Secondary Purchase Agreement

Contract Categories: Business Finance - Purchase Agreements
EX-10.3 4 k90442exv10w3.txt SECONDARY PURCHASE AGREEMENT Exhibit 10.3 SECONDARY PURCHASE AGREEMENT Dated as of December 9, 2004 Among HL FUNDING I, LLC as Seller and HL FUNDING I, INC., as Purchaser TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS........................................................................................... 1 SECTION 1.01. Certain Defined Terms.................................................................. 1 SECTION 1.02. Other Terms and Constructions.......................................................... 13 SECTION 1.03. Computation of Time Periods............................................................ 13 ARTICLE II AMOUNTS AND TERMS OF PURCHASES....................................................................... 13 SECTION 2.01. Facility............................................................................... 13 SECTION 2.02. Making Purchases....................................................................... 14 SECTION 2.03. Collections............................................................................ 17 SECTION 2.04. Payments and Computations, Etc......................................................... 18 SECTION 2.05. Certain Rights of the Purchaser........................................................ 18 SECTION 2.06. Rights and Remedies.................................................................... 19 SECTION 2.07. Transfer of Records to Purchaser....................................................... 19 SECTION 2.08. Servicer............................................................................... 20 ARTICLE III REPRESENTATIONS AND WARRANTIES...................................................................... 20 SECTION 3.01. Representations and Warranties of the Seller........................................... 20 ARTICLE IV COVENANTS............................................................................................ 23 SECTION 4.01. Covenants of the Seller................................................................ 23 ARTICLE V EVENTS OF TERMINATION................................................................................. 29 SECTION 5.01. Events of Termination.................................................................. 29 ARTICLE VI INDEMNIFICATION...................................................................................... 31 SECTION 6.01. Indemnities by the Seller.............................................................. 31 ARTICLE VII MISCELLANEOUS....................................................................................... 34 SECTION 7.01. Amendments, Etc........................................................................ 34 SECTION 7.02. Notices, Etc........................................................................... 34 SECTION 7.03. Binding Effect; Assignability.......................................................... 34 SECTION 7.04. Costs, Expenses and Taxes.............................................................. 35 SECTION 7.05. WAVIER OF JURY TRIAL; CONSENT TO JURISDICTION.......................................... 35 SECTION 7.06. GOVERNING LAW.......................................................................... 35 SECTION 7.07. Execution in Counterparts.............................................................. 36 SECTION 7.08. Purchaser's Assignment of Rights to Program Agent...................................... 36 SECTION 7.09. Limited Recourse....................................................................... 36 SECTION 7.10. Confidentiality........................................................................ 36
i EXHIBITS EXHIBIT A Credit and Collection Policy EXHIBIT B Form of Subordinated Note EXHIBIT C Location of Records, Chief Executive Office and Notice Addresses EXHIBIT D Deposit Banks, Lock Boxes and Deposit Accounts ii SECONDARY PURCHASE AGREEMENT Dated as of December 9, 2004 THIS SECONDARY PURCHASE AGREEMENT (as amended, restated, supplemented and otherwise modified from time to time, this "Agreement") is entered into among HL FUNDING I, LLC, a Delaware limited liability company (the "Seller") and HL FUNDING II, INC., a Delaware corporation, as the purchaser (the "Purchaser"). ARTICLE I DEFINITIONS SECTION 1.01. Certain Defined Terms. As used in this Agreement, the following terms shall have the following meanings, or if not defined herein, shall have the meanings specified in the Financing Agreement (defined below): "Adverse Claim" means a lien, security interest or other charge or encumbrance, or any other type of preferential arrangement. "Affiliate" means, as to any Person, any other Person that, directly or indirectly, is in control of, is controlled by or is under common control with such Person or is a director or officer of such Person. "Agreement" has the meaning specified in the preamble. "Alternate Base Rate" means a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the highest of: (a) the rate of interest announced publicly by Citibank, N.A. in New York, New York, from time to time as Citibank, N.A.'s base rate; and (b) 1/2 of one percent above the Federal Funds Rate. "Applicable Report" has the meaning specified in the Financing Agreement. "Bankruptcy Code" means the Bankruptcy Code, 11 U.S.C. Section.101 et seq., as amended, any similar or successor federal statute, and the rules and regulations thereunder, all as the same shall be in effect from time to time. "Banks" means the Persons designated as "Banks" pursuant to the Financing Agreement. "Beneficiary" means, as of any date, the Investors, the Banks, the Investor Agents, the Program Agent and the Disbursement Agent. "Borrower Report" has the meaning specified in the Financing Agreement. "Business Day" means any day on which banks are not authorized or required to close in New York, New York. "Capital Lease" means any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which, in accordance with GAAP, should be capitalized on the lessee's balance sheet. "Capital Lease Obligation" of any Person means the obligations of such Person to pay rent or other amounts under any Capital Lease, which obligations should be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP. "Charter Documents" means, with respect to any corporation or limited liability company, such Person's articles or certificate of incorporation or formation and such entity's bylaws or operating agreement. "Collections" means, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including, without limitation, all cash proceeds of Related Security with respect to such Receivable, and all funds deemed to have been received by the Seller or any other Person as a Collection pursuant to Section 2.03(c) or 2.03(d). "Contract" means an agreement between any Originator and a Person, pursuant to or under which such Person shall be obligated to pay for goods or services sold by any Originator from time to time. "Credit Agreement" means that certain Credit Agreement dated as of June 3, 2004, among HLIOC as borrower, Parent, the "Lenders" and "Issuers" party thereto, Citicorp North America, Inc. as administrative agent, Lehman Commercial Paper Inc. as syndication agent and General Electric Capital Corporation as documentation agent, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Credit and Collection Policy" means those receivables credit and collection policies and practices of each of the Originators in effect on the date of this Agreement and described in Exhibit A hereto, as modified in compliance with this Agreement. "Daily Report" and "Daily Reporting Period" each have the meaning specified in the Financing Agreement. "Debt" of any Person means, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, or that bear interest, (c) all indebtedness of such Person created by or arising under any conditional sale or other title retention agreement relating to property acquired by such Person (even though the rights and remedies of the seller or lender under such agreement in the event of a default are limited to repossession or sale of such property), (d) all indebtedness for the deferred purchase price of property 2 or services other than unsecured trade payables incurred in the ordinary course of business that are (i) not more than 90 days overdue or (ii) being contested in good faith and by appropriate proceedings if adequate reserves therefor have been established on the books of such Person in accordance with GAAP, (e) all Debt of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Adverse Claim on property (including accounts and general intangibles) owned or acquired by such Person, whether or not the Debt secured thereby has been assumed, (f) all Guarantees by such Person of Debt of others, (g) all Capital Lease Obligations of such Person and the present value of future rental payments under all synthetic leases, (h) all reimbursement obligations and all obligations with respect to letters of credit, surety bonds and performance bonds, whether or not matured, (i) all obligations of such Person upon which interest charges are customarily paid, (j) all obligations, contingent or otherwise, of such Person in respect of bankers' acceptances, (k) all obligations of such Person to purchase, redeem, retire, defease or otherwise acquire for value any Stock of stock equivalents of such Person, valued, in the case of redeemable preferred stock, at the greater of its voluntary liquidation preference and its involuntary liquidation preference plus accrued and unpaid dividends, and (l) all payments that such Person would have to make in the event of an early termination on the date Debt of such Person is being determined in respect of Hedging Agreements of such Person. "Deemed Collections" means Collections deemed to have been received pursuant to Section 2.03(c) or (d). "Defaulted Receivable" means a Receivable: (a) as to which any payment, or part thereof, remains unpaid for 90 or more days from the original due date; (b) as to which the Servicer or an Originator has received notice that the Obligor thereof has taken any action, or suffered any event to occur, of the type described in Section 5.01(f); (c) which, consistent with the Credit and Collection Policy, would be written off the applicable Originator's books as uncollectible; or (d) as to which the applicable Originator has (or consistent with the Credit and Collection Policy should have) established a specific reserve for non-payment. "Defaulting Originator" has the meaning specified in the Financing Agreement. "Deposit Account" means an account maintained at a bank into which is subject to a Deposit Account Agreement into which (a) Collections in the form of checks and other items are deposited that have been sent to one or more related Lockboxes by Obligors and/or (b) Collections in the form of electronic funds transfers and other items are paid directly by Obligors. 3 "Deposit Account Agreement" means an agreement among, other Persons, the Purchaser (or its assignees or designees) and any Deposit Bank in form and substance satisfactory to the Purchaser (or its assignees or designees). "Deposit Bank" means any of the banks holding one or more Deposit Accounts. "Designated Obligor" means, at any time, each Obligor; provided, however, that any Obligor shall cease to be a Designated Obligor upon five (5) Business Days' prior written notice by the Program Agent in the exercise of its reasonable discretion to the Purchaser and the Investor Agents. "Determination Date" means (a) the twelfth Business Day after the end of each Month other than December of each year, and (b) the fifteenth Business Day after the end of December of each year; provided that if an Event of Termination has occurred and is continuing under and as defined in the Financing Agreement, the Program Agent or the Borrower may designate more frequent Determination Dates. "Diluted Receivable" means that portion (and only that portion) of any Receivable which is either (a) reduced or canceled as a result of (i) any defective, rejected or returned goods or services or any failure by an Originator to deliver any goods or provide any services or otherwise to perform under the underlying Contract, (ii) any change in the terms of or cancellation of, a Contract or any cash discount, discount for quick payment or other adjustment by an Originator which reduces the amount payable by the Obligor on the related Receivable (except any such change or cancellation resulting from or relating to the financial inability to pay or insolvency of the Obligor of such Receivable) or (iii) any set-off by an Obligor in respect of any claim by such Obligor as to amounts owed by it on the related Receivable (whether such claim arises out of the same or a related transaction or an unrelated transaction) or (b) subject to any specific dispute, offset, counterclaim or defense whatsoever (except the discharge in bankruptcy of the Obligor thereof); provided that Diluted Receivables are calculated assuming that all chargebacks are resolved in the Obligor's favor. "Disbursement Agent" means Citibank, N.A., or such other Person designated from time to time as "Disbursement Agent" pursuant to the Financing Agreement. "Disbursement Agent's Account" means a segregated non-interest bearing deposit account accessible only by the Disbursement Agent, which is identified as the "Disbursement Agent's Account for the Hayes Lemmerz Receivables Financing Agreement" and bears a designation clearly indicating that the funds deposited therein are held for the benefit of the Beneficiaries. "Discount" means, in respect of each Purchase from the Seller, the percentage of the Outstanding Balance of the Receivables that are the subject of such Purchase as may be agreed upon prospectively, on an arm's length basis, between the Seller and the Purchaser; provided, that the Program Agent and Investor Agents shall be notified promptly following any changes in such agreed-upon percentage. 4 "Distribution Date" means (a) at any time other than during a Daily Reporting Period or Weekly Reporting Period, the second Business Day after each Determination Date, and (b) at any time during a Daily Reporting Period or Weekly Reporting Period, the fifth Business Day of each Month (which such day is also a Payment Date). "Eligible Receivable" means, at any time, a Transferred Receivable: (i) (A) the Obligor of which is a United States resident which is not a Governmental Entity, and is not an Affiliate of the Parent, any Originator, Purchaser or Seller, (B) the Obligor of which is a Governmental Entity within the United States but only to the extent that the aggregate Outstanding Balance of all Transferred Receivables of all Obligors that are Governmental Entities within the United States are not in excess of 2.0% of the aggregate Outstanding Balance of all Transferred Receivables or (C) the Obligor of which is a Canada resident which is not a Governmental Entity, and is not an Affiliate of the Parent, any Originator, Purchaser or Seller but only to the extent that the aggregate Outstanding Balance of all Transferred Receivables of all Obligors under this clause (C) are not in excess of 6.0% of the aggregate Outstanding Balance of all Transferred Receivables; (ii) the Obligor of which, at the later of the date of this Agreement and the date such Receivable is created, is a Designated Obligor; (iii) which is not a Defaulted Receivable; (iv) the Obligor of which is not the Obligor of any Defaulted Receivables which in the aggregate constitute 15% or more of the aggregate Outstanding Balance of all Transferred Receivables of such Obligor; (v) which has been billed and, according to the Contract related thereto, is required to be paid in full within 60 days of the original billing date therefor; (vi) which is an obligation representing all or part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended, and the nature of which is such that financing such Receivable with the proceeds of notes would constitute a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended; (vii) which is an "account" or a "payment intangible" within the meaning of Article 9 of the UCC of the applicable jurisdictions governing the perfection of the security interest created by this Agreement in the Receivables; (viii) which is denominated and payable only in United States dollars in the United States; 5 (ix) which arises under a Contract which, together with such Receivable, (A) is in full force and effect and constitutes the legal, valid and binding obligation of the Obligor of such Receivable, (B) is not subject to any Adverse Claim or any dispute, offset, counterclaim or defense whatsoever (except the potential discharge in bankruptcy of such Obligor) and is not settled on a net basis, and (C) is governed by the laws of one of the United States of America or the provinces of Canada; provided, that if it is governed by the laws of a province of Canada, (1) such Receivable shall not be interest-bearing, (2) no withholding tax or other deductions shall be imposed by applicable law on such Receivable and (3) the Contract therefor shall not contain any prohibition or restriction on assignment unless the Obligor thereof has waived such prohibition or restriction in writing; (x) which, together with the Contract related thereto, does not contravene in any material respect any laws, rules or regulations applicable thereto (including, without limitation, laws, rules and regulations relating to usury, consumer protection, truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy) and with respect to which none of the Seller, Purchaser, any Originator, the Servicer or the Obligor is in violation of any such law, rule or regulation in any material respect; (xi) which arises under a Contract which does not contain an enforceable provision requiring the Obligor thereunder to consent to (A) the transfer, sale or assignment of the Obligor's payment obligation by the Originator pursuant to the Originator Purchase Agreement or by the Seller pursuant to this Agreement, or (B) the grant of a security interest therein pursuant to this Agreement, the Originator Purchase Agreement or the Financing Agreement; (xii) which was generated in the ordinary course of the applicable Originator's business; (xiii) which has not been extended, rewritten or otherwise modified from the original terms thereof (except as permitted by Section 6.02(c) of the Financing Agreement); (xiv) the transfer, sale or assignment of which in accordance with the Transaction Documents does not contravene any applicable law, rule or regulation; (xv) which satisfies all applicable requirements of the Credit and Collection Policy; (xvi) which is not a Tooling Receivable; and (xvii) as to which the applicable Originator has satisfied and fully performed all obligations required to be fulfilled by it and the applicable Originator is not a Defaulting Originator. 6 "Enforceability Exceptions" means exceptions to the enforceability of an obligation arising under bankruptcy, insolvency, reorganization, moratorium or similar laws relating to or affecting creditors' rights generally, and general principles of equity (regardless of whether considered in a proceeding at equity or at law). "Event of Termination" has the meaning specified in Section 5.01. "Facility Termination Date" means the earliest of (a) the "Facility Termination Date" (as such term is defined in the Financing Agreement), (b) the date determined pursuant to Section 5.01 and (c) the date which HLIOC or any Originator designates by at least 2 Business Days' prior notice to the Purchaser and its assignees (including the Program Agent under the Financing Agreement). "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average (rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day on such transactions received by Citibank, N.A. from three Federal funds brokers of recognized standing selected by it. "Final Collection Date" means the date on or following the Facility Termination Date on which the aggregate Outstanding Balance of all Transferred Receivables has been reduced to zero and the Seller shall have paid all amounts payable to the Purchaser pursuant to this Agreement. "Financial Covenants" has the meaning specified in the Financing Agreement. "Financing Agreement" means that certain Receivables Financing Agreement, dated as of the date hereof, among the Purchaser, CAFCO, LLC, as an investor, Citibank, N.A., as a bank, Citicorp North America, Inc., as program agent (together with its successors and assigns, "Program Agent"), Citicorp North America, Inc., as an investor agent, the other investors, banks and investor agents party thereto from time to time, the Servicer, and the Disbursement Agent, as amended, restated, supplemented and otherwise modified from time to time. "GAAP" means generally accepted accounting principles in the United States. "Governmental Entity" means the United States of America, any state, any political subdivision of a state and any agency or instrumentality of the United States of America or any state or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. 7 "Guarantee" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of such Person with respect to Debt of another Person (or with respect to any trade payables, not constituting Debt, of a foreign Subsidiary of such Person), if the purpose or intent of such Person in incurring the Guarantee is to provide assurance to the obligee of such Debt (or such trade payables) that such Debt (or trade payables) will be paid or discharged, or that any agreement relating thereto will be complied with, or that any holder of such Debt (or such trade payables) will be protected (in whole or in part) against loss in respect thereof, including (a) the direct or indirect guaranty, endorsement (other than for collection or deposit in the ordinary course of business), co-making, discounting with recourse or sale with recourse by such Person of Debt of another Person (or such trade payables) and (b) any liability of such Person for Debt of another Person (or such trade payables) through any agreement (contingent or otherwise) (i) to purchase, repurchase or otherwise acquire such Debt (or such trade payables) or any security therefor, or to provide funds for the payment or discharge of such Debt (whether in the form of a loan, advance, stock purchase, capital contribution or otherwise), (ii) to maintain the solvency or any balance sheet item, level of income or financial condition of another Person, (iii) to make take-or-pay or similar payments, if required, regardless of non-performance by another party or parties to an agreement, (iv) to purchase, sell or lease (as lessor or lessee) property, or to purchase or sell services, primarily for the purpose of enabling the debtor to make payment of such Debt (or such trade payables) against loss or (v) to supply funds to, or in any other manner invest in, such other Person (including to pay for property or services irrespective of whether such property is received or such services are rendered), if in the case of any agreement described under clause (i), (ii), (iii), (iv) or (v) above the primary purpose or intent thereof is to provide assurance that Debt of another Person (or such trade payables) will be paid or discharged, that any agreement relating thereto will be complied with or that any holder of such Debt (or such trade payables) will be protected (in whole or in part) against loss in respect thereof. The amount of any Guarantee shall be equal to the amount of the Debt (or such trade payables) so guaranteed or otherwise supported. "Hedging Agreement" means any rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of the foregoing transactions) or any combination of the foregoing transactions. "HLIOC" means HLI Operating Company, Inc., a Delaware corporation. "Incipient Event of Termination" means an event that but for notice or lapse of time or both would constitute an Event of Termination; provided, however, that an Incipient Event of Termination shall not become an Event of Termination until the grace period applicable thereto, if any, shall have passed. "Indemnified Amounts" has the meaning specified in Section 6.01. 8 "Indemnified Party" has the meaning specified in Section 6.01. "Initial Cutoff Date" has the meaning specified in Section 2.02(a). "Initial Purchase Date" means the date on which the first Purchase made pursuant to this Agreement shall occur. "Investor Agents" means the Persons designated as "Investor Agents" pursuant to the Financing Agreement. "Investors" means the Persons designated as "Investors" pursuant to the Financing Agreement. "Lockbox" means a post office box administered by a Deposit Bank for the purpose of receiving Collections, which is the subject of a Deposit Account Agreement. "Material Adverse Change" means a material adverse change in the business, assets, operations, property, prospects or other condition (financial or otherwise) of the Seller. "Material Adverse Effect" means a material adverse effect on (a) the collectibility of the Receivables, (b) the ability of the Seller, Purchaser, Parent or the Originators taken as a whole to perform any of their respective material obligations under the Transaction Documents to which they are a party, (c) the legality, validity or enforceability of the Transaction Documents (including, without limitation, the validity, enforceability or priority of the ownership interests and security interests granted hereunder or thereunder) or the rights of or benefits available to the Purchaser under the Transaction Documents, or (iv) the business, assets, operations, condition (financial or otherwise), property, or prospects of the Originators taken as a whole or the Parent and its subsidiaries, taken as a whole. "Month" means a calendar month. "Negotiation Date" has the meaning specified in the Financing Agreement. "Net Receivables Pool Balance" has the meaning specified in the Financing Agreement. "Net Worth Percentage" means, with respect to the Purchaser, a fraction (expressed as a percentage) (a) the numerator of which equals the excess of the Purchaser's assets over its liabilities, in each case determined in accordance with GAAP consistently applied and (b) the denominator of which equals the Outstanding Balance of Transferred Receivables. "Obligor" means a Person obligated to make payments pursuant to a Contract. "Originator" has the meaning specified the Originator Purchase Agreement. 9 "Originator Purchase Agreement" means the purchase agreement, dated as of the date of this Agreement, among the Originators, as a sellers, and the Seller, as purchaser, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Other Companies" means the Originators, Parent, HLIOC, the Borrower and all of their respective Affiliates except the Borrower. "Other Taxes" has the meaning specified in the Financing Agreement. "Outstanding Balance" of any Receivable at any time means the then outstanding principal balance thereof. "Parent" means Hayes Lemmerz International, Inc., a Delaware corporation. "Payment Date" means (a) the fifth Business Day of each Month (the "Regular Payment Date"), and, (b) if any amounts required to be paid under the Financing Agreement on such Regular Payment Date are not paid in the amount so required on such date, each subsequent Business Day until such amounts are paid in full. "Person" means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a Governmental Entity. "Program Agent" has the meaning specified in the definition of "Financing Agreement". "Purchase" means a purchase by the Purchaser of Receivable Assets from the Seller pursuant to Article II. "Purchase Date" means each day on which a Purchase is made pursuant to Article II. "Purchase Price" for any Purchase means an amount equal to the Outstanding Balance of the Receivables that are the subject of such Purchase minus the Discount for such Purchase. "Purchaser" has the meaning specified in the preamble. "Receivable" means all indebtedness and other obligations of an Obligor resulting from the provision or sale of goods or services by any Originator under a Contract (whether constituting an account, instrument, chattel paper, payment intangible or general intangible), including Tooling Receivables, and includes the right to payment of any interest, finance charges, rebates, administration fees, data fees, late payment charges, delinquency charges, extension or collection fees and all other obligations of such Obligor with respect thereto. "Receivable Asset" has the meaning specified in Section 2.01. 10 "Related Security" means with respect to any Receivable: (a) all of the Seller's interest in goods, if any, (including returned goods) relating to any sale giving rise to such Receivable; (b) all security interests or liens and property subject thereto from time to time purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements filed against an Obligor describing any collateral securing such Receivable; (c) guaranties, letters of credit, insurance and other agreements or arrangements of whatever character from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; (d) the Contract and all other books, records and other information (including, without limitation, computer programs, tapes, discs, punch cards, data processing software and related property and rights, subject to the rights of any licensors and to applicable law) relating to such Receivable or any other Related Security and the related Obligor; (e) prepayment penalties, indemnities, warranties, insurance policies and proceeds and premium refunds thereof; and (f) all proceeds of the foregoing. "Repurchase Price" has the meaning specified in Section 2.03(d). "RFA Final Payment Date" means the later of the "Facility Termination Date" (as such term is defined in the Financing Agreement) and the date on which all Principal, Yield, Fees and other Obligations (each as defined in the Financing Agreement) under the Financing Agreement are paid in full. "Secured Obligations" has the meaning specified in Section 2.02(h). "Seller" has the meaning specified in the preamble. "Seller Collateral" has the meaning specified in Section 2.02(h). "Servicer" means at any time the Person then authorized pursuant to Section 6.01 of the Financing Agreement to administer and collect Receivables. "Settlement Date" means a Distribution Date; provided, however, that following the occurrence of an Event of Termination, Settlement Dates shall occur on such days as are selected from time to time by the Purchaser or its assignees in a written notice to the Seller. 11 "Settlement Period" means (a) with respect to the first Settlement Period, the period from the date hereof to the first Settlement Date, and (b) with respect to each other Settlement Period, the period from a Settlement Date to the next Settlement Date. "Solvent" shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its Debts as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur Debts or liabilities beyond such Person's ability to pay as such Debts and liabilities mature; (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute an unreasonably small capital; and (e) such Person generally is not paying its Debts or liabilities as such Debts or liabilities become due. The amount of contingent liabilities (such as litigation, guaranties and pension plan liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can reasonably be expected to become an actual or matured liability. "Stock" means shares of capital stock (whether denominated as common stock or preferred stock), beneficial, partnership or membership interests, participations or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company, trust or equivalent entity, whether voting or non-voting. "Subordinated Loan" has the meaning specified in Section 2.02(c)(i). "Subordinated Note" has the meaning specified in Section 2.02(c)(i). "Subsidiaries" means any corporation or other entity of which securities 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 an Originator, or the Parent, as the case may be, or one or more Subsidiaries, or by an Originator or the Parent, as the case may be, and one or more Subsidiaries. "Taxes" has the meaning specified in the Financing Agreement. "Tooling Receivable" means an obligation of any Person to pay for (i) tooling or equipment purchased or built by an Originator for the purpose of manufacturing products for such Person or (ii) services rendered in connection with building tooling for the purposes of manufacturing products for such Person, including in each case, the right to payment of any interest, sales taxes, finance charges, returned check or late charges and other obligations of such Person with respect thereto. "Transaction Document" means any of this Agreement, the Deposit Account Agreements, and all other agreements and documents delivered and/or related hereto or thereto, as amended, restated, supplemented and otherwise modified from time to time. 12 "Transferred Asset" means any Receivable Asset which is Purchased or purported to be Purchased by the Purchaser pursuant to Article II. "Transferred Receivable" means any Receivable which is Purchased or purported to be Purchased by the Purchaser pursuant to Article II. "UCC" means the Uniform Commercial Code as from time to time in effect in the relevant jurisdiction. "Weekly Report" and "Weekly Reporting Period" each have the meaning specified in the Financing Agreement. SECTION 1.02. Other Terms and Constructions. Under this Agreement, all accounting terms not specifically defined herein shall be construed in accordance with GAAP, and all accounting determinations made and all financial statements prepared hereunder shall be made and prepared in accordance with GAAP. All terms used in Article 9 of the UCC in the State of New York, and not specifically defined herein, are used herein as defined in such Article 9. The words "herein," "hereof," and "hereunder" and other words of similar import refer to this Agreement as a whole, including the exhibits and schedules hereto, as the same may from time to time be amended, modified or supplemented and not to any particular section, subsection, or clause contained in this Agreement, and all references to Sections, Annexes and Schedules shall mean, unless the context clearly indicates otherwise, the Sections hereof and the Annexes and Schedules attached hereto, the terms of which Schedules are hereby incorporated into this Agreement. The captions and section numbers appearing in this Agreement are inserted only as a matter of convenience and do not define, limit, construe or describe the scope or intent of the provisions of this Agreement. Each of the definitions set forth in Section 1.01 hereof shall be equally applicable to both the singular and plural forms of the defined terms. SECTION 1.03. Computation of Time Periods. 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." ARTICLE II AMOUNTS AND TERMS OF PURCHASES SECTION 2.01. Facility. On the terms and conditions hereinafter set forth and without recourse to the Seller (except to the extent specifically provided herein), the Seller shall sell to the Purchaser all of its right, title and interest in, under and to all Receivables originated by it from time to time, all Related Security, Collections, Deposit Accounts, Lockboxes and all proceeds of the foregoing (collectively, the "Receivable Assets"), and the Purchaser shall purchase from the Seller all such Receivable Assets of the Seller from time to time, in each case during the period from the date hereof to the Facility Termination Date. 13 SECTION 2.02. Making Purchases. (a) Initial Purchase. The Seller shall give the Purchaser at least one Business Day's notice of its request for the initial Purchase, which request shall specify the date of such Purchase (which shall be a Business Day on or after the date on which the conditions precedent set forth in Section 3.01 of the Financing Agreement shall have been satisfied) and the proposed Purchase Price for such Purchase. The Purchaser shall promptly notify the Seller whether it has determined to make such Purchase. On the date of such Purchase, the Purchaser shall pay the Purchase Price for such Purchase in the manner provided in Section 2.02(c). Effective upon such payment, the Seller hereby sells, conveys, transfers and assigns to the Purchaser all Receivable Assets in existence on the Initial Purchase Date immediately after giving effect to the first "Purchase" under and as defined in the Originator Purchase Agreement (the "Initial Cutoff Date"). (b) Subsequent Purchases. On each Business Day following the Initial Purchase Date until the Facility Termination Date, unless any party shall notify the other parties to the contrary, the Seller shall sell to the Purchaser and the Purchaser shall purchase from the Seller, all Receivable Assets owned by the Seller immediately after giving effect to the "Purchase" under and as defined in the Originator Purchase Agreement on such Business Day which have not previously been sold to the Purchaser. Each Purchase described herein shall automatically occur at 9 A.M. (New York time) on the date of such Purchase without any further action on the part of any party hereto. The Purchaser shall pay the Purchase Price for such Purchase in the manner provided in Section 2.02(c). Effective on each Purchase Date, the Seller hereby sells, conveys, transfers and assigns to the Purchaser all Receivable Assets not previously sold, conveyed, transferred or assigned to the Purchaser. (c) Payment of Purchase Price. (i) The Purchase Price for each Purchase of Receivable Assets (other than any Receivable Assets contributed to the Purchaser's capital) that are in existence on the Initial Cutoff Date shall be payable in full by the Purchaser to the Seller on the Initial Purchase Date, and shall be paid to the Seller in the following manner: (A) first, by delivery of immediately available funds, to the extent of funds made available to the Purchaser in connection with a borrowing of Advances under the Financing Agreement or other cash on hand; and (B) second, by: (1) delivery of the proceeds of a subordinated revolving loan from the Seller to the Purchaser (a "Subordinated Loan") pursuant to the Purchaser's subordinated promissory note in the form of Exhibit B hereto (the "Subordinated Note") payable to the Seller, in an amount not to exceed the lesser of (a) the remaining unpaid portion of such Purchase Price and (b) the maximum Subordinated Loan that could be borrowed without rendering the Net Worth Percentage less than 10.00%; and/or (2) accepting such Receivable Assets (or the relevant portion thereof) as a capital contribution to the Purchaser's capital in an amount (without duplication with clause (B)(1) above) equal to the remaining unpaid balance of such Purchase Price. 14 (ii) Each Receivable Asset coming into existence after the Initial Cutoff Date shall be sold or contributed to the Purchaser on the Business Day on which such Receivable Asset was acquired and the Purchase Price for such Receivable Asset shall be due and owing in full by the Purchaser to the Seller on such Business Day (except that the Purchaser may, with respect to any such Purchase Price, offset against such Purchase Price any amounts owed by the Seller to the Purchaser hereunder and which have become due but remain unpaid) and shall be paid to the Seller thereof in the following manner: (A) first, by delivery of immediately available funds, to the extent of funds made available to the Purchaser in connection with a borrowing of Advances under the Financing Agreement or other cash on hand; and (B) second, by: (1) delivery of the proceeds of a Subordinated Loan, provided that the making of any such Subordinated Loan shall be subject to the provisions of Section 2.02(c)(i)(B)(1); and/or (2) accepting such Receivable Assets (or the relevant portion thereof) as a contribution to the Purchaser's capital in an amount (without duplication with clause (B)(1) above) equal to the remaining unpaid balance of such Purchase Price; provided, that no such capital contribution shall be made from and after the Facility Termination Date. (d) Subordinated Note. Subject to the limitations set forth in Section 2.02(c)(i)(B) and Section 2.02(e), the Seller irrevocably agrees to advance each Subordinated Loan requested by the Purchaser on or prior to the Facility Termination Date. The Subordinated Loans shall be evidenced by, and shall be payable in accordance with the terms and provisions of, the Subordinated Note and shall be payable solely from Collections of Transferred Assets after all other amounts then due from the Purchaser under the Financing Agreement have been paid in full and all amounts then required to be set aside by the Purchaser thereunder have been so set aside; provided, that no such payment may be made at any time when an Event of Termination shall have occurred and be continuing. The Seller is hereby authorized by the Purchaser to endorse on the schedule attached to the Subordinated Note an appropriate notation evidencing the date and amount of each advance thereunder, as well as the date of each payment with respect thereto; provided that the failure to make such notation shall not affect any obligation of the Purchaser thereunder. (e) Settlement of Purchase Price. Although the Purchase Price for each Receivable Asset coming into existence after the Initial Cutoff Date shall be paid in full by the Purchaser to the Seller on the date such Receivable Asset is purchased, a precise reconciliation of the Purchase Price between the Purchaser and the Seller shall be effected on each Settlement Date with respect to all Receivable Assets transferred during the Month most recently ended prior to such Settlement Date and based on the information contained in the Borrower Report most recently delivered by the Servicer pursuant to the Financing Agreement for such Month (or if Settlement Dates occur more frequently than Monthly, in the Applicable Report most recently delivered). Although such reconciliation shall be effected on Settlement Dates, increases or decreases in the amount owing under the Subordinated Note made pursuant to Section 2.02(d) and any contribution of capital by the Seller to Purchaser made pursuant to Section 2.02(c) shall be deemed to have occurred and shall be effective as of the date that the Purchase Price is paid. 15 On each Settlement Date, the Seller shall determine the net increase or the net reduction in the outstanding principal amount of the Subordinated Note occurring during the immediately preceding Month and shall account for such net increase or net reduction in its books and records. If the Purchaser shall fail to make any payment of the applicable Purchase Price in respect of any Purchase on the date such Purchase Price is due hereunder then the Seller may, upon written notice to the Purchaser and the Program Agent (as assignee of the Purchaser), elect to terminate its obligation to sell Receivable Assets to the Purchaser hereunder and its obligation to make Subordinated Loans. (f) Capital Contributions and Purchases in Exchange for Proceeds of a Subordinated Loan. Each contribution of a Receivable Asset by the Seller to Purchaser shall be deemed to be a Purchase of such Receivable Asset by the Purchaser for all purposes of this Agreement. The Purchaser hereby acknowledges that the Seller shall not have any obligation to make further capital contributions to the Purchaser, in respect of the Seller's equity interest in the Purchaser or otherwise, in order to provide funds to pay the Purchase Price to the Seller under this Agreement or for any other reason. Each sale of a Receivable Asset by the Seller to Purchaser in exchange for the proceeds of a Subordinated Loan shall be deemed to be a Purchase of such Receivable Asset by the Purchaser for all purposes of this Agreement. (g) Ownership of Receivable Assets. On each Purchase Date, after giving effect to the Purchase on such date, the Purchaser shall own all Receivables acquired by the Seller on such Purchase Date (including Receivables which have been previously sold to the Purchaser hereunder) and all other Receivable Assets. Each sale of Receivable Assets hereunder is made without recourse; provided, however, that (i) the Seller shall be liable to the Purchaser for all representations, warranties and covenants made by the Seller hereunder and (ii) such sale does not constitute and is not intended to constitute an assumption by the Purchaser or its assignee thereof of the Seller or other Person arising in connection with the Transferred Assets or any other obligations or liabilities of the Seller. (h) Intention Is An Irrevocable Transfer; Grant of Security Interest. It is the intention of the parties hereto that each Purchase to be made hereunder shall be absolute and irrevocable and will provide the Purchaser with the full risks and benefits of ownership of the Transferred Assets so purchased (such that the Transferred Assets would not constitute property of the Seller's estate in the event of the Seller's bankruptcy) and shall constitute a "sale of accounts", as such term is used in Article 9 of the UCC of the State of New York, to the extent applicable, and not a loan secured by such Transferred Assets. In the event that, contrary to the mutual intent of the Seller and the Purchaser, any Purchase of Transferred Assets hereunder is not characterized as a sale but rather as a collateral transfer for security (or the transactions contemplated hereby are characterized as a financing transaction), it is the intent of the parties hereto that this Agreement shall constitute a security agreement under applicable law and that such Purchase shall be deemed to be a secured financing, secured by a security interest in all of the Seller's right, title and interest now or hereafter existing and hereafter arising in, to and under (i) all Receivables, (ii) all Related Security, (iii) all Collections with respect to the items in clauses (i) through (ii), (iv) all Deposit Accounts and Lockboxes, (v) all other property or interests in property, and (vi) all proceeds of the foregoing (collectively, the "Seller Collateral"). In furtherance of the foregoing, the Seller hereby grants to the Purchaser a security interest in all of the Seller's right, title and interest now or hereafter existing in, to and under the Seller 16 Collateral to secure the repayment of all amounts due and owing by the Seller to the Purchaser hereunder with accrued interest thereon, if applicable, whether now or hereafter existing, due or to become due, direct or indirect, or absolute or contingent (such amounts the "Secured Obligations"). SECTION 2.03. Collections. (a) In the event that the Seller believes that funds which are not Collections of Transferred Assets have been deposited into an account of the Purchaser or the Purchaser's assignee, the Seller shall notify the Servicer who shall so advise the Purchaser and, on the Business Day following such identification, the Purchaser shall remit, or shall cause to be remitted, all funds so deposited which are identified to the Purchaser's satisfaction to the Seller. (b) On each Settlement Date, the Purchaser shall pay to the Seller accrued interest on the Subordinated Loan and the Purchaser may, at its option, prepay in whole or in part the principal amount of the Subordinated Loan; provided that each such payment shall be made solely from Collections of Transferred Assets after all other amounts then due from the Purchaser under the Financing Agreement have been paid in full and all amounts then required to be set aside by the Purchaser under the Financing Agreement have been so set aside; and provided further, that no such payment shall be made at any time when an Event of Termination shall have occurred and be continuing. At such time following the Facility Termination Date and the RFA Final Payment Date, the Purchaser shall apply, on each Settlement Date, all other Collections of Transferred Assets received by the Purchaser and not previously distributed first to the payment of accrued interest on the Subordinated Loan, and then to the reduction of the principal amount of the Subordinated Loan. (c) If on any day any Transferred Asset becomes (in whole or in part) a Diluted Receivable, the Seller shall be deemed to have received on such day a Collection of such Transferred Asset in the amount of such Diluted Receivable. The Seller shall pay to the Purchaser on or prior to the next Business Day all amounts deemed to have been received pursuant to this subsection. (d) Upon discovery by the Seller or the Purchaser of any breach of the representation and warranty made in Section 3.01(j) with respect to any Transferred Receivable, the party discovering the same shall give prompt written notice thereof to the other parties hereto. The Seller shall, on the Business Day following such notice, repurchase the affected Transferred Receivable, at the option of the Seller, either (i) by making a cash payment to the Purchaser in an amount equal to the Repurchase Price (defined below), or (ii) so long as no "Event of Termination" under, and as defined in, the Financing Agreement has occurred, and no Pool Non-compliance Date has occurred and is continuing under (and as defined in) the Financing Agreement, by either (x) reducing the principal amount of the Subordinated Note due to the Seller by the amount of the Repurchase Price (defined below) or (y) transferring ownership of a new Eligible Receivable to the Purchaser on such Business Day having an Outstanding Balance at least equal to the Repurchase Price. The "Repurchase Price" for any Purchased Receivable to be repurchased under this Section 2.03(d) shall equal the Purchase Price paid for such Receivable by the Purchaser minus Collections received in respect thereof minus any payments or offsets made by the Seller to the Purchaser in respect of Dilution Factors 17 relating to such Transferred Receivable. Simultaneously upon the payment to the Purchaser, or transfer to the Purchaser of Eligible Receivables in respect of, the Repurchase Price for any such repurchased Transferred Receivable, such Transferred Receivable and all Transferred Assets relating solely to such Transferred Receivable shall automatically be reconveyed by the Purchaser to the Seller without any further action by the Purchaser or any other Person, and the Purchaser shall have no further rights with respect thereto. Each party hereto shall, at the Seller's expense, take any action the other party may reasonably request to further evidence such reconveyance. The Seller's obligation to reacquire Transferred Receivables pursuant to this Section 2.03(d) shall, upon satisfaction thereof, constitute the sole remedy (except for any obligation under Section 6.01 hereof) respecting the event giving rise to such obligation and is expressly limited to the Transferred Receivable affected by such event. Except as expressly provided in this Section 2.03, the Seller shall not have any right or obligation under this Agreement, by implication or otherwise, to repurchase from the Purchaser any Transferred Assets or to rescind or otherwise retroactively affect any transfer of any Transferred Assets after the date on which such Transferred Assets are transferred by the Purchaser hereunder. (e) Except as stated in subsection (c) or (d) of this Section 2.03 or as otherwise required by law or the underlying Contract, all Collections from an Obligor of any Transferred Receivable shall be applied to the Receivables of such Obligor in the order of the age of such Receivables, starting with the oldest such Receivable, unless such Obligor designates its payment for application to specific Receivables. SECTION 2.04. Payments and Computations, Etc. (a) All amounts to be paid or deposited by the Seller hereunder, including payments to be made with respect to Deemed Collections, shall be paid or deposited no later than 2 P.M. (New York City time) on the day when due in same day funds to an account or accounts designated by the Purchaser from time to time, which accounts, during the existence of the Financing Agreement, shall be the Distribution Agent's Account or such other accounts set forth in the Financing Agreement. (b) The Seller shall, to the extent permitted by law, pay to the Purchaser interest on any amount not paid or deposited by the Seller when due hereunder at an interest rate per annum equal to 2% per annum above the Alternate Base Rate, payable on demand. (c) All computations of interest and all computations of fees hereunder shall be made on the basis of a year of 360 days for the actual number of days (including the first but excluding the last day) elapsed. Whenever any payment or deposit to be made hereunder shall be due on a day other than a Business Day, such payment or deposit shall be made on the next succeeding Business Day and such extension of time shall be included in the computation of such payment or deposit. SECTION 2.05. Certain Rights of the Purchaser. (a) The Purchaser may, at any time during the existence of an Event of Termination, give notice of ownership to, and/or direct, the Obligors of Transferred Assets and any other Person obligated on any Transferred Assets, or any of them, that payment of all 18 amounts payable under any Transferred Asset shall be made directly to the Purchaser or its assignees. (b) The Initial Purchase hereunder shall include the transfer by the Seller, and the Seller does hereby transfer, to the Purchaser (and its assigns and designees) the exclusive ownership and control of the Lockboxes and Deposit Accounts. From and after the Initial Purchase Date, the Seller shall not have any right to withdraw or order a transfer of funds from the Deposit Accounts or to direct the investment of any funds therein. (c) At the Purchaser's request and at the Seller's expense, the Seller shall (i) assemble all of the documents, instruments and other records (including, without limitation, computer tapes and disks) that evidence or relate to the Transferred Assets or that are otherwise necessary or desirable to collect the Transferred Assets, and shall make the same available to the Purchaser at a place selected by the Purchaser or its designee, and (ii) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Transferred Assets in a manner acceptable to the Purchaser and, promptly upon receipt, remit all such cash, checks and instruments, duly indorsed or with duly executed instruments of transfer, to the Purchaser or its designee. The Purchaser shall also have the right to make copies of all such documents, instruments and other records at any time. (d) The Seller authorizes the Purchaser to take any and all steps in the Seller's name and on behalf of the Seller that are necessary or desirable, in the determination of the Purchaser, to collect amounts due under the Transferred Assets, including, without limitation, endorsing the Seller's name on checks and other instruments representing Collections of Transferred Assets and enforcing the Transferred Assets. SECTION 2.06. Rights and Remedies. (a) If the Seller fails to perform any of its obligations under this Agreement, the Purchaser may (but shall not be required to) itself perform, or cause performance of, such obligation; and the costs and expenses incurred in connection therewith shall be payable by the Seller. (b) The Seller shall cause each Originator to perform all of its obligations under the Contracts related to the Transferred Receivables to the same extent as if such Originator had not sold Receivables to the Seller under the Originator Purchase Agreement and the exercise by the Purchaser of its rights hereunder shall not relieve such Originator from such obligations or its obligations with respect to the Transferred Assets. The Purchaser shall not have any obligation or liability with respect to any Transferred Assets, nor shall the Purchaser be obligated to perform any of the obligations of the applicable Originator or the Seller thereunder. SECTION 2.07. Transfer of Records to Purchaser. (a) Each Purchase hereunder shall include the transfer of, and the Seller does hereby transfer to the Purchaser, all of the Seller's right and title to and interest in the records relating to the Transferred Assets, and the Seller hereby agrees that such transfer shall be effected automatically with each such Purchase, without any further action on the part of the parties hereto or any further documentation. 19 (b) In connection with such transfer, to the extent not prohibited under the relevant agreement between the Seller and the relevant licensor, the Seller hereby grants to each of the Purchaser, the Program Agent (as the Purchaser's assignee) and the Servicer an irrevocable, non-exclusive license to use, without royalty or payment of any kind, all software used by the Seller to account for the Transferred Assets, whether such software is owned by the Seller or is owned by others and used by the Seller under license agreements with respect thereto; provided that should the consent of any licensor of such software to grant the license described herein be required, the Seller hereby agrees that upon request by the Purchaser (or the Program Agent as the Purchaser's assignee), the Seller will use its reasonable efforts to obtain the consent of such third-party licensor. The license granted hereby shall be irrevocable, and shall terminate on the date this Agreement terminates in accordance with its terms. (c) The Seller shall take such action requested by the Purchaser, from time to time hereafter, that may be deemed by the Purchaser as reasonably necessary or appropriate to ensure that the Purchaser has an enforceable ownership interest in the records relating to the Transferred Assets and, subject to the limitation in clause (b) above, rights (whether by ownership, license or sublicense) to the use of the Seller's computer software system to access and create such records, subject to the rights of any licensors and applicable law. SECTION 2.08. Servicer. (a) The Seller acknowledges that pursuant to the Financing Agreement the Program Agent has appointed the Servicer to take certain actions associated with the administration and collection of the Transferred Assets. The Seller agrees that it shall cooperate with the Servicer in collecting amounts due from Obligors in respect of the Transferred Assets. The Seller hereby grants to Servicer an irrevocable power of attorney, with full power of substitution, coupled with an interest, to take in the name of the Seller all steps necessary or advisable to endorse, negotiate or otherwise realize on any writing or other right of any kind held or transmitted by the Seller or transmitted or received by Purchaser in connection with any Transferred Asset. (b) The Seller agrees that in connection with the Servicer's duties under the Financing Agreement and the agreements in this Section 2.08 that the Servicer shall be a third party beneficiary of this Agreement to the same extent as if the Servicer was a party hereto. ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.01. Representations and Warranties of the Seller. The Seller represents and warrants as of each Purchase Date as follows: (a) Due Formation and Good Standing. The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware, its organizational identification number is [__________], and the Seller has all limited liability company power and authority to carry on its business as now conducted, and is duly 20 qualified to do business, and is in good standing, in every jurisdiction where the nature of its business requires it to be so qualified. (b) Due Authorization and No Conflict. The execution, delivery and performance by the Seller of this Agreement and the other Transaction Documents to which it is a party, including the Seller's sale of Receivable Assets hereunder and the Seller's use of the proceeds of Purchases, (i) are within the Seller's limited liability company powers, (ii) have been duly authorized by all necessary limited liability company action, (iii) do not contravene (A) the Seller's Charter Documents, (B) any law, rule or regulation applicable to the Seller, (C) any contractual restriction binding on the Seller or its property or (D) any order, writ, judgment, award, injunction or decree binding on the Seller or its property, and (iv) do not result in or require the creation of any Adverse Claim upon or with respect to any of its properties (except for the transfer of the Seller's interest in the Transferred Assets pursuant to this Agreement). This Agreement has been duly executed and delivered by the Seller. (c) Governmental Approvals. No authorization or approval or other action by, and no notice to or filing with, any Governmental Entity is required for the due execution, delivery and performance by the Seller of this Agreement or any other document to be delivered by it hereunder, except for the filing of UCC financing statements referred to herein. (d) Enforceability of Transaction Documents. Each of the Transaction Documents to which the Seller is a party constitutes the legal, valid and binding obligation of the Seller enforceable against the Seller in accordance with its terms, subject to the Enforceability Exceptions. (e) Perfection of Interest in Transferred Assets. Immediately after each Purchase hereunder, the Purchaser will have acquired a valid and perfected first priority ownership interest or security interest in each such Transferred Asset so purchased, free and clear of any Adverse Claim. No effective financing statement or other instrument similar in effect, is filed in any appropriate recording office listing the Seller as debtor or seller, covering any Transferred Assets except such as may be filed in favor of the Purchaser in accordance with this Agreement or in favor of the Program Agent in accordance with the Financing Agreement. (f) Financial Statements. The consolidated balance sheet of HLIOC and its Subsidiaries as at July 31, 2004, and the related statements of income, stockholders equity and cash flow of HLIOC and its Subsidiaries for the fiscal year then ended, reported on by KPMG, LLP, copies of which have been furnished to the Purchaser, fairly present, in accordance with GAAP, the financial condition and results of operations and cash flows of HLIOC and its Subsidiaries as of and for the three-quarter period ended on such date. Since its date of formation, there has been no Material Adverse Change with respect to the Seller. (g) No Litigation. Except as disclosed in the Parent's or the Seller's publicly available SEC filings or otherwise disclosed in writing to the Program Agent after the date hereof, there is no pending or threatened action, investigation or proceeding affecting the Seller before any court, Governmental Entity or arbitrator in which there is a reasonable possibility of an adverse decision which could reasonably be expected, individually or in the aggregate, to 21 have a Material Adverse Effect or which in any way draws into question the validity or enforceability of this Agreement or any Transaction Document. (h) Use of Proceeds. No proceeds of any Purchase will be used to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) Bulk Sales Act. No transaction contemplated hereby requires compliance with any bulk sales act or similar law. (j) Eligibility of Eligible Receivables. Each Transferred Receivable characterized in any Borrower Report, Daily Report or Weekly Report as an Eligible Receivable is, as of the date of such report (or if applicable, as of a date certain specified in such report) an Eligible Receivable. Each Transferred Asset is owned (immediately prior to its sale hereunder) by the Seller free and clear of any Adverse Claim. As of each Purchase Date, each Receivable acquired by the Seller on the Purchase Date has been transferred to the Purchaser hereby. (k) Accuracy of Information. All written information, exhibits, financial statements, documents, books, records and reports furnished or to be furnished at any time (whether before or after the date of this Agreement) by the Seller to the Purchaser, Program Agent, any Investor Agent, Bank, or Investor in connection with this Agreement or any other Transaction Document is or will be accurate in all material respects as of its date or (except as otherwise disclosed to the Purchaser at such time) as of the date so furnished (or, if applicable, as of a date certain specified in such report), and, as of any such date, no such document 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. (l) Location of Chief Executive Office and Records. The location of the Seller's principal place of business and chief executive office, the locations of the offices where it keeps all the books and records relating to the Transferred Assets, and federal employer identification number are correctly set forth on Exhibit C. (m) Collection Information. The names and addresses of all the Deposit Banks, together with the post office boxes and account numbers of the Lockboxes and Deposit Accounts at such Deposit Banks are specified in Exhibit D (as the same may be updated from time to time pursuant to Section 4.01(g)). The Lockboxes and Deposit Accounts are the only post office boxes and bank accounts into which Collections of Transferred Receivables are deposited or remitted. (n) No Trade Names. The Seller is not known by nor uses any tradename or doing-business-as name. (o) Not an Investment Company. The Seller is not and, after giving effect to the transactions contemplated hereby, will not be, required to be registered as an "investment company" within the meaning of the Investment Company Act of 1940, as amended. 22 (p) Solvency. The Seller is Solvent. The transfers of Transferred Assets by the Seller to the Purchaser pursuant to this Agreement, and all other transactions between the Seller and the Purchaser, have been and will be made in good faith and without intent to hinder, delay or defraud creditors of the Seller. The transfers of Transferred Assets pursuant to, and as defined in, the Originator Purchase Agreement will not render the Seller insolvent. (q) Taxes. The Seller has timely filed or caused to be filed all required income tax and sales tax returns and reports and all other material tax returns and reports required to have been filed and has paid or caused to be paid all material taxes due pursuant to such returns or pursuant to any assessment received by the Seller. The charges, accruals and reserves on the books of the Seller in respect of such taxes or charges imposed by a Governmental Entity are, in the opinion of the Seller, adequate for the payment thereof. (r) Compliance with Laws. The Seller has complied in all material respects with all applicable laws, rules, tariffs, regulations, orders, writs, judgments, injunctions, decrees or awards to which it may be subject. (s) No Events of Termination. Immediately after giving effect to each Purchase, no Event of Termination has occurred. (t) Transaction Documents. The Transaction Documents represent all agreements between the Seller and the Purchaser relating to the transfer of the Transferred Receivables except for other agreements related to the transactions that are permitted by Section 4.01(l). (u) Payments to Seller. With respect to each Transferred Asset transferred to the Purchaser hereunder, the Purchase Price received by the Seller constitutes reasonably equivalent value in consideration thereof. No transfer by the Seller to the Purchaser of a Transferred Asset has been made for or on account of an antecedent debt owed by the Seller to the Purchaser, and no such sale is or may be voidable or subject to avoidance under any section of the Bankruptcy Code. (v) Determination by Management. The management of the Seller has determined that the transactions contemplated by the Originator Purchase Agreement, including Seller's "Purchase" (as defined therein) of the Receivable Assets, are in Seller's best interest and represent a practicable course of action without impairing the rights and interests of the Seller's creditors. ARTICLE IV COVENANTS SECTION 4.01. Covenants of the Seller. Until the Final Collection Date, the Seller shall: (a) Compliance with Laws, Etc. Comply in all material respects with all applicable laws, rules, regulations and orders and preserve and maintain its corporate existence, rights, franchises, qualifications and privileges. 23 (b) Offices, Records, Name and Organization. Keep its principal place of business and chief executive office and the office where it keeps its records concerning the Transferred Assets at the address of the Seller set forth on Exhibit C hereto or, upon 30 days' prior written notice to the Purchaser and its assignees, at any other locations within the United States. The Seller will not change its name or its jurisdiction of organization, unless (i) the Seller shall have provided the Purchaser and its assignees with at least 30 days' prior written notice thereof and (ii) no later than the effective date of such change, all actions required by Section 4.01(j) shall have been taken and completed. The Seller shall make a notation in its books and records, including its computer files, to indicate which Receivables and other Receivable Assets have been sold by it to the Purchaser hereunder. (c) Performance and Compliance with Contracts and Credit and Collection Policy. At its expense, timely and fully perform and comply in all material respects with all provisions, covenants and other promises required to be observed by it under the Contracts related to the Transferred Assets, and timely and fully comply in all material respects with the Credit and Collection Policy in regard to each Transferred Receivable and the related Contract. (d) Sales, Liens, Etc. Except for the sales of Transferred Assets contemplated herein, not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create or suffer to exist any Adverse Claim upon or with respect to, any Receivable Asset or Seller Collateral, or upon or with respect to any account to which any Collections of any Transferred Asset are sent, or assign any right to receive income in respect thereof. (e) Extension or Amendment of Receivables. Except as permitted under Section 6.02(c) of the Financing Agreement by the Servicer, not extend, amend or otherwise modify the terms of any Transferred Receivable, or amend, modify or waive any term or condition of any Contract (to which it is a party) related thereto. (f) Change in Business or Credit and Collection Policy. Not make any change (i) in the character of its business or (ii) in the Credit and Collection Policy that would impair the collectibility of the Transferred Receivables. (g) Change in Payment Instructions to Obligors. Not add or terminate any post office box, bank, or bank account as a Lockbox, Deposit Bank, or Deposit Account from those listed in Exhibit D to this Agreement, or make any change in its instructions to Obligors regarding payments to be made to any such box or account, unless the Purchaser shall have received notice of such addition, termination or change (including an updated Exhibit D) and a fully executed Deposit Account Agreement with each new Deposit Bank with respect to each new Lockbox or Deposit Account. (h) Deposits to Lockboxes and Deposit Accounts. Instruct all of its Obligors to remit all their payments in respect of Transferred Assets to Deposit Accounts or Lockboxes associated therewith. If the Seller shall receive any Collections directly, it shall immediately (and in any event within one Business Day) deposit the same to a Deposit Account. The Seller will not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lockbox or Deposit Account cash or cash proceeds other than Collections of Transferred Assets. 24 (i) Audits. Will, at its expense, from time to time during regular business hours as requested by the Purchaser, its assignees, agents or representatives (including independent public accountants, which may be the Seller's, any Originator's or the Parent's independent public accountants), permit such Persons (i) to conduct audits of the Transferred Assets and the related books and records and collections systems of the Seller, (ii) to examine and make copies of and abstracts from all books, records and documents (including, without limitation, computer tapes and disks) in the possession or under the control of the Seller relating to the Transferred Assets, and (iii) to visit the offices and properties of the Seller for the purpose of examining such materials described in clause (ii) above, and to discuss matters relating to the Transferred Assets or the Seller's performance under the Transaction Documents or under the Contracts with any of the officers or employees of the Seller having knowledge of such matters. In addition, the Purchaser, its assignees, agents or representatives may appoint independent public accountants or other Persons acceptable to the Purchaser or its assigns (which shall not be the Parent's, the Seller's or any Originator's independent public accountants who perform regular financial statement audits for the Parent and its Subsidiaries), to prepare and deliver to the Purchaser and its assignees a written report with respect to the Transferred Assets and the Credit and Collection Policy (including, in each case, the systems, procedures and records relating thereto) on a scope and in a form reasonably requested by the Purchaser or its assigns, and the Seller shall reimburse the Purchaser and its assigns all reasonable costs and expense incurred in connection therewith; provided, that so long as no Event of Termination has occurred or is continuing, the Seller's reimbursement obligations hereunder shall be limited to two such audits per calendar year (but without such limitation for follow-up audits if an audit deficiency is described during any such audit or follow-up audit); provided, further, that satisfaction of the requirements of Section 5.02 of the Financing Agreement shall also constitute satisfaction of this sentence. (j) Further Assurances. (i) From time to time, at its expense, promptly execute and deliver all further instruments and documents, and take all further actions, that may be necessary or desirable, or that the Purchaser or its assignees may reasonably request, to perfect, protect or more fully evidence the sale of Transferred Assets under this Agreement, or to enable the Purchaser or its assignees to exercise and enforce its respective rights and remedies under this Agreement. Without limiting the foregoing, the Seller will, upon the request of the Purchaser or its assignees, (A) execute and file such financing or continuation statements, or amendments thereto, and such other instruments and documents, that may be necessary or desirable to perfect, protect or evidence such Transferred Assets; and (B) deliver to the Purchaser copies of all Contracts relating to the Transferred Assets and all records relating to such Contracts and the Transferred Assets, whether in hard copy or in magnetic tape or diskette format (which if in magnetic tape or diskette format shall be compatible with the Purchaser's computer equipment). (ii) The Seller authorizes the Purchaser or its assignees to file financing or continuation statements, and amendments thereto and assignments thereof, relating to the Transferred Assets and Seller Collateral. (k) Reporting Requirements. Provide to the Purchaser the following: 25 (i) as soon as available and in any event prior to the date on which the Parent is required to file a form 10-Q pursuant to SOXA, financial information regarding HLIOC and its Subsidiaries consisting of consolidated unaudited balance sheets as of the close of such quarter and the related statements of income and cash flow for such quarter and that portion of the fiscal year ending as of the close of such quarter, certified by a Financial Officer of the Seller as fairly presenting the consolidated financial position of HLIOC and its Subsidiaries as at the dates indicated and the results of their operations and cash flow for the periods indicated in accordance with GAAP (subject to the absence of footnote disclosure and normal year-end audit adjustments); (ii) as soon as available and in any event prior to the date on which the Parent is required to file a form 10-K pursuant to SOXA, financial information regarding HLIOC and its Subsidiaries consisting of consolidated and consolidating balance sheets of HLIOC and its Subsidiaries as of the end of such year and related statements of income and cash flows of HLIOC and its Subsidiaries for such fiscal year, all prepared in conformity with GAAP and certified, in the case of the consolidated financial statements, without qualification as to the scope of the audit or as to HLIOC being a going concern by KPMG, LLP or other independent public accountants of recognized national standing acceptable to the Program Agent, together with a report of such accounting firm stating that (A) such financial statements fairly present the consolidated financial position of HLIOC and its Subsidiaries as at the dates indicated and the results of their operations and cash flows for the period indicated in conformity with GAAP applied on a basis consistent with prior years (except for changes which such accountants shall concur and that shall have been disclosed in the notes to such financial statements) and (B) the examination by such accountants in connection with such consolidated financial statements has been made in accordance with generally accepted auditing standards, and accompanied by (1) prior to the Negotiation Date, a copy of the certificate delivered by such accountants with respect to such accounting firm's knowledge of any events of default or potential events of default under the Credit Agreement, in the form required to be delivered under the Credit Agreement, or (2) on and after the Negotiation Date, a certificate stating that in the course of the regular audit of the business of HLIOC and its Subsidiaries such accounting firm has obtained no knowledge that a Event of Termination or Incipient Event of Termination with respect to the Financial Covenants under, as defined in, the Financing Agreement, has occurred and is continuing, or if in the opinion of such accounting firm, such a default has occurred and is continuing, a statement as to the nature thereof; (iii) as soon as possible and in any event within five Business Days after the occurrence of each Event of Termination or Incipient Event of Termination, in each case of which the Seller has actual knowledge, a statement of a Financial Officer of the Seller setting forth details of such Event of Termination or Incipient Event of Termination and the action that the Seller has taken and propose to take with respect thereto; (iv) at least 30 days prior to any change in the Seller's name or state of organization, a notice setting forth the new name or state of organization and the effective date thereof; 26 (v) promptly and in no event more than five (5) Business Days after obtaining knowledge thereof, notice of any matter or the occurrence of any event concerning it which could reasonably be expected to have a Material Adverse Effect; and (vi) such other information respecting the Transferred Assets or the condition or operations, financial or otherwise, of the Seller as the Purchaser may from time to time reasonably request, to the extent such disclosure is permitted under applicable law, rule or regulation. Reports and financial statements required to be delivered pursuant to clauses (i) and (ii) of this Section 4.01(k) shall be deemed to have been delivered on the date on which the Parent posts such reports, or reports containing such financial statements, on the Parent's website on the internet at http://www.hayes-lemmerz.com or when such reports, or reports containing such financial statements, are posted on the SEC's website at www.sec.gov. (l) Limitation on Transactions with the Purchaser. Not enter into, or be a party to any transaction with the Purchaser, except for (i) the transactions contemplated by this Agreement and the other Transaction Documents; and (ii) to the extent not otherwise prohibited under this Agreement, other transactions in the nature of employment contracts and directors' fees, upon fair and reasonable terms materially no less favorable to the Purchaser than would be obtained in a comparable arm's-length transaction with a Person not an Affiliate. (m) Originator Purchase Agreement. The Seller will not amend, waive or modify any provision of the Originator Purchase Agreement or waive the occurrence of any "Event of Termination" under the Originator Purchase Agreement, without in each case the prior written consent of the Purchaser, the Program Agent and each Investor Agent. The Seller will perform all of its obligations under the Originator Purchase Agreement in all respects and will enforce the Originator Purchase Agreement in accordance with its terms. (n) Records. Record each Purchase as a sale or capital contribution, as the case may be, on its books and records, and reflect each Purchase in its financial statements and tax returns as a sale or capital contribution, as the case may be. Maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing the Transferred Receivables in the event of the destruction of the originals thereof) and keep and maintain all documents, books, records and other information reasonably necessary for the collection of all such Transferred Receivables, and in which timely entries are made in accordance with GAAP. Such books and records shall include, without limitation, records adequate to permit the daily identification of each new Transferred Receivable and all Collections of and adjustments to each existing Transferred Receivable, as well as its actual experience with respect to any Dilution Factor. Promptly notify the Purchaser of any material conversion or substitution (excluding, in each case, version upgrades) of the computer software used by the Servicer in its collection of Transferred Receivables. (o) Separate Existence. (i) The Seller shall maintain at least one Independent Director on its board of directors at all times. 27 (ii) The Seller shall not direct or participate in the management of any of the Other Companies' operations or of any other Person's operations. (iii) The Seller shall conduct its business from an office separate from that of the Other Companies and any other Person (but which may be located in the same facility as one or more of the Other Companies). The Seller shall have stationery and other business forms and a mailing address and a telephone number separate from that of the Other Companies and any other Person. (iv) The Seller shall at all times be adequately capitalized in light of its contemplated business. (v) The Seller shall at all times provide for its own operating expenses and liabilities from its own funds. (vi) The Seller shall maintain its assets and transactions separately from those of the Other Companies and any other Person and reflect such assets and transactions in financial statements separate and distinct from those of the Other Companies and any other Person and evidence such assets and transactions by appropriate entries in books and records separate and distinct from those of the Other Companies and any other Person. The Seller shall hold itself out to the public under the Seller's own name as a legal entity separate and distinct from the Other Companies. The Seller shall not hold itself out as having agreed to pay, or as being liable, primarily or secondarily, for, any obligations of the Other Companies or any other Person. (vii) The Seller shall not maintain any joint account with any Other Company or any other Person or become liable as a guarantor or otherwise with respect to any Debt or contractual obligation of any Other Company or any other Person. (viii) The Seller shall not make any payment or distribution of assets with respect to any obligation of any Other Company or any other Person or grant an Adverse Claim on any of its assets to secure any obligation of any Other Company or any other Person. (ix) The Seller shall not make loans, advances or otherwise extend credit to any of the Other Companies. (x) The Seller shall comply in all respects with its Charter Documents and resolutions. (xi) The Seller shall not engage in any transaction with any of the Other Companies, except as permitted by this Agreement and the other Transaction Documents. (xii) The Seller shall comply with (and cause to be true and correct) each of the facts and assumptions contained in paragraphs (5), (6), (11) through (14) on pages 3-6 of the opinion of Skadden, Arps, Slate, Meagher & Flom, LLP delivered pursuant to Section 3.01(g). 28 (p) Nature of Business. The Seller will not engage in any business other than the purchase or acquisition of Transferred Assets from the Originators and the transactions contemplated by this Agreement. The Seller will not create or form any Subsidiary other than the Purchaser. (q) Taxes. File all material tax returns and reports required by law to be filed by it and will promptly pay all taxes and governmental charges at any time owing, and pay when due any taxes payable in connection with the transfer of the Receivables Assets. (r) Accounting of Transfers. Not account for or treat (whether in financial statements or otherwise) the transactions provided for by this Agreement in any manner other than as the sale and/or absolute conveyance by it of Transferred Assets to the Purchaser. (s) Mergers, Etc. The Seller will not merge with or into or consolidate with or into, or convey, transfer, lease or otherwise dispose of (whether in one transaction or in a series of transactions), any of its assets (whether now owned or hereafter acquired) to, or acquire all or substantially all of the assets or capital stock or other ownership interest of, or enter into any joint venture or partnership agreement with, any Person, other than as specifically contemplated by this Agreement and the other Transaction Documents. (t) Distributions, Etc. The Seller will not declare or make any dividend payment or other distribution of assets, properties, cash, rights, obligations or securities on account of any of its Stock, or return any capital to its shareholders as such, or purchase, retire, defease, redeem or otherwise acquire for value or make any payment in respect of any Stock of the Seller or any warrants, rights or options to acquire any such Stock, now or hereafter outstanding; provided, however, that the Seller may declare and pay cash dividends on its Stock to its shareholders so long as (i) no Event of Termination shall then exist or would occur as a result thereof, (ii) such dividends are in compliance with all applicable law including the laws of the State of Delaware, and (iii) such dividends have been approved by all necessary and appropriate limited liability company action of the Seller. The Seller will not make or suffer to exist any loans or advances to, or extend any credit to, or make any investments (by way of transfer of property, contributions to capital, purchase of stock or securities or evidences of indebtedness, acquisition of the business or assets, or otherwise) in, any Affiliate or any other Person except for the purchase and receipt of capital contributions of Transferred Assets pursuant to the terms of the Originator Purchase Agreement. (u) Debt. The Seller will not incur any Debt, other than any Debt incurred pursuant to this Agreement. (v) Charter Documents. The Seller will not amend or delete or modify its Charter Documents without the prior written consent of the Purchaser and the Program Agent. ARTICLE V EVENTS OF TERMINATION SECTION 5.01. Events of Termination. If any of the following events ("Events of Termination") shall occur and be continuing: 29 (a) the Seller shall fail to make when due any payment or deposit to be made by it under this Agreement (including any payment with respect to any Deemed Collection); (b) the Seller shall fail to perform or observe (i) any term, covenant or agreement contained in Section 4.01(l) or 4.01(o) and such failure shall remain unremedied for 15 days or (ii) any other term, covenant or agreement contained in this Agreement or any other Transaction Document on its part to be performed or observed and any such failure shall remain unremedied for thirty (30) days; provided, that failure to perform or observe any covenant contained in Sections 4.01(b), 4.01(d), 4.01(g), 4.01(h) or 4.01(q) shall not be entitled to the benefit of such 30-day or 15-day period; (c) any representation or warranty (unless such representation or warranty relates solely to one or more specific Receivables incorrectly characterized as Eligible Receivables and the Seller shall have made any required Deemed Collection payment pursuant to Section 2.03 with respect to such Receivables) made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement or any information or report delivered by the Seller pursuant to this Agreement shall prove to have been incorrect or untrue in any material respect when made or deemed made or delivered (except that the materiality standard in this clause (c) shall not apply to any such representation or warranty that is qualified by a materiality standard by its terms); (d) the Seller shall fail to pay any principal of or premium or interest on any of its Debt which is outstanding in a principal amount of at least $10,000 in the aggregate when the same becomes due and payable (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise), and such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Debt; or any other event shall occur or condition shall exist under any agreement or instrument relating to any such Debt and shall continue after the applicable grace period, if any, specified in such agreement or instrument, if the effect of such event or condition is to accelerate, or to permit the acceleration of, the maturity of such Debt; or any such Debt shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), redeemed, purchased or defeased, or an offer to repay, redeem, purchase or defease such Debt shall be required to be made, in each case prior to the stated maturity thereof; (e) any Purchase of Transferred Assets hereunder shall for any reason cease to constitute valid and perfected ownership of such Transferred Assets or immediately prior to each Purchase hereunder the Seller shall cease to have a valid and perfected first priority ownership interest therein, or there shall exist any Adverse Claim in the Seller Collateral; (f) the Seller shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Seller seeking to adjudicate it a 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, custodian or other similar official for it or for any substantial part of its property and, in the case of any such proceeding instituted 30 against it (but not instituted by it), either such proceeding shall remain undismissed or unstayed for a period of 60 days, or any of the actions sought in such proceeding (including, without limitation, the entry of an order for relief against, or the appointment of a receiver, trustee, custodian or other similar official for, it or for any substantial part of its property) shall occur; or the Seller shall take any corporate action to authorize any of the actions set forth above in this subsection (f); (g) an Event of Termination shall have occurred under the Financing Agreement; or (h) there shall have occurred any event which may materially adversely affect the collectibility of the Transferred Receivables or the ability of the Seller to collect Transferred Receivables or otherwise perform its respective obligations under this Agreement or the other Transaction Documents; then, and in any such event, the Purchaser may, by notice to the Seller, declare the Facility Termination Date to have occurred (in which case the Facility Termination Date shall be deemed to have occurred), and all Purchases hereunder shall cease immediately; provided, however, that in the case of any event described in clause (f) above, the Facility Termination Date shall occur automatically upon the occurrence of such event. Upon any such declaration or designation or upon such automatic termination, the Purchaser shall have, in addition to the rights and remedies under this Agreement, all other rights and remedies with respect to the Transferred Assets and Seller Collateral provided after default under the UCC and under other applicable law, which rights and remedies shall be cumulative. ARTICLE VI INDEMNIFICATION SECTION 6.01. Indemnities by the Seller. (a) Without limiting any other rights which the Purchaser may have hereunder or under applicable law, the Seller hereby agrees to indemnify the Purchaser and its assigns and transferees (each, an "Indemnified Party"), from and against any and all damages, claims, losses, liabilities and related costs and expenses, including reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts"), awarded against or incurred by any Indemnified Party arising out of or as a result of any of the following: (i) the characterization (A) in any Borrower Report, Weekly Report, Daily Report or (B) for the purpose of inclusion of a Transferred Receivable in the Net Receivables Pool Balance in any other written statement made by the Seller to the Program Agent, of any Transferred Receivable as an Eligible Receivable which is not an Eligible Receivable as of the date on which such information was certified; (ii) any representation or warranty or statement made or deemed made by the Seller (or any of its officers) under or in connection with this Agreement or any other Transaction Document, which shall have been incorrect in any respect when made or deemed made; 31 (iii) the failure by the Seller to comply with any applicable law, rule or regulation with respect to any Transferred Asset or the related Contract; or the failure of any Transferred Asset or the related Contract to conform to any such applicable law, rule or regulation; (iv) the failure to vest and maintain vested in the Purchaser absolute ownership of the Transferred Assets that are, or that purport to be, the subject of a Purchase under this Agreement, free and clear of any Adverse Claim; (v) any dispute, claim, offset or defense (other than discharge in bankruptcy of the Obligor) of the Obligor to the payment of any Receivable that is, or that purports to be, the subject of a Purchase under this Agreement from the Seller (including, without limitation, a defense based on such Receivable or the related Contract not being a legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of the goods or services related to such Receivable or the furnishing or failure to furnish such goods or services; (vi) any failure of the Seller to comply with any term, provision or covenant contained in this Agreement or any other Transaction Document to which it is a party or to perform its duties or obligations under any Contract related to a Transferred Receivable; (vii) any products liability or other claim arising out of or in connection with goods or services which are the subject of any Contract related to a Transferred Receivable originated by the Seller; (viii) the commingling of Collections of Transferred Assets by the Seller (or a designee of the Seller), as Servicer or otherwise, at any time with other funds; (ix) any investigation, litigation or proceeding related to this Agreement or any other Transaction Document to which the Seller is a party or the use of proceeds of Purchases by the Seller or in respect of any Transferred Asset with respect thereto; (x) any claim brought by any Person other than an Indemnified Party arising from any activity the Seller or any designee of the Seller in servicing, administering or collecting any Transferred Asset; (xi) the sale by the Seller of any Receivable Asset in violation of any applicable law, rule or regulation; (xii) any Adverse Claim attaching to any Transferred Asset or any Seller Collateral with respect thereto, except a Lien created under the Transaction Documents; (xiii) the failure to pay when due any and all Other Taxes and the payment by such Indemnified Party of Taxes; 32 (xiv) any failure by the Purchaser to give reasonably equivalent value to the Seller in consideration for the transfer by the Seller to the Purchaser of any Transferred Assets, or any attempt by any Person to void any Purchases under any statutory provision or common law or equitable action, including, without limitation, any provision of the Bankruptcy Code; (xv) the failure of any Lockbox processor or Deposit Bank to remit any amounts or items of payment held in a Lockbox or Deposit Account pursuant to the instructions of the Program Agent given in accordance with the Financing Agreement, the applicable Deposit Account Agreement or the other Transaction Documents, whether by reason of the exercise of setoff rights or otherwise; (xvi) the failure of the Seller to furnish accurate and complete documentation (including, without limitation, a Contract or invoice) to any Obligor; and (xvii) any Transferred Receivable becoming (in whole or in part) a Diluted Receivable. (b) It is expressly agreed and understood by the parties hereto (i) that the foregoing indemnification is not intended to, and shall not, constitute a guarantee of the collectibility or payment of the Transferred Assets and (ii) that nothing in this Section 6.01 shall require the Seller to indemnify any Person (A) for Transferred Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy, or financial inability to pay of the applicable Obligor or (B) for damages, losses, claims or liabilities or related costs or expenses to the extent found in a final non-appealable judgment of a court of competent jurisdiction to have resulted from such Person's gross negligence or willful misconduct. In no event, however, shall the Seller be liable for punitive damages other than arising from a third party claim. (c) Any amounts subject to the indemnification provisions of this Section 6.01 shall be paid by the Seller to the related Indemnified Party within five (5) Business Days following demand therefor accompanied by reasonable supporting documentation with respect to such amounts. Notwithstanding anything to the contrary in this Agreement, solely for purposes of this Section 6.01, any representation, warranty or covenant qualified by materiality or the occurrence of a Material Adverse Effect shall not be so qualified. (d) No Indemnified Party shall have any liability (whether in contract, tort or otherwise) to the Seller or any of their security holders or creditors for or in connection with the transactions contemplated hereby, except to the extent such liability is determined in a final non-appealable judgment by a court of competent jurisdiction to have resulted primarily from such Indemnified Party's gross negligence or willful misconduct or breach of its obligations under the Financing Agreement. In no event, however, shall any Indemnified Party be liable on any theory of liability for any special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings). 33 ARTICLE VII MISCELLANEOUS SECTION 7.01. Amendments, Etc. No amendment or waiver of any provision of this Agreement or consent to any departure by the Seller therefrom shall be effective unless in a writing signed by the Purchaser and, in the case of any amendment, also signed by the Seller, and then such amendment, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No failure on the part of the Purchaser 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. This Agreement, the Originator Purchase Agreement and the Financing Agreement, together with the other written agreements required to be delivered hereunder and thereunder and the exhibits and schedules hereto and thereto, contains a 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 (together with the exhibits hereto) among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings. SECTION 7.02. Notices, Etc. All notices and other communications hereunder shall, unless otherwise stated herein, be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile, to each party hereto, at its address set forth on Exhibit C hereto or at such other address as shall be designated by such party in a written notice to the other parties hereto. All notices and communications given to any party hereto shall be deemed to have been given on the date of receipt. Each of the Purchaser and the Seller consents to the service of any and all process in any action or proceeding described in Section 7.05 by the mailing of copies of such process to it at its address specified for notice hereunder. Nothing in this Section 7.02 shall affect the right of the Purchaser or the Seller to serve legal process in any other manner permitted by law. SECTION 7.03. Binding Effect; Assignability. (a) This Agreement shall be binding upon and inure to the benefit of the Seller, the Purchaser and their respective successors and assigns; provided, however, that the Seller may not assign its rights or obligations hereunder or any interest herein without the prior written consent of the Purchaser. In connection with any sale or assignment by the Purchaser of all or a portion of the Transferred Assets, the buyer or assignee, as the case may be, shall, to the extent of its purchase or assignment, have all rights of the Purchaser under this Agreement (as if such buyer or assignee, as the case may be, were the Purchaser hereunder) except to the extent specifically provided in the agreement between the Purchaser and such buyer or assignee, as the case may be. (b) This Agreement shall create and constitute the continuing obligations of the parties hereto in accordance with its terms, and shall remain in full force and effect until such time, after the Facility Termination Date, when all of the Transferred Receivables are either collected in full or become Defaulted Receivables; provided, however, that rights and remedies with respect to any breach of any representation and warranty made by the Seller pursuant to 34 Article III and the provisions of Article VI and Sections 7.04 and 7.05 shall be continuing and shall survive any termination of this Agreement. SECTION 7.04. Costs, Expenses and Taxes. (a) In addition to the rights of indemnification granted to the Purchaser pursuant to Article VI hereof, the Seller agrees to pay on demand all costs and expenses in connection with the preparation, execution and delivery of this Agreement and the other documents and agreements to be delivered hereunder, including, without limitation, the reasonable fees and reasonable out-of-pocket expenses of counsel for the Purchaser with respect thereto and with respect to advising the Purchaser as to its rights and remedies under this Agreement, and the Seller agrees to pay, on a joint and several basis, all costs and expenses, if any (including reasonable counsel fees and expenses), in connection with the enforcement of this Agreement and the other documents to be delivered hereunder excluding, however, any costs of enforcement or collection of Transferred Assets which are not paid on account of the insolvency, bankruptcy or financial inability to pay of the applicable Obligor. (b) In addition, the Seller agrees to pay any and all stamp and other taxes and fees payable in connection with the execution, delivery, filing and recording of this Agreement or the other documents or agreements to be delivered hereunder, and the Seller agrees to save each Indemnified Party harmless from and against any liabilities with respect to or resulting from any delay in paying or omission to pay such taxes and fees. SECTION 7.05. WAVIER OF JURY TRIAL; CONSENT TO JURISDICTION. EACH PARTY HERETO HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE AMONG THE SELLER AND THE PURCHASER ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP AMONG THEM IN CONNECTION WITH THIS AGREEMENT. INSTEAD, ANY DISPUTE RESOLVED IN COURT WILL BE RESOLVED IN A BENCH TRIAL WITHOUT A JURY. EACH PARTY HERETO HEREBY AGREES AND SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE COURTS OF THE UNITED STATES LOCATED IN THE STATE OF NEW YORK FOR THE PURPOSE OF ADJUDICATING ANY CLAIM OR CONTROVERSY ARISING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY AND, FOR SUCH PURPOSE, HEREBY WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS AND ANY OBJECTION TO VENUE THEREIN OF ANY ACTION INSTITUTED HEREUNDER AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. NOTHING IN THIS SECTION 7.05 SHALL AFFECT THE RIGHT OF THE SELLER OR THE PURCHASER TO BRING ANY ACTION OR PROCEEDING AGAINST ANY OTHER PARTY HERETO OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION. SECTION 7.06. GOVERNING LAW. THIS AGREEMENT SHALL, IN ACCORDANCE WITH SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF 35 THE STATE OF NEW YORK, BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 7.07. Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. SECTION 7.08. Purchaser's Assignment of Rights to Program Agent. The Seller acknowledges that all of the Purchaser's right, title and interest in, to and under this Agreement and each other document, agreement or instrument executed in connection herewith or therewith, constitutes part of the Transferred Assets and the Collateral under the Financing Agreement. Pursuant to and subject to the limitations contained in, and the terms and conditions of, the Financing Agreement, the Purchaser has assigned to the Program Agent, for the benefit of the Beneficiaries, all benefits, rights and remedies exercisable by the Purchaser under this Agreement and each other document, agreement or instrument executed in connection herewith or therewith. Such assignment includes, without limitation, (a) all monies due and to become due to the Purchaser from the Seller, whether as Transferred Receivables or any fees, expenses, costs, indemnities, or damages for the breach of this Agreement or otherwise and (b) all rights, remedies, powers, privileges and claims of the Purchaser against the Seller under or with respect to this Agreement (whether arising pursuant to the terms of this Agreement or as otherwise available at law or in equity). The Seller acknowledges that the Program Agent shall have the sole right to enforce the Purchaser's rights and remedies under this Agreement to the extent permitted by the Financing Agreement; provided, however, that the Program Agent shall not be obligated to perform any of the obligations of the Purchaser under this Agreement. The Seller acknowledges that the rights of the Program Agent with respect to the rights and remedies in connection with any indemnification or any breach of any representation, warranty, or covenant made by the Seller under this Agreement shall be continuing and shall survive any termination of this Agreement. SECTION 7.09. Limited Recourse. Notwithstanding anything to the contrary contained herein, the obligations of the Purchaser under this Agreement shall be payable solely out of Collections as they are received by or are available to the Purchaser to make such payments pursuant to the Financing Agreement, and, to the extent Collections are not available to pay such obligations, the claims relating thereto shall not constitute a claim (as defined in Section 101 of Title 11 of the Bankruptcy Code) against the Purchaser but shall continue to accrue. The Seller agrees that the payment by the Purchaser of any claim of the Seller shall be subordinated in the priority for such claim on the same subordination terms as set forth in the Subordinated Note. The Seller hereby agrees that it will not institute against the Purchaser any proceeding of the type referred to in Section 5.01(f) so long as any Obligations shall be outstanding or there shall not have elapsed one year plus one day since the last day on which any such Obligations shall have been outstanding. SECTION 7.10. Confidentiality. (a) The Seller agrees to maintain the confidentiality of this Agreement in communications with third parties and otherwise; provided that this Agreement may be disclosed (i) to third parties to the extent such disclosure is made pursuant to a written agreement of 36 confidentiality in form and substance reasonably satisfactory to the Purchaser, (ii) to the legal counsel and auditors of the Seller if they agree to hold it confidential and (iii) to the extent required by applicable law or regulation or by any court, regulatory body or agency having jurisdiction over such party; and provided, further, that such party shall have no obligation of confidentiality in respect of any information which may be generally available to the public or becomes available to the public through no fault of such party. (b) The Purchaser agrees to maintain the confidentiality of all information with respect to the Seller furnished or delivered to it pursuant to this Agreement and identified by the Seller as being confidential; provided, that such information may be disclosed (i) to such party's legal counsel and auditors and to such party's assignees and participants and potential assignees and participants and their respective counsel if they agree to hold it confidential, (ii) to the nationally recognized statistical rating agencies, (iii) to any actual or potential subordinated investor in any Investor or any provider of liquidity for any Investor, if such subordinated investor or provider of liquidity has agreed to hold it confidential, (iv) to credit enhancers and dealers and investors in respect of promissory notes of each Investor in accordance with the customary practices of said Investor for disclosure to credit enhancers, dealers or investors, as the case may be, it being understood that any such disclosure to dealers or investors will not identify the Seller or any of its Affiliates by name, (v) to the extent required by applicable law or regulation or by any court, regulatory body or agency having jurisdiction over such party (or its assignees), (vi) in connection with enforcement of the Purchaser's or any Beneficiary's rights and remedies hereunder or under the other Transaction Documents, and (vii) to any other Person with the Seller's prior written consent; and provided, further, that such party shall have no obligation of confidentiality in respect of any information which may be generally available to the public or becomes available to the public through no fault of such party. Notwithstanding anything herein to the contrary, the foregoing shall not be construed to prohibit (A) disclosure as required pursuant to the Transaction Documents, (B) disclosure of any and all information (w) if required to do so by any applicable statute, law, rule or regulation, or in working with any taxing authorities or other governmental agencies, (x) to any government agency or regulatory body having or claiming authority to regulate or oversee any respects of any Beneficiary's business or that of its affiliates, (y) pursuant to any subpoena, civil investigative demand or similar demand or request of any court, regulatory authority, arbitrator or arbitration to which any Beneficiary or any affiliate or an officer, director, employer or shareholder thereof is a party, or (z) to any affiliate, independent or internal auditor, agent, employee or attorney of any Beneficiary having a need to know the same, provided that such Beneficiary advises such recipient of the confidential nature of the information being disclosed. (c) Notwithstanding any other provision herein or in any other Transaction Document, the Purchaser hereby confirms that the Seller (and each employee, representative or other agent of such party) may disclose to any and all Persons, without limitation of any kind, the U.S. tax treatment and U.S. tax structure of the transaction contemplated by this Agreement and the other Transaction Documents. * * * 37 IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. SELLER: HLI FUNDING I, LLC By: /s/ Gary Findling __________________________________ Name: Gary Findling Title: Treasurer PURCHASER: HL FUNDING II, INC. By: /s/Gary Findling __________________________________ Name: Gary Findling Title: Treasurer SIGNATURE PAGE TO SECONDARY PURCHASE AGREEMENT EXHIBIT A CREDIT AND COLLECTION POLICY [omitted] A-1 EXHIBIT B FORM OF SUBORDINATED NOTE New York, New York _____________, 2004 FOR VALUE RECEIVED, HL FUNDING II, INC., a Delaware corporation (the "Purchaser"), hereby promises to pay to HL FUNDING I, LLC ("HLI"), the principal amount of this Note, determined as described below, together with interest thereon at a rate per annum equal at all times to the sum of 1.35% plus the Applicable Margin (as defined in the Financing Agreement defined below) in effect from time to time plus the Eurodollar Rate (as defined in the Financing Agreement) for periods of one month, in each case in lawful money of the United States of America. Capitalized terms used herein but not defined herein shall have the meanings assigned to such terms in the Secondary Purchase Agreement (as amended, restated, supplemented or otherwise modified from time to time, the "Secondary Purchase Agreement"), dated as of December 9, 2004, between Purchaser and HLI. This note (as amended, restated, supplemented and otherwise modified from time to time, the "Note") is the Subordinated Note referred to in the Secondary Purchase Agreement. The aggregate principal amount of this Note at any time shall be equal to the difference between (a) the sum of the aggregate principal amount of this Note on the date of the issuance hereof and each addition to the principal amount of this Note pursuant to the terms of Section 2.02 of the Secondary Purchase Agreement minus (b) the aggregate amount of all payments made in respect of the principal amount of this Note, in each case, as recorded on the schedule annexed to and constituting a part of this Note, but failure to so record shall not affect the obligations of the Purchaser to HLI. The entire principal amount of this Note shall be due and payable one year and one day after the Facility Termination Date or such later date as may be agreed in writing by HLI and the Purchaser. The principal amount of this Note may, at the option of the Purchaser, be prepaid in whole at any time or in part from time to time, subject to the provisions of the Secondary Purchase Agreement. Interest on this Note shall be paid in arrears on each Settlement Date, at maturity and thereafter on demand. All payments hereunder shall be made by wire transfer of immediately available funds to such account of HLI as HLI may designate in writing. Notwithstanding any other provisions contained in this Note, in no event shall the rate of interest payable by the Purchaser under this Note exceed the highest rate of interest permissible under applicable law. The obligations of the Purchaser under this Note are subordinated in right of payment, to the extent set forth in Section 2.03(b) of the Secondary Purchase Agreement, to the prior payment in full of certain obligations of the Purchaser. Notwithstanding any provision to the contrary in this Note or elsewhere, other than with respect to payments specifically permitted by Section 2.03(b) of the Secondary Purchase Agreement, no demand for any payment may be made hereunder, no payment shall be B-1 due with respect hereto and HLI shall not have any claim for any payment hereunder prior to the occurrence of the Facility Termination Date and the RFA Final Payment Date. In the event that, notwithstanding the foregoing provision limiting such payment, HLI shall receive any payment or distribution on this Note which is not specifically permitted by Section 2.03(b) of the Secondary Purchase Agreement, such payment shall be received and held in trust by HLI for the benefit of the entities to whom the obligations are owed under the Financing Agreement and shall be promptly paid over to such entities. The Purchaser hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. Neither this Note, nor any right of HLI to receive payments hereunder, shall, without the prior written consent of the Purchaser and (so long as the Financing Agreement remains in effect or any amounts remain outstanding thereunder) the Program Agent under the Financing Agreement, be assigned, transferred, exchanged, pledged, hypothecated, participated or otherwise conveyed. THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. HL FUNDING II, INC. By: ___________________________________ Name: Title: B-2 SCHEDULE TO SUBORDINATED NOTE
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B-3 EXHIBIT C LOCATION OF RECORDS, CHIEF EXECUTIVE OFFICES AND ADDRESSES PURCHASER ADDRESS 15300 Centennial Dr. Northville, MI 48167 Facsimile: (734) 737-2169 Phone: (734) 737-5006 SELLER ADDRESS, LOCATION OF RECORDS AND CHIEF EXECUTIVE OFFICE 15300 Centennial Dr. Northville, MI 48167 Facsimile: (734) 737-2014 Phone: (734) 737-5005 C-1 EXHIBIT D DEPOSIT BANKS, DEPOSIT ACCOUNTS AND LOCKBOXES [omitted] D-1