-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GRaYKt47h8iCgvJLz4BxelOUQudRoLafWLG+iGZv/OH3BFAGX8blEQ8LheCZfFjA NqYkrZXVnp8JRYyJz/XkDA== 0000950152-01-503479.txt : 20010802 0000950152-01-503479.hdr.sgml : 20010802 ACCESSION NUMBER: 0000950152-01-503479 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010801 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOODYEAR TIRE & RUBBER CO /OH/ CENTRAL INDEX KEY: 0000042582 STANDARD INDUSTRIAL CLASSIFICATION: TIRES AND INNER TUBES [3011] IRS NUMBER: 340253240 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-01927 FILM NUMBER: 1694539 BUSINESS ADDRESS: STREET 1: 1144 E MARKET ST CITY: AKRON STATE: OH ZIP: 44316 BUSINESS PHONE: 2167962121 MAIL ADDRESS: STREET 1: 1144 E MARKET ST CITY: AKRON STATE: OH ZIP: 44316 10-Q 1 l89521ae10-q.txt THE GOODYEAR TIRE & RUBBER COMPANY 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2001 COMMISSION FILE NUMBER: 1-1927 THE GOODYEAR TIRE & RUBBER COMPANY (Exact name of Registrant as specified in its charter) OHIO 34-0253240 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1144 EAST MARKET STREET, AKRON, OHIO 44316-0001 (Address of Principal Executive Offices) (Zip Code) (330) 796-2121 (Registrant's Telephone Number, Including Area Code) ----------------------------------- Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No -------- -------- ----------------------------------- Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date. Number of Shares of Common Stock, Without Par Value, Outstanding at June 30, 2001: 158,824,413 ================================================================================ 2 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME AND RETAINED EARNINGS Unaudited
(In millions, except per share) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 --------- --------- --------- --------- NET SALES $ 3,582.5 $ 3,607.3 $ 6,996.7 $ 7,271.4 Cost of Goods Sold 2,912.1 2,850.6 5,697.7 5,784.6 Selling, Administrative and General Expense 565.8 553.3 1,113.7 1,113.0 Rationalizations - 4.7 79.0 4.7 Interest Expense 74.5 69.9 143.2 132.0 Other (Income) Expense 8.4 9.1 1.9 13.0 Foreign Currency Exchange (5.4) (1.4) (15.3) 3.7 Equity in Earnings of Affiliates 4.1 0.3 9.2 2.7 Minority Interest in Net Income of Subsidiaries 8.7 10.9 16.5 27.5 --------- --------- --------- --------- Income (Loss) before Income Taxes 14.3 109.9 (49.2) 190.2 United States and Foreign Taxes on Income 6.5 32.8 (10.3) 64.9 --------- --------- --------- --------- NET INCOME (LOSS) $ 7.8 $ 77.1 $ (38.9) $ 125.3 ========= ========= Retained Earnings at Beginning of Period 3,558.8 3,706.9 CASH DIVIDENDS (95.3) (93.9) --------- --------- Retained Earnings at End of Period $ 3,424.6 $ 3,738.3 ========= ========= NET INCOME (LOSS) PER SHARE OF COMMON STOCK - BASIC: $ 0.05 $ 0.49 $ (0.25) $ 0.80 ========= ========= ========= ========= Average Shares Outstanding 158.8 156.4 158.5 156.4 NET INCOME (LOSS) PER SHARE OF COMMON STOCK - DILUTED: $ 0.05 $ 0.49 $ (0.25) $ 0.79 ========= ========= ========= ========= Average Shares Outstanding 161.2 158.7 158.5 158.7 CASH DIVIDENDS PER SHARE $ 0.30 $ 0.30 $ 0.60 $ 0.60 ========= ========= ========= =========
The accompanying notes are an integral part of this financial statement. -1- 3 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET Unaudited
(In millions) JUNE 30, DECEMBER 31, 2001 2000 ASSETS: ----------- ----------- CURRENT ASSETS: Cash and cash equivalents $ 287.4 $ 252.9 Accounts and notes receivable, less allowance - $88.0 ($93.3 in 2000) 1,852.0 2,074.7 Inventories: Raw materials 461.7 480.4 Work in process 115.9 123.5 Finished product 2,359.7 2,275.8 --------- --------- 2,937.3 2,879.7 Prepaid expenses and other current assets 251.1 259.9 --------- --------- TOTAL CURRENT ASSETS 5,327.8 5,467.2 Long Term Accounts and Notes Receivable 101.7 92.8 Investments in Affiliates, at equity 117.0 102.0 Other Assets 264.8 183.8 Goodwill 567.9 588.4 Deferred Charges 1,611.5 1,612.8 Properties and Plants, less accumulated depreciation - $5,944.9 ($5,862.6 in 2000) 5,249.1 5,521.0 --------- --------- TOTAL ASSETS $13,239.8 $13,568.0 ========= ========= LIABILITIES: CURRENT LIABILITIES: Accounts payable - trade $ 1,394.2 $ 1,505.2 Compensation and benefits 787.7 823.6 Other current liabilities 315.3 395.6 United States and foreign taxes 214.4 208.4 Notes payable 1,056.1 1,077.0 Sumitomo 1.2% Convertible Note Payable - 56.9 Long term debt due within one year 128.8 159.2 --------- --------- TOTAL CURRENT LIABILITIES 3,896.5 4,225.9 Long Term Debt and Capital Leases 2,597.6 2,349.6 Compensation and Benefits 2,295.2 2,310.5 Other Long Term Liabilities 355.3 334.1 Minority Equity in Subsidiaries 820.2 844.9 --------- --------- TOTAL LIABILITIES 9,964.8 10,065.0 SHAREHOLDERS' EQUITY: Preferred Stock, no par value: Authorized 50.0 shares, unissued - - Common Stock, no par value: Authorized 300.0 shares Outstanding shares - 158.8 (157.6 in 2000) after deducting 36.9 treasury shares (38.1 in 2000) 158.8 157.6 Capital Surplus 1,148.7 1,092.4 Retained Earnings 3,424.6 3,558.8 Accumulated Other Comprehensive Income (1,457.1) (1,305.8) --------- --------- TOTAL SHAREHOLDERS' EQUITY 3,275.0 3,503.0 --------- --------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $13,239.8 $13,568.0 ========= =========
The accompanying notes are an integral part of this financial statement. -2- 4 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY Unaudited
(In millions) Accumulated Common Capital Retained Other Total Stock Surplus Earnings Comprehensive Shareholders' Income Equity --------------------------------------------------------------- Balance at December 31, 2000 $157.6 $ 1,092.4 $ 3,558.8 $(1,305.8) $3,503.0 Comprehensive income (loss) for 2001: NET INCOME (LOSS) (38.9) FOREIGN CURRENCY TRANSLATION (158.7) MINIMUM PENSION LIABILITY 3.4 UNREALIZED INVESTMENT GAIN 9.0 (NET OF TAX OF $5.5) TRANSITION ADJUSTMENT FROM ADOPTION OF SFAS 133 5.4 DEFERRED DERIVATIVE LOSS (27.7) LESS RECLASSIFICATION ADJUSTMENT FOR AMOUNTS RECOGNIZED IN INCOME 17.3 TOTAL COMPREHENSIVE INCOME (LOSS) (190.2) Cash dividends (95.3) (95.3) Common stock issued from treasury: Conversion of 1.2% Convertible Note Payable 1.1 55.1 56.2 Stock compensation plans 0.1 1.2 1.3 --------------------------------------------------------------- Balance at June 30, 2001 $158.8 $ 1,148.7 $3,424.6 $(1,457.1) $3,275.0 =============================================================== ACCUMULATED OTHER COMPREHENSIVE INCOME 06/30/01 12/31/00 -------- -------- Foreign currency translation adjustment $(1,432.6) $(1,273.9) Minimum pension liability adjustment (18.5) (21.9) Unrealized investment loss (1.0) (10.0) Deferred derivative loss (5.0) - --------- --------- TOTAL $(1,457.1) $(1,305.8) ========= =========
THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME Unaudited
(In millions) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 ------- ------- ------- ------- NET INCOME (LOSS) $7.8 $77.1 $(38.9) $125.3 Other comprehensive income (loss): Foreign currency translation (40.7) (87.3) (158.7) (107.7) Minimum pension liability 0.4 (1.6) 3.4 0.1 FAS 133 transition amount (net of tax of $3.3) - - 5.4 - Deferred derivative gain (loss) (9.2) - (44.7) - Tax on deferred derivative gain (loss) 3.5 - 17.0 - Reclassification adjustment for amounts recognized in income 8.6 - 27.9 - Tax on derivative reclassification adjustment (3.3) - (10.6) - Unrealized investment gain (loss) (3.7) 13.6 14.5 43.5 Tax on unrealized investment gain (loss) 1.4 (5.2) (5.5) (16.6) ------------------- -------------------- COMPREHENSIVE INCOME (LOSS) $(35.2) $(3.4) $(190.2) $44.6 =================== ====================
The accompanying notes are an integral part of this financial statement. -3- 5 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS Unaudited
(In millions) SIX MONTHS ENDED JUNE 30, 2001 2000 CASH FLOWS FROM OPERATING ACTIVITIES: ------ ------ NET INCOME (LOSS) $(38.9) $125.3 Adjustments to reconcile net income to cash flows from operating activities: Depreciation and amortization 323.0 320.2 Rationalizations 57.1 5.2 Asset sales (13.9) - Cash flows from sale of accounts receivable 285.8 (2.3) Changes in operating assets and liabilities: Accounts and notes receivable (179.9) (142.5) Inventories (129.4) (269.7) Accounts payable-trade (64.8) (72.6) Other assets and liabilities (129.2) (107.4) ------ -------- Total adjustments 148.7 (269.1) ------ -------- TOTAL CASH FLOWS FROM OPERATING ACTIVITIES 109.8 (143.8) CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (221.2) (266.7) Asset sales 40.0 - Other transactions (115.8) (16.3) ------ -------- TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (297.0) (283.0) CASH FLOWS FROM FINANCING ACTIVITIES: Short term debt incurred 82.7 713.4 Short term debt paid (537.2) (1,124.3) Long term debt incurred 834.3 1,003.4 Long term debt paid (48.0) (46.0) Common stock issued 1.3 1.4 Dividends paid to Sumitomo (10.0) (25.9) Dividends paid to Goodyear shareholders (95.3) (93.9) ------ -------- TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 227.8 428.1 Effect of Exchange Rate Changes on Cash and Cash Equivalents (6.1) (5.9) ------ -------- Net Change in Cash and Cash Equivalents 34.5 (4.6) Cash and Cash Equivalents at Beginning of the Period 252.9 241.3 ------ -------- Cash and Cash Equivalents at End of the Period $287.4 $236.7 ====== ========
The accompanying notes are an integral part of this financial statement. -4- 6 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS All per share amounts in these Notes to Financial Statements are diluted unless otherwise indicated. ACCOUNTING POLICIES - ------------------- On January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended and interpreted (SFAS 133). DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES Derivative financial instrument contracts and nonderivative instruments are utilized by the Company to manage interest rate and foreign exchange risks. The Company has established a control environment that includes policies and procedures for risk assessment and the approval, reporting and monitoring of derivative financial instrument activities. Company policy prohibits holding or issuing derivative financial instruments for trading purposes. To qualify for hedge accounting, hedging instruments must be designated as hedges and meet defined correlation and effectiveness criteria. These criteria require that the anticipated cash flows and/or financial statement effects of the hedging instrument substantially offset those of the position being hedged. Derivative contracts are reported at fair value on the Consolidated Balance Sheet as both current and long term Accounts Receivable or Other Liabilities. Deferred gains and losses on contracts designated as cash flow hedges are recorded in Accumulated Other Comprehensive Income (OCI). Ineffectiveness in hedging relationships is recorded as Other (Income) and Expense in the current period. INTEREST RATE CONTRACTS - Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in OCI. Amounts are transferred from OCI and recognized in income as Interest Expense in the same period that the hedged item is recognized in income. Gains and losses on contracts with no hedging designation are recorded in income currently as Other (Income) and Expense. FOREIGN CURRENCY CONTRACTS - Gains and losses on contracts designated as cash flow hedges are initially deferred and recorded in OCI. Amounts are transferred from OCI and recognized in income as Foreign Currency Exchange in the same period that the hedged item is recognized in income. Gains and losses on contracts with no hedging designation are recorded in income currently as Foreign Currency Exchange. The Company does not include premiums paid on forward currency contracts in its assessment of hedge effectiveness. Premiums on contracts designated as hedges are recognized in income as Foreign Currency Exchange over the life of the contract. NET INVESTMENT HEDGING - Nonderivative instruments denominated in foreign currencies are used to hedge net investments in foreign subsidiaries. Gains and losses on these instruments are deferred and recorded in OCI as Foreign Currency Translation Adjustment. These gains and losses are only recognized in income upon the complete or partial sale of the related investment or the complete liquidation of the investment. TERMINATION OF CONTRACTS - Deferred gains and losses in OCI are recognized in income as Other (Income) and Expense when contracts are terminated concurrently with the termination of the hedged position. To the extent that such position remains outstanding, deferred gains and losses in OCI are amortized to Interest Expense or Foreign Currency Exchange over the remaining life of that position. Gains and losses on contracts that the Company temporarily continues to hold after the early termination of a hedged position, or that otherwise no longer qualify for hedge accounting, are recognized in income as Other (Income) and Expense. -5- 7 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - --------------------------------------------- INTEREST RATE EXCHANGE CONTRACTS The Company actively manages its fixed and floating rate debt mix, within defined limitations, using refinancings and unleveraged interest rate swaps. The Company will enter into fixed and floating interest rate swaps to hedge against the effects of adverse changes in interest rates on consolidated results of operations and future cash outflows for interest. Fixed rate swaps are used to reduce the Company's risk of increased interest costs during periods of rising interest rates, and are normally designated as cash flow hedges. Floating rate swaps are used to convert the fixed rates of long term borrowings into short term variable rates, and are normally designated as fair value hedges. Interest rate swap contracts are thus used by the Company to separate interest rate risk management from the debt funding decision. Certain fixed rate contracts outstanding during 2001 mature during 2001 and have no hedge designation. INTEREST RATE LOCK CONTRACTS The Company will use, when appropriate, interest rate lock contracts to hedge the risk-free rate component of anticipated long term debt issuances. These contracts are designated as cash flow hedges of forecasted transactions. Gains and losses on these contracts are amortized to income over the life of the debt. FOREIGN CURRENCY CONTRACTS In order to reduce the impact of changes in foreign exchange rates on consolidated results of operations and future foreign currency-denominated cash flows, the Company will enter into foreign currency contracts. These contracts reduce exposure to currency movements affecting existing foreign currency-denominated assets, liabilities, firm commitments and forecasted transactions resulting primarily from trade receivables and payables, equipment acquisitions, intercompany loans and royalty agreements and forecasted purchases and sales. In addition, the principal and interest on the Company's Swiss franc bonds due 2006 and Euro300 million of the Eurobonds due 2005 are hedged by currency swap agreements. Contracts hedging the Swiss franc bonds, the Eurobonds and forecasted transactions under intercompany royalty agreements are designated as cash flow hedges. The hedged intercompany royalty transactions will occur during 2001 and 2002. Contracts hedging short-term trade receivables and payables normally have no hedging designation. Amounts are reclassified from OCI into earnings each period to offset the effects of exchange rate movements on the principal and interest of the Swiss franc bonds and the Eurobonds. Amounts are also reclassified concurrently with the recognition of intercompany royalty expense. HEDGES OF NET INVESTMENT IN FOREIGN OPERATIONS In order to reduce the impact of changes in foreign exchange rates on consolidated shareholders' equity, the Company has designated certain foreign currency-denominated nonderivative instruments as hedges of its net investment in various foreign operations. On January 1, 2001, Euro100 million of the Company's 6 5/8% Eurobonds due 2005 was designated as hedging the Company's net investment in European subsidiaries which have the Euro as the functional currency. In addition, from January 1 to February 6 of 2001, the Company's Y6,536,535,767 Sumitomo 1.2% Convertible Note Payable Due August 2001 was designated as hedging the Company's net investment in Japanese subsidiaries which have the Yen as the functional currency. The Note Payable was converted into shares of the Common Stock of the Company on February 6, 2001. -6- 8 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (continued) - --------------------------------------------------------- RESULTS OF HEDGING ACTIVITIES Ineffectiveness and premium amortization totaled $.4 million and $.9 million during the three and six months ended June 30, 2001, respectively. Deferred net losses totaling $.9 million on hedges of forecasted transactions are anticipated to be recognized in income during the twelve months ending June 30, 2002. It is not practicable to estimate the amount of deferred gains and losses that will be recognized in income resulting from the remeasurement of the derivative contracts of the Swiss franc bonds and the Eurobonds. Deferred gains totaling $2.4 million and $5.6 million were recorded as Foreign Currency Translation Adjustment during the three and six months ended June 30, 2001, respectively, as a result of the designation of nonderivative instruments as net investment hedges. These gains and losses are only recognized in earnings upon the complete or partial sale of the related investment or the complete liquidation of the investment. RATIONALIZATIONS - ---------------- The Company recorded a rationalization charge on the Consolidated Statement of Income totaling $79.0 million ($57.1 million after tax) in the 2001 first quarter. Of this amount $40.7 million related to future cash outflows, primarily associate severance costs and $38.3 million related to non-cash charges, primarily $33.3 million for special termination benefits and pension curtailments related to a voluntary exit program in the United States. Of the $79.0 million charge, $66.5 million continued the rationalization programs announced in the fourth quarter of 2000. These programs were for global workforce reductions and manufacturing facility consolidations including the closure of a tire plant in Latin America. The remaining $12.5 million related to the closure of the Company's manufacturing facility in Italy announced in 1999. Associate-related rationalization costs for programs started in the fourth quarter of 2000 totaled $152.0 million. Activity during 2001 is presented below:
BALANCE AT 2001 BALANCE AT (In millions) 12/31/00 CHARGES INCURRED 6/30/01 -------- ------- -------- ------- Plant downsizing and consolidation $48.0 $10.8 $ (56.4) $ 2.4 Worldwide associate reductions 25.2 48.6 (51.0) 22.8 ----- ----- ------- ----- $73.2 $59.4 $(107.4) $25.2 ===== ===== ======= =====
Under the above programs, the Company provided for the release of approximately 7,100 associates around the world, primarily production and support associates. To date, 5,300 associates have been released for which the Company incurred costs totaling $107.4 million during the first half of 2001, including 3,000 associates at a cost of $42.2 million in the second quarter. The Company plans to release approximately 1,800 more associates under the above program during 2001. Rationalization costs, other than associate-related costs, for these programs totaled $33.9 million and were primarily for the writeoff of equipment taken out of service, scrap removal costs and noncancellable lease costs. The Company plans to complete these actions during 2001. Activity during 2001 is presented below: BALANCE AT 2001 BALANCE AT (In millions) 12/31/00 CHARGES INCURRED 6/30/01 -------- ------- -------- ------- Plant downsizing and consolidation $8.8 $7.1 $(10.7) $5.2 ==== ==== ====== ==== The Company recorded a charge of $12.5 milllion in the first quarter of 2001 related to the closing of a manufacturing facility in Italy. This charge was for associate benefits accepted in the first quarter of 2001. During 2001, $14 million of costs were incurred, including $4.9 million in the second quarter, primarily for the release of approximately 300 associates. In the second quarter of 2001, the Company finalized the closure of the Italian manufacturing facility with the release of the remaining 35 associates. The remaining reserve of $2.8 million at June 30, 2001, relates primarily to ongoing associate severance payments. -7- 9 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS RATIONALIZATIONS (continued) - ---------------------------- The Company committed to certain rationalization actions related to the Dunlop businesses acquired from Sumitomo on September 1, 1999, for the purpose of optimizing market growth opportunities and maximizing cost efficiencies. The following rationalization actions have been recorded as adjustments to the purchase price allocation in respect of the acquired Dunlop businesses, and did not affect the Consolidated Statement of Income. During 2001, the Company incurred associate-related costs of $10.9 million for the release of approximately 600 associates, including approximately 400 associates at a cost of $5.4 million in the second quarter. At June 30, 2001, a balance of $12.5 million remained for the release of approximately 200 associates. The balance at June 30, 2001, for rationalization costs, other than associate-related costs, was $8.9 million. The Company intends to complete these actions by the end of the third quarter of 2001. PER SHARE OF COMMON STOCK - ------------------------- Basic earnings per share have been computed based on the average number of common shares outstanding. The following table presents the number of incremental weighted average shares used in computing diluted per share amounts: THREE MONTHS ENDED SIX MONTHS ENDED (In millions) JUNE 30, JUNE 30, 2001 2000 2001 2000 ----- ----- ----- ----- Average shares outstanding-basic 158.8 156.4 158.5 156.4 Stock options 2.4 - - - 1.2% Convertible Note - 2.3 - 2.3 ----- ----- ----- ----- Average shares outstanding-diluted 161.2 158.7 158.5 158.7 ===== ===== ===== ===== The average shares outstanding-diluted total for the first half of 2001 does not include the antidilutive impact of 2.2 million shares of potential common stock associated with stock options and .3 million shares associated with the Sumitomo 1.2% Convertible Note Payable. NONCASH INVESTING AND FINANCING ACTIVITIES - ------------------------------------------ The Consolidated Statement of Cash Flows is net of the following transactions. In connection with the Company's strategic alliance with Sumitomo, on February 25, 1999 the Company issued to Sumitomo at par its 1.2% Convertible Note Due August 16, 2000, in the principal amount of Y13,073,070,934 pursuant to a Note Purchase Agreement dated February 25, 1999 (the "Note Agreement"). The Company's Note was convertible during the period beginning July 16, 2000 through August 15, 2000 into 2,281,115 shares of Common Stock, without par value, of the Company at a conversion price of Y5,731 per share, subject to certain adjustments. In addition, on February 25, 1999, the Company purchased at par from Sumitomo a 1.2% Convertible Note Due August 16, 2000, in the principal amount of Y13,073,070,934 (the "Sumitomo Note"). The Sumitomo Note was convertible, if not earlier redeemed, during the period beginning July 16, 2000 through August 15, 2000 into 24,254,306 shares of Common Stock, Y50 par value per share, of Sumitomo at a conversion price of Y539 per share, subject to certain adjustments. The principal amount of each Note was equivalent to $108.0 million at February 25, 1999. The Company converted the Sumitomo Note in its entirety on July 27, 2000 into 24,254,306 shares of Sumitomo's Common Stock, which represents 10% of Sumitomo's outstanding shares. Sumitomo converted Y6,536,535,167 principal amount of the Company's Note into 1,138,030 shares of the Company's Common Stock on August 15, 2000, and Sumitomo converted the remaining Y6,536,535,767 principal amount of the Company's replacement Note into 1,140,866 shares of the Company's Common Stock on February 6, 2001. -8- 10 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS INVESTMENTS - ----------- The Company has classified the previously mentioned investment in Sumitomo Common Stock ("the Sumitomo Investment") as available-for-sale, as provided in Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities". The fair value of the Sumitomo Investment was $115.5 million at June 30, 2001 compared to $100.9 million at December 31, 2000. Changes in the fair value of the Sumitomo Investment are reported in the Consolidated Balance Sheet as Accumulated Other Comprehensive Income. The Sumitomo Investment was hedged during 1999 and 2000. At June 30, 2001, the gross unrealized holding loss on the Sumitomo Investment, net of the hedge, totaled $1.6 million ($1.0 million after tax). ACCOUNTS RECEIVABLE - ------------------- During the second quarter of 2001, the Company terminated its $550 million domestic accounts receivable continuous sale program and entered into a new twelve-month revolving-period securitization program. The new program is renewable for subsequent one-year periods upon request by the Company and agreement by the participating financial institutions and results in the sale of receivables through a special purpose company, up to a maximum of $800 million. The Company retained servicing responsibilities, subordinated interests in the receivables transferred and a residual equity interest in the special purpose company. Fees paid by the Company under this program are based on certain variable market rate indices and are recorded as Other (Income) and Expense. Results of operations and financial position of the special purpose company are not included in the consolidated financial statements of the Company. The following table presents certain cash flows between the Company and the special purpose company: THREE MONTHS ENDED (In millions) JUNE 30, 2001 -------------------- Proceeds from new securitizations $741.5 Proceeds from collections reinvested in previous securtizations 915.3 Servicing fees received .6 Reimbursement for rebates and discounts issued (18.9) At June 30, 2001, the level of net proceeds from sales under the program was $744.7 million. In addition, the uncollected portion of receivables sold under international agreements totaled $136.5 million at June 30, 2001. OTHER (INCOME) AND EXPENSE - -------------------------- Other (Income) and Expense in 2001 included a gain of $17.0 million ($13.9 million after tax) resulting from the sale of land and buildings in the United Kingdom in the first quarter. ADJUSTMENTS - ----------- All adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the results of these unaudited interim periods have been included. RECLASSIFICATION - ---------------- Certain items previously reported in specific financial statement captions have been reclassified to conform to the 2001 presentation. -9- 11 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES SEGMENT INFORMATION Unaudited
(In millions) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 -------- -------- -------- -------- SALES: North American Tire $1,828.0 $1,757.5 $3,452.4 $3,487.6 European Union Tire 759.7 802.2 1,559.0 1,676.6 Eastern Europe, Africa and Middle East Tire 177.9 193.6 341.3 384.6 Latin American Tire 250.7 264.5 508.4 522.3 Asia Tire 128.4 137.9 247.4 275.9 -------- -------- -------- -------- TOTAL TIRES 3,144.7 3,155.7 6,108.5 6,347.0 Engineered Products 300.9 306.4 600.3 627.4 Chemical Products 271.6 293.8 563.2 571.8 -------- -------- -------- -------- TOTAL SEGMENT SALES 3,717.2 3,755.9 7,272.0 7,546.2 Inter-SBU Sales (133.3) (147.4) (283.4) (282.8) Other (1.4) (1.2) 8.1 8.0 -------- -------- -------- -------- NET SALES $3,582.5 $3,607.3 $6,996.7 $7,271.4 ======== ======== ======== ======== INCOME: North American Tire $ 49.0 $ 86.1 $ 64.4 $ 136.3 European Union Tire 17.6 39.8 49.0 83.5 Eastern Europe, Africa and Middle East Tire 3.5 12.1 9.4 27.4 Latin American Tire 19.4 21.4 42.2 44.8 Asia Tire 6.7 6.3 10.6 16.1 -------- -------- -------- -------- TOTAL TIRES 96.2 165.7 175.6 308.1 Engineered Products 8.4 20.5 17.9 44.3 Chemical Products 12.9 30.0 29.3 53.4 -------- -------- -------- -------- TOTAL SEGMENT INCOME (EBIT) 117.5 216.2 222.8 405.8 Rationalizations and Asset sales - (4.7) (62.0) (4.7) Interest expense (74.5) (69.9) (143.2) (132.0) Foreign currency exchange 5.4 1.4 15.3 (3.7) Minority interest in net income of subsidiaries (8.7) (10.9) (16.5) (27.5) Inter-SBU income (6.5) (8.0) (13.4) (17.4) Other (18.9) (14.2) (52.2) (30.3) -------- -------- -------- -------- INCOME (LOSS) BEFORE INCOME TAXES $ 14.3 $ 109.9 $ (49.2) $ 190.2 ======== ======== ======== ========
-10- 12 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS BUSINESS SEGMENTS - ----------------- Portions of the items reported as Rationalizations and Other (Income) and Expense on the Consolidated Statement of Income were not charged (credited) to segment operating income (EBIT) but were attributable to the Company's seven segments as follows: (In millions) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2001 2000 2001 2000 ----- ----- ----- ----- North American Tire $ - $ (.7) $ 4.0 $ (.7) European Union Tire - 6.0 6.2 6.0 Eastern Europe, Africa and Middle East Tire - - 8.9 - Latin American Tire - - - - Asia Tire - - 3.6 - ----- ----- ----- ----- TOTAL TIRES - 5.3 22.7 5.3 Engineered Products - (.6) 3.0 (.6) Chemical Products - - - - ----- ----- ----- ----- TOTAL SEGMENTS $ - $ 4.7 $25.7 $ 4.7 ===== ===== ===== ===== NON-CONSOLIDATED OPERATIONS - SOUTH PACIFIC TYRE - ------------------------------------------------ In addition to its consolidated operations in the Asia region, the Company owns a 50% interest in South Pacific Tyres Ltd (SPT), a partnership with Pacific Dunlop Ltd of Australia. SPT is the largest tire manufacturer, marketer and exporter in Australia and New Zealand. The Company is required to use the equity method to account for its interest in the results of operations and financial position of SPT. The following table presents sales and EBIT of the Company's Asia Tire segment and 100% of the operations of SPT: THREE MONTHS ENDED SIX MONTHS ENDED (In millions) JUNE 30, JUNE 30, 2001 2000 2001 2000 ------ ------ ------ ------ NET SALES: Asia Tire $128.4 $137.9 $247.4 $275.9 SPT 124.8 155.8 243.1 309.5 ------ ------ ------ ------ $253.2 $293.7 $490.5 $585.4 ====== ====== ====== ====== EBIT: Asia Tire $ 6.7 $ 6.3 $ 10.6 $ 16.1 SPT (6.9) (.3) (13.9) (3.3) ------ ------ ------ ------ $ ( .2) $ 6.0 $ (3.3) $ 12.8 ====== ====== ====== ====== -11- 13 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS --------------------- CONSOLIDATED - ------------ (All per share amounts are diluted) Sales in the second quarter of 2001 were $3.58 billion, decreasing .7% from $3.61 billion in the 2000 quarter. Net income of $7.8 million or $.05 per share was recorded in the 2001 second quarter, compared to net income of $77.1 million or $.49 per share in the 2000 period. In the first six months of 2001, sales of $7.0 billion decreased 3.8% from $7.27 billion in 2000. A net loss of $38.9 million or $.25 per share was recorded in the 2001 half compared to net income of $125.3 million or $.79 per share in the 2000 first half. Revenues decreased in both 2001 periods primarily due to lower tire unit sales, the adverse impact of worldwide competitive pricing pressures and the effect of currency translations on international results. The Company estimates that versus 2000, currency translation adversely affected revenues by approximately $145 million in the second quarter and $280 million in the six months. Worldwide tire unit sales in the second quarter of 2001 were 55.5 million units, a decrease of 427 thousand units or .8% compared to the 2000 period. North American (U.S. and Canada) volume increased 95.7 thousand units or .3% in the quarter, while international unit sales decreased 522.7 thousand units or 1.9%. Worldwide replacement unit sales increased .8% from the 2000 quarter, due to gains in North America. Original equipment unit sales were down 4.0% in the quarter, primarily in North America. Worldwide tire unit sales in the first six months of 2001 decreased 2.3% from the 2000 period, with North American units 4.6% lower and international units up .2%. Cost of goods sold (CGS) was up in dollars and was 81.3% of sales in the second quarter of 2001, compared to 79.0% in the 2000 period. CGS reflected higher raw material and conversion costs combined with lower levels of plant utilization. Costs in both years were favorably impacted by the effects of rationalization actions, ongoing cost containment measures and synergies realized from, among other actions, the strategic alliance with Sumitomo. CGS was down in dollars for the first half of 2001 but rose to 81.4% of sales compared to 79.6% in the first half of 2000. Selling, administrative and general expense (SAG) in the second quarter of 2001 was up in dollars and was 15.8% of sales -12- 14 compared to 15.3% in the 2000 period primarily due to lower sales. SAG benefited in both years from the favorable impact of ongoing worldwide cost containment measures. SAG was 15.9% of sales for the first half of 2001 compared to 15.3% in the year ago half. The Company estimates the impact of foreign currency translation reduced the 2001 quarter's and six month's operating income by approximately $30 million and $50 million, respectively. Revenues in future periods may continue to be adversely affected by competitive pricing pressures and changes in product mix and channels of distribution. Revenues and earnings in future periods are likely to be unfavorably impacted if the dollar strengthens versus various foreign currencies. In addition, anticipated continued lower original equipment demand, increases in energy costs and increases in labor costs, which may not be recoverable in the market due to pricing pressures present in today's highly competitive market, are also expected to adversely affect earnings in future periods. Similarly, continued volatile economic conditions in emerging markets could adversely affect sales and earnings in future periods. Currency fluctuations and general economic and industry conditions may adversely impact sales and earnings in future periods. Interest expense of $74.5 million rose 6.6% in the 2001 second quarter compared to the second quarter last year and 8.5% in the first six months of 2001 to $143.2 million compared to the first six months of 2000 due to higher debt levels needed to fund working capital requirements. Other (Income) and Expense was $8.4 million net expense in the 2001 second quarter compared to $9.1 million net expense in the 2000 period. For the first half of 2001, Other (Income) and Expense was $1.9 million net expense compared to $13.0 million net expense in 2000. The 2001 half included gains in the first quarter of $17.0 million ($13.9 million after tax) resulting from the sale of land and buildings in the United Kingdom. Foreign currency exchange gain of $5.4 million rose $4.0 million from last year's second quarter. For the first half of 2001, foreign currency exchange gain was $15.3 million compared to foreign currency exchange expense of $3.7 million in 2000. Foreign currency exchange in both 2001 periods benefited from the impact of currency movements on U.S. dollar denominated monetary items, primarily in Brazil. For the 2001 first half, the Company's effective tax rate was 31.5% compared to 29.8% in the first half of 2000. RATIONALIZATION ACTIVITY The Company recorded a rationalization charge on the Consolidated Statement of Income totaling $79.0 million ($57.1 -13- 15 million after tax) in the first quarter of 2001. The rationalization charge was primarily related to associate severance and pension costs. The Company continued in 2001 the rationalization programs announced in the fourth quarter of 2000. These programs were for global workforce reductions and manufacturing facility consolidations including the closure of a tire plant in Latin America. Of the $79.0 million charge, $66.5 million related to the 2000 program and $12.5 million related to the closure of the Company's tire manufacturing facility in Italy announced in 1999. The Company provided for the release of approximately 7,100 associates around the world, primarily production and support associates. To date, approximately 5,300 associates have been released for which the Company incurred costs totaling $107.4 million during the first half of 2001, including approximately 3,000 associates at a cost of $42.2 million in the second quarter. The Company plans to release approximately 1,800 more associates under the program in 2001. Rationalization costs, other than for associate-related costs, totaled $33.9 million and were related to the writeoff of equipment taken out of service, scrap removal costs and noncancellable lease costs. The remaining reserve for these costs was $30.4 million at June 30, 2001. The Company will substantially complete these actions during 2001. Annual pretax savings of approximately $260 million are expected when the planned actions have been fully implemented. The Company estimates that operating costs were reduced by approximately $35 million in the first half of 2001, including approximately $25 million in the second quarter. The Company recorded a charge of $12.5 million in the first quarter of 2001 related to the closing of a manufacturing facility in Italy. This charge was for associate benefits accepted in the first quarter of 2001. During 2001, $14 million of costs were incurred, including $4.9 million in the second quarter, primarily for the release of approximately 300 associates. In the second quarter of 2001, the Company finalized the closure of the Italian manufacturing facility with the release of the remaining associates. The remaining reserve of $2.8 million at June 30, 2001, relates primarily to ongoing associate severance payments. The following rationalization actions have been recorded as adjustments to the purchase price allocation in respect of the acquired Dunlop businesses, and did not affect the Consolidated Statement of Income. -14- 16 The Company committed to certain rationalization actions related to the Dunlop businesses acquired from Sumitomo on September 1, 1999, for the purpose of optimizing market growth opportunities and maximizing cost efficiencies. In accordance with these actions approximately 600 associates were released at a cost of $10.9 million during the first half of 2001, including approximately 400 associates in the second quarter at a cost of $5.4 million. The Company plans to release approximately 200 more associates under this program during 2001. The balance of the reserve for associate and other than associate-related costs at June 30, 2001 was $21.4 million. The Company expects that these actions will be completed during 2001, except for future rental payments under noncancellable leases. For further information, refer to the note to the financial statements, Rationalizations. NEW ACCOUNTING STANDARDS The Company adopted Statement of Financial Accounting Standards No. 133 (SFAS 133), "Accounting for Derivative Instruments and Hedging Activities". SFAS 133 requires all derivatives to be recognized as assets or liabilities and measured at fair value. Changes in such fair value will impact earnings to the extent of any ineffectiveness in hedging relationships. The transition adjustment resulting from the adoption of SFAS 133 increased Shareholders' Equity by $5.4 million during the first half of 2001. The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 142 (SFAS 142), "Goodwill and Other Intangible Assets," which addresses the accounting for goodwill and other intangible assets. SFAS 142 specifies that, among other things, intangible assets with an indefinite useful life and goodwill will no longer be amortized. The standard requires goodwill to be periodically tested for impairment and written down to fair value if considered impaired. The provisions of SFAS 142 are effective for fiscal years beginning after December 15, 2001, and are effective for interim periods in the initial year of adoption. The Company is currently assessing the financial statement impact of the adoption of SFAS 142. SEGMENT INFORMATION - ------------------- Segment EBIT was $117.5 million in the second quarter of 2001, decreasing 45.7% from $216.2 million in the 2000 quarter. Segment operating margin in the second quarter of 2001 was 3.2%, compared to 5.8% in the 2000 period. In the six months, segment EBIT was $222.8 million, decreasing 45.1% from $405.8 million in the 2000 period. Segment operating margin in the six months was 3.1% compared to 5.4% in the 2000 period. -15- 17 Segment EBIT does not include the previously discussed rationalizations and certain other items. For further information, refer to the note to the financial statements, Business Segments. NORTH AMERICAN TIRE North American Tire segment sales in the second quarter of 2001 were $1.83 billion, increasing 4.0% from $1.76 billion in the 2000 quarter. In the six months, sales of $3.45 billion decreased 1.0% from $3.49 billion in 2000. Unit sales in the 2001 second quarter were 28.9 million, increasing .3% from the 2000 period. Replacement unit sales increased 7.5% but original equipment volume decreased 12.7%. Industry shipments of consumer replacement tires were up about 1% during the second quarter compared with last year. However, the Company's shipments in this segment grew approximately 10%. Unit sales in the six months were 54.7 million, decreasing 4.6% from the 2000 period. Replacement unit sales increased 2.4% and original equipment volume decreased 17.4%. Sales in both 2001 periods reflect the favorable impact of a change in product mix to higher priced tires and price increases in the replacement market. Sales were adversely affected in both 2001 periods by lower original equipment volume resulting from production cutbacks by most of the Company's original equipment customers that manufacture autos and commercial trucks. On May 22, 2001, Ford Motor Company ("Ford") announced a customer satisfaction program impacting 13 million units of a competitor's tires. Under this program, Ford will replace such tires free of charge with approved brands. Tire manufacturers have been requested to provide replacement products to support Ford's program. The Company has increased production in response to this request. Ford stated that about 2 million tires have been replaced, and it expects to complete the program by the first quarter of 2002. The Company supplied approximately 1 million tire units under this program during the second quarter of 2001 which increased EBIT by approximately $20 million. North American Tire segment EBIT was $49.0 million in the second quarter of 2001, decreasing 43.1% from EBIT of $86.1 million in the 2000 quarter. Operating margin was 2.7%, compared to 4.9% in 2000. In the six months, EBIT was $64.4 million, decreasing 52.8% from $136.3 million in 2000. Operating margin was 1.9%, compared to 3.9% in 2000. EBIT was adversely affected in the 2001 periods by higher raw -16- 18 material costs and higher conversion costs resulting from production cutbacks to align inventory with demand. EBIT in 2001 did not include rationalization charges, recorded in the first quarter, totaling $4.0 million. EBIT in 2000 did not include the second quarter reversal of $.7 million of rationalization reserves identified as no longer needed for their originally intended purposes. Revenues and EBIT in the North American Tire segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, lower demand by original equipment customers, changes in product mix, rising raw material and energy prices and general economic conditions. EUROPEAN UNION TIRE European Union Tire segment sales in the second quarter of 2001 were $759.7 million, decreasing 5.3% from $802.2 million in the 2000 quarter. In the six months, sales of $1.56 billion decreased 7.0% from $1.68 billion in 2000. Unit sales in the 2001 second quarter were 15.0 million, decreasing 1.2% from the 2000 period. Replacement unit sales decreased 3.7% while original equipment volume increased 4.1%. Unit sales in the six months were 30.6 million, increasing .9% from the 2000 period. Replacement unit sales decreased 2.2% and original equipment volume increased 7.9% Revenues in the second quarter of 2001 decreased compared to 2000 due to currency translation and lower volume in some market segments. Price increases, however, had a favorable impact on revenues. For the six months, revenues decreased compared to 2000 due to currency translation and competitive pricing. Revenues were favorably impacted by higher volume in the original equipment market. The Company estimates that the effects of currency translation adversely affected European Union Tire segment sales by approximately $60 million in the 2001 second quarter and $120 million in the six months compared to the 2000 periods. European Union Tire segment EBIT was $17.6 million in the second quarter of 2001, decreasing 55.8% from $39.8 million in the 2000 quarter. Operating margin was 2.3%, compared to 5.0% in 2000. In the six months, EBIT was $49.0 million, decreasing 41.3% from $83.5 million in 2000. Operating margin was 3.1%, compared to 5.0% in 2000. -17- 19 EBIT decreased in the 2001 quarter due to higher raw material costs, competitive pricing, higher conversion costs due to production cuts, currency translation and lower sales volume. EBIT was favorably impacted by lower SAG costs from cost containment and rationalization programs. For the six months, EBIT decreased compared to 2000 due to higher raw material costs, higher conversion costs due to production cuts, currency translation and competitive pricing. EBIT was favorably impacted by higher sales volume and lower SAG costs from cost containment programs. The Company estimates that the effects of currency translation, especially the weak Euro versus the U.S. dollar, reduced operating income by approximately $5 million in the 2001 second quarter and $10 million in the 2001 six months. Rationalization charges totaling $23.2 million and the $17.0 million gain on the sale of closed manufacturing and warehouse facilities in the United Kingdom, both recorded in the first quarter, were not included in EBIT for 2001. EBIT in 2000 did not include second quarter rationalization charges totaling $6.0 million. Revenues and EBIT in the European Union Tire segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, changes in mix, rising raw material and energy prices, currency translation and general economic conditions. EASTERN EUROPE, AFRICA AND MIDDLE EAST TIRE Eastern Europe, Africa and Middle East Tire ("Eastern Europe Tire") segment sales in the second quarter of 2001 were $177.9 million, decreasing 8.1% from $193.6 million in the 2000 quarter. In the six months, sales of $341.3 million decreased 11.3% from $384.6 million in 2000. Unit sales in the 2001 second quarter were 3.4 million, decreasing 11.1% from units sold in the 2000 period. Replacement unit sales decreased 8.0% while original equipment volume decreased 20.1%. Unit sales in the six months were 6.7 million, decreasing 6.0% from the 2000 period. Replacement unit sales decreased 3.9% while original equipment volume decreased 12.1%. Revenues in both 2001 periods decreased from the 2000 periods due to currency devaluations in Turkey, South Africa and Slovenia and lower volume. The Company estimates that the effects of currency translation adversely affected Eastern Europe Tire segment sales by approximately $30 million in the second quarter and $50 million in the six months compared to 2000. -18- 20 Eastern Europe Tire segment EBIT was $3.5 million in the second quarter of 2001, decreasing 71.1% from $12.1 million in the 2000 quarter. Operating margin was 2.0%, compared to 6.3% in 2000. In the six months, EBIT was $9.4 million, decreasing 65.7% from $27.4 million in 2000. Operating margin was 2.8%, compared to 7.1% in 2000. EBIT in both 2001 periods decreased due primarily to the economic crisis in Turkey, the effects of currency translation, and lower sales volume. EBIT was favorably impacted by reduced SAG from cost containment and rationalization programs. The Company estimates that the effects of currency translation reduced operating income by approximately $10 million in the second quarter and $20 million in the six months. EBIT in 2001 did not include first quarter rationalization charges totaling $8.9 million. Revenues and EBIT in the Eastern Europe Tire segment may be adversely affected in future periods by the effects of continued competitive pricing conditions, changes in mix, rising raw material and energy prices, continued volatile economic conditions and currency translation. LATIN AMERICAN TIRE Latin American Tire segment sales in the second quarter of 2001 were $250.7 million decreasing 5.2% from $264.5 million in the 2000 quarter. In the six months, sales of $508.4 million decreased 2.7% from $522.3 million in 2000. Unit sales in the 2001 second quarter were 5.0 million, increasing .6% from the 2000 period. Replacement unit sales decreased 11.7% and original equipment volume increased 40.8%. Unit sales in the six months were 10.0 million, increasing 3.4% from the 2000 period. Replacement unit sales decreased 7.4% and original equipment volume increased 41.2%. Revenues in both 2001 periods were adversely impacted by currency translation, particularly in Brazil, and a shift in mix to the original equipment market. Revenues benefited from higher volume and price increases in some markets. The Company estimates that currency translation reduced sales by approximately $25 million in the second quarter and $45 million in the six months compared to 2000. Latin American Tire segment EBIT was $19.4 million in the second quarter of 2001, decreasing 9.3% from $21.4 million in the 2000 quarter. Operating margin was 7.7%, compared to 8.1% in 2000. -19- 21 In the six months, EBIT was $42.2 million, decreasing 5.8% from $44.8 million in 2000. Operating margin was 8.3%, compared to 8.6% in 2000. EBIT in both 2001 periods reflected the favorable impact of price increases, the benefits of cost reduction and rationalization programs and the adverse effect of currency translation, higher raw material costs and a change in mix to low margin original equipment tires. The Company estimates that the effects of currency translation reduced operating income by approximately $10 million in the second quarter and $15 million in the six months. Revenues and EBIT in future periods may be adversely affected by the effects of continued competitive pricing conditions, changes in mix, rising raw material and energy prices, continued volatile economic conditions and currency translation. ASIA TIRE Asia Tire segment sales in the second quarter of 2001 were $128.4 million, decreasing 6.9% from $137.9 million in the 2000 quarter. In the six months, sales of $247.4 million decreased 10.3% from $275.9 million in 2000. Unit sales in the 2001 second quarter were 3.2 million, increasing 1.7% from the 2000 period. Replacement unit sales decreased 2.0% while original equipment volume increased 13.4%. Unit sales in the six months were 6.1 million, decreasing 1.2% from the 2000 period. Replacement unit sales decreased 5.4% while original equipment volume increased 12.5%. Revenues decreased in both 2001 periods compared to the 2000 periods reflecting the adverse impacts of currency translation and competitive pricing pressures and for the six months, lower volume. The Company estimates that currency translation reduced sales by approximately $15 million in the second quarter and $25 million in the six months compared to 2000. Asia Tire segment EBIT was $6.7 million in the second quarter of 2001, increasing 6.3% from $6.3 million in the 2000 quarter. Operating margin was 5.2%, compared to 4.6% in 2000. In the six months, EBIT was $10.6 million, decreasing 34.2% from $16.1 million in 2000. Operating margin was 4.3%, compared to 5.8% in 2000. EBIT increased slightly in the second quarter of 2001 as the adverse impact of price competition and currency translation was offset by lower SAG and conversion costs from cost containment programs. -20- 22 For the six months, EBIT decreased due to the adverse effects of currency translation, intense price competition and reduced sales volume. EBIT was favorably impacted by lower SAG and conversion costs as a result of cost containment programs. The Company estimates that the effects of currency translation reduced operating income by approximately $5 million in the second quarter and $10 million in the six months. EBIT in 2001 did not include a first quarter rationalization charge totaling $3.6 million. Revenues and EBIT in future periods may be adversely affected by the effects of continued competitive pricing conditions, changes in mix, rising raw material and energy costs and currency translation. Sales and EBIT of the Asia Tire segment reflect the results of the Company's majority-owned tire business in the region. In addition, the Company owns a 50% interest in South Pacific Tyres Ltd. (SPT), the largest tire manufacturer, marketer and exporter in Australia and New Zealand. Results of operations of SPT are not reported in segment results, and are reflected in the Company's Consolidated Statement of Income using the equity method. The following table presents the sales and EBIT of the Company's Asia Tire segment together with 100% of the sales and EBIT of SPT:
THREE MONTHS ENDED SIX MONTHS ENDED (In millions) JUNE 30, JUNE 30, 2001 2000 2001 2000 ---- ---- ---- ---- NET SALES: Asia Tire $128.4 $137.9 $247.4 $275.9 SPT 124.8 155.8 243.1 309.5 ------ ------ ------ ------ $253.2 $293.7 $490.5 $585.4 ====== ====== ====== ====== EBIT: Asia Tire $ 6.7 $ 6.3 $ 10.6 $ 16.1 SPT (6.9) (.3) (13.9) (3.3) ------ ------ ------ ------ $ (.2) $ 6.0 $ (3.3) $ 12.8 ====== ====== ====== ======
ENGINEERED PRODUCTS Engineered Products segment sales in the second quarter of 2001 were $300.9 million, decreasing 1.8% from $306.4 million in the 2000 quarter. In the six months, sales of $600.3 million decreased 4.3% from $627.4 million in 2000. Revenues in both 2001 periods decreased from 2000 due primarily to unit sales decreases in the hose, air springs, power transmission belt and molded products businesses resulting from production cutbacks by the automotive industry. -21- 23 Engineered Products segment EBIT was $8.4 million in the second quarter of 2001, decreasing 59.0% from $20.5 million in the 2000 quarter. Operating margin was 2.8%, compared to 6.7% in 2000. In the six months, EBIT was $17.9 million, decreasing 59.6% from $44.3 million in 2000. Operating margin was 3.0%, compared to 7.1% in 2000. EBIT in the 2001 periods decreased due primarily to lower revenues, higher raw material costs and increased costs associated with reduced capacity utilization resulting from reduced demand from the automotive industry. EBIT in 2001 did not include first quarter rationalization charges totaling $3.0 million. Revenues and EBIT in the Engineered Products segment may be adversely affected in future periods by lower original equipment demand, competitive pricing pressures, expected continuing unfavorable economic conditions in certain markets, adverse economic conditions globally in the mining, construction and agriculture industries, increasing raw material and energy prices and currency translation. CHEMICAL PRODUCTS Chemical Products segment sales in the second quarter of 2001 were $271.6 million, decreasing 7.6% from $293.8 million in the 2000 quarter. In the six months, sales of $563.2 million decreased 1.5% from $571.8 million in 2000. Approximately 50% of Chemical Products segment sales were made to the Company's other segments. Chemical Products segment EBIT was $12.9 million in the second quarter of 2001, decreasing 57.0% from $30.0 million in the 2000 quarter. Operating margin was 4.7%, compared to 10.2% in 2000. In the six months, EBIT was $29.3 million, decreasing 45.1% from $53.4 million in 2000. Operating margin was 5.2%, compared to 9.3%. Revenues decreased in both 2001 periods compared to 2000 due primarily to lower volumes resulting from the slowdown in the tire industry. EBIT in both 2001 periods was down as increases in raw material and energy prices outpaced price increases due to the competitive pricing environment. LIQUIDITY AND CAPITAL RESOURCES ------------------------------- Net cash provided by operating activities was $109.8 million during the first six months of 2001, as reported on the -22- 24 Consolidated Statement of Cash Flows. Working capital requirements increased for inventories and accounts payable. During the second quarter of 2001, the Company terminated its $550 million domestic accounts receivable continuous sale program and entered into a new twelve-month revolving-period securitization program. The new program is renewable for subsequent one-year periods upon request by the Company and agreement by the participating financial institutions and results in the sale of receivables through a special purpose company, up to a maximum of $800 million. The Company retained servicing responsibilities, subordinated interests in the receivables transferred and a residual equity interest in the special purpose company. Fees paid by the Company under this program are based on certain variable market rate indices and are recorded as Other (Income) and Expense. Results of operations and financial position of the special purpose company are not included in the consolidated financial statements of the Company. Net cash used in investing activities was $297.0 million during the first six months of 2001. Capital expenditures totaled $221.2 million, and were primarily for plant modernizations and new tire molds. THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, (In millions) 2001 2000 2001 2000 ---- ---- ---- ---- Capital Expenditures $117.3 $139.0 $221.2 $266.7 Depreciation and amortization $162.6 $159.8 $323.0 $320.2 Cash inflows of $40.0 million were realized from asset sales, primarily from the sale of closed manufacturing and warehouse facilities in the United Kingdom. Net cash provided by financing activities was $227.8 million during the first half of 2001, which was used primarily to support the previously mentioned operating and investing activities. (Dollars in millions) 6/30/01 12/31/00 6/30/00 ------- -------- ------- Consolidated Debt $ 3,782.5 $ 3,585.8 $ 3,919.2 Debt to Debt and Equity 53.6% 50.6% 51.1% On February 6, 2001 Sumitomo converted the Company's 1.2% Convertible Note Due August 16, 2001 in the principal amount of (Y)6,536,535,767 into 1,140,866 shares of the Common Stock of the Company. On March 30, 2001, the Company borrowed $800 million for a period of three years under a bank term loan agreement with 27 domestic and international banks. The term loan is due on March 30, 2004, although the Company may prepay without penalty at the -23- 25 end of any interest period. The loan bears interest at a floating rate at a spread over LIBOR for interest periods of 1,2,3,6 or 12 months, as selected by the Company. Proceeds from the borrowing were used to repay short term debt outstanding. Substantial short term and long term credit sources are available to the Company globally under normal commercial practices. At June 30, 2001, the Company had an aggregate of $200 million of commercial paper outstanding. In addition, at June 30, 2001, the Company had short term committed and uncommitted bank credit arrangements totaling $1.8 billion, of which $.9 billion were unused. The Company also had available long term credit arrangements at June 30, 2001, totaling $4.2 billion, of which $1.5 billion were unused. Funds generated by operations, together with funds available under existing credit arrangements, are expected to be sufficient to meet the Company's currently anticipated operating cash requirements. -24- 26 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ---------------------------------------------------------- The Company actively manages its fixed and floating rate debt mix, within defined limitations, using refinancings and unleveraged interest rate swaps. The Company will enter into fixed and floating interest rate swaps to alter its exposure to the impact of changing interest rates on consolidated results of operations and future cash outflows for interest. Fixed rate swaps are used to reduce the Company's risk of increased interest costs during periods of rising interest rates. Floating rate swaps are used to convert the fixed rates of long term borrowings into short term variable rates. Interest rate swap contracts are thus used by the Company to separate interest rate risk management from debt funding decisions. At June 30, 2001, the interest rate on 46% of the Company's debt was fixed by either the nature of the obligation or through the interest rate swap contracts, compared to 48% at December 31, 2000 and 48% at June 30, 2000. The Company also from time to time enters into interest rate lock contracts to hedge the risk-free component of anticipated long term debt issuances. The following table presents interest rate swap contract information at June 30: (Dollars in millions) INTEREST RATE SWAP CONTRACTS 2001 2000 ---- ---- Notional principal amount $ 300.0 $ 75.0 Pay fixed rate 5.28% 6.24% Receive variable LIBOR 3.88% 6.86% Average years to maturity 2.2 1.0 Fair value - asset (liability) $ .3 $ .8 Pro forma fair value - asset (liability) .2 .4 The pro forma fair value assumes a 10% decrease in variable market interest rates at June 30, 2001 and 2000, respectively, and reflects the estimated fair value of contracts outstanding at that date under that assumption. Weighted average interest rate swap contract information follows: THREE MONTHS ENDED SIX MONTHS ENDED (Dollars in millions) JUNE 30, JUNE 30, 2001 2000 2001 2000 ---- ---- ---- ---- Notional principal $ 50.0 $ 75.0 $ 50.0 $ 75.0 Pay fixed rate 6.25% 6.24% 6.25% 6.24% Receive variable LIBOR 5.56% 6.45% 6.11% 6.28% -25- 27 The following table presents fixed rate debt information at June 30: (In millions) FIXED RATE DEBT 2001 2000 ---- ---- Fair value - liability $ 1,710.8 $ 1,989.7 Pro forma fair value - liability 1,771.2 2,069.8 The pro forma fair value assumes a 100 basis point decrease in market interest rates at June 30, 2001 and 2000, respectively, and reflects the estimated fair value of fixed rate debt outstanding at that date under that assumption. The sensitivity to changes in interest rates of the Company's interest rate contracts and fixed rate debt was determined with a valuation model based upon net modified duration analysis. The model assumes a parallel shift in the yield curve, and the precision of the model decreases as the assumed change in interest rates increases. FOREIGN CURRENCY EXCHANGE RISK In order to reduce the impact of changes in foreign exchange rates on consolidated results of operations and future foreign currency-denominated cash flows, the Company enters into forward exchange contracts. These contracts reduce exposure to currency movements affecting existing foreign currency-denominated assets, liabilities, firm commitments and forecasted transactions resulting primarily from trade receivables and payables, equipment acquisitions, intercompany loans and royalty agreements and forecasted purchases and sales. In addition, the principal and interest on the Company's Swiss franc bonds due 2006 and Euro300 million of the Eurobonds due 2005 are hedged by currency swap agreements. Contracts hedging the Swiss franc bonds, the Eurobonds and forecasted transactions under intercompany royalty agreements are designated as cash flow hedges. The hedged intercompany royalty transactions will occur during 2001. Contracts hedging short term trade receivables and payables normally have no hedging designation. -26- 28 The following table presents foreign exchange contract information at June 30: (In millions) FOREIGN EXCHANGE CONTRACTS 2001 2000 ---- ---- Spot value (unfavorable) favorable $ (25.9) $ 45.5 Pro forma change in spot value 35.3 11.6 Contract maturities 07/01-03/06 07/00-03/06 Fair value asset (liability): Swiss franc swap-current $ - $ 30.6 Swiss franc swap-long term 1.2 11.8 Euro swaps-long term (25.5) - Other-current (1.6) 3.1 The pro forma change in spot value assumes a 10% change in foreign exchange rates at June 30, 2001 and 2000, respectively, and reflects the estimated change in the spot value of contracts outstanding at that date under that assumption. The sensitivity to changes in exchange rates of the Company's foreign currency positions was determined using current market pricing models. -27- 29 FORWARD-LOOKING INFORMATION - SAFE HARBOR STATEMENT --------------------------------------------------- Certain information set forth herein (other than historical data and information) may constitute forward-looking statements regarding events and trends which may affect the Company's future operating results and financial position. The words "estimate," "expect," "intend" and "project," as well as other words or expressions of similar meaning, are intended to identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this quarterly report. Such statements are based on current expectations, are inherently uncertain, are subject to risks and should be viewed with caution. Actual results and experience may differ materially from the forward-looking statements as a result of many factors, including: changes in general economic and industry conditions in the various markets served by the Company's operations; increased competitive activity; demand for Goodyear's products; fluctuations in the prices paid for raw materials and energy; the ability to control costs and expenses; changes in the monetary policies of various countries where the Company has significant operations; changes in interest rates; changes in the relative values of currencies; and other unanticipated events and conditions. It is not possible to foresee or identify all such factors. The Company disclaims any intention, commitment or obligation to revise or to update any forward-looking statement, or to disclose any facts, events or circumstances that occur after the date hereof which may affect the accuracy of any forward-looking statement. -28- 30 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS - ------- ----------------- Reference is made to the Annual Report of The Goodyear Tire & Rubber Company ("Goodyear") on Form 10-K for the year ended December 31, 2000 (the "2000 10-K"), wherein at Item 3, paragraphs (F), (G) and (H), page 26, Goodyear reported certain legal proceedings, and to the Quarterly Report of Goodyear on Form 10-Q for the quarter ended March 31, 2001 (the "2001 1st Quarter 10-Q"), wherein at Part II, Item 1, paragraphs (3) and (4), page 28, Goodyear reported developments in respect of certain legal proceedings. Goodyear reports the following developments in respect of the legal proceedings (3) and described at paragraphs (F), (G) and (H) of Item 3 of the 2000 10-K and at paragraphs (3) and (4) of Part II, Item 1 of the 2001 1st Quarter 10-Q: (1) At paragraph (F), page 26, of the 2000 10-K and paragraph (3), page 28, of the 2001 1st Quarter 10-Q, Goodyear previously reported on certain class action proceedings involving its load range E light truck tires. Goodyear also has fourteen non-class action lawsuits related to deaths and/or serious injuries allegedly involving our load range E light truck tires. At paragraph (G), page 26, of the 2000 10-K, Goodyear also previously reported on a National Highway Traffic Safety Administration ("NHTSA") preliminary evaluation involving certain of its load range E light truck tires. From 1991 to 2000, Goodyear produced and sold approximately 23 million of these load range E tires of which Goodyear believes many are no longer in service. Under the law and regulations governing NHTSA, this evaluation could end in a dismissal, other action or could proceed and ultimately result in a recall order. In any event, Goodyear believes that its load range E tires are free of design and manufacturing defects. (2) At paragraph (H), page 26, of the 2000 10-K and paragraph (4), page 28, of the 2001 1st Quarter 10-Q, Goodyear previously reported that it was one of numerous defendants in legal proceedings involving claims of individuals relating to alleged exposure to materials containing asbestos in products allegedly manufactured by Goodyear or present in Goodyear's facilities. The number of new asbestos-related claims filed against Goodyear has increased since 1998 with a substantial majority of all claims filed against Goodyear having been filed in that period. Accordingly, Goodyear has limited experience in resolving or otherwise disposing of these claims. The number of new claims filed in the second quarter of 2001 was approximately 7,000 and at June 30, 2001, approximately 58,000 claims were pending. Goodyear cannot predict the number of claims which may be filed against Goodyear in the future. While Goodyear has insurance policies that it believes address asbestos-related liabilities, Goodyear also cannot predict the extent to which costs of these claims will be covered by insurance. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. - ------ -------------------------------- (a) EXHIBITS. See the Index of Exhibits at page E-1, which is by specific reference incorporated into and made a part of this Quarterly Report on Form 10-Q. (b) REPORTS ON FORM 8-K. No Current Report on Form 8-K was filed by The Goodyear Tire & Rubber Company during the quarter ended June 30, 2001. -29- 31 S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE GOODYEAR TIRE & RUBBER COMPANY (Registrant) Date: August 1, 2001 By /s/ Richard J. Kramer -------------------------------------- Richard J. Kramer, Vice President (Signing on behalf of Registrant as a duly authorized officer of Registrant and signing as the principal accounting officer of Registrant.) -30- 32 THE GOODYEAR TIRE & RUBBER COMPANY QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001 INDEX OF EXHIBITS
EXHIBIT EXHIBIT ------- ------- TABLE ITEM NO. * Description of Exhibit NUMBER ---------------- ---------------------- ------ 3 ARTICLES OF INCORPORTATION AND BY-LAWS -------------------------------------- (a) Certificate of Amended Articles of Incorporation of The Goodyear Tire & Rubber Company ("Goodyear"), dated December 20, 1954, and Certificate of Amendment to Amended Articles of Incorporation of Goodyear, dated April 6, 1993, and Certificate of Amendment to Amended Articles of Incorporation of Goodyear dated June 4, 1996, three documents comprising Goodyear's Articles of Incorporation as amended (incorporated by reference, filed as Exhibit 3.1 to Goodyear's Form 10-Q for the quarter ended June 30, 1996, File No. 1-1927). (b) Code of Regulations of Goodyear, adopted November 22, 1955, as amended April 5, 1965, April 7, 1980, April 6, 1981 and April 13, 1987 (incorporated by reference, filed as Exhibit 4.1(B) to Goodyear's Registration Statement on Form S-3, File No. 333-1995). 4 INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING INDENTURES ---------------------------------------------- (a) Specimen nondenominational Certificate for shares of the Common Stock, Without Par Value, of Goodyear; First Chicago Trust Company of New York as transfer agent and registrar (incorporated by reference, filed as Exhibit 4.3 to Goodyear's Form 10-Q for the quarter ended September 30, 1996, File No. 1-1927).
- ---------- *Pursuant to Item 601 of Regulation S-K. E-1 33
EXHIBIT EXHIBIT ------- ------- TABLE ITEM NO. * Description of Exhibit NUMBER ---------------- ---------------------- ------ 4 (b) Conformed copy of Rights Agreement, dated as of June 4, 1996, between Goodyear and First Chicago Trust Company of New York, Rights Agent (incorporated by reference, filed as Exhibit 1 to Goodyear's Registration Statement on Form 8-A dated June 11, 1996 and as Exhibit 4(a) to Goodyear's Form 8-K dated June 4, 1996, File No. 1-1927). (c) Conformed copy of Amendment to Rights Agreement, dated as of February 8, 2000, between Goodyear and First Chicago Trust Company of New York, Rights Agent (incorporated by reference, filed as Exhibit 4.1 to Goodyear's Form 10-K for the year ended December 31, 1999, File No. 1-1927). (d) Form of Indenture, dated as of March 15, 1996, between Goodyear and Chemical Bank (now The Chase Manhattan Bank), as Trustee, as supplemented on December 3, 1996, March 11, 1998 and March 17, 1998 (incorporated by reference, filed as Exhibit 4.1 to Goodyear's Form 10-Q for the quarter ended March 31, 1998, File No. 1-1927). (e) Form of Indenture, dated as of March 1, 1999, between Goodyear and The Chase Manhattan Bank, as Trustee, as supplemented on March 14, 2000 (incorporated by reference, filed as Exhibit 4.1 to Goodyear's Form 10-Q for the quarter ended March 31, 2000, File No. 1-1927). (f) Conformed copy of Term Loan Agreement, dated as of March 30, 2001, among Goodyear, the Lenders named therein, The Chase Manhattan Bank, as Agent, and Chase Manhattan International Limited, as London Agent (incorporated by reference, filed as Exhibit 4.1 to Goodyear's Form 10-Q for the quarter ended March 31, 2001, File No. 1-1927).
- ---------- *Pursuant to Item 601 of Regulation S-K. E-2 34
EXHIBIT EXHIBIT ------- ------- TABLE ITEM NO. * Description of Exhibit NUMBER ---------------- ---------------------- ------ No instrument defining the rights of holders of long-term debt which relates to securities having an aggregate principal amount in excess of 10% of the consolidated assets of Registrant and its subsidiaries was entered into during the quarter ended June 30, 2001. In accordance with paragraph (iii) to Item 601 (b)(4) of Regulation S-K, agreements and instruments defining the rights of holders of certain items of long-term debt entered into during the quarter ended June 30, 2001 which relate to securities having an aggregate principal amount less than 10% of the consolidated assets of Registrant and its Subsidiaries are not filed herewith. The Registrant hereby agrees to furnish a copy of any such agreements or instruments to the Securities and Exchange Commission upon request. 10 MATERIAL CONTRACTS ---------------------------------------------- (a) Conformed copy of Receivables Purchase 10.1 Agreement, dated as of April 27, 2001, between Goodyear and Wingfoot A/R LLC. (b) Conformed copy of Base Indenture, dated as 10.2 of April 27, 2001, between Wingfoot A/R LLC and The Chase Manhattan Bank, as Indenture Trustee. 10 (c) Conformed copy of Series 2001-1 Indenture 10.3 Supplement, dated as of April 27, 2001, among Wingfoot A/R LLC, Goodyear, as Collection Agent, the CP Conduit Purchasers named therein, the APA Banks named therein, the Funding Agents named therein, The Chase Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank, as Indenture Trustee. 12 STATEMENT RE COMPUTATION OF RATIOS --------------------------------------------- Statement setting forth the computation of 12 Ratio of Earnings to Fixed Charges.
- ---------- *Pursuant to Item 601 of Regulation S-K. E-3 EX-10.1 3 l89521aex10-1.txt EXHIBIT 10.1 1 Exhibit 10.1 EXECUTION COPY =============================================================================== THE GOODYEAR TIRE & RUBBER COMPANY, as Seller, and WINGFOOT A/R LLC ------------------------------ RECEIVABLES PURCHASE AGREEMENT Dated as of April 27, 2001 ------------------------------ =============================================================================== 2 TABLE OF CONTENTS
PAGE ---- ARTICLE I DEFINITIONS.............................................................................................1 Section 1.1. Definitions............................................................................1 Section 1.2. Other Definitional Provisions..........................................................3 ARTICLE II PURCHASE AND SALE OF RECEIVABLES.......................................................................4 Section 2.1. Purchase and Sale of Receivables.......................................................4 Section 2.2. Purchase Price.........................................................................6 Section 2.3. Payment of Purchase Price..............................................................7 Section 2.4. No Repurchase..........................................................................8 Section 2.5. Rebates, Adjustments, Returns and Reductions; Modifications............................8 Section 2.6. Limited Repurchase Obligation..........................................................8 Section 2.7. Obligations Unaffected.................................................................9 Section 2.8. Certain Charges........................................................................9 Section 2.9. Certain Allocations....................................................................9 Section 2.10. Further Assurances.....................................................................9 Section 2.11. Purchase of Seller's Interest in Designated Receivables and Receivables Property.......9 ARTICLE III CONDITIONS PRECEDENT.................................................................................10 Section 3.1. Conditions Precedent to Issuer's Initial Purchase.....................................10 Section 3.2. Conditions Precedent to All the Issuer's Purchases of Designated Receivables..........12 Section 3.3. Condition Precedent to the Seller's Obligations.......................................13 ARTICLE IV REPRESENTATIONS AND WARRANTIES........................................................................13 Section 4.1. Representations and Warranties of the Issuer..........................................13 Section 4.2. Representations and Warranties of the Seller..........................................14 ARTICLE V GENERAL COVENANTS......................................................................................18 Section 5.1. Affirmative Covenants of the Seller...................................................18 Section 5.2. Reporting Requirements................................................................22 Section 5.3. Negative Covenants....................................................................23 ARTICLE VI PURCHASE TERMINATION EVENTS...........................................................................24 Section 6.1. Purchase Termination Events...........................................................24 Section 6.2. Additional Remedies...................................................................26 ARTICLE VII INDEMNIFICATION......................................................................................26 Section 7.1. Indemnities by the Seller.............................................................26 ARTICLE VIII SUBORDINATED NOTE...................................................................................28 Section 8.1. Subordinated Note.....................................................................28 Section 8.2. Restrictions on Transfer of Subordinated Note.........................................28
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PAGE ---- ARTICLE IX MISCELLANEOUS.........................................................................................28 Section 9.1. Amendment.............................................................................28 Section 9.2. Further Assurances....................................................................28 Section 9.3. Governing Law.........................................................................28 Section 9.4. Notices...............................................................................28 Section 9.5. No Waiver; Remedies...................................................................29 Section 9.6. Binding Effect........................................................................29 Section 9.7. Costs, Expenses and Taxes.............................................................29 Section 9.8. Merger and Integration................................................................29 Section 9.9. Headings..............................................................................29 Section 9.10. Execution in Counterparts.............................................................29 Section 9.11. No Bankruptcy Petition................................................................29 Section 9.12. Acknowledgment of Assignments.........................................................30 Section 9.13. Termination...........................................................................30 EXHIBITS Exhibit A Form of UCC Certificate Exhibit B Form of Contract Exhibit C Form of Subordinated Note SCHEDULES Schedule I Calculation of Discounted Percentage Schedule II Seller Locations Schedule III Trade Names Schedule IV Litigation
-ii- 4 RECEIVABLES PURCHASE AGREEMENT, dated as of April 27, 2001, between THE GOODYEAR TIRE & RUBBER COMPANY, an Ohio corporation ("GOODYEAR"), as seller (the "SELLER"), and WINGFOOT A/R LLC, a Delaware limited liability company (the "ISSUER"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Seller intends to sell all of its right, title and interest in, to and under the Designated Receivables now existing or hereafter created and the Receivables Property to the Issuer on the terms and subject to the conditions set forth in this Agreement; WHEREAS, the Issuer desires to purchase all of the Seller's right, title and interest in, to and under the Designated Receivables now existing or hereafter created and the Receivables Property from the Seller on the terms and subject to the conditions set forth in this Agreement; WHEREAS, the Seller and the Issuer desire the transfer of the Designated Receivables and the Receivables Property from the Seller to the Issuer to be a true sale providing the Issuer with the full benefits of ownership of the Designated Receivables; and WHEREAS, to obtain the necessary funds to purchase the Designated Receivables, the Issuer has entered into a Base Indenture, dated as of the date hereof (as amended, supplemented or otherwise modified from time to time, the "BASE INDENTURE"), between the Issuer and The Chase Manhattan Bank, as indenture trustee, pursuant to which it will issue one or more Series of Investor Notes; NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements contained herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. DEFINITIONS. Unless otherwise defined herein, capitalized terms which are used herein shall have the meanings assigned to such terms in the Definitions List attached to the Base Indenture as Schedule 1. The following terms shall have the following meanings: "ACTUAL CLOSING DATE PURCHASE PRICE" is defined in SECTION 2.2. "CHARGED OFF RECEIVABLE" means a Receivable that has been written off as uncollectible in accordance with the Credit and Collection Policy. "CUT-OFF DATE" means March 31, 2001. "DESIGNATED RECEIVABLE" means each Receivable other than: (i) Receivables payable by Penske Auto Centers Inc. and its successors; 5 (ii) Receivables payable by the United States federal government or any agency, department or instrumentality thereof; (iii) Receivables payable by the Seller or any Affiliate of the Seller; (iv) Receivables arising from sales to retail outlets owned by the Seller or any Affiliate of the Seller; (v) Receivables arising from sales made outside of the United States; and (vi) Receivables evidenced by promissory notes or "instruments," as defined in Section 9-105 of the UCC as in effect in the State of New York. "DISCOUNTED PERCENTAGE" is defined in SCHEDULE I hereto. "DOCUMENTS" is defined in SECTION 2.1. "INITIAL CLOSING DATE PURCHASE PRICE" is defined in SECTION 2.2. "INITIAL SETTLEMENT DATE" is defined in SECTION 2.2. "KNOWLEDGE" means the actual knowledge of (i) any Authorized Officer of the Seller or (ii) any other person employed in the Seller's Treasury Department or Legal Department and responsible for the oversight or administration of the transactions contemplated by the Transaction Documents. "MULTIEMPLOYER PLAN" means a "multiemployer plan" (within the meaning of Section 4001(a)(3) of ERISA) and to which the Seller or any ERISA Affiliate of the Seller (other than one considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code) is making or accruing an obligation to make contributions, or has within any of the preceding five years made or accrued an obligation to make contributions. "PAYMENT DATE" is defined in SECTION 2.3(a). "PLAN" means, with respect to any Person, any pension plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code which is maintained for employees of such Person or any ERISA Affiliate of such Person. "PRIME RATE" means the rate of interest per annum publicly announced from time to time by The Chase Manhattan Bank as its prime rate in effect at its principal office in New York, New York; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "PURCHASED RECEIVABLE" means, at any time, any Designated Receivable sold to the Issuer by the Seller pursuant to, and in accordance with the terms of, this Agreement and not theretofore resold to the Seller pursuant to SECTION 2.6 or SECTION 2.11. -2- 6 "PURCHASE PRICE" is defined in SECTION 2.2. "PURCHASE TERMINATION DATE" means the date on which the Issuer's obligation to purchase Receivables from the Seller shall terminate in accordance with SECTION 6.1. "PURCHASE TERMINATION EVENT" is defined in SECTION 6.1. "RECEIVABLE" means the indebtedness and payment obligations of any Person to the Seller or Dunlop under a Contract (including, without limitation, payment obligations constituting an account or general intangible or evidenced by a note, instrument, contract, security agreement, chattel paper or other evidence of indebtedness or security) arising from a sale of chemical products, engineered products and tire products or the provision of related services by the Seller or Dunlop, as the case may be, including, without limitation, any usage or mileage fees payable in connection therewith, and including the right to payment of any interest, sales taxes, Finance Charges, returned check or late charges and other payment obligations of such Person with respect thereto. "RECEIVABLES LIST" is defined in SECTION 2.1. "RECEIVABLES PROPERTY" is defined in SECTION 2.1. "REPORTABLE EVENT" means any reportable event as defined in Section 4043(b) of ERISA or the regulations issued thereunder with respect to a Plan (other than a Plan maintained by an ERISA Affiliate which is considered an ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of the Code). "REPURCHASE EVENT" is defined in SECTION 2.11. "SELLER ADJUSTMENT PAYMENT" is defined in SECTION 2.5. "SELLER REPURCHASE PAYMENT" is defined in SECTION 2.6. "SUBORDINATED NOTE" is defined in SECTION 8.1. "WITHDRAWAL LIABILITIES" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. SECTION 1.2. OTHER DEFINITIONAL PROVISIONS. (a) The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement, and Section, subsection, Schedule and Exhibit references contained in this agreement are references to Sections, subsections, Schedules and Exhibits in or to this Agreement unless otherwise specified. (b) The definitions contained in Section 1.1 of this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine, the feminine and the neuter genders of such terms. (c) Any reference herein or in any other Transaction Document to a provision of the Code or ERISA shall be deemed a reference to any successor provision thereto. -3- 7 (d) All references herein to any agreement or instrument shall be deemed references to such agreement or instrument as amended, supplemented or otherwise modified from time to time unless there are any restrictions herein on the amendment, supplementation or modification of such agreement or instrument. ARTICLE II PURCHASE AND SALE OF RECEIVABLES SECTION 2.1. PURCHASE AND SALE OF RECEIVABLES. (a) Upon the terms set forth herein, the Seller hereby sells, assigns transfers and conveys to the Issuer, without recourse (except to the limited extent provided herein), all of its right, title and interest in, to and under: (i) all Designated Receivables existing on the Initial Closing Date and thereafter arising from time to time until the Purchase Termination Date; (ii) all Related Property with respect thereto; (iii) all Collections; (iv) all payment, enforcement and other rights (including rescission, replevin or reclamation), but none of the obligations, relating to any Designated Receivable or arising therefrom; (v) the right, title and interest of the Seller in the Dunlop Receivables Purchase Agreement, including, without limitation, all of the Seller's rights, remedies, powers, interests and privileges under the Dunlop Receivables Purchase Agreement (whether arising pursuant to the terms thereof or otherwise available to the Seller), including, without limitation, the right to enforce the Dunlop Receivables Purchase Agreement, to give or withhold any and all consents, requests, notices, directions, approvals or waivers thereunder and all amounts due and to become due thereunder, whether payable as indemnities or damages for breach thereof; and (vi) all monies due or to become due and all amounts received with respect to the items listed in clauses (i), (ii), (iii), (iv) and(v) and all proceeds (including, without limitation, whatever is received upon the sale, exchange, collection or other disposition of the foregoing and all "proceeds" as defined in Section 9-306 of the UCC as in effect in the State of New York) (the property described in the foregoing clauses (ii) through (vi) are hereinafter collectively referred to as the "RECEIVABLES PROPERTY"). Subject to the terms and conditions set forth herein, the Issuer hereby agrees to purchase the Designated Receivables and the Receivables Property from time to time (until the Purchase Termination Date). (b) On the Initial Closing Date and on the date of creation of each newly created Designated Receivable until the Purchase Termination Date, all of the Seller's right, title and interest in, to and under (i) in the case of the Initial Closing Date, all then existing Designated -4- 8 Receivables and all Receivables Property in respect of such Designated Receivables and (ii) in the case of each such date of creation, all such newly created Designated Receivables and all Receivables Property in respect of such Designated Receivables, shall be immediately and automatically sold, assigned, transferred and conveyed to the Issuer pursuant to paragraph (a) above without any further action by the Seller or any other Person. (c) The parties to this Agreement intend that the transactions contemplated by SECTIONS 2.1(a) and (b) shall be, and shall be treated as, a purchase by the Issuer and a sale by the Seller of the Purchased Receivables and the Receivables Property in respect thereof and not a lending transaction. All transfers of Designated Receivables and Receivables Property by the Seller hereunder shall be without recourse to, or representation or warranty of any kind (express or implied) by, the Seller, except as otherwise specifically provided herein. The foregoing sale, assignment, transfer and conveyance does not constitute and is not intended to result in a creation or assumption by the Issuer of any obligation of the Seller or any other Person in connection with the Designated Receivables, the Receivables Property or any agreement or instrument relating thereto, including any obligation to any Obligor. If this Agreement does not constitute a valid sale, assignment, transfer and conveyance of all right, title and interest of the Seller in, to and under the Purchased Receivables and the Receivables Property in respect thereof despite the intent of the parties hereto, the Seller hereby grants a "security interest" (as defined in the UCC as in effect in the State of New York) in the Purchased Receivables, the Receivables Property in respect thereof and all proceeds thereof to the Issuer and the parties agree that this Agreement shall constitute a security agreement under the UCC in effect in New York. (d) In connection with the foregoing conveyances, the Seller agrees to record and file, at its own expense, any financing statements (and continuation statements with respect to such financing statements when applicable) or, where applicable, registrations in the appropriate records, with respect to the Designated Receivables and Receivables Property now existing and hereafter created meeting the requirements of applicable law in such manner and in such jurisdictions as are necessary or desirable to perfect the sale of the Designated Receivables and the Receivables Property by the Seller to the Issuer, and to deliver a file-stamped copy or certified statement of such financing statement or registration or other evidence of such filing or registration to the Issuer on or prior to the Initial Closing Date. The Seller hereby irrevocably authorizes the Issuer and the Indenture Trustee to file one or more financing or continuation statements, and amendments thereto, relative to all or any part of the Receivables and the Receivables Property, without the signature of the Seller where permitted by law. (e) In connection with the foregoing conveyances, the Seller agrees at its own expense, on or prior to the Initial Closing Date, (i) to maintain its computer systems and files containing its master database of Receivables so as to enable a third party inspecting such files to readily conclude or ascertain that all Designated Receivables included in such files and all Receivables Property have been sold to the Issuer in accordance with this Agreement and (ii) to deliver to the Issuer computer tapes or disks containing a true and complete list of all Designated Receivables conveyed to the Issuer specifying for each such Designated Receivable, as of the Cut-Off Date, (i) the identification or reference number assigned to such Designated Receivable by the Seller and (ii) the Outstanding Amount of such Receivable (the "RECEIVABLES LIST"). (f) As further confirmation of the sale of the Designated Receivables, but subject to SECTION 6.2(b), it is understood and agreed that the Issuer shall have the following rights: -5- 9 (i) the Issuer (and the Indenture Trustee, as its assignee) shall have the right at any time to (A) notify, or require that the Seller at its own expense notify, the respective Obligors of the Issuer's ownership of the Purchased Receivables and Receivables Property, (B) direct that payment of all amounts due or to become due under the Purchased Receivables be made directly to the Issuer or its designee, (C) sue for collection on any Purchased Receivable or (D) sell any Purchased Receivables to any Person for a price that is acceptable to the Issuer (or the Indenture Trustee, as its assignee); (ii) the Seller shall, upon written request of the Issuer, and at the Seller's expense (A) deliver to the Issuer or a party designated by the Issuer all documents, instruments and other records (including credit files) that evidence or record the Designated Receivables and all licenses, rights, copies of all relevant computer programs and any necessary licenses for the use thereof (subject to the restrictions contained in any license with respect thereto), related material, computer tapes, disks, cassettes and data necessary or desirable to the immediate collection of the Purchased Receivables by the Issuer, with or without the participation of the Seller (collectively, the "DOCUMENTS") and (B) make such arrangements with respect to the collection of the Purchased Receivables as may be reasonably required by the Issuer. In recognition of the Seller's need to have access to any Documents which may be transferred to the Issuer hereunder, whether as a result of its continuing business relationship with any Obligor for Designated Receivables purchased hereunder or as a result of its responsibilities as collection agent of accounts receivable which are not sold to the Issuer or otherwise, the Issuer shall provide to the Seller reasonable access to the Documents in connection with any activity arising in the ordinary course of the Seller's business, PROVIDED, however, that the Seller shall not disrupt or otherwise interfere with the Issuer's use of and access to the Documents; and (iii) the Seller hereby grants to the Issuer an irrevocable power of attorney (coupled with an interest) to take any and all steps in the Seller's name necessary or desirable, in the reasonable opinion of the Issuer, to collect all amounts due under the Purchased Receivables, including, without limitation, enforcing the Purchased Receivables, exercising all rights and remedies in respect thereof and, without regard to the limitation set forth in SECTION 6.2(b), endorsing the Seller's name on checks and other instruments representing Collections. SECTION 2.2. PURCHASE PRICE. The amount payable by the Issuer to the Seller (the "PURCHASE PRICE") for Designated Receivables and the Receivables Property on any Payment Date under this Agreement shall be equal to the product of (a) the aggregate Outstanding Balance of the Designated Receivables sold to the Issuer hereunder since the immediately preceding Payment Date TIMES (b) the Discounted Percentage; PROVIDED that for purposes of the Payment Date occurring on the Initial Closing Date, the Purchase Price for the Designated Receivables and the Receivables Property existing on the Initial Closing Date shall be based on the Designated Receivables existing as of the Cut-Off Date (the "INITIAL CLOSING DATE PURCHASE -6- 10 PRICE"). On the first Settlement Date occurring after the Initial Closing Date (the "INITIAL SETTLEMENT DATE"), the Seller shall determine the Purchase Price for the Designated Receivables and Receivables Property existing on the Initial Closing Date based on the Designated Receivables existing on the Initial Closing Date (the "ACTUAL CLOSING DATE PURCHASE PRICE"). If the Initial Closing Date Purchase Price paid by the Issuer on the Initial Closing Date is greater than the Actual Closing Date Purchase Price, the Seller shall apply that excess to reduce the outstanding principal amount of the Subordinated Note on the Initial Settlement Date. If the Initial Closing Date Purchase Price paid by the Issuer on the Initial Closing Date is less than the Actual Closing Date Purchase Price, the Issuer shall pay that difference to the Seller on the Initial Settlement Date by increasing the outstanding principal amount of the Subordinated Note in the amount of the difference. SECTION 2.3. PAYMENT OF PURCHASE PRICE. (a) Upon the fulfillment of the conditions set forth in Article III, the Purchase Price for Designated Receivables and the Receivables Property shall be paid or provided for by the Issuer in the manner provided below on each Business Day (each such day, a "PAYMENT DATE"). (b) The Purchase Price for Designated Receivables and Receivables Property shall be paid by the Issuer on each Payment Date as follows: (i) by netting the amount of any Seller Adjustment Payments or Seller Repurchase Payments pursuant to SECTION 2.5 or 2.6 against such Purchase Price; (ii) to the extent available for such purpose, in cash from Collections released to the Issuer pursuant to the Indenture; (iii) to the extent available for such purpose, in cash from the net proceeds of the issuance of a Series of Investor Notes or an increase in the Invested Amount thereof; (iv) in cash from the proceeds of capital contributed by Goodyear to the Issuer, if any, in respect of its equity interest in the Issuer; and (v) by means of an addition to the principal amount of the Subordinated Note in an aggregate amount equal to the remaining portion of the Purchase Price; PROVIDED HOWEVER that the Issuer may pay the Purchase Price by means of additions to the principal amount of the Subordinated Note only if, at the time of such payment and after giving effect thereto, (A) the Issuer shall be in compliance with Section 8.19 of the Base Indenture and (B) the aggregate principal amount outstanding of the Subordinated Note would not exceed 30% of the outstanding principal amount of the Purchased Receivables on such Payment Date. 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 Settlement Period and shall note that increase or reduction on the grid attached to the Subordinated Note; PROVIDED that the failure to make any such recordation or any error in such grid shall not adversely affect the Seller's rights. -7- 11 The Issuer hereby acknowledges that the Seller shall have no obligation to make further capital contributions to the Issuer in respect of the Seller's equity interest in the Issuer in order to provide funds to pay the Purchase Price to the Seller hereunder or otherwise. (c) The Issuer shall pay all amounts in respect of the Purchase Price of Purchased Receivables and Receivables Property to an account of the Seller designated by the Seller in writing to the Issuer. All payments under this Agreement shall be made not later than 2:00 p.m. (New York City time) on the date specified therefor in Dollars in same day funds. (d) Whenever any payment to be made under this Agreement shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. Amounts not paid when due in accordance with the terms of this Agreement shall bear interest at a rate equal at all times to the Prime Rate PLUS 2%, payable on demand. SECTION 2.4. NO REPURCHASE. Except to the extent expressly set forth herein, the Seller shall not have any right or obligation under this Agreement, by implication or otherwise, to repurchase from the Issuer any Purchased Receivables or Receivables Property or to rescind or otherwise retroactively affect any purchase of any Purchased Receivables or Receivables Property after the Payment Date relating thereto. SECTION 2.5. REBATES, ADJUSTMENTS, RETURNS AND REDUCTIONS; MODIFICATIONS. From time to time, the Seller or Dunlop may make Dilution Adjustments to Receivables in accordance with this SECTION 2.5 or Section 2.5 of the Dunlop Receivables Purchase Agreement, as the case may be. The Seller agrees to pay to the Issuer, on the first Reporting Date immediately succeeding the date of the grant of any Dilution Adjustment, the amount of any such Dilution Adjustment (a "SELLER ADJUSTMENT PAYMENT") by depositing such amount into the Collection Account; PROVIDED that, prior to the Purchase Termination Date, any such Seller Adjustment Payment due to the Issuer shall be netted against the Purchase Price of newly created Designated Receivables in accordance with SECTION 2.3(c)(i) on the first Payment Date after the grant of such Dilution Adjustment to the extent of such Purchase Price and the remaining amount of such Seller Adjustment Payment due to the Issuer after such netting, if any, shall be paid to the Issuer on such date in cash by depositing such amount into the Collection Account. The amount of any Dilution Adjustment made on any Business Day shall be set forth on the first Monthly Settlement Statement prepared after the date of the grant of such Dilution Adjustment. SECTION 2.6. LIMITED REPURCHASE OBLIGATION(a) . In the event that (i) any representation or warranty contained in SECTION 4.2(c), (i), (l) or (m) in respect of any Purchased Receivable transferred to the Issuer is not true and correct in any material respect on the date of such transfer, or (ii) there is a breach of any covenant contained in SECTION 5.1(c) or (f) or SECTION 5.3(a), (b) or (c) with respect to any Purchased Receivable in any material respect or (iii) the Issuer's interest in any Purchased Receivable is not a first priority perfected ownership or security interest at any time as a result of any action taken by, or any failure to take action by, the Seller, then the Seller agrees to pay to the Issuer an amount equal to the Purchase Price paid by the Issuer in respect of such Purchased Receivable (whether the Issuer paid such Purchase Price in cash or otherwise) less Collections received by the Issuer in respect of such Purchased Receivable as of the date of repurchase by depositing such amount into the Collection Account, such payment to occur no later than the Settlement Date occurring on the 30th day (or, if such 30th day is not a Settlement Date, on the Settlement Date immediately succeeding such 30th day) after the day such breach or incorrectness becomes known to the Seller (unless such breach or incorrectness shall have been cured on or before such day, in which case the Seller shall have no -8- 12 obligation to repurchase such Purchased Receivable under this Section 2.6); PROVIDED that, prior to the Purchase Termination Date, any such payment due and owing to the Issuer shall be netted against the Purchase Price of newly created Designated Receivables in accordance with SECTION 2.3(c)(i) on the first Payment Date to occur after such 30th day to the extent of such Purchase Price and the remaining amount of such payment due to the Issuer after such netting, if any, shall be paid to the Issuer in cash to the extent still unpaid on such Payment Date by depositing such amount into the Collection Account. Any payment by the Seller pursuant to this SECTION 2.6 is referred to as a "SELLER REPURCHASE PAYMENT". The obligation to reacquire any Purchased Receivable pursuant to this Section 2.6 shall, upon satisfaction thereof, constitute the sole remedy respecting the event giving rise to such obligation of the Seller and is expressly limited to the Purchased Receivable affected by such event. Simultaneously with any Seller Repurchase Payment with respect to any Purchased Receivable, such Purchased Receivable and the Receivables Property with respect thereto shall immediately and automatically be sold, assigned, transferred and reconveyed by the Issuer to the Seller without any further action by the Issuer or any other Person. SECTION 2.7. OBLIGATIONS UNAFFECTED. The obligations of the Seller to the Issuer under this Agreement shall not be affected by reason of any invalidity, illegality or irregularity of any Designated Receivable or any sale of a Designated Receivable. SECTION 2.8. CERTAIN CHARGES. The Seller and the Issuer agree that late charge revenue, reversals of discounts, other fees and charges and other similar items, whenever created, accrued in respect of Purchased Receivables shall be the property of the Issuer notwithstanding the occurrence of a Purchase Termination Event and all Collections with respect thereto shall continue to be allocated and treated as Collections in respect of Purchased Receivables. SECTION 2.9. CERTAIN ALLOCATIONS. The Seller hereby agrees all Collections and other proceeds received from an Obligor in respect of Receivables shall be applied to Receivables owed by such Obligor (including Purchased Receivables) in the order in which such Receivables were created; PROVIDED, HOWEVER, that notwithstanding the foregoing, if an Obligor indicates that a particular Collection is to be applied to a specific Receivable of such Obligor, then such Collection shall be applied to pay such Receivable. SECTION 2.10. FURTHER ASSURANCES. From time to time at the request of the Seller, the Issuer shall deliver to the Seller such documents, assignments, releases and instruments of termination as the Seller may reasonably request to evidence the reconveyance by the Issuer to the Seller of a Receivable pursuant to the terms of SECTION 2.6 or 2.11(b); PROVIDED that the Issuer shall have been paid all amounts due thereunder; and the Issuer and the Collection Agent shall take such action as the Seller may reasonably request, at the expense of the Seller, to assure that any such Receivable, the Related Property and Collections with respect thereto do not remain commingled with other Collections hereunder. SECTION 2.11. PURCHASE OF SELLER'S INTEREST IN DESIGNATED RECEIVABLES AND RECEIVABLES PROPERTY. (a) In the event of any breach of any of the representations and warranties set forth in SECTION 4.2(a), (b), (d) or (e), as of the date made, which breach has a material adverse effect on the interests of the Issuer in the Purchased Receivables and the Receivables Property (taken as a whole) (a "REPURCHASE EVENT"), then the Issuer, by notice then given in writing to the Seller, may direct the Seller to purchase all Purchased Receivables and Receivables Property and the Seller shall be obligated to make such purchase on the next Settlement Date occurring at least ten Business Days after receipt of such notice on the terms and -9- 13 conditions set forth in SECTION 2.11(b) below; PROVIDED, HOWEVER, that no such purchase shall be required to made if, by such Settlement Date, such material adverse effect shall have been cured and no other Repurchase Event shall be in existence. (b) The Seller agrees to pay to the Issuer an amount equal to the Purchase Price of the Purchased Receivables being repurchased pursuant to this Section 2.11 paid by the Issuer in respect of such Purchased Receivables (whether the Issuer paid such Purchase Price in cash or otherwise) less Collections received by the Issuer in respect of such Purchased Receivables as of the date of repurchase, by depositing such amount into the Collection Account on the Settlement Date specified in Section 2.11(a). The obligation to reacquire Purchased Receivables pursuant to this Section 2.11 shall, upon satisfaction thereof, constitute the sole remedy respecting the event giving rise to such obligation of the Seller. Simultaneously with the payment of such amount, all Purchased Receivables and Receivables Property shall immediately and automatically be sold, assigned, transferred and conveyed by the Issuer to the Seller without any further action by the Issuer or any other Person. ARTICLE III CONDITIONS PRECEDENT SECTION 3.1. CONDITIONS PRECEDENT TO ISSUER'S INITIAL PURCHASE. The obligation of the Issuer to purchase Designated Receivables and Receivables Property hereunder on the Initial Closing Date from the Seller is subject to the conditions precedent that the Issuer shall have received on or before the date of such purchase the following, each (unless otherwise indicated) dated the day of such sale and in form and substance satisfactory to the Issuer: (a) SECRETARY'S CERTIFICATE. A certificate of the Secretary or an Assistant Secretary of the Seller, dated the Initial Closing Date, and certifying (i) that attached thereto is a true and complete copy of the by-laws of the Seller, as in effect on the Initial Closing Date and at all times since a date prior to the date of the resolutions described in clause (ii) below, (ii) that attached thereto is a true and complete copy of the resolutions, in form and substance reasonably satisfactory to the Issuer, of the Board of Directors of the Seller or committees thereof authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and the transactions contemplated hereby and thereby, and that such resolutions have not been amended, modified, revoked or rescinded and are in full force and effect, (iii) that the articles of incorporation of the Seller have not been amended since the date of the last amendment thereto shown on the certificate of good standing (or its equivalent) furnished pursuant to clause (b) below and (iv) as to the incumbency and specimen signature of each officer executing this Agreement and any other Transaction Documents or any other document delivered in connection herewith or therewith on behalf of the Seller (on which certificates the Issuer may conclusively rely until such time as the Issuer shall receive from the Seller a revised certificate with respect to the Seller meeting the requirements of this subsection (a)); (b) CORPORATE DOCUMENTS. A short form good standing certificate describing the articles of incorporation, including all amendments thereto, of the Seller, certified as of a recent date by the Secretary of State or other appropriate authority of the state of incorporation, and a certificate of compliance, of status or of good standing, as and to the extent applicable, of the Seller as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction; -10- 14 (c) GOOD STANDING CERTIFICATES. Certificates of compliance, of status or of good standing, dated as of a recent date, from the Secretary of State or other appropriate authority of Alabama, Illinois, North Carolina, Oklahoma, Tennessee and Texas, with respect to the Seller; (d) CONSENTS, LICENSES, APPROVALS, ETC. A Certificate dated the Initial Closing Date of an Authorized Officer of the Seller stating either (i) that all material consents, licenses and approvals required in connection with the execution, delivery and performance by the Seller of this Agreement and the validity and enforceability of this Agreement against the Seller are in full force and effect or (ii) that no such consents, licenses or approvals are so required; (e) NO LITIGATION. Confirmation that, except as set forth in Schedule IV, there is no pending or, to its knowledge after due inquiry, threatened action or proceeding affecting the Seller or any of its Subsidiaries before any Governmental Authority that could reasonably be expected to have a Seller Material Adverse Effect; (f) UCC CERTIFICATE; UCC FINANCING STATEMENTS. (i) A UCC Certificate, substantially in the form of Exhibit A, duly executed by an Authorized Officer of the Seller and dated the Initial Closing Date and (ii) executed copies of such proper financing statements, filed prior to the Initial Closing Date, naming the Seller as the seller and the Issuer as the purchaser of the Designated Receivables and the Receivables Property, in proper form for filing in each jurisdiction in which the Issuer (or any of its assignees) deems it necessary or desirable to perfect the Issuer's ownership interest in all Designated Receivables and Receivables Property (to the extent that the Receivables Property constitutes property an ownership interest in which may be perfected by filing a financing statement under the UCC in the Applicable Jurisdictions) under the UCC or any comparable law of such jurisdiction; (g) LIEN SEARCHES. A written search report listing all effective financing statements that name the Seller as debtor or assignor and that are filed in the jurisdictions in which filings were made pursuant to subsection (f) above and in any other jurisdictions that the Issuer determines are necessary or appropriate, together with copies of such financing statements (none of which, except for those described in subsection (f) above, shall cover any Designated Receivables or Receivables Property, after giving effect to the termination statements described in subsection (h) below), and tax and judgment lien searches showing no such liens that are not permitted by the Transaction Documents; (h) TERMINATION STATEMENTS. Executed copies of proper termination statements (Form UCC-3), if any, necessary to release all security interests and other rights of any Person in the Designated Receivables and the Receivables Property previously granted by the Seller; (i) OTHER TRANSACTION DOCUMENTS. Original copies, executed by each of the parties thereto, of each of the other Transaction Documents to be executed and delivered in connection herewith, including each of the Lock-Box Agreements; (j) LEGAL OPINIONS. (i) An opinion of Covington & Burling (containing customary assumptions, limitations and qualifications) to the effect that: -11- 15 (A) the sales of Purchased Receivables by the Seller to the Issuer pursuant to this Agreement are true sales under New York law and that such Purchased Receivables would not be property of the Seller's bankruptcy estate; and (B) a bankruptcy court would not order the substantive consolidation of the assets and liabilities of the Issuer with those of the Seller; (ii) One or more legal opinions from outside counsel to the Seller and counsel to the Issuer (containing customary assumptions, limitations and qualifications): (A) to the effect that the Seller and the Issuer, as applicable, has all approvals, judicial, regulatory, legal or otherwise, needed to execute, deliver and perform each Transaction Document to which it is a party and that no conflict or default shall occur as a result of the execution, delivery and performance thereof; (B) to the effect that the Issuer has a perfected, first priority, security interest in the Purchased Receivables and the proceeds thereof; and (C) addressing other customary matters; (k) RECEIVABLES LIST. A copy of the Receivables List; and (l) SYSTEMS. Evidence reasonably satisfactory to the Issuer that the Seller's systems, procedures and record keeping relating to the Purchased Receivables are in all material respects sufficient and satisfactory in order to permit the purchase and administration of the Purchased Receivables in accordance with the terms and intent of this Agreement. SECTION 3.2. CONDITIONS PRECEDENT TO ALL THE ISSUER'S PURCHASES OF DESIGNATED RECEIVABLES. The obligation of the Issuer to pay for any Designated Receivable and the Receivables Property with respect thereto on each Payment Date (including the Initial Closing Date) shall be subject to the further conditions precedent that, on and as of such Payment Date: (a) the following statements shall be true (and the acceptance by the Seller of the Purchase Price for such Designated Receivable on such Payment Date shall constitute a representation and warranty by the Seller that on such Payment Date such statements are true): (i) the representation and warranties of the Seller contained in SECTION 4.2 shall be true and correct in all material respects on and as of such Payment Date as though made on and as of such date except to the extent any such representation or warranty is expressly made only as of another date (in which case it shall be true and correct in all material respects on and as of such other date); and (ii) no Potential Purchase Termination Event arising from the occurrence of an Insolvency Event with respect to the Seller described -12- 16 in paragraph (a)(ii) of the definition thereof shall have occurred and be continuing; (b) the Issuer shall have received payment in full of all amounts for which payment is due from the Seller pursuant to SECTIONS 2.5, 2.6 or 7.1; and (c) the Seller shall have complied with all of its covenants in all material respects and satisfied all of its obligations in all material respects under this Agreement required to be complied with or satisfied as of such date; PROVIDED, HOWEVER, that the failure of the Seller to satisfy any of the foregoing conditions shall not prevent the Seller from subsequently selling Designated Receivables upon satisfaction of all such conditions or exercising its rights under SECTION 2.1(b). SECTION 3.3. CONDITION PRECEDENT TO THE SELLER'S OBLIGATIONS. The obligation of the Seller to sell any Designated Receivable generated by it on any date (including on the Initial Closing Date) shall be subject to the condition precedent that, on the related Payment Date, the following statement shall be true (and the payment by the Issuer of the Purchase Price for such Designated Receivable on such date shall constitute a representation and warranty by the Issuer that on such Payment Date such statement is true): no Purchase Termination Event or Termination Event or Potential Termination Event of a type set forth in SECTION 6.1(h) shall have occurred and be continuing. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.1. REPRESENTATIONS AND WARRANTIES OF THE ISSUER. The Issuer represents and warrants as to itself for the benefit of the Seller as follows: (a) It is a special purpose limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware, (b) is duly qualified to do business as a foreign limited liability company and in good standing under the laws of each jurisdiction where the character of its property, the nature of its business or the performance of its obligations make such qualification necessary or which shall be necessary to protect the validity and enforceability of this Agreement, and (c) has all powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and for purposes of the transactions contemplated by this Agreement. (b) The execution, delivery and performance by the Issuer of this Agreement (i) is within the Issuer's power, has been duly authorized by all necessary action, (ii) requires no consent or action by or in respect of, or filing with, any governmental body, agency or official which has not been obtained and (iii) does not contravene, or constitute a default under, any Requirement of Law or any agreement or instrument binding on it or result in the creation or imposition of any Adverse Claim on any of its assets, other than Permitted Liens. This Agreement has been executed and delivered by a duly authorized officer of the Issuer. (c) This Agreement is a legal, valid and binding obligation of the Issuer enforceable against the Issuer in accordance with its terms (except as such enforceability -13- 17 may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing). SECTION 4.2. REPRESENTATIONS AND WARRANTIES OF THE SELLER. The Seller hereby represents and warrants for the benefit of the Issuer and its assigns (including the Indenture Trustee): (a) CORPORATE EXISTENCE. The Seller (i) is a corporation duly incorporated, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has all requisite corporate power and authority, and all legal right, to own and operate its properties, to lease the properties it operates as lessee and to conduct its business as now conducted, (iii) is duly qualified as a foreign corporation to do business and in good standing (or is exempt from such requirements) under the laws of each jurisdiction in which the ownership or lease of property or the conduct of its business requires such qualification and (iv) is in compliance with all Requirements of Law, except, in the case of clauses (ii), (iii) and (iv), to the extent that a failure to have such power, authority or right or to qualify and be in good standing or to comply, as the case may be, could not reasonably be expected to have a Seller Material Adverse Effect. (b) CORPORATE POWER; AUTHORIZATION; CONSENTS. The Seller has the corporate power and authority, and the legal right, to execute, deliver and perform this Agreement and the other Transaction Documents to which it is a party and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party. No consent or authorization of, filing with, notice to or other act by or in respect of, any Governmental Authority or any other Person is required in connection with the execution, delivery, performance, validity or enforceability of this Agreement and the other Transaction Documents to which it is a party by or against the Seller other than (i) those consents which have duly been obtained or made and are in full force and effect on the Initial Closing Date or the relevant Payment Date, as the case may be, (ii) any filings of UCC-1 financing statements necessary to perfect the Issuer's or the Indenture Trustee's interest in the Purchased Receivables and the Receivables Property and (iii) any such consent, authorization, filing, notice or other act, the absence of which could not reasonably be expected to have a Seller Material Adverse Effect. This Agreement and each other Transaction Document to which it is a party have been duly executed and delivered on behalf of the Seller. (c) VALID SALE; BINDING OBLIGATIONS. Each transfer of Designated Receivables and related Receivables Property made pursuant to this Agreement shall constitute a valid sale, transfer and assignment of such Designated Receivables and the related Receivables Property to the Issuer, enforceable against creditors of, and purchasers from, the Seller; and this Agreement and each other Transaction Document to which it is a party constitute the legal, valid and binding obligation of the Seller enforceable against it in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors' rights generally and except as such enforceability may be limited by general principles of equity (whether considered in a proceeding at law or in equity). -14- 18 (d) NO LEGAL BAR. The execution, delivery and performance of, this Agreement and the other Transaction Documents and the fulfillment of the terms hereof and thereof shall not violate any Requirement of Law applicable to the Seller or its property or Contractual Obligation of the Seller (other than any violation which could not reasonably be expected to have a Seller Material Adverse Effect), and shall not result in, or require, the creation or imposition of any Adverse Claim (other than Permitted Liens) on any of its properties pursuant to any such Requirement of Law or Contractual Obligation. (e) NO PROCEEDINGS. Except as set forth on Schedule IV, there are no actions, suits, investigations or proceedings at law or in equity or by or before any arbitrator, court or Governmental Authority now pending or, to the knowledge of the Seller, threatened against or affecting it or any of its properties, revenues or rights which (i) involve this Agreement, any of the other Transaction Documents to which the Seller is a party or any of the transactions contemplated hereby or thereby or (ii) could individually or in the aggregate reasonably be expected to have a Seller Material Adverse Effect. (f) NO DEFAULT. No Potential Purchase Termination Event arising from the occurrence of an Insolvency Event with respect to the Seller described in paragraph (a)(ii) of the definition thereof shall have occurred and be continuing. (g) REQUIREMENTS OF LAW. The Seller is not in default under or with respect to any Requirement of Law applicable to the Seller or its property where such default could reasonably be expected to have a Seller Material Adverse Effect. (h) BULK SALES ACT. No transaction contemplated by this Agreement or any other Transaction Document with respect to the Seller requires compliance with, or shall be subject to avoidance under, any bulk sales act or similar law. (i) ELIGIBLE RECEIVABLES. Each Purchased Receivable conveyed by it hereunder and included in the Aggregate Outstanding Balance was on the date transferred to the Issuer hereunder an Eligible Receivable. (j) LOCATION OF RECORDS; CHIEF EXECUTIVE OFFICE. The chief executive office of the Seller is as indicated on SCHEDULE II hereto and is the place where the Seller is "located" for the purposes of Section 9-103(3)(d) of the UCC as in effect in the State of New York. The state and county where the chief executive office of the Seller is "located" for the purposes of Section 9-103(3)(d) of the UCC as in effect in the State of New York has not changed in the past four months. The offices where the Seller keeps its records concerning the Receivables and related Contracts and all other agreements related to the Receivables are as indicated for the Seller on SCHEDULE II hereto (or at such other locations, notified to the Issuer and the Indenture Trustee in accordance with SECTION 5.1(g), in jurisdictions where all action required by SECTION 9.2 has been taken and completed). (k) MARGIN REGULATIONS. No proceeds of the sale of the Designated Receivables hereunder shall be used by the Seller to purchase or carry any margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System, as in effect from time to time). -15- 19 (l) QUALITY OF TITLE. Each Designated Receivable and all Receivables Property which is to be transferred to the Issuer by the Seller shall be transferred by the Seller free and clear of any Adverse Claim (other than any Permitted Lien); prior to such transfer the Seller shall have made all filings under applicable law in each relevant jurisdiction that can be made to protect and perfect the Issuer's ownership interest in all Purchased Receivables and Receivables Property (to the extent that the Receivables Property constitutes property an ownership interest in which may be perfected by filing a financing statement under the UCC in the Applicable Jurisdictions) against all creditors of, and purchasers from, the Seller and all filing fees and taxes, if any, payable in connection with such filings shall have been paid in full; and the Issuer shall have acquired and shall continue to have maintained a valid and perfected first priority ownership interest in each Purchased Receivable and the Receivables Property (to the extent that the Receivables Property constitutes property an ownership interest in which may be perfected by filing a financing statement under the UCC in the Applicable Jurisdictions) free and clear of any Adverse Claim (other than any Permitted Lien); and no effective financing statement or other instrument similar in effect covering any Purchased Receivable, any interest therein or any Receivables Property with respect thereto is on file in any recording office except such as may be filed (i) in favor of the Issuer pursuant to this Agreement or (ii) in favor of the Indenture Trustee. (m) VALID TRANSFERS. No transfer of any Designated Receivables or any Receivables Property to the Issuer by the Seller constitutes a fraudulent transfer or fraudulent conveyance or is otherwise void or voidable under similar laws or principles, the doctrine of equitable subordination or for any other reason. The transfers of the Designated Receivables and the Receivables Property by the Seller to the Issuer pursuant to this Agreement, and all other transactions between the Seller and the Issuer, have been and shall be made in good faith and without intent to hinder, delay or defraud creditors of the Seller, and the Seller acknowledges that it has received and shall receive fair consideration and reasonably equivalent value for the purchases by the Issuer of the Designated Receivables and the Receivables Property hereunder. The purchase of the Designated Receivables and the Receivables Property by the Issuer from the Seller constitutes a true sale of the Designated Receivables and the Receivables Property under applicable state law. (n) TRADE NAMES. The Seller uses no trade name in the furnishing of its products or services which generate Receivables other than its actual corporate name and the trade names set forth in SCHEDULE III. During the five years preceding the date hereof, except as set forth in SCHEDULE III, (i) the Seller has not been known by any legal name or trade name other than its corporate name nor (ii) has the Seller been the subject of any merger or other corporate reorganization within the last five years. (o) TAXES. The Seller has filed or caused to be filed all U.S. federal income tax returns which are required to have been filed by it and has paid or caused to be paid (or made adequate provision for the payment of) all U.S. federal income taxes shown thereon to be due and payable. No tax lien has been filed in respect of unpaid U.S. federal income taxes on any property of the Seller. The Seller has filed or caused to be filed all tax returns, other than U.S. federal income tax returns, which are required to have been filed by it unless the failure to file any such other tax return, individually or in the aggregate, could not reasonably be expected to have a Seller Material Adverse Effect -16- 20 and has paid or caused to be paid (or made adequate provision for the payment of) all such other taxes shown thereon to be due and payable, and any assessments made against it or any of its property unless the failure to pay such other taxes or assessments, individually or in the aggregate, could not reasonably be expected to have a Seller Material Adverse Effect or is contesting any such tax, assessment or other governmental charge in good faith through appropriate proceedings. For purposes of this paragraph, "taxes" shall mean any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any Governmental Authority. (p) ERISA MATTERS. (i) The Seller and each of its ERISA Affiliates is in compliance in all material respects with the applicable provisions of ERISA and the regulations and published interpretations thereunder with respect to each Plan of the Seller or any of its ERISA Affiliates, except for such noncompliance which could not reasonably be expected to result in a Seller Material Adverse Effect; (ii) No Reportable Event has occurred or is reasonably expected to occur that, when taken together with all other such Reportable Events, could reasonably be expected to result in a Seller Material Adverse Effect; (iii) The present value of all benefit liabilities under each Plan of the Seller or any of its ERISA Affiliates (on an ongoing basis and based on those assumptions used to fund such Plan) did not, as of the last valuation report applicable thereto, exceed the value of the assets of such Plan; (iv) Neither the Seller nor any of its ERISA Affiliates has incurred any Withdrawal Liability that could reasonably be expected to result in a Seller Material Adverse Effect; and (v) Neither the Seller nor any of its ERISA Affiliates has received any notification that any Multiemployer Plan is in reorganization or has been terminated within the meaning of Title IV of ERISA, or that a reorganization or termination has resulted or could reasonably be expected to result, through increases in the contributions required to be made to such Plan or otherwise, in a Seller Material Adverse Effect. (q) CONTRACTS; CREDIT AND COLLECTION POLICY. The forms of Contracts used by the Seller or Dunlop to originate Designated Receivables are attached as EXHIBIT B. (r) INVESTMENT COMPANY ACT. The Seller is not (i) an "investment company" registered or required to be registered under the 1940 Act, or (ii) a "holding company", or a "subsidiary company" or an "affiliate" of a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. -17- 21 (s) INDEBTEDNESS TO ISSUER. Immediately prior to consummation of the transactions contemplated hereby on the Initial Closing Date, the Seller had no outstanding Indebtedness to the Issuer. (t) RECEIVABLES LIST. The Receivables List sets forth in all material respects an accurate and complete listing as of the Cut-Off Date of all Designated Receivables to be transferred to the Issuer on the Initial Closing Date and the information contained therein with respect to the identity and Outstanding Balance of each such Designated Receivable is true and correct in all material respects as of the Cut-Off Date. (u) LOCK-BOX ACCOUNTS. The names and addresses of the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are specified in Exhibit B to the Collection Agency Agreement. All Obligors of Designated Receivables have been instructed to make payments to a Lock-Box Account. The representations and warranties set forth in this SECTION 4.2 shall survive the transfer and assignment of Designated Receivables to the Issuer pursuant to this Agreement. The Seller hereby represents and warrants to the Issuer, as of the Initial Closing Date and each Payment Date, that the representations and warranties of the Seller set forth in SECTION 4.2 are true and correct as of such date. Upon discovery by the Seller or the Issuer of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give prompt written notice to the other. ARTICLE V GENERAL COVENANTS SECTION 5.1. AFFIRMATIVE COVENANTS OF THE SELLER. The Seller hereby covenants that, until the Purchase Termination Date shall have occurred and there are no amounts outstanding with respect to the Purchased Receivables (other than Charged Off Receivables), the Seller shall: (a) PRESERVATION OF CORPORATE EXISTENCE AND NAME. Preserve and maintain its corporate existence, rights, franchises and privileges in the jurisdiction of its incorporation, and qualify and remain qualified in good standing as a foreign corporation in each jurisdiction where the failure to preserve and maintain such existence, rights, franchises, privileges and qualification could reasonably be expected to have a Seller Material Adverse Effect. (b) MAINTENANCE OF PROPERTY. Keep all material tangible property useful and necessary in its business in good working order and condition (normal wear and tear excepted), except to the extent that the failure to do any of the foregoing with respect to any such property could not reasonably be expected to have a Seller Material Adverse Effect. (c) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with all laws, rules, regulations and orders applicable to the Designated Receivables and the Receivables Property, including, without limitation, rules and regulations relating to truth in lending, fair credit billing, fair credit reporting, equal credit opportunity, fair debt collection practices and privacy. -18- 22 (d) VISITATION RIGHTS. At any reasonable time during normal business hours on any Business Day and from time to time, upon reasonable prior notice (and upon one Business Day's prior notice if a Purchase Termination Event has occurred)), permit (i) the Issuer, or any of its agents or representatives, (A) to examine and make copies of and abstracts from the records, books of account and documents (including, without limitation, computer tapes and disks) of the Seller relating to the Receivables and (B) following the termination of the appointment of Goodyear as the Collection Agent with respect to the Designated Receivables, to be present at the offices and properties of the Seller to administer and control the collection of amounts owing on the Purchased Receivables and (ii) the Issuer, or any of its agents or representatives, to visit the properties of the Seller to discuss the business, operations, properties and financial and other condition of the Seller with any of its officers or directors and, with reasonable prior notice to the Seller, together with the Seller, with its independent certified public accountants. (e) KEEPING OF RECORDS AND BOOKS OF ACCOUNT. Maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing the Purchased Receivables and the Receivables Property in the event of the destruction of the originals thereof), and keep and maintain all documents, books, records and other information which are reasonably necessary for the collection of all Purchased Receivables and the Receivables Property (including, without limitation, records adequate to permit the daily identification of each new Designated Receivable and all Collections of and adjustments to each existing Purchased Receivable). Upon the request of the Issuer, the Seller shall deliver copies of all books and records maintained pursuant to this SECTION 5.1(e) to the Indenture Trustee or its representatives. (f) DELIVERY, PERFORMANCE AND COMPLIANCE WITH CREDIT AND COLLECTION POLICY, RECEIVABLES AND CONTRACTS. (i) Deliver a copy of the Credit and Collection Policy relating to the Contracts and the Designated Receivables, as in effect on the Initial Closing Date, to the Issuer and the Indenture Trustee within two weeks of the Initial Closing Date, (ii) perform its obligations in all material respects in accordance with and comply in all material respects with the Credit and Collection Policy, as amended from time to time in accordance with the Transaction Documents, and, (iii) at its expense, comply in all material respects with all material provisions, covenants and other promises required to be observed by it under the Purchased Receivables and the Contracts related to the Purchased Receivables and any other agreements related to the Purchased Receivables. (g) LOCATION OF RECORDS. Keep its principal place of business and chief executive office, and the offices where it keeps its records concerning the Purchased Receivables, all Receivables Property, all Contracts and other agreements related to the Purchased Receivables (and all original documents relating thereto), at the address(es) of the Seller referred to in SCHEDULE II or, upon 30 days' prior written notice to the Issuer and the Indenture Trustee, at such other locations in jurisdictions where all action required by SECTION 9.2 shall have been taken and completed. (h) OBLIGATION TO RECORD AND REPORT. To the fullest extent permitted by GAAP and by applicable law, treat each conveyance of the Designated Receivables as a sale on its books and records and financial statements. -19- 23 (i) COLLECTIONS. Cause each invoice issued to an Obligor to indicate that payments in respect of its Designated Receivables shall be made by such Obligor to a Lock-Box Account and otherwise direct the Obligors to pay all such payments directly to a Lock-Box Account. In the event that any payments in respect of any Designated Receivables are made directly to the Seller, the Seller shall, within two Business Days of receipt thereof, forward such amounts to a Lock-Box Account and, prior to forwarding such amounts, the Seller shall hold such payments in trust as custodian for the Issuer and the Indenture Trustee. The Seller shall use commercially reasonable efforts to prevent the deposit of any funds other than Collections into any of the Lock-Box Accounts or the Collection Account and, to the extent that the Seller determines that any such funds are nevertheless deposited into any Lock-Box Account or the Collection Account, promptly (and in any event within two Business Days of such determination) identify any such funds to the Collection Agent for segregation and remittance to the owner thereof. (j) SEPARATE CORPORATE EXISTENCE OF THE ISSUER. The Seller hereby acknowledges that the Issuer and the other parties to the Transaction Documents are entering into the transactions contemplated by the Transaction Documents in reliance upon the Issuer's identity as a legal entity separate from the Seller and its Affiliates. Therefore, from and after the date hereof, the Seller shall take (or refrain from taking, as the case may be) such actions and shall cause each of its Affiliates to take (or refrain from taking, as the case may be) such actions, as shall be required in order that the Issuer shall at all times: (i) practice and adhere to organizational formalities, such as maintaining appropriate books, records and accounts separate from those of any other Person; (ii) observe all organizational formalities in connection with all dealings between itself and any of its members and any Affiliate of any thereof or any unaffiliated entity; (iii) observe all procedures required by its certificate of formation and its operating agreement and the Delaware Limited Liability Company Act; (iv) act solely in its name and through its duly authorized officers or agents in the conduct of its businesses; (v) manage its business and affairs by or under the direction of its Board of Managers; (vi) ensure that its Board of Managers duly authorizes all of its actions; (vii) own or lease (including through shared arrangements with its Affiliates) all office furniture and equipment necessary to operate its business; (viii) maintain at least one member of its Board of Managers who is an Independent Manager; -20- 24 (ix) not (A) have or incur any indebtedness to any of its members or any Affiliate of any of its members (other than the Subordinated Note); (B) guarantee or otherwise become liable for any obligations of any of its members or any Affiliate of any thereof; (C) have obligations guaranteed by any of its members or any Affiliate of any thereof; (D) hold itself out as responsible for debts of any of its members or any Affiliates of any thereof or for decisions or actions with respect to the affairs of any of its members or any Affiliate of any thereof; (E) operate or purport to operate as an integrated, single economic unit with respect to any of its members or any Affiliate of any thereof or any unaffiliated entity; (F) seek to obtain credit or incur any obligation to any third party based upon the assets of any of its members or any Affiliate of any thereof or any unaffiliated entity; (G) induce any such third party to reasonably rely on the creditworthiness of any of its members or any Affiliate of any thereof or any unaffiliated entity or (H) be directly or indirectly named as a direct or contingent beneficiary or loss payee on any insurance policy of any of its members or any Affiliate of any thereof; (x) other than as provided in the Transaction Documents, maintain its deposit and other bank accounts and all of its assets separate from those of any other Person; (xi) maintain its financial records separate and apart from those of any other Person; (xii) not suggest in any way, within its financial statements, that its assets are available to pay the claims of creditors of any of its members or any Affiliate of any thereof or any unaffiliated entity; (xiii) compensate all its employees, officers, consultants and agents for services provided to it by such Persons out of its own funds or reimbursing any of its Affiliate in respect of amounts paid by such Affiliates for such services; (xiv) maintain office space separate and apart from that of any of its members or any Affiliate of any thereof (even if such office space is subleased from or is on or near premises occupied by any of its members or an Affiliate of any thereof) and a telephone number separate and apart from that of any of its members or any Affiliate of any thereof; (xv) conduct all oral and written communications, including, without limitation, letters, invoices, purchase orders, contracts, statements, and applications solely in its own name; (xvi) have separate stationery, invoices and checks from any of its members, any Affiliate of any thereof or any unaffiliated entity; (xvii) account for and manage all of its liabilities separately from those of any of its members or any Affiliate of any thereof and pay its own liabilities out of its own funds; -21- 25 (xviii) allocate, on an arm's length basis, all shared corporate operating services, leases and expenses, including, without limitation, those associated with the services of shared consultants and agents and shared computer and other office equipment and software; and otherwise maintain an arm's length relationship with any of its members, any Affiliate of any thereof and any unaffiliated entity; (xix) refrain from filing or otherwise initiating or supporting the filing of a motion in any bankruptcy or other insolvency proceeding involving any of its members or any Affiliate of any thereof to substantively consolidate any of its members or any Affiliate of any thereof with the Issuer; (xx) remain solvent; (xxi) not commingle its property with the property of any of its members or any other Person; (xxii) prepare separate financial statements, prepared in accordance with GAAP and susceptible to audit, or in the event the Issuer's financial statements are consolidated with those of another entity, note on such financial statements the separate existence and obligations of the Issuer; (xxiii) maintain a sufficient number of employees in light of its contemplated business operations; (xxiv) not acquire obligations or securities of any of its members; (xxv) hold itself out as a separate entity and correct any known misunderstanding regarding its separate identity; (xxvi) maintain adequate capital in light of its contemplated business operations; and (xxvii) conduct no other business other than in connection with the transactions contemplated by the Transaction Documents and enter into no other agreements other than as contemplated by the Transaction Documents. SECTION 5.2. REPORTING REQUIREMENTS. The Seller shall furnish to the Issuer and the Indenture Trustee from the date hereof until the Purchase Termination Date shall have occurred and until there are no amounts outstanding with respect to Purchased Receivables (other than Charged Off Receivables): (a) GOODYEAR FINANCIALS. (i) As soon as available, but in any event not later than 120 days after the end of each fiscal year of the Seller, a copy of the annual report of the Seller on Form 10-K filed with the U.S. Securities and Exchange Commission; and -22- 26 (ii) as soon as practicable, but in any event not later than 60 days after the end of each fiscal quarter of the Seller, a copy of each quarterly report of the Seller on Form 10-Q filed with the U.S. Securities and Exchange Commission. (b) COMPLIANCE CERTIFICATE. Not later than 90 days after the end of each fiscal year and not later than 45 days after the end of each of the first three fiscal quarters of each fiscal year, a certificate of an Authorized Officer of the Seller stating that, to the best of such Authorized Officer's knowledge, the Seller during such period, has observed or performed all of its covenants and other agreements, and satisfied every condition, contained in this Agreement to be observed, performed or satisfied by it, and that such Authorized Officer has obtained no knowledge of any Purchase Termination Event or Potential Purchase Termination Event except as specified in such certificate; (c) ERISA. If and when the Seller or any ERISA Affiliate (i) gives or is required to give notice to the PBGC of any Reportable Event with respect to any Plan which might constitute grounds for a termination of such Plan under Title IV of ERISA, or knows that the plan administrator of any Plan has given or is required to give notice of any such Reportable Event, a copy of the notice of such reportable event given or required to be given to the PBGC; (ii) receives notice of any accrued and payable Withdrawal Liabilities or notice that any Multiemployer Plan is in reorganization, is insolvent or has been terminated, a copy of such notice; or (iii) receives notice from the PBGC under the Title IV of ERISA of an intent to terminate, impose liability (other than for premiums under Section 4007 of ERISA) in respect of or appoint a trustee to administer any Plan, a copy of such notice; (d) TERMINATION EVENTS; OTHER MATERIAL EVENTS. As soon as possible and in any event within two Business Days after the Seller obtains Knowledge of each Purchase Termination Event, Potential Purchase Termination Event, Collection Agent Termination Event, Potential Collection Agent Termination Event, Termination Event or Potential Termination Event or any other event that has a material likelihood of having a Seller Material Adverse Effect (including, without limitation, any pending or threatened action or proceeding affecting the Seller or its Subsidiaries before any court, governmental agency or arbitrator that has a material likelihood of having a Seller Material Adverse Effect), a written statement of the treasurer, any assistant treasurer or chief financial officer of the Seller setting forth details of such event and the action that the Seller proposes to take with respect thereto; and (e) OTHER. Promptly, from time to time, such other information, documents, records or reports respecting the Designated Receivables or the condition or operations, financial or otherwise, of the Seller as the Issuer or the Indenture Trustee may from time to time reasonably request. SECTION 5.3. NEGATIVE COVENANTS. The Seller hereby covenants that, until the Purchase Termination Date shall have occurred and there are no amounts outstanding with respect to Purchased Receivables (other than Charged Off Receivables), the Seller shall not: (a) SECURITY INTERESTS. Except for the conveyances hereunder and as provided below, sell, pledge, assign or transfer to any other Person, or grant, create, incur, assume or suffer to exist any other Adverse Claim on any Purchased Receivable, -23- 27 whether now existing or hereafter created, or the Receivables Property or any Lock-Box Account; the Seller shall promptly notify the Issuer of the existence of any Adverse Claim (other than a Permitted Lien) on any Purchased Receivable or Receivables Property; and the Seller shall defend the right, title and interest of the Issuer in, to and under the Purchased Receivables and the Receivables Property, whether now existing or hereafter created, against all claims of third parties claiming through or under the Seller; PROVIDED, HOWEVER, that nothing in this SECTION 5.3(a) shall prevent or be deemed to prohibit the Seller from suffering to exist upon any of the Designated Receivables any Permitted Lien. (b) CHANGE IN CREDIT AND COLLECTION POLICY. Make or permit to be made any material change or modification to the Credit and Collection Policy without the prior written consent of the Issuer and the Indenture Trustee (acting at the direction of the Holders of a Majority in Interest of each Series of Outstanding Investor Notes). (c) CHANGE IN FORM OF CONTRACTS. Make or permit to be made any material change or modification to the Contracts without the prior written consent of the Issuer and the Indenture Trustee (acting at the direction of the Holders of a Majority in Interest of each Series of Outstanding Investor Notes). (d) CHANGE IN NAME. Change its name, identity or corporate structure in any manner which would or might make any financing statement or continuation statement (or other similar instrument) relating to this Agreement seriously misleading within the meaning of Section 9-402(7) of the UCC, or impair the perfection of the Issuer's interest in any Designated Receivable under any other similar law, without having (i) delivered 30 days' prior written notice to the Issuer, the Collection Agent and the Indenture Trustee and (ii) taken all action required by SECTION 9.2. (e) CHANGES IN PAYMENT INSTRUCTIONS. Add, terminate or make any change to any Lock-Box Account, except in accordance with the Collection Agency Agreement, or instruct Obligors to make payments of the Designated Receivables other than to a Lock-Box Account. (f) ACCOUNTING CHANGES. Prepare any financial statements (other than consolidated financial statements) which shall account for the transactions contemplated hereby in any manner other than as a sale of the Purchased Receivables by the Seller to the Issuer nor in any other respect account for or treat the transactions contemplated hereby (including for financial accounting purposes) in any manner other than as sales of the Purchased Receivables to the Issuer. ARTICLE VI PURCHASE TERMINATION EVENTS SECTION 6.1. PURCHASE TERMINATION EVENTS. If any of the following events (each, a "PURCHASE TERMINATION EVENT") shall have occurred and be continuing: (a) failure by the Seller to pay any amount or make any deposit required to be paid by it hereunder on or before the date occurring two Business Days after the date such payment or deposit is due; -24- 28 (b) failure on the part of the Seller duly to observe or perform in any material respect any other covenants or agreements of the Seller set forth herein which failure continues unremedied for 30 days after the earlier to occur of (i) the date upon which the Seller obtains knowledge of such failure or (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Issuer or the Indenture Trustee, or to the Seller, the Issuer and the Indenture Trustee by any Investor Noteholder; (c) any representation, warranty or certification made by the Seller herein or in any report or certificate delivered pursuant hereto shall prove to have been incorrect in any material respect when made or deemed made which failure, if capable of being remedied, continues unremedied for 30 days after the earlier to occur of (i) the date upon which the Seller obtains knowledge thereof and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Seller by the Issuer or the Indenture Trustee or to the Seller, the Issuer and the Indenture Trustee by any Investor Noteholder; (d) the Seller shall fail to pay any principal of Funded Debt of the Seller which is then outstanding in a principal amount in excess of $25,000,000 at the scheduled maturity thereof, such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Funded Debt, and such Funded Debt is not paid within ten Business Days after the earlier of (i) the day on which an Authorized Officer first obtains actual knowledge of such failure or (ii) written notice of such failure shall have been given to the Seller by the holder or holders of such Funded Debt; or Funded Debt of the Seller which is then outstanding in a principal amount in excess of $25,000,000 shall become due and payable prior to the scheduled maturity thereof as a result of the lawful acceleration thereof due to the occurrence of an event of default thereunder and such Funded Debt is not paid, or such acceleration thereof is not rescinded or annulled, within ten Business Days following such lawful acceleration thereof; (e) any material provision of this Agreement shall cease, for any reason, to be in full force and effect or the Seller shall so assert in writing; (f) the long-term unsecured senior debt of the Seller shall be rated below BB by S&P or below Ba2 by Moody's; (g) there shall have been filed against the Seller or Dunlop (i) a notice of federal tax lien from the Internal Revenue Service or (ii) a notice of lien from the PBGC under Section 412(n) of the Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which either of such sections applies; (h) an Insolvency Event shall occur with respect to the Seller; (i) a Termination Event with respect to each Series of Outstanding Investor Notes shall have deemed to have occurred or shall have been declared to have occurred in accordance with the terms of the applicable Indenture Supplement; or (j) the Issuer shall for any reason cease to have a valid and perfected first priority ownership interest in the Purchased Receivables and the Receivables Property (to the extent that the Related Property constitutes property an ownership interest in which may be perfected by filing a financing statement under the UCC in the Applicable Jurisdictions), free and clear of any Adverse Claims, other than Permitted Liens, or any of the Seller or any Affiliate thereof shall so -25- 29 assert in writing; PROVIDED, HOWEVER that a Purchase Termination Event shall not be deemed to have occurred under this paragraph (j) if there shall be a lien on one or more Purchased Receivables and (x) the Seller shall repurchase such Purchased Receivables in accordance with SECTION 2.6 or (y) the Collection Agent shall make payment of a Collection Agent Indemnification Amount in respect of such Purchased Receivables in accordance with Section 5.2 of the Collection Agency Agreement; then, (x) in the case of any Purchase Termination Event described in paragraph (h) or (i) above, the obligation of the Issuer to purchase Designated Receivables shall thereupon automatically terminate without further notice of any kind, which is hereby waived by the Seller and (y) in the case of any other Purchase Termination Event, so long as such Purchase Termination Event shall be continuing, the Issuer may terminate its obligation to purchase Designated Receivables from the Seller by written notice to the Seller. SECTION 6.2. ADDITIONAL REMEDIES. (a) Upon the occurrence of any Purchase Termination Event, the Issuer shall have, in addition to all other rights and remedies under this Agreement or otherwise, all other rights and remedies provided under the UCC of each applicable jurisdiction and other applicable laws, which rights shall be cumulative. Without limiting the foregoing, the occurrence of a Purchase Termination Event shall not deny to the Issuer any remedy (in addition to termination of the Issuer's obligation to purchase Designated Receivables from the Seller) to which the Issuer may be otherwise appropriately entitled, whether by statute or other applicable law, at law or in equity. (b) Unless a Purchase Termination Event has occurred and is continuing, the Issuer shall not exercise the rights granted to it pursuant to SECTION 2.1(F). ARTICLE VII INDEMNIFICATION SECTION 7.1. INDEMNITIES BY THE SELLER. Without limiting any other rights that the Issuer may have hereunder or under applicable law, the Seller hereby agrees to indemnify the Issuer from and against any and all claims, losses and liabilities (including reasonable attorneys' fees) (all the foregoing being collectively referred to as "INDEMNIFIED AMOUNTS") arising out of or resulting from any of the following, excluding, however, Indemnified Amounts (a) to the extent resulting from the gross negligence or willful misconduct on the part of the Issuer (or any assignee thereof, including without limitation the Indenture Trustee or any Investor Noteholder), (b) constituting recourse for Designated Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy, inability to pay or lack of creditworthiness of the applicable Obligor or (c) attributable to any Excluded Taxes: (a) the transfer by the Seller of any interest in any Purchased Receivable or Receivables Property or proceeds thereof to a Person other than the Issuer; (b) reliance on any representation or warranty or statement made or deemed made by or on behalf of the Seller under or in connection with this Agreement or in any certificate or report delivered pursuant hereto that, in either case, shall have been false or incorrect when made or deemed made; (c) the failure by the Seller to comply with any applicable law, rule or regulation of any governmental authority with respect to any Purchased Receivable or -26- 30 related Receivables Property, or the nonconformity of any Purchased Receivable or related Receivables Property with any such applicable law, rule or regulation; (d) the failure to vest and maintain vested in the Issuer an ownership interest in any Purchased Receivable or related Receivables Property, free and clear of any Adverse Claim, other than Permitted Liens, whether existing at the time of the purchase of such Purchased Receivable or related Receivables Property or at any time thereafter; (e) the failure to file, or any delay in filing, financing statements or other similar instruments or documents under the UCC of any applicable jurisdiction or other applicable laws with respect to any Purchased Receivables or related Receivables Property of the Seller; (f) any dispute, claim, offset or defense of the Obligor to the payment of any Purchased Receivable (including, without limitation, a defense based on such Purchased Receivable or the related Contract not being fully enforceable against the Obligor in accordance with its terms), or any other claim resulting from the sale of the goods or services related to any such Purchased Receivable or the furnishing or failure to furnish such goods or services; (g) any failure of the Seller to perform its duties or obligations under this Agreement or the other Transaction Documents; (h) any products liability claim or claim involving environmental liability arising out of or in connection with goods or services that are the subject of any Purchased Receivable or Receivables Property; (i) the commingling of Collections at any time with other funds of the Seller; (j) any tax or governmental fee or charge (but not including any Excluded Taxes), all interest and penalties thereon or with respect thereto, and all out-of-pocket costs and expenses, including the reasonable fees and expenses of counsel in defending against the same, which may arise by reason of the purchase or ownership of any Purchased Receivable or related Receivables Property, or any interest therein or in any merchandise which secure any such Purchased Receivables, such related Receivables Property or any other rights or assets transferred hereunder; or (k) any governmental investigation, litigation or proceeding related to this Agreement or in respect of any Purchased Receivable or related Receivables Property of the Seller. The Seller shall pay on demand to the Issuer any and all amounts necessary to indemnify the Issuer from and against any and all Indemnified Amounts. Notwithstanding the foregoing, the Seller shall not be required to indemnify the Issuer for any Indemnified Amount that results from any delay in the collection of any Purchased Receivables or any default by an Obligor with respect to any Purchased Receivables. -27- 31 ARTICLE VIII SUBORDINATED NOTE SECTION 8.1. SUBORDINATED NOTE. (a) On the Initial Closing Date, the Issuer shall issue to the Seller a subordinated note substantially in the form of EXHIBIT D (as amended, supplemented or otherwise modified from time to time, the "SUBORDINATED NOTE"). The aggregate principal amount of the Subordinated Note at any time shall be equal to the excess, if any, of (i) the aggregate principal amount thereof upon original issuance and each addition to the principal amount of such Subordinated Note pursuant to the terms of SECTION 2.3 as of such time, over (ii) the aggregate amount of all payments made in respect of the principal of such Subordinated Note as of such time. Interest on the outstanding principal amount of the Subordinated Note shall accrue at a rate per annum equal to the Prime Rate in effect from time to time and shall be paid (x) on each Settlement Date with respect to the principal amount of the Subordinated Note outstanding from time to time during the Settlement Period immediately preceding such Settlement Date and/or (y) on the maturity date thereof. Principal thereunder not paid or prepaid pursuant to the terms thereof shall be payable on the maturity date of the Subordinated Note. Notwithstanding any contrary provision of any Transaction Document, default in the payment of principal or interest under the Subordinated Note shall not constitute an Event of Default, a Purchase Termination Event, a Collection Agent Termination Event or Termination Event. SECTION 8.2. RESTRICTIONS ON TRANSFER OF SUBORDINATED NOTE. The Seller shall not assign, transfer, exchange, pledge, hypothecate, participate or convey the Subordinated Note or any right of the Seller to receive payments thereunder other than to an Affiliate of the Seller. ARTICLE IX MISCELLANEOUS SECTION 9.1. AMENDMENT. This Agreement may only be amended in writing by the Seller and the Issuer with the prior written consent of the Holders of a Majority in Interest of each Series of Outstanding Investor Notes. SECTION 9.2. FURTHER ASSURANCES. From time to time, at its own expense, the Seller shall promptly execute and deliver all further instruments and documents, and take all further action, that may be necessary or desirable or that the Issuer may reasonably request, to protect or more fully evidence the Issuer's ownership, right, title and interest in the Purchased Receivables and the Receivables Property and its rights under the Contracts with respect thereto, or to enable the Issuer to exercise or enforce any of its rights hereunder or under any other Transaction Document. Without limiting the generality of the foregoing, the Seller shall upon the request of the Issuer execute and file such financing or continuation statements, or amendments thereto, and such other instruments or notices, as may be necessary or, in the reasonable opinion of the Issuer or the Indenture Trustee, desirable. SECTION 9.3. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. SECTION 9.4. NOTICES. All notices, requests and demands to or upon the respective parties hereto to be effective shall be in writing (including by facsimile), and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when -28- 32 delivered by hand, or five days after being sent by first class mail, postage prepaid, or, in the case of facsimile notice, when delivered addressed as set forth in Section 13.4 of the Base Indenture. SECTION 9.5. NO WAIVER; REMEDIES. No failure on the part of the Issuer or the Indenture Trustee, as assignee, to exercise, and no delay in exercising, any right under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 9.6. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of the Seller and the Issuer and their respective successors and assigns. SECTION 9.7. COSTS, EXPENSES AND TAXES. In addition to, and without duplication of, the limited rights of indemnification granted to the Issuer under Article VII hereof, the Seller agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Issuer in connection with the preparation, execution and delivery of this Agreement and the documents to be delivered hereunder, including, without limitation, the reasonable fees and out-of-pocket expenses of counsel for the Issuer with respect thereto and with respect to advising the Issuer as to its rights and remedies under this Agreement, and all costs and expenses (including, without limitation, reasonable counsel fees and expenses), in connection with the enforcement (whether through negotiations, legal proceedings or otherwise) of this Agreement and the other Transaction Documents to be delivered hereunder. In addition, the Seller agrees to pay any and all stamp and other taxes and governmental fees payable or determined to be payable in connection with the execution, delivery, filing and recording of this Agreement or the other Transaction Documents to be delivered hereunder, and agrees to hold the Issuer harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such taxes and fees. SECTION 9.8. MERGER AND INTEGRATION. This Agreement and the other Transaction Documents set forth the entire understanding of the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and the other Transaction Documents. SECTION 9.9. HEADINGS. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. SECTION 9.10. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Agreement by facsimile transmission shall be effective as delivery of a manually executed counterpart of this Agreement. SECTION 9.11. NO BANKRUPTCY PETITION. The Seller hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all Investor Notes, it will not institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any federal or state bankruptcy or similar law. -29- 33 SECTION 9.12. ACKNOWLEDGMENT OF ASSIGNMENTS. The Seller hereby acknowledges and consents to the assignment by the Issuer of the Purchased Receivables and the Receivables Property and the rights of the Issuer under this Agreement pursuant to the Indenture. The Seller acknowledges that the Issuer shall grant a security interest in the Collection Account and the Lock-Box Accounts to the Indenture Trustee for the benefit of the Investor Noteholders. The Seller agrees to take any action that the Indenture Trustee may reasonably request in connection with such assignment or security interest. SECTION 9.13. TERMINATION. This Agreement shall terminate at such time as (a) a Purchase Termination Event shall have occurred and the Issuer's obligations to purchase Receivables hereunder shall have been terminated in accordance with Section 6.1 and (b) all Purchased Receivables purchased hereunder have been collected, and the proceeds thereof turned over to the Issuer and all other amounts owing to the Issuer hereunder shall have been paid in full or, if Purchased Receivables sold hereunder have not been collected, such Receivables have become Charged Off Receivables and the Issuer shall have completed its collection efforts with respect thereto; PROVIDED, HOWEVER, that the indemnities of the Seller to the Issuer set forth in this Agreement shall survive such termination and PROVIDED further that the Issuer shall remain entitled to receive any collections on Receivables sold hereunder which have become Defaulted Receivables. -30- 34 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE GOODYEAR TIRE & RUBBER COMPANY By: /s/ Stephanie W. Bergeron ----------------------------------------- Name: Stephanie W. Bergeron Title: Vice President and Treasurer Address: 1144 East Market Street Akron, Ohio 44316-0001 WINGFOOT A/R LLC By: /s/ Stephanie W. Bergeron ----------------------------------------- Name: Stephanie W. Bergeron Title: Vice President and Treasurer Address: 1201 East Market Street Akron, Ohio 44305-4017 EX-10.2 4 l89521aex10-2.txt EXHIBIT 10.2 1 Exhibit 10.2 EXECUTION COPY WINGFOOT A/R LLC, as Issuer and THE CHASE MANHATTAN BANK, as Indenture Trustee ------------------------------ BASE INDENTURE Dated as of April 27, 2001 ------------------------------ Asset Backed Investor Notes (Each Issuable in Series) 2 TABLE OF CONTENTS
Page ---- ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE..............................................................1 Section 1.1. Definitions............................................................................1 Section 1.2. Cross-References.......................................................................1 Section 1.3. Accounting and Financial Determinations; No Duplication................................1 Section 1.4. Rules of Construction..................................................................2 ARTICLE II THE INVESTOR NOTES.....................................................................................2 Section 2.1. Designation and Terms of Investor Notes................................................2 Section 2.2. Investor Notes Issuable in Series......................................................3 Section 2.3. Execution and Authentication...........................................................4 Section 2.4. Registration of Transfer and Exchange of Investor Notes................................5 Section 2.5. Mutilated, Destroyed, Lost or Stolen Investor Notes....................................7 Section 2.6. Appointment of Paying Agent............................................................8 Section 2.7. Persons Deemed Owners..................................................................9 Section 2.8. Treasury Investor Notes...............................................................10 Section 2.9. Principal and Interest................................................................10 Section 2.10. Tax Treatment.........................................................................10 ARTICLE III SECURITY.............................................................................................11 Section 3.1. Grant of Security Interest............................................................11 Section 3.2. Protection of the Collateral..........................................................13 Section 3.3. Transaction Documents.................................................................13 Section 3.4. Release of Collateral.................................................................14 Section 3.5. Stamp, Other Similar Taxes and Filing Fees............................................14 ARTICLE IV REPORTS...............................................................................................14 Section 4.1. Collection Agent Reports..............................................................14 Section 4.2. Reports by the Issuer.................................................................15 ARTICLE V ALLOCATION AND APPLICATION OF COLLECTIONS..............................................................16 Section 5.1. Collection Account....................................................................16 Section 5.2. Collection of Money...................................................................17 Section 5.3. Collections and Allocations...........................................................17 ARTICLE VI DISTRIBUTIONS.........................................................................................19 Section 6.1. Distributions in General..............................................................19
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Page ---- ARTICLE VII REPRESENTATIONS AND WARRANTIES.......................................................................19 Section 7.1. Existence and Power...................................................................19 Section 7.2. Governmental Authorization............................................................20 Section 7.3. Binding Effect........................................................................20 Section 7.4. Collateral............................................................................20 Section 7.5. Financial Information; Other Information..............................................21 Section 7.6. Tax Filings and Expenses..............................................................21 Section 7.7. Litigation............................................................................22 Section 7.8. Regulations T, U and X................................................................22 Section 7.9. Credit and Collection Policy..........................................................22 Section 7.10. Collections...........................................................................22 Section 7.11. Investment Company Act................................................................22 Section 7.12. No ERISA Liens........................................................................22 Section 7.13. Lock-Box Accounts.....................................................................22 Section 7.14. Transfers Under Receivables Purchase Agreement........................................23 Section 7.15. Solvency..............................................................................23 Section 7.16. Binding Effect of Receivables Purchase Agreement......................................23 Section 7.17. Non-Existence of Other Agreements.....................................................23 Section 7.18. Subsidiaries..........................................................................23 ARTICLE VIII COVENANTS...........................................................................................24 Section 8.1. Payment of Investor Notes.............................................................24 Section 8.2. Payment of Obligations................................................................24 Section 8.3. Conduct of Business and Maintenance of Existence......................................24 Section 8.4. Compliance with Laws..................................................................24 Section 8.5. Inspection of Property, Books and Records.............................................24 Section 8.6. Collateral............................................................................25 Section 8.7. Notice of Defaults....................................................................25 Section 8.8. Notice of Material Proceedings........................................................25 Section 8.9. Notice of Reportable Event............................................................25 Section 8.10. Annual Opinion of Counsel.............................................................26 Section 8.11. Performance and Compliance with Contracts.............................................26 Section 8.12. Compliance with Credit and Collection Policy..........................................26 Section 8.13. Use of Proceeds of Investor Notes.....................................................26 Section 8.14. Adverse Claims........................................................................26 Section 8.15. Other Indebtedness....................................................................26 Section 8.16. Mergers...............................................................................27 Section 8.17. Sales of Collateral...................................................................27 Section 8.18. Acquisition of Assets.................................................................27 Section 8.19. Net Worth.............................................................................27 Section 8.20. Name; Principal Office................................................................27 Section 8.21. Organizational Documents..............................................................27 Section 8.22. Investments...........................................................................27 Section 8.23. No Other Agreements...................................................................28 Section 8.24. Other Business........................................................................28
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Page ---- Section 8.25. Sale Treatment........................................................................28 Section 8.26. Maintenance of Separate Existence.....................................................28 ARTICLE IX REMEDIES..............................................................................................31 Section 9.1. Events of Default.....................................................................31 Section 9.2. Acceleration of Maturity; Rescission and Annulment....................................31 Section 9.3. Collection of Indebtedness and Suits for Enforcement by the Indenture Trustee.........32 Section 9.4. Remedies; Priorities..................................................................34 Section 9.5. Optional Preservation of the Collateral...............................................35 Section 9.6. Limitation on Suits...................................................................36 Section 9.7. Unconditional Rights of Investor Noteholders to Receive Principal and Interest........36 Section 9.8. Restoration of Rights and Remedies....................................................37 Section 9.9. Rights and Remedies Cumulative........................................................37 Section 9.10. Delay or Omission Not a Waiver........................................................37 Section 9.11. Control by Investor Noteholders.......................................................37 Section 9.12. Waiver of Past Defaults...............................................................38 Section 9.13. Undertaking for Costs.................................................................38 Section 9.14. Waiver of Stay or Extension Laws......................................................39 Section 9.15. Action on Investor Notes..............................................................39 ARTICLE X THE INDENTURE TRUSTEE..................................................................................39 Section 10.1. Duties of the Indenture Trustee.......................................................39 Section 10.2. Rights of the Indenture Trustee.......................................................41 Section 10.3. Indenture Trustee's Disclaimer........................................................42 Section 10.4. Indenture Trustee May Own Investor Notes..............................................42 Section 10.5. Notice of Defaults....................................................................42 Section 10.6. Compensation..........................................................................43 Section 10.7. Eligibility Requirements for Indenture Trustee........................................43 Section 10.8. Resignation or Removal of Indenture Trustee...........................................44 Section 10.9. Successor Indenture Trustee by Merger.................................................45 Section 10.10. Appointment of Co-Indenture Trustee or Separate Indenture Trustee.....................45 Section 10.11. Representations and Warranties of Indenture Trustee...................................47 ARTICLE XI DISCHARGE OF INDENTURE................................................................................47 Section 11.1. Termination of the Issuer's Obligations...............................................47 Section 11.2. Repayment to the Issuer...............................................................47 ARTICLE XII AMENDMENTS...........................................................................................48 Section 12.1. Without Consent of the Investor Noteholders...........................................48 Section 12.2. With Consent of the Investor Noteholders..............................................49 Section 12.3. Supplements...........................................................................49 Section 12.4. Revocation and Effect of Consents.....................................................49
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Page ---- Section 12.5. Notation on or Exchange of Investor Notes.............................................50 Section 12.6. The Indenture Trustee to Sign Amendments, etc.........................................50 ARTICLE XIII MISCELLANEOUS.......................................................................................50 Section 13.1. Compliance Certificates and Opinions..................................................50 Section 13.2. Forms of Documents Delivered to Indenture Trustee.....................................51 Section 13.3. Actions of Investor Noteholders.......................................................52 Section 13.4. Notices...............................................................................52 Section 13.5. Rules by the Indenture Trustee........................................................54 Section 13.6. Duplicate Originals...................................................................54 Section 13.7. Benefits of Base Indenture............................................................54 Section 13.8. Payment on Business Day...............................................................54 Section 13.9. Governing Law.........................................................................54 Section 13.10. Severability of Provisions............................................................54 Section 13.11. Counterparts..........................................................................55 Section 13.12. Successors............................................................................55 Section 13.13. Table of Contents, Headings, etc......................................................55 Section 13.14. Recording of Base Indenture...........................................................55 Section 13.15. No Petition...........................................................................55
-iv- 6 BASE INDENTURE, dated as of April 27, 2001, between WINGFOOT A/R LLC, a special purpose limited liability company established under the laws of Delaware, as issuer (the "ISSUER"), and THE CHASE MANHATTAN BANK, a New York banking corporation, as trustee (in such capacity, the "INDENTURE TRUSTEE"). W I T N E S S E T H: WHEREAS, the Issuer has duly authorized the execution and delivery of this Base Indenture to provide for the issuance from time to time of one or more series of Investor Notes from time to time, issuable as provided in this Base Indenture; WHEREAS, all things necessary to make this Base Indenture a legal, valid and binding agreement of the Issuer, in accordance with its terms, have been done, and the Issuer proposes to do all the things necessary to make the Investor Notes, when executed by the Issuer and authenticated and delivered by the Indenture Trustee hereunder and duly issued by the Issuer, the legal, valid and binding obligations of the Issuer as hereinafter provided; NOW, THEREFORE, for and in consideration of the premises and the receipt of the Investor Notes by the Investor Noteholders, it is mutually covenanted and agreed, for the equal and proportionate benefit of all Investor Noteholders as follows: ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE SECTION 1.1. DEFINITIONS. Certain capitalized terms used herein (including the preamble and the recitals hereto) shall have the meanings assigned to such terms in the Definitions List attached hereto as SCHEDULE 1 (the "DEFINITIONS LIST"), as such Definitions List may be amended or modified from time to time in accordance with the provisions hereof. SECTION 1.2. CROSS-REFERENCES. Unless otherwise specified, references in this Base Indenture, any Indenture Supplement and in each other Transaction Document to any Article or Section are references to such Article or Section of this Base Indenture, such Indenture Supplement or such other Transaction Document, as the case may be and, unless otherwise specified, references in any Article, Section or definition to any clause are references to such clause of such Article, Section or definition. SECTION 1.3. ACCOUNTING AND FINANCIAL DETERMINATIONS; NO DUPLICATION. Where the character or amount of any asset or liability or item of income or expense is required to be determined, or any accounting computation is required to be made, for the purpose of the Indenture, such determination or calculation shall be made, to the extent applicable and except as otherwise specified in the Indenture, in accordance with GAAP. When used herein, the term "financial statement" shall include the notes and schedules thereto. All 1 7 accounting determinations and computations hereunder or under any other Transaction Documents shall be made without duplication. SECTION 1.4. RULES OF CONSTRUCTION. In this Base Indenture and each Indenture Supplement, unless the context otherwise requires: (i) the singular includes the plural and vice versa; (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by this Base Indenture, and reference to any Person in a particular capacity only refers to such Person in such capacity; (iii) reference to any gender includes the other gender; (iv) reference to any Requirement of Law means such Requirement of Law as amended, modified, codified or reenacted, in whole or in part, and in effect from time to time; (v) "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; and (vi) with respect to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding." ARTICLE II THE INVESTOR NOTES SECTION 2.1. DESIGNATION AND TERMS OF INVESTOR NOTES. Each Series of Investor Notes shall be issued in fully registered form substantially in the form specified in the applicable Indenture Supplement, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted hereby or by the related Indenture Supplement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined to be appropriate by the Authorized Officers executing such Investor Notes, as evidenced by their execution of the Investor Notes. All Investor Notes of any Series shall, except as specified in the related Indenture Supplement, be equally and ratably entitled as provided herein to the benefits hereof without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Base Indenture and the applicable Indenture Supplement. The aggregate principal amount of Investor Notes which may be authenticated and delivered under the Indenture is unlimited. The Investor Notes shall be issued in the denominations set forth in the related Indenture Supplement. 2 8 SECTION 2.2. INVESTOR NOTES ISSUABLE IN SERIES. (a) The Investor Notes may be issued in one or more Series. Each Series of Investor Notes shall be created by an Indenture Supplement. (b) Investor Notes of a new Series may from time to time be executed by the Issuer and delivered to the Indenture Trustee for authentication and thereupon the same shall be authenticated and delivered by the Indenture Trustee upon the receipt of an Issuer Request at least three (3) Business Days (or such shorter time as is acceptable to the Indenture Trustee) in advance of the related Series Closing Date and upon delivery by the Issuer to the Indenture Trustee, and receipt by the Indenture Trustee, of the following: (i) an Issuer Order authorizing and directing the authentication and delivery of the Investor Notes of such new Series by the Indenture Trustee and specifying the designation of such new Series, the Initial Invested Amount (or the method for calculating such Initial Invested Amount) and the Note Rate (or the method for allocating interest payments or other cash flows to such Series), if any, with respect to such Series; (ii) an Indenture Supplement satisfying the criteria set forth in SECTION 2.2(c) executed by the Issuer and specifying the Principal Terms of such Series; (iii) a Tax Opinion; and (iv) written confirmation from each Rating Agency that the Rating Agency Condition with respect to each Series of Outstanding Investor Notes shall have been satisfied with respect to such issuance. (c) In conjunction with the issuance of a new Series of Investor Notes, the parties hereto shall execute an Indenture Supplement, which shall specify the relevant terms with respect to any newly issued Series of Investor Notes, which may include without limitation: (i) its name or designation; (ii) an Initial Invested Amount or the method of calculating the Initial Invested Amount; (iii) the Note Rate (or formula for the determination thereof); (iv) the Series Closing Date; (v) the interest payment date or dates and the date or dates from which interest shall accrue; (vi) the method of allocating Collections with respect to such Series; 3 9 (vii) the method by which the principal amount of Investor Notes of such Series shall amortize or accrete; (viii) the names of any Series Accounts to be used by such Series and the terms governing the operation of any such accounts and use of moneys therein; (ix) the Series Collection Agent Fee; (x) the terms on which the Investor Notes of such Series may be redeemed, repurchased or remarketed to other investors; (xi) any deposit into any Series Account; (xii) the priority of any Series with respect to any other Series; and (xiii) any other relevant terms of such Series (all such terms, the "PRINCIPAL TERMS" of such Series). The terms of such Indenture Supplement may modify or amend the terms of this Base Indenture solely as applied to such new Series. (d) The Issuer may direct the Indenture Trustee to deposit all or a portion of the net proceeds from the issuance of any new Series of Investor Notes into a Series Account for another Series of Investor Notes and may specify that the proceeds from the sale of such new Series of Investor Notes may be used to reduce the Invested Amount of another Series of Investor Notes. SECTION 2.3. EXECUTION AND AUTHENTICATION. (a) The Investor Notes shall, upon issue pursuant to SECTION 2.2, be executed on behalf of the Issuer by an Authorized Officer and delivered by the Issuer to the Indenture Trustee for authentication and redelivery as provided herein. If an Authorized Officer whose signature is on an Investor Note no longer holds that office at the time the Investor Note is authenticated, the Investor Note shall nevertheless be valid. (b) At any time and from time to time after the execution and delivery of this Base Indenture, the Issuer may deliver Investor Notes of any particular Series executed by the Issuer to the Indenture Trustee for authentication, together with one or more Issuer Orders for the authentication and delivery of such Investor Notes, and the Indenture Trustee, in accordance with such Issuer Order and this Base Indenture, shall authenticate and deliver such Investor Notes. (c) No Investor Note shall be entitled to any benefit under the Indenture or be valid for any purpose unless there appears on such Investor Note a certificate of authentication substantially in the form provided for herein, duly and manually executed by the Indenture Trustee. Such signatures on such certificate shall be conclusive evidence, and the only evidence, that the Investor Note has been duly authenticated under the Indenture. The Indenture Trustee may appoint an authenticating agent acceptable to the Issuer to authenticate Investor Notes. 4 10 Unless limited by the term of such appointment, an authenticating agent may authenticate Investor Notes whenever the Indenture Trustee may do so. Each reference in the Indenture to authentication by the Indenture Trustee includes authentication by such agent. The Indenture Trustee's certificate of authentication shall be in substantially the following form: This is one of the Investor Notes of a series issued under the within mentioned Indenture. THE CHASE MANHATTAN BANK, as Indenture Trustee By: ------------------------------ Authorized Signatory (d) Each Investor Note shall be dated and issued as of the date of its authentication by the Indenture Trustee. (e) Notwithstanding the foregoing, if any Investor Note shall have been authenticated and delivered hereunder but never issued and sold by the Issuer, and the Issuer shall deliver such Investor Note to the Indenture Trustee for cancellation, together with a written statement (which need not comply with SECTION 13.2 and need not be accompanied by an Opinion of Counsel) stating that such Investor Note has never been issued and sold by the Issuer, for all purposes of the Indenture such Investor Note shall be deemed never to have been authenticated and delivered hereunder and shall not be entitled to the benefits of the Indenture. SECTION 2.4. REGISTRATION OF TRANSFER AND EXCHANGE OF INVESTOR NOTES. (a) The Issuer shall cause to be kept at the office or agency to be maintained by a transfer agent and registrar (the "TRANSFER AGENT AND REGISTRAR"), a register (the "NOTE REGISTER") in which, subject to such reasonable regulations as it may prescribe, the Transfer Agent and Registrar shall provide for the registration of the Investor Notes of each Series (unless otherwise provided in the related Indenture Supplement) and of transfers and exchanges of the Investor Notes as herein provided. The Indenture Trustee is hereby initially appointed Transfer Agent and Registrar for the purposes of registering the Investor Notes and transfers and exchanges of the Investor Notes as herein provided. Any reference in the Indenture to the Transfer Agent and Registrar shall include any co-transfer agent and co-registrar unless the context otherwise requires. If a Person other than the Indenture Trustee is appointed by the Issuer as the Transfer Agent and Registrar, (a) the Issuer will give the Indenture Trustee prompt written notice of the appointment of such Transfer Agent and Registrar and of the location, and any change in the location, of the Transfer Agent and Register, and the Indenture Trustee shall have the right to inspect the Transfer Agent and Register at all reasonable times and to obtain copies thereof and (b) such Person shall be permitted to resign as Transfer Agent and Registrar upon 30 days' written notice to the Indenture Trustee; provided, however, that such resignation shall not be effective and such Person shall continue to perform its duties as Transfer Agent and Registrar until the Indenture Trustee has appointed a successor Transfer Agent and Registrar with the 5 11 consent of the Issuer. If the Person that is acting as the Indenture Trustee is also acting as the Transfer Agent and Registrar, then such Person shall be permitted to resign as Transfer Agent and Registrar as and when such Person resigns as Indenture Trustee pursuant to the terms hereof. An institution succeeding to the corporate agency business of the Transfer Agent and Registrar shall continue to be the Transfer Agent and Registrar without the execution or filing of any paper or any further act on the part of the Indenture Trustee or such Transfer Agent and Registrar. The Transfer Agent and Registrar shall maintain in The City of New York (and, if so specified in the related Indenture Supplement for any Series of Investor Notes, any other city designated in such Indenture Supplement) an office or offices or agency or agencies where Investor Notes may be surrendered for registration of transfer or exchange. The Transfer Agent and Registrar initially designates its corporate trust office located at 450 West 33rd Street, New York, New York 10001-2697 as its office for such purposes. The Transfer Agent and Registrar shall give prompt written notice to the Indenture Trustee, the Issuer and to the Investor Noteholders of any change in the location of such office or agency. Upon surrender for registration of transfer of any Investor Note at the office or agency of the Transfer Agent and Registrar, if the requirements of SECTION 2.4(b) and Section 8-401(a) of the UCC are met, the Issuer shall execute and after the Issuer has executed, the Indenture Trustee shall authenticate and (if the Transfer Agent and Registrar is different than the Indenture Trustee, then the Transfer Agent and Registrar shall) deliver to the Investor Noteholder, in the name of the designated transferee or transferees, one or more new Investor Notes, in any authorized denominations and a like aggregate principal amount. Whenever any Investor Notes of any Series are so surrendered for exchange, if the requirements of Section 8-401(a) of the UCC are met, the Issuer shall execute and after the Issuer has executed, the Indenture Trustee shall authenticate and (if the Transfer Agent and Registrar is different than the Indenture Trustee, then the Transfer Agent and Registrar shall) deliver to the Investor Noteholder, the Investor Notes which the Investor Noteholder making the exchange is entitled to receive. All Investor Notes issued upon any registration of transfer or exchange of the Investor Notes shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under the Indenture, as the Investor Notes surrendered upon such registration of transfer or exchange. Every Investor Note presented or surrendered for registration of transfer or exchange shall be (i) duly endorsed by, or be accompanied by a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by, the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by a commercial bank or trust company located, or having a correspondent located, in The City of New York or the city in which the Corporate Trust Office is located, or by a member firm of a national securities exchange, and (ii) accompanied by such other documents as the Indenture Trustee may require. 6 12 The preceding provisions of this SECTION 2.4 notwithstanding, the Indenture Trustee or the Transfer Agent and Registrar, as the case may be, shall not be required to register the transfer of or exchange any Investor Note of any Series for a period of 15 days preceding the due date for any payment in full of the Investor Notes of such Series. Unless otherwise provided in the related Indenture Supplement, no service charge shall be made for any registration of transfer or exchange of Investor Notes, but the Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer or exchange of Investor Notes. All Investor Notes surrendered for registration of transfer and exchange shall be canceled by the Transfer Agent and Registrar and disposed of in a manner satisfactory to the Indenture Trustee. The Issuer shall execute and deliver to the Indenture Trustee or the Transfer Agent and Registrar, as applicable, Investor Notes in such amounts and at such times as are necessary to enable the Indenture Trustee to fulfill its responsibilities under this Base Indenture and the Investor Notes. (b) Unless otherwise provided in the related Indenture Supplement, registration of transfer of Investor Notes containing a legend relating to the restrictions on transfer of such Investor Notes (which legend shall be set forth in the Indenture Supplement relating to such Investor Notes) shall be effected only if the conditions set forth in such related Indenture Supplement are satisfied. SECTION 2.5. MUTILATED, DESTROYED, LOST OR STOLEN INVESTOR NOTES. If (a) any mutilated Investor Note is surrendered to the Transfer Agent and Registrar, or the Transfer Agent and Registrar receives evidence to its satisfaction of the destruction, loss or theft of any Investor Note and (b) there is delivered to the Transfer Agent and Registrar and the Indenture Trustee such security or indemnity as may be reasonably required by them to save each of them harmless, then provided that the requirements of Section 8-405 of the UCC are met, the Issuer shall execute and after the Issuer has executed, the Indenture Trustee shall authenticate and (unless the Transfer Agent and Registrar is different from the Indenture Trustee, in which case the Transfer Agent and Registrar shall) deliver (in compliance with applicable law), in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Investor Note, a new Investor Note of like tenor and aggregate principal amount; provided, however, that if any such destroyed, lost or stolen Investor Note, but not a mutilated Investor Note, shall have become or within seven days shall be due and payable, instead of issuing a replacement Investor Note, the Issuer may pay such destroyed, lost or stolen Investor Note when so due or payable without surrender thereof. If, after the delivery of such replacement Investor Note or payment of a destroyed, lost or stolen Investor Note pursuant to the proviso to the preceding sentence, a purchaser for value of the original Investor Note in lieu of which such replacement Investor Note was issued presents for payment such original Investor Note, the Issuer, the Transfer Agent and Registrar and the Indenture Trustee shall be entitled to recover such replacement Investor Note (or such payment) from the Person to whom it was delivered or any Person taking such replacement Investor Note from such Person to whom such replacement 7 13 Investor Note was delivered or any assignee of such Person, except a purchaser for value, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer, the Transfer Agent and Registrar or the Indenture Trustee in connection therewith. In connection with the issuance of any new Investor Note under this Section 2.5, the Indenture Trustee or the Transfer Agent and Registrar may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Indenture Trustee and the Transfer Agent and Registrar) connected therewith. Any duplicate Investor Note issued pursuant to this SECTION 2.5 shall constitute an original contractual obligation of the Issuer whether or not the lost, stolen or destroyed note shall be found at any time. SECTION 2.6. APPOINTMENT OF PAYING AGENT. (a) The Indenture Trustee may appoint a Paying Agent with respect to the Investor Notes. The Indenture Trustee hereby appoints Chase as the initial Paying Agent. The Paying Agent shall have the revocable power to withdraw funds and make distributions to Investor Noteholders from the appropriate account or accounts maintained for the benefit of Investor Noteholders as specified in this Base Indenture or the related Indenture Supplement for any Series pursuant to ARTICLE V. The Indenture Trustee may revoke such power and remove the Paying Agent, if the Indenture Trustee determines in its sole discretion that the Paying Agent shall have failed to perform its obligations under the Indenture in any material respect or for other good cause. The Indenture Trustee shall notify the Rating Agency of the removal of any Paying Agent. If the Person that is acting as the Indenture Trustee is also acting as the Paying Agent, then such Person shall be permitted to resign as Paying Agent as and when such Person resigns as Indenture Trustee pursuant to the terms hereof. If the Person acting as Paying Agent is not the Person acting as Indenture Trustee hereunder, such Person shall be permitted to resign as Paying Agent upon 30 days' written notice to the Indenture Trustee. In the event that any Paying Agent shall no longer be the Paying Agent, the Indenture Trustee shall appoint a successor to act as Paying Agent (which shall be a bank or trust company and may be the Indenture Trustee) with the consent of the Issuer. The provisions of Sections 10.1, 10.2, 10.3, 10.6, 10.8 and 10.9 shall apply to the Indenture Trustee also in the capacity of Paying Agent, for so long as the Indenture Trustee shall act as Paying Agent. Any reference in the Indenture to the Paying Agent shall include any co-paying agent unless the context requires otherwise. (b) The Indenture Trustee shall cause each Paying Agent (other than itself) to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee that such Paying Agent will: (i) hold all sums held by it for the payment of amounts due with respect to the Investor Notes in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided; 8 14 (ii) give the Indenture Trustee notice of any default by the Issuer of which it has actual knowledge in the making of any payment required to be made with respect to the Investor Notes; (iii) at any time during the continuance of any such default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent; (iv) immediately resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of the Investor Notes if at any time it ceases to meet the standards required to be met by the Paying Agent at the time of its appointment; and (v) comply with all requirements of the Code with respect to the withholding from any payments made by it on any Investor Notes of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith. An institution succeeding to the corporate agency business of the Paying Agent shall continue to be the Paying Agent without the execution or filing of any paper or any further act on the part of the Indenture Trustee or such Paying Agent. (c) Subject to applicable laws with respect to escheat of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Investor Note and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and be paid to the Issuer on Issuer Request; and the Holder of such Investor Note shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; PROVIDED, HOWEVER, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in New York City notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. The Indenture Trustee may also adopt and employ, at the expense of the Issuer, any other reasonable means of notification of such repayment. SECTION 2.7. PERSONS DEEMED OWNERS. Prior to due presentation of an Investor Note for registration of transfer, the Indenture Trustee, the Paying Agent, the Transfer Agent and Registrar and any agent of any of them may treat the Person in whose name any Investor Note is registered as the owner of such Investor Note for the purpose of receiving distributions pursuant to ARTICLE V (as described in any Indenture Supplement) and for all other purposes whatsoever, and neither the Indenture Trustee, the Paying Agent, the Transfer Agent and Registrar nor any agent of any of them shall be affected by any notice to the contrary. 9 15 SECTION 2.8. TREASURY INVESTOR NOTES. In determining whether the Investor Noteholders of the required principal amount of Investor Notes have concurred in any direction, waiver or consent, Investor Notes owned by the Issuer or any Affiliate of the Issuer shall be considered as though they are not Outstanding, except that for the purpose of determining whether the Indenture Trustee shall be protected in relying on any such direction, waiver or consent, only Investor Notes of which a Responsible Officer of the Indenture Trustee has received written notice of such ownership shall be so disregarded. Absent written notice to a Responsible Officer of the Indenture Trustee of such ownership, the Indenture Trustee shall not be deemed to have knowledge of the identity of the individual beneficial owners of the Investor Notes. SECTION 2.9. PRINCIPAL AND INTEREST. (a) The principal of each Series of Investor Notes shall be payable at the times and in the amount set forth in the related Indenture Supplement and in accordance with SECTION 6.1. (b) Each Series of Investor Notes shall accrue interest as provided in the related Indenture Supplement and such interest shall be payable on each Payment Date for such Series in accordance with SECTION 6.1 and the related Indenture Supplement. (c) Except as provided in the following sentence, the Person in whose name any Investor Note is registered at the close of business on any Record Date with respect to a Payment Date for such Investor Note shall be entitled to receive the principal and interest payable on such Payment Date notwithstanding the cancellation of such Investor Note upon any registration of transfer, exchange or substitution of such Investor Note subsequent to such Record Date. Any interest payable at maturity shall be paid to the Person to whom the principal of such Investor Note is payable. (d) If the Issuer defaults in the payment of interest on the Investor Notes of any Series, such interest, to the extent paid on any date that is more than five (5) Business Days after the applicable due date, shall, at the option of the Issuer, cease to be payable to the Persons who were Investor Noteholders of such Series at the applicable Record Date and the Issuer shall pay the defaulted interest in any lawful manner, plus, to the extent lawful, interest payable on the defaulted interest, to the Persons who are Investor Noteholders of such Series on a subsequent special record date which date shall be at least five (5) Business Days prior to the payment date, at the rate provided in the Indenture and in the Investor Notes of such Series. The Issuer shall fix or cause to be fixed each such special record date and payment date, and at least 15 days before the special record date, the Issuer (or the Indenture Trustee, in the name of and at the expense of the Issuer) shall mail to Investor Noteholders of such Series a notice that states the special record date, the related payment date and the amount of such interest to be paid. SECTION 2.10. TAX TREATMENT. The Issuer has structured the Indenture and the Investor Notes have been (or will be) issued with the intention that the Investor Notes will qualify under applicable tax law as indebtedness of the Issuer and any entity acquiring any direct or indirect interest in any Investor 10 16 Note by acceptance of its Investor Notes agrees to treat the Investor Notes for purposes of Federal, state and local and income or franchise taxes and any other tax imposed on or measured by income, as indebtedness of the Issuer. ARTICLE III SECURITY SECTION 3.1. GRANT OF SECURITY INTEREST. (a) To secure the Issuer Obligations, the Issuer hereby grants to the Indenture Trustee, for the benefit of the Investor Noteholders, a security interest in all of the Issuer's right, title and interest in and to all of the Issuer's assets, property and interests in property of any kind or nature whatsoever whether now or hereafter existing, acquired or created (all of the foregoing being referred to as the "COLLATERAL"), including without limitation, all right, title and interest of the Issuer in the following property and interests in property: (i) all Receivables and all Related Property with respect thereto, including those existing on the Initial Closing Date and all Receivables thereafter arising from time to time and the Related Property with respect thereto; (ii) all Collections; (iii) all payment, enforcement and other rights (including rescission, replevin or reclamation), but none of the obligations, relating to any Receivable or arising therefrom; (iv) the Receivables Purchase Agreement, including, without limitation, all of the Issuer's rights, remedies, powers, interests and privileges under the Receivables Purchase Agreement (whether arising pursuant to the terms thereof or otherwise available to the Issuer), including, without limitation, the right to enforce the Receivables Purchase Agreement, to give or withhold any and all consents, requests, notices, directions, approvals or waivers thereunder and all amounts due and to become due thereunder, whether payable as indemnities or damages for breach thereof; (v) the Collection Agency Agreement, including, without limitation, all of the Issuer's rights, remedies, powers, interests and privileges under the Collection Agency Agreement (whether arising pursuant to the terms thereof or otherwise available to the Issuer), including, without limitation, the right to enforce the Collection Agency Agreement, to give or withhold any and all consents, requests, notices, directions, approvals or waivers thereunder and all amounts due and to become due thereunder, whether payable as indemnities or damages for breach thereof; (vi) the right, title and interest of the Seller in the Dunlop Receivables Purchase Agreement, including, without limitation, all of the Seller's rights, remedies, powers, interests and privileges under the Dunlop Receivables 11 17 Purchase Agreement (whether arising pursuant to the terms thereof or otherwise available to the Issuer), including, without limitation, the right to enforce the Dunlop Receivables Purchase Agreement, to give or withhold any and all consents, requests, notices, directions, approvals or waivers thereunder and all amounts due and to become due thereunder, whether payable as indemnities or damages for breach thereof; (vii) the Collection Account and all monies on deposit from time to time in the Collection Account and all proceeds thereof (including any Permitted Investments purchased with monies from any account held for the benefit of the Issuer or the Investor Noteholders and any investment earnings thereon); (viii) the Lock-Box Accounts and all cash, checks and other negotiable instruments, funds and other evidences of payment held therein; (ix) each Series Account and all monies on deposit from time to time in such Series Account and all proceeds thereof (including any Permitted Investments purchased with monies from any account held for the benefit of the Issuer or the Investor Noteholders and any investment earnings thereon); (x) all additional property that may from time to time hereafter (pursuant to the terms of any Indenture Supplement or otherwise) be subjected to the grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Investor Noteholders; and (xi) all proceeds of any and all of the foregoing including, without limitation, all present and future claims, demands, causes of action and chooses in action in respect of any or all of the foregoing and all payments on or under and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing, including all proceeds of the conversion thereof, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts, accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property which at any time constitute all or part of or are included in the proceeds of any of the foregoing. (b) The foregoing grant is made in trust to secure the Issuer Obligations and to secure compliance with the provisions of this Base Indenture and any Indenture Supplement, all as provided in the Indenture. The Indenture Trustee, as Indenture Trustee on behalf of the Investor Noteholders, acknowledges such grant, accepts the trusts under this Base Indenture in accordance with the provisions of this Base Indenture. The Collateral shall secure the Investor Notes equally and ratably without prejudice, priority or distinction (except, with respect to any Series of Investor Notes, as otherwise stated in the applicable Indenture Supplement). 12 18 SECTION 3.2. PROTECTION OF THE COLLATERAL. The Issuer agrees that it will, and will cause the Seller to, from time to time, at its expense, promptly execute and deliver all instruments and documents and take all actions as may be necessary or as the Indenture Trustee may reasonably request at the direction of the Holders of a Majority in Interest of any Series of Outstanding Investor Notes in order to perfect or protect the lien of this Base Indenture in the Collateral, defend its title to the Collateral or to enable the Indenture Trustee to exercise or enforce any of its rights hereunder. Without limiting the foregoing, the Issuer will, and will cause the Seller to, in order to accurately reflect the transactions contemplated by the Transaction Documents, (x) execute and file such financing or continuation statements or amendments thereto or assignments thereof as may be reasonably requested by the Indenture Trustee for the benefit of the Investor Noteholders and (y) mark its respective master data processing records and other documents with a legend describing the conveyance to the Issuer (in the case of the Seller) of the Receivables and the Related Property with respect thereto and the granting of the security in the Collateral to the Indenture Trustee for the benefit of the Investor Noteholders. The Indenture Trustee shall sign continuation statements and amendments thereto and assignments thereof prepared by and at the expense of the Issuer; provided, however, the Indenture Trustee shall have no duty to see to the maintenance of any recording or filing of any financing statements. The Issuer shall not, and shall not permit the Seller to, change its name, identity or corporate structure (within the meaning of Section 9-402(7) of the UCC), or relocate its respective chief executive office or any office where Records are kept unless it shall have: (i) given the Indenture Trustee at least thirty (30) days' prior written notice thereof and (ii) prepared at the Issuer's expense and delivered to the Indenture Trustee all financing statements, instruments and other documents necessary to preserve and protect the lien of this Base Indenture in the Collateral or reasonably requested by the Indenture Trustee in connection with such change or relocation. Any filings under the UCC or otherwise that are occasioned by such change in name or location shall be made by, and at the expense of, the Issuer. SECTION 3.3. TRANSACTION DOCUMENTS. Promptly following a request from the Indenture Trustee, acting at the direction of the Holders of a Majority in Interest of any Series of Outstanding Investor Notes, to do so and at the Issuer's expense, the Issuer agrees to take all such lawful action as permitted under this Base Indenture as the Indenture Trustee may request to compel or secure the performance and observance by the Seller, the Collection Agent or Dunlop of its obligations under the Transaction Documents, in each case in accordance with the applicable terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under the Transaction Documents against the Seller, the Collection Agent or Dunlop to the extent and in the manner directed by the Indenture Trustee, including, without limitation, the transmission of notices of default and the institution of legal or administrative actions or proceedings, to compel or secure performance by each of the Seller, the Collection Agent or Dunlop of their respective obligations thereunder. If (i) the Issuer shall have failed, within 30 days of receiving any such request of the Indenture Trustee, to take commercially reasonable action to accomplish such requests of the Indenture Trustee, (ii) the Issuer refuses to take any such action, or (iii) the Indenture Trustee reasonably determines that such action must be taken immediately, the Indenture Trustee may take such previously requested action and any related action permitted under the Indenture which 13 19 the Indenture Trustee thereafter reasonably determines is appropriate to compel or secure the performance and observance by the Seller, the Collection Agent or Dunlop of its obligations under the Transaction Documents (without the need under this provision or any other provision under the Indenture to direct the Issuer to take such action), on behalf of the Issuer and the Investor Noteholders. SECTION 3.4. RELEASE OF COLLATERAL. (a) The Indenture Trustee shall when required by the provisions of this Base Indenture promptly execute instruments prepared by and at the expense of the Issuer to release property from the lien of this Base Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of the Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this SECTION 3.4 shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. (b) The Indenture Trustee shall, at such time as there are no Investor Notes Outstanding and each Indenture Supplement shall have terminated in accordance with its terms, release any remaining portion of the Collateral that secured the Investor Notes from the lien of this Base Indenture and release to the Issuer any funds then on deposit in the Issuer Accounts. The Indenture Trustee shall release property from the lien of this Base Indenture pursuant to this SECTION 3.4(b) only upon receipt of an Issuer Order accompanied by an Officer's Certificate. SECTION 3.5. STAMP, OTHER SIMILAR TAXES AND FILING FEES. The Issuer shall indemnify and hold harmless the Indenture Trustee and each Investor Noteholder from any present or future claim for liability for any stamp or other similar tax and any penalties or interest with respect thereto, that may be assessed, levied or collected by any jurisdiction in connection with the Indenture or any Collateral. The Issuer shall pay, or reimburse the Indenture Trustee for, any and all amounts in respect of, all search, filing, recording and registration fees, taxes, excise taxes and other similar imposts that may be payable or determined to be payable in respect of the execution, delivery, performance and/or enforcement of the Indenture. ARTICLE IV REPORTS SECTION 4.1. COLLECTION AGENT REPORTS. The Issuer will deliver or cause to be delivered to the Indenture Trustee: (i) after the occurrence and during the continuance of a Downgrade Event, prior to 1:00 p.m., New York City time, on each Weekly Reporting Date, a written report with respect to each Series of Outstanding Investor Notes, setting forth the information required to be set forth therein under the Collection Agency Agreement and the related Indenture Supplement (a 14 20 "WEEKLY REPORT") prepared and delivered by the Collection Agent to the Issuer pursuant to Section 4.2 of the Collection Agency Agreement; (ii) on the second Business Day prior to each Settlement Date a Monthly Settlement Report with respect to each Series of Outstanding Investor Notes setting forth the information required to be set forth therein under the Collection Agency Agreement and the related Indenture Supplement prepared and delivered by the Collection Agent to the Issuer pursuant to Section 4.1 of the Collection Agency Agreement; (iii) not later than 120 days after the end of each fiscal year and not later than 60 days after the end of each of the first three fiscal quarters of each fiscal year, a copy of a compliance certificate (a "COMPLIANCE CERTIFICATE") prepared and delivered by the Collection Agent pursuant to the Collection Agency Agreement, setting forth the information required to be set forth therein under Section 4.4 of the Collection Agency Agreement; (iv) on or before March 31 of each year, a copy of an annual servicing report (an "ANNUAL COLLECTION AGENT REPORT") prepared by the Collection Agent's independent auditors in accordance with the Collection Agency Agreement, setting forth the information required to be set forth therein under Section 4.5 of the Collection Agency Agreement; (v) promptly upon the delivery by the Collection Agent to the Issuer, a copy of any other information, reports or other materials required to be delivered by the Collection Agent to the Issuer pursuant to the Collection Agency Agreement or by the Seller to the Issuer pursuant to the Receivables Purchase Agreement; and (vi) from time to time such additional information regarding the Receivables and the financial position, results of operations or business of the Collection Agent as the Indenture Trustee may reasonably request to the extent that the Collection Agent delivers such information to the Issuer pursuant to the Collection Agency Agreement. SECTION 4.2. REPORTS BY THE ISSUER. (a) Unless otherwise specified in the related Indenture Supplement, on each Settlement Date, the Issuer shall deliver to the Indenture Trustee or the Paying Agent and the Indenture Trustee or the Paying Agent, as the case may be, shall forward to each Investor Noteholder of each Outstanding Series of Investor Notes the Monthly Settlement Statement with respect to such Series. (b) As soon as available, but in any event within 120 days after the end of each fiscal year of the Issuer, the Issuer shall deliver to the Indenture Trustee or the Paying Agent and the Indenture Trustee or the Paying Agent, as the case may be, shall forward to each Investor Noteholder of each Outstanding Series a copy of the financial statements of the Issuer at 15 21 the end of such year prepared in accordance with GAAP and certified by an Authorized Officer of the Issuer. (c) Unless otherwise specified in the related Indenture Supplement, on or before January 31 of each calendar year, beginning with calendar year 2002, the Indenture Trustee or the Paying Agent shall furnish to each Person who at any time during the preceding calendar year was an Investor Noteholder of a Series of Investor Notes a statement prepared by or on behalf of the Issuer containing the information which is required to be contained in the Monthly Settlement Statements with respect to such Series of Investor Notes aggregated for such calendar year or the applicable portion thereof during which such Person was an Investor Noteholder, together with such other customary information (consistent with the treatment of the Investor Notes as debt) as the Issuer deems necessary or desirable to enable the Investor Noteholders to prepare their tax returns (each such statement, an "ANNUAL INVESTOR NOTEHOLDERS' TAX STATEMENT"). Such obligations of the Issuer to prepare and the Indenture Trustee or the Paying Agent to distribute the Annual Investor Noteholders' Tax Statement shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Indenture Trustee or the Paying Agent pursuant to any requirements of the Code as from time to time in effect. ARTICLE V ALLOCATION AND APPLICATION OF COLLECTIONS SECTION 5.1. COLLECTION ACCOUNT. (a) ESTABLISHMENT OF COLLECTION ACCOUNT. The Indenture Trustee shall establish and maintain in the name of the Indenture Trustee, for the benefit of the Investor Noteholders, an Eligible Deposit Account bearing a designation clearly indicating that the funds deposited therein are held in trust for the benefit of the Investor Noteholders (the "Collection Account"). If at any time the Indenture Trustee obtains knowledge that the Collection Account is no longer an Eligible Deposit Account, the Indenture Trustee shall, within 30 days of obtaining such knowledge, establish a new Collection Account that is an Eligible Deposit Account and transfer into the new Collection Account all cash and investments from the non-qualifying Collection Account. Initially, the Collection Account will be established with Chase. Subject to the terms of this Base Indenture and each Indenture Supplement, the Indenture Trustee shall possess all right, title and interest in all moneys, instruments, securities and other property on deposit from time to time in the Collection Account and the proceeds thereof as secured party for the benefit of the Investor Noteholders. The Collection Account shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Investor Noteholders. (b) SERIES ACCOUNTS. If so provided in the related Indenture Supplement, the Indenture Trustee, for the benefit of the Investor Noteholders, shall cause to be established and maintained one or more Series Accounts and/or administrative sub-accounts of the Collection Account (each a "SERIES COLLECTION SUBACCOUNT") to facilitate the proper allocation of Collections in accordance with the terms of such Indenture Supplement. Each such Series Account shall bear a designation clearly indicating that the funds deposited therein are held for the benefit of the Investor Noteholders of such Series. Each such Series Account will be an Eligible Deposit 16 22 Account, if so provided in the related Indenture Supplement, and will have the other features and be applied as set forth in the related Indenture Supplement. (c) ADMINISTRATION OF THE COLLECTION ACCOUNT. The Issuer shall instruct the institution maintaining the Collection Account in writing to invest the funds on deposit in the Collection Account in Permitted Investments. Any such investment shall mature and such funds shall be available for withdrawal on or prior to the Transfer Date related to the Settlement Period in which such funds were processed for collection, or if so specified in the related Indenture Supplement, on the immediately succeeding Payment Date. All such Permitted Investments will be credited to the Collection Account and any such Permitted Investments that constitute (i) Physical Property (and that is not either a United States Security Entitlement or a Security Entitlement) shall be delivered to the Indenture Trustee in accordance with paragraph (a) of the definition of "Delivery" and shall be held by the Indenture Trustee pending maturity or disposition; (ii) United States Security Entitlements or Security Entitlements shall be Controlled by the Indenture Trustee pending maturity or disposition; and (iii) Uncertificated Securities (and not United States Security Entitlements) shall be delivered to the Indenture Trustee in accordance with paragraph (b) of the definition of "Delivery" and shall be maintained by the Indenture Trustee pending maturity or disposition. The Indenture Trustee shall take such action as is required to maintain the Indenture Trustee's security interest in the Permitted Investments credited to the Collection Account. In the absence of written investment instructions hereunder, funds on deposit in the Collection Account shall remain uninvested. Neither the Issuer nor the Indenture Trustee shall dispose of (or, to the extent of its authority, permit the disposal of) any Permitted Investments prior to the maturity thereof to the extent such disposal would result in a loss of principal of such Permitted Investment. SECTION 5.2. COLLECTION OF MONEY. Except as otherwise provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to the Indenture. The Indenture Trustee shall apply all such money received by it as provided in the Indenture. To the extent provided in this Base Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, including the institution and prosecution of appropriate proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Base Indenture or any Indenture Supplement and any right to proceeds thereafter as provided in ARTICLE IX. SECTION 5.3. COLLECTIONS AND ALLOCATIONS. (a) COLLECTIONS IN GENERAL. Until this Base Indenture is terminated pursuant to SECTION 11.1, the Issuer shall, and the Indenture Trustee is authorized to, cause all Collections due and to become due to the Issuer or the Indenture Trustee, as the case may be, under or in connection with the Collateral to be paid to the Indenture Trustee for deposit into the Collection Account in accordance with the terms of, and under the circumstances provided under, this SECTION 5.3. The Issuer agrees that if any Collections shall be received by the Issuer in an 17 23 account other than the Collection Account, the Issuer shall promptly cause such monies, instruments, cash and other proceeds not to be commingled with any of the Issuer's other funds or property, if any, to be held separate and apart therefrom and to be held in trust by the Issuer for, and promptly remitted to, the Indenture Trustee, with any necessary endorsement. All monies, instruments, cash and other proceeds remitted to the Indenture Trustee in accordance with the terms of, and under the circumstances provided under, this Section 5.3 shall be immediately deposited in the Collection Account and shall be applied as provided in this ARTICLE V. (b) DAILY COLLECTIONS. (i) Except as otherwise provided in SECTION 5.3(c), the Collection Agent shall transfer all Collections received in the Lock-Box Accounts in the form of available funds to the Collection Account promptly following receipt by the Collection Agent, but in no event later than the Business Day following such receipt. (ii) On each Business Day on which funds are deposited in the Collection Account (or if such funds are deposited after 3:00 p.m., New York City time, on such date, then on the next Business Day), the Indenture Trustee shall (in accordance with written directions received from the Collection Agent) allocate the funds deposited into the Collection Account on such Business Day, to the respective Series Collection Subaccounts in accordance with the respective Indenture Supplements, an amount equal to the product of (x) the Invested Percentage for each Series of Outstanding Investor Notes and (y) the amount of funds deposited into the Collection Account on such Business Day. (iii) On each Business Day on which funds are deposited in the Collection Account (or if such funds are deposited after 3:00 p.m., New York City time, on such date, then on the next Business Day), the Indenture Trustee shall (in accordance with written directions received from the Collection Agent) distribute to the Issuer from the funds deposited into the Collection Account on such Business Day, the remaining funds, if any, deposited in the Collection Account on such Business Day, after giving effect to allocations to be made pursuant to paragraph (ii) of this Section 5.3(b). (c) EXCEPTIONS TO DAILY DEPOSIT REQUIREMENTS. Notwithstanding anything in this Base Indenture to the contrary, (i) the Collection Agent shall deposit into the Collection Account Collections received by the Collection Agent on any Business Day that would be allocated to a particular Series of Outstanding Investor Notes in accordance with SECTION 5.3(b)(ii) only to the extent and under the circumstances provided in the related Indenture Supplement and (ii) the Collection Agent shall not be required to deposit into the Collection Account Collections received by the Collection Agent that are distributable to the Issuer in accordance with SECTION 5.3(b)(iii) but shall pay such amounts to or at the direction of the Issuer. (d) SHARING COLLECTIONS. In the manner described in the related Indenture Supplement, to the extent that Collections that are allocated to any Series are not needed to make 18 24 payments to Investor Noteholders of such Series or required to be deposited in a Series Collection Subaccount or Series Account for such Series on any Settlement Date, such Collections may, at the direction of the Issuer, be applied to cover principal payments due to or for the benefit of Investor Noteholders of another Series. Any such reallocation will not result in a reduction in the Invested Amount of the Series to which such Collections were initially allocated. (e) SET-OFF. If the Issuer shall fail to make a payment when due as provided in this Base Indenture or any Indenture Supplement, the Indenture Trustee may set off and apply any amounts otherwise payable to the Issuer hereunder or under any Indenture Supplement. The Issuer hereby waives demand, notice or declaration of such set-off and application; provided that notice will promptly be given to the Issuer of such set-off. [THE REMAINDER OF ARTICLE V IS RESERVED AND MAY BE SPECIFIED IN ANY INDENTURE SUPPLEMENT WITH RESPECT TO ANY SERIES.] ARTICLE VI DISTRIBUTIONS SECTION 6.1. DISTRIBUTIONS IN GENERAL. (a) Unless otherwise specified in the applicable Indenture Supplement, amounts payable to an Investor Noteholder hereunder shall be payable by wire transfer of immediately available funds released by the Indenture Trustee or the Paying Agent from the Collection Account or the applicable Series Account no later than 12:00 Noon, New York City time, on the Payment Date for credit to the account of the Person or Persons specified in the applicable Indenture Supplement. (b) Unless otherwise specified in the applicable Indenture Supplement (i) all distributions to Investor Noteholders of all classes within a Series of Investor Notes will have the same priority and (ii) in the event that on any date of determination the amount available to make payments to the Investor Noteholders of a Series is not sufficient to pay all sums required to be paid to such Investor Noteholders on such date, then each class of Investor Noteholders will receive its ratable share (based upon the aggregate amount due to such class of Investor Noteholders) of the aggregate amount available to be distributed in respect of the Investor Notes of such Series. ARTICLE VII REPRESENTATIONS AND WARRANTIES The Issuer hereby represents and warrants, for the benefit of the Indenture Trustee and the Investor Noteholders, as follows as of each Series Closing Date: SECTION 7.1. EXISTENCE AND POWER. 19 25 The Issuer (a) is a special purpose limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware, (b) is duly qualified to do business as a foreign limited liability company and in good standing under the laws of each jurisdiction where the character of its property, the nature of its business or the performance of its obligations make such qualification necessary or which shall be necessary to protect the validity and enforceability of the Indenture, the Investor Notes or any instrument or agreement included in the Collateral, and (c) has all powers and all governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted and for purposes of the transactions contemplated by the Indenture and the other Transaction Documents. SECTION 7.2. GOVERNMENTAL AUTHORIZATION. The execution, delivery and performance by the Issuer of the Indenture and the other Transaction Documents to which it is a party (a) is within the Issuer's power, has been duly authorized by all necessary action, (b) requires no consent or action by or in respect of, or filing with, any governmental body, agency or official which has not been obtained and (c) does not contravene, or constitute a default under, any Requirement of Law or any agreement or instrument binding on it or result in the creation or imposition of any Adverse Claim on any of the Collateral, except for the liens created by the Indenture or the other Transaction Documents. The Indenture and each of the other Transaction Documents to which the Issuer is a party has been executed and delivered by a duly authorized officer of the Issuer. SECTION 7.3. BINDING EFFECT. The Indenture and each other Transaction Document to which it is a party is a legal, valid and binding obligation of the Issuer enforceable against the Issuer in accordance with its terms (except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing). SECTION 7.4. COLLATERAL. (a) The Issuer is the owner of the Receivables and the Related Property with respect thereto, free and clear of all Adverse Claims (other than Permitted Liens). (b) This Base Indenture constitutes a valid and continuing security interest in the Collateral in favor of the Indenture Trustee on behalf of the Investor Noteholders, which security interest is a first priority perfected security interest in the Collateral (except to the extent that any of the Related Property included in the Collateral constitutes property a security interest in which may not be perfected by filing a financing statement under the UCC in the Applicable Jurisdictions) and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing. 20 26 (c) All action necessary (including the filing of UCC-1 financing statements) to protect and perfect the Indenture Trustee's security interest in the Collateral now in existence and hereafter acquired or created has been duly and effectively taken and all filing fees and taxes, if any, payable in connection with such filings have been paid in full, except that not all action has been taken to perfect the Indenture Trustee's security interest in the Collateral to the extent that such Collateral constitutes property a security interest in which may not be perfected by filing a financing statement under the UCC in the Applicable Jurisdictions. (d) No security agreement, financing statement, equivalent security or lien instrument or continuation statement listing the Issuer as debtor covering all or any part of the Collateral is on file or of record in any jurisdiction, except such as may have been filed, recorded or made by the Issuer in favor of the Indenture Trustee on behalf of the Investor Noteholders in connection with this Base Indenture. (e) Except for a change made pursuant to Section 8.20, the Issuer's principal place of business and chief executive office shall be at: 1201 East Market Street, Akron, OH, 44305-4017 and the place where its records concerning the Collateral are kept is at: 1201 East Market Street, Akron, OH, 44305-4017 and 200 John James Audobon Parkway, West Amherst, NY, 14228. The Issuer does not transact, and has not transacted, business under any other name. The Issuer is organized under the laws of Delaware. SECTION 7.5. FINANCIAL INFORMATION; OTHER INFORMATION. (a) All financial statements and other financial data which have been or shall hereafter be furnished by the Issuer to the Indenture Trustee pursuant to SECTION 4.2(b) have been and will be prepared in accordance with GAAP. (b) All certificates, reports, statements, documents and other information furnished to the Indenture Trustee by or on behalf of the Issuer pursuant to any provision of the Indenture or any Transaction Document, or in connection with or pursuant to any amendment or modification of, or waiver under, the Indenture or any Transaction Document, shall, at the time the same are so furnished, be complete and correct to the extent necessary to give the Indenture Trustee true and accurate knowledge of the subject matter thereof in all material respects, and the furnishing of the same to the Indenture Trustee shall constitute a representation and warranty by the Issuer made on the date the same are furnished to the Indenture Trustee to the effect specified herein. SECTION 7.6. TAX FILINGS AND EXPENSES. The Issuer has filed all federal, state and local tax returns and all other tax returns which, to the knowledge of the Issuer, are required to be filed by the Issuer (whether informational returns or not), and has paid all taxes due, if any, pursuant to said returns or pursuant to any assessment received by the Issuer, except such taxes, if any, as are being contested in good faith and for which adequate reserves have been set aside on its books in accordance with GAAP. The Issuer has paid all fees and expenses required to be paid by it in connection with the conduct of its business, the maintenance of its existence and its qualification 21 27 as a foreign limited liability company authorized to do business in each State in which it is required to so qualify. SECTION 7.7. LITIGATION. There is no action, suit or proceeding pending against or, to the knowledge of any officer of the Issuer, threatened against or affecting the Issuer before any court or arbitrator or any Governmental Authority that could reasonably be expected to, individually or in the aggregate, materially adversely affect the financial position, results of operations, business, properties, performance, prospects or condition (financial or otherwise) of the Issuer or which in any manner draws into question the validity or enforceability of this Base Indenture, any Indenture Supplement or any other Transaction Document or the ability of the Issuer to perform its obligations hereunder or thereunder. SECTION 7.8. REGULATIONS T, U AND X. The proceeds of the Investor Notes will not be used to purchase or carry any "margin stock" (as defined or used in the regulations of the Board of Governors of the Federal Reserve System, including Regulations T, U and X thereof). The Issuer is not engaged in the business of extending credit for the purpose of purchasing or carrying any margin stock. SECTION 7.9. CREDIT AND COLLECTION POLICY. Since the Initial Closing Date, there have been no material changes in the Credit and Collection Policy, other than as permitted by Section 5.3(b) of the Receivables Purchase Agreement and Section 4.7(b) of the Collection Agency Agreement. Since such date, no material adverse change has occurred in the overall rate of collection of the Receivables. SECTION 7.10. COLLECTIONS. Since the Initial Closing Date, there has been no material adverse change in the ability of the Collection Agent to service and collect the Receivables. SECTION 7.11. INVESTMENT COMPANY ACT. The Issuer is not, and is not controlled by, an "investment company" within the meaning of, and is not required to register as an "investment company" under, the Investment Company Act of 1940. SECTION 7.12. NO ERISA LIENS. The Issuer and each of its ERISA Affiliates is in compliance in all material respects with ERISA, and no lien exists in favor of the PBGC on any of the Collateral. SECTION 7.13. LOCK-BOX ACCOUNTS. The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are specified in Exhibit A to the 22 28 Collection Agency Agreement (or at such other Lock-Box Banks and/or with such other Lock-Box Accounts as have been notified to the Indenture Trustee and for which Lock-Box Agreements have been executed in accordance with Section 2.3 of the Collection Agency Agreement and delivered to the Indenture Trustee). All Obligors have been instructed to make payment to a Lock-Box Account, and only Collections are deposited into the Lock-Box Accounts. SECTION 7.14. TRANSFERS UNDER RECEIVABLES PURCHASE AGREEMENT. Each Receivable that has been transferred to the Issuer by the Seller has been purchased by the Issuer from the Seller pursuant to, and in accordance with, the terms of the Receivables Purchase Agreement. The Issuer shall have given reasonably equivalent value to the Seller in consideration for the transfer to the Issuer of the Receivables and Related Property with respect thereto, and each such transfer shall not have been made for or on account of an antecedent debt owed by the Seller to the Issuer, and no such transfer is or may be voidable under any Section of the Bankruptcy Code. SECTION 7.15. SOLVENCY. Both before and after giving effect to the transactions contemplated by this Base Indenture and the other Transaction Documents, the Issuer is solvent within the meaning of the Bankruptcy Code and the Issuer is not the subject of any voluntary or involuntary case or proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy or insolvency law and no Insolvency Event has occurred with respect to the Issuer. SECTION 7.16. BINDING EFFECT OF RECEIVABLES PURCHASE AGREEMENT. The Receivables Purchase Agreement and the Dunlop Receivables Purchase Agreement are each in full force and effect and there are no outstanding events of default thereunder nor have events occurred which, with the giving of notice, the passage of time or both, would constitute a Purchase Termination Event. SECTION 7.17. NON-EXISTENCE OF OTHER AGREEMENTS. Other than as permitted by SECTION 8.23, (i) the Issuer is not a party to any contract or agreement of any kind or nature and (ii) the Issuer is not subject to any obligations or liabilities of any kind or nature in favor of any third party, including, without limitation, Contingent Obligations. The Issuer has not engaged in any activities since its formation (other than those incidental to its formation and other appropriate actions including the authorization and the issue of the initial Series of Investor Notes, the execution of the Transaction Documents to which it is a party and the performance of the activities referred to in or contemplated by such agreements). SECTION 7.18. SUBSIDIARIES. The Issuer has no Subsidiaries. 23 29 ARTICLE VIII COVENANTS SECTION 8.1. PAYMENT OF INVESTOR NOTES. The Issuer shall pay the principal of (and premium, if any) and interest on the Investor Notes pursuant to the provisions of this Base Indenture and any applicable Indenture Supplement. Principal and interest shall be considered paid on the date due if the Paying Agent holds on that date money designated for and sufficient to pay all principal and interest then due. SECTION 8.2. PAYMENT OF OBLIGATIONS. The Issuer will pay and discharge, at or before maturity, all of its material obligations and liabilities, including, without limitation, tax liabilities and other governmental claims, except where the same may be contested in good faith by appropriate proceedings, and will maintain, in accordance with GAAP, reserves as appropriate for the accrual of any of the same. SECTION 8.3. CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Issuer will keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware and will obtain and preserve its qualification to do business under the laws of each jurisdiction where the character of its property, the nature of its business or the performance of its obligations make such qualification necessary or which shall be reasonably necessary to protect the validity and enforceability of the Indenture, the Investor Notes or any instrument or agreement included in the Collateral. SECTION 8.4. COMPLIANCE WITH LAWS. The Issuer will comply in all respects with all Requirements of Law and all applicable laws, ordinances, rules, regulations, and requirements of Governmental Authorities (including, without limitation, ERISA and the rules and regulations thereunder) except where such noncompliance would not materially and adversely affect the condition, financial or otherwise, operations, performance, properties or prospects of the Issuer or its ability to carry out the transactions contemplated in the Indenture and each other Transaction Document; provided, however, such noncompliance will not result in an Adverse Claim (other than a Permitted Lien) on the Collateral. SECTION 8.5. INSPECTION OF PROPERTY, BOOKS AND RECORDS. The Issuer will keep proper books of record and account in which full, true and correct entries shall be made of all dealings and transactions in relation to the Collateral and its business activities in accordance with GAAP; and will permit the Indenture Trustee to visit and inspect any of its properties, to examine and make abstracts from any of its books and records and to discuss its affairs, finances and accounts with its officers, directors, employees and independent public accountants, all at such reasonable times upon reasonable notice and as often as may reasonably be requested. 24 30 SECTION 8.6. COLLATERAL. (a) Except as permitted under the Credit and Collection Policy, the Issuer will not take any action and will use its commercially reasonable efforts not to permit any action to be taken by others that would release any Person from any of such Person's covenants or obligations under any instrument or agreement included in the Collateral or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except as expressly provided in the Indenture, any other Transaction Document or such other instrument or agreement. (b) The Issuer shall not waive any breach or agree to any amendment, modification or supplement of any Transaction Document without the consent of a Majority in Interest of each Series of Outstanding Investor Notes. (c) After the occurrence of a Purchase Termination Event, the Issuer shall terminate its obligation to purchase Receivables from the Seller pursuant to Section 6.1 of the Receivables Purchase Agreement only at the written request of the Indenture Trustee acting at the direction of the Holders of a Majority in Interest of each Series of Outstanding Investor Notes. SECTION 8.7. NOTICE OF DEFAULTS. As soon as possible and in any event within 2 Business Days after becoming aware of any Potential Purchase Termination Event, Purchase Termination Event, Potential Termination Event, Termination Event, Collection Agent Termination Event, Event of Default or Default under any of the Transaction Documents, the Issuer shall give the Indenture Trustee written notice thereof, together with an Officer's Certificate, setting forth the details thereof and any action with respect thereto taken or contemplated to be taken by the Issuer. SECTION 8.8. NOTICE OF MATERIAL PROCEEDINGS. As soon as possible and in any event within 2 Business Days after becoming aware thereof, the Issuer shall give the Indenture Trustee written notice of the commencement or existence of any proceeding by or before any Governmental Authority against or affecting the Issuer which is reasonably likely to have a material adverse effect on the business, condition (financial or otherwise), results of operations, properties, performance or prospects of the Issuer or the ability of the Issuer to perform its obligations under the Indenture or under any other Transaction Document to which it is a party. SECTION 8.9. NOTICE OF REPORTABLE EVENT. As soon as possible and in any event within 2 Business Days after the filing or receiving thereof, copies of all reports and notices with respect to any reportable event (as defined in Article IV of ERISA) which the Issuer, the Seller or any ERISA Affiliate of the Issuer or the Seller files under ERISA with the Internal Revenue Service, the PBGC or the U.S. Department of Labor which might constitute grounds for termination of the related plan under Article IV of ERISA or which the Issuer, the Seller or any ERISA Affiliate of the Issuer or the Seller knows that the plan administrator of any plan has given or is required to give to the PBGC 25 31 or which the Issuer, the Seller or any ERISA Affiliates of the Issuer or the Seller receives from the Internal Revenue Service, the PBGC or the U.S. Department of Labor. SECTION 8.10. ANNUAL OPINION OF COUNSEL. On or before March 31 of each calendar year, commencing with March 31, 2002, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel either stating that, in the opinion of such counsel, such action has been taken with respect to the recording, filing, re-recording and refiling of this Base Indenture, any indentures supplemental hereto and any other requisite documents and with respect to the execution and filing of any financing statements and continuation statements as are necessary to maintain the perfection of the lien and security interest created by this Base Indenture and reciting the details of such action or stating that in the opinion of such counsel no such action is necessary to maintain the perfection of such lien and security interest. Such Opinion of Counsel shall also describe the recording, filing, re-recording and refiling of this Base Indenture, any indentures supplemental hereto and any other requisite documents and the execution and filing of any financing statements and continuation statements that will, in the opinion of such counsel, be required to maintain the perfection of the lien and security interest of this Base Indenture until March 31 in the following calendar year. SECTION 8.11. PERFORMANCE AND COMPLIANCE WITH CONTRACTS. The Issuer will cause the Seller pursuant to Section 5.1(f) of the Receivables Purchase Agreement to timely and fully perform and comply in all material respects with all material provisions, covenants and other promises required to be observed by the Seller under the Contracts related to the Receivables. SECTION 8.12. COMPLIANCE WITH CREDIT AND COLLECTION POLICY. The Issuer will cause the Seller pursuant to Section 5.1(f) of the Receivables Purchase Agreement and the Collection Agent pursuant to Section 2.2 of the Collection Agreement to comply in all material respects with the Credit and Collection Policy in respect of the Receivables and the related Contracts. SECTION 8.13. USE OF PROCEEDS OF INVESTOR NOTES. The Issuer will use the net proceeds of each Series of Investor Notes in accordance with the provisions of the related Indenture Supplement. SECTION 8.14. ADVERSE CLAIMS. The Issuer will not create, incur, assume or permit to exist any Adverse Claim upon any of the Collateral, other than Permitted Liens. SECTION 8.15. OTHER INDEBTEDNESS. The Issuer will not create, assume, incur, suffer to exist or otherwise become or remain liable in respect of any Indebtedness other than (i) Indebtedness hereunder and (ii) Indebtedness permitted under any other Transaction Document. 26 32 SECTION 8.16. MERGERS. The Issuer will not merge or consolidate with or into any other Person. SECTION 8.17. SALES OF COLLATERAL. The Issuer will not sell, lease, transfer, liquidate or otherwise dispose of any of the Collateral, except as contemplated by the Transaction Documents. SECTION 8.18. ACQUISITION OF ASSETS. The Issuer will not acquire, by long-term or operating lease or otherwise, any assets except in accordance with the terms of the Transaction Documents. SECTION 8.19. NET WORTH. On the Initial Closing Date, the Issuer has a net worth, and thereafter will at all times maintain a net worth (as defined in accordance with GAAP), of at least $98,156,520. SECTION 8.20. NAME; PRINCIPAL OFFICE. The Issuer will neither (a) change the location of its chief executive office or principal place of business (within the meaning of the applicable UCC) without sixty (60) days' prior written notice to the Indenture Trustee nor (b) change its name without prior written notice to the Indenture Trustee sufficient to allow the Indenture Trustee to execute all filings prepared by the Issuer (including filings of financing statements on form UCC-1) and recordings necessary to maintain the perfection of the interest of the Indenture Trustee on behalf of the Investor Noteholders in the Collateral pursuant to this Base Indenture. In the event that the Issuer desires to so change its office or change its name, the Issuer will make any required filings and prior to actually changing its office or its name the Issuer will deliver to the Indenture Trustee (i) an Officer's Certificate and (except with respect to a change of the location of the Issuer's chief executive office or principal place of business to a new location in the same county) an Opinion of Counsel confirming that all required filings have been made to continue the perfected interest of the Indenture Trustee on behalf of the Investor Noteholders in the Collateral in respect of the new office or new name of the Issuer and (ii) copies of all such required filings with the filing information duly noted thereon by the office in which such filings were made. SECTION 8.21. ORGANIZATIONAL DOCUMENTS. The Issuer will not amend its limited liability company agreement without the consent of a Majority in Interest of each Series of Outstanding Investor Notes. SECTION 8.22. INVESTMENTS. The Issuer will not maintain any loan, advance, extension of credit or other investment in any Person other than in accordance with the Transaction Documents and, in addition, without limiting the generality of the foregoing, the Issuer will not cause the Indenture 27 33 Trustee to make any Permitted Investments on the Issuer's behalf that would have the effect of causing the Issuer to be an "investment company" within the meaning of the Investment Company Act. SECTION 8.23. NO OTHER AGREEMENTS. The Issuer will not enter into or be a party to any agreement or instrument other than any Transaction Document or documents and agreements incidental thereto. SECTION 8.24. OTHER BUSINESS. The Issuer will not engage in any business or enterprise or enter into any transaction other than acquiring the Receivables and the Related Property with respect thereto pursuant to the Receivables Purchase Agreement, funding such acquisitions through the issuance and sale of the Investor Notes and as otherwise contemplated by the Transaction Documents, incurring and paying ordinary course operating expenses and other activities related to or incidental to any of the foregoing. SECTION 8.25. SALE TREATMENT. The Issuer will not account for (including for accounting purposes), or otherwise treat, the transactions contemplated by the Receivables Purchase Agreement in any manner other than as a sale of Receivables by the Seller to the Issuer; provided, however that the Issuer shall not be required to treat the sale of Receivables by the Seller to the Issuer as a sale for purposes of federal income tax or applicable taxes of the State of Ohio. In addition, the Issuer will disclose (in a footnote or otherwise) in all of its financial statements (including any such financial statements consolidated with any other Persons' financial statements) the existence and nature of the transaction contemplated hereby and by the Receivables Purchase Agreement. SECTION 8.26. MAINTENANCE OF SEPARATE EXISTENCE. The Issuer will do all things necessary to continue to be readily distinguishable from the Seller and any Affiliate of the Seller and maintain its existence separate and apart from that of the Seller and any Affiliate of the Seller. Without limiting the foregoing, the Issuer shall at all times: (i) practice and adhere to organizational formalities, such as maintaining appropriate books, records and accounts separate from those of any other Person; (ii) observe all organizational formalities in connection with all dealings between itself and any of its members and any Affiliate of any thereof or any unaffiliated entity; (iii) observe all procedures required by its certificate of formation and its operating agreement and the Delaware Limited Liability Company Act; 28 34 (iv) act solely in its name and through its duly authorized officers or agents in the conduct of its businesses; (v) manage its business and affairs by or under the direction of its Board of Managers; (vi) ensure that its Board of Managers duly authorizes all of its actions; (vii) own or lease (including through shared arrangements with its Affiliates) all office furniture and equipment necessary to operation its business; (viii) maintain at least one member of its Board of Managers who is an Independent Manager; (ix) not (A) have or incur any indebtedness to any of its members or any Affiliate of any of its members (other than the Subordinated Note); (B) guarantee or otherwise become liable for any obligations of any of its members or any Affiliate of any thereof; (C) have obligations guaranteed by any of its members or any Affiliate of any thereof; (D) hold itself out as responsible for debts of any of its members or any Affiliates of any thereof or for decisions or actions with respect to the affairs of any of its members or any Affiliate of any thereof; (E) operate or purport to operate as an integrated, single economic unit with respect to any of its members or any Affiliate of any thereof or any unaffiliated entity; (F) seek to obtain credit or incur any obligation to any third party based upon the assets of any of its members or any Affiliate of any thereof or any unaffiliated entity; (G) induce any such third party to reasonably rely on the creditworthiness of any of its members or any Affiliate of any thereof or any unaffiliated entity or (H) be directly or indirectly named as a direct or contingent beneficiary or loss payee on any insurance policy of any of its members or any Affiliate of any thereof; (x) other than as provided in the Transaction Documents, maintain its deposit and other bank accounts and all of its assets separate from those of any other Person; (xi) maintain its financial records separate and apart from those of any other Person; (xii) not suggest in any way, within its financial statements, that its assets are available to pay the claims of creditors of any of its members or any Affiliate of any thereof or any unaffiliated entity; (xiii) compensate all its employees, officers, consultants and agents for services provided to it by such Persons out of its own funds or reimbursing any of its Affiliates in respect of amounts paid by such Affiliates for such services; 29 35 (xiv) maintain office space separate and apart from that of any of its members or any Affiliate or any thereof (even if such office space is subleased from or is on or near premises occupied by any of its members or an Affiliate of any thereof) and a telephone number separate and apart from that of any of its members or any Affiliate of any thereof; (xv) conduct all oral and written communications, including, without limitation, letters, invoices, purchase orders, contracts, statements, and applications solely in its own name; (xvi) have separate stationery, invoices and checks from any of its members, any Affiliate of any thereof or any unaffiliated entity; (xvii) account for and manage all of its liabilities separately from those of any of its members or any Affiliate of any thereof and pay its own liabilities out of its own funds; (xviii) allocate, on an arm's length basis, all shared corporate operating services, leases and expenses, including, without limitation, those associated with the services of shared consultants and agents and shared computer and other office equipment and software; and otherwise maintaining an arm's length relationship with any of its members, any Affiliate of any thereof and any unaffiliated entity; (xix) refrain from filing or otherwise initiating or supporting the filing of a motion in any bankruptcy or other insolvency proceeding involving any of its members or any Affiliate of any thereof to substantively consolidate any of its members or any Affiliate of any thereof with the Issuer; (xx) remain solvent; (xxi) not commingle its property with the property of any of its members or any other Person; (xxii) prepare separate financial statements, prepared in accordance with GAAP and susceptible to audit, or in the event the Issuer's financial statements are consolidated with those of another entity, note on such financial statements the separate existence and obligations of the Issuer; (xxiii) maintain a sufficient number of employees in light of its contemplated business operations; (xxiv) not acquire obligations or securities of any of its members ; (xxv) hold itself out as a separate entity and correct any known misunderstanding regarding its separate identity; 30 36 (xxvi) maintain adequate capital in light of its contemplated business operations; and (xxvii) conduct no other business other than in connection with the transactions contemplated by the Transaction Documents and enter into no other agreements other than as contemplated by the Transaction Documents. ARTICLE IX REMEDIES SECTION 9.1. EVENTS OF DEFAULT. "EVENT OF DEFAULT", wherever used herein, with respect to any Series of Investor Notes, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body): (a) default in the payment of any interest on any Investor Note of any Series when the same becomes due and payable, and such default shall continue for two Business Days; (b) default in the payment of the principal of any Investor Note of any Series when the same becomes due and payable; (c) default in the observance or performance of any covenant or agreement of the Issuer made in this Base Indenture or any Indenture Supplement (other than a covenant or agreement, a default in the observance or performance of which is elsewhere in this Section specifically dealt with) which default continues for thirty (30) days after the earlier to occur of (i) the date upon which the Issuer obtains knowledge of such failure or (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Issuer by the Indenture Trustee, or to the Issuer and the Indenture Trustee by any Investor Noteholder; (d) the Securities and Exchange Commission or other regulatory body having jurisdiction reaches a final determination that the Issuer is an "investment company" within the meaning of the Investment Company Act; or (e) an Insolvency Event shall have occurred with respect to the Issuer. SECTION 9.2. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT. If an Event of Default referred to in CLAUSE (d) or (e) of SECTION 9.1 has occurred, the unpaid principal amount of all Series of Investor Notes, together with interest accrued but unpaid thereon, and all other amounts due to the Investor Noteholders under this Base Indenture and the related Indenture Supplement, shall immediately and without further act become due and payable. If an Event of Default referred to in CLAUSE (a) or (b) of SECTION 9.1 has occurred, then the Indenture Trustee shall, at the direction of the Holders of a Majority in Interest of any Series of Outstanding Investor Notes, declare all of the Investor Notes of such Series to be immediately 31 37 due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee if given by the Investor Noteholders), and upon any such declaration the unpaid principal amount of such Investor Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable. If an Event of Default referred to in CLAUSE (c) of SECTION 9.1 shall occur and be continuing with respect to any Series of Investor Notes, then and in every such case the Indenture Trustee shall, acting at the direction of the Holders of a Majority in Interest of such Series of Investor Notes, declare all the Investor Notes of such Series to be immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee if given by the Investor Noteholders), and upon any such declaration the unpaid principal amount of such Investor Notes, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable. At any time after such declaration of acceleration of maturity has been made with respect to the Investor Notes (or a particular Series of Investor Notes) and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this ARTICLE IX, the Holders of a Majority in Interest of each Series of Outstanding Investor Notes (or, in the case of the acceleration of a particular Series of Investor Notes, the Holders of a Majority in Interest of the Investor Notes of such Series), by written notice to the Issuer and the Indenture Trustee, may rescind and annul such declaration and its consequences; provided, that, no such rescission shall affect any subsequent default or impair any right consequent thereto. SECTION 9.3. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY THE INDENTURE TRUSTEE. (a) The Issuer covenants that if (i) default is made in the payment of any interest on any Investor Note when the same becomes due and payable, and such default continues for one Business Day or (ii) default is made in the payment of the principal of any Investor Note when the same becomes due and payable, by acceleration or at stated maturity, the Issuer will, upon demand of the Indenture Trustee, pay to it, for the benefit of the Holders of such Investor Notes, the whole amount then due and payable on such Investor Notes for principal and interest, with interest upon the overdue principal at the Note Rate borne by the Investor Notes, and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel. (b) In case the Issuer shall fail forthwith to pay such amounts upon such demand, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a proceeding for the collection of the sums so due and unpaid, and may prosecute such proceeding to judgment or final decree, and may enforce the same against the Issuer or other obligor upon such Investor Notes and collect in the manner provided by law out of the property of the Issuer or other obligor upon such Investor Notes, wherever situated, the moneys adjudged or decreed to be payable. (c) If an Event of Default occurs and is continuing, the Indenture Trustee may, as more particularly provided in SECTION 9.4, in its discretion, proceed to protect and enforce its rights and the rights of the Investor Noteholders, by such appropriate proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such rights, whether 32 38 for the specific enforcement of any covenant or agreement in this Base Indenture or any Indenture Supplement or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Base Indenture, any Indenture Supplement or by law. (d) In case there shall be pending, relative to the Issuer or any other obligor upon the Investor Notes or any Person having or claiming an ownership interest in the Collateral, proceedings under the Bankruptcy Code or any other applicable Federal or state bankruptcy, insolvency or other similar law, or in case a receiver, assignee or trustee in bankruptcy or reorganization, liquidator, sequestrator or similar official shall have been appointed for or taken possession of the Issuer or its property or such other obligor or Person, or in the case of any other comparable judicial proceedings relative to the Issuer or other obligor upon the Investor Notes, or to the creditors or property of the Issuer or such other obligor, the Indenture Trustee, irrespective of whether the principal of any Investor Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this Section, shall be entitled and empowered, by intervention in such proceedings or otherwise: (i) to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Investor Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence, bad faith or willful misconduct) and of the Investor Noteholders allowed in such proceedings; (ii) unless prohibited by applicable law and regulations, to vote on behalf of the Holders of the Investor Notes in any election of a trustee, a standby trustee or person performing similar functions in any such proceedings; (iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Investor Noteholders and of the Indenture Trustee on their behalf; and (iv) to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders of the Investor Notes allowed in any judicial proceedings relative to the Issuer, its creditors and its property; and any trustee, receiver, liquidator, custodian or other similar official in any such proceeding is hereby authorized by each of such Investor Noteholders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Investor Noteholders, to pay to the Indenture Trustee such amounts as shall be 33 39 sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith. (e) Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Investor Noteholder any plan of reorganization, arrangement, adjustment or composition affecting the Investor Notes or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Investor Noteholder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar person. (f) All rights of action and of asserting claims under the Indenture, or under any of the Investor Notes, may be enforced by the Indenture Trustee without the possession of any of the Investor Notes or the production thereof in any trial or other proceedings relative thereto, and any such action or proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Investor Notes. (g) In any proceedings brought by the Indenture Trustee (and also any proceedings involving the interpretation of any provision of the Indenture to which the Indenture Trustee shall be a party), the Indenture Trustee shall be held to represent all the Holders of the Investor Notes, and it shall not be necessary to make any Investor Noteholder a party to any such proceedings. SECTION 9.4. REMEDIES; PRIORITIES. (a) If an Event of Default shall have occurred and be continuing with respect to any Series of Outstanding Investor Notes and such Series of Investor Notes has been accelerated under SECTION 9.2, the Indenture Trustee may institute proceedings to enforce the obligations of the Issuer hereunder in its own name and as trustee of an express trust for the collection of all amounts then payable on the Investor Notes of such Series or under the Indenture with respect thereto, whether by declaration or otherwise, enforce any judgment obtained, and collect from the Issuer and any other obligor upon such Investor Notes moneys adjudged due. (b) If an Event of Default shall have occurred and be continuing with respect to all Series of Outstanding Investor Notes and all Series of Outstanding Investor Notes have been accelerated under SECTION 9.2, the Indenture Trustee (subject to SECTION 9.5) may do one or more of the following: (i) institute proceedings from time to time for the complete or partial foreclosure of this Base Indenture with respect to the Collateral; 34 40 (ii) exercise any remedies of a secured party under the UCC and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Holders of the Investor Notes; and (iii) in the case of an Event of Default referred to in clause (a) or (b) of SECTION 9.1, sell the Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law; provided that the Indenture Trustee may not sell or otherwise liquidate the Collateral following an Event of Default referred to in clause (a) or (b) of SECTION 9.1, unless (A) the Holders of Investor Notes representing 100% of the Aggregate Invested Amount consent thereto, (B) the proceeds of such sale or liquidation distributable to the Investor Noteholders are sufficient to discharge in full all amounts then due and unpaid upon the Investor Notes for principal and interest or (C) (1) the Indenture Trustee determines that the Collateral will not continue to provide sufficient funds for the payment of principal of and interest on the Investor Notes as they would have become due if the Investor Notes had not been declared due and payable and (2) the Indenture Trustee obtains the consent of a Majority in Interest of the Holders of each Series of Outstanding Investor Notes. In determining such sufficiency or insufficiency with respect to clause (B) and (C), the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose. (c) If the Indenture Trustee collects any money or property pursuant to this Article IX, such money or property shall be held by the Indenture Trustee as additional collateral hereunder and the Indenture Trustee shall pay out such money or property in the following order: FIRST: to the Indenture Trustee for amounts due under SECTION 10.6; and SECOND: to the Collection Account for distribution in accordance with the provisions of ARTICLE V. SECTION 9.5. OPTIONAL PRESERVATION OF THE COLLATERAL. (a) If the Investor Notes of each Series Outstanding have been declared to be due and payable under SECTION 9.2 following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of the Collateral. It is the desire of the parties hereto and the Investor Noteholders that there be at all times sufficient funds for the payment of principal of and interest on the Investor Notes, and the Indenture Trustee shall take such desire into account when determining whether to maintain possession of the Collateral. In determining whether to maintain possession of the Collateral, the Indenture Trustee may, but need not, obtain and rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Collateral for such purpose. Nothing contained in this SECTION 9.5 shall be construed to require the Indenture Trustee to preserve the Collateral securing the Issuer Obligations if prohibited by applicable law 35 41 or if the Indenture Trustee is authorized, directed or permitted to liquidate the Collateral pursuant to SECTION 9.4(b). SECTION 9.6. LIMITATION ON SUITS. No Holder of any Investor Note shall have any right to institute any proceeding, judicial or otherwise, with respect to the Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless: (a) such Holder has previously given written notice to the Indenture Trustee of a continuing Event of Default; (b) Holders of each Series of Outstanding Investor Notes holding Investor Notes evidencing at least 25% of the Investor Notes of such Series have made written request to the Indenture Trustee to institute such proceeding in respect of such Event of Default in its own name as the Indenture Trustee hereunder; (c) such Holder or Holders have offered to the Indenture Trustee indemnity reasonably satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request; (d) the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such proceedings; and (e) no direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Holders of a Majority in Interest of each Series of Outstanding Investor Notes; it being understood and intended that no one or more Holders of the Investor Notes shall have any right in any manner whatever by virtue of, or by availing of, any provision of the Indenture to affect, disturb or prejudice the rights of any other Holders of the Investor Notes or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under the Indenture, except in the manner herein provided. In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders of Investor Notes, each representing less than a Majority in Interest of each Series of Outstanding Investor Notes, the Indenture Trustee shall act at the direction of the group of Holders of Investor Notes with the greater amount of Investor Notes, however, should the Indenture Trustee receive conflicting or inconsistent requests on indemnity from two or more groups of Holders with an equal amount of Investor Notes the Indenture Trustee in its sole discretion may determine what action, if any, shall be taken, notwithstanding any other provisions of the Indenture. SECTION 9.7. UNCONDITIONAL RIGHTS OF INVESTOR NOTEHOLDERS TO RECEIVE PRINCIPAL AND INTEREST. Notwithstanding any other provisions in the Indenture, the Holder of any Investor Note shall have the right, which is absolute and unconditional, to receive payment of the 36 42 principal of and interest, if any, on such Investor Note on or after the respective due dates thereof expressed in such Investor Note or in the Indenture and to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder. SECTION 9.8. RESTORATION OF RIGHTS AND REMEDIES. If the Indenture Trustee or any Investor Noteholder has instituted any Proceeding to enforce any right or remedy under the Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Investor Noteholder, then and in every such case the Issuer, the Indenture Trustee and the Investor Noteholders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Investor Noteholders shall continue as though no such Proceeding had been instituted. SECTION 9.9. RIGHTS AND REMEDIES CUMULATIVE. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Investor Noteholders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy. SECTION 9.10. DELAY OR OMISSION NOT A WAIVER. No delay or omission of the Indenture Trustee or any Holder of any Investor Note to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this ARTICLE IX or by law to the Indenture Trustee or to the Investor Noteholders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Investor Noteholders, as the case may be. SECTION 9.11. CONTROL BY INVESTOR NOTEHOLDERS. The Holders of a Majority in Interest of each Series of Outstanding Investor Notes shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Indenture Trustee with respect to the Investor Notes or exercising any trust or power conferred on the Indenture Trustee; provided that (a) such direction shall not be in conflict with any rule of law or with the Indenture; (b) if an Event of Default is with respect to less than all Series of Outstanding Investor Notes, then the Indenture Trustee's rights and remedies shall be limited to the rights and remedies pertaining only to those Series of Investor Notes with respect to which such Event of 37 43 Default has occurred and the Indenture Trustee shall exercise such rights and remedies only at the direction of the Holders of a Majority in Interest of all such Series of Investor Notes; (c) subject to the express terms of SECTION 9.4, any direction to the Indenture Trustee to sell or liquidate the Collateral shall be by the Holders of Investor Notes representing not less than 100% of the Aggregate Invested Amount; (d) if the conditions set forth in SECTION 9.5 have been satisfied and the Indenture Trustee elects to retain the Collateral pursuant to such Section, then any direction to the Indenture Trustee by Holders of Investor Notes representing less than 100% of the Aggregate Invested Amount to sell or liquidate the Collateral shall be of no force and effect; (e) the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction; and (f) such direction shall be in writing; provided, further, that, subject to SECTION 10.1, the Indenture Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Investor Noteholders not consenting to such action. SECTION 9.12. WAIVER OF PAST DEFAULTS. Prior to the declaration of the acceleration of the maturity of the Investor Notes of any Series as provided in SECTION 9.2, the Holders of the Investor Notes of not less than a Majority in Interest of such Series of Outstanding Investor Notes may, on behalf of all such Holders, waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of or interest on any of the Investor Notes or (b) in respect of a covenant or provision hereof which cannot be modified or amended without the consent of the Holder of each Investor Note. In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders of the Investor Notes of such Outstanding Series shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto. Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of the Indenture; but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto. SECTION 9.13. UNDERTAKING FOR COSTS. All parties to the Indenture agree, and each Holder of any Investor Note by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under the Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as the Indenture Trustee, the filing by any party litigant in such Proceeding of an undertaking to pay the costs of such Proceeding, and that such court may in its discretion assess reasonable costs, including 38 44 reasonable attorneys' fees, against any party litigant in such Proceeding, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Investor Noteholder or group of Investor Noteholders, in each case holding in the aggregate more than 10% of the Invested Amount of any Series of Investor Notes, or (c) any suit instituted by any Investor Noteholder for the enforcement of the payment of principal of or interest on any Investor Note on or after the respective due dates expressed in such Investor Note and in the Indenture. SECTION 9.14. WAIVER OF STAY OR EXTENSION LAWS. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead or in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of the Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted. SECTION 9.15. ACTION ON INVESTOR NOTES. The Indenture Trustee's right to seek and recover judgment on the Investor Notes or under the Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to the Indenture. Neither the lien of this Base Indenture nor any rights or remedies of the Indenture Trustee or the Investor Noteholders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or upon any of the assets of the Issuer. ARTICLE X THE INDENTURE TRUSTEE SECTION 10.1. DUTIES OF THE INDENTURE TRUSTEE. (a) If a Termination Event or Event of Default has occurred and is continuing, the Indenture Trustee shall exercise such of the rights and powers vested in it by the Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs. (b) The Indenture Trustee, upon receipt of all resolutions, certificates, statements, opinions, reports, documents, orders or other instruments furnished to the Indenture Trustee which are specifically required to be furnished pursuant to any provision of this Base Indenture or any of the other Transaction Documents, shall examine them to determine whether they substantially conform to the requirements of the Indenture or such other Transaction Document, as the case may be; provided, however, that the Indenture Trustee shall not be 39 45 responsible for the content of any resolution, certificate, statement, opinion, report, document, order or other instrument furnished by the Collection Agent or the Issuer hereunder. (c) SUBJECT TO SUBSECTION 10.1(a), no provision of the Indenture shall be construed to relieve the Indenture Trustee from liability for its own negligent action, its own negligent failure to act or its own bad faith or wilful misconduct; provided, however, that: (i) the Indenture Trustee shall not be liable for an error of judgment made in good faith by a Responsible Officer of the Indenture Trustee, unless it shall be proved that the Indenture Trustee was negligent in ascertaining the pertinent facts nor shall the Indenture Trustee be liable with respect to any action it takes or omits to take in good faith in accordance with the Indenture or in accordance with a direction received by it pursuant to the terms of this Base Indenture or any of the Transaction Documents; (ii) the Indenture Trustee shall not be charged with knowledge of any Event of Default unless a Responsible Officer of the Indenture Trustee obtains actual knowledge thereof or receives written notice thereof; (iii) the Indenture Trustee shall not be charged with knowledge of any failure by any Person to comply with its obligations under the Transaction Documents unless a Responsible Officer of the Indenture Trustee obtains actual knowledge of such failure or receives written notice thereof; (iv) prior to the occurrence of a Termination Event or an Event of Default, and after the curing of all such Termination Events or Events of Default which may have occurred, the duties and obligations of the Indenture Trustee shall be determined solely by the express provisions of the Indenture, the Indenture Trustee shall be obligated to perform only such duties and obligations as are specifically set forth in the Indenture and no implied covenants or obligations shall be read into the Indenture against the Indenture Trustee; (v) anything in the Indenture to the contrary notwithstanding, in no event shall the Indenture Trustee be liable for special, indirect or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Indenture Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action; and (vi) subject to the other provisions of the Indenture and without limiting the generality of this SECTION 10.1, the Indenture Trustee shall have no duty (A) to record, file, or deposit the Indenture, the Transaction Documents or any agreement referred to herein or therein or any financing statement or continuation statement evidencing a security interest, or to maintain any such recording or filing or depositing or to rerecord, refile, or redeposit any thereof, (B) to insure the Collateral and (C) to pay or discharge any tax, assessment, or other governmental charge or any lien or encumbrance of any kind owing with respect 40 46 to assessed or levied against, any part of the Collateral other than from funds available in the Collection Account. (d) The Indenture Trustee shall not be required to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if there is reasonable ground for believing that the repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it, and none of the provisions contained in the Indenture shall in any event require the Indenture Trustee to perform, or be responsible for the manner of performance of, any of the obligations of any Person under any of the Transaction Documents. (e) Except for actions expressly authorized by the Indenture, the Indenture Trustee shall take no action reasonably likely to impair the security interests created hereunder in any of the Collateral now existing or hereafter created or to impair the value of any of the Collateral now existing or hereafter created. (f) In the event that the Paying Agent or the Transfer Agent and Registrar shall fail to perform any obligation, duty or agreement in the manner or on the day required to be performed by the Paying Agent or the Transfer Agent and Registrar, as the case may be, under the Indenture, the Indenture Trustee shall be obligated promptly to perform such obligation, duty or agreement in the manner so required. SECTION 10.2. RIGHTS OF THE INDENTURE TRUSTEE. Except as otherwise provided by SECTION 10.1: (a) The Indenture Trustee may conclusively rely and shall be fully protected in acting or refraining from acting based upon any document believed by it to be genuine and to have been signed by or presented by the proper person. (b) The Indenture Trustee may consult with counsel of its selection and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection from liability in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon. (c) The Indenture Trustee may act through agents, custodians and nominees and shall not be liable for any misconduct or negligence on the part of, or for the supervision of, any such agent, custodian or nominee so long as such agent, custodian or nominee is appointed with due care. (d) The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers conferred upon it by the Indenture; provided, that the Indenture Trustee's conduct does not constitute wilful misconduct, negligence or bad faith. (e) Prior to the occurrence of an Event of Default and after the curing of all Events of Default that may have occurred, the Indenture Trustee shall be under no obligation to institute, conduct or defend any litigation hereunder or in relation hereto, unless requested in 41 47 writing to do so by Holders of the Investor Notes evidencing not less than 25% of the Invested Amount of any Series of Investor Notes; provided, however, that if the payment within a reasonable time to the Indenture Trustee of the costs, expenses, or liabilities likely to be incurred by it in instituting, conducting or defending any litigation hereunder or in relation hereto shall be, in the opinion of the Indenture Trustee, not reasonably assured to the Indenture Trustee by the security afforded to it by the terms of the Indenture, the Indenture Trustee may require reasonable indemnity against such cost, expense, or liability or payment of such expenses as a condition precedent to so proceeding. The reasonable expense of every such examination shall be paid by the Collection Agent or, if paid by the Indenture Trustee, shall be reimbursed by the Collection Agent upon demand. (f) The Indenture Trustee shall not be liable for any losses or liquidation penalties in connection with Permitted Investments, unless such losses or liquidation penalties were incurred through the Indenture Trustee's own willful misconduct, negligence or bad faith. (g) The Indenture Trustee shall not be liable for the acts or omissions of any successor to the Indenture Trustee so long as such acts or omissions were not the result of its negligence, bad faith or willful misconduct. (h) The right of the Indenture Trustee to perform any discretionary act enumerated in the Indenture shall not be construed as a duty, and the Indenture Trustee shall not be answerable for other than its negligence or wilful misconduct in the performance of such act. SECTION 10.3. INDENTURE TRUSTEE'S DISCLAIMER. The Indenture Trustee assumes no responsibility for the correctness of the recitals contained herein and in the Investor Notes (other than the certificate of authentication on the Investor Notes). Except as set forth in SECTION 10.11, the Indenture Trustee makes no representations as to the validity or sufficiency of the Indenture or of the Investor Notes (other than the certificate of authentication on the Investor Notes) or of any of the Collateral. The Indenture Trustee shall not be accountable for the use or application by the Issuer of any of the Investor Notes or of the proceeds of such Investor Notes, or for the use or application of any funds paid to the Issuer in respect of the Collateral. SECTION 10.4. INDENTURE TRUSTEE MAY OWN INVESTOR NOTES. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Investor Notes with the same rights as it would have if it were not the Indenture Trustee. SECTION 10.5. NOTICE OF DEFAULTS. If a Default or an Event of Default or a Potential Termination Event or a Termination Event or a Collection Agent Termination Event or Potential Collection Agent Termination Event occurs and is continuing and if it is either actually known or written notice of the existence thereof has been delivered to a Responsible Officer of the Indenture Trustee, the Indenture Trustee shall promptly provide written notice thereof to each Investor Noteholder and 42 48 in any case shall provide written notice thereof within one Business Day after such knowledge or notice occurs. SECTION 10.6. COMPENSATION. The Issuer shall cause the Collection Agent pursuant to the Collection Agency Agreement to pay to the Indenture Trustee from time to time reasonable compensation for its services. The Indenture Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Issuer shall cause the Collection Agent pursuant to the Collection Agency Agreement to reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall cause the Collection Agent pursuant to the Collection Agency Agreement to indemnify the Indenture Trustee against any and all loss, liability or expense (including the reasonable fees of counsel) incurred by it in connection with the administration of this trust and the performance of its duties hereunder. The Indenture Trustee shall notify the Issuer and the Collection Agent promptly of any claim for which it may seek indemnity; provided, however, a failure by the Indenture Trustee to promptly notify the Issuer and the Collection Agent of a claim for which it may seek indemnity shall not relieve the Collection Agent from its obligation to indemnify the Indenture Trustee. When the Indenture Trustee incurs expenses after the occurrence of an Event of Default specified in Section 9.1(e) with respect to the Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Code or any other applicable federal or state bankruptcy, insolvency or similar law. SECTION 10.7. ELIGIBILITY REQUIREMENTS FOR INDENTURE TRUSTEE. The Indenture Trustee hereunder shall at all times be a corporation organized and doing business under the laws of the United States or any state thereof authorized under such laws to exercise corporate trust powers, having a long-term unsecured debt rating of at least "Baa3" by Moody's and "BBB-" by Standard & Poor's having, in the case of an entity that is subject to risk-based capital adequacy requirements, risk-based capital of at least $50,000,000 or, in the case of an entity that is not subject to risk-based capital adequacy requirements, having a combined capital and surplus of at least $50,000,000 and subject to supervision or examination by federal or state authority, and shall satisfy the requirements for a trustee set forth in paragraph (a)(4)(i) of Rule 3a-7 under the Investment Company Act. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this SECTION 10.7, the risk-based capital or the combined capital and surplus of such corporation, as the case may be, shall be deemed to be its risk-based capital or combined capital and surplus as set forth in the most recent report of condition so published. If at any time the Indenture Trustee ceases to be eligible in accordance with the provisions of this SECTION 10.7, the Indenture Trustee shall resign immediately in the manner and with the effect specified in SECTION 10.8. 43 49 SECTION 10.8. RESIGNATION OR REMOVAL OF INDENTURE TRUSTEE. (a) The Indenture Trustee may give notice of its intent to resign at any time by so notifying the Issuer. The Holders of a Majority in Interest of each Series of Outstanding Investor Notes may remove the Indenture Trustee by so notifying the Indenture Trustee and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if: (i) the Indenture Trustee fails to comply with SECTION 10.7; (ii) the Indenture Trustee is adjudged bankrupt or insolvent; (iii) a receiver or other public officer takes charge of the Indenture Trustee or its property; or (iv) the Indenture Trustee otherwise becomes incapable of acting. (b) If the Indenture Trustee gives notice of its intent to resign or is removed or if a vacancy exists in the office of the Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall promptly appoint a successor Indenture Trustee. (c) A successor Indenture Trustee shall deliver a written acceptance of its appointment to the retiring Indenture Trustee and to the Issuer and thereupon the resignation or removal of the Indenture Trustee shall become effective, and the successor Indenture Trustee, without any further act, deed or conveyance shall have all the rights, powers and duties of the Indenture Trustee under the Indenture. The successor Indenture Trustee shall mail a notice of its succession to Investor Noteholders. The retiring Indenture Trustee shall promptly transfer all property held by it as the Indenture Trustee to the successor Indenture Trustee. (d) If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee gives notice of its intent to resign or is removed, the retiring Indenture Trustee, the Issuer or the Holders of a Majority in Interest of each Series of Outstanding Investor Notes may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee. (e) If the Indenture Trustee fails to comply with Section 10.7, any Investor Noteholder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee. (f) Any resignation or removal of the Indenture Trustee and appointment of a successor Indenture Trustee pursuant to any of the provisions of this Section shall not become effective until acceptance of appointment by the successor Indenture Trustee pursuant to SECTION 10.8(c) and payment of all fees and expenses owed to the outgoing Indenture Trustee. (g) Notwithstanding the resignation or removal of the Indenture Trustee pursuant to this Section, the Issuer's obligations under SECTION 10.6 shall continue for the benefit of the retiring Indenture Trustee. The Indenture Trustee shall not be liable for the acts or omissions of any successor Indenture Trustee. 44 50 SECTION 10.9. SUCCESSOR INDENTURE TRUSTEE BY MERGER. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Indenture Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Indenture Trustee shall succeed to the trusts created by this Base Indenture any of the Investor Notes shall have been authenticated but not delivered, any such successor to the Indenture Trustee may adopt the certificate of authentication of any predecessor Indenture Trustee, and deliver such Investor Notes so authenticated; and in case at that time any of the Investor Notes shall not have been authenticated, any successor Indenture Trustee may authenticate such Investor Notes either in the name of any predecessor Indenture Trustee hereunder or in the name of the successor Indenture Trustee; and in all such cases such certificate of authentication shall have the same full force as is provided anywhere in the Investor Notes or in this Base Indenture with respect to the certificate of authentication of the Indenture Trustee. SECTION 10.10. APPOINTMENT OF CO-INDENTURE TRUSTEE OR SEPARATE INDENTURE TRUSTEE. (a) Notwithstanding any other provisions of this Base Indenture or any Indenture Supplement, at any time, for the purpose of meeting any legal requirements of any jurisdiction in which any part of the Collateral may at the time be located, the Indenture Trustee shall have the power and may execute and deliver all instruments to appoint one or more persons to act as a co-Indenture Trustee or co-Indenture Trustees, or separate Indenture Trustee or separate Indenture Trustees, of all or any part of the Collateral, and to vest in such Person or Persons, in such capacity and for the benefit of the Investor Noteholders, such title to the Collateral, or any part thereof, and, subject to the other provisions of this SECTION 10.10, such powers, duties, obligations, rights and trusts as the Indenture Trustee may consider necessary or desirable. No co-Indenture Trustee or separate Indenture Trustee hereunder shall be required to meet the terms of eligibility as a successor Indenture Trustee under SECTION 10.7 and no notice to Investor Noteholders of the appointment of any co-Indenture Trustee or separate Indenture Trustee shall be required under SECTION 10.8. No co-Indenture Trustee shall be appointed without the consent of the Issuer unless such appointment is required as a matter of state law or to enable the Indenture Trustee to perform its functions hereunder. (b) Every separate Indenture Trustee and co-Indenture Trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions: (i) The Investor Notes of each Series shall be authenticated and delivered solely by the Indenture Trustee or an authenticating agent appointed by the Indenture Trustee; (ii) All rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate Indenture Trustee or 45 51 co-Indenture Trustee jointly (it being understood that such separate Indenture Trustee or co-Indenture Trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed, the Indenture Trustee shall be incompetent or unqualified to perform, such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Collateral or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate Indenture Trustee or co-Indenture Trustee, but solely at the direction of the Indenture Trustee; (iii) No Indenture Trustee hereunder shall be personally liable by reason of any act or omission of any other Indenture Trustee hereunder; and (iv) The Indenture Trustee may at any time accept the resignation of or remove any separate Indenture Trustee or co-Indenture Trustee. (c) Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then separate Indenture Trustees and co-Indenture Trustees, as effectively as if given to each of them. Every instrument appointing any separate Indenture Trustee or co-Indenture Trustee shall refer to this Base Indenture and the conditions of this ARTICLE IX. Each separate Indenture Trustee and co-Indenture Trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Base Indenture and any Indenture Supplement, specifically including every provision of this Base Indenture or any Indenture Supplement relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee and a copy thereof given to the Issuer. (d) Any separate Indenture Trustee or co-Indenture Trustee may at any time constitute the Indenture Trustee, its agent or attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect to this Base Indenture or any Indenture Supplement on its behalf and in its name. If any separate Indenture Trustee or co-Indenture Trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor Indenture Trustee. (e) In connection with the appointment of a co-Indenture Trustee, the Indenture Trustee may, at any time, at the Indenture Trustee's sole cost and expense, without notice to the Investor Noteholders, delegate its duties under this Base Indenture and any Indenture Supplement to any Person who agrees to conduct such duties in accordance with the terms hereof; provided, however, that no such delegation shall relieve the Indenture Trustee of its obligations and responsibilities hereunder with respect to any such delegated duties. 46 52 SECTION 10.11. REPRESENTATIONS AND WARRANTIES OF INDENTURE TRUSTEE. The Indenture Trustee represents and warrants to the Issuer and the Investor Noteholders that: (i) The Indenture Trustee is a banking corporation organized, existing and in good standing under the laws of the State of New York; (ii) The Indenture Trustee has full power, authority and right to execute, deliver and perform this Base Indenture and any Indenture Supplement issued concurrently with this Base Indenture and to authenticate the Investor Notes, and has taken all necessary action to authorize the execution, delivery and performance by it of this Base Indenture and any Indenture Supplement issued concurrently with this Base Indenture and to authenticate the Investor Notes; (iii) This Base Indenture has been duly executed and delivered by the Indenture Trustee; and (iv) The Indenture Trustee meets the requirements of eligibility as an Indenture Trustee hereunder set forth in SECTION 10.7. ARTICLE XI DISCHARGE OF INDENTURE SECTION 11.1. TERMINATION OF THE ISSUER'S OBLIGATIONS. This Base Indenture shall cease to be of further effect (except that the Issuer's obligations under SECTION 10.6 shall survive) when all Outstanding Investor Notes theretofore authenticated and issued have been delivered (other than destroyed, lost or stolen Investor Notes which have been replaced or paid) to the Indenture Trustee for cancellation, the Issuer has paid all sums payable hereunder and all Indenture Supplements shall have terminated in accordance with their respective terms. SECTION 11.2. REPAYMENT TO THE ISSUER. The Indenture Trustee and the Paying Agent shall promptly pay to the Issuer upon written request any excess money or, pursuant to SECTION 2.4, return any Investor Notes held by them at any time. The provisions of this SECTION 11.2 shall survive the expiration or earlier termination of this Base Indenture. 47 53 ARTICLE XII AMENDMENTS SECTION 12.1. WITHOUT CONSENT OF THE INVESTOR NOTEHOLDERS. Without the consent of any Investor Noteholder, the Issuer and the Indenture Trustee, at any time and from time to time, may enter into one or more supplements hereto, in form satisfactory to the Indenture Trustee, for any of the following purposes, provided that the Rating Agency Condition is met: (a) to create a new Series of Investor Notes; (b) to add to the covenants of the Issuer for the benefit of any Investor Noteholders (and if such covenants are to be for the benefit of less than all Series of Investor Notes, stating that such covenants are expressly being included solely for the benefit of such Series) or to surrender any right or power herein conferred upon the Issuer (PROVIDED, HOWEVER, that the Issuer will not pursuant to this SECTION 12.1(b) surrender any right or power it has under the Transaction Documents); (c) to mortgage, pledge, convey, assign and transfer to the Indenture Trustee any property or assets as security for the Investor Notes and to specify the terms and conditions upon which such property or assets are to be held and dealt with by the Indenture Trustee and to set forth such other provisions in respect thereof as may be required by the Base Indenture or as may, consistent with the provisions of the Base Indenture, be deemed appropriate by the Issuer and the Indenture Trustee, or to correct or amplify the description of any such property or assets at any time so mortgaged, pledged, conveyed and transferred to the Indenture Trustee on behalf of the Investor Noteholders; (d) to cure any ambiguity, defect, or inconsistency or to correct or supplement any provision contained herein or in any Indenture Supplement or in any Investor Notes issued hereunder; (e) to evidence and provide for the acceptance of appointment hereunder by a successor Indenture Trustee with respect to the Investor Notes of one or more Series and to add to or change any of the provisions of the Base Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Indenture Trustee; or (f) to correct or supplement any provision herein which may be inconsistent with any other provision herein or to make any other provisions with respect to matters or questions arising under this Base Indenture; PROVIDED, HOWEVER, that, as evidenced by an Opinion of Counsel delivered to the Indenture Trustee (at the Issuer's expense), such action shall not adversely affect in any material respect the interests of any Investor Noteholder. Upon the request of the Issuer, the Indenture Trustee shall join with the Issuer in the execution of any supplement hereto authorized or permitted by the terms of this Base Indenture and shall make any further appropriate agreements and stipulations which may be therein contained, but the Indenture Trustee shall not be obligated to 48 54 enter into such supplement which affects its own rights, duties or immunities under this Base Indenture or otherwise. SECTION 12.2. WITH CONSENT OF THE INVESTOR NOTEHOLDERS. Except as provided in SECTION 12.1, the provisions of this Base Indenture and any Indenture Supplement (unless otherwise provided in such Indenture Supplement) may from time to time be amended, modified or waived, if such amendment, modification or waiver is in writing and consented to in writing by the Issuer, the Indenture Trustee and the Holders of a Majority in Interest of each Series of Outstanding Investor Notes; provided that, if such amendment, modification or waiver of or to this Base Indenture or such Indenture Supplement does not affect the Investor Noteholders of a particular Series of Investor Notes (as substantiated by an Opinion of Counsel to such effect), then the consent of the Investor Noteholders of such Series shall not be required to such amendment, modification or waiver. Notwithstanding the foregoing: (i) any modification of this SECTION 12.2, any requirement hereunder that any particular action be taken by Investor Noteholders holding the relevant percentage in principal amount of the Investor Notes or any change in the definition of the terms "Net Receivables Balance" or "Invested Amount", "Invested Percentage" or any defined term used for the purpose of any such definitions shall require the consent of each affected Investor Noteholder; and (ii) any amendment, waiver or other modification that would (a) extend the due date for, or reduce the amount of any scheduled repayment or prepayment of principal of or interest on any Investor Note (or reduce the principal amount of or rate of interest on any Investor Note) shall require the consent of each affected Investor Noteholder; (b) approve the assignment or transfer by the Issuer of any of its rights or obligations hereunder or under any other Transaction Document to which it is a party except pursuant to the express terms hereof or thereof shall require the consent of each Investor Noteholder; (c) release any obligor under any Transaction Document to which it is a party except pursuant to the express terms of such Transaction Document shall require the consent of each Investor Noteholder; or (d) affect adversely the interests, rights or obligations of any Investor Noteholder individually in comparison to any other Investor Noteholder shall require the consent of such Investor Noteholder. SECTION 12.3. SUPPLEMENTS. Each amendment or other modification to this Base Indenture or the Investor Notes shall be set forth in a supplement thereto. In addition to the manner provided in SECTIONS 12.1 and 12.2, each Indenture Supplement may be amended as provided in such Indenture Supplement. SECTION 12.4. REVOCATION AND EFFECT OF CONSENTS. Until an amendment or waiver becomes effective, a consent to it by an Investor Noteholder of an Investor Note is a continuing consent by the Investor Noteholder and every 49 55 subsequent Investor Noteholder of an Investor Note or portion of an Investor Note that evidences the same debt as the consenting Investor Noteholder's Investor Note, even if notation of the consent is not made on any Investor Note. However, any such Investor Noteholder or subsequent Investor Noteholder may revoke the consent as to his Investor Note or portion of an Investor Note if the Indenture Trustee receives written notice of revocation before the date the amendment or waiver becomes effective. An amendment or waiver becomes effective in accordance with its terms and thereafter binds every Investor Noteholder. The Issuer may fix a record date for determining which Investor Noteholders must consent to such amendment or waiver. SECTION 12.5. NOTATION ON OR EXCHANGE OF INVESTOR NOTES. The Indenture Trustee may place an appropriate notation about an amendment or waiver on any Investor Note thereafter authenticated. The Issuer in exchange for all Investor Notes may issue and the Indenture Trustee shall authenticate new Investor Notes that reflect the amendment or waiver. Failure to make the appropriate notation or issue a new Investor Note shall not affect the validity and effect of-such amendment or waiver. SECTION 12.6. THE INDENTURE TRUSTEE TO SIGN AMENDMENTS, ETC. The Indenture Trustee shall sign any supplement authorized pursuant to this ARTICLE XII if the supplement does not adversely affect the rights, duties, liabilities or immunities of the Indenture Trustee. If it does, the Indenture Trustee may, but need not, sign it. In signing such supplement, the Indenture Trustee shall be entitled to receive, if requested, an indemnity reasonably satisfactory to it and to receive and, subject to Section 10.1, shall be fully protected in relying upon, an Officer's Certificate and an Opinion of Counsel as conclusive evidence that such supplement is authorized or permitted by this Base Indenture and that it will be valid and binding upon the Issuer in accordance with its terms. ARTICLE XIII MISCELLANEOUS SECTION 13.1. COMPLIANCE CERTIFICATES AND OPINIONS. (a) Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Base Indenture or any Indenture Supplement, the Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Base Indenture or such Indenture Supplement relating to the proposed action have been complied with and (ii) an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Base Indenture, no additional certificate or opinion need be furnished. Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Base Indenture or any Indenture Supplement shall include: 50 56 (i) a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto; (ii) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (iii) a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether such covenant or condition has been complied with; and (iv) a statement as to whether, in the opinion of each such signatory such condition or covenant has been complied with. SECTION 13.2. FORMS OF DOCUMENTS DELIVERED TO INDENTURE TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person my certify or give an opinion as to such matters in one or several documents. Any certificate or opinion of an Authorized Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate of an Authorized Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Collection Agent, the Seller or the Issuer, stating that the information with respect to such factual matters is in the possession of the Collection Agent, the Seller or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous. Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Base Indenture or any Indenture Supplement, they may, but need not, be consolidated and form one instrument. Whenever in this Base Indenture or any Indenture Supplement, in connection with any application, certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document (x) as a condition of the granting of such application, or (y) as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in each case be conditions 51 57 precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee's right to rely upon the truth and accuracy of any statement or opinion contained in any such document as provided in ARTICLE X. SECTION 13.3. ACTIONS OF INVESTOR NOTEHOLDERS. (a) Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Base Indenture or any Indenture Supplement to be given or taken by the Investor Noteholders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Investor Noteholders in person or by an agent duly appointed in writing; and except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, when required, to the Issuer. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Base Indenture or any Indenture Supplement and conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this SECTION 13.3. (b) The fact and date of the execution by any Investor Noteholder of any such instrument or writing may be proved in any reasonable manner which the Indenture Trustee deems sufficient. (c) Any request, demand, authorization, direction, notice, consent, waiver or other act by an Investor Noteholder shall bind every Holder of every Investor Note issued upon the registration of transfer thereof or in exchange therefor or in lieu thereof, in respect of anything done, or omitted to be done, by the Indenture Trustee or the Issuer in reliance thereon, regardless of whether notation of such action is made upon such Investor Note. (d) The Indenture Trustee may require such additional proof of any matter referred to in this SECTION 13.3 as it shall deem necessary. SECTION 13.4. NOTICES. (a) Any notice or communication by the Issuer or the Indenture Trustee to the other shall be in writing and delivered in person or mailed by first-class mail (registered or certified, return receipt requested), telex, telecopier or overnight air courier guaranteeing next day delivery, to the other's address: If to the Issuer: 1201 East Market Street Akron, Ohio 44305-4017 Attention: Telecopier No.(330) 796-1866 with a copy to the Collection Agent: 52 58 The Goodyear Tire & Rubber Company 1144 East Market Street Akron, Ohio 44316-0001 Telecopier: Attention: Office of the Treasurer If to the Indenture Trustee: The Chase Manhattan Bank 450 W. 33rd Street, 14th Floor New York, New York 10001 Attention: Institutional Trust Services, Goodyear Asset Backed Investor Notes Phone: (212) 946-3200 Fax: (212) 946-8302 The Issuer or the Indenture Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice (i) given in person shall be deemed delivered on the date of delivery of such notice, (ii) given by first class mail shall be deemed given five (5) days after the date that such notice is mailed, (iii) delivered by telex or telecopier shall be deemed given on the date of delivery of such notice, and (iv) delivered by overnight air courier shall be deemed delivered one Business Day after the date that such notice is delivered to such overnight courier. Notwithstanding any provisions of this Base Indenture to the contrary, the Indenture Trustee shall have no liability based upon or arising from the failure to receive any notice required by or relating to this Base Indenture or the Investor Notes. If the Issuer mails a notice or communication to Investor Noteholders, it shall mail a copy to the Indenture Trustee at the same time. (b) Where the Indenture provides for notice to Investor Noteholders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if sent in writing and mailed, first-class postage prepaid, to each Investor Noteholder affected by such event, at its address as it appears in the Note Register, not later than the latest date, and not earlier than the earliest date, prescribed (if any) for the giving of such notice. In any case where notice to Investor Noteholder is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Investor Noteholder shall affect the sufficiency of such notice with respect to other Investor Noteholders, and any notice which is mailed in the manner herein provided shall be conclusively presumed to have been duly given. Where the Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Investor Noteholders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver. 53 59 In the case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made that is satisfactory to the Indenture Trustee shall constitute a sufficient notification for every purpose hereunder. SECTION 13.5. RULES BY THE INDENTURE TRUSTEE. The Indenture Trustee may make reasonable rules for action by or at a meeting of Investor Noteholders. SECTION 13.6. DUPLICATE ORIGINALS. The parties may sign any number of copies of this Base Indenture. One signed copy is enough to prove this Base Indenture. SECTION 13.7. BENEFITS OF BASE INDENTURE. Except as set forth in an Indenture Supplement, nothing in this Base Indenture or in the Investor Notes, expressed or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under the Base Indenture. SECTION 13.8. PAYMENT ON BUSINESS DAY. In any case where any Payment Date, redemption date or maturity date of any Investor Note shall not be a Business Day, then (notwithstanding any other provision of the Indenture) payment of interest or principal (and premium, if any), as the case may be, need not be made on such date but may be made on the next succeeding Business Day with the same force and effect as if made on the Payment Date, redemption date, or maturity date; provided, however. that no interest shall accrue for the period from and after such Payment Date, redemption date, or maturity date, as the case may be. SECTION 13.9. GOVERNING LAW. THIS BASE INDENTURE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 13.10. SEVERABILITY OF PROVISIONS. If any one or more of the covenants, agreements, provisions or terms of this Base Indenture shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions or terms shall be deemed severable from the remaining covenants, agreements, provisions or terms of this Base Indenture and shall in no way affect the validity of enforceability of the other provisions of this Base Indenture or of the Investor Notes or rights of the Investor Noteholders thereof. 54 60 SECTION 13.11. COUNTERPARTS. This Base Indenture may be executed in two or more counterparts (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 13.12. SUCCESSORS. All agreements of the Issuer in the Indenture and the Investor Notes shall bind its successor; provided, however, the Issuer may not assign its obligations or rights under the Indenture or any Transaction Document. All agreements of the Indenture Trustee in the Indenture shall bind its successor. SECTION 13.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents, Cross-Reference Table, and headings of the Articles and Sections of this Base Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof. SECTION 13.14. RECORDING OF BASE INDENTURE. If this Base Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee) to the effect that such recording is necessary either for the protection of the Investor Noteholders or any other person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Base Indenture. SECTION 13.15. NO PETITION. The Indenture Trustee, by entering into this Base Indenture, and each Investor Noteholder, by accepting an Investor Note, hereby covenant and agree that they will not at any time institute against the Issuer or join in any institution against the Issuer of, any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or state bankruptcy or similar law in connection with any obligations relating to the Investor Notes, this Base Indenture or any of the other Transaction Documents. 55 61 IN WITNESS WHEREOF, the Indenture Trustee and the Issuer have caused, this Base Indenture to be duly executed by their respective duly authorized officers as of the day and year first written above. WINGFOOT A/R LLC, as Issuer By: /s/ Stephanie W. Bergeron ----------------------------------------- Name: Stephanie W. Bergeron Title: Vice President and Treasurer THE CHASE MANHATTAN BANK, as Indenture Trustee By: ----------------------------------------- Name: Title: 62 IN WITNESS WHEREOF, the Indenture Trustee and the Issuer have caused, this Base Indenture to be duly executed by their respective duly authorized officers as of the day and year first written above. WINGFOOT A/R LLC, as Issuer By: ---------------------------------------- Name: Title: THE CHASE MANHATTAN BANK, as Indenture Trustee By: /s/ Kristen Driscoll -------------------------------------- Name: Kristen Driscoll Title: Assistant Vice President EX-10.3 5 l89521aex10-3.txt EXHIBIT 10.3 1 Exhibit 10.3 EXECUTION COPY WINGFOOT A/R LLC, as Issuer THE GOODYEAR TIRE & RUBBER COMPANY, as Collection Agent THE CHASE MANHATTAN BANK, as Administrative Agent, CERTAIN CP CONDUIT PURCHASERS, CERTAIN APA BANKS, CERTAIN FUNDING AGENTS and THE CHASE MANHATTAN BANK, as Indenture Trustee SERIES 2001-1 INDENTURE SUPPLEMENT dated as of April 27, 2001 to BASE INDENTURE dated as of April 27, 2001 2 TABLE OF CONTENTS
Page ---- ARTICLE 1 DEFINITIONS.............................................................................................1 ARTICLE 2 PURCHASE AND SALE OF SERIES 2001-1 INVESTOR NOTES; INCREASES AND DECREASES OF SERIES 2001-1 INVESTED AMOUNT....................................................................................19 SECTION 2.1. Purchases of the Series 2001-1 Investor Notes..............................................19 SECTION 2.2. Delivery...................................................................................20 SECTION 2.3. Procedure for Initial Issuance and for Increasing the Series 2001-1 Invested Amount........20 SECTION 2.4. Sales by CP Conduit Purchasers of Series 2001-1 Investor Notes to APA Banks................22 SECTION 2.5. Procedure for Decreasing the Series 2001-1 Invested Amount; Optional Termination...........22 SECTION 2.6. Increases and Reductions of the Commitments; Extensions of the Commitments.................23 SECTION 2.7. Interest; Fees.............................................................................25 SECTION 2.8. Indemnification by the Issuer and the Collection Agent.....................................26 SECTION 2.9. Funding Agents.............................................................................27 ARTICLE 3 ARTICLE V OF THE BASE INDENTURE........................................................................28 Section 5A.1 Establishment of Series 2001-1 Subaccounts................................................28 Section 5A.2 Allocations with Respect to the Series 2001-1 Investor Notes..............................29 Section 5A.3. Determination of Interest................................................................33 Section 5A.4. Monthly Application of Collections.......................................................33 Section 5A.5 Payment of Monthly Interest Payment, Fees and Expenses....................................34 Section 5A.6. Determination of Principal Payment.......................................................35 ARTICLE 4 TERMINATION EVENTS.....................................................................................36 ARTICLE 5 OPTIONAL PREPAYMENT....................................................................................39 ARTICLE 6 COLLECTION AGENT FEE...................................................................................39 SECTION 6.1. Collection Agent Fee.......................................................................39 ARTICLE 7 CHANGE IN CIRCUMSTANCES................................................................................39 SECTION 7.1. Illegality.................................................................................39 SECTION 7.2. Increased Costs............................................................................40 SECTION 7.3. Taxes......................................................................................41 SECTION 7.4. Break Funding Payments.....................................................................43 SECTION 7.5. Alternate Rate of Interest.................................................................43 SECTION 7.6. Mitigation Obligations.....................................................................44 ARTICLE 8 REPRESENTATIONS AND WARRANTIES, COVENANTS..............................................................44 SECTION 8.1. Representations and Warranties of the Issuer and Goodyear..................................44 SECTION 8.2. Covenants of the Issuer and Goodyear.......................................................45
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SECTION 8.3. Covenants of the Collection Agent..........................................................45 SECTION 8.4. Obligations Unaffected.....................................................................46 SECTION 8.5. Designation of Eligible Special Obligors and Additional Eligibility Criteria...............46 ARTICLE 9 CONDITIONS PRECEDENT...................................................................................47 SECTION 9.1. Conditions Precedent to Effectiveness of Indenture Supplement..............................47 ARTICLE 10 THE ADMINISTRATIVE AGENT..............................................................................51 SECTION 10.1. Appointment...............................................................................51 SECTION 10.2. Delegation of Duties......................................................................51 SECTION 10.3. Exculpatory Provisions....................................................................51 SECTION 10.4. Reliance by Administrative Agent..........................................................52 SECTION 10.5. Notice of Collection Agent Termination Event or Termination Event or Potential Termination Event........................................................... 52 SECTION 10.6. Non-Reliance on the Administrative Agent and Other Purchasers.............................53 SECTION 10.7. Indemnification...........................................................................53 SECTION 10.8. The Administrative Agent in Its Individual Capacity.......................................54 SECTION 10.9. Resignation of Administrative Agent; Successor Administrative Agent.......................54 ARTICLE 11 MISCELLANEOUS.........................................................................................55 SECTION 11.1. Ratification of Indenture.................................................................55 SECTION 11.2. Governing Law.............................................................................55 SECTION 11.3. Further Assurances........................................................................55 SECTION 11.4. Payments..................................................................................55 SECTION 11.5. Costs and Expenses........................................................................55 SECTION 11.6. No Waiver; Cumulative Remedies............................................................55 SECTION 11.7. Amendments................................................................................56 SECTION 11.8. Severability..............................................................................57 SECTION 11.9. Notices...................................................................................57 SECTION 11.10. Successors and Assigns...................................................................57 SECTION 11.11. Securities Laws..........................................................................59 SECTION 11.12. Adjustments; Set-off.....................................................................60 SECTION 11.13. Counterparts.............................................................................60 SECTION 11.14. No Bankruptcy Petition...................................................................60 SECTION 11.15. Termination of this Indenture Supplement.................................................61 SECTION 11.16. Limited Recourse.........................................................................61 SECTION 11.17. Waiver of Setoff.........................................................................62 SECTION 11.18. Conflict of Instructions.................................................................62 SECTION 11.19. Chase Conflict Waiver....................................................................62 SECTION 11.20. Submission to Jurisdiction; Waiver of Jury Trial.........................................62
-ii- 4 SCHEDULES Schedule I: List of CP Conduit Purchasers Schedule II: Litigation EXHIBITS Exhibit A Form of Series 2001-1 Variable Funding Investor Note Exhibit B: Increase Notice Exhibit C: Monthly Settlement Statement Exhibit D: Weekly Report Exhibit E: UCC Certificate Exhibit F: Form of Transfer Supplement Exhibit G: Form of Purchaser Supplement -iii- 5 SERIES 2001-1 SUPPLEMENT, dated as of April 27, 2001 (as amended, supplemented, restated or otherwise modified from time to time, this "INDENTURE SUPPLEMENT") among WINGFOOT A/R LLC, a special purpose limited liability company established under the laws of Delaware (the "ISSUER"), THE GOODYEAR TIRE & RUBBER COMPANY, as collection agent (in such capacity, the "COLLECTION AGENT"), the several commercial paper conduits listed on Schedule I and their respective permitted successors and assigns (the "CP CONDUIT PURCHASERS"; each, individually, a "CP CONDUIT PURCHASER"), the several banks set forth opposite the name of each CP Conduit Purchaser on Schedule I and the other banks parties hereto pursuant to SECTION 11.10(C) (each an "APA BANK" with respect to such CP Conduit Purchaser), the agent bank set forth opposite the name of each CP Conduit Purchaser on Schedule I and its permitted successor and assign (the "FUNDING AGENT" with respect to such CP Conduit Purchaser), Chase, in its capacity as administrative agent for the CP Conduit Purchasers, the APA Banks and the Funding Agents (the "ADMINISTRATIVE AGENT"), and The Chase Manhattan Bank, in its capacity as Indenture Trustee (together with its successors in trust thereunder as provided in the Base Indenture referred to below, the "INDENTURE TRUSTEE"), to the Base Indenture, dated as of April 27, 2001, between the Issuer and the Indenture Trustee (as amended, modified, restated or supplemented from time to time, exclusive of Indenture Supplements creating new Series of Investor Notes, the "BASE INDENTURE"). PRELIMINARY STATEMENT --------------------- WHEREAS, SECTIONS 2.2 and 12.1 of the Base Indenture provide, among other things, that the Issuer and the Indenture Trustee may at any time and from time to time enter into an Indenture Supplement to the Base Indenture for the purpose of authorizing the issuance of one or more Series of Investor Notes. NOW, THEREFORE, the parties hereto agree as follows: DESIGNATION ----------- There is hereby created a Series of Investor Notes to be issued pursuant to the Base Indenture and this Indenture Supplement and such Series of Investor Notes shall be designated generally as Floating Rate Asset Backed Variable Funding Investor Notes, Series 2001-1. The proceeds from the sale of the Series 2001-1 Investor Notes (as defined herein) and the proceeds from any Increase (as defined herein) shall be deposited in the Series 2001-1 Collection Subaccount and shall be used by the Issuer to purchase Receivables from the Seller pursuant to the Receivables Purchase Agreement. ARTICLE 1 DEFINITIONS ----------- (a) All capitalized terms not otherwise defined herein are defined in the Definitions List attached to the Base Indenture as SCHEDULE 1 thereto. All Article, Section or Subsection references herein shall refer to Articles, Sections or Subsections of this Indenture 6 2 Supplement, except as otherwise provided herein. Unless otherwise stated herein, as the context otherwise requires or if such term is otherwise defined in the Base Indenture, each capitalized term used or defined herein shall relate only to the Series 2001-1 Investor Notes and not to any other Series of Investor Notes issued by the Issuer. (b) The following words and phrases shall have the following meanings with respect to the Series 2001-1 Investor Notes and the definitions of such terms are applicable to the singular as well as the plural form of such terms and to the masculine as well as the feminine and neuter genders of such terms: "ACCRUED EXPENSE AMOUNT" means, for each Business Day, the sum of (i) the Daily Interest Amount for such Business Day, (ii) the Daily Unused Fee Amount for such Business Day, (iii) the Daily Collection Agent Fee Amount for such Business Day and (vi) all Article 7 Costs which have accrued since the preceding Business Day. "ACQUIRING APA BANK" is defined in SECTION 11.10(c). "ACQUIRING PURCHASER" is defined in SECTION 11.10(e). "ADDITIONAL CP CONDUIT PURCHASER" is defined in SECTION 2.6(e). "ADDITIONAL FUNDING AGENT" is defined in SECTION 2.6(e). "ADDITIONAL INTEREST" is defined in SECTION 5A.3(b). "ADJUSTED LIBO RATE" means, with respect to each day during each Eurodollar Period pertaining to a portion of the Purchaser Invested Amount with respect to any Purchaser allocated to a Eurodollar Tranche, an interest rate per annum (rounded upwards, if necessary, to the nearest 1/16th of 1%) equal to the LIBO Rate for such Eurodollar Period multiplied by the Statutory Reserve Rate. "AFFECTED PARTY" means any CP Conduit Purchaser and any Program Support Provider with respect to such CP Conduit Purchaser. "AGGREGATE COMMITMENT AMOUNT" means, on any date of determination, the sum of the Commitment Amounts with respect to the APA Banks included in each Purchaser on such date. "ALTERNATE BASE RATE" means, for any day, a rate per annum equal to the greater of (a) the Prime Rate in effect on such day AND (b) the Federal Funds Effective Rate in effect on such day plus 1.5%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective day of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "AMORTIZATION PERIOD" means the period commencing on the Business Day following the earliest to occur of (i) the date on which the Expiry Date with respect to each Purchaser shall have occurred, (ii) the Optional Termination Date and (iii) the 7 3 Prepayment Date and ending on the date when the Series 2001-1 Invested Amount shall have been reduced to zero and all accrued interest and other amounts owing on the Series 2001-1 Investor Notes and to the Administrative Agent, the CP Conduit Purchasers, the Funding Agents and the APA Banks shall have been paid in full. "APA BANK" is defined in the recitals hereto. "APA BANK FUNDED AMOUNT" means, with respect to any Purchaser for any day, the excess, if any, of the Purchaser Invested Amount with respect to such Purchaser over the CP Conduit Funded Amount for such day. "APA BANK PERCENTAGE" means, with respect to any APA Bank, the percentage set forth opposite the name of such APA Bank on Schedule I. "APPLICABLE MARGIN" means on any date of determination, (i) with respect to the Floating Tranche, (x) 0% per annum prior to the deemed or declared occurrence of a Termination Event or the occurrence and continuance of a Potential Termination Event and (y) 2% per annum after the deemed or declared occurrence of a Termination Event or after the occurrence and during the continuance of a Potential Termination Event and (ii) with respect to any Eurodollar Tranche, (x) the sum of 0.125% per annum plus the Applicable Used Fee on such date of determination prior to the deemed or declared occurrence of a Termination Event or the occurrence and continuance of a Potential Termination Event and (y) 4.00% per annum after the deemed or declared occurrence of a Termination Event or after the occurrence and during the continuance of a Potential Termination Event. "APPLICABLE USED FEE" means on any date of determination, (a) during any period when the unsecured long-term debt of Goodyear is rated at least A by S&P and at least A2 by Moody's, 0.250% per annum; (b) during any period when the unsecured long-term debt of Goodyear does not satisfy the ratings required by clause (a) hereof and it is rated at least BBB+ by S&P and at least Baa1 by Moody's, 0.325%; (c) during any period when the unsecured long-term debt of Goodyear does not satisfy the ratings required by clause (a) or (b) hereof and it is rated at least BBB- by S&P and at least Baa3 by Moody's, 0.400%; (d) during any period when the unsecured long-term debt of Goodyear does not satisfy the ratings required by clause (a), (b) or (c) hereof and it is rated at least BB by S&P and at least Ba2 by Moody's; 0.500% and (e) during any period when the unsecured long-term debt of Goodyear does not satisfy the ratings required by clause (a), (b), (c) or (d), 4.00%; PROVIDED, HOWEVER, that on any date of determination after the deemed or declared occurrence of a Termination Event or after the occurrence and during the continuance of a Potential Termination Event, the Applicable Used Fee shall be 4.00%. "ARTICLE 7 COSTS" means any amounts due pursuant to Article 7. "ASSET PURCHASE AGREEMENT" means, with respect to any CP Conduit Purchaser, the asset purchase agreement, liquidity agreement or other agreement among such CP Conduit Purchaser, the Funding Agent with respect to such CP Conduit Purchaser and the 8 4 APA Banks with respect to such CP Conduit Purchaser, as amended, modified or supplemented from time to time. "AVAILABLE APA BANK FUNDING AMOUNT" means, with respect to any Purchaser for any Business Day, the sum of (i) the portion of such Purchaser's Commitment Percentage of the Series 2001-1 Initial Invested Amount not to be funded by such Purchaser by issuing Commercial Paper if such Business Day is the Series 2001-1 Initial Funding Date, (ii) the portion of the APA Bank Funded Amount with respect to such Purchaser not allocated to a Eurodollar Tranche on such Business Day, (iii) the portion of the APA Bank Funded Amount with respect to such Purchaser allocated to any Eurodollar Tranche the Eurodollar Period in respect of which expires on such Business Day and (iv) the portion of such Purchaser's Purchaser Increase Amount for such Business Day not to be funded by such Purchaser by issuing Commercial Paper. "AVAILABLE CP FUNDING AMOUNT" means, with respect to any Purchaser for any Business Day, the sum of (i) the portion of such Purchaser's Commitment Percentage of the Series 2001-1 Initial Invested Amount to be funded by such Purchaser by issuing Commercial Paper if such Business Day is the Series 2001-1 Initial Funding Date, (ii) the portion of the CP Conduit Funded Amount with respect to such Purchaser allocated to any CP Tranche, the CP Rate Period in respect of which expires on such Business Day and (iii) the portion of such Purchaser's Purchaser Increase Amount for such Business Day to be funded by such Purchaser by issuing Commercial Paper. "BOARD" means the Board of Governors of the Federal Reserve System or any successor thereto. "CARRYING COST RESERVE" means, on any date of determination during a Reporting Period, the percentage equivalent of a fraction, the numerator of which is equal to the product of (i) two times DSO as of the last day of the Settlement Period immediately preceding the first day of such Reporting Period and (ii) the Alternate Base Rate in effect as of such date plus 2% and the denominator of which is 365. "CHANGE IN LAW" means (a) any law, rule or regulation or any change therein or in the interpretation or application thereof (whether or not having the force of law), in each case, adopted, issued or occurring after the Series 2001-1 Closing Date or (b) any request, guideline or directive (whether or not having the force of law) from any government or political subdivision or agency, authority, bureau, central bank, commission, department or instrumentality thereof, or any court, tribunal, grand jury or arbitrator, in each case, whether foreign or domestic (each an "OFFICIAL BODY") charged with the administration, interpretation or application thereof, or the compliance with any request or directive of any Official Body (whether or not having the force of law) made, issued or occurring after the Series 2001-1 Closing Date. "COLLECTION AGENT" is defined in the recitals hereto. "COLLECTION AGENT FEE RESERVE" means , on any date of determination during a Reporting Period, the percentage equivalent of a fraction, the numerator of which is equal 9 5 to the product of (i) two times DSO as of the last day of the Settlement Period immediately preceding the first day of such Reporting Period and (ii) the Collection Agent Fee Rate and the denominator of which is 360. "COMMERCIAL PAPER" means, with respect to any CP Conduit Purchaser, the promissory notes issued by, or for the benefit of, such CP Conduit Purchaser in the commercial paper market. "COMMITMENT" means, with respect to the APA Banks included in a Purchaser, the obligation of such APA Banks to purchase a Series 2001-1 Investor Note on the Series 2001-1 Initial Funding Date and, thereafter, to maintain and, subject to certain conditions, increase the Purchaser Invested Amount with respect to such Purchaser, in each case, in an amount up to the Maximum Purchaser Invested Amount with respect to such Purchaser. "COMMITMENT AMOUNt" means, with respect to the APA Banks included in a Purchaser, an amount equal to 102% of the Maximum Purchaser Invested Amount with respect to such Purchaser. "COMMITMENT PERCENTAGE" means, on any date of determination, with respect to any Purchaser, the ratio, expressed as a percentage, which such Purchaser's Maximum Purchaser Invested Amount bears to the Series 2001-1 Maximum Invested Amount on such date. "CONDUIT ASSIGNEE" means, with respect to any CP Conduit Purchaser, any commercial paper conduit administered by the Funding Agent with respect to such CP Conduit Purchaser and designated by such Funding Agent to accept an assignment from such CP Conduit Purchaser of the Purchaser Invested Amount with respect to such CP Conduit Purchaser pursuant to SECTION 11.10(b). "CP CONDUIT FUNDED AMOUNT" means, with respect to any Purchaser for any day, the portion of the Purchaser Invested Amount with respect to such Purchaser funded by such Purchaser through the issuance of Commercial Paper outstanding on such day. "CP CONDUIT PURCHASER" is defined in the recitals hereto. "CP RATE PERIOD" means, with respect to any CP Tranche, a period of days not to exceed 270 days commencing on a Business Day selected in accordance with SECTION 2.7(b); provided that (x) if a CP Rate Period would end on a day that is not a Business Day, such CP Rate Period shall end on the next succeeding Business Day and (y) during the Amortization Period, each CP Rate Period shall end on or prior to the next succeeding Payment Date. "CP TRANCHE" means, with respect to a Match Funding CP Conduit Purchaser, a portion of the CP Conduit Funded Amount with respect to such Match Funding CP Conduit Purchaser for which the Monthly Funding Costs with respect to such Match Funding CP Conduit Purchaser is calculated by reference to a particular Discount and a particular CP Rate Period. 10 6 "DAILY COLLECTION AGENT FEE AMOUNT" means, for any Business Day during a Settlement Period, an amount equal to (i) the amount of Daily Collection Agent Fee Expense for each day during such Settlement Period since the preceding Business Day plus (ii) for each Business Day after the occurrence and during the continuance of a Downgrade Event if Goodyear is not the Collection Agent, the aggregate amount of all previously accrued Daily Collection Agent Fee Expense for such Settlement Period that has not yet been deposited in the Collection Account for allocation to the Series 2001-1 Expense Subaccount pursuant to SECTION 5A.2(b) or, if Goodyear is the Collection Agent, not yet paid to the Collection Agent pursuant to SECTION 5A.2(b)(i). "DAILY COLLECTION AGENT FEE EXPENSE" means, for any day, the Series 2001-1 Invested Percentage of the Collection Agent Fee accruing for such day. "DAILY INTEREST AMOUNT" means, for any Business Day during a Settlement Period, an amount equal to (i) the amount of Daily Interest Expense for each day during such Settlement Period since the preceding Business Day plus (ii) for each Business Day after the occurrence and during the continuance of a Downgrade Event, the aggregate amount of all previously accrued Daily Interest Expense for such Settlement Period that has not yet been deposited in the Collection Account for allocation to the Series 2001-1 Expense Subaccount pursuant to SECTION 5A.2(b). "DAILY INTEREST EXPENSE" means, for each day during a Settlement Period, the sum of (i) the product of (A) the Series 2001-1 Invested Amount on such day divided by 360 and (B) the sum of the Applicable Used Fee and the rate appearing on Page 3750 of the Dow Jones market screen (or on any successor or substitute page of such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time in accordance with its customary practices for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m. (London time) on the second Business Day prior to the commencement of such Settlement Period, as the rate for dollar deposits with a thirty-day maturity and (ii) plus the amount of Additional Interest for such day. "DAILY UNUSED FEE EXPENSE" means, (i) for each day during the Revolving Period, the product of (A) the excess of the Aggregate Commitment Amount over the Series 2001-1 Invested Amount on such day multiplied by (B) the Unused Fee Rate divided by 360 and (ii) for each day during the Amortization Period, zero. "DAILY UNUSED FEE AMOUNT" means for any Business Day during a Settlement Period, an amount equal to (i) the amount of Daily Unused Fee Expense for each day during such Settlement Period since the preceding Business Day plus (ii) for each Business Day after the occurrence and during the continuance of a Downgrade Event, the aggregate amount of all previously accrued Daily Unused Fee Expense for such Settlement Period that has not yet been deposited in the Collection Account for allocation to the Series 2001-1 Expense Subaccount pursuant to SECTION 5A.2(b). "DECREASE" is defined in SECTION 2.5(a). 11 7 "DEFAULT RATIO" means for any Settlement Period, the percentage equivalent of a fraction, the numerator of which is the sum of (a) the aggregate principal amount of all Receivables which were 91-120 days past their original due date as of the last day of such Settlement Period plus (b) the aggregate principal amount of all Receivables which were written off as uncollectible by the Collection Agent in accordance with the Credit and Collection Policy during such Settlement Period prior to 91 days after their original due dates, and the denominator of which is the aggregate principal amount of all Receivables originated by the Seller and Dunlop during the Settlement Period four Settlement Periods prior to such Settlement Period. "DELINQUENCY RATIO" means for any Settlement Period, the percentage equivalent of a fraction, the numerator of which is the outstanding principal amount of all Receivables which were Delinquent Receivables as of the last day of such Settlement Period and the denominator of which is the sum of (i) the Aggregate Outstanding Balance and (ii) the outstanding principal amount of all Delinquent Receivables. "DILUTION PERIOD" means, on any date of determination during a Reporting Period, an amount equal to the quotient of (i) the quotient of (A) the product of (1) the aggregate principal amount of all Receivables originated by the Seller and Dunlop during the Settlement Period immediately preceding the first day of such Reporting Period and (2) DSO as of the last day of such Settlement Period divided by (B) 30 divided by (ii) the Net Receivables Balance as of the last day of such Settlement Period. "DILUTION RATIO" means, for any Settlement Period, the percentage equivalent of a fraction, the numerator of which is the aggregate amount of Dilution Adjustments made during such Settlement Period, and the denominator of which is the aggregate principal amount of all Receivables originated by the Seller and Dunlop during the immediately preceding Settlement Period. "DILUTION RESERVE" means, on any date of determination during a Reporting Period, an amount (expressed as a percentage) that is calculated as follows: DR = [(C*D)+[(E-D)*(E/D)]]*F Where: DR = Dilution Reserve; C = 2.0; D = the rolling average of the Dilution Ratios for the twelve consecutive Settlement Periods ending immediately prior to the first day of such Reporting Period; 12 8 E = the highest Dilution Ratio for any Settlement Period during the period of twelve consecutive Settlement Periods ending immediately prior to the first day of such Reporting Period; and F = the Dilution Period on such date. "DISCOUNT" means, (a) with respect to any Match Funding CP Conduit Purchaser, the interest or discount component of the Commercial Paper issued by such Match Funding CP Conduit Purchaser, including the portion thereof constituting dealer or placement agent commissions, to fund the CP Conduit Funded Amount with respect to such Match Funding CP Conduit Purchaser and (b) with respect to any Pooled Funding CP Conduit Purchaser, the amount of interest or discount to accrue on or in respect of the Commercial Paper issued by such Pooled Funding CP Conduit Purchaser allocated, in whole or in part, by the Funding Agent with respect to such Pooled Funding CP Conduit Purchaser, to fund the purchase or maintenance of the CP Conduit Funded Amount with respect to such Pooled Funding CP Conduit Purchaser (including, without limitation, any interest attributable to the commissions of placement agents and dealers in respect of such Commercial Paper and any costs associated with funding small or odd-lot amounts, to the extent that such commissions or costs are allocated, in whole or in part, to such Commercial Paper by such Funding Agent). "DSO" means, as of the last day of any Settlement Period, the number of calendar days equal to the product of (a) 91 and (b) the amount obtained by dividing (i) the Net Receivables Balance as of such date by (ii) the aggregate Outstanding Balance of all Receivables originated by the Seller and Dunlop during that Settlement Period and the two Settlement Periods preceding such Settlement Period. "EFFECTIVE DATE" is defined in SECTION 9.1. "ELIGIBLE ASSIGNEE" means a financial institution having short-term debt ratings of at least A-1 from S&P and P-1 from Moody's. "EURODOLLAR PERIOD" means, with respect to any Eurodollar Tranche and any Purchaser: (i) initially, the period commencing on the Series 2001-1 Initial Funding Date, the Increase Date or a conversion date, as the case may be, with respect to such Eurodollar Tranche and ending one month thereafter (or such other period which is acceptable to the Funding Agent with respect to such Purchaser and which in no event will be less than 7 days); and (ii) thereafter, each period commencing on the last day of the immediately preceding Eurodollar Period applicable to such Eurodollar Tranche and ending one month thereafter (or such other period which is acceptable to the Funding Agent with respect to such Purchaser and which in no event will be less than 7 days); 13 9 provided that each Eurodollar Period must end on the next succeeding Payment Date and all of the foregoing provisions relating to Eurodollar Periods are subject to the following: (i) if any Eurodollar Period would otherwise end on a day that is not a Business Day, such Eurodollar Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Eurodollar Period into another calendar month, in which event such Eurodollar Period shall end on the immediately preceding Business Day; and (ii) any Eurodollar Period that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Eurodollar Period) shall end on the last Business Day of the calendar month at the end of such Eurodollar Period. "EURODOLLAR TRANCHE" means, with respect to any Purchaser, a portion of the APA Bank Funded Amount with respect to such Purchaser allocated to a particular Eurodollar Period and an Adjusted LIBO Rate determined by reference thereto. "EXPIRY DATE" means, with respect to any Purchaser, the earlier of (a) the Scheduled Expiry Date with respect to such Purchaser and (b) the date on which a Termination Event shall have been deemed to have occurred or shall have been declared to have occurred. "EXTENDING PURCHASER" shall mean a Purchaser other than a Non-Extending Purchaser. "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, 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 on the next succeeding Business Day by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average (rounded upwards, if necessary, to the next 1/100 of 1%) of the quotations for such day of such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by it. "FINAL MATURITY DATE" means the Payment Date that occurs in the 12th month after the month in which the Amortization Period shall have commenced. "FLOATING TRANCHE" means, with respect to any Purchaser, the portion of the APA Bank Funded Amount with respect to such Purchaser not allocated to a Eurodollar Tranche. "FUNDING AGENT" is defined in the recitals hereto. "INCREASE AMOUNT" means, with respect to any Increase Date, the amount set forth in the Increase Notice with respect to such Increase Date 14 10 "INCREASE DATE" is defined in SECTION 2.3(a). "INCREASE NOTICE" is defined in SECTION 2.3(a). "INCREASED COSTS" means, for each Payment Date, the sum of (1) any Article 7 Costs due and payable on such Payment Date and (2) any amounts due and payable pursuant to SECTIONS 2.8 or 11.5 on such Payment Date. "INCREASES" is defined in SECTION 2.3(a). "INDEMNIFIED TAXES" means Taxes other than Excluded Taxes. "INDENTURE SUPPLEMENT" has the meaning set forth in the preamble. "INTEREST SHORTFALL" is defined in SECTION 5A.3(b). "LIBO RATE" means, with respect to each day during each Eurodollar Period pertaining to a Eurodollar Tranche, the rate appearing on Page 3750 of the Dow Jones market screen (or on any successor or substitute page of such Service, providing rate quotations comparable to those currently provided on such page of such Service, as determined by the Administrative Agent from time to time in accordance with its customary practices for purposes of providing quotations of interest rates applicable to dollar deposits in the London interbank market) at approximately 11:00 a.m. (London time) on the second Business Day prior to the commencement of such Eurodollar Period, as the rate for dollar deposits with a maturity comparable to the Eurodollar Period applicable to such Eurodollar Tranche. "LOSS AND DILUTION RESERVE" means, on any date of determination during a Reporting Period, the greater of (a) the sum of (i) 12% plus (ii) 2% for each Special Obligor for such Reporting Period plus (iii) the product of (A) the rolling average of the Dilution Ratios for the twelve consecutive Settlement Periods ending immediately prior to the first day of such Reporting Period and (B) the Dilution Period on such date and (b) the sum of the Loss Reserve plus the Dilution Reserve on such date. "LOSS RESERVE" means, on any date of determination during a Reporting Period, an amount (expressed as a percentage) that is calculated as follows: LR = (A*B)/C * D * E Where: LR = Loss Reserve; A = the aggregate principal amount of all Receivables generated by the Seller and Dunlop during the three Settlement Periods ending immediately prior to the first day of such Reporting Period; 15 11 B = the highest three month rolling average of the Default Ratios during the period of the twelve consecutive Settlement Periods ending immediately prior to the first day of such Reporting Period; C = the Net Receivables Balance as of the last day of the Settlement Period ending immediately prior to the first day of such Reporting Period; D = 2.00; and E = Payment Terms Factor on such date. "MATCH FUNDING CP CONDUIT PURCHASER" means each CP Conduit Purchaser that is identified on Schedule I as a Match Funding CP Conduit Purchaser and each CP Conduit Purchaser that, after the Series 2001-1 Closing Date, notifies the Issuer and the Administrative Agent in accordance with SECTION 2.7(d) in writing that it is funding its CP Conduit Funded Amount with Commercial Paper issued by it, or for its benefit, in specified CP Tranches selected in accordance with Sections 2.7(b) and (c) and that, in each case, has not subsequently notified the Issuer and the Administrative Agent in writing that the Issuer will no longer be permitted to select CP Tranches in accordance with SECTIONS 2.7(b) and (c) in respect of the CP Conduit Funded Amount with respect to such CP Conduit Purchaser. "MAXIMUM PURCHASER INVESTED AMOUNT" means, with respect to any Purchaser, the amount set forth opposite the name of the CP Conduit Purchaser included in such Purchaser on Schedule I, as such amount may be increased or reduced from time to time as provided in SECTION 2.6. The Maximum Purchaser Invested Amount with respect to each Non-Extending Purchaser shall be reduced to zero on the Scheduled Expiry Date with respect to such Purchaser. "MONTHLY FUNDING COSTS" means, with respect to each Settlement Period and any Purchaser, the sum of: (i) for each day during such Settlement Period, (A) with respect to a Match Funding CP Conduit Purchaser, the aggregate amount of Discount accruing on all outstanding Commercial Paper issued by, or for the benefit of, such Match Funding CP Conduit Purchaser to fund the CP Conduit Funded Amount with respect to such Match Funding CP Conduit Purchaser on such day or (B) with respect to a Pooled Funding CP Conduit Purchaser, the aggregate amount of Discount accruing on or otherwise in respect of the Commercial Paper issued by, or for the benefit of, such Pooled Funding CP Conduit Purchaser allocated, in whole or in part, by the Funding Agent with respect to such Pooled Funding CP Conduit Purchaser, to fund the purchase or maintenance of the CP Conduit Funded Amount with respect to such Pooled Funding CP Conduit Purchaser on such day; plus (ii) for each day during such Settlement Period, the sum of: 16 12 (A) the product of (x) the portion of the APA Bank Funded Amount with respect to such Purchaser allocated to the Floating Tranche with respect to such Purchaser on such day times (y) the Alternate Base Rate plus the Applicable Margin on such day in effect with respect thereto, divided by (z) 365 (or 366, as the case may be) plus (B) the product of (x) the portion of the APA Bank Funded Amount with respect to such Purchaser allocated to Eurodollar Tranches with respect to such Purchaser on such day times (y) the weighted average Adjusted LIBO Rate with respect to such Eurodollar Tranches plus the Applicable Margin on such day in effect with respect thereto divided by (z) 360; plus (iii) for each day during such Settlement Period, the product of (A) the CP Conduit Funded Amount with respect to such Purchaser on such day times (B) the Applicable Used Fee, divided by (C) 360. "MONTHLY INTEREST PAYMENT" is defined in SECTION 5A.4(a). "MONTHLY PRINCIPAL PAYMENT" is defined in SECTION 5A.6. "NON-EXTENDING PURCHASER" means any Purchaser who shall not have agreed to an extension of its Scheduled Expiry Date pursuant to SECTION 2.6(b) on such Scheduled Expiry Date and thereafter until the Purchaser Invested Amount with respect to such Purchaser shall have been reduced to zero. "OPTIONAL TERMINATION DATE" is defined in SECTION 2.5(b). "OPTIONAL TERMINATION NOTICE" is defined in SECTION 2.5(b). "OTHER TAXES" means any and all current or future stamp or documentary taxes or other excise or property taxes, charges or similar levies arising from any payment made under the Transaction Documents or from the execution, delivery or enforcement of, or otherwise with respect to, any Transaction Document. "OUTSTANDING" means, with respect to the Series 2001-1 Investor Notes, the Series 2001-1 Invested Amount shall not have been reduced to zero and all accrued interest and other amounts owing on the Series 2001-1 Investor Notes and to the Administrative Agent, the Funding Agents, the CP Conduit Purchasers and the APA Banks hereunder shall not have been paid in full. "PARTICIPANTS" is defined in SECTION 11.10(d). "PAYDOWN PERIOD" means any period from but excluding the Scheduled Expiry Date with respect to any Non-Extending Purchaser to but excluding the earlier of (a) the date on which the Purchaser Invested Amounts with respect to all Non-Extending 17 13 Purchasers shall have been reduced to zero and (b) the commencement of the Amortization Period. "PAYDOWN PERCENTAGE" means, with respect to any Paydown Period, the percentage equivalent of a fraction, the numerator of which is the aggregate Purchaser Invested Amounts with respect to all Non-Extending Purchasers and the denominator of which is the Series 2001-1 Invested Amount, in each case, as of the first day of such Paydown Period; provided, however that if a Purchaser becomes a Non-Extending Purchaser after the first day of a Paydown Period, the Paydown Percentage shall be recalculated to equal the percentage equivalent of a fraction, the numerator of which is the aggregate Purchaser Invested Amounts with respect to all Non-Extending Purchasers and the denominator of which is the Series 2001-1 Invested Amount, in each case, as of the date such Purchaser becomes a Non-Extending Purchaser. "PAYMENT DATE" means the 17th day of each month, or if such date is not a Business Day, the next succeeding Business Day, commencing May 17, 2001. "PAYMENT TERMS FACTOR" means (i) during the period from the Series 2001-1 Closing Date until the third Settlement Date thereafter, 1.365 and (ii) during each three Reporting Periods to occur thereafter, the percentage equivalent of a fraction, the numerator of which is the sum of (A) the weighted average payment terms (weighted on the basis of the Outstanding Balances of the Receivables originated during such period and expressed as a number of days) for the Receivables generated by the Seller and Dunlop during such period plus (B) 60, and the denominator of which is 90; provided, however, that if the Payment Terms Factor for any period is less than the Payment Terms Factor for the immediately preceding period, then the actual Payment Terms Factor for such current period shall be recalculated to equal the percentage equivalent of a fraction, the numerator of which is equal to the average of the numerators used to calculate the Payment Terms Factor for such current period and the three immediately preceding periods (without giving effect to this proviso) and the denominator of which is 90. "POOLED FUNDING CP CONDUIT PURCHASER" means each CP Conduit Purchaser that is not a Match Funding CP Conduit Purchaser. "PREPAYMENT DATE" is defined in ARTICLE 5. "PRIME RATE" means the rate of interest per annum publicly announced from time to time by Chase as its prime rate in effect at its principal office in New York City. Each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "PROGRAM SUPPORT PROVIDER" means, with respect to any CP Conduit Purchaser, the APA Banks with respect to such CP Conduit Purchaser and any other or additional Person now or hereafter extending credit, or having a commitment to extend credit to or for the account of, or to make purchases from, such CP Conduit Purchaser or issuing a letter of credit, surety bond or other instrument to support any obligations arising under or in connection with such CP Conduit Purchaser's securitization program. 18 14 "PRO RATA SHARE" means, with respect to any Purchaser, on any date, the ratio, expressed as a percentage, which the Purchaser Invested Amount with respect to such Purchaser bears to the Series 2001-1 Invested Amount on such date. "PURCHASER" means a CP Conduit Purchaser and the APA Banks with respect to such CP Conduit Purchaser. "PURCHASER ADDITION DATE" is defined in SECTION 2.6(e). "PURCHASER INCREASE AMOUNT" means, with respect to any Purchaser, for any Business Day, such Purchaser's Commitment Percentage of the Increase Amount, if any, on such Business Day. "PURCHASER INVESTED AMOUNT" means, with respect to any Purchaser, (a) when used with respect to the Series 2001-1 Initial Funding Date, such Purchaser's Commitment Percentage of the Series 2001-1 Initial Invested Amount and (b) when used with respect to any other date, an amount equal to (i) the Purchaser Invested Amount with respect to such Purchaser on the immediately preceding Business Day plus (ii) the Purchaser Increase Amount with respect to such Purchaser on such Business Day minus (iii) the amount of principal payments made to such Purchaser pursuant to SECTION 5A.6 on such date. "PURCHASER SUPPLEMENT" is defined in SECTION 11.10(e). "RATING AGENCIES" means, with respect to the Series 2001-1 Investor Notes, S&P and Moody's. "RATING AGENCY CONDITION" means, with respect to any action specified herein or in the Base Indenture as requiring satisfaction of the Rating Agency Condition with respect to the Series 2001-1 Investor Notes, the Administrative Agent shall have received written confirmation, to the extent required, from the Rating Agencies that such action will not result in a reduction or withdrawal of the then current rating of the Commercial Paper issued by each of the CP Conduit Purchasers. "RECORD DATE" means, with respect to each Payment Date, the immediately preceding Business Day. "RELATED ADDITIONAL APA BANKS" is defined in SECTION 2.6(e). "REVOLVING PERIOD" means the period from and including the Effective Date to but excluding the commencement of the Amortization Period. "SCHEDULED EXPIRY DATE" shall mean, with respect to any Purchaser, the later of (a) April 26, 2002 and (b) the last day of any extension of such Purchaser's Commitment made in accordance with SECTION 2.6(b). "SERIES 2001-1" means Series 2001-1 of Investor Notes, the Principal Terms of which are set forth in this Indenture Supplement. 19 15 "SERIES 2001-1 ADJUSTED INVESTED AMOUNT" means, on any date of determination, the excess of the Series 2001-1 Invested Amount over the aggregate amount on deposit in the Collection Account and allocated to the Series 2001-1 Principal Collection Subaccount on such date. "SERIES 2001-1 ALLOCATED NET RECEIVABLES BALANCE" means, as of any date of determination, the lesser of (a) the Series 2001-1 Required Net Receivables Balance as of such date and (b) the product of (i) the Net Receivables Balance and (ii) the percentage equivalent of a fraction the numerator of which is the Series 2001-1 Required Net Receivables Balance as of such date and the denominator of which is the sum of (x) the Series 2001-1 Required Net Receivables Balance and (y) the aggregate Required Net Receivables Balances with respect to each other Series of Outstanding Investor Notes as of such date. "SERIES 2001-1 ALLOCATED RECEIVABLES DEFICIENCY" means, as of any date of determination, the amount, if any, by which the Series 2001-1 Allocated Net Receivables Balance is less than the Series 2001-1 Required Net Receivables Balance as of such date. "SERIES 2001-1 COLLECTION AGENT FEE" is defined in SECTION 6.1. "SERIES 2001-1 CLOSING DATE" means May 1, 2001. "SERIES 2001-1 COLLECTION SUBACCOUNT" is defined in SECTION 5A.1(a). "SERIES 2001-1 DEPOSIT DATE" is defined in SECTION 5A.2(a). "SERIES 2001-1 EXPENSE SUBACCOUNT" is defined in SECTION 5A.1(a). "SERIES 2001-1 INITIAL FUNDING DATE" is defined in SECTION 2.1(a). "SERIES 2001-1 INITIAL INVESTED AMOUNT" is defined in SECTION 2.3(a). "SERIES 2001-1 INVESTED AMOUNT" means, on any date of determination, the sum of the Purchaser Invested Amounts with respect to each of the Purchasers on such date. "SERIES 2001-1 INVESTED PERCENTAGE" means, with respect to any Business Day (i) during the Revolving Period, the percentage equivalent (which percentage shall never exceed 100%) of a fraction the numerator of which shall be equal to the Series 2001-1 Allocated Net Receivables Balance as of the end of the immediately preceding Business Day and the denominator of which is the Net Receivables Balance as of the end of such immediately preceding Business Day or (ii) during the Amortization Period prior to the deemed or declared occurrence of a Termination Event, the percentage equivalent (which percentage shall never exceed 100%) of a fraction the numerator of which shall be equal to the Series 2001-1 Allocated Net Receivables Balance as of the end of the Revolving Period, and the denominator of which is the lesser of (A) the Net Receivables Balance as of the end of the immediately preceding Business Day or (B) the sum of the numerators used to determine invested percentages for allocations for all Series of Investor Notes (and all classes of such Series of Investor Notes) as of the end of the immediately 20 16 preceding Business Day or (iii) during the Amortization Period after the deemed or declared occurrence of a Termination Event, the percentage equivalent (which percentage shall never exceed 100%) of a fraction the numerator of which shall be equal to the Series 2001-1 Allocated Net Receivables Balance as of the end of the Revolving Period, and the denominator of which is the sum of the numerators used to determine invested percentages for allocations for all Series of Investor Notes (and all classes of such Series of Investor Notes) as of the end of the immediately preceding Business Day. "SERIES 2001-1 INVESTOR NOTEHOLDER" means the Person in whose name a Series 2001-1 Investor Note is registered in the Note Register. "SERIES 2001-1 INVESTOR NOTE" means any one of the Series 2001-1 Floating Rate Asset Backed Variable Funding Investor Notes, executed by the Issuer and authenticated and delivered by the Indenture Trustee, substantially in the form of EXHIBIT A. "SERIES 2001-1 MAXIMUM INVESTED AMOUNT" means, on any date of determination, the sum of the Maximum Purchaser Invested Amounts with respect to each of the Purchasers on such date. The Series 2001-1 Maximum Invested Amount shall be reduced by the Maximum Purchaser Invested Amount of each Non-Extending Purchaser on the Scheduled Expiry Date with respect to such Purchaser. "SERIES 2001-1 MONTHLY INTEREST" is defined in SECTION 5A.3(a). "SERIES 2001-1 NOTE RATE" means for any Settlement Period, the interest rate equal to the product of (a) the percentage equivalent of a fraction, the numerator of which is equal to the sum of the Monthly Funding Costs with respect to each Purchaser for such Settlement Period and the denominator of which is equal to the average daily Series 2001-1 Invested Amount during such Settlement Period and (b) a fraction, the numerator of which is 360 and the denominator of which is the number of days in such Settlement Period; provided, however, that the Series 2001-1 Note Rate will in no event be higher than the maximum rate permitted by applicable law. "SERIES 2001-1 NOTE TERMINATION DATE" means the date on which the Series 2001-1 Invested Amount shall have been reduced to zero and all accrued and unpaid interest on the Series 2001-1 Notes shall have been paid in full. "SERIES 2001-1 PREPAYMENT AMOUNT" means, the sum of the following amounts with respect to each Purchaser: (i) the Purchaser Invested Amount with respect to such Purchaser, plus (ii) (A) if such Purchaser is a Match Funding CP Conduit Purchaser, the sum of (x) all accrued and unpaid Discount on all outstanding Commercial Paper issued by, or for the benefit of, such Match Funding CP Conduit Purchaser to fund the CP Funded Amount with respect to such Match Funding CP Conduit Purchaser from the issuance date(s) thereof to but excluding the Prepayment Date and (y) the aggregate Discount to accrue on all outstanding Commercial Paper issued by, or for the benefit of, such Match Funding CP Conduit Purchaser to fund the CP Funded Amount with respect to such 21 17 Match Funding CP Conduit Purchaser from and including the Prepayment Date to and excluding the maturity date of each CP Tranche with respect to such Match Funding CP Conduit Purchaser or (B) if such Purchaser is a Pooled Funding CP Conduit Purchaser, the sum of (x) the aggregate amount of Discount on or in respect of the Commercial Paper issued by, or for the benefit of, such Pooled Funding CP Conduit Purchaser allocated, in whole or in part, by the Funding Agent with respect to such Pooled Funding CP Conduit Purchaser, to fund the purchase or maintenance of the CP Funded Amount with respect to such Pooled Funding CP Conduit Purchaser as of the Prepayment Date and (y) the aggregate amount of Discount to accrue on or in respect of the Commercial Paper issued by, or for the benefit of, such Pooled Funding CP Conduit Purchaser allocated, in whole or in part, by the Funding Agent with respect to such Pooled Funding CP Conduit Purchaser, to fund the purchase or maintenance of the CP Funded Amount with respect to such Pooled Funding CP Conduit Purchaser from and including the Prepayment Date to and excluding the maturity dates of such Commercial Paper; plus (iii) all accrued and unpaid interest on the APA Bank Funded Amount with respect to such Purchaser, calculated at the Alternate Base Rate or the applicable Adjusted LIBO Rate plus the Applicable Margin as of the Prepayment Date, plus (iv) the sum of (A) for each day from but excluding the last day of the Settlement Period immediately preceding the Prepayment Date, the product of (x) the CP Funded Amount with respect to such Purchaser on such day times (y) the Applicable Used Fee divided by (z) 360 plus (B) if the Prepayment Date is on or before the Settlement Date for such immediately preceding Settlement Period, for each day during such Settlement Period, the product of (x) the CP Funded Amount with respect to such Purchaser on such day times (y) the Applicable Used Fee divided by (z) 360; plus (v) the sum of (A) for each day from but excluding the last day of the Settlement Period immediately preceding the Prepayment Date, the product of (x) the excess, if any, of the Commitment Amount with respect to such Purchaser over the Purchaser Invested Amount with respect to such Purchaser on such day times (y) the Unused Fee Rate divided by (z) 360 plus (B) if the Prepayment Date is on or before the Settlement Date for such immediately preceding Settlement Period, the Unused Fee payable to such Purchaser for such Settlement Period pursuant to Section 2.7(e); (vi) all Article 7 Costs then due and payable to such Purchaser, plus (vii) without duplication, any other amounts then due and payable to such Purchaser pursuant to SECTION 2.8 and 11.5. "SERIES 2001-1 PRINCIPAL COLLECTION SUBACCOUNT" is defined in SECTION 5A.1(a). "SERIES 2001-1 REQUIRED NET RECEIVABLES BALANCE" means, as of any date of determination, the sum of (i) the Series 2001-1 Adjusted Invested Amount and (ii) the Series 2001-1 Required Reserves as of such date. "SERIES 2001-1 REQUIRED RESERVES" means, on any date of determination, an amount equal to the sum of: 22 18 (i) an amount equal to the product of (A) the Series 2001-1 Adjusted Invested Amount on such date and (B) the percentage equivalent of a fraction, the numerator of which is the Loss and Dilution Reserve on such date and the denominator of which is one minus the Loss and Dilution Reserve on such date; (ii) an amount equal to the product of (A) the Series 2001-1 Invested Amount on such date and (B) the percentage equivalent of a fraction, the numerator of which is the Carrying Cost Reserve on such date and the denominator of which is one minus the Loss and Dilution Reserve on such date; and (iii) an amount equal to the product of (A) the Aggregate Outstanding Balance on such date, (B) the quotient of (x) the Series 2001-1 Invested Amount on such date divided by (y) the Aggregate Invested Amount on such date, and (C) the percentage equivalent of a fraction, the numerator of which is the Collection Agent Fee Reserve on such date and the denominator of which is one minus the Loss and Dilution Reserve on such date. "SERIES 2001-1 REQUIRED INVESTOR NOTEHOLDERS" means Purchasers having Commitment Percentages aggregating 66 2/3% or more. "SERIES 2001-1 SUBACCOUNTS" is defined in SECTION 5A.1(a). "STATUTORY RESERVE RATE" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal (rounded up to the nearest 1/100th of 1%) established by the Board with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to Regulation D. Eurodollar Tranches shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time under such Regulation D or comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in the reserve percentage. "TAXES" means any and all present or future taxes, levies, imposts, duties, deductions, charges or withholdings now or hereafter imposed by any Governmental Authority. "TERMINATION EVENT" is defined in ARTICLE 4. "TRANSFEREE" is defined in SECTION 11.10(f). "TRANSFEREE SUPPLEMENT" is defined in SECTION 11.10(c). "UNUSED FEE" is defined in SECTION 2.7(e). 23 19 "UNUSED FEE PAYMENT" is defined in SECTION 5A.4(a). "UNUSED FEE RATE" means 0.20% per annum. ARTICLE 2 PURCHASE AND SALE OF SERIES 2001-1 INVESTOR NOTES; -------------------------------------------------- INCREASES AND DECREASES OF SERIES 2001-1 INVESTED AMOUNT -------------------------------------------------------- SECTION 2.1. PURCHASES OF THE SERIES 2001-1 INVESTOR NOTES (a) INITIAL PURCHASES. Subject to the terms and conditions of this Indenture Supplement, including delivery of notice in accordance with SECTION 2.3, (i) each CP Conduit Purchaser may, in its sole discretion, purchase a Series 2001-1 Investor Note in an amount equal to all or a portion of its Commitment Percentage of the Series 2001-1 Initial Invested Amount on any Business Day during the period from the Effective Date to and including the Expiry Date with respect to such CP Conduit Purchaser (the "SERIES 2001-1 INITIAL FUNDING DATE"), and if such CP Conduit Purchaser shall have notified the Administrative Agent and the Funding Agent with respect to such CP Conduit Purchaser that it has elected not to fund a Series 2001-1 Investor Note in an amount equal to its Commitment Percentage of the Series 2001-1 Initial Invested Amount on the Series 2001-1 Initial Funding Date, each APA Bank with respect to such CP Conduit Purchaser shall fund on the Series 2001-1 Initial Funding Date its APA Bank Percentage of that portion of such Series 2001-1 Investor Note not to be funded by such CP Conduit Purchaser and (ii) thereafter, (A) if a CP Conduit Purchaser shall have purchased a Series 2001-1 Investor Note on the Series 2001-1 Initial Funding Date, such CP Conduit Purchaser may, in its sole discretion, maintain its Series 2001-1 Investor Note, subject to increase or decrease during the period from the Effective Date to and including the Expiry Date with respect to such CP Conduit Purchaser, in accordance with the provisions of this Indenture Supplement and (B) the APA Banks with respect to such CP Conduit Purchaser shall maintain their respective APA Bank Percentages of the Series 2001-1 Investor Note with respect to such Purchaser, subject to increase or decrease during the period from the Effective Date to and including the Expiry Date with respect to such CP Conduit Purchaser, in accordance with the provisions of this Indenture Supplement. Payments by each CP Conduit Purchaser and/or the APA Banks with respect to such CP Conduit Purchaser shall be made in immediately available funds on the Series 2001-1 Initial Funding Date to the Funding Agent with respect to such CP Conduit Purchaser for remittance to the Indenture Trustee for deposit into the Series 2001-1 Collection Subaccount. (b) MAXIMUM PURCHASER INVESTED AMOUNTS. Notwithstanding anything to the contrary contained in this Indenture Supplement, at no time shall the Purchaser Invested Amount with respect to any Purchaser exceed the Maximum Purchaser Invested Amount with respect to such Purchaser at such time. (c) FORM OF SERIES 2001-1 INVESTOR NOTES. The Series 2001-1 Investor Notes shall be issued in fully registered form without interest coupons, substantially in the form set forth in EXHIBIT A hereto. 24 20 SECTION 2.2. DELIVERY. (a) On the Series 2001-1 Initial Funding Date, the Issuer shall sign and shall direct the Indenture Trustee in writing pursuant to SECTION 2.4 of the Base Indenture to duly authenticate, and the Indenture Trustee, upon receiving such direction, shall so authenticate a Series 2001-1 Investor Note in the name of the Funding Agent with respect to each Purchaser in an amount equal to the Maximum Purchaser Invested Amount with respect to such Purchaser and deliver such Series 2001-1 Investor Note to such Funding Agent in accordance with such written directions. (b) The Administrative Agent shall maintain a record of the actual Purchaser Invested Amount outstanding with respect to each Purchaser and the actual Series 2001-1 Invested Amount outstanding on any date of determination, which, absent manifest error, shall constitute PRIMA FACIE evidence of the outstanding Purchaser Invested Amounts and outstanding Series 2001-1 Invested Amount from time to time. SECTION 2.3. PROCEDURE FOR INITIAL ISSUANCE AND FOR INCREASING THE SERIES 2001-1 INVESTED AMOUNT. (a) Subject to SECTION 2.3(c), (i) on the Series 2001-1 Initial Funding Date, each CP Conduit Purchaser may agree, in its sole discretion, to purchase, and the APA Banks with respect to such CP Conduit Purchaser shall purchase, a Series 2001-1 Investor Note in accordance with SECTION 2.1 and (ii) on any Settlement Date or on the second Business Day following any Weekly Reporting Date (other than a Weekly Reporting Date occurring during the first 60 days following the first occurrence of a Downgrade Event) during the period from the Effective Date to and including the Expiry Date with respect to a CP Conduit Purchaser, such CP Conduit Purchaser may agree, in its sole discretion, and each APA Bank with respect to such CP Conduit Purchaser hereby agrees, that the Purchaser Invested Amount with respect to such Purchaser may be increased (an "INCREASE") by an amount equal to its APA Bank Percentage of the Commitment Percentage with respect to such Purchaser of the Increase Amount, upon the request of the Issuer (each date on which an Increase occurs hereunder being herein referred to as the "INCREASE DATE" applicable to such Increase); provided, however, that the Issuer shall have given the Administrative Agent (with a copy to the Indenture Trustee) irrevocable written notice (effective upon receipt), by telecopy (receipt confirmed), substantially in the form of EXHIBIT B (an "INCREASE NOTICE"), of such request no later than 1:00 P.M., New York City time, on the second Business Day prior to such Increase Date. Such notice shall state (x) the Increase Date and (y) the proposed Increase Amount. The Issuer shall give the Administrative Agent (with a copy to the Indenture Trustee) irrevocable written notice (effective upon receipt), by telecopy (receipt confirmed), of the Series 2001-1 Initial Funding Date and the proposed initial invested amount of the Series 2001-1 Notes (the "SERIES 2001-1 INITIAL INVESTED AMOUNT") no later 1:00 P.M., New York City time, on the second Business Day prior to the Series 2001-1 Initial Funding Date. (b) If a CP Conduit Purchaser elects not to fund the full amount of its Commitment Percentage of the Series 2001-1 Initial Invested Amount or a requested Increase Amount, such CP Conduit Purchaser shall notify the Administrative Agent and the Funding Agent with respect to such CP Conduit Purchaser, and each APA Bank with respect to such CP 25 21 Conduit Purchaser shall fund its APA Bank Percentage of the portion of the Commitment Percentage with respect to such Purchaser of the Series 2001-1 Initial Invested Amount or such Increase Amount, as the case may be, not funded by such CP Conduit Purchaser. (c) No Purchaser shall be required to make the initial purchase of a Series 2001-1 Investor Note on the Series 2001-1 Initial Funding Date or to increase its Purchaser Invested Amount on any Increase Date hereunder unless: (i) in the case of the Series 2001-1 Initial Funding Date, the Series 2001-1 Initial Invested Amount is at least $1,000,000 for each Purchaser; (ii) in the case of any Increase Date, the Increase Amount is equal to $1,000,000 or an integral multiple of $100,000 in excess thereof; (iii) after giving effect to the initial purchase amount or Increase Amount, the Purchaser Invested Amount with respect to such Purchaser would not exceed the Maximum Purchaser Invested Amount with respect to such Purchaser; (iv) after giving effect to the initial purchase amount or Increase Amount, no Series 2001-1 Allocated Receivables Deficiency would have occurred and be continuing; (v) no Termination Event or Potential Termination Event shall have been deemed to have occurred or shall have been declared to have occurred and be continuing; and (vi) all of the representations and warranties made by each of the Issuer, the Seller, the Collection Agent and Dunlop in each Transaction Document to which it is a party are true and correct in all material respects on and as of the Series 2001-1 Initial Funding Date or such Increase Date, as the case may be, as if made on and as of such date (except to the extent such representations and warranties are expressly made as of another date). The Issuer's acceptance of funds in connection with (x) the initial purchase of Series 2001-1 Investor Notes on the Series 2001-1 Initial Funding Date and (y) each Increase occurring on any Increase Date shall constitute a representation and warranty by the Issuer to the applicable Purchasers as of the Series 2001-1 Initial Funding Date or such Increase Date, as the case may be, that all of the conditions contained in this SECTION 2.3(c) have been satisfied. (d) Upon receipt of any notice required by SECTION 2.3(a) from the Issuer, the Administrative Agent shall forward (by telecopy or electronic messaging system) a copy of such notice to the Funding Agent with respect to each Purchaser, no later than 1:00 P.M., New York City time, on the day received. After receipt by any Funding Agent with respect to a Purchaser of such notice from the Administrative Agent, such Funding Agent shall, so long as the conditions set forth in SECTIONS 2.3(a) and (c) are satisfied, promptly provide telephonic notice to the related CP Conduit Purchaser and the related APA Banks, of the Increase Date and of such Purchaser's Commitment Percentage of the Increase Amount. If such CP Conduit Purchaser 26 22 elects to fund all or a portion of its Commitment Percentage of the Increase Amount, such CP Conduit Purchaser shall pay in immediately available funds its Commitment Percentage (or any portion thereof) of the amount of such Increase on the related Increase Date to the Funding Agent with respect to such Purchaser for deposit into the Series 2001-1 Collection Subaccount. If such CP Conduit Purchaser does not fund the full amount of its Commitment Percentage of the Increase Amount and the related APA Banks are required to fund the portion thereof not funded by the CP Conduit Purchaser, each such APA Bank shall pay in immediately available funds its APA Bank Percentage of such portion on the related Increase Date to the Funding Agent with respect to such Purchaser for deposit in the Series 2001-1 Collection Subaccount. Each Funding Agent shall remit the amounts received by it from its CP Conduit Purchaser or the related APA Banks pursuant to this SECTION 2.3(d) to the Indenture Trustee for deposit into the Collection Account and allocation to the Series 2001-1 Principal Collection Subaccount. SECTION 2.4. SALES BY CP CONDUIT PURCHASERS OF SERIES 2001-1 INVESTOR NOTES TO APA BANKS. Notwithstanding any limitation to the contrary contained herein, each CP Conduit Purchaser may, in its own discretion, at any time, sell or assign all or any portion of its interest in its Series 2001-1 Investor Note to any Conduit Assignee or to the APA Banks with respect to such CP Conduit Purchaser pursuant to, and subject to the terms and conditions of, the Asset Purchase Agreement with respect to such CP Conduit Purchaser. SECTION 2.5. PROCEDURE FOR DECREASING THE SERIES 2001-1 INVESTED AMOUNT; OPTIONAL TERMINATION. (a) Upon the written request of the Issuer or the Collection Agent on behalf of the Issuer, the Series 2001-1 Invested Amount may be reduced (a "DECREASE") on any Reporting Date during the Revolving Period, in the case of any Decrease in an amount less than $50,000,000 or, on the second Business Day following any Reporting Date during the Revolving Period, in the case of any Decrease in an amount of $50,000,000 or more, by the Indenture Trustee's withdrawing from the Series 2001-1 Principal Collection Subaccount and distributing to the Administrative Agent funds on deposit in the Series 2001-1 Principal Collection Subaccount on such day in accordance with SECTION 5A.6(d) in an amount not to exceed the amount of such funds available on such day in the Series 2001-1 Principal Collection Subaccount; provided that the Collection Agent shall have given the Administrative Agent (with a copy to the Indenture Trustee) irrevocable written notice (effective upon receipt) of the amount of such Decrease prior to 9:30 A.M., New York City time, on the second Business Day prior to such Reporting Date, in the case of any such Decrease in an amount less than $50,000,000, and prior to 9:30 A.M., New York City time, on a Business Day that is at least five Business Days prior to such Reporting Date, in the case of any such Decrease in an amount of $50,000,000 or more; provided, further, that any such Decrease shall be in an amount equal to $1,000,000 and integral multiples of $100,000 in excess thereof. Upon each Decrease, the Administrative Agent shall indicate in its records such Decrease and the Purchaser Invested Amount outstanding with respect to each Purchaser, after giving effect to such Decrease. Upon receipt of any notice required by SECTION 2.5(a) from the Issuer, the Administrative Agent shall forward (by telecopy or electronic messaging system) a copy of such notice to the Funding Agent with respect to each Purchaser, no later than 1:00 P.M., New York City time, on the day received. 27 23 (b) On any Business Day, the Issuer shall have the right to deliver an irrevocable written notice (an "OPTIONAL TERMINATION NOTICE") to the Administrative Agent, the Indenture Trustee and the Collection Agent in which the Issuer declares that the Commitments shall terminate on the date (the "OPTIONAL TERMINATION DATE") set forth in such notice (which date, in any event, shall be a Payment Date not less than twenty Business Days from the date on which such notice is delivered). Upon receipt of any Optional Termination Notice from the Issuer, the Administrative Agent shall promptly notify the Funding Agent with respect to each Purchaser thereof. From and after the Optional Termination Date, the Amortization Period shall commence for all purposes under this Indenture Supplement and the other Transaction Documents. SECTION 2.6. INCREASES AND REDUCTIONS OF THE COMMITMENTS; EXTENSIONS OF THE COMMITMENTS. (a) The Issuer may from time to time request that any Purchaser agree to increase its Maximum Purchaser Invested Amount. An increase in any Maximum Purchaser Invested Amount shall be effective hereunder if such Purchaser shall have agreed to such increase in its Maximum Purchaser Invested Amount. (b) If the Issuer desires to extend the Scheduled Expiry Date with respect to the Purchasers, the Issuer shall notify the Administrative Agent no more than four months prior to such Scheduled Expiry Date of its desire to extend the Scheduled Expiry Date with respect to the Purchasers, whereupon the Administrative Agent shall notify the Funding Agent with respect to each Purchaser of the Issuer's desire to so extend the Scheduled Expiry Date. Each Funding Agent, on behalf of its Purchaser, shall notify the Administrative Agent and the Issuer in writing of whether such Purchaser agrees to an extension of the Scheduled Expiry Date with respect to such Purchaser within thirty days of the receipt of the request for extension; provided that failure by a Funding Agent to respond to such request shall not be construed as a consent by such Purchaser to such extension. The decision to extend or not extend shall be made by each Purchaser in its sole discretion. In the event that any Purchaser desires to extend its Scheduled Expiry Date for an amount that is less than its Maximum Purchaser Invested Amount prior to the Issuer's request for an extension, the Issuer, in its sole discretion, may accept such extension; provided, however, that such Purchaser (x) shall be deemed to be a Non-Extending Purchaser for purposes of SECTION 5A.6(d) having a Purchaser Invested Amount equal to the excess of (A) its Purchaser Invested Amount over (B) a percentage of its Maximum Purchaser Invested Amount that will be available after the extension of its Scheduled Expiry Date equal to the percentage equivalent of a fraction, the numerator of which is the sum of the Purchaser Invested Amounts with respect to all Extending Purchasers, other than such Purchaser and any other Purchaser reducing its Maximum Purchaser Invested Amount, and the denominator of which is the sum of the Maximum Purchaser Invested Amounts of all Extending Purchasers, other than such Purchaser and any other Purchaser reducing its Maximum Purchaser Invested Amount, and (y) shall be deemed to be an Extending Purchaser with a Maximum Purchaser Invested Amount equal to the portion of its Maximum Purchaser Invested Amount that will be available after the extension of its Scheduled Expiry Date. (c) On any Business Day during the Revolving Period, the Issuer may, upon two (2) Business Days' prior written notice to the Administrative Agent (effective upon receipt) 28 24 (with copies to the Collection Agent and the Indenture Trustee) reduce the Series 2001-1 Maximum Invested Amount in an amount equal to $10,000,000 or a whole multiple of $1,000,000 in excess thereof; PROVIDED that no such termination or reduction shall be permitted if, after giving effect thereto and to any reduction in the Series 2001-1 Invested Amount on such date, the Purchaser Invested Amount with respect to any Purchaser would exceed the Maximum Purchaser Invested Amount with respect to such Purchaser then in effect. Any reduction in the Series 2001-1 Maximum Invested Amount shall be made on a pro rata basis to the Maximum Purchaser Invested Amounts with respect to the Purchasers, based on the Maximum Purchaser Invested Amount with respect to each Purchaser. Once reduced, the Maximum Purchaser Invested Amounts may not be subsequently reinstated. (d) If, after receiving a request for extension of its Scheduled Expiry Date from the Issuer pursuant to SECTION 2.6(b), the Funding Agent with respect to a CP Conduit Purchaser notifies the Issuer in writing of its decision not to extend its Scheduled Expiry Date as requested or fails to respond to the Issuer's request within 30 days of its receipt of such request, at the request of the Issuer, such CP Conduit Purchaser and the APA Banks with respect to such CP Conduit Purchaser shall assign all or any portion of their respective rights and obligations under this Indenture Supplement and the Series 2001-1 Notes pursuant to SECTION 11.10(e) to a replacement CP Conduit Purchaser and the APA Banks with respect to such replacement CP Conduit Purchaser selected by the Issuer upon payment by the replacement CP Conduit Purchaser and the APA Banks with respect to such replacement CP Conduit Purchaser of the Purchaser Invested Amount with respect such Non-Extending Purchaser (or the applicable portion thereof) plus any accrued interest and fees thereon and any other amounts owed to such Non-Extending Purchaser hereunder (the "PURCHASE PRICE"). The Purchase Price with respect to any Non-Extending Purchaser shall be equivalent to the Series 2001-1 Prepayment Amount with respect to such Purchaser (or the applicable portion thereof), calculated as if the date of the assignment to the replacement CP Conduit Purchaser and the APA Banks with respect to such CP Conduit Purchaser were the Prepayment Date. (e) The Issuer may at any time add a multi-seller commercial paper conduit as an additional CP Conduit Purchaser (an "ADDITIONAL CP CONDUIT PURCHASER") and one or more banks providing support to the Additional CP Conduit Purchaser as APA Banks with respect to the Additional CP Conduit Purchaser (the "RELATED ADDITIONAL APA BANKS"), with the prior written consent of the Administrative Agent (which consent shall not be unreasonably withheld), by providing at least ten Business Days written notice of (i) the names of the Additional CP Conduit Purchaser, the Related Additional APA Banks and the funding agent with respect to the Additional CP Conduit Purchaser and the Related Additional APA Banks (the "ADDITIONAL FUNDING AGENT"), (ii) the date on which the Issuer desires to effect such addition (the "PURCHASER ADDITION DATE"), (iii) the proposed Maximum Purchaser Invested Amount with respect to the Additional CP Conduit Purchaser and the Related Additional APA Banks and (iv) the Commitment Percentage of each Purchaser, on the Purchaser Addition Date after giving effect to the addition of the Additional CP Conduit Purchaser and the Related Additional APA Banks. On the Purchaser Addition Date, each CP Conduit Purchaser, the APA Banks with respect to such CP Conduit Purchaser and the Funding Agent with respect to such CP Conduit Purchaser shall make an assignment to the Additional CP Conduit Purchaser, the Related Additional APA Banks and the Additional Funding Agent pursuant to SECTION 11.10(e), as directed by the Administrative Agent, with the result that after giving effect thereto, the Purchaser Invested 29 25 Amount with respect to each such Purchaser shall equal the product of (x) the Series 2001-1 Invested Amount on the Purchaser Addition Date and (y) the Commitment Percentage of such Purchaser on the Purchaser Addition Date after giving effect to the addition of the Additional CP Conduit Purchaser and the Related Additional APA Banks. SECTION 2.7. INTEREST; FEES. (a) Interest shall be payable on the Series 2001-1 Investor Notes on each Payment Date pursuant to SECTION 5A.4. (b) On any Business Day, the Issuer may, subject to SECTION 2.7(c), elect to allocate all or any portion of the Available CP Funding Amount with respect to any Match Funding CP Conduit Purchaser, to one or more CP Tranches with CP Rate Periods commencing on such Business Day by giving the Administrative Agent and the Funding Agent with respect to such Match Funding CP Conduit Purchaser irrevocable written or telephonic (confirmed in writing) notice thereof, which notice must be received by such Funding Agent prior to 11:00 A.M., New York City time, one Business Day prior to such Business Day. Such notice shall specify (i) the applicable Business Day, (ii) the CP Rate Period for each CP Tranche to which a portion of the Available CP Funding Amount with respect to such Purchaser is to be allocated and (iii) the portion of such Available CP Funding Amount being allocated to each such CP Tranche. On any Business Day, the Issuer may, subject to SECTION 2.7(c), elect to allocate all or any portion of the Available APA Bank Funding Amount with respect to any Purchaser to one or more Eurodollar Tranches with Eurodollar Periods commencing on such Business Day by giving the Administrative Agent and the Funding Agent with respect to such Purchaser irrevocable written or telephonic (confirmed in writing) notice thereof, which notice must be received by such Funding Agent prior to 1:00 P.M., New York City time, three Business Days prior to such Business Day. Such notice shall specify (i) the applicable Business Day, (ii) the Eurodollar Period for each Eurodollar Tranche to which a portion of the Available APA Bank Funding Amount with respect to such Purchaser is to be allocated and (iii) the portion of such Available APA Bank Funding Amount being allocated to each such Eurodollar Tranche. The Funding Agent with respect to a Purchaser shall notify the CP Conduit Purchaser and the APA Banks with respect to such Purchaser of the contents of such notice promptly upon receipt thereof. (c) Notwithstanding anything to the contrary contained in this SECTION 2.7, (i) (A) each Match Funding CP Conduit Purchaser shall approve the length of each CP Rate Period and the portion of the Available CP Funding Amount with respect to such Match Funding CP Conduit Purchaser allocated to such CP Rate Period, (B) such Match Funding CP Conduit Purchaser may select, in its sole discretion, any new CP Rate Period if (x) the Issuer does not provide notice of a new CP Rate Period on a timely basis or (y) the Funding Agent with respect to such Match Funding CP Conduit Purchaser, on behalf of such Match Funding CP Conduit Purchaser, determines, in its sole discretion, that the CP Rate Period requested by the Issuer is unavailable or for any reason commercially undesirable and (C) the portion of the Available CP Funding Amount with respect to such Match Funding CP Conduit Purchaser allocable to each CP Tranche must be in an amount equal to $1,000,000 or an integral multiple of $100,000 in excess thereof and (ii) (A) the portion of the Available APA Bank Funding Amount with respect to any Purchaser allocable to each Eurodollar Tranche must be in an amount equal to $100,000 or an integral multiple of $100,000 in excess thereof, (B) no more than 10 Eurodollar Tranches 30 26 with respect to such Purchaser shall be outstanding at any one time, (C) after the deemed or declared occurrence and during the continuance of any Termination Event or Potential Termination Event, the Issuer may not elect to allocate any portion of the Available APA Bank Funding Amount with respect to any Purchaser to a Eurodollar Tranche and (D) during the Amortization Period, the Issuer may not select any Eurodollar Period that does not end on or prior to the next succeeding Payment Date. (d) On any Business Day, a Match Funding CP Conduit Purchaser may elect that the Issuer no longer be permitted to select CP Tranches in accordance with SECTIONS 2.7(b) and (c) in respect of the CP Conduit Funded Amount with respect to such CP Conduit Purchaser by giving the Issuer and the Administrative Agent irrevocable written notice thereof, which notice must be received by the Issuer and the Administrative Agent at least one Business Day prior to such Business Day. On any Business Day, a Pooled Funding CP Conduit Purchaser may elect thereafter to allow the Issuer to select CP Tranches in accordance with SECTIONS 2.7(b) and (c) in respect of the CP Conduit Funded Amount with respect to such CP Conduit Purchaser by giving the Issuer and the Administrative Agent irrevocable written notice thereof, which notice must be received by the Issuer and the Administrative Agent at least one Business Day prior to such Business Day. Any CP Conduit Purchaser making an election to change the manner in which its funding costs in respect of its Series 2001-1 Investor Note are allocated in accordance with this SECTION 2.7(d) will be both a Match Funding CP Conduit Purchaser and a Pooled Funding CP Conduit Purchaser during the period that its Series 2001-1 Investor Note is funded on both a "pooled" and "match funded" basis and its Monthly Funding Costs during that period will be calculated accordingly. (e) The Issuer shall pay pursuant to SECTION 5A.4 to the Administrative Agent, for the account of each Purchaser, on each Payment Date, an unused fee with respect to the most recent Settlement Period (the "UNUSED FEE") for each Settlement Period (or portion thereof) during the period from the Effective Date to and including the Expiry Date with respect to such Purchaser at the Unused Fee Rate times (i) the average daily Commitment Amount with respect to such Purchaser during such Settlement Period minus (ii) the average daily Purchaser Invested Amount with respect to such Purchaser during such Settlement Period. The Unused Fee shall be payable monthly in arrears on each Payment Date. (f) Calculations of per annum rates under this Indenture Supplement shall be made on the basis of a 360- (or 365-/366-, in the case of interest on the Floating Tranche based on the Prime Rate) day year. Calculations of Unused Fees shall be made on the basis of a 360-day year. Each determination of the Adjusted LIBO Rate by the Administrative Agent shall be conclusive and binding upon each of the parties hereto in the absence of manifest error. SECTION 2.8. INDEMNIFICATION BY THE ISSUER AND THE COLLECTION AGENT. (a) The Issuer agrees to indemnify and hold harmless the Indenture Trustee, the Administrative Agent, each Funding Agent, each Purchaser and each of their respective officers, directors, agents and employees (each, a "COMPANY INDEMNIFIED PERSON") from and against any loss, liability, expense, damage or injury suffered or sustained by (a "CLAIM") such Company indemnified person by reason of (i) any acts, omissions or alleged acts or omissions arising out of, or relating to, activities of the Issuer pursuant to the Indenture or the other 31 27 Transaction Documents to which it is a party, (ii) a breach of any representation or warranty made or deemed made by or on behalf of the Issuer in the Indenture or other Transaction Document or (iii) a failure by the Issuer (A) to comply with any applicable law or regulation (B) or to perform its covenants, agreements, duties or obligations required to be performed or observed by it in accordance with the provisions of the Indenture or the other Transaction Documents, including, but not limited to, any judgment, award, settlement, reasonable attorneys' fees and other reasonable costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, except, in each case, to the extent such loss, liability, expense, damage or injury (A) resulted from the gross negligence, bad faith or wilful misconduct of such Company indemnified person, (B) constitutes recourse for Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy, inability to pay or lack of creditworthiness of the applicable Obligor or (C) includes any Excluded Taxes; provided that any payments made by the Issuer pursuant to this SECTION 2.8 shall be made solely from funds available therefor pursuant to SECTION 5A.4 and from any other funds otherwise payable to the Issuer pursuant to the Base Indenture or any Indenture Supplement, shall be non-recourse other than with respect to such funds, and shall not constitute a claim against the Issuer or the Seller or any of their respective Affiliates to the extent that such funds are insufficient to make such payment. (b) The Collection Agent agrees to indemnify and hold harmless the Indenture Trustee, the Administrative Agent, each Funding Agent, each Purchaser and each of their respective officers, directors, agents and employees (each, a "COLLECTION AGENT INDEMNIFIED PERSON") from and against any Claim by reason of (i) any acts, omissions or alleged acts or omissions arising out of, or relating to, activities of the Collection Agent pursuant to the Indenture or the other Transaction Documents to which it is a party, (ii) a breach of any representation or warranty made by or on behalf of the Collection Agent in the Indenture or other Transaction Document or (iii) a failure by the Collection Agent (A) to comply with any applicable law or regulation or (B) to perform its covenants, agreements, duties or obligations required to be performed or observed by it in accordance with the provisions of the Indenture or the other Transaction Documents, including, but not limited to, any judgment, award, settlement, reasonable attorneys' fees and other reasonable costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, except, in each case, to the extent such loss, liability, expense, damage or injury (A) resulted from the gross negligence, bad faith or wilful misconduct of such Collection Agent indemnified person, (B) constitutes recourse for Receivables which are not collected, not paid or uncollectible on account of the insolvency, bankruptcy, inability to pay or lack of creditworthiness of the applicable Obligor or (C) includes Excluded Taxes. SECTION 2.9. FUNDING AGENTS. (a) The Funding Agent with respect to each Purchaser is hereby authorized to record on each Business Day the CP Funded Amount with respect to such Purchaser and the aggregate amount of Discount accruing with respect thereto on such Business Day and the APA Bank Funded Amount with respect to such Purchaser and the amount of interest accruing with respect thereto on such Business Day and, based on such recordations, to determine the Monthly Funding Costs with respect to each Settlement Period and such Purchaser. Any such recordation by a Funding Agent, absent manifest error, shall constitute PRIMA FACIE evidence of the accuracy 32 28 of the information so recorded. Furthermore, the Funding Agent with respect to each Purchaser will maintain records sufficient to identify the percentage interest of the related CP Conduit Purchaser and each APA Bank with respect to such Purchaser holding an interest in the Series 2001-1 Investor Note registered in the name of such Funding Agent and any amounts owing thereunder. (b) Upon receipt of funds from the Administrative Agent on each Payment Date, each Funding Agent shall pay such funds to the related CP Conduit Purchaser and/or the related APA Bank owed such funds in accordance with the recordations maintained by it in accordance with SECTION 2.9(a) and the Asset Purchase Agreement with respect to such CP Conduit Purchaser. If a Funding Agent shall have paid to any CP Conduit Purchaser or APA Bank any funds that (i) must be returned for any reason (including bankruptcy) or (ii) exceeds that which such CP Conduit Purchaser or APA Bank was entitled to receive, such amount shall be promptly repaid to such Funding Agent by such CP Conduit Purchaser or APA Bank. ARTICLE 3 ARTICLE V OF THE BASE INDENTURE ------------------------------- SECTIONS 5.1 through 5.3 of the Base Indenture and each other Section of Article V of the Indenture relating to another Series shall read in their entirety as provided in the Base Indenture or any applicable Indenture Supplement. ARTICLE V of the Base Indenture (except for SECTIONS 5.1 through 5.3 thereof and any portion thereof relating to another Series) shall read in its entirety as follows and shall be exclusively applicable to the Series 2001-1 Investor Notes: SECTION 5A.1. ESTABLISHMENT OF SERIES 2001-1 COLLECTION SUBACCOUNTS. (a) The Indenture Trustee shall establish and maintain in the name of the Indenture Trustee for the benefit of the Series 2001-1 Investor Noteholders (i) a subaccount of the Collection Account (the "SERIES 2001-1 COLLECTION SUBACCOUNT") and (ii) two subaccounts of the Series 2001-1 Collection Subaccount: (1) the Series 2001-1 Expense Subaccount and (2) the Series 2001-1 Principal Collection Subaccount (respectively, the "SERIES 2001-1 EXPENSE SUBACCOUNT" and the "SERIES 2001-1 PRINCIPAL COLLECTION SUBACCOUNT"; the accounts established pursuant to this Section 5A.1, collectively, the "SERIES 2001-1 SUBACCOUNTS"); each Series 2001-1 Subaccount shall bear a designation indicating that the funds deposited therein are held for the benefit of the Series 2001-1 Investor Noteholders. The Indenture Trustee shall possess all right, title and interest in all moneys, instruments, securities and other property on deposit from time to time in the Series 2001-1 Subaccounts and the proceeds thereof as security for the benefit of the Series 2001-1 Investor Noteholders. The Series 2001-1 Subaccounts shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Series 2001-1 Investor Noteholders. (b) So long as no Termination Event shall have been deemed to have occurred or shall have been declared to have occurred, the Issuer shall instruct the institution maintaining the Collection Account in writing to invest funds on deposit in the Series 2001-1 Subaccounts at all times in Permitted Investments selected by the Issuer (by standing instructions or otherwise); PROVIDED, HOWEVER, that funds on deposit in a Series 2001-1 Subaccount may be invested 33 29 together with funds held in other subaccounts of the Collection Account. Amounts on deposit and available for investment in the Series 2001-1 Principal Collection Subaccount shall be invested by the Indenture Trustee, at the written direction of the Issuer during the Revolving Period in Permitted Investments that mature, or that are payable or redeemable upon demand of the holder thereof, on or prior to the next Business Day and during the Amortization Period in Permitted Investments that mature, or that are payable or redeemable upon demand of the holder thereof, on or prior to the Business Day immediately preceding the next Payment Date. Amounts on deposit and available for investment in the Series 2001-1 Expense Subaccount shall be invested by the Indenture Trustee; at the written direction of the Issuer, so long as no Termination Event shall have been deemed to have occurred or shall have been declared to have occurred, in Permitted Investments that mature, or that are payable or redeemable upon demand of the holder thereof, on or prior to the Business Day immediately preceding the next Payment Date. Amounts on deposit and available for investment in the Series 2001-1 Collection Subaccount shall be invested by the Indenture Trustee; at the written direction of the Issuer, so long as no Termination Event shall have been deemed to have occurred or shall have been declared to have occurred, in Permitted Investments that mature, or that are payable or redeemable upon demand of the holder thereof, on or prior to the Business Day immediately preceding the next Payment Date. On each Settlement Date, all interest and other investment earnings (net of losses and investment expenses) on funds deposited in the Series 2001-1 Collection Subaccount, the Series 2001-1 Principal Collection Subaccount and the Series 2001-1 Expense Subaccount shall be deposited in the Series 2001-1 Collection Subaccount. The Issuer shall not direct the Indenture Trustee to dispose of (or permit the disposal of) any Permitted Investments prior to the maturity thereof to the extent such disposal would result in a loss of principal of such Permitted Investment. In the absence of written direction as provided hereunder, all funds on deposit in the Collection Account shall remain uninvested. (c) After the deemed or declared occurrence of a Termination Event, the Administrative Agent shall instruct the institution maintaining the Collection Account in writing to invest funds on deposit in the Series 2001-1 Subaccounts from time to time in Permitted Investments selected by the Administrative Agent (by standing instructions or otherwise). Amounts on deposit and available for investment in the Series 2001-1 Subaccounts shall be invested by the Indenture Trustee at the written direction of the Administrative Agent in Permitted Investments that mature, or that are payable or redeemable upon demand of the holder thereof, on or prior to the Business Day immediately preceding the next Payment Date. On each Settlement Date, all interest and other investment earnings (net of losses and investment expenses) on funds deposited in the Series 2001-1 Subaccounts shall be deposited in the Series 2001-1 Collection Subaccount. The Administrative Agent shall not direct the Indenture Trustee to dispose of (or permit the disposal of) any Permitted Investments prior to the maturity thereof to the extent such disposal would result in a loss of principal of such Permitted Investment. In the absence of written direction as provided hereunder, all funds on deposit shall remain uninvested. SECTION 5A.2. ALLOCATIONS WITH RESPECT TO THE SERIES 2001-1 INVESTOR NOTES. (a) PRIOR TO A DOWNGRADE EVENT. For so long as no Downgrade Event shall have occurred and be continuing, on each Business Day during the Revolving Period on which the Collection Agent receives Collections in the form of available funds in the Lock-Box 34 30 Accounts prior to 12:00, New York City time (each a "SERIES 2001-1 DEPOSIT DATE"), the Collection Agent shall allocate to the Series 2001-1 Investor Notes an amount equal to the product of the Series 2001-1 Invested Percentage on such Business Day and the aggregate amount of Collections so received on such Business Day and shall, at the election of the Collection Agent on behalf of the Issuer: (i) apply such funds pursuant to Section 2.3 of the Receivables Purchase Agreement or to reduce the outstanding principal amount of the Subordinated Note; (ii) deposit such funds to the Collection Account for allocation to the Series 2001-1 Principal Collection Subaccount; or (iii) deposit such funds to the Collection Account for allocation to the Series 2001-1 Accrued Expense Account; provided, however that (A) during each Reporting Period, the Collection Agent shall retain from such funds an aggregate amount equal to the Accrued Expense Amount for every Business Day during the Settlement Period ending during such Reporting Period and hold such funds on behalf of the Issuer or deposit such funds into the Collection Account for allocation to the Series 2001-1 Accrued Expense Account; (B) if there is a Series 2001-1 Allocated Receivables Deficiency, the Collection Agent shall deposit into the Collection Account for allocation to the Series 2001-1 Principal Collection Subaccount the lesser of (x) the amount of such funds less any amounts retained by the Collection Agent pursuant to clause (A) above and (y) the amount of such funds sufficient to cure such Series 2001-1 Allocated Receivables Deficiency; and (C) during any Paydown Period, the Collection Agent shall deposit into the Collection Account for allocation to the Series 2001-1 Principal Collection Subaccount an amount from such funds equal to the Paydown Percentage with respect to such Paydown Period of the amount of such funds less any amounts retained by the Collection Agent pursuant to clause (A) above. Not later than 1:00 p.m., New York City time, on each Transfer Date, the Collection Agent shall deposit into the Collection Account the portion of the funds retained by the Collection Agent during the Reporting Period then ending pursuant to clause (A) of the proviso to SECTION 5A.2(a) and not previously deposited into the Collection Account and direct the Indenture Trustee to allocate such funds to the Series 2001-1 Expense Subaccount. Pending the deposit of funds retained by the Collection Agent pursuant to clause (A) of the proviso to SECTION 5A.2(a) into the Collection Account, the Collection Agent shall hold such funds on behalf of the Issuer but shall not be required to segregate such funds from the funds of Goodyear. 35 31 (b) AFTER A DOWNGRADE EVENT. On each Series 2001-1 Deposit Date during the Revolving Period after a Downgrade Event shall have occurred and is continuing, the Collection Agent shall deposit or cause to be deposited into the Collection Account prior to 12:00, New York City time on such Series 2001-1 Deposit Date an amount equal to the product of the Series 2001-1 Invested Percentage and the aggregate amount of Collections so received on such Series 2001-1 Deposit Date and direct the Indenture Trustee in writing to allocate such funds to the Series 2001-1 Collection Subaccount and to further allocate such funds as follows: (i) to the Series 2001-1 Expense Subaccount, an amount equal to the Accrued Expense Amount for each Business Day since the immediately preceding Series 2001-1 Deposit Date; PROVIDED, HOWEVER that if Goodyear is the Collection Agent the Collection Agent may direct the Indenture Trustee in writing to withhold from such allocation, and pay to the Collection Agent, an amount equal to the Daily Collection Agent Fee Amount for each Business Day since the immediately preceding Series 2001-1 Deposit Date; and (ii) following the transfer pursuant to clause (i) above, to the Series 2001-1 Principal Collection Subaccount, any remaining funds on deposit in the Series 2001-1 Collection Subaccount. The Collection Agent shall deposit into the Collection Account an amount equal to the funds paid to the Collection Agent on account of the Daily Collection Agent Fee Amount for each Business Day during any Settlement Period pursuant to clause (i) above and direct the Indenture Trustee to allocate such funds to the Series 2001-1 Expense Subaccount not later than 1:00 p.m., New York City time, on the Transfer Date preceding the Payment Date on which such amounts are payable to the Collection Agent hereunder. Pending deposit of those funds, those funds shall represent a deposit on behalf of the Issuer of the Series 2001-1 Collection Agent Fee payable to the Collection Agent and the Collection Agent shall not be required to segregate such funds from the funds of Goodyear and may use such funds for the general corporate purposes of Goodyear.. (c) SERIES 2001-1 PRINCIPAL COLLECTION SUBACCOUNT. On any Business Day during the Revolving Period (whether or not a Downgrade Event shall have occurred and be continuing), the Collection Agent may direct the Indenture Trustee in writing to: (i) distribute to the Collection Agent on behalf of the Issuer for application pursuant to Section 2.3 of the Receivables Purchase Agreement or to reduce the outstanding principal amount of the Subordinated Note, the proceeds of any Increase deposited in the Series 2001-1 Principal Collection Subaccount pursuant to SECTION 2.3(d) on such Business Day; or (ii) distribute to the Collection Agent all amounts on deposit in the Collection Account and allocated to the Series 2001-1 Principal Collection Subaccount for application on behalf of the Issuer pursuant to Section 2.3 of the Receivables Purchase Agreement or to reduce the outstanding principal amount of the Subordinated Note; provided, that 36 32 (A) no distribution to the Collection Agent shall be made pursuant to this SECTION 5A.2(c)(ii) to the extent that, after giving effect to such distribution, there would be a Series 2001-1 Allocated Receivables Deficiency; and (B) during any Paydown Period, (x) amounts deposited into the Collection Account and allocated to the Series 2001-1 Principal Collection Subaccount pursuant to Clause (C) of the proviso to SECTION 5A.2(a) and (y) the Paydown Percentage with respect to such Paydown Period of all amounts deposited in the Collection Account and allocated to the Series 2001-1 Principal Collection Subaccount pursuant to SECTION 5A.2(b)(ii) shall be retained in the Series 2001-1 Principal Collection Subaccount and applied to effect a Decrease in accordance with SECTION 2.5(a). (d) TERMINATION EVENT. No later than one Business Day after the deemed or declared occurrence of a Termination Event, the Collection Agent shall (x) deposit into the Collection Account and direct the Indenture Trustee to allocate to the Series 2001-1 Collection Subaccount any Collections allocated to the Series 2001-1 Investor Noteholders that have not been applied pursuant to Section 2.3 of the Receivables Purchase Agreement or to reduce the outstanding principal amount of the Subordinated Note or otherwise deposited into the Collection Account hereunder and (y) direct the Indenture Trustee in writing to allocate to the Series 2001-1 Collection Subaccount all funds then allocated to the Series 2001-1 Principal Collection Subaccount. (e) AMORTIZATION PERIOD. On each Business Day during the Amortization Period on which the Collection Agent receives Collections in the form of available funds in the Lock-Box Accounts prior to 12:00, New York City time, the Collection Agent shall deposit into the Collection Account an amount equal to the product of the Series 2001-1 Invested Percentage on such Business Day and the aggregate amount of Collections received on such Business Day and direct the Indenture Trustee in writing to allocate such funds to the Series 2001-1 Investor Noteholders and the Series 2001-1 Collection Subaccount. (f) SERIES 2001-1 INITIAL FUNDING DATE. The Issuer hereby directs the Indenture Trustee to pay to the Seller the proceeds from the initial sale of the Series 2001-1 Investor Notes for application in accordance with Section 2.3 of the Receivables Purchase Agreement. (g) COLLECTIONS ALLOCATED TO OTHER SERIES OF INVESTOR NOTES. The Collection Agent shall direct the Indenture Trustee in writing to allocate to the Series 2001-1 Investor Noteholders and the Series 2001-1 Principal Collection Subaccount any amounts allocated to another Series of Investor Notes that the Issuer or the Collection Agent, on behalf of the Issuer, has elected to apply to reduce the Series 2001-1 Invested Amount. (h) DECREASE. If the Collection Agent shall have given the Administrative Agent written notice of a Decrease in accordance with SECTION 2.5(a), the Collection Agent may direct the Indenture Trustee in writing by 10:00 a.m., New York City time, on the date of such Decrease, to withdraw amounts on deposit in the Series 2001-1 Principal Collection Subaccount 37 33 and reduce the Series 2001-1 Invested Amount on the date of such Decrease in accordance with SECTIONS 2.5 and 5A.6(d). SECTION 5A.3. DETERMINATION OF INTEREST (a) On the third Business Day prior to each Payment Date, the Collection Agent shall determine the Series 2001-1 Note Rate for the most recent Settlement Period, based on the information provided by the Funding Agents pursuant to this SECTION 5A.3(a), and the amount of interest payable on such Payment Date on the Series 2001-1 Investor Notes ("SERIES 2001-1 MONTHLY INTEREST"). Series 2001-1 Monthly Interest for each Series 2001-1 Interest Period will equal the product of (i) the Series 2001-1 Note Rate for such Settlement Period, (ii) the average daily Series 2001-1 Invested Amount during such Settlement Period and (iii) the actual number of days elapsed in such Settlement Period divided by 360. On the fifth Business Day prior to each Payment Date, the Funding Agent with respect to each Purchaser shall provide written notice to the Collection Agent of the Monthly Funding Costs with respect to such Purchaser with respect to the most recent Settlement Period. (b) On the third Business Day prior to each Payment Date, the Collection Agent shall determine the excess, if any (the "INTEREST SHORTFALL"), of (i) the sum of (x) the Series 2001-1 Monthly Interest for the most recent Settlement Period and (y) the amount of any unpaid Interest Shortfall, as of the preceding Payment Date (together with any Additional Interest on such Interest Shortfall) OVER (ii) the amount which will be available to be distributed to the Purchasers on such Payment Date in respect thereof pursuant to this Indenture Supplement. If the Interest Shortfall with respect to any Payment Date is greater than zero, an additional amount ("ADDITIONAL INTEREST") equal to the product of (A) the number of days until such Interest Shortfall shall be repaid divided BY 365 (or 366, as the case may be), (B) the Alternate Base Rate plus 2.0% and (C) such Interest Shortfall (or the portion thereof which has not been paid to the Series 2001-1 Investor Noteholders) shall be payable as provided herein on each Payment Date following such Payment Date, to but excluding the Payment Date on which such Interest Shortfall is paid to the Series 2001-1 Investor Noteholders. SECTION 5A.4. MONTHLY APPLICATION OF COLLECTIONS. (a) On each Payment Date during the Revolving Period, based solely on the information contained in the Monthly Settlement Statement with respect to Series 2001-1 Investor Notes, the Indenture Trustee shall apply the following amounts allocated to the Series 2001-1 Expense Subaccount on such Payment Date in the following order of priority: (i) if Goodyear is not the Collection Agent, to the Collection Agent, an amount equal to the Series 2001-1 Collection Agent Fee for the most recent Settlement Period; (ii) to the Administrative Agent, for the account of the Series 2001-1 Investor Noteholders, an amount equal to the Series 2001-1 Monthly Interest payable on such Payment Date plus the amount of any unpaid Interest Shortfall, as of the preceding Payment Date, together with any Additional Interest on such Interest Shortfall (such amount, the "MONTHLY INTEREST PAYMENT"); 38 34 (iii) to the Administrative Agent, for the account of the Series 2001-1 Investor Noteholders, an amount equal to the Unused Fee for the most recent Settlement Period plus the amount of any unpaid Unused Fee for any prior Settlement Period (such amount, the "UNUSED FEE PAYMENT"); (iv) if Goodyear is the Collection Agent, to the Collection Agent, an amount equal to the Series 2001-1 Collection Agent Fee for the most recent Settlement Period; (v) to the Administrative Agent, for the account of the applicable Series 2001-1 Investor Noteholders, an amount equal to any Increased Costs payable on such Payment Date; and (vi) to the Issuer, any amounts remaining on deposit in the Series 2001-1 Expense Subaccount. (b) On each Payment Date during the Amortization Period, based solely on the information contained in the Monthly Settlement Statement with respect to Series 2001-1 Investor Notes, the Indenture Trustee shall apply the following amounts allocated to the Series 2001-1 Collection Subaccount on such Payment Date in the following order of priority: (i) if Goodyear is not the Collection Agent, to the Collection Agent, an amount equal to the Series 2001-1 Collection Agent Fee for the most recent Settlement Period; (ii) to the Administrative Agent , for the account of the Series 2001-1 Investor Noteholders, an amount equal to the Series 2001-1 Monthly Interest Payment; (iii) if Goodyear is the Collection Agent, to the Collection Agent, an amount equal to the Series 2001-1 Collection Agent Fee for the most recent Settlement Period; (iv) to the Administrative Agent, for the account of the Series 2001-1 Investor Noteholders, an amount up to the Series 2001-1 Invested Amount on such Payment Date; (v) to the Administrative Agent, for the account of the applicable Series 2001-1 Investor Noteholders, an amount equal to any Increased Costs payable on such Payment Date; and (vi) to the Issuer, any amounts remaining on deposit in the Series 2001-Collection Subaccount. SECTION 5A.5. PAYMENT OF MONTHLY INTEREST PAYMENT, FEES AND EXPENSES. (a) Upon the receipt of funds from the Indenture Trustee on each Payment Date on account of the Monthly Interest Payment, the Administrative Agent shall pay to each 39 35 Funding Agent with respect to a Purchaser an amount equal to the Monthly Funding Costs with respect to such Purchaser with respect to the most recent Settlement Period plus the amount of any unpaid Interest Shortfall payable to such Purchaser as of the preceding Payment Date, together with any Additional Interest thereon. If the amount paid to the Administrative Agent on any Payment Date pursuant to SECTION 5A.4 is less than the Monthly Interest Payment on such Payment Date, the Administrative Agent shall pay the amount available to the Funding Agents, on behalf of the Purchasers, on a pro rata basis, based on the Monthly Funding Costs with respect to each Purchaser with respect to the most recent Settlement Period. (b) Upon the receipt of funds from the Indenture Trustee on each Payment Date on account of the Unused Fee Payment, the Administrative Agent shall pay to each Funding Agent with respect to a Purchaser an amount equal to the Unused Fee payable to such Purchaser with respect to the most recent Settlement Period plus the amount of any unpaid Unused Fee for any prior Settlement Period payable to such Purchaser. If the amount paid to the Administrative Agent on any Payment Date pursuant to SECTION 5A.4 is less than the Unused Fee Payment on such Payment Date, the Administrative Agent shall pay the amount available to the Funding Agents, on behalf of the Purchasers, on a pro rata basis, based on the Unused Fee payable to each Purchaser with respect to the most recent Settlement Period. (c) Upon the receipt of funds from the Indenture Trustee on any Payment Date on account of Increased Costs, the Administrative Agent shall pay such amounts to the Funding Agent with respect to the CP Conduit Purchaser or the APA Bank owed such amounts. If the amounts paid to the Administrative Agent on any Payment Date pursuant to SECTION 5A.4 are less than the Increased Costs due and payable on such Payment Date, the Administrative Agent shall pay the amounts available to the Funding Agents with respect to the CP Conduit Purchasers and APA Banks owed such amounts, on a pro rata basis, based on the amounts owing to such CP Conduit Purchasers and APA Banks. SECTION 5A.6. DETERMINATION AND PAYMENT OF PRINCIPAL. (a) The principal amount of the Series 2001-1 Investor Notes shall be due and payable on the Final Maturity Date. (b) The amount of principal distributable to the Series 2001-1 Investor Noteholders on any Payment Date during the Amortization Period (the "MONTHLY PRINCIPAL PAYMENT") shall be equal to the amount available on such Payment Date to be distributed to the Administrative Agent pursuant to SECTION 5A.4(b)(iv). (c) Upon the receipt of funds from the Indenture Trustee on any Payment Date on account of the Monthly Principal Payment, the Administrative Agent shall pay to each Funding Agent with respect to a Purchaser, such Purchaser's Pro Rata Share of the Monthly Principal Payment. (d) On the date of any Decrease, the Indenture Trustee shall pay to the Administrative Agent, for the account of the Series 2001-1 Investor Noteholders, from the Series 2001-1 Principal Collection Subaccount the amount of the Decrease indicated in the request 40 36 received by the Indenture Trustee pursuant to SECTION 2.5(a). Upon the receipt of funds on account of a Decrease from the Indenture Trustee, the Administrative Agent shall pay (i) during a Paydown Period, to each Funding Agent with respect to a Non-Extending Purchaser, a pro rata amount of such Decrease, based on the Purchaser Invested Amount with respect to such Non-Extending Purchaser relative to the Purchaser Invested Amounts with respect to all Non-Extending Purchasers on the date of such Decrease; and (ii) other than during any Paydown Period, to each Funding Agent with respect to a Purchaser, such Purchaser's Pro Rata Share of the amount of such Decrease (or, in the case of a Decrease occurring on a date when the aggregate Purchaser Invested Amounts of all Non-Extending Purchasers shall have been reduced to zero, such Purchaser's Pro Rata Share of the amount of such Decrease remaining after the application of such Decrease pursuant to SECTION 5A.6(d)(i)). Each Purchaser's share of the amount of any Decrease on any Business Day shall be allocated by such Purchaser first to reduce the Available CP Funding Amount with respect to such Purchaser and the Available APA Bank Funding Amount with respect to such Purchaser on such Business Day and then to reduce the portion of the Purchaser Invested Amount with respect to such Purchaser allocated to CP Tranches and Eurodollar Tranches in such order as such Purchaser may select in order to minimize costs payable pursuant to SECTION 7.4. ARTICLE 4 TERMINATION EVENTS ------------------ If any one of the following events shall occur with respect to the Series 2001-1 Investor Notes: (a) a Series 2001-1 Allocated Receivables Deficiency shall occur and continue for two Business Days after the earlier to occur of (i) the date upon which the Issuer or the Collection Agent obtains knowledge of such Series 2001-1 Allocated Receivables Deficiency and (ii) the date on which written notice of such Series 2001-1 Allocated Receivables Deficiency shall have been given to the Issuer or the Collection Agent by the Administrative Agent or any Funding Agent; (b) a Purchase Termination Event shall have occurred and the Issuer's obligation to purchase Receivables under the Receivables Purchase Agreement shall have terminated in accordance with Section 6.1 of the Receivables Purchase Agreement; (c) an Event of Default with respect to the Series 2001-1 Investor Notes shall have occurred and the maturity of the Series 2001-1 Investor Notes shall have been accelerated in accordance with Section 9.2 of the Base Indenture; (d) an Insolvency Event shall occur with respect to Goodyear or the Issuer; 41 37 (e) the Indenture Trustee shall for any reason cease to have a valid and perfected first priority security interest in the Collateral, free and clear of any Adverse Claims, other than Permitted Liens, or any of Goodyear, the Issuer or any Affiliate of either thereof shall so assert in writing; PROVIDED, HOWEVER that a Termination Event may not be declared under this paragraph (e) if there shall be a lien on one or more Purchased Receivables and (x) the Seller shall repurchase such Purchased Receivables in accordance with Section 2.6 of the Receivables Purchase Agreement or (y) the Collection Agent shall make payment of a Collection Agent Indemnification Amount in respect of such Purchased Receivables in accordance with Section 5.2 of the Collection Agency Agreement; (f) there shall have been filed against Goodyear, Dunlop or the Issuer (i) a notice of federal tax lien from the Internal Revenue Service or (ii) a notice of lien from the PBGC under Section 412(n) of the Code or Section 302(f) of ERISA for a failure to make a required installment or other payment to a plan to which either of such sections applies; (g) the Seller shall fail to maintain 100% ownership of the Issuer; (h) the long-term unsecured senior debt of the Seller shall be rated below BB by S&P or below Ba2 by Moody's; (i) any Collection Agent Termination Event shall have been declared in accordance with the Collection Agency Agreement; (j) the average Dilution Ratio for the three preceding Settlement Periods exceeds 4.75%; (k) the average Default Ratio for the three preceding Settlement Periods exceeds 1.75%; (l) the average Delinquency Ratio for the three preceding Settlement Periods exceeds 7.25%; (m) the failure on the part of the Issuer to make any payment or deposit required by the terms of the Base Indenture, this Indenture Supplement or any other Transaction Document and such failure continues unremedied for two Business Days; (n) any material provision of the Base Indenture, this Indenture Supplement, the Collection Agency Agreement or the Receivables Purchase Agreement shall cease, for any reason, to be in full force and effect or any of the Seller, the Collection Agent or the Issuer shall so assert in writing; (o) the failure on the part of the Issuer to duly to observe or perform in any material respect any covenants or agreements of the Issuer set forth in the Base Indenture, this Indenture Supplement or any other Transaction Document (other than those covered by clause (m) above) and such failure continues for thirty days after the earlier to occur of (i) the date upon which the Issuer obtains knowledge of such failure or (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Issuer by the 42 38 Indenture Trustee, or to the Issuer and the Indenture Trustee by the Administrative Agent or any Purchaser; (p) any representation or warranty made by the Issuer in the Base Indenture or this Indenture Supplement or any information required to be delivered by the Issuer to the Indenture Trustee shall prove to have been incorrect in any material respect when made or when delivered which failure, if capable of being remedied, continues unremedied for 30 days after the earlier to occur of (i) the date upon which the Issuer obtains knowledge thereof and (ii) the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Administrative Agent or any Purchaser; (q) the Seller shall enter into any corporate transaction or merger whereby it is not the surviving entity and the unsecured senior long-term debt of the surviving entity is rated less than BBB- by S&P or less than Baa3 by Moody's on the effective date of such transaction or merger; (r) the Seller shall fail to pay any principal of Funded Debt of the Seller which is then outstanding in a principal amount in excess of $25,000,000 at the scheduled maturity hereof, such failure shall continue after the applicable grace period, if any, specified in the agreement or instrument relating to such Funded Debt, and such Funded Debt is not paid within ten Business Days after the earlier of (i) the day on which an Authorized Officer of the Seller first obtains actual knowledge of such failure or (ii) written notice of such failure shall have been given to the Seller by the holder or holders of such Funded Debt; or Funded Debt of the Seller which is then outstanding in a principal amount in excess of $25,000,000 shall become due and payable prior to the scheduled maturity thereof as a result of the lawful acceleration thereof due to the occurrence of an event of default thereunder and such Funded Debt is not paid, or such acceleration thereof is not rescinded or annulled, within ten Business Days following such lawful acceleration thereof; (s) one or more judgments or decrees shall be entered against the Issuer involving in the aggregate a liability (not paid or fully covered by insurance) of $25,000 or more and such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within 30 days from the entry thereof; or (t) any Termination Event with respect to any other Series of Outstanding Investor Notes shall have been deemed to have occurred or shall have been declared to have occurred in accordance with the terms of the applicable Indenture Supplement; then, in the case of any event described in clause (e) or (f) or clauses (i) through (t) above, after the applicable grace period, if any, the Indenture Trustee shall, acting at the direction of the Series 2001-1 Required Investor Noteholders, declare that a Termination Event has occurred with respect to the Series 2001-1 Investor Notes. In the case of any event described in clause (h) above, a Termination Event with respect to the Series 2001-1 Investor Notes will be deemed to have occurred without notice or other action on the part of the Indenture Trustee or the Series 2001-1 Investor Noteholders on the thirtieth day after the occurrence of such event if the Series 2001-1 Required Investor Noteholders shall not have waived the occurrence of such event prior 43 39 to such day. In the case of any event described in clauses (a) through (d) and clause (g) above, a Termination Event with respect to the Series 2001-1 Investor Notes will be deemed to have occurred without notice or other action on the part of the Indenture Trustee or the Series 2001-1 Investor Noteholders. ARTICLE 5 OPTIONAL PREPAYMENT ------------------- The Issuer shall have the option to prepay all outstanding Series 2001-1 Investor Notes at any time by paying an amount equal to the Series 2001-1 Prepayment Amount. The Issuer shall give the Indenture Trustee and the Administrative Agent at least ten Business Days' prior written notice of the date on which the Issuer intends to exercise such option to prepay (the "PREPAYMENT DATE"). Upon receipt of any notice of a Prepayment Date from the Issuer, the Administrative Agent shall promptly notify the Funding Agent with respect to each Purchaser thereof. Not later than 11:00 A.M., New York City time, on such Prepayment Date, the Issuer shall deposit in the Collection Account for allocation to the Series 2001-1 Collection Subaccount an amount equal to the Series 2001-1 Prepayment Amount in immediately available funds. The funds deposited into the Series 2001-1 Collection Subaccount will be paid by the Indenture Trustee to the Administrative Agent, for the account of the Series 2001-1 Investor Noteholders, on such Prepayment Date. Upon the receipt of funds from the Indenture Trustee on any Prepayment Date, the Administrative Agent shall pay to each Funding Agent with respect to a Purchaser, the portion of the Series 2001-1 Prepayment Amount owing to such Purchaser. ARTICLE 6 COLLECTION AGENT FEE -------------------- SECTION 6.1. COLLECTION AGENT FEE. A periodic collection agent fee (the "Series 2001-1 Collection Agent Fee") shall be payable to the Collection Agent on each Payment Date for the preceding Settlement Period in an amount equal to the product of (a) the Collection Agent Fee Rate times (b) the daily average Series 2001-1 Allocated Net Receivables Balance for such Settlement Period times (c) the number of days in such Settlement Period divided by 365 (or 366, as applicable) days. The Series 2001-1 Collection Agent Fee shall be payable to the Collection Agent on each Payment Date pursuant to Section 5A.4. ARTICLE 7 CHANGE IN CIRCUMSTANCES SECTION 7.1. ILLEGALITY. Notwithstanding any other provision herein, if any Change in Law shall make it unlawful for any Purchaser to make or maintain any portion of the Purchaser Invested Amount with respect to such Purchaser allocated to a Eurodollar Tranche and such Purchaser shall notify in writing the Administrative Agent, the Funding Agent with respect to such Purchaser, the Indenture Trustee and the Issuer, then the portion of such Purchaser Invested Amount allocated to Eurodollar Tranches shall thereafter be calculated by reference to the Alternate Base Rate. If any such change in the method of calculating interest occurs on a day 44 40 which is not the last day of the Eurodollar Period with respect to any Eurodollar Tranche, the Issuer shall pay to such Purchaser the amounts, if any, as may be required pursuant to SECTION 7.4. SECTION 7.2. INCREASED COSTS. (a) If any Change in Law (except with respect to Taxes which shall be governed by SECTION 7.3) shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Affected Party (except any such reserve requirement reflected in the Adjusted LIBO Rate); or (ii) impose on any Affected Party or the London interbank market any other condition affecting the Transaction Documents or the funding of Eurodollar Tranches by such Affected Party; and the result of any of the foregoing shall be to increase the cost to such Affected Party of making, converting into, continuing or maintaining Eurodollar Tranches (or maintaining its obligation to do so) or to reduce any amount received or receivable by such Affected Party hereunder or in connection herewith (whether principal, interest or otherwise), then the Issuer will pay to such Affected Party such additional amount or amounts as will compensate such Affected Party for such additional costs incurred or reduction suffered. (b) If any Affected Party reasonably determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on such Affected Party's capital or the capital of any corporation controlling such Affected Party as a consequence of its obligations hereunder to a level below that which such Affected Party or such corporation could have achieved but for such Change in Law (taking into consideration such Affected Party's or such corporation's policies with respect to capital adequacy), then from time to time, the Issuer shall pay to such Affected Party such additional amount or amounts as will compensate such Affected Party for any such reduction suffered. (c) A certificate of an Affected Party setting forth the amount or amounts necessary to compensate such Affected Party as specified in subsections (a) and (b) of this SECTION 7.2 shall be delivered to the Issuer (with a copy to the Administrative Agent and the Funding Agent with respect to such Affected Party) and shall be conclusive absent manifest error. The agreements in this Section shall survive the termination of this Indenture Supplement and the Base Indenture and the payment of all amounts payable hereunder and thereunder. (d) Failure or delay on the part of an Affected Party to demand compensation pursuant to this SECTION 7.2 shall not constitute a waiver of such Affected Party's right to demand such compensation; PROVIDED that the Issuer shall not be required to compensate any Affected Party pursuant to this Section 7.2 for any increased costs or reductions incurred more than 30 days prior to the date that such Affected Party notifies the Issuer of the Change in Law giving rise to such increased costs or reductions and of such Affected Party's intention to claim compensation therefor. 45 41 SECTION 7.3. TAXES. (a) Any and all payments by or on account of any obligation of the Issuer hereunder shall be made free and clear of and without deduction for any Indemnified Taxes or Other Taxes; PROVIDED that if the Issuer shall be required to deduct any Indemnified Taxes or Other Taxes from such payments, then (i) subject to SECTION 7.3(c) below, the sum payable shall be increased as necessary so that after making all required deductions (including deductions applicable to additional sums payable under this SECTION 7.3) the recipient receives an amount equal to the sum that it would have received had no such deductions been made, (ii) the Issuer shall make such deductions and (iii) the Issuer shall pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law. (b) In addition, the Issuer shall pay any Other Taxes to the relevant Governmental Authority in accordance with applicable law. (c) The Issuer shall indemnify the Administrative Agent, each Funding Agent, each Program Support Provider and each Purchaser within the later of 10 days after written demand therefor and the Payment Date next following such demand for the full amount of any Indemnified Taxes or Other Taxes paid by the Administrative Agent, such Funding Agent, such Program Support Provider or such Purchaser on or with respect to any payment by or on account of any obligation of the Issuer hereunder or under any other Transaction Document (including Indemnified Taxes or Other Taxes imposed or asserted on or attributable to amounts payable under this SECTION 7.3) and any penalties, interest and reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority; PROVIDED that no Person shall be indemnified pursuant to this SECTION 7.3(c) or required to pay additional amounts under the proviso of SECTION 7.3(a) to the extent that the reason for such indemnification results from the failure by such Person to comply with the provisions of SECTION 7.3(e) (g) or (h). A certificate as to the amount of such payment or liability delivered to the Issuer by the Administrative Agent, any Funding Agent, any Program Support Provider or any Purchaser shall be conclusive absent manifest error. Any payments made by the Issuer pursuant to this SECTION 7.3 shall be made solely from funds available therefor pursuant to SECTION 5A.4 and from any other funds otherwise payable to the Issuer pursuant to the Base Indenture or any Indenture Supplement, shall be non-recourse other than with respect to such funds, and shall not constitute a claim against the Issuer to the extent that insufficient funds exist to make such payment. The agreements in this Section shall survive the termination of this Indenture Supplement and the Base Indenture and the payment of all amounts payable hereunder and thereunder. (d) As soon as practicable after any payment of Indemnified Taxes or Other Taxes by the Issuer to a Governmental Authority, the Issuer shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent. (e) The Administrative Agent, each Funding Agent, each Purchaser and each Program Support Provider, if entitled to an exemption from or reduction of an Indemnified Tax or Other Tax with respect to payments made under this Indenture Supplement and the Base 46 42 Indenture shall (to the extent legally able to do so) deliver to the Issuer (with a copy to the Administrative Agent) such properly completed and executed documentation prescribed by applicable law and reasonably requested by the Issuer on the later of (i) 20 Business Days after such request is made and the applicable forms are provided to the Administrative Agent, such Funding Agent, such Purchaser or such Program Support Provider or (ii) 20 Business Days before prescribed by applicable law as will permit such payments to be made without withholding or with an exemption from or reduction of Indemnified Taxes or Other Taxes. (f) If the Administrative Agent, any Funding Agent, any Program Support Provider or any Purchaser receives a refund solely in respect of Indemnified Taxes or Other Taxes, it shall pay over such refund to the Issuer to the extent that it has already received indemnity payments or additional amounts pursuant to this SECTION 7.3 with respect to such Indemnified Taxes or Other Taxes giving rise to the refund, net of all out-of-pocket expenses and without interest (other than interest paid by the relevant Governmental Authority with respect to such refund); PROVIDED, HOWEVER, that the Issuer shall, upon request of the Administrative Agent, such Funding Agent, such Program Support Provider or such Purchaser, repay such refund (plus interest or other charges imposed by the relevant Governmental Authority) to the Administrative Agent, such Funding Agent, such Program Support Provider or such Purchaser if the Administrative Agent, such Funding Agent, such Program Support Provider or such Purchaser is required to repay such refund to such Governmental Authority. Nothing contained herein shall require the Administrative Agent, any Funding Agent, any Program Support Provider or any Purchaser to make its tax returns (or any other information relating to its taxes which it deems confidential) available to the Issuer or any other Person. (g) If any Purchaser is an entity that is not incorporated or organized under the laws of the United States of America or a state thereof or the District of Columbia, such Purchaser shall: (i) upon or prior to becoming a party to any Transaction Document, deliver to the Issuer and the Administrative Agent two duly completed copies of IRS Form W-8BEN or Form W-8ECI, or successor applicable forms, as the case may be; (ii) deliver to the Issuer and the Administrative Agent two (2) further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Issuer; and (iii) obtain such extensions of time for filing and completing such forms or certifications as may be reasonably be requested by the Issuer and the Administrative Agent; unless, in any such case, any change in treaty, law or regulation has occurred after the Series 2001-1 Closing Date (or, if later, the date such Purchaser becomes a party to any Transaction Document) and prior to the date on which any such delivery would otherwise be required which renders the relevant form inapplicable or which would prevent such Purchaser from duly 47 43 completing and delivering the relevant form with respect to it, and such Purchaser so advises the Issuer and the Administrative Agent. (h) If a beneficial or equity owner of a Purchaser (instead of the Purchaser itself) is required under United States federal income tax law or the terms of a relevant treaty to provide IRS Form W-8BEN or IRS Form W-8ECI or any successor applicable forms, as the case may be, in order to claim an exemption from withholding of United Stated federal income taxes or backup withholding taxes, then each such beneficial owner or equity owner shall be considered to be a Purchaser for purposes of SECTION 7.3 (g). SECTION 7.4. BREAK FUNDING PAYMENTS. The Issuer agrees to indemnify each Purchaser and to hold each Purchaser harmless from any loss or expense which such Purchaser may sustain or incur as a consequence of (a) default by the Issuer in making a borrowing of, conversion into or continuation of a CP Tranche or a Eurodollar Tranche after the Issuer has given irrevocable notice requesting the same in accordance with the provisions of this Indenture Supplement, or (b) default by the Issuer in making any prepayment in connection with a Decrease after the Issuer has given irrevocable notice thereof in accordance with the provisions of SECTION 2.5 or (c) the making of a prepayment of a CP Tranche or a Eurodollar Tranche (including, without limitation, any Decrease) prior to the termination of the CP Rate Period for such CP Tranche or the Eurodollar Period for such Eurodollar Tranche, as the case may be. Such indemnification shall include an amount determined by the Funding Agent with respect to such Purchaser and shall equal either (x) the excess, if any, of (i) such Purchaser's cost of funding the amount so prepaid or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of the CP Rate Period or the Eurodollar Period (or in the case of a failure to borrow, convert or continue, the CP Rate Period or the Eurodollar Period that would have commenced on the date of such prepayment or of such failure), as the case may be, over (ii) the amount of interest earned by such Purchaser upon redeployment of an amount of funds equal to the amount prepaid or not borrowed, converted or continued for a comparable period or (y) if such Purchaser is able to terminate the funding source before its scheduled maturity, any costs associated with such termination; provided that any payments made by the Issuer pursuant to this subsection shall be made solely from funds available therefor pursuant to SECTION 5A.4 and from any other funds otherwise payable to the Issuer pursuant to the Base Indenture or any Indenture Supplement, shall be non-recourse other than with respect to such funds, and shall not constitute a claim against the Issuer to the extent that such funds are insufficient to make such payment. This covenant shall survive the termination of this Indenture Supplement and the Base Indenture and the payment of all amounts payable hereunder and thereunder. A certificate as to any additional amounts payable pursuant to the foregoing sentence submitted by any Funding Agent on behalf of a Purchaser to the Issuer shall be conclusive absent manifest error. SECTION 7.5. ALTERNATE RATE OF INTEREST. If prior to the commencement of any Eurodollar Period: (a) the Administrative Agent determines (which determination shall be conclusive absent manifest error) that adequate and reasonable means do not exist for ascertaining the Adjusted LIBO Rate for such Eurodollar Period, or 48 44 (b) the Administrative Agent is advised by any Purchaser that the Adjusted LIBO Rate for such Eurodollar Period will not adequately and fairly reflect the cost to such Purchaser of making or maintaining the Eurodollar Tranches during such Eurodollar Period, then the Administrative Agent shall promptly give telecopy or telephonic notice thereof to the Issuer and the Indenture Trustee, whereupon until the Administrative Agent notifies the Issuer and the Indenture Trustee that the circumstances giving rise to such notice no longer exist, the Available APA Bank Funding Amount with respect to any Purchaser (in the case of clause (a) above) or with respect to such Purchaser (in the case of clause (b) above) shall not be allocated to any Eurodollar Tranche. SECTION 7.6. MITIGATION OBLIGATIONS. If an Affected Party requests compensation under SECTION 7.2, or if the Issuer is required to pay any additional amount to any Purchaser or any Governmental Authority for the account of any Purchaser pursuant to SECTION 7.3, then, upon written notice from the Issuer, such Affected Party or Purchaser, as the case may be, shall use commercially reasonable efforts to designate a different lending office for funding or booking its obligations hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, which pays a price for such assignment which is acceptable to such Purchaser and its assignee, in the judgment of such Affected Party or Purchaser, if such designation or assignment (i) would eliminate or reduce amounts payable pursuant to SECTION 7.2 or 7.3, as the case may be, in the future and (ii) would not subject such Affected Party or Purchaser to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Affected Party or Purchaser. The Issuer hereby agrees to pay all reasonable costs and expenses incurred by such Affected Party or Purchaser in connection with any such designation or assignment. ARTICLE 8 REPRESENTATIONS AND WARRANTIES, COVENANTS ----------------------------------------- SECTION 8.1. REPRESENTATIONS AND WARRANTIES OF THE ISSUER AND GOODYEAR. The Issuer and Goodyear each hereby represents and warrants to the Indenture Trustee, the Administrative Agent, each Funding Agent and each Purchaser that: (a) each and every of their respective representations and warranties contained in the Transaction Documents is true and correct as of the Series 2001-1 Closing Date and true and correct in all material respects as of the Series 2001-1 Initial Funding Date and as of the date of each Increase; (b) each of the Series 2001-1 Investor Notes has been duly authorized and executed by the Issuer and when duly authenticated by the Indenture Trustee and delivered to the Series 2001-1 Investor Noteholders in accordance with the terms of this Indenture Supplement will constitute legal, valid and binding obligations of the Issuer enforceable in accordance with their terms, except as enforceability thereof may be limited by bankruptcy, insolvency, or other similar laws relating to or affecting generally the enforcement of creditors' rights or by general equitable principles; and 49 45 (c) as of the Series 2001-1 Closing Date, they have not engaged, in connection with the offering of the Series 2001-1 Investor Notes, in any form of general solicitation or general advertising within the meaning of Rule 502(c) under the Securities Act. SECTION 8.2. COVENANTS OF THE ISSUER AND GOODYEAR. The Issuer and Goodyear hereby agree, in addition to their obligations hereunder, that: (a) they shall observe in all material respects each and every of their respective covenants (both affirmative and negative) contained in the Base Indenture and all other Transaction Documents to which each is a party; (b) they shall afford each Funding Agent with respect to a Purchaser, the Indenture Trustee or any representatives of any such Funding Agent or the Indenture Trustee access to all records relating to the Receivables at any reasonable time during regular business hours, upon reasonable prior notice (and with one Business Day's prior notice if a Termination Event shall have been deemed to have occurred or shall have been declared to have occurred), for purposes of inspection and shall permit such Funding Agent, the Indenture Trustee or any representative of such Funding Agent or the Indenture Trustee to visit any of the Issuer's or Goodyear's, as the case may be, offices or properties during regular business hours and as often as may reasonably be desired to discuss the business, operations, properties, financial and other conditions of the Issuer or Goodyear with their respective officers and employees and, with reasonable prior notice to Goodyear, together with Goodyear, with their independent certified public accountants; (c) they shall promptly provide such additional financial and other information with respect to the Transaction Documents, the Issuer, Goodyear, Dunlop or the Receivables as the Administrative Agent or any Funding Agent may from time to time reasonably request; and (d) they shall not take any action, nor permit Dunlop to take any action, requiring the satisfaction of the Rating Agency Condition pursuant to any Transaction Document, other than the issuance of any series of Investor Notes, without the prior written consent of the Series 2001-1 Required Investor Noteholders. SECTION 8.3. COVENANTS OF THE COLLECTION AGENT. The Collection Agent hereby agrees that: (a) it shall provide to the Indenture Trustee, the Administrative Agent and each Funding Agent, on the second Business Day prior to each Payment Date, a Monthly Settlement Statement, substantially in the form of EXHIBIT C, setting forth as of the last day of the most recent Settlement Period and for such Settlement Period the information set forth therein; (b) it shall provide to the Indenture Trustee, the Administrative Agent and each Funding Agent, on each Weekly Reporting Date after the occurrence and during the continuance of a Downgrade Event, a Weekly Report, substantially in the form of EXHIBIT D, setting forth as of the last day of the most recent calendar week and for such calendar week the information set forth therein; PROVIDED, HOWEVER that the Weekly Reports delivered during the first 60 days following the occurrence of the first Downgrade Event may contain a calculation of 50 46 the Net Receivables Balance that uses the amounts contained in clause (ii) of the definition thereof as of the last day of the most recent calendar month and that recognizes Receivables as Delinquent Receivables or Defaulted Receivables only if they were Delinquent Receivables or Defaulted Receivables, as the case may be, as of the last day of the most recent calendar month; and (c) it shall provide to the Administrative Agent simultaneously with delivery to the Indenture Trustee, all reports, notices, certificates, statements and other documents required to be delivered to the Indenture Trustee pursuant to the Base Indenture and the other Transaction Documents, and furnish to the Administrative Agent promptly after receipt thereof a copy of each notice, demand or other material communication (excluding routine communications) received by or on behalf of the Issuer or the Collection Agent with respect to the Transaction Documents. The Administrative Agent shall distribute to the Funding Agents copies of all reports, notices, certificates, statements and other documents delivered to it pursuant to this SECTION 8.3(b). SECTION 8.4. OBLIGATIONS UNAFFECTED. The obligations of the Issuer and the Collection Agent to the Funding Agent and the Purchasers under this Indenture Supplement shall not be affected by reason of any invalidity, illegality or irregularity of any of the Receivables. SECTION 8.5. DESIGNATION OF ELIGIBLE SPECIAL OBLIGORS AND ADDITIONAL ELIGIBILITY CRITERIA. The Issuer, the Collection Agent, the Indenture Trustee, each of the CP Conduit Purchasers, each of the APA Banks, each of the Funding Agents and the Administrative Agent hereby agree that: (a) TBC Corporation and Heafner Tire Group are hereby designated as Eligible Special Obligors each with a Concentration Factor of 5%; (b) the Issuer, with the prior written consent of each Funding Agent, may designate any other Obligor as an Eligible Special Obligor hereunder by giving written notice of such designation and the applicable Concentration Factor, together with evidence of the prior written consent of the Funding Agents to such designation, to the Indenture Trustee and the Collection Agent; (c) TBC Corporation, Heafner Tire Group and any Obligor designated as an Eligible Special Obligor in accordance with clause (b) of this Section 8.5 shall remain designated as an Eligible Special Obligor hereunder only until the date no less than 30 days after the date of any written notice given by a Funding Agent to the Issuer, the Collection Agent and the Indenture Trustee to the effect that, based on such Funding Agent's reasonable credit judgment, such Obligor shall no longer be designated as an Eligible Special Obligor hereunder; and (d) any Funding Agent may request the Indenture Trustee in writing to give the Issuer and the Collection Agent written notice of additional criteria and requirements mandated by either of the Rating Agencies with respect to trade receivable securitizations funded by multi-seller commercial paper conduits that each Receivable will be required to satisfy to be considered an "Eligible Receivable" after a date no less than 60 days after the date of such notice set forth in such notice. 51 47 ARTICLE 9 CONDITIONS PRECEDENT -------------------- SECTION 9.1. CONDITIONS PRECEDENT TO EFFECTIVENESS OF INDENTURE SUPPLEMENT. This Indenture Supplement shall become effective on the date (the "Effective Date") on which the following conditions precedent have been satisfied: (a) DOCUMENTS. The Administrative Agent shall have received an original copy for each CP Conduit Purchaser and the Funding Agent and the APA Bank with respect to such CP Conduit Purchaser, each executed and delivered in form and substance satisfactory to it of (i) the Base Indenture, executed by a duly authorized officer of each of the Issuer and the Indenture Trustee, (ii) the Dunlop Receivables Purchase Agreement, executed by a duly authorized officer of each of Dunlop and the Seller, (iii) the Receivables Purchase Agreement, executed by a duly authorized officer of each of the Seller and the Issuer, (iv) this Indenture Supplement, executed by a duly authorized officer of each of the Issuer, the Collection Agent, the Indenture Trustee, the Administrative Agent, the Funding Agents, the CP Conduit Purchasers and the APA Banks and (v) the Collection Agency Agreement, executed by a duly authorized officer of each of the Issuer, the Collection Agent and the Indenture Trustee. (b) CORPORATE DOCUMENTS; PROCEEDINGS OF THE ISSUER, DUNLOP AND GOODYEAR. The Administrative Agent shall have received, with a copy for each CP Conduit Purchaser and the Funding Agent and the APA Bank with respect to such CP Conduit Purchaser, from the Issuer, Goodyear and Dunlop true and complete copies of: (i) to the extent applicable, the articles of incorporation or certificate of formation, including all amendments thereto, of such Person, certified as of a recent date by the Secretary of State or other appropriate authority of the state of incorporation or organization, as the case may be, and a certificate of compliance, of status or of good standing, as and to the extent applicable, of each such Person as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction; (ii) a certificate of the Secretary or an Assistant Secretary of each of the Issuer, Goodyear and Dunlop, dated the Effective Date and certifying (A) in the case of Dunlop, that attached thereto is a true and complete copy of the limited liability company agreement of Dunlop, as in effect on the Effective Date and at all times since a date prior to the date of the resolutions described in clause (B) below, (B) that attached thereto is a true and complete copy of the resolutions, in form and substance reasonably satisfactory to the Funding Agent, of the Board of Directors of such Person or committees thereof authorizing the execution, delivery and performance of the Transaction Documents to which it is a party and the transactions contemplated thereby, and that such resolutions have not been amended, modified, revoked or rescinded and are in full force and effect, (C) that the certificate of incorporation or certificate of formation of such Person has not been amended since the date of the last amendment thereto shown on the certificate of good standing (or its equivalent) furnished pursuant to clause (i) 52 48 above and (D) as to the incumbency and specimen signature of each officer or authorized signatory executing any Transaction Documents or any other document delivered in connection herewith or therewith on behalf of such Person; (iii) a certificate of another officer as to the incumbency and specimen signature of the Secretary or Assistant Secretary executing the certificate pursuant to clause (ii) above. (c) GOOD STANDING CERTIFICATES. The Administrative Agent shall have received copies of certificates of compliance, of status or of good standing, dated as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction, with respect to the Issuer, Goodyear and Dunlop in each State where the ownership, lease or operation of property or the conduct of business requires it to qualify as a foreign corporation, except where the failure to so qualify would not have a material adverse effect on the business, operations, properties or condition (financial or otherwise) of the Issuer, Goodyear or Dunlop, as the case may be. (d) CONSENTS, LICENSES, APPROVALS, ETC. The Administrative Agent shall have received, with a counterpart for each CP Conduit Purchaser and the Funding Agent and the APA Bank with respect to such CP Conduit Purchaser, certificates dated the date hereof of an Authorized Officer of the Issuer, Goodyear and Dunlop stating either (i) that all material consents, licenses and approvals required in connection with the execution, delivery and performance by the Issuer, Goodyear and Dunlop of the Transaction Documents to which it is a party and the validity and enforceability of the Transaction Documents to which it is a party against the Issuer, Goodyear and Dunlop, respectively are in full force and effect or (ii) that no such consents, licenses or approvals are so required. (e) NO LITIGATION. The Administrative Agent shall have received confirmation that, except as set forth on Schedule II, as to which no representation or warranty is made, there is no pending or, to their knowledge after due inquiry, threatened action or proceeding affecting the Issuer, Goodyear or Dunlop or any Subsidiaries of Goodyear before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect. (f) LIEN SEARCHES. The Administrative Agent shall have received a written search report listing all effective financing statements that name the Issuer, Goodyear or Dunlop as debtor or assignor and that are filed in the jurisdictions in which filings were made pursuant to paragraph (h) below and in any other jurisdictions that the Administrative Agent determines are necessary or appropriate, together with copies of such financing statements (none of which, except for those described in paragraph (h) below shall cover any portion of the Collateral), and tax and judgment lien searches showing no such liens that are not permitted by the Transaction Documents. (g) UCC CERTIFICATE. The Administrative Agent shall have received from each of the Issuer, Goodyear and Dunlop a certificate, substantially in the form of EXHIBIT E completed in a manner satisfactory to the Administrative Agent, duly executed by an Authorized Officer of each of the Issuer, Goodyear and Dunlop and dated the Series 2001-1 Closing Date. 53 49 (h) FILINGS, REGISTRATIONS AND RECORDINGS. Any documents (including, without limitation, financing statements) required to be filed in order (i) to create, in favor of the Indenture Trustee, a perfected security interest in the Collateral with respect to which a security interest may be perfected by a filing under the UCC or other comparable statute, (ii) to create in favor of the Issuer a perfected ownership/security interest in the Receivables and the Related Property with respect thereto and the Seller's rights under the Dunlop Receivables Purchase Agreement under the Receivables Purchase Agreement with respect to which an ownership/security interest may be perfected by filing under the UCC or other comparable statute and (iii) to create in favor of the Seller a perfected ownership/security interest in the Dunlop Receivables and the Related Property with respect thereto under the Dunlop Receivables Purchase Agreement with respect to which a ownership/security interest may be perfected by filing under the UCC or other comparable statute, shall, in each case, have been properly prepared and executed for immediate filing in each office in each jurisdiction listed in the UCC Certificate referred to in paragraph (g) above, and such filings are the only filings required in order to perfect the security interest of the Indenture Trustee in the Collateral, the transfer of the Receivables and the Related Property with respect thereto to the Issuer pursuant to the Receivables Purchase Agreement and the transfer of the Dunlop Receivables and the Related Property with respect thereto to the Seller pursuant to the Dunlop Receivables Purchase Agreement, as the case may be. The Administrative Agent shall have received evidence reasonably satisfactory to it of each such filing, registration or recordation and reasonably satisfactory evidence of the payment of any necessary fee, tax or expense relating thereto. (i) TERMINATION STATEMENTS. The Administrative Agent shall have received executed copies of proper termination statements (Form UCC-3), if any, necessary to release all security interests and other rights of any Person in the Receivables and the Related Property previously granted by Goodyear or Dunlop. (j) LOCK-BOX AGREEMENTS. The Administrative Agent shall have received executed copies of the Lock-Box Agreements relating to each of the Lock-Box Banks and the Lock-Box Accounts. (k) LEGAL OPINIONS. The Administrative Agent shall have received, with a counterpart addressed to each CP Conduit Purchaser and the Funding Agent, the Program Support Provider and the APA Bank with respect to such CP Conduit Purchaser and the Indenture Trustee, opinions of counsel to the Issuer, Goodyear and Dunlop, dated the Series 2001-1 Closing Date addressing due organization of the Issuer, Goodyear and Dunlop, the due authorization, execution and delivery of the Transaction Documents, the enforceability of the Transaction Documents, the "true sale" of the Dunlop Receivables and the Related Property with respect thereto by Dunlop to the Seller, the "true sale" of the Receivables and the Related Property with respect thereto by the Seller to the Issuer, the "non-substantive consolidation" of the Issuer with Goodyear or any Affiliate of Goodyear, the creation, perfection and priority of security interests in the Collateral, the creation, perfection and priority of the ownership/security interests in the Seller's interests in the Receivables and the Related Property with respect thereto under the Receivables Purchase Agreement, creation, perfection and priority of the ownership/security interests in Dunlop's interests in the Dunlop Receivables and the Related Property with respect thereto under the Dunlop Receivables Purchase Agreement and other 54 50 matters, in each case, in form and substance reasonably acceptable to the addressees thereof and their counsel. (l) INDENTURE TRUSTEE'S COUNSEL OPINION. The Administrative Agent shall have received an opinion of counsel to the Indenture Trustee , with a counterpart addressed to each CP Conduit Purchaser and the Funding Agent, the Program Support Provider and the APA Bank with respect to such CP Conduit Purchaser, as to the due authorization, execution and delivery by the Indenture Trustee of the Base Indenture and this Indenture Supplement and the due authentication and delivery by the Indenture Trustee of the Series 2001-1 Investor Notes. (m) FEES AND EXPENSES. Each Funding Agent with respect to a CP Conduit Purchaser shall have received payment of all fees, out-of-pocket expenses and other amounts due and payable to such CP Conduit Purchaser or the APA Bank with respect to such CP Conduit Purchaser on or before the Effective Date. (n) ESTABLISHMENT OF ACCOUNTS. The Administrative Agent shall have received evidence reasonably satisfactory to it that the Collection Account (including the Series 2001-1 Subaccounts) shall have been established in accordance with the terms and provisions of the Indenture. (o) MATERIAL ADVERSE CHANGE. No material adverse change shall have occurred with respect to the business, operations, property or condition (financial or otherwise) of Goodyear and its Subsidiaries taken as a whole since December 31, 2000. (p) NO POTENTIAL TERMINATION EVENT OR TERMINATION EVENT. The Administrative Agent shall have received a certificate of an Authorized Officer of the Collection Agent dated the Effective Date to the effect that no Potential Termination Event or Termination Event has occurred and is continuing. (q) RATINGS CONFIRMATIONS. The Funding Agent with respect to each CP Conduit Purchaser shall have received written confirmation, to the extent required, from each of S&P and Moody's that the execution, delivery and performance by such CP Conduit Purchaser of its obligations hereunder will not result in a downgrade or withdrawal of such rating agency's current rating on the Commercial Paper issued by or on behalf of such CP Conduit Purchaser. (r) CONSENT TO SERVICE OF PROCESS. The Administrative Agent shall have received an instrument confirming acceptance of the appointment by the Issuer of CT Corporation located at 111 Eighth Avenue, New York, New York 10011 as the authorized agent upon whom process may be served in any action arising out of or based upon this Indenture Supplement or any other Transaction Document to which the Issuer is a party that may be instituted in the United States District Court for the Southern District of New York. (s) PROCEEDINGS. All corporate and other proceedings and all other documents and legal matters in connection with the transactions contemplated by the Transaction Documents shall be satisfactory in form and substance to the Administrative Agent and its counsel. 55 51 (t) SPARC MEMBERSHIP. The Issuer shall have executed and delivered to Canadian Imperial Bank of Commerce, as Funding Agent, a membership agreement for, and become a member of, Special Purpose Accounts Receivables Cooperative Corporation. ARTICLE 10 THE ADMINISTRATIVE AGENT ------------------------ SECTION 10.1. APPOINTMENT. Each of the CP Conduit Purchasers, the APA Banks and the Funding Agents hereby irrevocably designates and appoints the Administrative Agent as the agent of such Person under this Indenture Supplement and irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Indenture Supplement and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Indenture Supplement, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Indenture Supplement, the Administrative Agent shall not have any duties or responsibilities except those expressly set forth herein, or any fiduciary relationship with any CP Conduit Purchaser, any APA Bank or any Funding Agent, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Indenture Supplement or otherwise exist against the Administrative Agent. In performing its functions and duties hereunder, the Administrative Agent shall act solely as the agent of the CP Conduit Purchasers, the APA Banks and the Funding Agents, and the Administrative Agent does not assume, nor shall be deemed to have assumed, any obligation or relationship of trust or agency with or for any such Person. SECTION 10.2. DELEGATION OF DUTIES. The Administrative Agent may execute any of its duties under this Indenture Supplement by or through agents or attorneys-in-fact and shall be entitled to advice of counsel (who may be counsel for the Issuer or the Collection Agent), independent public accountants and other experts selected by it concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 10.3. EXCULPATORY PROVISIONS. Neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (i) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with the Base Indenture or this Indenture Supplement (x) with the consent or at the request of the Purchasers or (y) in the absence of its own gross negligence or willful misconduct or (ii) responsible in any manner to any of the CP Conduit Purchasers, the APA Banks or the Funding Agents for any recitals, statements, representations or warranties made by the Issuer, the Collection Agent or any officer thereof contained in this Indenture Supplement or any other Transaction Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Indenture Supplement or any other Transaction Document or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Indenture Supplement, any other Transaction Document or the Receivables or for any failure of any of the Issuer, the Collection Agent, the Seller or Dunlop to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any CP Conduit Purchaser, any APA 56 52 Bank or any Funding Agent to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Indenture Supplement, any other Transaction Document or the Receivables or to inspect the properties, books or records of the Issuer, the Collection Agent, the Seller or Dunlop. SECTION 10.4. RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any writing, resolution, notice, consent, certificate, affidavit, letter, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Issuer or the Collection Agent), independent accountants and other experts selected by the Administrative Agent and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel, accountants or experts. The Administrative Agent may deem and treat the registered holder of any Series 2001-1 Investor Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been filed with the Administrative Agent. The Administrative Agent shall be fully justified in failing or refusing to take any action under this Indenture Supplement or any other Transaction Document unless it shall first receive such advice or concurrence of the Funding Agents, on behalf of the Purchasers, as it deems appropriate or it shall first be indemnified to its satisfaction by the Funding Agents against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Indenture Supplement and the other Transaction Documents in accordance with a request of the Series 2001-1 Required Investor Noteholders (unless, in the case of any action relating to the giving of consent hereunder, the giving of such consent requires the consent of all Series 2001-1 Investor Noteholders), and such request and any action taken or failure to act pursuant thereto shall be binding upon all the CP Conduit Purchasers, the APA Banks and the Funding Agents. SECTION 10.5. NOTICE OF COLLECTION AGENT TERMINATION EVENT OR TERMINATION EVENT OR POTENTIAL TERMINATION EVENT. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Termination Event or Potential Termination Event, any Event of Default or Default, any Purchase Termination Event, any Potential Purchase Termination Event, any Collection Agent Termination Event or any Potential Collection Agent Termination Event unless the Administrative Agent has received notice from a CP Conduit Purchaser, an APA Bank, a Funding Agent, the Issuer, the Collection Agent, the Seller or Dunlop referring to this Indenture Supplement, describing such Termination Event or Potential Termination Event, Event of Default or Default, Purchase Termination Event or Potential Purchase Termination Event or Collection Agent Termination Event or Potential Collection Agent Termination Event and stating that such notice is a "notice of a Termination Event or Potential Termination Event," "notice of an Event of Default or Default," "notice of a Purchase Termination Event or Potential Purchase Termination Event" or "notice of a Collection Agent Termination Event or Potential Collection Agent Termination Event", as the case may be. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Funding Agents, the Indenture Trustee, the Issuer and the Collection Agent. The Administrative Agent shall take such action with respect to such event as shall be reasonably directed by the Series 2001-1 Required Investor Noteholders, PROVIDED that unless and until the 57 53 Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such event as it shall deem advisable in the best interests of the Purchasers. SECTION 10.6. NON-RELIANCE ON THE ADMINISTRATIVE AGENT AND OTHER PURCHASERS. Each of the CP Conduit Purchasers, the APA Banks and the Funding Agents expressly acknowledges that neither the Administrative Agent nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereinafter taken, including any review of the affairs of the Issuer, shall be deemed to constitute any representation or warranty by the Administrative Agent to any such Person. Each of the CP Conduit Purchasers, the APA Banks and the Funding Agents represents to the Administrative Agent that it has, independently and without reliance upon the Administrative Agent or any other CP Conduit Purchaser, APA Bank or Funding Agent and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Issuer, the Collection Agent, the Seller and Dunlop and made its own decision to enter into this Indenture Supplement. Each of the CP Conduit Purchasers, the APA Banks and the Funding Agents also represents that it will, independently and without reliance upon the Administrative Agent or any other CP Conduit Purchaser, APA Bank or Funding Agent, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Indenture Supplement and the other Transaction Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Issuer, the Collection Agent, the Seller and Dunlop. Except for notices, reports and other documents expressly required to be furnished to the Funding Agents by the Administrative Agent hereunder, the Administrative Agent shall have no duty or responsibility to provide any CP Conduit Purchaser, any APA Bank or any Funding Agent with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Issuer, the Collection Agent, the Seller or Dunlop which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates. SECTION 10.7. INDEMNIFICATION. Each of the APA Banks and the Funding Agents agrees to indemnify the Administrative Agent in its capacity as such (to the extent not reimbursed by the Issuer and the Collection Agent and without limiting the obligation of the Issuer and the Collection Agent to do so), from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind whatsoever which may at any time be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Indenture Supplement, any of the other Transaction Documents or any documents contemplated by or referred to herein or therein or the transactions contemplated hereby or thereby or any action taken or omitted by the Administrative Agent under or in connection with any of the foregoing; PROVIDED that no APA Bank or Funding Agent shall be liable for the payment of any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the Administrative Agent's gross negligence or willful 58 54 misconduct. The agreements in this Section shall survive the payment of all amounts payable hereunder. SECTION 10.8. THE ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY. The Administrative Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with the Issuer, the Collection Agent or any of their Affiliates as though the Administrative Agent were not the Administrative Agent hereunder. With respect to any Series 2001-1 Investor Note held by the Administrative Agent, the Administrative Agent shall have the same rights and powers under this Indenture Supplement and the other Transaction Documents as any Purchaser and may exercise the same as though it were not the Administrative Agent, and the terms "APA Bank," and "Purchaser" shall include the Administrative Agent in its individual capacity. SECTION 10.9. RESIGNATION OF ADMINISTRATIVE AGENT; SUCCESSOR ADMINISTRATIVE AGENT. The Administrative Agent may resign as Administrative Agent at any time by giving 30 days' notice to the Funding Agents, the Indenture Trustee, the Issuer and the Collection Agent. The Administrative Agent may be removed at any time by a resolution of the Series 2001-1 Required Investor Noteholders, removing the Administrative Agent and appointing from among the Funding Agents a successor administrative agent, which successor administrative agent shall be approved by the Issuer and the Collection Agent (which approval shall not be unreasonably withheld), delivered to the Administrative Agent, the Indenture Trustee and the Collection Agent. If Chase shall resign as Administrative Agent under this Indenture Supplement, then the Series 2001-1 Required Investor Noteholders shall promptly appoint a successor administrative agent from among the Funding Agents, which successor administrative agent shall be approved by the Issuer and the Collection Agent (which approval shall not be unreasonably withheld). If no successor administrative agent is appointed prior to the effective date of the resignation of the Administrative Agent, the Administrative Agent may appoint, after consulting with the Funding Agents, the Issuer and the Collection Agent, a successor agent from among the Funding Agents. If no successor administrative agent has accepted appointment as Administrative Agent by the date which is 30 days following a retiring Administrative Agent's notice of resignation, the retiring Administrative Agent's resignation shall nevertheless thereupon become effective and the Collection Agent shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Series 2001-1 Required Investor Noteholders appoint a successor agent as provided for above. Effective upon the appointment of a successor administrative agent, such successor administrative agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor administrative agent effective upon such appointment and approval, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Indenture Supplement. After any retiring Administrative Agent's resignation as Administrative Agent, the provisions of this Article 10 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Indenture Supplement. 59 55 ARTICLE 11 MISCELLANEOUS ------------- SECTION 11.1. RATIFICATION OF INDENTURE. As Indenture Supplemented by this Indenture Supplement, the Indenture is in all respects ratified and confirmed and the Indenture as so Indenture Supplemented by this Indenture Supplement shall be read, taken and construed as one and the same instrument. SECTION 11.2. GOVERNING LAW. THIS INDENTURE SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS. SECTION 11.3. FURTHER ASSURANCES. Each of the Issuer, the Collection Agent and the Indenture Trustee agrees, from time to time, to do and perform any and all acts and to execute any and all further instruments required or reasonably requested by the Administrative Agent more fully to effect the purposes of this Indenture Supplement and the sale of the Series 2001-1 Investor Notes hereunder, including, without limitation, in the case of the Issuer and the Collection Agent, the execution of any financing or registration statements or similar documents or notices or continuation statements relating to the Collateral for filing or registration under the provisions of the UCC or similar legislation of any applicable jurisdiction. SECTION 11.4. PAYMENTS. Each payment to be made hereunder shall be made on the required payment date in lawful money of the United States and in immediately available funds, if to a Purchaser, at the office of the Funding Agent with respect to such Purchaser set forth in SECTION 11.9. SECTION 11.5. COSTS AND EXPENSES. The Collection Agent agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Administrative Agent (including, without limitation, reasonable fees and disbursements of counsel to the Administrative Agent) and of each Purchaser (including in connection with the preparation, execution and delivery of this Indenture Supplement the reasonable fees and disbursements of one counsel for all such Purchasers) in connection with (i) the preparation, execution, delivery and administration (including periodic auditing and any requested amendments, waivers or consents) of this Indenture Supplement, the Indenture and the other Transaction Documents and amendments or waivers of any such documents and (ii) the enforcement by the Administrative Agent or any Funding Agent of the obligations and liabilities of the Issuer, the Collection Agent, the Seller and Dunlop under the Indenture, this Indenture Supplement, the other Transaction Documents or any related document and all costs and expenses, if any (including reasonable counsel fees and expenses), in connection with the enforcement of this Agreement and the other Transaction Documents. SECTION 11.6. NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in exercising, on the part of the Indenture Trustee, the Administrative Agent, any Funding Agent, any CP Conduit Purchaser or any APA Bank, any right, remedy, power or 60 56 privilege hereunder shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privileges provided by law. SECTION 11.7. AMENDMENTS. (a) This Indenture Supplement may be amended in writing from time to time by the Collection Agent, the Issuer and the Indenture Trustee, with the consent of the Series 2001-1 Required Investor Noteholders; provided that, notwithstanding the foregoing, without the consent of each CP Conduit Purchaser and each APA Bank, no such amendment shall: (i) reduce the percentage of Series 2001-1 Investor Noteholders whose consent is required to take any particular action hereunder; (ii) (A) extend the due date for, or reduce the amount of any scheduled repayment or prepayment of principal of or interest on any Series 2001-1 Investor Note (or reduce the principal amount of or rate of interest on any Series 2001-1 Investor Note); (B) extend the due date for, or reduce the amount of ,any fees or other amounts payable hereunder; (C) change the calculation of any Increased Costs or other amounts payable by the Issuer to the CP Conduit Purchasers or APA Banks hereunder; (D) modify SECTION 5A.4; (E) approve the assignment or transfer by the Issuer of any of its rights or obligations hereunder or under any other Transaction Document to which it is a party except pursuant to the express terms hereof or thereof; (F) release any obligor under any Transaction Document to which it is a party except pursuant to the express terms of such Transaction Document; (G) amend or otherwise modify any Termination Event or any defined term referred to therein; (H) amend or otherwise modify the Series 2001-1 Required Receivables Balance, the Series 2001-1 Required Reserves or any defined term referred to therein or (I) permit the creation of any lien ranking prior to or on a parity with the Indenture Trustee's lien on the Collateral, release such lien except pursuant to the express terms hereof or deprive any Series 2001-1 Investor Noteholder of the security afforded by such lien; (iii) modify SECTION 11.7(a); and (iv) modify the allocations and priorities of payments set forth in Article 3 of this Indenture Supplement. (b) Any amendment hereof can be effected without the Administrative Agent's being party thereto; PROVIDED, HOWEVER, that no such amendment, modification or waiver of this Indenture Supplement that affects rights or duties of the Administrative Agent shall be effective unless the Administrative Agent shall have given its prior written consent thereto. (c) Promptly after the execution of any amendment of this Indenture Supplement or any other Transaction Document, the Collection Agent shall mail to each of the Funding Agents and each Rating Agency a copy thereof. 61 57 SECTION 11.8. SEVERABILITY. If any provision hereof is void or unenforceable in any jurisdiction, such voidness or unenforceability shall not affect the validity or enforceability of (i) such provision in any other jurisdiction or (ii) any other provision hereof in such or any other jurisdiction. SECTION 11.9. NOTICES. All notices, requests, instructions and demands to or upon any party hereto to be effective shall be given (i) in the case of the Issuer, the Collection Agent and the Indenture Trustee, in the manner set forth in SECTION 13.4 of the Base Indenture and (ii) in the case of the Administrative Agent, the CP Conduit Purchasers, the APA Banks and the Funding Agents, in writing, and, unless otherwise expressly provided herein, shall be deemed to have been duly given or made when delivered by hand or three days after being deposited in the mail, postage prepaid, in the case of facsimile notice, when received, or in the case of overnight air courier, one Business Day after the date such notice is delivered to such overnight courier, addressed as follows in the case of the Administrative Agent and to the addresses therefor set forth in Schedule I, in the case of the CP Conduit Purchasers, the APA Banks and the Funding Agents; or to such other address as may be hereafter notified by the respective parties hereto: Administrative Agent: The Chase Manhattan Bank 450 West 33rd Street New York, New York 10001 Attention: Fax: 212-946-7776 SECTION 11.10. SUCCESSORS AND ASSIGNS. (a) This Indenture Supplement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, except that the Issuer may not assign or transfer any of its rights under this Indenture Supplement without the prior written consent of all of the Series 2001-1 Investor Noteholders, no CP Conduit Purchaser may assign or transfer any of its rights under this Indenture Supplement other than in accordance with the Asset Purchase Agreement with respect to such CP Conduit Purchaser or otherwise to the APA Banks with respect to such CP Conduit Purchaser or a Program Support Provider with respect to such CP Conduit Purchaser or pursuant to clause (b) or (e) below of this SECTION 11.10 and no APA Bank may assign or transfer any of its rights or obligations under this Indenture Supplement except to a Program Support Provider or pursuant to clause (c), (d) or (e) below of this SECTION 11.10. (b) Without limiting the foregoing, each CP Conduit Purchaser may, from time to time with prior or concurrent notice to the Issuer and the Administrative Agent assign the Purchaser Invested Amount with respect to such CP Conduit Purchaser and its rights and obligations under this Indenture Supplement and any other Transaction Documents to which it is a party to a Conduit Assignee with respect to such CP Conduit Purchaser. Upon such assignment by a CP Conduit Purchaser to a Conduit Assignee, (A) such Conduit Assignee shall be the owner of the Purchaser Invested Amount with respect to such CP Conduit Purchaser, (B) the related administrative or managing agent for such Conduit Assignee will act as the administrative agent for such Conduit Assignee hereunder, with all corresponding rights and powers, express or implied, granted to the Funding Agent hereunder or under the other 62 58 Transaction Documents, (C) such Conduit Assignee and its liquidity support provider(s) and credit support provider(s) and other related parties shall have the benefit of all the rights and protections provided to such CP Conduit Purchaser herein and in the other Transaction Documents (including, without limitation, any limitation on recourse against such Conduit Assignee as provided in this paragraph), (D) such Conduit Assignee shall assume all of such CP Conduit Purchaser's obligations, if any, hereunder or under any other Transaction Document and such CP Conduit Purchaser shall be released from all such obligations, (E) all distributions in respect of the Purchaser Invested Amount with respect to such CP Conduit Purchaser shall be made to the applicable agent or administrative agent, as applicable, on behalf of such Conduit Assignee, (F) the definitions of the terms "Monthly Funding Costs" and "Discount" shall be determined in the manner set forth in the definition of "Monthly Funding Costs" and "Discount" applicable to such CP Conduit Purchaser on the basis of the interest rate or discount applicable to commercial paper issued by such Conduit Assignee (rather than such CP Conduit Purchaser), (G) the defined terms and other terms and provisions of this Indenture Supplement and the other Transaction Documents shall be interpreted in accordance with the foregoing, and (H) if requested by the Administrative Agent or the agent or administrative agent with respect to the Conduit Assignee, the parties will execute and deliver such further agreements and documents and take such other actions as the Administrative Agent or such agent or administrative agent may reasonably request to evidence and give effect to the foregoing. No assignment by any CP Conduit Purchaser to a Conduit Assignee of the Purchaser Invested Amount with respect to such CP Conduit Purchaser shall in any way diminish the obligations of the APA Bank with respect to such CP Conduit Purchaser under SECTION 2.3 to fund any Increase. Notwithstanding any contrary provision in this Indenture Supplement, a Conduit Assignee shall not be entitled to receive with respect to the rights and obligations under this Indenture Supplement assigned to it pursuant to this Section 11.10(b) any greater Increased Costs than the assignor CP Conduit Purchaser would have been entitled to receive with respect to those rights and obligations unless such assignment shall have been made with the prior written consent of the Issuer. (c) Any APA Bank may, in the ordinary course of its business and in accordance with applicable law, at any time sell all or any part of its rights and obligations under this Indenture Supplement and the Series 2001-1 Investor Notes, with the prior written consent of the Administrative Agent, the Issuer and the Collection Agent (in each case, which consent shall not be unreasonably withheld), to one or more banks (an "ACQUIRING APA BANK") pursuant to a transfer supplement, substantially in the form of EXHIBIT F (the "TRANSFER SUPPLEMENT"), executed by such Acquiring APA Bank, such assigning APA Bank, the Funding Agent with respect to such APA Bank, the Administrative Agent, the Issuer and the Collection Agent and delivered to the Administrative Agent. Notwithstanding the foregoing, no APA Bank shall so sell its rights hereunder if such Acquiring APA Bank is not an Eligible Assignee. (d) Any APA Bank may, in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more financial institutions or other entities ("PARTICIPANTS") participations in its APA Bank Percentage of the Commitment Amount with respect to it and the other APA Banks included in the related Purchaser, its Series 2001-1 Investor Note and its rights hereunder pursuant to documentation in form and substance satisfactory to such APA Bank and the Participant; PROVIDED, HOWEVER, that (i) in the event of any such sale by an APA Bank to a Participant, (A) such APA Bank's obligations under this Indenture Supplement shall remain unchanged, (B) such APA Bank shall remain solely 63 59 responsible for the performance thereof and (C) the Issuer and the Administrative Agent shall continue to deal solely and directly with such APA Bank in connection with its rights and obligations under this Indenture Supplement and (ii) no APA Bank shall sell any participating interest under which the Participant shall have rights to approve any amendment to, or any consent or waiver with respect to, this Indenture Supplement or any Transaction Document, except to the extent that the approval of such amendment, consent or waiver otherwise would require the unanimous consent of all APA Banks hereunder. A Participant shall have the right to receive Increased Costs but only to the extent that the related selling APA Bank would have had such right absent the sale of the related participation. (e) Any CP Conduit Purchaser and the APA Banks with respect to such CP Conduit Purchaser may at any time sell all or any part of their respective rights and obligations under this Indenture Supplement and the Series 2001-1 Investor Notes, with the prior written consent of the Administrative Agent, the Issuer and the Collection Agent (in each case, which consent shall not be unreasonably withheld), to a multi-seller commercial paper conduit and one or more banks providing support to such multi-seller commercial paper conduit (an "ACQUIRING PURCHASER") pursuant to a transfer supplement, substantially in the form of EXHIBIT G(the "PURCHASER SUPPLEMENT"), executed by such Acquiring Purchaser, the Funding Agent with respect to such Acquiring Purchaser (including the CP Conduit Purchaser and the APA Banks with respect to such Purchaser), such assigning CP Conduit Purchaser and the APA Banks with respect to such CP Conduit Purchaser, the Funding Agent with respect to such assigning CP Conduit Purchaser and APA Banks, the Administrative Agent, the Issuer and the Collection Agent and delivered to the Administrative Agent. (f) The Issuer authorizes each APA Bank to disclose to any Participant or Acquiring APA Bank (each, a "TRANSFEREE") and any prospective Transferee any and all financial information in such APA Bank's possession concerning the Issuer, the Collateral, the Collection Agent and the Transaction Documents which has been delivered to such APA Bank by the Issuer or the Collection Agent in connection with such APA Bank's credit evaluation of the Issuer, the Collateral and the Collection Agent. SECTION 11.11. SECURITIES LAWS. Each Purchaser hereby represents and warrants to the Issuer and the Collection Agent that it is an "accredited investor" as such term is defined in paragraphs (1), (2), (3) and (7) of Rule 501(a) of Regulation D under the Securities Act and has sufficient assets to bear the economic risk of, and sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of, its investment in a Series 2001-1 Investor Note. Each Purchaser agrees that its Series 2001-1 Investor Note will be acquired for investment only and not with a view to any public distribution thereof, and that such Purchaser will not offer to sell or otherwise dispose of its Series 2001-1 Investor Note (or any interest therein) in violation of any of the registration requirements of the Securities Act, or any applicable state or other securities laws. Each Purchaser acknowledges that it has no right to require the Issuer to register its Series 2001-1 Investor Note under the Securities Act or any other securities law. Each Purchaser hereby confirms and agrees that in connection with any transfer by it of an interest in the Series 2001-1 Investor Note, such Purchaser has not engaged and will not engage in a general solicitation or general advertising including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or 64 60 broadcast over radio or television, or any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. SECTION 11.12. ADJUSTMENTS; SET-OFF. (a) If any Purchaser (a "BENEFITTED PURCHASER") shall at any time receive in respect of its Purchaser Invested Amount any distribution of principal, interest, Unused Fees or any interest thereon, or receive any collateral in respect thereof (whether voluntarily or involuntarily, by set-off or otherwise) in a greater proportion than any such distribution received by any other Purchaser, if any, in respect of such other Purchaser's Purchaser Invested Amount, or interest thereon, such Benefitted Purchaser shall purchase for cash from the other Purchaser such portion of such other Purchaser's interest in the Series 2001-1 Investor Notes, or shall provide such other Purchaser with the benefits of any such collateral, or the proceeds thereof, as shall be necessary to cause such Benefitted Purchaser to share the excess payment or benefits of such collateral or proceeds ratably with the other Purchaser; PROVIDED, HOWEVER, that if all or any portion of such excess payment or benefits is thereafter recovered from such Benefitted Purchaser, such purchase shall be rescinded, and the purchase price and benefits returned, to the extent of such recovery, but without interest. The Issuer agrees that any Purchaser so purchasing a portion of another Purchaser's Purchaser Invested Amount may exercise all rights of payment (including, without limitation, rights of set-off) with respect to such portion as fully as if such Purchaser were the direct holder of such portion. (b) In addition to any rights and remedies of the Purchasers provided by law, each Purchaser shall have the right, without prior notice to the Issuer, any such notice being expressly waived by the Issuer to the extent permitted by applicable law, upon any amount becoming due and payable by the Issuer hereunder or under the Series 2001-1 Investor Notes to set-off and appropriate and apply against any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by such Purchaser to or for the credit or the account of the Issuer. Each Purchaser agrees promptly to notify the Issuer and the Administrative Agent after any such set-off and application made by such Purchaser; PROVIDED that the failure to give such notice shall not affect the validity of such set-off and application. SECTION 11.13. COUNTERPARTS. This Indenture Supplement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original, and all of which taken together shall constitute one and the same agreement. SECTION 11.14. NO BANKRUPTCY PETITION. (a) Each of the Administrative Agent, the CP Conduit Purchasers, the APA Banks and the Funding Agents hereby covenants and agrees that, prior to the date which is one year and one day after the later of (i) the last day of the Amortization Period and (ii) the last day of the amortization period of any other Series of Outstanding Investor Notes , it will not institute against, or join any other Person in instituting against, the Issuer any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other similar proceedings under any federal or state bankruptcy or similar law. 65 61 (b) The Issuer, the Collection Agent, the Indenture Trustee, the Administrative Agent, each Funding Agent and each APA Bank hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all outstanding Commercial Paper issued by, or for the benefit of, a CP Conduit Purchaser, it will not institute against, or join any other Person in instituting against, such CP Conduit Purchaser (or the Person issuing Commercial Paper for the benefit of such CP Conduit Purchaser) any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other similar proceedings under any federal or state bankruptcy or similar law. This covenant shall survive the termination of this Indenture Supplement and the Base Indenture and the payment of all amounts payable hereunder and thereunder. SECTION 11.15. TERMINATION OF THIS INDENTURE SUPPLEMENT. This Indenture Supplement shall terminate upon the termination of the Amortization Period. SECTION 11.16. LIMITED RECOURSE. (a) Notwithstanding anything to the contrary contained herein, any obligations of each CP Conduit Purchaser hereunder to any party hereto are solely the corporate obligations of such CP Conduit Purchaser and shall be payable at such time as funds are received by or are available to such CP Conduit Purchaser in excess of funds necessary to pay in full all of its outstanding Commercial Paper and, to the extent funds are not available to pay such obligations, the claims relating thereto shall not constitute a claim against such CP Conduit Purchaser but shall continue to accrue. Each party hereto agrees that the payment of any claim (as defined in Section 101 of Title 11 of the Bankruptcy Code) of any such party against a CP Conduit Purchaser shall be subordinated to the payment in full of all of its Commercial Paper. (b) No recourse under any obligation, covenant or agreement of any CP Conduit Purchaser contained herein shall be had against any incorporator, stockholder, officer, director, employee or agent of such CP Conduit Purchaser, its administrative agent, the Funding Agent with respect to such CP Conduit Purchaser or any of their Affiliates by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Indenture Supplement is solely a corporate obligation of such CP Conduit Purchaser individually, and that no personal liability whatever shall attach to or be incurred by any incorporator, stockholder, officer, director, employee or agent of such CP Conduit Purchaser, its administrative agent, the Funding Agent with respect to such CP Conduit Purchaser or any of its Affiliates (solely by virtue of such capacity) or any of them under or by reason of any of the obligations, covenants or agreements of such CP Conduit Purchaser contained in this Agreement, or implied therefrom, and that any and all personal liability for breaches by such CP Conduit Purchaser of any of such obligations, covenants or agreements, either at common law or at equity, or by statute, rule or regulation, of every such incorporator, stockholder, officer, director, employee or agent is hereby expressly waived as a condition of and in consideration for the execution of this Indenture Supplement; PROVIDED that the foregoing shall not relieve any such Person from any liability it might otherwise have as a result of fraudulent actions taken or omissions made by them. The provisions of this Section 11.18 shall survive termination of this Indenture Supplement. 66 62 SECTION 11.17. WAIVER OF SETOFF. Notwithstanding any other provision of this Indenture Supplement or any other agreement to the contrary, all payments to the Purchasers hereunder shall be made without set-off or counterclaim. SECTION 11.18. CONFLICT OF INSTRUCTIONS. In the event the Issuer and the Collection Agent shall have delivered conflicting instructions to the Indenture Trustee or the Administrative Agent to take or refrain from taking action hereunder, the Indenture Trustee or the Administrative Agent, as the case may be, shall follow the instructions of the Issuer. SECTION 11.19. CHASE CONFLICT WAIVER. Chase acts as Indenture Trustee, the Funding Agent with respect to Park Avenue Receivables Corporation ("PARCO") and as administrative agent for PARCO, as issuing and paying agent for PARCO's Commercial Paper, as provider of other backup facilities for PARCO, and may provide other services or facilities from time to time (the "CHASE ROLES"). Each of the parties hereto hereby acknowledges and consents to any and all Chase Roles, waives any objections it may have to any actual or potential conflict of interest caused by Chase's acting as the Indenture Trustee, the Funding Agent with respect to PARCO or as the APA Bank with respect to PARCO and acting as or maintaining any of the Chase Roles, and agrees that in connection with any Chase Role, Chase may take, or refrain from taking, any action which it in its discretion deems appropriate. SECTION 11.20. SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. (a) Each of the parties hereto irrevocably and unconditionally submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in the City of New York for purposes of all legal proceedings arising out of or relating to this Indenture Supplement, the Transaction Documents or the transactions contemplated hereby or thereby. Each of the parties hereto hereby irrevocably waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Each of the parties hereto agrees that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail, postage prepaid, in the case of the Issuer, to the Issuer's agent for service of process identified pursuant to SECTION 9.1(r) and, in the case of Goodyear, to Goodyear at its address set forth in the Receivables Purchase Agreement and agrees that nothing herein shall affect the right to effect service of process in any other manner permitted by law. In addition, nothing in this Section 11.20 shall affect the right of any party hereto to bring any action or proceeding against any other party hereto or its respective property in the courts of other jurisdictions. (b) EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS INDENTURE SUPPLEMENT OR ANY OTHER OF THE TRANSACTION DOCUMENTS AND FOR ANY COUNTERCLAIM THEREIN. 67 IN WITNESS WHEREOF, the Issuer, the Collection Agent, the Administrative Agent, the CP Conduit Purchasers, the APA Banks, the Funding Agents and the Indenture Trustee have caused this Indenture Supplement to be duly executed by their respective officers hereunto duly authorized as of the day and year first above written. WINGFOOT A/R LLC By: /s/ Stephanie W. Bergeron --------------------------------------------- Name: Stephanie W. Bergeron Title: Vice President and Treasurer THE GOODYEAR TIRE & RUBBER COMPANY AS COLLECTION AGENT By: /s/ Stephanie W. Bergeron --------------------------------------------- Name: Stephanie W. Bergeron Title: Vice President and Treasurer THE CHASE MANHATTAN BANK, as Administrative Agent By: /s/ Lara Graff --------------------------------------------- Name: Lara Graff Title: Vice President THE CHASE MANHATTAN BANK, as Indenture Trustee By: /s/ Kristen Driscoll --------------------------------------------- Name: Kristen Driscoll Title: Assistant Vice President PARK AVENUE RECEIVABLES CORPORATION, as a CP Conduit Purchaser By: /s/ Andrew L. Stidd --------------------------------------------- Name: Andrew L. Stidd Title: President 68 THE CHASE MANHATTAN BANK, as an APA Bank By: /s/ Bradley S. Schwartz --------------------------------------------- Name: Bradley S. Schwartz Title: Managing Director THE CHASE MANHATTAN BANK, as a Funding Agent By: /s/ Lara Graff --------------------------------------------- Name: Lara Graff Title: Vice President SPECIAL PURPOSE ACCOUNTS RECEIVABLES COOPERATIVE CORPORATION, as a CP Conduit Purchaser By: /s/ John Gevlin --------------------------------------------- Name: John Gevlin Title: Vice President CANADIAN IMPERIAL BANK OF COMMERCE, as an APA Bank By: /s/ Henry Sandlass --------------------------------------------- Name: Henry Sandlass Title: Managing Director CANADIAN IMPERIAL BANK OF COMMERCE, as a Funding Agent By: /s/ Henry Sandlass --------------------------------------------- Name: Henry Sandlass Title: Managing Director EX-12 6 l89521aex12.txt EXHIBIT 12 1 EXHIBIT 12 THE GOODYEAR TIRE & RUBBER COMPANY AND SUBSIDIARIES COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Dollars in millions)
SIX MONTHS ENDED TWELVE MONTHS ENDED JUNE 30, DECEMBER 31, ---------- ---------------------------------------------------------- 2001 2000 1999 1998 1997 1996 ---- ---- ---- ---- ---- ---- EARNINGS - -------- INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES $ (49.2) $ 58.8 $ 300.1 $ 930.4 $ 703.0 $ 803.0 Add: Amortization of previously capitalized interest 4.9 9.7 11.0 10.7 11.0 11.6 Minority interest in net income of consolidated subsidiaries with fixed charges 20.8 45.6 42.9 33.6 45.1 45.9 Proportionate share of fixed charges of investees accounted for by the equity method 1.8 5.7 5.5 4.8 6.5 5.1 Proportionate share of net loss of investees accounted for by the equity method 10.7 28.4 0.3 - 0.1 2.7 ------- --------- --------- --------- --------- --------- Total additions 38.2 89.4 59.7 49.1 62.7 65.3 Deduct: Capitalized interest 4.2 12.0 11.8 6.6 6.2 5.4 Minority interest in net loss of consolidated subsidiaries 3.3 8.3 4.2 2.9 3.6 4.4 Undistributed proportionate share of net income of investees accounted for by the equity method 0.9 4.3 2.2 - - - ------- --------- --------- --------- --------- --------- Total deductions 8.4 24.6 18.2 9.5 9.8 9.8 TOTAL EARNINGS (DEFICIT) $ (19.4) $ 123.6 $ 341.6 $ 970.0 $ 755.9 $ 858.5 ======= ========= ========= ========= ========= ========= FIXED CHARGES - ------------- Interest expense $ 143.2 $ 282.6 $ 179.4 $ 147.8 $ 119.5 $ 128.6 Capitalized interest 4.2 12.0 11.8 6.6 6.2 5.4 Amortization of debt discount, premium or expense 3.8 1.5 0.7 1.2 0.1 0.3 Interest portion of rental expense 36.8 73.5 62.1 57.7 63.0 68.2 Proportionate share of fixed charges of investees accounted for by the equity method 1.8 5.7 5.5 4.8 6.5 5.1 ------- --------- --------- --------- --------- --------- TOTAL FIXED CHARGES $ 189.8 $ 375.3 $ 259.5 $ 218.1 $ 195.3 $ 207.6 ======= ========= ========= ========= ========= ========= TOTAL EARNINGS BEFORE FIXED CHARGES $ 170.4 $ 498.9 $ 601.1 $ 1,188.1 $ 951.2 $ 1,066.1 ======= ========= ========= ========= ========= ========= RATIO OF EARNINGS TO FIXED CHARGES 0.90 1.33 2.32 5.45 4.87 5.14
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