicer/Seller] the below-mentioned [First Tier Agreement/Second Tier Agreement], the Transfer and Administration Agreement dated as of March 3, 2009 among the United Stationers Receivables, LLC, an Illinois limited liability company (the SPV ), United Stationers Supply Co., an Illinois corporation (the Originator ), United Stationers Financial Services LLC, an Illinois limited liability company (the Seller ) and as Servicer, Enterprise Funding Company LLC, a Delaware limited liability company ( Enterprise Funding ), as a Conduit Investor, Market Street Funding, LLC, a Delaware limited liability company ( Market Street , each of Enterprise Funding and Market Street a Conduit Investor and, collectively, the Conduit Investors), Bank of America, National Association, a national banking association ( Bank of America ), as Agent, as a Class Agent and as an Alternate Investor, PNC Bank, National Association ( PNC Bank ), as a Class Agent and as an Alternate Investor, and the financial institutions from time to time parties hereto as Alternate Investors and certain financial institutions named therein (the Agreement ) and all other Transaction Documents to which the [Originator/Servicer/Seller] is a party and the signatures below set opposite their names are their genuine signatures:
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WITNESS my hand and seal of the [Originator/Servicer/Seller] as of the date first above written.
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Secretary |
I, the undersigned, [Title] of the [Originator/Servicer/Seller], DO HEREBY CERTIFY that [ ] is the duly elected and qualified Secretary of the [Originator/Servicer/Seller] and the signature above is his/her genuine signature.
WITNESS my hand as of the date first above written.
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Exhibit I
Form of Opinion of Counsel for the SPV, Originator, Seller and Servicer
[ ], [20][ ]
Enterprise Funding Company LLC
c/o Global Securitization Services, LLC
68 South Service Road, Suite 120
Melville, New York 11747
Market Street Funding LLC
[address]
Bank of America, National Association
[231 South LaSalle Street
Suite 1611
Chicago, Illinois 60697]
[Bank of America Corporate Center, 10th Floor
Charlotte, North Carolina 28255]
PNC Bank, National Association
[address]
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section [5.1(m)] of the Transfer and Administration Agreement dated as of March 3, 2009 (the Agreement ) United Stationers Receivables, LLC, an Illinois limited liability company (the SPV ), United Stationers Supply Co., an Illinois corporation (the Originator ), United Stationers Financial Services LLC, an Illinois limited liability company (the Seller ) and as Servicer, Enterprise Funding Company LLC, a Delaware limited liability company ( Enterprise Funding ), as a Conduit Investor, Market Street Funding LLC, a Delaware limited liability company ( Market Street , each of Enterprise Funding and Market Street a Conduit Investor and, collectively, the Conduit Investors), Bank of America, National Association, a national banking association ( Bank of America ), as Agent, as a Class Agent and as an Alternate Investor, PNC Bank, National Association ( PNC Bank ), as a Class Agent and as an Alternate Investor, and the financial institutions from time to time parties hereto as Alternate Investors and certain financial institutions from time to time parties hereto as Alternate Investors. Capitalized terms used herein and not otherwise defined herein shall have the meanings given such terms in the Agreement.
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We have acted as counsel to the Originator, the Seller and the SPV in connection with the preparation of the Agreement, the First Tier Agreement, the Second Tier Agreement, the other Transaction Documents and the transactions contemplated thereby.
We have examined, on the date hereof, the Agreement and all exhibits thereto, the First Tier Agreement, the Second Tier Agreement and all exhibits thereto, certificates of public officials and of officers of the SPV, the Seller and the Originator and certified copies of the Originators, the Sellers and the SPVs [Modify the following for appropriate type of entity] [certificate of incorporation, by-laws, the Board of Directors resolutions] authorizing the Originators, the Sellers and the SPVs participation in the transactions contemplated by the Agreement, the First Tier Agreement, the Second Tier Agreement, the other Transaction Documents, copies of each of the above having been delivered to you, copies of the financing statements on Form UCC-1 filed in the filing offices listed in Schedule I hereto executed by the Originator, as debtor, in favor of the SPV, as secured party and showing the Agent, on behalf of the Conduit Investors and the Alternate Investors, as the assignee of the secured party, substantially in the form attached hereto as Exhibit A (the Originator Financing Statements ) and the Seller, as debtor, in favor of the SPV, as secured party and showing the Agent, on behalf of the Conduit Investors and the Alternate Investors, as the assignee of the secured party, substantially in the form attached hereto as Exhibit B (the Seller Financing Statements ) and copies of the financing statements on Form UCC-1 filed in the filing offices listed in Schedule II hereto executed by SPV, as debtor, in favor of the Agent, on behalf of the Conduit Investor and the Alternate Investors, as secured party, substantially in the form attached hereto as Exhibit C [Should track the granting clause of the Agreement or if the SPV will only be used for a single transaction a blanket lien may be given by the SPV to the Agent covering: all accounts, chattel paper, instruments, general intangibles, inventory, investment property and other property of the SPV, whether now or hereafter owned or existing, and all proceeds of the foregoing] (the SPV Financing Statements ). We have also examined the closing documents delivered pursuant to the Agreement, the First Tier Agreement, the Second Tier Agreement and copies of all such documents and records, and have made such investigations of law, as we have deemed necessary and relevant as a basis for our opinion. With respect to the accuracy of material factual matters which were not independently established, we have relied on certificates and statements of officers of the Originator, the Seller and the SPV.
On the basis of the foregoing, we are of the opinion that:
1 . The SPV is a corporation duly [incorporated], validly existing and in good standing under the laws of [ ], has the [corporate] power and authority to own its properties and to carry on its business as now being conducted, and had at all relevant times, and now has, all necessary power, authority, and legal right to acquire and own the Receivables and other Affected Assets, and is duly qualified and in good standing as a foreign [corporation] and is authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization.
2 . The Originator is a [corporation] duly incorporated, validly existing and in good standing under the laws of [ ], has the [corporate] power and authority to own its properties and to carry on its business as now being conducted, and had at all relevant times, and now has, all necessary power, authority, and legal right to acquire and own the Receivables and
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other Affected Assets, and is duly qualified and in good standing as a foreign [corporation] and is authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization.
3. The Seller is a [corporation] duly incorporated, validly existing and in good standing under the laws of [ ], has the [corporate] power and authority to own its properties and to carry on its business as now being conducted, and had at all relevant times, and now has, all necessary power, authority, and legal right to acquire and own the Receivables and other Affected Assets, and is duly qualified and in good standing as a foreign [corporation] and is authorized to do business in each jurisdiction in which the character of its properties or the nature of its business requires such qualification or authorization.
4. The SPV has the power, [corporate] and other, and has taken all necessary [corporate] action to execute, deliver and perform the Agreement and the other Transaction Documents to which it is a party, each in accordance with its respective terms, and to consummate the transactions contemplated thereby. The Transaction Documents to which the SPV is a party have been duly executed and delivered by the SPV and constitute the legal, valid and binding obligations of the SPV enforceable against the SPV in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally and by general equitable principles.
5. The Originator has the power, [corporate] and other, and has taken all necessary corporate action to execute, deliver and perform the First Tier Agreement and the other Transaction Documents to which it is a party, each in accordance with its respective terms, and to consummate the transactions contemplated thereby. The Transaction Documents to which the Originator is a party have been duly executed and delivered by the Originator and constitute the legal, valid and binding obligations of the Originator enforceable against the Originator in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally and by general equitable principles.
6. The Seller has the power, [corporate] and other, and has taken all necessary corporate action to execute, deliver and perform the Second Tier Agreement and the other Transaction Documents to which it is a party, each in accordance with its respective terms, and to consummate the transactions contemplated thereby. The Transaction Documents to which the Seller is a party have been duly executed and delivered by the Seller and constitute the legal, valid and binding obligations of the Seller enforceable against the Seller in accordance with their terms, except as enforcement thereof may be limited by bankruptcy, insolvency and other similar laws affecting the enforcement of creditors rights generally and by general equitable principles.
7 . The execution, delivery and performance in accordance with their terms by the SPV of the Agreement and the other Transaction Documents and the consummation of the transactions contemplated thereby, do not and will not (i) require (a) any governmental approval or (b) any consent or approval of any stockholder of the SPV that has not been obtained, (ii) violate or conflict with, result in a breach of, or constitute a default under (a) the [certificate of incorporation or the by-laws] of the SPV, (b) any other agreement to which the SPV is a party or by which the SPV or any of its properties may be bound, or (c) any Law applicable to the SPV of
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any court or of any Official Body having jurisdiction over the SPV or any of its properties, or (iii) result in or require the creation or imposition of any Adverse Claim upon any of the assets, property or revenue of the SPV other than as contemplated by the Agreement.
8 . The execution, delivery and performance in accordance with their terms by the Originator of the First Tier Agreement and the other Transaction Documents and the consummation of the transactions contemplated thereby, do not and will not (i) require (a) any governmental approval or (b) any consent or approval of any stockholder of the Originator that has not been obtained, (ii) violate or conflict with, result in a breach of, or constitute a default under (a) the certificate of incorporation or the by-laws of the Originator, (b) any other agreement to which the Originator is a party or by which the Originator or any of its properties may be bound, or (c) any Law applicable to the Originator of any Official Body having jurisdiction over the Originator or any of its properties, or (iii) result in or require the creation or imposition of any Adverse Claim upon any of the assets, property or revenue of the Originator other than as contemplated by the First Tier Agreement.
9. The execution, delivery and performance in accordance with their terms by the Seller of the Second Tier Agreement and the other Transaction Documents and the consummation of the transactions contemplated thereby, do not and will not (i) require (a) any governmental approval or (b) any consent or approval of any stockholder of the Originator that has not been obtained, (ii) violate or conflict with, result in a breach of, or constitute a default under (a) the certificate of incorporation or the by-laws of the Seller, (b) any other agreement to which the Seller is a party or by which the Seller or any of its properties may be bound, or (c) any Law applicable to the Seller of any Official Body having jurisdiction over the Seller or any of its properties, or (iii) result in or require the creation or imposition of any Adverse Claim upon any of the assets, property or revenue of the Seller other than as contemplated by the Second Tier Agreement.
10 . Except as set forth in the schedules attached hereto, there are not, in any court or before any arbitrator of any kind or before or by any governmental or non-governmental body, any actions, suits, proceedings, litigation or investigations, pending or to the best of our knowledge, after due inquiry, threatened, (i) against the SPV or the business or any property of the SPV except actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, have a Material Adverse Effect or (ii) relating to the Agreement or any other Transaction Document.
11 . Except as set forth in the schedules attached hereto, there are not, in any court or before any arbitrator of any kind or before or by any governmental or non-governmental body, any actions, suits, proceedings, litigation or investigations, pending or to the best of our knowledge, after due inquiry, threatened, (i) against the Originator or the business or any property of the Originator except actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, have a Material Adverse Effect or (ii) relating to the First Tier Agreement or any other Transaction Document.
12. Except as set forth in the schedules attached hereto, there are not, in any court or before any arbitrator of any kind or before or by any governmental or non-governmental body, any actions, suits, proceedings, litigation or investigations, pending or to the best of our
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knowledge, after due inquiry, threatened, (i) against the Seller or the business or any property of the Seller except actions, suits or proceedings that, if adversely determined, would not, singly or in the aggregate, have a Material Adverse Effect or (ii) relating to the Second Tier Agreement or any other Transaction Document.
13 . The Receivables constitute [accounts] [general intangibles][chattel paper] [instruments] [certificated securities] [uncertificated securities] [investment property] as [that] [such] term[s] [is] [are] defined in the Uniform Commercial Code as in effect in [Insert the state whose law governs] [XYZ].
14 . The First Tier Agreement creates a valid and enforceable security interest (as that term is defined in Section 1-201(37) of the Uniform Commercial Code (including the conflict of laws rules thereof) (the UCC ) as in effect in New York (the New York UCC ) and [ ] (the [XYZ] UCC ), under Article 9 of the New York UCC ( First Tier Security Interest ) in favor of the SPV in the Receivables and other Affected Assets and the proceeds thereof (except that the First Tier Security Interest will attach to any Receivable created after the date hereof only when the Originator possesses rights in such Receivable). The internal laws of [XYZ] govern the perfection by the filing of financing statements of the First Tier Security Interest in the Receivables and the proceeds thereof. The Originator Financing Statement(s) have been filed in the filing office(s) located in [XYZ] listed in Schedule I hereto, which [is] [are] the only office(s) in which filings are required under the [XYZ] UCC to perfect the First Tier Security Interest in the Receivables and the proceeds thereof, and accordingly the First Tier Security Interest in each Receivable and the proceeds thereof will, on the date of the initial transfer under the First Tier Agreement, be perfected under Article 9 of the [XYZ] UCC. All filing fees and all taxes required to be paid as a condition to or upon the filing of the Originator Financing Statement(s) in [XYZ] have been paid in full. As of the date hereof, there were no (i) UCC financing statements naming the Originator as debtor, Originator or assignor and covering any Receivables or other Affected Assets or any interest therein or (ii) notices of the filing of any federal tax lien (filed pursuant to Section 6323 of the Internal Revenue Code) or lien of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of the Employment Retirement Income Security Act) covering any Receivable or other Affected Asset or any interest therein. The filing of the Originator Financing Statement(s) in the filing offices listed in Schedule I will create a first priority security interest in each Receivable. Such perfection and priority will continue, provided that appropriate continuation statements are timely filed where and when required under the UCC.
15 . The Second Tier Agreement creates a valid and enforceable security interest (as that term is defined in Section 1-201(37) of the Uniform Commercial Code (including the conflict of laws rules thereof) (the UCC ) as in effect in New York (the New York UCC ) and [ ] (the [XYZ] UCC ), under Article 9 of the New York UCC ( Second Tier Security Interest ) in favor of the SPV in the Receivables and other Affected Assets and the proceeds thereof (except that the Second Tier Security Interest will attach to any Receivable created after the date hereof only when the Seller possesses rights in such Receivable). The internal laws of [XYZ] govern the perfection by the filing of financing statements of the Second Tier Security Interest in the Receivables and the proceeds thereof. The Seller Financing Statement(s) have been filed in the filing office(s) located in [XYZ] listed in Schedule I hereto, which [is] [are] the only office(s) in which filings are required under the [XYZ] UCC to perfect the Second Tier
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Security Interest in the Receivables and the proceeds thereof, and accordingly the Second Tier Security Interest in each Receivable and the proceeds thereof will, on the date of the initial transfer under the Second Tier Agreement, be perfected under Article 9 of the [XYZ] UCC. All filing fees and all taxes required to be paid as a condition to or upon the filing of the Seller and/or Seller Financing Statement(s) in [XYZ] have been paid in full. As of the date hereof, there were no (i) UCC financing statements naming the Seller as debtor, Seller or assignor and covering any Receivables or other Affected Assets or any interest therein or (ii) notices of the filing of any federal tax lien (filed pursuant to Section 6323 of the Internal Revenue Code) or lien of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of the Employment Retirement Income Security Act) covering any Receivable or other Affected Asset or any interest therein. The filing of the Seller Financing Statement(s) in the filing offices listed in Schedule I will create a first priority security interest in each Receivable. Such perfection and priority will continue, provided that appropriate continuation statements are timely filed where and when required under the UCC.
16. The Agreement creates a valid and enforceable security interest (as that term is defined in Section 1-201(37) of the New York UCC and [ ] the [Note that the states in this paragraph 11 may be different that the stated in paragraph 10 ] ( the [ABC] UCC ), under Article 9 of the New York UCC ( Third Tier Security Interest ) in favor of the Agent in each Receivable and other Affected Assets (except that the Third Tier Security Interest will attach only when the SPV possesses rights in such Receivable). The internal laws of [ABC] govern the perfection by the filing of financing statements of the Third Tier Security Interest in the Receivables and the proceeds thereof. The SPV Financing Statement(s) have been filed in the filing office(s) located in [ABC] listed in Schedule II hereto, which [is] [are] the only office(s) in which filings are required under the [ABC] UCC to perfect the Third Tier Security Interest in the Receivables and the proceeds thereof, and accordingly the Third Tier Security Interest in each Receivable and the proceeds thereof will, on the date of the initial transfer under the Agreement, be perfected under Article 9 of the [ABC] UCC. All filing fees and all taxes required to be paid as a condition to or upon the filing of the SPV Financing Statement(s) in [ABC] have been paid in full. As of the date hereof, there were no (i) UCC financing statements naming SPV as debtor, Originator or assignor and covering any Receivables or other Affected Assets or any interest therein or (ii) notices of the filing of any federal tax lien (filed pursuant to Section 6323 of the Internal Revenue Code) or lien of the Pension Benefit Guaranty Corporation (filed pursuant to Section 4068 of the Employment Retirement Income Security Act) covering any Receivable or other Affected Assets or any interest therein. The filing of the SPV Financing Statement(s) in the filing offices listed in Schedule II will create a first priority security interest in each Receivable. Such perfection and priority will continue, provided that appropriate continuation statements are timely filed where and when required under the UCC. [If the Receivables constitute instruments, certificated securities or uncertificated securities, this paragraph should be redrafted to reflect different perfection requirements]
17 . Neither the SPV, the Seller nor the Originator is, nor is controlled by, an investment company within the meaning of the Investment Company Act of 1940, as amended.
In giving the opinions in paragraphs 14, 15 and 16 , we have assumed that the Originators, the Sellers and the SPVs chief executive office will continue to be located in
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[XYZ][ABC][, as applicable]. The conclusions expressed in paragraphs 14, 15 and 16 are subject to the accuracy of the personnel in the filing offices referred to above with regard to the filing, indexing and recording of financing statements and notices of Adverse Claim, and to the correctness of reports to us by [Insert name of search company.] [ ], who performed the searches of such records and who made the filings on behalf of the Originator, the Seller and the SPV in [XYZ][ABC][, as applicable].
In giving the opinions set forth in paragraphs 14, 15 and 16 , we have assumed that all filings as appropriate in the event of a change in the name, identity or corporate structure of the debtor (or the Originator or assignor) named in any financing statements and all continuation statements necessary under the UCC to maintain the perfection of the First Tier Security Interest and the Second Tier Security Interest in the Receivables and the proceeds thereof will be duly and timely filed. In giving such opinions, we also do not express any opinion as to (a) transactions excluded from Article 9 of the UCC by virtue of Section 9-104 of the UCC, (b) any security interest in proceeds except to the extent that the validity and perfection of any interest in proceeds (as such term is defined under the UCC) thereof that is covered by the Originator Financing Statements, the Seller Financing Statements or the SPV Financing Statements or any duly filed financing statement referred to above may be permitted by Section 9-306 of the UCC, and (c) any security interest that is terminated or released.
The foregoing opinions and conclusions were given only in respect of the laws of [XYZ] [, ABC], the State of New York and, to the extent specifically referred to herein, the Federal laws of the United States of America.
This opinion has been delivered at your request for the purposes contemplated by the Agreement. Without our prior written consent, this opinion is not to be utilized or quoted for any other purpose and no one other than you is entitled to rely thereon; provided, that any Alternate Investor, any Program Support Provider [and any placement agent or dealer of any Conduit Investors commercial paper] may rely on this opinion as of it were addressed to them.
Very truly yours,
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Exhibit J
Scope of Agreed Upon Procedures
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Exhibit K
Form of Compliance Certificate
To: Bank of America, National Association, as Agent
This Compliance Certificate (the Certificate) is furnished pursuant to Section 6.1(a)(iii) of that certain Transfer and Administration Agreement dated as of March 3, 2009 as it may be amended or otherwise modified from time to time (as so amended or modified, the Agreement ) by and among United Stationers Receivables, LLC, an Illinois limited liability company (the SPV ), United Stationers Supply Co., an Illinois corporation (the Originator ), United Stationers Financial Services LLC, an Illinois limited liability company (the Seller ) and as Servicer, Enterprise Funding Company LLC, a Delaware limited liability company ( Enterprise Funding ), as a Conduit Investor, Market Street Funding LLC, a Delaware limited liability company ( Market Street , each of Enterprise Funding and Market Street a Conduit Investor and, collectively, the Conduit Investors), Bank of America, National Association, a national banking association ( Bank of America ), as Agent, as a Class Agent and as an Alternate Investor, PNC Bank, National Association ( PNC Bank ), as a Class Agent and as an Alternate Investor, and the financial institutions from time to time parties hereto as Alternate Investors. Capitalized terms used and not otherwise defined herein are used with the meanings attributed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected [president] [treasurer] of the [SPV] [Performance Guarantor].
2. I have reviewed the terms of the Agreement and I have made, or have caused to be made under my supervision, a detailed review of the transactions and conditions of the SPV and Performance Guarantor during the accounting period covered by the attached financial statements.
3. The examinations described in Paragraph 2 did not disclose, and I have no knowledge of, the existence of any condition or event which constitutes a Termination Event or Potential Termination Event during or at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate, except as set forth in Paragraph 5 below.
4. Schedule I attached hereto sets forth financial data and computations evidencing the compliance with certain covenants of the Agreement, including the financial covenants in Section 6.3 of the Agreement, all of which data and computations are true, complete and correct and have been prepared in accordance with GAAP.
5. Described below are the exceptions, if any, to Paragraph 3 by listing, in detail, the nature of the condition or event, the period during which it has existed and the action which the
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SPV or the Performance Guarantor has taken, is taking, or proposes to take with respect to each such condition or event:
6. [add for SPV certification: As of the date hereof, the jurisdiction of organization of the SPV is the State of Illinois, the place where the SPV is located for the purposes of Section 9-307 of the UCC is the State of Illinois, and the SPV has not changed its jurisdiction of organization or its location for the purposes of Section 9-307 of the UCC since the date of the original Agreement.]
The foregoing certifications, together with the computations set forth in Schedule I hereto and the financial statements delivered with this Certificate in support hereof, are made and delivered this day of , .
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SCHEDULE I TO COMPLIANCE CERTIFICATE
A. Schedule of Compliance as of , with Section of the Agreement.
This schedule relates to the fiscal year ended:
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Exhibit 10.2
EXECUTION COPY
RECEIVABLES SALE AGREEMENT
by and between
UNITED STATIONERS SUPPLY CO.,
as Originator,
and
UNITED STATIONERS FINANCIAL SERVICES LLC,
as Purchaser
Dated as of March 3, 2009
Table of Contents
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Article I Definitions |
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Section 1.1 |
Definitions |
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Section 1.2 |
Other Terms |
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Section 1.3 |
Computation of Time Periods |
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Article II Purchase, Conveyance and Servicing of Receivables |
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Section 2.1 |
Sale |
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Section 2.2 |
Servicing of Receivables |
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Article III Consideration and Payment; Receivables |
4 |
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Section 3.1 |
Conveyance Amount |
4 |
Section 3.2 |
Payment of Conveyance Amount |
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Section 3.3 |
Settlement |
5 |
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Article IV Representations and Warranties |
5 |
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Section 4.1 |
Originators Representations and Warranties |
5 |
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Article V Covenants |
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Section 5.1 |
Covenants of the Originator |
8 |
Section 5.2 |
Covenants of the Purchaser |
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Article VI Repurchase Obligation |
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Section 6.1 |
Mandatory Repurchase |
12 |
Section 6.2 |
No Recourse |
12 |
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Article VII Conditions Precedent |
12 |
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Section 7.1 |
Conditions to the Purchasers Obligations Regarding Receivables |
12 |
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Article VIII Term and Termination |
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Section 8.1 |
Term |
13 |
Section 8.2 |
Effect of Sale Termination Date |
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Article IX Indemnification |
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Section 9.1 |
Indemnities by the Originator |
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Article X Miscellaneous Provisions |
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Section 10.1 |
Amendment |
14 |
Section 10.2 |
GOVERNING LAW; Submission to Jurisdiction |
14 |
Section 10.3 |
Notices |
15 |
Section 10.4 |
Severability of Provisions |
15 |
Section 10.5 |
Assignment |
15 |
Section 10.6 |
Further Assurances |
16 |
Section 10.7 |
No Waiver; Cumulative Remedies |
16 |
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Section 10.8 |
Counterparts |
16 |
Section 10.9 |
Binding Effect; Third-Party Beneficiaries |
16 |
Section 10.10 |
Merger and Integration |
16 |
Section 10.11 |
Headings |
17 |
Section 10.12 |
Exhibits |
17 |
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Exhibits |
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Exhibit A |
Credit and Collection Policy |
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Schedules |
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Schedule 4.1(g) |
List of Actions and Suits |
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Schedule 4.1(i) |
Names, Jurisdictions of Formation, Type of Entity and Locations of Certain Offices and Records |
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Schedule 4.1(j) |
List of Subsidiaries, Divisions and Tradenames; FEIN |
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Schedule 4.1(p) |
List of Blocked Account Banks and Blocked Accounts |
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RECEIVABLES SALE AGREEMENT
This RECEIVABLES SALE AGREEMENT, dated as of March 3, 2009 (as amended, supplemented or otherwise modified and in effect from time to time, this Agreement ), by UNITED STATIONERS SUPPLY CO., an Illinois corporation, as originator (the Originator ) and UNITED STATIONERS FINANCIAL SERVICES LLC, an Illinois limited liability company, as purchaser (the Purchaser ).
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase from the Originator from time to time certain accounts receivable both currently existing and hereafter generated in the normal course of the Originators business pursuant to written agreements or with invoices on open accounts;
WHEREAS, the Originator desires to sell and assign from time to time such certain accounts receivable to the Purchaser upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by and between the Purchaser and the Originator as follows:
All capitalized terms used herein shall have the meanings specified herein or, if not so specified, the meaning specified in, or incorporated by reference into, the Transfer Agreement (as defined below), and shall include in the singular number the plural and in the plural number the singular:
Conveyance Amount : As defined in Section 3.1 hereof.
Discount Purchase Percentage : A percentage determined by the Purchaser and the Seller from time to time (but at least on a quarterly basis).
Distribution Business : (i) The distribution of products, including but not limited to, technology products, office products, janitorial/sanitation products, foodservice consumables, office furniture, and safety products, (ii) any activity necessary, appropriate or incidental to the activities described in the preceding clause (i) of this definition, including but not limited to delivering, installing and servicing the products of the Originator or any Subsidiary sells; and (iii) any business related, ancillary or complementary to or arising from the foregoing.
Eligible Receivable : As defined in the Transfer Agreement.
Investment Company Act : The Investment Company Act of 1940, as amended.
Originator : As defined in the Preamble .
Purchaser : As defined in the Preamble .
Receivables Purchase Agreement : The Receivables Purchase Agreement, dated as of March 3, 2009, by and between United Stationers Financial Services LLC, as Seller, and the SPV, as Purchaser, as such agreement may be amended, modified or supplemented from time to time.
Related Security : As defined in the Transfer Agreement.
Relevant UCC : The Uniform Commercial Code as in effect in the States of New York or Illinois, as applicable.
Sale Termination Date : As defined in Section 8.1 hereof.
Securities Exchange Act : The Securities Exchange Act of 1934, as amended.
Secured Obligations : As defined in Section 2.1(d) hereof.
SPV : United Stationers Receivables, LLC, an Illinois limited liability company, together with its successors and assigns.
Transfer Agreement : The Transfer and Administration Agreement, dated as of March 3, 2009, by and among the SPV, the Originator, the Servicer, United Stationers Financial Services LLC, the Class Agents, the Agent and the Investors, as such agreement may be amended, modified or supplemented from time to time.
All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the Relevant UCC, and not specifically defined herein, are used herein as defined in such Article 9.
Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word from means from and including and the words to and until each means to but excluding.
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The servicing, administering and collection of the Receivables and Related Security, Collections and proceeds thereof conveyed hereunder shall be conducted by the Servicer as set forth and in accordance with the Transfer Agreement. The Purchaser hereby appoints the Servicer as its agent to enforce the Purchasers rights and interests in, to and under the Receivables, the Related Security, Collections and proceeds with respect thereto.
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The Originator represents and warrants to the Purchaser, the Agent, the Class Agents and the Investors, as to itself, that, on the Closing Date and on each date that Receivables are transferred by it pursuant to Section 2.1 :
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At all times from the date hereof to the Final Payout Date, unless the Purchaser shall otherwise consent in writing:
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Except as otherwise provided herein, the Purchaser shall not sell, transfer or otherwise dispose of any Receivables to any Person other than the SPV or as otherwise expressly provided for in the Transaction Documents.
The Originator agrees to repurchase from the Purchaser any Receivables sold by it hereunder if the Purchaser notifies the Originator that, as of the related date of purchase of such Receivable, there existed a material breach of any representation or warranty made or deemed made with respect to such a Receivable pursuant to Article IV and the Originator shall fail to cure such breach within ten (10) Business Days of such notice. The repurchase price shall be paid by the Originator to the Purchaser in immediately available funds on such tenth (10 th ) Business Day in an amount equal to the Unpaid Balance of each Receivable repurchased.
Except as otherwise provided in this Agreement, the purchase and sale of Receivables under this Agreement shall be without recourse to the Originator.
The obligations of the Purchaser to purchase any Receivables on any sale date shall be subject to the satisfaction of the following conditions:
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This Agreement shall commence as of the Closing Date and shall continue in full force and effect until the date following the earlier of (a) the date designated by the Purchaser or the Originator as the termination date at any time following sixty (60) day written notice to the other (with a copy thereof to the Agent), (b) the date on which the Termination Date occurs or is declared pursuant to Section 8.2 of the Transfer Agreement, (c) upon the occurrence of a Purchaser Termination Date under Section 8.1 of the Receivables Purchase Agreement, (d) upon the occurrence of an Event of Bankruptcy with respect to the Purchaser or the Originator or (e) the date on which the Purchaser or the Originator becomes unable for any reason to purchase or re-purchase any Receivable in accordance with the provisions of this Agreement or defaults on its obligations hereunder, which default continues unremedied for more than thirty (30) days after written notice (any such date being a Sale Termination Date ); provided , however , that the occurrence of the Sale Termination Date pursuant to this Section 8.1 hereof shall not discharge any Person from any obligations incurred prior to the Sale Termination Date, including, without limitation, any obligations to make any payments with respect to the interest of the Purchaser in any Receivable sold prior to the Sale Termination Date.
Following the occurrence of the Sale Termination Date pursuant to Section 8.1 hereof, the Originator shall not sell, and the Purchaser shall not purchase, any Receivables. No termination or rejection or failure to assume the executory obligations of this Agreement in any Event of Bankruptcy with respect to the Originator or the Purchaser shall be deemed to impair or affect the obligations pertaining to any executed sale or executed obligations, including, without limitation, pre-termination breaches of representations and warranties by the Originator or the Purchaser. Without limiting the foregoing, prior to the Sale Termination Date, the failure of the Originator to deliver computer records of any Receivables or any reports regarding any Receivables shall not render such transfer or obligation executory, nor shall the continued duties of the parties pursuant to Article V or Section 10.1 of this Agreement render an executed sale executory.
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Without limiting any other rights which the Indemnified Party may have hereunder or under applicable Law, the Originator hereby agrees to indemnify the Purchaser and its respective officers, directors, employees, counsel, other agents, successors and assigns (collectively, Seller Indemnified Party ) from and against any and all damages, losses, claims, liabilities, costs and expenses, including reasonable attorneys fees (which such attorneys may be employees of the Program Support Providers, the Agent, the Collateral Agent or the Class Agents, as applicable) and disbursements (all of the foregoing being collectively referred to as Seller Indemnified Amounts ) awarded against or incurred by it in any action or proceeding between the Originator and the Seller Indemnified Party or between the Seller Indemnified Party and any third party or otherwise arising out of or as a result of this Agreement, the other Transaction Documents, the ownership or maintenance, either directly or indirectly, of the Receivables, any Related Security or any interest therein or any of the other transactions contemplated hereby or thereby, excluding, however, (x) Seller Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Seller Indemnified Party, as finally determined by a court of competent jurisdiction, (y) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables or (z) Excluded Taxes.
This Agreement and the rights and obligations of the parties hereunder may not be changed orally, but only by an instrument in writing signed by the Purchaser and the Originator and consented to in writing by the Agent. Any reconveyance executed in accordance with the provisions hereof shall not be considered amendments to this Agreement.
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Except as provided below, all communications and notices provided for hereunder shall be in writing (including telecopy, facsimile or electronic transmission or similar writing) and shall be given to the other party at its address or telecopy number set forth below or at such other address or telecopy number as such party may hereafter specify for the purposes of notice to such party. Each such notice or other communication shall be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 10.3 and confirmation is received, (b) if given by mail 3 Business Days following such posting, postage prepaid, U.S. certified or registered, (c) if given by overnight courier, one (1) Business Day after deposit thereof with a national overnight courier service, or (d) if given by any other means, when received at the address specified in this Section 10.3 .
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in the case of the Purchaser: |
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United Stationers Financial Services, LLC |
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One Parkway North Boulevard |
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Deerfield, Illinois 60015-2559 |
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Telephone: |
(847) 627-7000 |
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Facsimile: |
(847) 627-7001 |
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in the case of the Originator: |
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United Stationers Supply Co. |
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One Parkway North Boulevard |
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Deerfield, Illinois 60015-2559 |
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Telephone: |
(847) 627-7000 |
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Facsimile: |
(847) 627-7001 |
or, as to each party, at such other address as shall be designated by such party in a written notice to each other party.
If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement.
This Agreement may not be assigned by the parties hereto, except that the Originator acknowledges that:
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The Purchaser will, pursuant to the Receivables Purchase Agreement, convey the Receivables and the Related Security, Collections and the proceeds thereof to the SPV and assign its rights under this Agreement to the SPV, and that the representations and warranties contained in this Agreement and the rights of the Purchaser under Article VI and the indemnities under Section 5.1(u) hereof are intended to benefit the SPV, the Agent, the Class Agents and the Investors. The Originator hereby consents to such conveyance and assignment.
The Purchaser and the Originator agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other party more fully to effect the purposes of this Agreement, including, without limitation, the execution of any financing statements or continuation statements or equivalent documents relating to the Receivables conveyed hereunder for filing under the provisions of the Relevant UCC or other laws of any applicable jurisdiction.
No failure to exercise and no delay in exercising, on the part of the Purchaser or the Originator, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privilege provided by law.
This Agreement may be executed in two or more counterparts including telecopy transmission thereof (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.
This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. The Purchaser and its respective assignees are intended by the parties hereto to be a third-party beneficiaries of this Agreement.
Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided herein.
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The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.
The schedules and exhibits referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for all purposes.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF, the Purchaser and the Originator each have caused this Receivables Sale Agreement to be duly executed by their respective officers as of the day and year first above written.
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UNITED STATIONERS SUPPLY CO., |
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as Originator |
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By: |
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Name: |
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Title: |
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[Signature page to Receivables Sale Agreement]
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UNITED STATIONERS FINANCIAL |
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SERVICES LLC, as Purchaser |
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By: |
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Name: |
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Title: |
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Acknowledged as of the
date first above written:
BANK OF AMERICA, NATIONAL |
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ASSOCIATION , as Agent |
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By: |
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Name: |
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Title: |
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[Signature page to Receivables Sale Agreement]
EXHIBIT A
Credit and Collection Policy
SCHEDULE 4.1(g)
List of Actions and Suits
None.
SCHEDULE 4.1(i)
Names,
Jurisdictions of Formation, Type of Entity
and
Locations of Certain Offices and Records
UNITED STATIONERS FINANCIAL SERVICES LLC |
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Jurisdiction of Formation: |
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Illinois |
Principal Place of Business: |
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One Parkway North Blvd., Deerfield, Illinois |
President: |
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Victoria J. Reich |
Location of Records: |
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One Parkway North Blvd., Deerfield, Illinois |
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UNITED STATIONERS SUPPLY CO. |
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Jurisdiction of Formation: |
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Illinois |
Principal Place of Business: |
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One Parkway North Blvd., Deerfield, Illinois |
President: |
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Richard W. Gochnauer |
Location of Records: |
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One Parkway North Blvd., Deerfield, Illinois |
SCHEDULE 4.1(j)
List of Subsidiaries, Divisions and Tradenames; FEIN
United Stationers Supply Co. |
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Subsidiaries: |
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Azerty de Mexico, S.A. de C.V. |
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Lagasse, Inc |
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ORS Nasco, Inc. |
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United Stationers Receivables, LLC |
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United Stationers Financial Services LLC |
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United Stationers Technology Services LLC |
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United Stationers Hong Kong Limited |
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United Worldwide Limited |
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Divisions: |
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United Supply US |
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Azerty US |
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Tradenames: |
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None |
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Federal Employer |
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Identification Number: |
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36-2431718 |
SCHEDULE 4.1(p)
List of Blocked Account Banks and Blocked Accounts
None.
Exhibit 10.3
EXECUTION COPY
RECEIVABLES PURCHASE AGREEMENT
by and between
UNITED STATIONERS FINANCIAL SERVICES LLC ,
as Seller
and
UNITED STATIONERS RECEIVABLES, LLC ,
as Purchaser
Dated as of March 3, 2009
Table of Contents
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Article I Definitions |
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1 |
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Section 1.1 |
Definitions |
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Section 1.2 |
Other Terms |
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3 |
Section 1.3 |
Computation of Time Periods |
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3 |
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Article II Purchase, Conveyance and Servicing of Receivables |
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3 |
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Section 2.1 |
Sale |
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Section 2.2 |
Servicing of Receivables |
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Article III Consideration and Payment; Receivables |
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Section 3.1 |
Conveyance Amount |
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Section 3.2 |
Payment of Conveyance Amount |
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Section 3.3 |
Settlement |
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Article IV Representations and Warranties |
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Section 4.1 |
Sellers Representations and Warranties |
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Article V Covenants of the Seller |
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Section 5.1 |
Covenants of the Seller |
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10 |
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Article VI Repurchase Obligation |
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Section 6.1 |
Mandatory Repurchase |
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Section 6.2 |
No Recourse |
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Article VII Conditions Precedent |
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Section 7.1 |
Conditions to the Purchasers Obligations Regarding Receivables |
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13 |
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Article VIII Term and Termination |
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Section 8.1 |
Term |
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Section 8.2 |
Effect of Purchase Termination Date |
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Article IX Indemnification |
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Section 9.1 |
Indemnities by the Seller |
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15 |
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Article X Miscellaneous Provisions |
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Section 10.1 |
Amendment |
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Section 10.2 |
GOVERNING LAW; Submission to Jurisdiction |
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Section 10.3 |
Notices |
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Section 10.4 |
Severability of Provisions |
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Section 10.5 |
Assignment |
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Section 10.6 |
Further Assurances |
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Section 10.7 |
No Waiver; Cumulative Remedies |
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Section 10.8 |
Counterparts |
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Section 10.9 |
Binding Effect; Third-Party Beneficiaries |
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Section 10.10 |
Merger and Integration |
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Section 10.11 |
Headings |
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Section 10.12 |
Exhibits |
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Exhibits |
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Exhibit A |
Form of Subordinated Note |
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Exhibit B |
Credit and Collection Policy |
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Schedules |
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Schedule 4.1(g) |
List of Actions and Suits |
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Schedule 4.1(i) |
Names, Jurisdictions of Formation, Type of Entity and Locations of Certain Offices and Records |
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Schedule 4.1(j) |
List of Subsidiaries, Divisions and Tradenames; FEIN |
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Schedule 4.1(p) |
List of Blocked Account Banks and Blocked Accounts |
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ii
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT, dated as of March 3, 2009 (as amended, supplemented or otherwise modified and in effect from time to time, this Agreement ), between UNITED STATIONERS FINANCIAL SERVICES, LLC , an Illinois limited liability company, as seller (the Seller ) and UNITED STATIONERS RECEIVABLES, LLC , an Illinois limited liability company, as purchaser (the Purchaser ).
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase from the Seller from time to time certain accounts receivable both currently existing and hereafter generated in the normal course of the Sellers or the Originators business pursuant to written agreements or with invoices on open accounts;
WHEREAS, the Seller desires to sell and assign from time to time such certain accounts receivable to the Purchaser upon the terms and conditions hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by and between the Purchaser and the Seller as follows:
All capitalized terms used herein shall have the meanings specified herein or, if not so specified, the meaning specified in, or incorporated by reference into, the Transfer Agreement (as defined below), and shall include in the singular number the plural and in the plural number the singular:
Advance : As defined in Section 3.2(a) .
Advance Limit : As defined in Section 3.2(a) .
Conveyance Amount : As defined in Section 3.1 hereof.
Discount Purchase Percentage : A percentage determined by the Purchaser and the Seller from time to time (but at least on a quarterly basis).
Eligible Receivable : As defined in the Transfer Agreement.
Investment Company Act : The Investment Company Act of 1940, as amended.
Net Worth : At any time, the excess, if any, of (a) the aggregate Unpaid Balances of the Receivables at such time, plus all cash Collections, if any, on deposit in the Blocked Accounts and/or the Collection Account at such time to the extent such amounts are available for and applicable to the payment of Net Investment, over (b) the sum of (i) the Net Investment outstanding at such time, (ii) the aggregate outstanding amount of Advances (including any Advance to be made on the date of determination), (iii) the Servicing Fee Reserve and (iv) the Yield Reserve.
Originator : United Stationers Supply Co., an Illinois corporation.
Prime Rate : On any day, the rate of interest equal to the U.S. Prime Rate published in the Money Rates section of the Wall Street Journal (National Edition) on such day.
Purchase Termination Date : As defined in Section 8.1 hereof.
Purchaser : United Stationers Receivables, LLC, an Illinois limited liability company, and its successors and assigns.
Receivables Sale Agreement : The Receivables Sale Agreement, dated March 3, 2009, by and between the Originator and the Seller, as such agreement may be amended, modified or supplemented from time to time.
Related Security : As defined in the Transfer Agreement.
Relevant UCC : The Uniform Commercial Code as in effect in the States of New York or Illinois, as applicable.
Required Capital Amount : As of any date of determination, an amount equal to 10% of the aggregate Unpaid Balance of Receivables.
Securities Exchange Act : The Securities Exchange Act of 1934, as amended.
Secured Obligations : As defined in Section 2.1(d) hereof.
Seller : United Stationers Financial Services, LLC, an Illinois limited liability company, and its successors and assigns.
Subordinated Note : As defined in Section 3.2(a) .
Transfer Agreement : The Transfer and Administration Agreement, dated as of March 3, 2009, by and among the Purchaser, the Originator, the Servicer, the Seller, the Class Agents, the Agent and the Investors, as such agreement may be amended, modified or supplemented from time to time.
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All accounting terms not specifically defined herein shall be construed in accordance with generally accepted accounting principles. All terms used in Article 9 of the Relevant UCC, and not specifically defined herein, are used herein as defined in such Article 9.
Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word from means from and including and the words to and until each means to but excluding.
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The servicing, administering and collection of the Receivables and the Related Security, Collections and proceeds thereof conveyed hereunder shall be conducted by the Servicer as set forth and in accordance with the Transfer Agreement. The Purchaser hereby appoints the Servicer as its agent to enforce the Purchasers rights and interests in, to and under the Receivables, the Related Security, Collections and proceeds with respect thereto.
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The Seller represents and warrants to the Purchaser, the Agent, the Class Agents, and the Investors, as to itself, that, on the Closing Date and on each date that Receivables are transferred by it pursuant to Section 2.1 :
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At all times from the date hereof to the Final Payout Date, unless the Purchaser shall otherwise consent in writing:
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The Seller agrees to repurchase from the SPV any Receivables sold by it hereunder if the SPV notifies the Seller that, as of the related date of purchase of such Receivable, there existed a material breach on the date of purchase thereof, of any representation or warranty made or deemed made with respect to such a Receivable pursuant to Article IV and the Seller shall fail to cure such breach within ten (10) Business Days of such notice. The repurchase price shall be paid by the Seller to the SPV in immediately available funds on such tenth (10 th ) Business Day in an amount equal to the Unpaid Balance of each Receivable repurchased.
Except as otherwise provided in this Agreement, the purchase and sale of Receivables under this Agreement shall be without recourse to the Seller.
The obligations of the Purchaser to purchase any Receivables on any sale date shall be subject to the satisfaction of the following conditions:
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This Agreement shall commence as of the Closing Date and shall continue in full force and effect until the date following the earlier of (a) the date designated by the Purchaser or the Seller as the termination date at any time following sixty (60) days written notice to the other (with a copy thereof to the Agent), (b) the date on which the Termination Date occurs or is declared pursuant to Section 8.2 of the Transfer Agreement, (c) upon the occurrence of a Purchaser Termination Date under Section 8.1 of the Receivable Sale Agreement, (d) upon the occurrence of an Event of Bankruptcy with respect to either the Purchaser or the Seller, or (e) the date on which either the Purchaser or the Seller becomes unable for any reason to purchase or re-purchase any Receivable in accordance with the provisions of this Agreement or defaults on its obligations hereunder, which default continues unremedied for more than thirty (30) days after written notice (any such date being a Purchase Termination Date ); provided , however , that the occurrence of the Purchase Termination Date pursuant to this Section 8.1 hereof shall not discharge any Person from any obligations incurred prior to the Purchase Termination Date, including, without limitation, any obligations to make any payments with respect to the interest of the Purchaser in any Receivable sold prior to the Purchase Termination Date.
Following the occurrence of the Purchase Termination Date pursuant to Section 8.1 hereof, the Seller shall not sell, and the Purchaser shall not purchase, any Receivables. No termination or rejection or failure to assume the executory obligations of this Agreement in any Event of Bankruptcy with respect to the Seller or the Purchaser shall be deemed to impair or affect the obligations pertaining to any executed sale or executed obligations, including, without
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limitation, pre-termination breaches of representations and warranties by the Seller or the Purchaser. Without limiting the foregoing, prior to the Purchase Termination Date, the failure of the Seller to deliver computer records of any Receivables or any reports regarding any Receivables shall not render such transfer or obligation executory, nor shall the continued duties of the parties pursuant to Article V or Section 10.1 of this Agreement render an executed sale executory.
Without limiting any other rights which the Indemnified Party may have hereunder or under applicable Law, the Seller hereby agrees to indemnify the SPV and its respective officers, directors, employees, counsel, other agents, successors and assigns (collectively, Seller Indemnified Party ) from and against any and all damages, losses, claims, liabilities, costs and expenses, including reasonable attorneys fees (which such attorneys may be employees of the Program Support Providers, the Agent, the Collateral Agent or the Class Agents, as applicable) and disbursements (all of the foregoing being collectively referred to as Seller Indemnified Amounts ) awarded against or incurred by it in any action or proceeding between the Seller and the Seller Indemnified Party or between the Seller Indemnified Party and any third party or otherwise arising out of or as a result of this Agreement, the other Transaction Documents, the ownership or maintenance, either directly or indirectly, of the Receivables, any Related Security or any interest therein or any of the other transactions contemplated hereby or thereby, excluding, however, (x) Seller Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of such Seller Indemnified Party, as finally determined by a court of competent jurisdiction, (y) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables or (z) Excluded Taxes.
This Agreement and the rights and obligations of the parties hereunder may not be changed orally, but only by an instrument in writing signed by the Purchaser and the Seller and consented to in writing by the Agent. Any reconveyance executed in accordance with the provisions hereof shall not be considered amendments to this Agreement.
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Except as provided below, all communications and notices provided for hereunder shall be in writing (including telecopy, facsimile or electronic transmission or similar writing) and shall be given to the other party at its address or telecopy number set forth below or at such other address or telecopy number as such party may hereafter specify for the purposes of notice to such party. Each such notice or other communication shall be effective (a) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 10.3 and confirmation is received, (b) if given by mail 3 Business Days following such posting, postage prepaid, U.S. certified or registered, (c) if given by overnight courier, one (1) Business Day after deposit thereof with a national overnight courier service, or (d) if given by any other means, when received at the address specified in this Section 10.3 .
(e) |
in the case of the Purchaser: |
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United Stationers Receivables, LLC |
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One Parkway North Boulevard |
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Deerfield, Illinois 60015-2559 |
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Telephone: |
(847) 627-7000 |
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Facsimile: |
(847) 627-7001 |
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with a copy to the Agent: |
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Bank of America, National Association , |
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Bank of America Hearst Tower, 19th Floor |
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Charlotte, North Carolina 28255 |
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Attention: |
Banc of America Securities, LLC Global Asset Backed Securitization Group; Portfolio Management |
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Telephone: |
704/386 7922 |
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Facsimile: |
704/388 9169 |
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(f) |
in the case of the Seller: |
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United Stationers Financial Services, LLC |
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One Parkway North Boulevard |
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Deerfield, Illinois 60015-2559 |
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Telephone: |
(847) 627-7000 |
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Facsimile: |
(847) 627-7001 |
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or, as to each party, at such other address as shall be designated by such party in a written notice to each other party.
If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement.
This Agreement may not be assigned by the parties hereto, except that the Purchaser may assign its rights hereunder pursuant to the Transfer Agreement to the Agent, for the benefit of the Investors, and that the Conduit Investor may assign any or all of its rights to any Liquidity Provider or to a Conduit Assignee. The Purchaser hereby notifies (and the Seller hereby acknowledges that) the Purchaser, pursuant to the Transfer Agreement, has assigned its rights hereunder to the Agent. All rights of the Purchaser hereunder may be exercised by the Agent or its assignees, to the extent of their respective rights pursuant to such assignments.
The Purchaser and the Seller agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other party more fully to effect the purposes of this Agreement, including, without limitation, the execution of any financing statements or continuation statements or equivalent documents relating to the Receivables conveyed hereunder for filing under the provisions of the Relevant UCC or other laws of any applicable jurisdiction.
No failure to exercise and no delay in exercising, on the part of the Purchaser, the Seller or the Agent, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privilege provided by law.
This Agreement may be executed in two or more counterparts including telecopy transmission thereof (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page by facsimile shall be effective as delivery of a manually executed counterpart of this Agreement.
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This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. The Agent, on behalf of the Investors and its assignees, and any Liquidity Provider is intended by the parties hereto to be a third-party beneficiary of this Agreement.
Except as specifically stated otherwise herein, this Agreement sets forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement. This Agreement may not be modified, amended, waived or supplemented except as provided herein.
The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof.
The schedules and exhibits referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for all purposes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Purchaser and the Seller each have caused this Receivables Purchase Agreement to be duly executed by their respective officers as of the day and year first above written.
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UNITED STATIONERS FINANCIAL
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UNITED STATIONERS RECEIVABLES, |
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LLC , as Purchaser |
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Acknowledged
as of the
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BANK OF AMERICA, NATIONAL |
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ASSOCIATION , as Agent |
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EXHIBIT A
FORM OF SUBORDINATED NOTE
[ · ], 200
FOR VALUE RECEIVED, the undersigned, [PURCHASER] , a corporation (the Maker ), hereby promises to pay to the order of [SELLER] , (the Payee ), on , or earlier as provided for in the Receivables Purchase Agreement dated as of the date hereof between the Maker and the Payee (as such agreement may from time to time be amended, supplemented or otherwise modified and in effect, the Receivables Purchase Agreement ), the lesser of the principal sum of Three Hundred and Fifty Million Dollars ($350,000,000.00) or the aggregate unpaid principal amount of all Advances to the Maker from the Payee pursuant to the terms of the Receivables Purchase Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date thereof on the principal amount hereof from time to time outstanding, in like funds, at said office, at the rate per annum set forth in the Receivables Purchase Agreement and shall be payable in arrears on the first day of each January, April, July and October (or if any such day is not a Business Day, on the succeeding Business Day).
The Maker hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The non-exercise by the holder hereof of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance.
All borrowings evidenced by this Subordinated Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof, or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided , however , that the failure of the holder hereof to make such a notation or any error in such a notation shall not in any manner affect the obligation of the Maker to make payments of principal and interest in accordance with the terms of this Subordinated Note and the Receivables Purchase Agreement.
The Maker shall have the right to prepay and, subject to the limitations set forth in the Receivables Purchase Agreement, reborrow Advances made to it without penalty or premium.
This Subordinated Note is the Subordinated Note referred to in the Receivables Purchase Agreement, which, among other things, contains provisions for the subordination of this Subordinated Note to the rights of certain parties under the Transfer Agreement, all upon the terms and conditions therein specified.
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This Note shall be governed by, and construed in accordance with, the laws of the State of New York.
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A-2
Advances and Payments
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Amount of
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Payments
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Unpaid Principal
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Name of Person
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A-3
EXHIBIT B
Credit and Collection Policy
SCHEDULE 4.1(g)
List of Actions and Suits
None.
SCHEDULE 4.1(i)
Names,
Jurisdictions of Formation, Type of Entity
and
Locations of Certain Offices and Records
United Stationers Financial Services LLC
Jurisdiction of formation: Illinois
Principal Place of Business: One Parkway North Blvd., Deerfield, Illinois
President: Victoria J. Reich
Location of Records: One Parkway North Blvd., Deerfield, Illinois
United Stationers Receivables, LLC
Jurisdiction of formation: Illinois
Principal Place of Business: One Parkway North Blvd., Deerfield, Illinois
President: Victoria J. Reich
Location of Records: One Parkway North Blvd., Deerfield, Illinois
SCHEDULE 4.1(j)
List of Subsidiaries, Divisions and Tradenames; FEIN
United Stationers Financial Services LLC
Subsidiaries: |
USS Receivables Company, Ltd. |
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Divisions: |
None |
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Tradenames: |
None |
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Federal Employer Identification Number: |
36-4428313 |
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SCHEDULE 4.1(p)
List of Blocked Account Banks and Blocked Accounts
None.
Exhibit 10.4
PERFORMANCE GUARANTEE
THIS PERFORMANCE GUARANTEE (this Guarantee ), dated as of March 3, 2009, is executed by United Stationers Inc., an Delaware corporation (the Performance Guarantor ) in favor of United Stationers Receivables, LLC, an Illinois limited liability company (together with its successors and assigns, Recipient ).
RECITALS
1. United Stationers Supply Co., an Illinois corporation (the Originator ) and United Stationers Financial Services LLC, an Illinois limited liability company (the Seller ) have entered into a Receivables Sale Agreement, dated as of March 3, 2009 (as amended, restated or otherwise modified from time to time, the Sale Agreement ), pursuant to which the Originator, subject to the terms and conditions contained therein, is selling and/or contributing its respective right, title and interest in its accounts receivable to the Seller.
2. The Seller and Recipient have entered into a Receivables Purchase Agreement, dated as of March 3, 2009 (as amended, restated or otherwise modified from time to time, the Purchase Agreement ), pursuant to which the Seller, subject to the terms and conditions contained therein, is selling and/or contributing its right, title and interest in its accounts receivable (consisting of the accounts receivable acquired by the Seller from the Originator pursuant to the Sale Agreement) to Recipient.
3. Performance Guarantor owns (directly or indirectly) one hundred percent (100%) of the capital stock and/or membership interests, as the case may be, of the Originator, the Seller and Recipient, and each of the Originator and the Seller, and accordingly, Performance Guarantor, is expected to receive substantial direct and indirect benefits from the sale or contribution of receivables to Recipient pursuant to the Purchase Agreement (which benefits are hereby acknowledged).
4. As an inducement for Recipient to acquire such accounts receivable, Performance Guarantor has agreed to guaranty the due and punctual performance by the Originator and the Seller of their respective obligations under the Sale Agreement and the Purchase Agreement, as well as the Sellers Servicing Related Obligations (as hereinafter defined).
5. Performance Guarantor wishes to guaranty the due and punctual performance by the Originator and the Seller of their respective obligations under or in respect of the Sale Agreement and the Purchase Agreement and Sellers Servicing Related Obligations, as provided herein.
AGREEMENT
NOW, THEREFORE, Performance Guarantor hereby agrees as follows:
Section 1. Definitions . Capitalized terms used herein and not defined herein shall the respective meanings assigned thereto in the Agreements (as hereinafter defined). In addition:
Guaranteed Obligations : Collectively: (a) all covenants, agreements, terms, conditions and indemnities to be performed and observed by the Originator or the Seller under and pursuant to the Sale Agreement and each other document executed and delivered by the Originator or the Seller pursuant to the Sale Agreement or any other Transaction Document, including, without limitation, the due and punctual payment of all sums which are or may become due and owing by the Originator or the Seller under the Sale Agreement, whether for fees, expenses (including counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason, (b) all covenants, agreements, terms, conditions and indemnities to be performed and observed by the Seller under and pursuant to the Purchase Agreement and each other document executed and delivered by the Seller pursuant to the Purchase Agreement or any other Transaction Document, including, without limitation, the due and punctual payment of all sums which are or may become due and owing by the Originator or the Seller under the Purchase Agreement, whether for fees, expenses (including counsel fees), indemnified amounts or otherwise, whether upon any termination or for any other reason and (c) all obligations (i) of the Seller as Servicer under the Transfer and Administration Agreement, dated as of March 3, 2009 by and among Recipient, the Originator, the Seller, Enterprise Funding Company, LLC, Market Street Funding, LLC, PNC Bank, National Association and Bank of America, National Association, as Agent (as amended, restated, modified, supplemented, replaced or waived, the TAA and, together with the Sale Agreement and the Purchase Agreement, the Agreements ) or (ii) of the Seller which arise pursuant to Section 7.2 or Section 9.6 of the TAA following its termination as Servicer which relates to acts or omissions of it as Servicer (all such obligations under this clause (c) , collectively, the Servicing Related Obligations ).
Section 2. Guaranty of Performance of Guaranteed Obligations . Performance Guarantor hereby guarantees to Recipient, the full and punctual payment and performance by the Originator and the Seller of their respective Guaranteed Obligations. This Guarantee is an absolute, unconditional and continuing guaranty of the full and punctual performance of all Guaranteed Obligations of the Originator and the Seller under the Agreements and each other document executed and delivered by the Originator or the Seller pursuant to the Agreements and is in no way conditioned upon any requirement that Recipient first attempt to collect any amounts owing by the Originator to the Seller or by the Seller to Recipient, the Agent or any Investor from any other Person or resort to any collateral security, any balance of any deposit account or credit on the books of Recipient, the Agent or any Investor in favor of the Originator or the Seller or any other Person or other means of obtaining payment. Should the Originator or the Seller default in the payment or performance of any of its Guaranteed Obligations, Recipient (or its assigns) may cause the immediate performance by Performance Guarantor of the Guaranteed Obligations and cause any payment Guaranteed Obligations to become forthwith due and payable to Recipient (or its assigns), without demand or notice of any nature (other than as expressly provided herein), all of which are hereby expressly waived by Performance Guarantor. Notwithstanding the foregoing, this Guarantee is not a guarantee of the collection of any of the Receivables and Performance Guarantor shall not be responsible for any Guaranteed Obligations to the extent the failure to perform such Guaranteed Obligations by the Originator or the Seller results from Receivables being uncollectible on account of the insolvency, bankruptcy or lack of creditworthiness of the related Obligor; provided that nothing herein shall relieve the Originator
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or the Seller from performing in full its Guaranteed Obligations under the Agreements or Performance Guarantor of its Guarantee hereunder with respect to the full performance of such duties.
Section 3. Performance Guarantors Further Agreements to Pay . Performance Guarantor further agrees, as the principal obligor and not as a guarantor only, to pay to Recipient (and its assigns), forthwith upon demand in funds immediately available to Recipient, all reasonable costs and expenses (including court costs and reasonable legal expenses) incurred or expended by Recipient in connection with the Guaranteed Obligations, this Guarantee and the enforcement thereof and of this Guarantee and the Guaranteed Obligations, together with interest on amounts recoverable under this Guarantee from the time when such amounts become due until payment, at a rate of interest (computed for the actual number of days elapsed based on a 360 day year) equal to the Prime Rate plus 2% per annum, such rate of interest changing when and as the Prime Rate changes.
Section 4. Waivers by Performance Guarantor . Performance Guarantor waives notice of acceptance of this Guarantee, notice of any action taken or omitted by Recipient (or its assigns) in reliance on this Guarantee, and any requirement that Recipient (or its assigns) be diligent or prompt in making demands under this Guarantee, giving notice of any Termination Event, Potential Termination Event, other default or omission by the Originator or the Seller or asserting any other rights of Recipient under this Guarantee. Performance Guarantor warrants that it has adequate means to obtain from the Originator and the Seller, on a continuing basis, information concerning the financial condition of the Originator and the Seller, and that it is not relying on Recipient to provide such information, now or in the future. Performance Guarantor also irrevocably waives all defenses (1) that at any time may be available in respect of the Guaranteed Obligations by virtue of any statute of limitations, valuation, stay, moratorium law or other similar law now or hereafter in effect or (2) that arise under the law of suretyship, including impairment of collateral. Recipient (and its assigns) shall be at liberty, without giving notice to or obtaining the assent of Performance Guarantor and without relieving Performance Guarantor of any liability under this Guarantee, to deal with the Originator and with each other party who now is or after the date hereof becomes liable in any manner for any of the Guaranteed Obligations, in such manner as Recipient in its sole discretion deems fit, and to this end Performance Guarantor agrees that the validity and enforceability of this Guarantee, including without limitation, the provisions of Section 7 hereof, shall not be impaired or affected by any of the following: (a) any extension, modification or renewal of, or indulgence with respect to, or substitutions for, the Guaranteed Obligations or any part thereof or any agreement relating thereto at any time; (b) any failure or omission to enforce any right, power or remedy with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto, or any collateral securing the Guaranteed Obligations or any part thereof; (c) any waiver of any right, power or remedy or of any Termination Event, Potential Termination Event, or default with respect to the Guaranteed Obligations or any part thereof or any agreement relating thereto; (d) any release, surrender, compromise, settlement, waiver, subordination or modification, with or without consideration, of any other obligation of any person or entity with respect to the Guaranteed Obligations or any part thereof; (e) the enforceability or validity of the Guaranteed Obligations or any part thereof or the genuineness, enforceability or validity of any agreement relating thereto or with respect to the Guaranteed Obligations or any part thereof; (f) the
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application of payments received from any source to the payment of any payment obligations of the Originator or the Seller or any part thereof or amounts which are not covered by this Guarantee even though Recipient (or its assigns) might lawfully have elected to apply such payments to any part or all of the payment obligations of the Originator or the Seller to amounts which are covered by this Guarantee; (g) the existence of any claim, setoff or other rights which Performance Guarantor may have at any time against the Originator or the Seller in connection herewith or any unrelated transaction; (h) any assignment or transfer of the Guaranteed Obligations or any part thereof; or (i) any failure on the part of the Originator or the Seller to perform or comply with any term of the Agreements or any other document executed in connection therewith or delivered thereunder, all whether or not Performance Guarantor shall have had notice or knowledge of any act or omission referred to in the foregoing clauses (A) through (I) of this Section 4 .
Section 5. Unenforceability of Guaranteed Obligations Against Originator . Notwithstanding (a) any change of ownership of the Originator or the Seller or the insolvency, bankruptcy or any other change in the legal status of the Originator or the Seller; (b) the change in or the imposition of any law, decree, regulation or other governmental act which does or might impair, delay or in any way affect the validity, enforceability or the payment when due of the Guaranteed Obligations; (c) the failure of the Originator or the Seller or Performance Guarantor to maintain in full force, validity or effect or to obtain or renew when required all governmental and other approvals, licenses or consents required in connection with the Guaranteed Obligations or this Guarantee, or to take any other action required in connection with the performance of all obligations pursuant to the Guaranteed Obligations or this Guarantee; or (d) if any of the moneys included in the Guaranteed Obligations have become irrecoverable from the Originator or the Seller for any other reason other than final payment in full of the payment obligations in accordance with their terms, this Guarantee shall nevertheless be binding on Performance Guarantor. This Guarantee shall be in addition to any other guaranty or other security for the Guaranteed Obligations, and it shall not be rendered unenforceable by the invalidity of any such other guaranty or security. In the event that acceleration of the time for payment of any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or reorganization of the Originator or the Seller or for any other reason with respect to the Originator or the Seller, all such amounts then due and owing with respect to the Guaranteed Obligations under the terms of the Agreements, or any other agreement evidencing, securing or otherwise executed in connection with the Guaranteed Obligations, shall be immediately due and payable by Performance Guarantor.
Section 6. Representations and Warranties . Performance Guarantor hereby represents and warrants to Recipient that:
(a) Existence and Standing . It (1) is a corporation duly organized, validly existing and in good standing under the laws of Delaware, which is its sole jurisdiction of formation, (2) has all corporate power and all licenses, authorizations, consents and approvals of all Official Bodies required to carry on its business in each jurisdiction in which its business is now and proposed to be conducted (except where the failure to have any such licenses, authorizations, consents and approvals would not individually or in the aggregate have a Material Adverse Effect) and (3) is duly qualified to do business and is
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in good standing in every other jurisdiction in which the nature of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect.
(b) Authorization, Execution and Delivery; Binding Effect; No Conflict . The execution, delivery and performance by it of this Guarantee and any other Transaction Document to which it is a party is (1) within its organizational powers, (2) have been duly authorized by all necessary organizational action, (3) require no action by or in respect of, or filing with, any Official Body or official thereof, (4) do not contravene or constitute a default under (a) its organizational documents, (b) any Law applicable to it, (c) any contractual restriction binding on or affecting it or its property or (d) any order, writ, judgment, award, injunction, decree or other instrument binding on or affecting it or its property, or (5) result in the creation or imposition of any Adverse Claim upon or with respect to its property or the property of any of its Subsidiaries (except as contemplated hereby), for purposes of clause (iv) hereof except to the extent such failure would not be reasonably expected to have a Material Adverse Effect. This Guarantee and the other Transaction Documents to which it is a party have been duly executed and delivered and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or limiting rights of creditors generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or law).
(c) Financial Statements . Its consolidated financial statements furnished by it to the Recipient for purposes of or in connection with this Guarantee or any transaction contemplated hereby, taken as a whole, is, and all such information hereafter furnished by it to the Recipient will be, true, complete and accurate in every material respect, on the date such information is stated or certified, and no such item contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained therein, in the light of the circumstances under which they were made, not misleading.
(e) Taxes . It has (1) timely filed all tax returns (federal, state and local) required to be filed, (2) paid or made adequate provision for the payment of all taxes, assessments and other governmental charges except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. No federal or state tax liens have been filed and no claims are being asserted with respect to any such taxes.
(f) Litigation and Contingent Obligations . Except as disclosed in the filings made with the Securities and Exchange Commission, it is not in violation of any order of any Official Body or arbitrator, except where such violation would not be reasonably expected to have a Material Adverse Effect on it or its Subsidiaries. There are no actions, suits, litigation or proceedings pending, or to its knowledge, threatened, against or affecting it or any of its Material Subsidiaries or their properties, in or before any Official Body or arbitrator, which may, individually or in the aggregate, have a Material Adverse
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(g) Disclosure of the Transaction . The Performance Guarantor makes the representations and agrees to the covenants set forth in Schedule 6.1(g) which are incorporated herein by reference.
Section 7. Subrogation; Subordination . Notwithstanding anything to the contrary contained herein, until the Guaranteed Obligations are paid in full Performance Guarantor: (a) will not enforce or otherwise exercise any right of subrogation to any of the rights of Recipient, the Agent or any Investor against the Originator or the Seller, (b) hereby waives all rights of subrogation (whether contractual, under Section 509 of the United States Bankruptcy Code, at law or in equity or otherwise) to the claims of Recipient, the Agent and any Investor against the Originator or the Seller and all contractual, statutory or legal or equitable rights of contribution, reimbursement, indemnification and similar rights and claims (as that term is defined in the United States Bankruptcy Code) which Performance Guarantor might now have or hereafter acquire against the Originator or the Seller that arise from the existence or performance of Performance Guarantors obligations hereunder, (c) will not claim any setoff, recoupment or counterclaim against the Originator or the Seller in respect of any liability of Performance Guarantor to the Originator and (d) waives any benefit of and any right to participate in any collateral security which may be held by Recipient, the Agent or any Investor. The payment of any amounts due with respect to any indebtedness of the Originator or the Seller now or hereafter owed to Performance Guarantor is hereby subordinated to the prior payment in full of all of the Guaranteed Obligations. Performance Guarantor agrees that, after the occurrence of any default in the payment or performance of any of the Guaranteed Obligations, Performance Guarantor will not demand, sue for or otherwise attempt to collect any such indebtedness of the Originator or the Seller to Performance Guarantor until all of the Guaranteed Obligations shall have been paid and performed in full. If, notwithstanding the foregoing sentence, Performance Guarantor shall collect, enforce or receive any amounts in respect of such indebtedness while any obligations are still unperformed or outstanding, such amounts shall be collected, enforced and received by Performance Guarantor as trustee for Recipient (and its assigns) and be paid over to Recipient (or its assigns) on account of the Guaranteed Obligations without affecting in any manner the liability of Performance Guarantor under the other provisions of this Guarantee. The provisions of this Section 7 shall be supplemental to and not in derogation of any rights and remedies of Recipient under any separate subordination agreement which Recipient may at any time and from time to time enter into with Performance Guarantor.
Section 8. Termination of Performance Guarantee . Performance Guarantors obligations hereunder shall continue in full force and effect until all Aggregate Unpaids are finally paid and satisfied in full and the TAA is terminated, provided that this Guarantee shall continue to be effective or shall be reinstated, as the case may be, if at any time payment or other satisfaction of any of the Guaranteed Obligations is rescinded or must otherwise be restored or returned upon the bankruptcy, insolvency, or reorganization of the Originator or the Seller or otherwise, as though such payment had not been made or other satisfaction occurred, whether or not Recipient (or its assigns) is in possession of this Guarantee. No invalidity, irregularity or unenforceability by reason of the federal bankruptcy code or any insolvency or other similar law, or any law or order of any government or agency thereof purporting to reduce, amend or otherwise affect the
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Guaranteed Obligations shall impair, affect, be a defense to or claim against the obligations of Performance Guarantor under this Guarantee.
Section 9. Effect of Bankruptcy . This Guarantee shall survive the insolvency of the Originator or the Seller and the commencement of any case or proceeding by or against the Originator or the Seller under the federal bankruptcy code or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes. No automatic stay under the federal bankruptcy code with respect to the Originator or the Seller or other federal, state or other applicable bankruptcy, insolvency or reorganization statutes to which the Originator or the Seller is subject shall postpone the obligations of Performance Guarantor under this Guarantee.
Section 10. Setoff . Regardless of the other means of obtaining payment of any of the Guaranteed Obligations, Recipient (and its assigns) is hereby authorized at any time and from time to time, without notice to Performance Guarantor (any such notice being expressly waived by Performance Guarantor) and to the fullest extent permitted by law, to set off and apply any deposits and other sums against the obligations of Performance Guarantor under this Guarantee, whether or not Recipient (or any such assign) shall have made any demand under this Guarantee and although such obligations may be contingent or unmatured.
Section 11. Taxes . All payments to be made by Performance Guarantor hereunder shall be made free and clear of any deduction or withholding. If Performance Guarantor is required by law to make any deduction or withholding on account of tax or otherwise from any such payment, the sum due from it in respect of such payment shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, Recipient receive a net sum equal to the sum which they would have received had no deduction or withholding been made.
Section 12. Further Assurances . Performance Guarantor agrees that it will from time to time, at the request of Recipient (or its assigns), provide information relating to the business and affairs of Performance Guarantor as Recipient may reasonably request. Performance Guarantor also agrees to do all such things and execute all such documents as Recipient (or its assigns) may reasonably consider necessary or desirable to give full effect to this Guarantee and to perfect and preserve the rights and powers of Recipient hereunder.
Section 13. Successors and Assigns . This Guarantee shall be binding upon Performance Guarantor, its successors and permitted assigns (to the extent permitted under the Agreements), and shall inure to the benefit of and be enforceable by Recipient and its successors and assigns. Performance Guarantor may not assign or transfer any of its obligations hereunder without the prior written consent of each of Recipient and the Agent. Without limiting the generality of the foregoing sentence, Recipient may, in accordance with the Transaction Documents, assign or otherwise transfer the Agreements, any other documents executed in connection therewith or delivered thereunder or any other agreement or note held by them evidencing, securing or otherwise executed in connection with the Guaranteed Obligations, or sell participations in any interest therein, to any other entity or other person, and such other entity or other person shall thereupon become vested, to the extent set forth in the agreement evidencing such assignment, transfer or participation, with all the rights in respect thereof granted to the Recipient herein.
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Section 14. Amendments and Waivers . No amendment or waiver of any provision of this Guarantee nor consent to any departure by Performance Guarantor therefrom shall be effective unless the same shall be in writing and signed by Recipient, the Agent and Performance Guarantor. No failure on the part of Recipient to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right hereunder preclude any other or further exercise thereof or the exercise of any other right.
Section 15. Notices . All notices and other communications provided for hereunder shall be made in writing (including electronic transmission, facsimile transmission or similar writing) and shall be addressed as follows: if to Performance Guarantor, at the address set forth beneath its signature hereto, and if to Recipient, at the addresses set forth beneath its signature hereto, or at such other addresses as each of Performance Guarantor or any Recipient may designate in writing to the other. Each such notice or other communication shall be effective (i) if given by telecopy, upon the receipt thereof, (ii) if given by mail, three (3) Business Days after the time such communication is deposited in the mail with first class postage prepaid or (iii) if given by any other means, when received at the address specified in this Section 15 .
Section 16. GOVERNING LAW . THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICTS OF LAW PRINCIPLES THEREOF OTHER THAN SECTION 5 1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
Section 17. CONSENT TO JURISDICTION . EACH OF PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTEE, THE AGREEMENTS OR ANY OTHER DOCUMENT EXECUTED IN CONNECTION THEREWITH OR DELIVERED THEREUNDER AND EACH OF THE PERFORMANCE GUARANTOR AND RECIPIENT HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM.
Section 18. Bankruptcy Petition . Performance Guarantor hereby covenants and agrees that, prior to the date that is one year and one day after the payment in full of all outstanding senior indebtedness of the Conduit Investor, it will not institute against, or join any other Person in instituting against, the Conduit Investor any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any state of the United States.
Section 19. Miscellaneous . This Guarantee constitutes the entire agreement of Performance Guarantor with respect to the matters set forth herein. The rights and remedies
8
herein provided are cumulative and not exclusive of any remedies provided by law or any other agreement, and this Guarantee shall be in addition to any other guaranty of or collateral security for any of the Guaranteed Obligations. The provisions of this Guarantee are severable, and in any action or proceeding involving any state corporate law, or any state or federal bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the obligations of Performance Guarantor hereunder would otherwise be held or determined to be avoidable, invalid or unenforceable on account of the amount of Performance Guarantors liability under this Guarantee, then, notwithstanding any other provision of this Guarantee to the contrary, the amount of such liability shall, without any further action by Performance Guarantor or Recipient, be automatically limited and reduced to the highest amount that is valid and enforceable as determined in such action or proceeding. Any provisions of this Guarantee which are 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 not invalidate or render unenforceable such provision in any other jurisdiction. Unless otherwise specified, references herein to Section shall mean a reference to sections of this Guarantee.
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IN WITNESS WHEREOF, Performance Guarantor has caused this Guarantee to be executed and delivered as of the date first above written.
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UNITED STATIONERS INC. |
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Title: |
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Address for Notices:
United Stationers Inc.
One Parkway North,
Suite 100
Deerfield, Illinois 60015
Attention: Robert J. Kelderhouse, Treasurer
with a copy to: Eric A. Blanchard, General Counsel
Telephone: (847) 627-2585
Facsimile: (847) 627-7111
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SCHEDULE 6.1(g)
Performance GuarantorDisclosure Representations and Covenants
Disclosure of the Transactions
1. The transactions referred to in the Opinion (the Transactions ) have been or will be publicly disclosed as follows the Transactions will be addressed in notes relating to Performance Guarantors securitization activities in its financial statements.
2. The footnotes that describe Performance Guarantors securitization activities (which include the Transactions) in Performance Guarantors consolidated financial statements (which will include the Originator, the Seller and the SPV) will describe Performance Guarantors securitization activities, will inform readers that securitized assets (such as the Receivables) are isolated in special purpose entities and support the securities issued by those entities.
3. Performance Guarantor will not conceal any transfers contemplated by the agreements referred to on Schedule II to the Opinion (the Agreements ) from any interested party. Although obligors on the Receivables will not be affirmatively informed of the transfers of their obligations, Performance Guarantor will not conceal the transfers from any obligor that inquires. Also, (other than certain rebates and allowances in respect of Receivables) the obligors are not expected to be material creditors of Performance Guarantor.
Terms of the Transactions
4. Performance Guarantors believes that its guaranty in the Performance Guarantee does not cause Performance Guarantor to retain or assume the risk of nonpayment or other material financial risks of the Receivables based in part on the belief that the matters covered are unlikely to occur. The guaranty is not intended to cover material liabilities that are reasonably likely to occur.
5. There are no agreements or understandings between the SPV, on one hand, and Performance Guarantor, Seller or Originator or any of Originators other affiliates that are relevant to the Transactions other than the Agreements and any other agreements and understandings specifically referenced in the Agreements. In particular, there are no other agreements or understandings pursuant to which Performance Guarantor or another of its other affiliates (a) is responsible for maintaining the SPVs solvency or (b) provides recourse, guarantees or otherwise retains or assumes financial risks with respect to the Receivables.
Relationship Between Performance Guarantor and the SPV
6. The SPV is a wholly-owned subsidiary of Seller, Seller is a wholly owned subsidiary of Originator and Originator is a wholly-owned subsidiary of Performance Guarantor, and the SPV was formed for the special purpose of consummating the Transactions.
7. Performance Guarantor intends to act in a manner that is consistent with the SPVs separate and distinct existence and will correct any known misunderstanding regarding its status as a separate entity.
8. Seller prepares and maintains separate corporate and financial records from the SPV that accurately reflect its assets, liabilities and financial affairs. Performance Guarantors believes its assets and liabilities can be readily and inexpensively segregated, ascertained and identified separate from those of the SPV. All transactions between Performance Guarantor and the SPV, including monetary transactions, are and will be properly reflected in Performance Guarantors books and records Performance Guarantor believes that each will be on terms and conditions consistent with those of an arms length transaction.
9. Performance Guarantor believes that the consolidation of Performance Guarantors and the SPVs business operations would not result in any significant cost savings or in a significantly greater efficiency or profitability of such combined business operation.
10. Performance Guarantor and the SPV do not intend to commingle their assets and liabilities, except that Seller, as Servicer of the Receivables: (a) may temporarily commingle collections pending identification and transfer to a collection account for the Transactions; and (b) will retain books and records pertaining to the Receivables. Performance Guarantor does not maintain joint bank accounts or other the SPV accounts to which the SPV has independent access.
11. An integration of business functions between Performance Guarantor and the SPV, if any, exists only to the extent summarized in this paragraph. The SPV is operated for the exclusive purpose of purchasing Receivables from Seller. The SPV will have no employees, and the SPVs day-to-day business operations with respect to the Receivables will be conducted through Seller, in its capacity as Servicer, pursuant to the Transfer and Administration Agreement and that under that agreement, Seller has limited rights, in its capacity as Servicer, to enter into modifications of Receivables on behalf of the SPV, and Seller is generally not permitted to resign as Servicer. Performance Guarantor and the SPV may share some expenses, but these are not expected to be material and, in any event, will be allocated between the entities on a basis reasonably related to the cost of the services involved and each entitys actual use of such services. Obligors on the Receivables transferred to the SPV will not be notified that their Receivables have been transferred to the SPV.
12. The SPV is held out to the public as a separate entity apart from Performance Guarantor, including as described under Part I: Description of the Transactions in the Opinion.
13. Performance Guarantor maintains its own stationery and other business forms separate from the SPVs and conducts business in its own name (including, without limitation, its contracts and written communications).
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14. Performance Guarantor adheres in all materials respects to corporate formalities in all transfers of assets and other transactions between Originator and the SPV. In general, Performance Guarantor observes appropriate corporate formalities under applicable law.
15. Performance Guarantor does not currently, and does not intend to, guaranty, and is not otherwise obligated to repay, the SPVs liabilities.
16. At closing, Performance Guarantor will: (a) be solvent; (b) be adequately capitalized to conduct its business and affairs as a going concern, considering the size and nature of its business and intended purposes and taking into account pending and threatened claims; and (c) intends to, and believes that it will be able to, pay its debts as they mature. As a result, Performance Guarantor is intended to (and is reasonably believed to) be able to survive as a stand-alone entity.
17. Performance Guarantor does not pay the SPVs expenses, except as specifically provided in the Agreements. Any allocations of direct, indirect or overhead expenses for items shared between Performance Guarantor and the SPV are made among such entities to the extent practical on the basis of actual use or value of services rendered and otherwise on a basis reasonably related to actual use or the value of services rendered.
18. Performance Guarantor has not held itself out, nor does it intend to do so in the future, as responsible for the SPVs debts.
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Exhibit 10.10
UNITED STATIONERS INC.
2004 LONG-TERM INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
First Name, Last Name
Address
City, State Zip
Dear <First Name>:
This Restricted Stock Unit Award Agreement (this Agreement), dated September 1, 2008, (the Award Date), is by and between <First Name, Last Name> (the Participant), and United Stationers Inc., a Delaware corporation (the Company). Any term capitalized but not defined in this Agreement will have the meaning set forth in the Companys 2004 Long-Term Incentive Plan (the Plan).
In the exercise of its discretion to grant awards under the Plan, the Committee has determined that the Participant should receive a restricted stock unit award, on the following terms and conditions:
1. Grant . The Company hereby grants to the Participant a Restricted Stock Unit Award (the Award) of <#> restricted stock units (the Units), each Unit that vests representing the right to receive one share of the Companys common stock as provided in Section 5 of this Agreement. The Award will be subject to the terms and conditions of the Plan and this Agreement.
2. No Rights as a Stockholder . The Units granted pursuant to this Award do not entitle the Participant to any rights of a stockholder of the Companys Stock. The Participants rights with respect to the Units shall remain forfeitable at all times until satisfaction of the vesting conditions set forth in Section 3 of this Agreement.
3. Vesting; Effect of Date of Termination . For purposes of this Agreement, Vesting Date means any date, including the Scheduled Vesting Date (as defined below), on which Units subject to this Award vest as provided in this Section 3.
(a) Except as otherwise provided in paragraphs 3(b) through 3(f), the Participants Units will vest on December 31, 2011 (the Scheduled Vesting Date) if the Participants Date of Termination has not occurred before the Scheduled Vesting Date, but only to the extent the Units have been earned during the period from January 1, 2009 to December 31, 2011 (the Performance Period) as provided in Section 4. If the Participants Date of Termination occurs for any reason before the Scheduled Vesting Date, the Participants Units will be forfeited on and after the Participants Date of Termination, except as provided in paragraphs 3(b) through 3(f).
(b) If the Participants Date of Termination occurs before the Scheduled Vesting Date by reason of the Participants death or Permanent and Total Disability (as defined in paragraph 3(g)), a portion of the then unvested Units will become vested as of
the Participants Date of Termination. That portion shall be equal to the sum of (i) the number of Earned Units (as defined in Section 4), if any, immediately prior to the Participants Date of Termination, and (ii) a number of additional Units determined by multiplying the lesser of (A) one-third of the total number of Units or (B) the number of Units not yet earned immediately prior to the Participants Date of Termination, by a fraction, the numerator of which shall be the number of whole months elapsed from the beginning of the calendar year in which the termination of employment occurred to the Date of Termination, and the denominator of which shall be twelve. Any Units not vested as provided in this paragraph shall be forfeited.
(c) If the Participants Date of Termination occurs before the Scheduled Vesting Date by reason of the Participants Retirement (as defined in paragraph 3(j)), a portion of the then unvested Units will become vested as of the end of the calendar year in which the Participants Date of Termination occurs. That portion shall be equal to the sum of (i) the number of Earned Units, if any, immediately prior to the Participants Date of Termination, and (ii) the number of additional Units that otherwise would have been earned as provided in Appendix A during the calendar year in which the termination occurred multiplied by a fraction, the numerator of which shall be the number of whole months elapsed from the beginning of the calendar year in which the termination of employment occurred to the Date of Termination, and the denominator of which shall be twelve. Settlement of the vested Units shall occur within the first 90 days of the calendar year immediately following the calendar year in which the Participants Date of termination occurs. Any Units not vested as provided in this paragraph shall be forfeited.
(d) If a Change of Control occurs after the Award Date and prior to both the Scheduled Vesting Date and the Participants Date of Termination, then a portion of the Units will become fully vested as of the date of such Change of Control. That portion shall be equal to the sum of (i) the number of Earned Units, if any, immediately prior to the date of the Change in Control, and (ii) a number of additional Units equal to the greater of (A) 50% of the number of Units not included in clause (i), or (B) an amount determined by multiplying 50% of the number of Units not included in clause (i) by the Performance Factor (determined as provided in Appendix A ) for all completed calendar years during the Performance Period prior to the date of the Change in Control. The Units that do not vest in accordance with the previous sentence shall remain subject to the vesting provisions of this Agreement, with all Units that have vested as a result of the Change of Control deemed Earned Units for purposes of applying the formula specified in Appendix A .
(e) If, prior to the Scheduled Vesting Date but within two years after a Change in Control described in paragraph 3(d), the Participants Date of Termination occurs by reason of the involuntary termination of the Participants employment by the Company or its Subsidiaries without Cause or by the Participant for Good Reason (as defined in paragraph 3(h)), all of the Units that did not vest as a result of the
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Change of Control as provided in paragraph 3(d) will vest as of the Participants Date of Termination.
(f) If the Participants Date of Termination occurs after the Award Date, before the Scheduled Vesting Date and during an Anticipated Change of Control by reason of the involuntary termination of the Participants employment by the Company or its Subsidiaries without Cause or by the Participant for Good Reason, and a Change of Control then occurs within two years following the Participants Date of Termination, a number of shares of Stock equal to the number of Units forfeited on the Participants Date of Termination (subject to paragraph 5.2(f) of the Plan) shall be issued to the Participant on a fully vested basis within 90 days of the date of the Change of Control.
(g) For purposes of this Agreement, the term Permanent and Total Disability means the Participants inability, due to illness, accident, injury, physical or mental incapacity or other disability, effectively to carry out his duties and obligations as an employee of the Company or its Subsidiaries or to participate effectively and actively as an employee of the Company or its Subsidiaries for 90 consecutive days or shorter periods aggregating at least 180 days (whether or not consecutive) during any twelve-month period.
(h) For purposes of this Agreement, Good Reason shall mean: (i) any material breach by the Company of this Agreement or of any employment agreement with the Participant without Participants written consent, (ii) any material reduction, without the Participants written consent, in the Participants duties, responsibilities or authority; provided, however, that for purposes of this clause (ii), neither (A) a change in the Participants supervisor or the number or identity of the Participants direct reports, nor (B) a change in the Participants title, duties, responsibilities or authority as a result of a realignment or restructuring of the Companys executive organizational chart nor (C) a change in the Participants title, duties, responsibilities or authority as a result of a realignment or restructuring of the Company shall be deemed by itself to materially reduce Participants duties, responsibilities or authority, as long as, in the case of either (B) or (C), Participant continues to report to either the supervisor to whom he or she reported immediately prior to the Change of Control or a supervisor of equivalent responsibility and authority; or (iii) without Participants written consent: (A) a material reduction in the Participants base salary, (B) the relocation of the Participants principal place of employment more than fifty (50) miles from its location on the date of a Change in Control, or (C) the relocation of the Companys corporate headquarters office outside of the metropolitan area in which it is located on the date of a Change in Control. For purposes of this Agreement, a Change of Control, alone, does not constitute Good Reason. Furthermore, notwithstanding the above, the occurrence of any of the events described above will not constitute Good Reason unless the Participant gives the Company written notice within thirty (30) days after the initial occurrence of any of such events that the Participant believes that such event constitutes Good
3
Reason, and the Company thereafter fails to cure any such event within sixty (60) days after receipt of such notice.
(i) For purposes of this Agreement, a Date of Termination shall be deemed to have occurred only if on such date the Participant has also experienced a separation from service as defined in the regulations promulgated under Code Section 409A.
(j) For purposes of this Agreement, Retirement means the Participants separation from service (as defined in the regulations promulgated under Code Section 409A) occurring after the earlier of (i) the Participant reaching age 65 or (ii) the Participant reaching age 55 and having completed at least 10 years of Service with the Company and its Subsidiaries.
(k) For purposes of this Agreement, a Change of Control shall be deemed to have occurred only if such event would also be deemed to constitute a change in ownership or effective control, or a change in the ownership of a substantial portion of the assets, of the Company under Code Section 409A.
Except as otherwise specifically provided, the Company will not have any further obligations to the Participant under this Agreement if the Participants Units are forfeited as provided herein.
4. Earned Units . The number of Units that the Participant will be deemed to have earned (Earned Units) as of the end of each calendar year occurring during the Performance Period (the end of each such year being a Determination Date) will be determined by the extent to which the Company has satisfied the performance-based objectives for the calendar year or years ending on the applicable Determination Date as set forth in Appendix A to this Agreement. The portion of the Units subject to this Award that will be deemed Earned Units as of each Determination Date during the Performance Period will be determined according to the formula specified in Appendix A , but in no event will the cumulative number of Units that are deemed Earned Units as of any Determination Date during the Performance Period exceed the total number of Units subject to this Agreement. Any Units that are not earned as of either of the first two Determination Dates during the Performance Period solely because of the failure to fully satisfy an applicable performance-based objective shall remain eligible to be earned as of a subsequent Determination Date during the Performance Period.
5. Settlement of Units . After any Units vest pursuant to Section 3, and unless otherwise provided in Section 3, the Company will promptly, but in no event later than 90 days after the Vesting Date, cause to be issued to the Participant, or to the Participants beneficiary or legal representative in the event of Participants death, one share of Stock in payment and settlement of each vested Unit. Such issuance shall be evidenced by a stock certificate or appropriate entry on the books of the Company or a duly authorized transfer agent of the Company, shall be subject to the tax withholding provisions of Section 6, and shall be in complete satisfaction of such vested Units. If the Units that vest include a fractional Unit, the Company will round the number of vested Units down
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to the nearest whole Unit prior to issuance of the shares as provided herein. Notwithstanding the foregoing, if any amount shall be payable with respect to this Award as a result of the Participants separation from service at such time as the Participant is a specified employee (as those terms are defined in regulations promulgated under Code Section 409A) and such amount is subject to the provisions of Code Section 409A, then no payment shall be made, except as permitted under Code Section 409A, prior to the first day of the seventh calendar month beginning after the Participants separation from service (or the date of Participants earlier death), or as soon as administratively practicable thereafter.
6. Tax Matters . The Committee may require the Participant, or the alternate recipient identified in Section 5, to satisfy any potential federal, state, local or other tax withholding liability. Such liability must be satisfied at the time such Units vest and are settled in shares of Stock. At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied: (A) through a cash payment by the Participant, (B) through the surrender of shares of Stock that the Participant already owns (provided, however, to the extent shares described in this clause (B) are used to satisfy more than the minimum statutory withholding obligation, as described below, then payments made with shares of Stock in accordance with this clause (B) shall be limited to shares held by the Participant for not less than six months prior to the payment date), (C) through the surrender of shares of Stock to which the Participant is otherwise entitled in respect of the Award under this Agreement; provided, however, that such shares under this clause (C) may be used to satisfy not more than the minimum statutory withholding obligation of the Company or applicable Subsidiary (based on minimum statutory withholding rates for federal, state and local tax purposes, including payroll taxes, that are applicable to such supplemental taxable income), or (D) any combination of (A), (B) and (C); provided , however , that the Committee shall have sole discretion to disapprove of an election pursuant to any of clauses (B)-(D) and that the Committee may require that the method of satisfying such an obligation be in compliance with Section 16 of the Exchange Act (if the Participant is subject thereto) and any other applicable laws and the respective rules and regulations thereunder. Any fraction of a share of Stock which would be required to satisfy such an obligation will be disregarded and the remaining amount due will be paid in cash by the Participant.
7. Compliance with Laws . Despite the provisions of Section 5 hereof, the Company is not required to issue or deliver any certificates for shares of Stock if at any time the Company determines that the listing, registration or qualification of such shares upon any securities exchange or under any law, the consent or approval of any governmental body or the taking of any other action is necessary or desirable as a condition of, or in connection with, the issuance or delivery of the shares hereunder in compliance with all applicable laws and regulations, unless such listing, registration, qualification, consent, approval or other action has been effected or obtained, free of any conditions not acceptable to the Company.
8. No Right to Employment . Nothing herein confers upon the Participant any right to continue in the employ of the Company or any Subsidiary.
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9. Nontransferability . Except as otherwise provided by the Committee or as provided in Section 5, and except with respect to shares of Stock issued in settlement of vested Units, the Participants interests and rights in and under this Agreement may not be assigned, transferred, exchanged, pledged or otherwise encumbered other than as designated by the Participant by will or by the laws of descent and distribution. Issuance of shares of Stock in settlement of Units will be made only to the Participant; or, if the Committee has been provided with evidence acceptable to it that the Participant is legally incompetent, the Participants personal representative; or, if the Participant is deceased, to the designated beneficiary or other appropriate recipient in accordance with Section 5 hereof. The Committee may require personal receipts or endorsements of a Participants personal representative, designated beneficiary or alternate recipient provided for herein, and the Committee shall extend to those individuals the rights otherwise exercisable by the Participant with regard to any withholding tax election in accordance with Section 6 hereof. Any effort to otherwise assign or transfer any Units or any rights or interests therein or thereto under this Agreement will be wholly ineffective, and will be grounds for termination by the Committee of all rights and interests of the Participant and his or her beneficiary in and under this Agreement.
10. Administration and Interpretation . The Committee has the authority to control and manage the operation and administration of the Plan. Any interpretations of the Plan by the Committee and any decisions made by it under the Plan are final and binding on the Participant and all other persons.
11. Governing Law . This Agreement and the rights and obligations hereunder shall be governed by and construed in accordance with the laws of the state of Delaware, without regard to principles of conflicts of law of Delaware or any other jurisdiction.
12. Sole Agreement . Notwithstanding anything in this Agreement to the contrary, the terms of this Agreement shall be subject to all of the terms and conditions of the Plan (as the same may be amended in accordance with its terms), a copy of which may be obtained by the Participant from the office of the Secretary of the Company. In addition, this Agreement and the Participants rights hereunder shall be subject to all interpretations, determinations, guidelines, rules and regulations adopted or made by the Committee from time to time pursuant to the Plan. This Agreement is the entire agreement between the parties to it with respect to the subject matter hereof, and supersedes any and all prior oral and written discussions, commitments, undertakings, representations or agreements (including, without limitation, any terms of any employment offers, discussions or agreements between the parties).
13. Binding Effect . This Agreement will be binding upon and will inure to the benefit of the Company and the Participant and, as and to the extent provided herein and under the Plan, their respective heirs, executors, administrators, legal representatives, successors and assigns.
14. Amendment and Waiver . This Agreement may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement between the Company and the Participant without the consent of any other person. No course of
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conduct or failure or delay in enforcing the provisions of this Agreement will affect the validity, binding effect or enforceability of this Agreement.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of the Award Date.
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Very truly yours, |
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UNITED STATIONERS INC. |
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By: |
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Frederick B. Hegi, Jr. |
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Chairman of the Board |
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Appendix A to
Restricted Stock Unit Award Agreement
Earned Units and Performance-Based Objectives
Performance Period: January 1, 2009 through December 31, 2011
The determination of the number of Units that will be earned as of each Determination Date during the Performance Period specified above as provided in Section 4 of the Agreement will be determined as follows:
1. The Companys Economic Profit (as defined below) for the period beginning on the first day of the Performance Period and ending on the applicable Determination Date (the Relevant Period) will be calculated.
2. Based on that actual Economic Profit, the Performance Factor for the Relevant Period will be determined from the following table by determining where the Companys actual Economic Profit falls relative to the goals specified in the applicable column of the table below, and then selecting the corresponding Performance Factor. If the Companys actual Economic Profit for any Relevant Period is between two amounts shown in the applicable column of the table, the corresponding Performance Factor will be determined by linear interpolation between the two relevant Performance Factors shown in the table. If actual Economic Profit for the Relevant Period is less than or equal to the Threshold amount specified, the Performance Factor is zero, and if it greater than the Maximum amount specified, the Performance Factor will be equal to the percentage specified for the Maximum amount.
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Companys Cumulative Economic Profit Goals and Corresponding Performance Factors
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December 31, 2009 |
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December 31, 2010 |
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December 31, 2011 |
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EP Goal |
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Perf. Factor |
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EP Goal |
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Perf. Factor |
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EP Goal |
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Perf. Factor |
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Maximum |
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$-10M |
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150 |
% |
$-17M |
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150 |
% |
$-36M |
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100 |
% |
Target |
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$-24M |
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100 |
% |
$-39M |
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100 |
% |
$-36M |
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100 |
% |
Threshold |
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$-30M |
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0 |
% |
$-52M |
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0 |
% |
$-52M |
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0 |
% |
3. The number of Earned Units as of any Determination Date will be calculated using the following formula:
(Performance Factor x Cumulative Unit Percentage x Number of Units Awarded) Number of Previously Earned Units
where:
· Performance Factor is the percentage determined as provided in item 2 above;
· Cumulative Unit Percentage is the percentage in the following table that corresponds to the Determination Date marking the end of the Relevant Period:
Determination Dates |
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Cumulative Unit Percentage |
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December 31, 2009 |
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33 1/3% |
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December 31, 2010 |
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66 2/3% |
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December 31, 2011 |
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100% |
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· Number of Units Awarded is the number in Section 1 of the Agreement; and
· Number of Previously Earned Units is the number of Units subject to the Award that had already been determined to be Earned Units during the Performance Period prior to the applicable Determination Date.
4. For purposes of this Appendix A, the Companys Economic Profit for any period shall mean profit after applying a capital charge based on the long-term weighted average cost of capital. Profit is defined as after-tax EBIT. Total capital used to calculate the capital charge includes all assets and liabilities except for cash, debt (including Asset Backed Securitization) and stockholders equity. Adjustments are made to both profit and total capital to remove the impact of LIFO expense and the amortization of intangible assets associated with acquisitions.
5. As an example, to compute the number of Earned Units as of the first, second and third Determination Dates, assume the following facts: (i) the Number of Units Awarded was 15,000; (ii) the Companys actual Economic Profit for the relevant period ending on the first Determination Date was half-way between the Threshold Amount and the Target Amount, resulting in a Performance Factor of 50%; (iii) the Companys actual Economic Profit for the relevant period ending on the second Determination Date was half-way between the Target Amount and the Maximum Amount, resulting in a Performance Factor of 125%; and (iv) the Companys actual Economic Profit for the relevant period ending on the third Determination Date was above the Target Amount, resulting in a Performance Factor of 100%. Under these facts, the number of additional Earned Units on each Determination Date would be:
First Determination Date: |
(50% x 33 1/3% x 15,000) 0 = 2,500 Units |
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Second Determination Date: |
(125% x 66 2/3% x 15,000) 2,500 = 10,000 Units |
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Third Determination Date: |
(100% x 100% x 15,000) 12,500 = 2,500 Units |
10
Exhibit 31.1
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Richard W. Gochnauer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of United Stationers Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: May 7, 2009 |
/s/ RICHARD W. GOCHNAUER |
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Richard W. Gochnauer
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Exhibit 31.2
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
AS ADOPTED PURSUANT TO
SECTION 302(a) OF THE SARBANES-OXLEY ACT OF 2002
I, Victoria J. Reich, certify that:
1. I have reviewed this quarterly report on Form 10-Q of United Stationers Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and
5. The registrants other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting.
Date: May 7, 2009 |
/s/ VICTORIA J. REICH |
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Victoria J. Reich
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Exhibit 32.1
CERTIFICATION
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of United Stationers Inc. (the Company) on Form 10-Q for the quarterly period ended March 31, 2009, as filed with the Securities and Exchange Commission on the date hereof (the Report), Richard W. Gochnauer, President and Chief Executive Officer of the Company, and Victoria J. Reich, Senior Vice President and Chief Financial Officer of the Company, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
/s/ RICHARD W. GOCHNAUER |
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Richard W. Gochnauer
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/s/ VICTORIA J. REICH |
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Victoria J. Reich
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