Exhibit 10.1(a)
RECEIVABLES PURCHASE AGREEMENT
dated as of November 22, 2000
Among
NEW SCHOOL, INC.,
as Seller,
SCHOOL SPECIALTY, INC.,
as Servicer,
FALCON ASSET SECURITIZATION CORPORATION
and
BANK ONE, NA (MAIN OFFICE CHICAGO),
as Agent
NEW SCHOOL, INC.
RECEIVABLES PURCHASE AGREEMENT
This Receivables Purchase Agreement dated as of
November 22, 2000 is among NEW SCHOOL, INC., a Delaware
corporation ("Seller"), SCHOOL SPECIALTY, INC., a
Wisconsin corporation ("SSI"), as initial Servicer (the
Servicer together with Seller, the "Seller Parties" and
each a "Seller Party"), the entities listed on Schedule
A to this Agreement (together with any of their
respective successors and assigns hereunder, the
"Financial Institutions"), FALCON ASSET SECURITIZATION
CORPORATION ("Falcon") and BANK ONE, NA (Main Office
Chicago), as agent for the Purchasers hereunder or any
successor agent hereunder (together with its successors
and assigns hereunder, the "Agent"). Unless defined
elsewhere herein, capitalized terms used in this
Agreement shall have the meanings assigned to such
terms in Exhibit I.
PRELIMINARY STATEMENTS
Seller desires to transfer and assign Purchaser
Interests to the Purchasers from time to time.
Falcon may, in its absolute and sole discretion,
purchase Purchaser Interests from Seller from time to
time.
In the event that Falcon declines to make any
purchase, the Financial Institutions shall, at the
request of Seller, purchase Purchaser Interests from
time to time. In addition, the Financial Institutions
have agreed to provide a liquidity facility to Falcon
in accordance with the terms hereof.
Bank One, NA (Main Office Chicago) has been
requested and is willing to act as Agent on behalf of
Falcon and the Financial Institutions in accordance
with the terms hereof.
ARTICLE I
PURCHASE ARRANGEMENTS
SECTION 1.1 Purchase Facility.
(a) Upon the terms and subject to the
conditions hereof, Seller may, at its option, sell and
assign Purchaser Interests to the Agent for the benefit
of one or more of the Purchasers. In accordance with the
terms and conditions set forth herein, Falcon may, at
its option, instruct the Agent to purchase on behalf of
Falcon, or if Falcon shall decline to purchase, the
Agent shall purchase, on behalf of the Financial
Institutions, Purchaser Interests from time to time in
an aggregate amount not to exceed at such time the
lesser of (i) the Purchase Limit and (ii) the aggregate
amount of the Commitments during the period from the
date hereof to but not including the Facility
Termination Date.
(b) Seller may, upon at least 10 Business
Days' notice to the Agent, terminate in whole or reduce
in part, ratably among the Financial Institutions, the
unused portion of the Purchase Limit; provided that each
partial reduction of the Purchase Limit shall be in an
amount equal to $5,000,000 or an integral multiple
thereof.
Section 1.2 Increases. No later than 11:00 a.m.
(Chicago time) at least three (3) Business Days prior
to each Incremental Purchase, Seller shall provide the
Agent with prior written notice in a form set forth as
Exhibit II hereto of such Incremental Purchase (a
"Purchase Notice"). Each Purchase Notice shall be
subject to Section 6.2 hereof and, except as set forth
below, shall be irrevocable and shall specify the
requested Purchase Price (which shall not be less than
$1,000,000) and date of purchase (which, in the case of
any Incremental Purchase (after the initial Incremental
Purchase hereunder), shall only be on a Settlement
Date) and, in the case of an Incremental Purchase to be
funded by the Financial Institutions, the requested
Discount Rate and Tranche Period. Following receipt of
a Purchase Notice, the Agent will determine whether
Falcon agrees to make the purchase. If Falcon declines
to make a proposed purchase, the Agent shall promptly
notify Seller and Seller may cancel the Purchase Notice
or, in the absence of such a cancellation, the
Incremental Purchase of the Purchaser Interest will be
made by the Financial Institutions. On the date of
each Incremental Purchase, upon satisfaction of the
applicable conditions precedent set forth in Article
VI, Falcon or the Financial Institutions, as
applicable, shall deposit to the Facility Account, in
immediately available funds, no later than 12:00 noon
(Chicago time), an amount equal to (i) in the case of
Falcon, the aggregate Purchase Price of the Purchaser
Interests Falcon is then purchasing or (ii) in the case
of a Financial Institution, such Financial
Institution's Pro Rata Share of the aggregate Purchase
Price of the Purchaser Interests the Financial
Institutions are purchasing.
Section 1.3 Decreases. No later than 11:00 a.m.
(Chicago time) at least three (3) Business Days prior
to each reduction of Aggregate Capital from
Collections, Seller shall provide the Agent with prior
written notice (a "Reduction Notice") of any such
proposed reduction. Such Reduction Notice shall
designate (i) the date (the "Proposed Reduction Date")
upon which any such reduction of Aggregate Capital
shall occur, and (ii) the amount of Aggregate Capital
to be reduced which shall be applied ratably to the
Purchaser Interests of Falcon and the Financial
Institutions in accordance with the amount of Capital
(if any) owing to
Falcon, on the one hand, and the amount of Capital
(if any) owing to the Financial Institutions (ratably,
based on their respective Pro Rata Shares), on the
other hand (the "Aggregate Reduction"). Only one (1)
Reduction Notice shall be outstanding at any time. No
Aggregate Reduction will be made following the
occurrence of the Amortization Date without the consent
of the Agent.
Section 1.4 Payment Requirements. All amounts
to be paid or deposited by any Seller Party pursuant to
any provision of this Agreement shall be paid or
deposited in accordance with the terms hereof no later
than 11:00 a.m. (Chicago time) on the day when due in
immediately available funds, and if not received before
11:00 a.m. (Chicago time) shall be deemed to be received
on the next succeeding Business Day. All amounts payable
to any Purchaser shall be paid to the Agent, for the
account of such Purchaser, at 1 Bank ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ until otherwise notified by the Agent.
Upon notice to Seller, the Agent may debit the Facility
Account for all amounts due and payable hereunder. All
computations of Yield, per annum fees calculated as part
of any CP Costs, per annum fees hereunder and per annum
fees under the Fee Letter shall be made on the basis of
a year of 360 days for the actual number of days elapsed.
If any amount hereunder shall be payable on a day which
is not a Business Day, such amount shall be payable on the
next succeeding Business Day.
ARTICLE II
PAYMENTS AND COLLECTIONS
Section 2.1 Payments. Notwithstanding any
limitation on recourse contained in this Agreement,
Seller shall immediately pay to the Agent when due, for
the account of the relevant Purchaser or Purchasers on
a full recourse basis, (i) such fees as set forth in
the Fee Letter (which fees shall be sufficient to pay
all fees owing to the Financial Institutions), (ii) all
CP Costs, (iii) all amounts payable as Yield, (iv) all
amounts payable as Deemed Collections (which shall be
immediately due and payable by Seller and applied to
reduce outstanding Aggregate Capital hereunder in
accordance with Sections 2.2 and 2.3 hereof), (v) all
amounts payable to reduce the Seller Interest, if
required, pursuant to Section 2.6, (vi) all amounts
payable pursuant to Article X, if any, (vii) all
Servicer costs and expenses, including the Servicing
Fee, in connection with servicing, administering and
collecting the Receivables; provided, however, that
Seller shall pay such Servicer costs and expenses
directly to Servicer so long as (a) either School
Specialty or any of its Affiliates is the Servicer and
(b) on the date of such payment all payment obligations
through and including item fifth of Section 2.4 have
been satisfied in full, (viii) all Broken Funding Costs
and (ix) all Default Fees (collectively, the
"Obligations"). If any Person fails to pay any of the
Obligations when due, such Person agrees to pay, on
demand, the Default Fee in respect thereof until paid.
Notwithstanding the foregoing, no provision of this
Agreement or the Fee Letter shall require the payment
or permit the collection of any amounts hereunder in
excess of the maximum permitted by applicable law. If
at any ▇▇▇▇ ▇▇▇▇▇▇ receives any Collections or is
deemed to receive any Collections, Seller shall
immediately pay such Collections or Deemed Collections
to the Servicer for application in accordance with the
terms and conditions hereof and, at all times prior to
such payment, such Collections or Deemed Collections
shall be held in trust by Seller for the exclusive
benefit of the Purchasers and the Agent.
Section 2.2 Collections Prior to Amortization.
Prior to the Amortization Date, any Collections and/or
Deemed Collections received by the Servicer shall be
set aside and held in trust by the Servicer for the
payment of any accrued and unpaid Aggregate Unpaids or
for a Reinvestment as provided in this Section 2.2. If
at any time any Collections are received by the
Servicer prior to the Amortization Date, (i) the
Servicer shall set aside the Termination Percentage of
Collections evidenced by the Purchaser Interests of
each Terminating Financial Institution and (ii) Seller
hereby requests and the Purchasers (other than any
Terminating Financial Institutions) hereby agree to
make, simultaneously with such receipt, a reinvestment
(each a "Reinvestment") with that portion of the
balance of each and every Collection received by the
Servicer that is part of any Purchaser Interest (other
than any Purchaser Interests of Terminating Financial
Institutions), such that after giving effect to such
Reinvestment, the amount of Capital of such Purchaser
Interest immediately after such receipt and
corresponding Reinvestment shall be equal to the amount
of Capital immediately prior to such receipt. On each
Settlement Date prior to the occurrence of the
Amortization Date, the Servicer shall remit to the
Agent's account the amounts set aside during the
preceding Settlement Period that have not been subject
to a Reinvestment (other than Servicing Fees so long as
the conditions set forth in the proviso in Section
2.1(vii) are satisfied) and apply such amounts (if not
previously paid in accordance with Section 2.1) first,
to reduce unpaid Obligations and second, to reduce the
Capital of all Purchaser Interests of Terminating
Financial Institutions, applied ratably to each
Terminating Financial Institution according to its
respective Termination Percentage. If such Capital,
and Obligations shall be reduced to zero, any
additional Collections received by the Servicer (i) if
applicable, shall be remitted to the Agent's account no
later than 11:00 a.m. (Chicago time) to the extent
required to fund any Aggregate Reduction on such
Settlement Date and (ii) any balance remaining
thereafter shall be remitted from the Servicer to
Seller on such Settlement Date. Each Terminating
Financial Institution shall be allocated a ratable
portion of Collections from the date of any assignment
by Falcon pursuant to Section 13.6 (the "Termination
Date") until such Terminating Financing Institution's
Capital shall be paid in full. This ratable portion
shall be calculated on the Termination Date of each
Terminating Financial Institution as a percentage equal
to (i) Capital of such Terminating Financial
Institution outstanding on its Termination Date,
divided by (ii) the Aggregate Capital outstanding on
such Termination Date (the "Termination Percentage").
Each Terminating Financial Institution's Termination
Percentage shall remain constant prior to the
Amortization Date. On and after the Amortization Date,
each Termination Percentage shall be disregarded, and
each Terminating Financial Institution's Capital shall
be reduced ratably with all Financial Institutions in
accordance with Section 2.3.
Section 2.3 Collections Following Amortization.
On the Amortization Date and on each day thereafter, the
Servicer shall set aside and hold in trust, for the
holder of each Purchaser Interest, the percentage
evidenced by such Purchaser Interests of all
Collections received on such day and an additional
amount for the payment of any accrued and unpaid
Obligations owed by Seller and not previously paid by
Seller in accordance with Section 2.1. On and after
the Amortization Date, the Servicer shall, at any time
upon the request from time to time by (or pursuant to
standing instructions from) the Agent (i) remit to the
Agent's account the amounts set aside pursuant to the
preceding sentence, and (ii) apply such amounts to
reduce the Capital associated with each such Purchaser
Interest and any other Aggregate Unpaids.
Section 2.4 Application of Collections. If
there shall be insufficient funds on deposit for the
Servicer to distribute funds in payment in full of the
aforementioned amounts pursuant to Section 2.2 or 2.3
(as applicable), the Servicer shall distribute funds:
first, to the payment of the Servicer's
reasonable out-of-pocket costs and expenses in
connection with servicing, administering and
collecting the Receivables , including the
Servicing Fee, if Seller or one of its Affiliates
is not then acting as the Servicer,
second, to the reimbursement of the Agent's
costs of collection and enforcement of this
Agreement,
third, ratably to the payment of all accrued
CP Costs, Yield and fees payable pursuant to the
Fee Letter,
fourth, (to the extent applicable) to the
ratable reduction of the Aggregate Capital
(without regard to any Termination Percentage),
fifth, for the ratable payment of all other
unpaid Obligations, provided that to the extent
such Obligations relate to the payment of
Servicer costs and expenses, including the
Servicing Fee, when Seller or one of its
Affiliates is acting as the Servicer, such costs
and expenses will not be paid until after the
payment in full of all other Obligations, and
sixth, after the Aggregate Unpaids have been
reduced to zero, to Seller.
Collections applied to the payment of
Aggregate Unpaids shall be distributed in accordance
with the aforementioned provisions, and, giving effect
to each of the priorities set forth in this Section
2.4, shall be shared ratably (within each priority)
among the Agent and the Purchasers in accordance with
the amount of such Aggregate Unpaids owing to each of
them in respect of each such priority.
Section 2.5 Payment Recission. No payment of
any of the Aggregate Unpaids shall be considered paid or
applied hereunder to the extent that, at any time, all
or any portion of such payment or application is
rescinded by application of law or judicial authority,
or must otherwise be returned or refunded for any
reason. Seller shall remain obligated for the amount
of any payment or application so rescinded, returned or
refunded, and shall promptly pay to the Agent (for
application to the Person or Persons who suffered such
recission, return or refund) the full amount thereof,
plus the Default Fee from the date of any such
recission, return or refunding.
Section 2.6 Maximum Purchaser Interests.
Seller shall ensure that the Purchaser Interests of the
Purchasers shall at no time exceed in the aggregate
100%. If the aggregate of the Purchaser Interests of
the Purchasers exceeds 100%, Seller shall pay to the
Agent within one (1) Business Day an amount to be
applied to reduce the Aggregate Capital (as allocated
by the Agent), such that after giving effect to such
payment the aggregate of the Purchaser Interests equals
or is less than 100%.
Section 2.7 Clean Up Call. In addition to
Seller's rights pursuant to Section 1.3, Seller shall
have the right (after providing three (3) Business Days'
prior written notice to the Agent),
at any time following the reduction of the Aggregate
Capital to a level that is less than 10.0% of the
original Purchase Limit, to repurchase from the
Purchasers all, but not less than all, of the then
outstanding Purchaser Interests. The purchase price in
respect thereof shall be an amount equal to the Aggregate
Unpaids (excluding, however, any Servicing Fees so long
as the conditions set forth in the proviso in Section
2.1(vii) are satisfied) through the date of such
repurchase, payable in immediately available funds. Such
repurchase shall be without representation, warranty or
recourse of any kind by, on the part of, or against any
Purchaser or the Agent except for the absence of any liens
created by or through any Purchaser or the Agent.
ARTICLE III
FALCON FUNDING
SECTION 3.1 CP Costs. Seller shall pay CP Costs
with respect to the Capital associated with each
Purchaser Interest of Falcon for each day that any
Capital in respect of such Purchaser Interest is
outstanding. Each Purchaser Interest funded
substantially with Pooled Commercial Paper will accrue
CP Costs each day on a pro rata basis, based upon the
percentage share the Capital in respect of such
Purchaser Interest represents in relation to all assets
held by Falcon and funded substantially with Pooled
Commercial Paper.
Section 3.2 CP Costs Payments. On each
Settlement Date, Seller shall pay to the Agent (for the
benefit of Falcon) an aggregate amount equal to all
accrued and unpaid CP Costs in respect of the Capital
associated with all Purchaser Interests of Falcon for
the immediately preceding Accrual Period in accordance
with Article II.
Section 3.3 Calculation of CP Costs. On or
before the third Business Day immediately preceding
each Settlement Date, Falcon shall calculate the
aggregate amount of CP Costs for the applicable Accrual
Period and shall notify Seller of such aggregate amount.
ARTICLE IV
FINANCIAL INSTITUTION FUNDING
SECTION 4.1 Financial Institution Funding. Each
Purchaser Interest of the Financial Institutions shall
accrue Yield for each day during its Tranche Period at
either the LIBO Rate or the Base Rate in accordance
with the terms and conditions hereof. Until Seller
gives notice to the Agent of another Discount Rate in
accordance with Section 4.4, the initial Discount Rate
for any Purchaser Interest transferred to the Financial
Institutions pursuant to the terms and conditions
hereof shall be the Base Rate; provided, however, that
if the Seller has given notice to the Agent requesting
the LIBO Rate in accordance with Section 4.4, such
initial Discount Rate will be the LIBO Rate. If the
Financial Institutions acquire by assignment from
Falcon any Purchaser Interest pursuant to Article XIII,
each Purchaser Interest so assigned shall each be
deemed to have a new Tranche Period commencing on the
date of any such assignment.
Section 4.2 Yield Payments. On the Settlement
Date for each Purchaser Interest of the Financial
Institutions, Seller shall pay to the Agent (for the
benefit of the Financial Institutions) an aggregate
amount equal to the accrued and unpaid Yield for the
entire Tranche Period of each such Purchaser Interest
in accordance with Article II.
Section 4.3 Selection and Continuation of
Tranche Periods.
(a) With consultation from the Agent, Seller
shall from time to time request Tranche Periods for the
Purchaser Interests of the Financial Institutions,
provided that, if at any time the Financial
Institutions shall have a Purchaser Interest, Seller
shall always request Tranche Periods such that at least
one Tranche Period shall end on the date specified in
clause (A) of the definition of Settlement Date.
(b) Seller or the Agent, upon notice to and
consent by the other received at least three (3) Business
Days prior to the end of a Tranche Period (the "Terminating
Tranche") for any Purchaser Interest, may, effective on
the last day of the Terminating Tranche: (i) divide
any such Purchaser Interest into multiple Purchaser
Interests, (ii) combine any such Purchaser Interest
with one or more other Purchaser Interests that have a
Terminating Tranche ending on the same day as such
Terminating Tranche or (iii) combine any such Purchaser
Interest with a new Purchaser Interests to be purchased
on the day such Terminating Tranche ends, provided,
that in no event may a Purchaser Interest of Falcon be
combined with a Purchaser Interest of the Financial
Institutions.
Section 4.4 Financial Institution Discount Rates.
Seller may select the LIBO Rate or the Base Rate for
each Purchaser Interest of the Financial Institutions.
Seller shall by 11:00 a.m. (Chicago time): (i) at least
three (3) Business Days prior to the expiration of any
Terminating Tranche with respect to which the LIBO Rate
is being requested as a new Discount Rate and (ii) at
least one (1) Business Day prior to the expiration of
any Terminating Tranche with respect to which the Base
Rate is being requested as a new Discount Rate, give
the Agent irrevocable notice of the new Discount Rate
for the Purchaser Interest associated with such
Terminating Tranche. Unless the Seller has given
notice to the Agent of its selection of the LIBO Rate
at least three (3) Business Days prior to the date of
such transfer, the initial Discount Rate for any
Purchaser Interest transferred to the Financial
Institutions pursuant to the terms and conditions
hereof shall be the Base Rate; if such notice has been
given, the initial Discount Rate shall be the LIBO
Rate.
Section 4.5 Suspension of the LIBO Rate.
(a) If any Financial Institution notifies the
Agent that it has determined that funding its Pro Rata
Share of the Purchaser Interests of the Financial
Institutions at a LIBO Rate would violate any applicable
law, rule, regulation, or directive of any governmental
or regulatory authority, whether or not having the force
of law, or that (i) deposits of a type and maturity
appropriate to match fund its Purchaser Interests at such
LIBO Rate are not available or (ii) such LIBO Rate does
not accurately reflect the cost of acquiring or maintaining
a Purchaser Interest at such LIBO Rate, then the Agent shall
suspend the availability of such LIBO Rate with respect to
such Financial Institution and require Seller to select the
Base Rate for any Purchaser Interest accruing Yield at such
LIBO Rate with respect to such Financial Institution.
(b) If less than all of the Financial Institutions
give a notice to the Agent pursuant to Section 4.5(a), each
Financial Institution which gave such a notice shall be
obliged, at the request of Seller, Falcon or the Agent, to
assign all of its rights and obligations hereunder to (i)
another Financial Institution or (ii) another funding entity
nominated by Seller or the Agent
that is acceptable to Falcon and willing to participate in
this Agreement through the Liquidity Termination Date in the
place of such notifying Financial Institution; provided that
(i) the notifying Financial Institution receives payment in
full, pursuant to an Assignment Agreement, of an amount equal
to such notifying Financial Institution's Pro Rata Share of
the Capital and Yield owing to all of the Financial
Institutions and all accrued but unpaid fees and other costs
and expenses payable in respect of its Pro Rata Share of the
Purchaser Interests of the Financial Institutions, and (ii)
the replacement Financial Institution otherwise satisfies the
requirements of Section 12.1(b).
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.1 Representations and Warranties of
the Seller Parties. Each Seller Party hereby represents
and warrants to the Agent and the Purchasers, as to
itself, as of the date hereof and as of the date of
each Incremental Purchase and the date of each
Reinvestment that:
(a) Corporate Existence and Power. Such
Seller Party is a corporation duly organized, validly
existing and in good standing or on active status under
the laws of its state of incorporation. Such Seller
Party is duly qualified to do business and is in good
standing as a foreign corporation, and has and holds all
corporate power and all governmental licenses,
authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business
is conducted except when the failure to do so would not
have a Material Adverse Effect.
(b) Power and Authority; Due Authorization,
Execution and Delivery. The execution and delivery by
such Seller Party of this Agreement and each other
Transaction Document to which it is a party, and the
performance of its obligations hereunder and thereunder
and, in the case of Seller, Seller's use of the
proceeds of purchases made hereunder, are within its
corporate powers and authority and have been duly
authorized by all necessary corporate action on its
part. This Agreement and each other Transaction
Document to which such Seller Party is a party have
been duly executed and delivered by such Seller Party.
(c) No Conflict. The execution and delivery
by such Seller Party of this Agreement and each other
Transaction Document to which it is a party, and the
performance of its obligations hereunder and thereunder
do not contravene or violate (i) its certificate or
articles of incorporation or by-laws, (ii) any law,
rule or regulation applicable to it, (iii) any
restrictions under any material agreement, contract or
instrument to which it is a party or by which it or any
of its property is bound, or (iv) any order, writ,
judgment, award, injunction or decree binding on or
affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on assets
of such Seller Party or its Subsidiaries (except as
created hereunder) and no transaction contemplated
hereby requires compliance with any bulk sales act or
similar law.
(d) Governmental Authorization. Other than
the filing of the financing statements required hereunder
and the filing of this Agreement with the Securities and
Exchange Commission, no authorization or approval or
other action by, and no notice to or filing with, any
governmental authority or regulatory body is required
for the due execution and delivery by such
Seller Party of this Agreement and each other Transaction
Document to which it is a party and the performance of its
obligations hereunder and thereunder.
(e) Actions, Suits. There are no actions,
suits or proceedings pending, or to the best of such
Seller Party's knowledge, threatened, against or
affecting such Seller Party, or any of its properties,
in or before any court, arbitrator or other body, that
could reasonably be expected to have a Material Adverse
Effect. Such Seller Party is not in default with
respect to any order of any court, arbitrator or
governmental body.
(f) Binding Effect. This Agreement and each
other Transaction Document to which such Seller Party is
a party constitute the legal, valid and binding
obligations of such Seller Party enforceable against
such Seller Party in accordance with their respective
terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or
other similar laws relating to or limiting creditors'
rights generally and by general principles of equity
(regardless of whether enforcement is sought in a
proceeding in equity or at law).
(g) Accuracy of Information. All information
heretofore furnished by such Seller Party or any of its
Affiliates to the Agent or the Purchasers for purposes
of or in connection with this Agreement, any of the
other Transaction Documents or any transaction
contemplated hereby or thereby is, and all such
information (including, without limitation, all Semi-
Monthly and Monthly Reports) hereafter furnished by
such Seller Party or any of its Affiliates to the Agent
or the Purchasers will be, true and accurate in every
material respect on the date such information is stated
or certified and does not and will not contain any
material misstatement of fact or omit to state a
material fact or any fact necessary to make the
statements contained therein not misleading.
(h) Use of Proceeds. No proceeds of any
purchase hereunder will be used (i) for a purpose that
violates, or would be inconsistent with, Regulation T,
U or X promulgated by the Board of Governors of the
Federal Reserve System from time to time or (ii) to
acquire any security in any transaction which is subject
to Section 12, 13 or 14 of the Securities Exchange Act
of 1934, as amended.
(i) Good Title. Immediately prior to each
purchase hereunder, Seller shall be the legal and
beneficial owner of the Receivables and Related Security
with respect thereto, free and clear of any Adverse Claim,
except as created by the Transaction Documents. There
have been duly filed all financing statements or other
similar instruments or documents necessary under the
UCC (or any comparable law) of all appropriate
jurisdictions to perfect Seller's ownership interest in
each Receivable, its Collections and the Related
Security.
(j) Perfection. This Agreement, together with
the filing of the financing statements contemplated hereby,
is effective to, and shall, upon each purchase
hereunder, transfer to the Agent for the benefit of the
relevant Purchaser or Purchasers (and the Agent for the
benefit of such Purchaser or Purchasers shall acquire
from Seller) a valid and perfected first priority
undivided percentage ownership or security interest in
each Receivable existing or hereafter arising and in
the Related Security and Collections with respect
thereto, free and clear of any Adverse Claim, except as
created by the Transactions Documents. There have been
duly filed all financing statements or other similar
instruments or documents necessary under the
UCC (or any comparable law) of all appropriate
jurisdictions to perfect the Agent's (on behalf of the
Purchasers) ownership or security interest in the
Receivables, the Related Security and the Collections.
(k) Places of Business and Locations of
Records. The principal places of business and chief
executive office of such Seller Party and the offices
where it keeps all of its Records are located at the
address(es) listed on Exhibit III or such other locations
of which the Agent has been notified in accordance with
Section 7.2(a) in jurisdictions where all action required
by Section 14.4(a) has been taken and completed. Seller's
Federal Employer Identification Number and Seller's
organizational identification number (if any) is correctly
set forth on Exhibit III.
(l) Collections. The conditions and
requirements set forth in Section 7.1(j) and Section 8.2
have at all times been satisfied and duly performed. The
names and addresses of all Collection Banks, together with
the account numbers of the Collection Accounts of Seller at
each Collection Bank and the post office box number of
each Lock-Box, are listed on Exhibit IV. Seller has
not granted any Person, other than the Agent as
contemplated by this Agreement, dominion and control of
any Lock-Box or Collection Account, or the right to take
dominion and control of any such Lock-Box or Collection
Account at a future time or upon the occurrence of a future
event.
(m) Material Adverse Effect. (i) The initial
Servicer represents and warrants that since April 29, 2000
no event has occurred that would reasonably be expected to
have a Material Adverse Effect on the financial condition
or operations of the initial Servicer and its Subsidiaries
taken as a whole, or the ability of the initial Servicer
to perform its obligations under this Agreement, and (ii)
Seller represents and warrants that since the date of this
Agreement, no event has occurred that would reasonably be
expected to have a Material Adverse Effect on (A) the
financial condition or operations of Seller, (B) the
ability of Seller to perform its obligations under the
Transaction Documents, or (C) the collectibility of the
Receivables generally or any material portion of the
Receivables.
(n) Names. In the past five (5) years, Seller
has not used any corporate names, trade names or assumed
names other than the name in which it has executed this
Agreement.
(o) Ownership of Seller. Originator owns,
directly or indirectly, 100% of the issued and outstanding
capital stock of Seller, free and clear of any Adverse
Claim. Such capital stock is validly issued, fully paid
and nonassessable, and there are no options, warrants or
other rights to acquire securities of Seller.
(p) Not a Holding Company or an Investment
Company. Such Seller Party is not a "holding company"
or a "subsidiary holding company" of a "holding company"
within the meaning of the Public Utility Holding Company
Act of 1935, as amended, or any successor statute. Such
Seller Party is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended,
or any successor statute.
(q) Compliance with Law. Such Seller Party
has complied in all respects with all applicable laws,
rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be
subject the violation of which would reasonably be
expected to have a Material Adverse Effect. Each
Receivable, together with the Contract related thereto,
does not contravene any laws, rules or regulations
applicable thereto (including, without limitation,
laws, rules and regulations relating to truth in
lending, fair credit billing, fair credit reporting,
equal credit opportunity, fair debt collection
practices and privacy), and no part of such Contract is
in violation of any such law, rule or regulation.
(r) Compliance with Credit and Collection
Policy. Such Seller Party has complied in all material
respects with the Credit and Collection Policy with
regard to each Receivable and the related Contract, and
has not made any change to such Credit and Collection
Policy, other than as permitted under Section 7.2(c),
and in compliance with the notification requirements of
Section 7.1(a)(vii).
(s) Payments to Originator. With respect to
each Receivable transferred to Seller under the
Receivables Sale Agreement, Seller has given reasonably
equivalent value to Originator in consideration therefor
and such transfer was not made for or on account of an
antecedent debt. No transfer by Originator of any
Receivable under the Receivables Sale Agreement is or
may be voidable under any section of the Bankruptcy
Reform Act of 1978 (11 U.S.C. 101 et seq.), as
amended.
(t) Enforceability of Contracts. Each
Contract with respect to each Receivable is effective
to create, and has created, a legal, valid and binding
obligation of the related Obligor to pay the Outstanding
Balance of the Receivable created thereunder and any
accrued interest thereon, enforceable against the Obligor
in accordance with its terms, except as such enforcement
may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or
limiting creditors' rights generally and by general
principles of equity (regardless of whether enforcement
is sought in a proceeding in equity or at law).
(u) Eligible Receivables. Each Receivable
included in the Net Receivables Balance as an Eligible
Receivable on the date of its purchase under the
Receivables Sale Agreement was an Eligible Receivable
on such purchase date.
(v) Net Receivables Balance. Seller has
determined that, immediately after giving effect to
each purchase hereunder, the Net Receivables Balance
is at least equal to the sum of (i) the Aggregate
Capital, plus (ii) the Aggregate Reserves.
(w) Accounting. The manner in which such
Seller Party accounts for the transactions contemplated
by this Agreement and the Receivables Sale Agreement
does not jeopardize the true sale analysis.
(x) Purpose. Seller has determined that,
from a business viewpoint, the purchase of the
Receivables and related interests thereto from the
Originator under the Receivables Sale Agreement, and
the sale of Purchaser Interests to the Purchasers and
the other transactions contemplated herein, are in the
best interests of Seller.
(y) Other Representations and Warranties.
This Agreement is effective to transfer to the Agent and
the Purchasers, as assignees of Seller, the full benefit
of and a direct claim against each of Originator and each
Original Seller in respect of each representation or
warranty made by Originator and each Original Seller
under any Transaction Document.
Section 5.2 Financial Institution Representations
and Warranties. Each Financial Institution hereby
represents and warrants to the Agent, Seller Parties
and Falcon that:
(a) Existence and Power. Such Financial
Institution is a corporation or a banking association
duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or
organization, and has all corporate power to perform
its obligations hereunder.
(b) No Conflict. The execution and delivery
by such Financial Institution of this Agreement and the
performance of its obligations hereunder are within its
corporate powers, have been duly authorized by all
necessary corporate action, do not contravene or
violate (i) its certificate or articles of incorporation
or association or by-laws, (ii) any law, rule or
regulation applicable to it, (iii) any restrictions under
any agreement, contract or instrument to which it is a
party or any of its property is bound, or (iv) any order,
writ, judgment, award, injunction or decree binding on or
affecting it or its property, and do not result in the
creation or imposition of any Adverse Claim on its assets.
This Agreement has been duly authorized, executed and
delivered by such Financial Institution.
(c) Governmental Authorization. No
authorization or approval or other action by, and no
notice to or filing with, any governmental authority
or regulatory body is required for the due execution
and delivery by such Financial Institution of this
Agreement and the performance of its obligations
hereunder.
(d) Binding Effect. This Agreement
constitutes the legal, valid and binding obligation of
such Financial Institution enforceable against such
Financial Institution in accordance with its terms,
except as such enforcement may be limited by applicable
bankruptcy, insolvency, reorganization or other similar
laws relating to or limiting creditors' rights generally
and by general principles of equity (regardless of
whether such enforcement is sought in a proceeding in
equity or at law).
ARTICLE VI
CONDITIONS OF PURCHASES
SECTION 6.1 Conditions Precedent to Initial
Incremental Purchase. The initial Incremental Purchase
of a Purchaser Interest under this Agreement is subject
to the conditions precedent that the Agent shall have
received on or before the date of such purchase those
documents listed on Schedule B and the Agent shall have
received all fees and expenses required to be paid on
such date pursuant to the terms of this Agreement and
the Fee Letter.
Section 6.2 Conditions Precedent to All
Purchases and Reinvestments. Each purchase of a
Purchaser Interest (other than pursuant to Section 13.1)
and each Reinvestment shall be subject to the further
conditions precedent that in the case of each such
purchase or
Reinvestment: (a) the Servicer shall have delivered to
the Agent on or prior to the date of such purchase, in
form and substance satisfactory to the Agent, all
Monthly Reports and Semi-Monthly Reports as and when due
under Section 8.5 and upon the Agent's request, the
Servicer shall have delivered to the Agent an interim
Monthly Report or Semi-Monthly Report showing the
amount of Eligible Receivables (i) at least three (3)
days prior to any Incremental Purchase and (ii) no
later than three (3) days after such request in the
case of any Reinvestment; (b) the Facility Termination
Date shall not have occurred; (c) the Agent shall have
received such other approvals, opinions or documents as
it may reasonably request and (d) on the date of each
such Incremental Purchase or Reinvestment, the
following statements shall be true (and acceptance of
the proceeds of such Incremental Purchase or
Reinvestment shall be deemed a representation and
warranty by Seller that such statements are then true):
(i) the representations and warranties set
forth in Section 5.1 are true and correct on and as of
the date of such Incremental Purchase or Reinvestment
as though made on and as of such date;
(ii) no event has occurred and is continuing,
or would result from such Incremental Purchase or
Reinvestment, that will constitute an Amortization Event,
and no event has occurred and is continuing, or would
result from such Incremental Purchase or Reinvestment,
that would constitute a Potential Amortization Event;
and
(iii) the Aggregate Capital does not exceed
the Purchase Limit and the aggregate Purchaser Interests
do not exceed 100%.
It is expressly understood that each Reinvestment
shall, unless otherwise directed by the Agent or any
Purchaser, occur automatically on each day that the
Servicer shall receive any Collections without the
requirement that any further action be taken on the
part of any Person and notwithstanding the failure of
Seller to satisfy any of the foregoing conditions
precedent in respect of such Reinvestment. The failure
of Seller to satisfy any of the foregoing conditions
precedent in respect of any Reinvestment shall give
rise to a right of the Agent, which right may be
exercised at any time on demand of the Agent, to
rescind the related purchase and direct Seller to pay
to the Agent for the benefit of the Purchasers an
amount equal to the Collections prior to the
Amortization Date that shall have been applied to the
affected Reinvestment.
ARTICLE VII
COVENANTS
SECTION 7.1 Affirmative Covenants of the Seller
Parties. Until the date on which the Aggregate Unpaids
have been paid in full and this Agreement terminates in
accordance with its terms, each Seller Party hereby
covenants, as to itself, as set forth below:
(a) Reporting. Such Seller Party will maintain,
for itself and each of its Subsidiaries, a system of
accounting established and administered in accordance with
GAAP, and furnish or cause to be furnished to the Agent:
(i) Annual Reporting. Within ninety (90)
days after the close of each of its respective fiscal
years (A) audited financial statements (which shall
include balance
sheets, statements of income and retained earnings and
a statement of cash flows) for the Servicer for such
fiscal year certified in a manner acceptable to the
Agent by PricewaterhouseCoopers LLP or other independent
public accountants reasonably acceptable to the Agent,
reported without a "going concern" or like qualification
or exception, or qualification indicating that the scope
of the audit was inadequate to permit such independent
certified public accountants to certify such financial
statements without such qualification and (B) financial
statements (which shall include balance sheets, statements
of income and retained earnings and a statement of cash
flows) for such Seller Party (other than the Servicer)
for such fiscal year certified by such Seller Party's
respective chief financial officer.
(ii) Quarterly Reporting. Within forty-five
(45) days after the close of the first three (3) quarterly
periods of each of its respective fiscal years, balance
sheets of each Seller Party as at the close of each
such period and statements of income and retained
earnings and a statement of cash flows for each such
Seller Party for the period from the beginning of such
fiscal year to the end of such quarter, all certified
by its respective chief financial officer.
(iii) Compliance Certificate. Together with
the financial statements required hereunder, a
compliance certificate in substantially the form of
Exhibit V signed by such Seller Party's Authorized Officer
and dated the date of such annual financial statement or
such quarterly financial statement, as the case may be.
(iv) Shareholders Statements and Reports.
Promptly upon the furnishing thereof to the shareholders,
in their capacity as shareholders, of such Seller Party
copies of all financial statements, reports and proxy
statements so furnished.
(v) S.E.C. Filings. Promptly upon the filing
thereof, copies of all registration statements and annual,
quarterly, monthly or other regular reports which
Originator or any of its Subsidiaries files with the
Securities and Exchange Commission.
(vi) Copies of Notices. Promptly upon its
receipt of any notice, request for consent, financial
statements, certification, report or other communication
under or in connection with any Transaction Document from
any Person other than the Agent or Falcon, copies of the
same.
(vii) Change in Credit and Collection Policy.
At least thirty (30) days prior to the effectiveness of
any material change in or material amendment to the
Credit and Collection Policy, a copy of the Credit and
Collection Policy then in effect and a notice (A)
indicating such change or amendment, and (B) if such
proposed change or amendment would be reasonably likely
to adversely affect the collectibility of the
Receivables or decrease the credit quality of any newly
created Receivables, requesting the Agent's consent
thereto.
(viii) Other Information. Promptly, from time
to time, such other information, documents, records or
reports relating to the Receivables or the condition or
operations, financial or otherwise, of such Seller
Party as the Agent may from time to
time reasonably request in order to protect the interests
of the Agent and the Purchasers under or as contemplated
by this Agreement.
Information required to be delivered pursuant
to Section 7.1(a)(i), (ii), (iv) or (v) above shall be
deemed to have been delivered on the date on which the
Agent is notified (which notification may be by e-mail)
that SSI has posted such information on SSI's website
on the Internet at the website address at
▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ or at another website
identified in a notice delivered to Seller and the
Agent and accessible by Seller and the Agent without
charge, provided that SSI shall deliver paper copies of
the information referred to in Section 7.1(a)(i), (ii),
(iv) or (v) to Seller or the Agent if Seller or the
Agent requests such delivery.
(b) Notices. Such Seller Party will cause an
Authorized Officer of such Seller Party to notify the
Agent in writing of any of the following promptly upon
learning of the occurrence thereof, describing the same
and, if applicable, the steps being taken with respect
thereto:
(i) Amortization Events or Potential
Amortization Events. The occurrence of each
Amortization Event and each Potential Amortization
Event.
(ii) Judgment and Proceedings. (1) The entry
of any judgment or decree against the Servicer or any of
its respective Subsidiaries if the aggregate amount of
all judgments and decrees then outstanding against the
Servicer and its Subsidiaries exceeds $1,000,000 and
(2) the institution of any litigation, arbitration
proceeding or governmental proceeding against the
Servicer which could reasonably be expected to have a
Material Adverse Effect; and (3) the entry of any
judgment or decree or the institution of any
litigation, arbitration proceeding or governmental
proceeding against Seller.
(iii) Material Adverse Effect. The
occurrence of any event or condition that has had, or
could reasonably be expected to have, a Material
Adverse Effect.
(iv) Termination Date. The occurrence of
the "Termination Date" under and as defined in the
Receivables Sale Agreement.
(v) Defaults Under Other Agreements. The
occurrence of a default or an event of default under
the SSI Loan Agreement or under any other financing
arrangement pursuant to which such Seller Party is a
debtor or an obligor which, in the case of the Servicer,
could reasonably be expected to have a Material Adverse
Effect.
(vi) Downgrade of Originator. Any downgrade
in the rating of any Indebtedness of Originator by
Standard & Poor's Ratings Group or by ▇▇▇▇▇'▇ Investors
Service, Inc., setting forth the Indebtedness affected
and the nature of such change.
(c) Compliance with Laws and Preservation of
Corporate Existence. Such Seller Party will comply in
all respects with all applicable laws, rules, regulations,
orders, writs, judgments, injunctions, decrees or awards
to which it may be subject the violation of which could
reasonably be expected to have a Material Adverse Effect.
Such Seller Party will 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 its business is conducted except when the failure to
so qualify could not reasonably be expected to have a
Material Adverse Effect.
(d) Audits. Such Seller Party will (and will
cause Originator to) furnish to the Agent from time to
time such information with respect to it and the
Receivables as the Agent may reasonably request. Such
Seller Party will, on or about the date which occurs six
(6) months after the date hereof and from time to time,
during regular business hours as requested by the Agent
upon reasonable notice and at the sole cost of such Seller
Party, permit the Agent, or its agents or representatives
and will cause Originator to permit the Agent or its agents
or representatives, (i) to examine and make copies of and
abstracts from all Records in the possession or under the
control of such Person relating to the Receivables and the
Related Security, including, without limitation, the
related Contracts, and (ii) to visit the offices and
properties of such Person for the purpose of examining such
materials described in clause (i) above, and to discuss
matters relating to such Person's financial condition or
the Receivables and the Related Security or any Person's
performance under any of the Transaction Documents or
any Person's performance under the Contracts and, in
each case, with any of the officers or employees of
Seller or the Servicer having knowledge of such matters.
(e) Keeping and Marking of Records and Books.
(i) The Servicer will (and will cause
Originator to) maintain and implement administrative and
operating procedures (including, without limitation, an
ability to recreate records evidencing Receivables in the
event of the destruction of the originals thereof), and
keep and maintain all documents, books, records and other
information reasonably necessary or advisable for the
collection of all Receivables (including, without
limitation, records adequate to permit the immediate
identification of each new Receivable and all
Collections of and adjustments to each existing
Receivable). The Servicer will (and will cause
Originator to) give the Agent notice of any material
change in the administrative and operating procedures
referred to in the previous sentence.
(ii) Such Seller Party will (and will cause
Originator to) (A) on or prior to the date hereof,
▇▇▇▇ its master data processing records and other
books and records relating to the Purchaser Interests
with a legend, acceptable to the Agent, describing the
Purchaser Interests and (B) after the occurrence and
during the continuation of an Amortization Event that
has not been waived in writing in accordance with the
terms hereof, upon the request of the Agent (x) ▇▇▇▇
each Contract with a legend describing the Purchaser
Interests and (y) deliver to the Agent all Contracts
(including, without limitation, all multiple originals
of any such Contract) relating to the Receivables.
(f) Compliance with Contracts and Credit and
Collection Policy. Such Seller Party will (and will
cause Originator to) timely and fully (i) perform and
comply in all material respects with all provisions,
covenants and other promises required to be observed by
it under the Contracts related to the Receivables, and
(ii) comply in all material respects with the Credit
and Collection Policy in regard to each Receivable and
the related Contract.
(g) Performance and Enforcement of Receivables
Sale Agreement. Seller will, and will require Originator
to, perform each of their respective obligations and
undertakings under and pursuant to the Receivables Sale
Agreement, will purchase Receivables thereunder in
strict compliance with the terms thereof and will
vigorously enforce the rights and remedies accorded to
Seller under the Receivables Sale Agreement. Seller
will take all actions to perfect and enforce its rights
and interests (and the rights and interests of the
Agent and the Purchasers as assignees of Seller) under
the Receivables Sale Agreement as the Agent may from
time to time reasonably request, including, without
limitation, making claims to which it may be entitled
under any indemnity, reimbursement or similar provision
contained in the Receivables Sale Agreement.
(h) Ownership. Seller will (or will cause
Originator to) take all necessary action to (i) vest
legal and equitable title to the Receivables, the
Related Security and the Collections purchased under the
Receivables Sale Agreement irrevocably in Seller, free
and clear of any Adverse Claims other than Adverse
Claims in favor of the Agent and the Purchasers
(including, without limitation, the filing of all
financing statements or other similar instruments or
documents necessary under the UCC (or any comparable
law) of all appropriate jurisdictions to perfect
Seller's ownership interest in such Receivables,
Related Security and Collections and such other action
to perfect, protect or more fully evidence the
ownership interest of Seller therein as the Agent may
reasonably request), and (ii) establish and maintain,
in favor of the Agent, for the benefit of the
Purchasers, a valid and perfected first priority
undivided percentage ownership interest (and/or a valid
and perfected first priority security interest) in all
Receivables, Related Security and Collections to the
full extent contemplated herein, free and clear of any
Adverse Claims other than Adverse Claims in favor of
the Agent for the benefit of the Purchasers (including,
without limitation, the filing of all financing
statements or other similar instruments or documents
necessary under the UCC (or any comparable law) of all
appropriate jurisdictions to perfect the Agent's (for
the benefit of the Purchasers) interest in such
Receivables, Related Security (to the extent covered by
Article 9 of the UCC) and Collections and such other
action to perfect, protect or more fully evidence the
interest of the Agent for the benefit of the Purchasers
as the Agent may reasonably request).
(i) Purchasers' Reliance. Seller acknowledges
that the Purchasers are entering into the transactions
contemplated by this Agreement in reliance upon Seller's
identity as a legal entity that is separate from
Originator and its Affiliates. Therefore, from and after
the date of execution and delivery of this Agreement,
Seller shall take all reasonable steps, including,
without limitation, all steps that the Agent or any
Purchaser may from time to time reasonably request, to
maintain Seller's identity as a separate legal entity and
to make it manifest to third parties that Seller is an
entity with assets and liabilities distinct from those of
Originator and any Affiliates thereof and not just a
division of Originator or any such Affiliate. Without
limiting the generality of the foregoing and in addition
to the other covenants set forth herein, Seller will:
(i) conduct its own business in its own name
and require that all full-time employees of Seller, if
any, identify themselves as such and not as employees of
Originator or its Affiliates (including, without
limitation, by means of providing appropriate employees
with business or identification cards identifying such
employees as Seller's employees);
(ii) compensate all employees, consultants and
agents directly, from Seller's own funds, for services
provided to Seller by such employees, consultants and
agents and, to the extent any employee, consultant or
agent of Seller is also an employee, consultant or
agent of Originator or any Affiliate thereof, allocate
the compensation of such employee, consultant or agent
between Seller and Originator or such Affiliate, as
applicable, on a basis that reflects the services
rendered to Seller and Originator or such Affiliate, as
applicable;
(iii) clearly identify its offices (by signage
or otherwise) as its offices and, if such office is
located in the offices of Originator or any of its
Affiliates, Seller shall lease such office at a fair
market rent;
(iv) have separate stationery, invoices and
checks in its own name;
(v) conduct all transactions with Originator
and the Servicer (including, without limitation, any
delegation of its obligations hereunder as Servicer)
strictly on an arm's-length basis, allocate all overhead
expenses (including, without limitation, telephone and
other utility charges) for items shared between Seller
and Originator on the basis of actual use to the extent
practicable and, to the extent such allocation is not
practicable, on a basis reasonably related to actual use;
(vi) at all times have a Board of Directors
consisting of three members, at least one member of which
is an Independent Director;
(vii) observe all corporate formalities as a
distinct entity, and ensure that all corporate actions
relating to (A) the selection, maintenance or
replacement of the Independent Director, (B) the
dissolution or liquidation of Seller or (C) the
initiation of, participation in, acquiescence in or
consent to any bankruptcy, insolvency, reorganization
or similar proceeding involving Seller, are duly
authorized by unanimous vote of its Board of Directors
(including the Independent Director);
(viii) maintain Seller's books and records
separate from those of Originator and any Affiliate
thereof and otherwise readily identifiable as its own
assets rather than assets of Originator and any Affiliate
thereof;
(ix) prepare its financial statements separately
from those of Originator or any Affiliate thereof and insure
that any consolidated financial statements of Originator or
any Affiliate thereof that include Seller and that are filed
with the Securities and Exchange Commission or any other
governmental agency have notes clearly stating that Seller
is a separate corporate entity and that its assets will be
available first and foremost to satisfy the claims of the
creditors of Seller;
(x) except as herein specifically otherwise
provided, maintain the funds or other assets of Seller
separate from, and not commingled with, those of
Originator or any Affiliate thereof and only maintain bank
accounts or other depository accounts to which Seller
alone is the account party, into which Seller alone makes
deposits and from which Seller alone (or the Agent
hereunder) has the power to make withdrawals;
(xi) pay all of Seller's operating expenses from
Seller's own assets (except for certain payments by
Originator or other Persons pursuant to allocation
arrangements that comply with the requirements of this
Section 7.1(i));
(xii) operate its business and activities such
that: it does not engage in any business or activity
of any kind, or enter into any transaction or indenture,
mortgage, instrument, agreement, contract, lease or other
undertaking, other than the transactions contemplated and
authorized by this Agreement, the Receivables Sale
Agreement and its Certificate of Incorporation; and does
not create, incur, guarantee, assume or suffer to exist
any indebtedness or other liabilities, whether direct or
contingent, other than (1) as a result of the endorsement
of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business,
(2) the incurrence of obligations under this Agreement and
the other Transaction Documents, (3) the incurrence of
obligations, as expressly contemplated in the
Receivables Sale Agreement, to make payment to
Originator thereunder for the purchase of Receivables
from Originator under the Receivables Sale Agreement,
and (4) the incurrence of operating expenses in the
ordinary course of business of the type otherwise
contemplated by this Agreement;
(xiii) maintain its corporate charter in
conformity with this Agreement, such that it does not
amend, restate, supplement or otherwise modify its
Certificate of Incorporation or By-Laws in any respect
that would impair its ability to comply with the terms
or provisions of any of the Transaction Documents,
including, without limitation, Section 7.1(i) of this
Agreement;
(xiv) maintain the effectiveness of, and
continue to perform under the Receivables Sale Agreement,
such that it does not amend, restate, supplement, cancel,
terminate or otherwise modify the Receivables Sale
Agreement, or give any consent, waiver, directive or
approval thereunder or waive any default, action,
omission or breach under the Receivables Sale Agreement
or otherwise grant any indulgence thereunder, without
(in each case) the prior written consent of the Agent;
(xv) maintain its corporate separateness such
that it does not merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether
in one transaction or in a series of transactions, and
except as otherwise contemplated herein) all or
substantially all of its assets (whether now owned or
hereafter acquired) to, or acquire all or substantially
all of the assets of, any Person, nor at any time create,
have, acquire, maintain or hold any interest in any
Subsidiary.
(xvi) maintain at all times the Required
Capital Amount (as defined in the Receivables Sale
Agreement) and refrain from making any dividend,
distribution, redemption of capital stock or payment of
any subordinated indebtedness which would cause the
Required Capital Amount to cease to be so maintained;
and
(xvii) take such other actions as are necessary
on its part to ensure that the facts and assumptions set
forth in the opinion issued by ▇▇▇▇▇ & ▇▇▇▇▇▇▇, as
counsel for Seller, in connection with the closing or
initial Incremental Purchase under this
Agreement and relating to substantive consolidation issues,
and in the certificates accompanying such opinion, remain
true and correct in all material respects at all times.
(j) Collections. Such Seller Party will cause
(1) all proceeds from all Lock-Boxes to be directly
deposited by a Collection Bank into a Collection Account
and (2) each Lock-Box and Collection Account to be subject
at all times to a Collection Account Agreement that is in
full force and effect. In the event any payments
relating to Receivables are remitted directly to Seller
or any Affiliate of Seller, Seller will remit (or will
cause all such payments to be remitted) directly to a
Collection Bank and deposited into a Collection Account
within two (2) Business Days following receipt thereof,
and, at all times prior to such remittance, Seller will
itself hold or, if applicable, will cause such payments
to be held in trust for the exclusive benefit of the
Agent and the Purchasers. Seller will maintain
exclusive ownership, dominion and control (subject to
the terms of this Agreement) of each Lock-Box and
Collection Account and shall not grant the right to
take dominion and control of any Lock-Box or Collection
Account at a future time or upon the occurrence of a
future event to any Person, except to the Agent as
contemplated by this Agreement.
(k) Taxes. Such Seller Party will file all
tax returns and reports required by law to be filed by
it and will promptly pay all taxes and governmental
charges at any time owing. Seller will pay when due
any taxes payable in connection with the Receivables,
exclusive of taxes on or measured by income or gross
receipts of Falcon, the Agent or any Financial
Institution.
(l) Insurance. Seller will maintain in
effect, or cause to be maintained in effect, at Seller's
own expense, such casualty and liability insurance as
Seller shall deem appropriate in its good faith
business judgment. The foregoing requirements shall
not be construed to negate, reduce or modify, and are
in addition to, Seller's obligations hereunder.
(m) Payment to Originator and Original Seller.
With respect to any Receivable purchased by Seller from
Originator, such sale shall be effected under, and in
strict compliance with the terms of, the Receivables
Sale Agreement, including, without limitation, the
terms relating to the amount and timing of payments to
be made to Originator in respect of the purchase price
for such Receivable. With respect to any Receivable
purchased by Originator from an Original Seller, such
sale shall be effected under, and in strict compliance
with the terms of, the related Transfer Agreement,
including, without limitation, the terms relating to
the amount and timing of payments to be made to each
such Original Seller in respect of the purchase price
for such Receivable.
Section 7.2 Negative Covenants of the Seller
Parties. Until the date on which the Aggregate Unpaids
have been paid in full and this Agreement terminates in
accordance with its terms, each Seller Party hereby
covenants, as to itself, that:
(a) Name Change, Offices and Records. Such
Seller Party will not change its jurisdiction of
incorporation or form of organization, or change its name,
identity or corporate structure (within the meaning of
Section 9-402(7) of any applicable enactment of the UCC)
or relocate its chief executive office or any office where
Records are kept unless it shall have: (i) given the
Agent at least thirty (30) days' prior written notice
thereof and (ii) delivered to the
Agent all financing statements, instruments and other
documents requested by the Agent in connection with such
change or relocation.
(b) Change in Payment Instructions to
Obligors. Except as may be required by the Agent
pursuant to Section 8.2(b), such Seller Party will not
add or terminate any bank as a Collection Bank, or make
any change in the instructions to Obligors regarding
payments to be made to any Lock-Box or Collection
Account, unless the Agent shall have received, at least
ten (10) days before the proposed effective date
therefor, (i) written notice of such addition,
termination or change and (ii) with respect to the
addition of a Collection Bank or a Collection Account
or Lock-Box, an executed Collection Account Agreement
with respect to the new Collection Account or Lock-Box;
provided, however, that the Servicer may make changes
in instructions to Obligors regarding payments if such
new instructions require such Obligor to make payments
to another existing Collection Account.
(c) Modifications to Contracts and Credit and
Collection Policy. Such Seller Party will not, and
will not permit Originator to, make any change to the
Credit and Collection Policy that could reasonably be
expected to adversely affect the collectibility of the
Receivables or decrease the credit quality of any newly
created Receivables. Except as provided in Section
8.2(d), the Servicer will not, and will not permit
Originator to, extend, amend or otherwise modify the
terms of any Receivable or any Contract related thereto
other than in accordance with the Credit and Collection
Policy.
(d) Sales, Liens. Seller will not sell, assign
(by operation of law or otherwise) or otherwise dispose of,
or grant any option with respect to, or create or suffer to
exist any Adverse Claim upon (including, without limitation,
the filing of any financing statement) or with respect to,
any Receivable, Related Security or Collections, or upon or
with respect to any Contract under which any Receivable
arises, or any Lock-Box or Collection Account, or assign any
right to receive income with respect thereto (other than, in
each case, the creation of the interests therein in favor of
the Agent and the Purchasers provided for herein), and Seller
will defend the right, title and interest of the Agent and
the Purchasers in, to and under any of the foregoing property,
against all claims of third parties claiming through or under
Seller or Originator. Seller will not create or suffer to
exist any mortgage, pledge, security interest, encumbrance,
lien, charge or other similar arrangement on any of its
inventory.
(e) Net Receivables Balance. At no time prior
to the Amortization Date shall Seller permit the Net
Receivables Balance to be less than an amount equal to
the sum of (i) the Aggregate Capital plus (ii) the
Aggregate Reserves.
(f) Termination Date Determination. Seller
will not designate the Termination Date (as defined in
the Receivables Sale Agreement), or send any written
notice to Originator in respect thereof, without the
prior written consent of the Agent, except with respect
to the occurrence of such Termination Date arising
pursuant to [Section 5.1(d)] of the Receivables Sale
Agreement.
(g) Restricted Junior Payments. From and
after the occurrence of any Amortization Event unless
waived in writing in accordance with the terms hereof,
Seller will not
make any Restricted Junior Payment if, after
giving effect thereto, Seller would fail to meet its
obligations set forth in Section 7.2(e).
ARTICLE VIII
ADMINISTRATION AND COLLECTION
SECTION 8.1 Designation of Servicer.
(a) The servicing, administration and
collection of the Receivables shall be conducted by such
Person (the "Servicer") so designated from time to time
in accordance with this Section 8.1. SSI is hereby
designated as, and hereby agrees to perform the duties
and obligations of, the Servicer pursuant to the terms
of this Agreement. The Agent may at any time after the
occurrence of an Amortization Event that has not been
waived in writing in accordance with the terms hereof,
designate as Servicer any Person to succeed SSI or any
successor Servicer.
(b) SSI may delegate, and SSI hereby advises
the Purchasers and the Agent that it has delegated, to
each Original Seller, as sub-servicer of the Servicer,
certain of its duties and responsibilities as Servicer
hereunder in respect of the Receivables originated by
such Original Seller. Without the prior written
consent of the Agent and the Required Financial
Institutions, Seller shall not be permitted to delegate
any of its duties or responsibilities as Servicer to
any Person other than (i) SSI and (ii) with respect to
certain Charged-Off Receivables, outside collection
agencies or attorneys in accordance with its customary
practices. SSI shall not be permitted to further
delegate to any other Person any of the duties or
responsibilities of the Servicer delegated to it by
Seller other than to the Original Sellers. If at any
time after the occurrence of an Amortization Event that
has not been waived in writing in accordance with the
terms hereof, the Agent shall designate as Servicer any
Person other than SSI all duties and responsibilities
theretofore delegated by Seller to SSI may, at the
discretion of the Agent, be terminated forthwith on
notice given by the Agent to SSI and to Seller.
(c) Notwithstanding the foregoing subsection
(b), (i) SSI shall be and remain primarily liable to the
Agent and the Purchasers for the full and prompt
performance of all duties and responsibilities of the
Servicer hereunder and (ii) the Agent and the Purchasers
shall be entitled to deal exclusively with SSI in matters
relating to the discharge by the Servicer of its duties
and responsibilities hereunder. The Agent and the
Purchasers shall not be required to give notice, demand
or other communication to any Person other than SSI in
order for communication to the Servicer and its sub-
servicer or other delegate with respect thereto to be
accomplished. SSI, at all times that it is the
Servicer, shall be responsible for providing any sub-
servicer or other delegate of the Servicer with any
notice given to the Servicer under this Agreement.
Section 8.2 Duties of Servicer. The Servicer
shall take or cause to be taken all such actions as may
be necessary or advisable to collect each Receivable from
time to time, all in accordance with applicable laws,
rules and regulations, with reasonable care and
diligence, and in accordance in all material respects
with the Credit and Collection Policy.
(a) The Servicer will instruct all Obligors
to pay all Collections directly to a Lock-Box or
Collection Account. The Servicer shall effect a
Collection Account Agreement substantially in the form
of Exhibit VI with each bank party to a Collection Account
at any time. In the case of any remittances received in
any Lock-Box or Collection Account that shall have been
identified, to the satisfaction of the Servicer, to not
constitute Collections or other proceeds
of the Receivables or the Related Security, the Servicer
shall promptly remit such items to the Person identified
to it as being the owner of such remittances. From and
after the date the Agent delivers to any Collection
Bank a Collection Notice pursuant to Section 8.3, the
Agent may request that the Servicer, and the Servicer
thereupon promptly shall instruct all Obligors with
respect to the Receivables, to remit all payments
thereon to a new depositary account specified by the
Agent and, at all times thereafter, Seller and the
Servicer shall not deposit or otherwise credit, and
shall not permit any other Person to deposit or
otherwise credit to such new depositary account any
cash or payment item other than Collections.
(b) The Servicer shall administer the
Collections in accordance with the procedures described
herein and in Article II. The Servicer shall set aside
and hold in trust for the account of Seller and the
Purchasers their respective shares of the Collections in
accordance with Article II. The Servicer shall, upon
the request of the Agent after the occurrence of an
Amortization Event that has not been waived in writing
in accordance with the terms hereof, segregate, in a
manner acceptable to the Agent, all cash, checks and
other instruments received by it from time to time
constituting Collections from the general funds of the
Servicer or Seller prior to the remittance thereof in
accordance with Article II. If the Servicer shall be
required to segregate Collections pursuant to the
preceding sentence, the Servicer shall segregate and
deposit with a bank designated by the Agent such
allocable share of Collections of Receivables set aside
for the Purchasers on the first Business Day following
receipt by the Servicer of such Collections, duly
endorsed or with duly executed instruments of transfer.
(c) The Servicer may, in accordance with the
Credit and Collection Policy, extend the maturity of any
Receivable or adjust the Outstanding Balance of any
Receivable as the Servicer determines to be appropriate
to maximize Collections thereof; provided, however,
that such extension or adjustment shall not alter the
status of such Receivable as a Delinquent Receivable or
Charged-Off Receivable or limit the rights of the Agent
or the Purchasers under this Agreement. Notwithstanding
anything to the contrary contained herein, after the
occurrence of an Amortization Event that has not been
waived in writing in accordance with the terms hereof,
the Agent shall have the absolute and unlimited right to
direct the Servicer to commence or settle any legal action
with respect to any Receivable or to foreclose upon or
repossess any Related Security.
(d) The Servicer shall hold in trust for
Seller and the Purchasers all Records that (i) evidence
or relate to the Receivables, the related Contracts and
Related Security or (ii) are otherwise necessary or
desirable to collect the Receivables and shall, after
the occurrence of an Amortization Event that has not
been waived in writing in accordance with the terms
hereof, as soon as practicable upon demand of the Agent,
deliver or make available to the Agent all such
Records, at a place selected by the Agent. The
Servicer shall, as soon as practicable following
receipt thereof turn over to Seller any cash
collections or other cash proceeds belonging to Seller
and received with respect to Indebtedness not
constituting Receivables. The Servicer shall, from
time to time at the request of any Purchaser, furnish
to the Purchasers (promptly after any such request) a
calculation of the amounts set aside for the Purchasers
pursuant to Article II.
(e) Any payment by an Obligor in respect of
any indebtedness owed by it to Originator or Seller
shall, except as otherwise specified by such Obligor or
otherwise required by contract or law and unless
otherwise instructed by the Agent, be applied as a
Collection of any
Receivable of such Obligor (starting with the oldest
such Receivable) to the extent of any amounts then due
and payable thereunder before being applied to any other
receivable or other obligation of such Obligor.
Section 8.3 Collection Notices. The Agent is
authorized at any time after the occurrence of an
Amortization Event that has not been waived in writing
in accordance with the terms hereof, to date and to
deliver to the Collection Banks the Collection Notices.
Seller hereby transfers to the Agent for the benefit of
the Purchasers, effective when the Agent delivers such
notice, the exclusive ownership and control of each
Lock-Box and the Collection Accounts. In case any
authorized signatory of Seller whose signature appears
on a Collection Account Agreement shall cease to have
such authority before the delivery of such notice, such
Collection Notice shall nevertheless be valid as if
such authority had remained in force. Seller hereby
authorizes the Agent, and agrees that after the
occurrence of an Amortization Event that has not been
waived in writing in accordance with the terms hereof,
the Agent shall be entitled to (i) endorse Seller's
name on checks and other instruments representing
Collections, (ii) enforce the Receivables, the related
Contracts and the Related Security and (iii) take such
action as shall be necessary or desirable to cause all
cash, checks and other instruments constituting
Collections of Receivables to come into the possession
of the Agent rather than Seller.
Section 8.4 Responsibilities of Seller. Anything
herein to the contrary notwithstanding, the exercise by
the Agent and the Purchasers of their rights hereunder
shall not release the Servicer, Originator or Seller
from any of their duties or obligations with respect to
any Receivables or under the related Contracts. The
Purchasers shall have no obligation or liability with
respect to any Receivables or related Contracts, nor
shall any of them be obligated to perform the
obligations of Seller.
Section 8.5 Reports. The Servicer shall prepare
and forward to the Agent (i) on each Monthly Reporting
Date and at such times as the Agent shall request, a
Monthly Report , (ii) on each Semi-Monthly Reporting Date
and at such times as the Agent shall request, a Semi-
Monthly Report and (iii) at such times as the Agent
shall request, a listing by Obligor of all Receivables
together with an aging of such Receivables.
Section 8.6 Servicing Fees. In consideration
of SSI's agreement to act as Servicer hereunder, the
Purchasers hereby agree that, so long as SSI shall
continue to perform as Servicer hereunder, Seller shall
pay over to SSI a fee (the "Servicing Fee") on the
first calendar day of each month, in arrears for the
immediately preceding month, no greater than 0.75% per
annum of the average Net Receivables Balance during
such period, as compensation for its servicing
activities. In the event that SSI is replaced as
servicer pursuant to Section 8.1(a), the "Servicing
Fee" shall be that fee agreed upon between the Agent
and any successor Servicer from time to time.
ARTICLE IX
AMORTIZATION EVENTS
SECTION 9.1 Amortization Events. The occurrence
of any one or more of the following events shall
constitute an Amortization Event:
(a) Any Seller Party or Original Seller shall
fail (i) to make any payment or deposit required hereunder
or under the Receivables Sale Agreement or each Transfer
Agreement when due, or (ii) to perform or observe any
term, covenant or agreement hereunder or under the
Receivables Sale Agreement or each Transfer Agreement
(other than as referred to in clause (i) of this clause
(a) and clause (e)) and such failure shall continue for
three (3) consecutive Business Days.
(b) Any representation, warranty, certification
or statement made by any Seller Party in this Agreement,
any other Transaction Document or in any other document
delivered pursuant hereto or thereto shall prove to
have been incorrect when made or deemed made.
(c) Failure of Seller to pay any Indebtedness
when due or the failure of any other Seller Party to pay
Indebtedness in excess of $5,000,000 when due; or the
default by any Seller Party in the performance of any
term, provision or condition contained in any agreement
under which any such Indebtedness was created or is
governed, the effect of which is to cause, or to permit
the holder or holders of such Indebtedness to cause,
such Indebtedness to become due prior to its stated
maturity; or any such Indebtedness of any Seller Party
shall be declared to be due and payable or required to
be prepaid (other than by a regularly scheduled
payment) prior to the date of maturity thereof.
(d) Any Seller Party shall generally not pay
its debts as such debts become due or shall admit in
writing its inability to pay its debts generally or shall
make a general assignment for the benefit of creditors;
or (ii) any proceeding shall be instituted by or against
any Seller Party seeking to adjudicate it bankrupt or
insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection,
relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or
relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee or
other similar official for it or any substantial part
of its property or (iii) any Seller Party shall take
any corporate action to authorize any of the actions
set forth in clauses (i) or (ii) above in this
subsection (d).
(e) Seller shall fail to comply with the
terms of Section 2.6 hereof.
(f) As at the end of any Collection Period:
(i) the number of Days Collections Outstanding
at the end of such Collection Period and as at the end of
the immediately preceding Collection Period shall equal
or exceed 95; or
(ii) the Run-Off Ratio as at the end of such
Collection Period and as at the end of the immediately
preceding Collection Period shall equal or exceed 25%; or
(iii) the three month rolling average Dilution
Trigger Ratio as at the end of such Collection Period
shall equal or exceed 2.70%; or
(iv) the Loss-to-Liquidation Ratio as at the
end of such Collection Period shall equal or exceed 1.20%.
(g) A Change of Control with respect to SSI shall
occur or SSI shall cease to own directly, free and clear of
all Adverse Claims, all of the outstanding shares of Seller.
(h) (i) One or more final judgments for the
payment of money shall be entered against Seller or (ii)
one or more final judgments for the payment of money in an
amount in excess of $1,000,000, individually or in the
aggregate, shall be entered against the Servicer on
claims not covered by insurance or as to which the
insurance carrier has denied its responsibility, and
such judgment shall continue unsatisfied and in effect
for fifteen (15) consecutive days without a stay of
execution.
(i) (i) The "Termination Date" under and as
defined in the Receivables Sale Agreement shall occur
under the Receivables Sale Agreement, or (ii) Seller or
Originator shall cease to perform any of their
respective material obligations and undertakings under
and pursuant to the Receivables Sale Agreement or shall
fail to vigorously enforce the rights and remedies
accorded under the Receivables Purchase Agreement after
the occurrence of such failure, or (iii) Originator
shall for any reason cease to transfer, or cease to
have the legal capacity to transfer, or otherwise be
incapable of transferring Receivables to Seller under
the Receivables Sale Agreement.
(j) This Agreement shall terminate in whole
or in part (except in accordance with its terms), or
shall cease to be effective or to be the legally valid,
binding and enforceable obligation of Seller, or any
Obligor shall directly or indirectly contest in any
manner such effectiveness, validity, binding nature or
enforceability, or the Agent for the benefit of the
Purchasers shall cease to have a valid and perfected
first priority security interest in the Receivables,
the Related Security and the Collections with respect
thereto and the Collection Accounts.
(k) As at the end of any fiscal quarter:
(i) the Consolidated Leverage Ratio shall
exceed (A) 3.75:1.0 for the fiscal quarter ending on
October 30, 2000, (B) 3:50:1.0 for each fiscal quarter
ending after October 30, 2000 (other than each fiscal
quarter ending July 30 of each year), or (C) 4.25:1.0
for each fiscal quarter ending on July 30 of each year;
(ii) the Consolidated Fixed Charge Coverage
Ratio (as defined in the SSI Loan Agreement) shall be
less than 2.0:1.0; or
(iii) Consolidated Net Worth (as defined in
the SSI Loan Agreement) shall be less than the sum of
(A) $125,000, 000 plus (B) 50% of the aggregate
Consolidated Net Income (as defined in the SSI Loan
Agreement) (but not less than zero) for each fiscal
quarter ending after September 30, 1998, such increases
to be cumulative, plus (C) 100% of the net proceeds
from Equity Transactions (as defined in the SSI Loan
Agreement) occurring after September 30, 1998.
Section 9.2 Remedies. Upon the occurrence and
during the continuation of an Amortization Event, the
Agent may, or upon the direction of the Required
Financial Institutions shall, take any of the following
actions: (i) replace the Person then acting as
Servicer, (ii) declare the Amortization Date to have
occurred, whereupon the Amortization Date shall
forthwith occur,
without demand, protest or further notice of any kind,
all of which are hereby expressly waived by each Seller
Party; provided, however, that upon the occurrence of an
Amortization Event described in Section 9.1(d), or of an
actual or deemed entry of an order for relief with
respect to any Seller Party under the Federal Bankruptcy
Code, the Amortization Date shall automatically occur,
without demand, protest or any notice of any kind, all
of which are hereby expressly waived by each Seller Party,
(iii) to the fullest extent permitted by applicable law,
declare that the Default Fee shall accrue with respect to
any of the Aggregate Unpaids outstanding at such time, (iv)
deliver the Collection Notices to the Collection Banks,
and (v) notify Obligors of the Purchasers' interest in
the Receivables. The aforementioned rights and
remedies shall be without limitation, and shall be in
addition to all other rights and remedies of the Agent
and the Purchasers otherwise available under any other
provision of this Agreement, by operation of law, at
equity or otherwise, all of which are hereby expressly
preserved, including, without limitation, all rights
and remedies provided under the UCC, all of which
rights shall be cumulative.
ARTICLE X
INDEMNIFICATION
SECTION 10.1 Indemnities by The Seller Parties.
Without limiting any other rights that the Agent or any
Purchaser may have hereunder or under applicable law,
(A) Seller hereby agrees to indemnify (and pay upon
demand to) the Agent and each Purchaser and their
respective assigns, officers, directors, agents and
employees (each an "Indemnified Party") from and
against any and all damages, losses, claims, taxes,
liabilities, costs, expenses and for all other amounts
payable, including reasonable attorneys' fees (which
attorneys may be employees of the Agent or such
Purchaser) and disbursements (all of the foregoing
being collectively referred to as "Indemnified
Amounts") awarded against or incurred by any of them
arising out of or as a result of this Agreement or the
acquisition, either directly or indirectly, by a
Purchaser of an interest in the Receivables, and (B)
the Servicer hereby agrees to indemnify (and pay upon
demand to) each Indemnified Party for Indemnified
Amounts awarded against or incurred by any of them
arising out of the Servicer's activities as Servicer
hereunder excluding, however, in all of the foregoing
instances under the preceding clauses (A) and (B):
(i) Indemnified Amounts to the extent a
final judgment of a court of competent jurisdiction
holds that such Indemnified Amounts resulted from gross
negligence or willful misconduct on the part of the
Indemnified Party seeking indemnification;
(ii) Indemnified Amounts to the extent the
same includes losses in respect of Receivables that are
uncollectible on account of the insolvency, bankruptcy
or lack of creditworthiness of the related Obligor; or
(iii) taxes imposed by the jurisdiction in
which such Indemnified Party's principal executive office
is located, on or measured by the overall net income of
such Indemnified Party to the extent that the computation
of such taxes is consistent with the characterization for
income tax purposes of the acquisition by the Purchasers
of Purchaser Interests as a loan or loans by the
Purchasers to Seller secured by the Receivables, the
Related Security, the Collection Accounts and the
Collections;
provided, however, that nothing contained in this
sentence shall limit the liability of any Seller
Party or limit the recourse of the Purchasers to any
Seller Party for amounts otherwise specifically provided
to be paid by such Seller Party under the terms of this
Agreement. Without limiting the generality of the
foregoing indemnification, Seller shall indemnify the
Agent and the Purchasers for Indemnified Amounts
(including, without limitation, losses in respect of
uncollectible receivables, regardless of whether
reimbursement therefor would constitute recourse to
Seller or the Servicer) relating to or resulting from:
(iv) any representation or warranty made by
any Seller Party or Originator (or any officers of any
such Person) under or in connection with this Agreement,
any other Transaction Document or any other information
or report delivered by any such Person pursuant hereto
or thereto, which shall have been false or incorrect
when made or deemed made;
(v) the failure by Seller, the Servicer or
Originator to comply with any applicable law, rule or
regulation with respect to any Receivable or Contract
related thereto, or the nonconformity of any Receivable
or Contract included therein with any such applicable
law, rule or regulation or any failure of Originator to
keep or perform any of its obligations, express or
implied, with respect to any Contract;
(vi) any failure of Seller, the Servicer or
Originator to perform its duties, covenants or other
obligations in accordance with the provisions of this
Agreement or any other Transaction Document;
(vii) any products liability, personal injury
or damage suit, or other similar claim arising out of or
in connection with merchandise, insurance or services
that are the subject of any Contract or any Receivable;
(viii) any dispute, claim, offset or defense
(other than discharge in bankruptcy, or suspension of
payments due to the bankruptcy, of the Obligor) of the
Obligor to the payment of any Receivable (including,
without limitation, a defense based on such Receivable
or the related Contract not being a legal, valid and
binding obligation of such Obligor enforceable against
it in accordance with its terms), or any other claim
resulting from the sale of the merchandise or service
related to such Receivable or the furnishing or failure
to furnish such merchandise or services;
(ix) the commingling of Collections of
Receivables at any time with other funds;
(x) any investigation, litigation or
proceeding related to or arising from this Agreement or
any other Transaction Document, the transactions
contemplated hereby, the use of the proceeds of an
Incremental Purchase or a Reinvestment, the ownership of
the Purchaser Interests or any other investigation,
litigation or proceeding relating to Seller, the
Servicer or Originator in which any Indemnified Party
becomes involved as a result of any of the transactions
contemplated hereby;
(xi) any inability to litigate any claim
against any Obligor in respect of any Receivable as a
result of such Obligor being immune from civil and
commercial law
and suit on the grounds of sovereignty or otherwise
from any legal action, suit or proceeding;
(xii) any Amortization Event described in
Section 9.1(d);
(xiii) any failure of Seller to acquire
and maintain legal and equitable title to, and
ownership of any Receivable and the Related Security
and Collections with respect thereto from Originator,
free and clear of any Adverse Claim (other than as
created hereunder); or any failure of Seller to give
reasonably equivalent value to Originator under the
Receivables Sale Agreement in consideration of the
transfer by Originator of any Receivable, or any
attempt by any Person to void such transfer under
statutory provisions or common law or equitable
action;
(xiv) any failure to vest and maintain
vested in the Agent for the benefit of the Purchasers,
or to transfer to the Agent for the benefit of the
Purchasers, legal and equitable title to, and ownership
of, a first priority perfected undivided percentage
ownership interest (to the extent of the Purchaser
Interests contemplated hereunder) or security interest
in the Receivables, the Related Security and the
Collections, free and clear of any Adverse Claim
(except as created by the Transaction Documents);
(xv) the failure to have filed, or any delay
in filing, financing statements or other similar
instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any
Receivable, the Related Security and Collections with
respect thereto, and the proceeds of any thereof,
whether at the time of any Incremental Purchase or
Reinvestment or at any subsequent time;
(xvi) any action or omission by any Seller
Party which reduces or impairs the rights of the Agent
or the Purchasers with respect to any Receivable or the
value of any such Receivable;
(xvii) any attempt by any Person to void any
Incremental Purchase or Reinvestment hereunder under
statutory provisions or common law or equitable action;
(xviii) the failure of any Receivable included
in the calculation of the Net Receivables Balance as an
Eligible Receivable to be an Eligible Receivable at the
time so included.
Section 10.2 Increased Cost and Reduced Return.
(a) If after the date hereof, any Funding
Source shall be charged any fee, expense or increased
cost on account of the adoption of any applicable law,
rule or regulation (including any applicable law, rule
or regulation regarding capital adequacy) or any change
therein, or any change in the interpretation or
administration thereof by any governmental authority,
central bank or comparable agency charged with the
interpretation or administration thereof, or compliance
with any request or directive (whether or not having
the force of law) of any such authority, central bank
or comparable agency (a "Regulatory Change"): (i) that
subjects any Funding Source to any charge or
withholding on or with respect to any Funding Agreement
or a Funding Source's obligations under a Funding
Agreement, or on or with respect
to the Receivables, or changes the basis of taxation of
payments to any Funding Source of any amounts payable
under any Funding Agreement (except for changes in the
rate of tax on the overall net income of a Funding Source
or taxes excluded by Section 10.1) or (ii) that imposes,
modifies or deems applicable any reserve, assessment,
insurance charge, special deposit or similar
requirement against assets of, deposits with or for the
account of a Funding Source, or credit extended by a
Funding Source pursuant to a Funding Agreement or (iii)
that imposes any other condition the result of which is
to increase the cost to a Funding Source of performing
its obligations under a Funding Agreement, or to reduce
the rate of return on a Funding Source's capital as a
consequence of its obligations under a Funding
Agreement, or to reduce the amount of any sum received
or receivable by a Funding Source under a Funding
Agreement or to require any payment calculated by
reference to the amount of interests or loans held or
interest received by it, then, upon demand by the
Agent, accompanied by a Certificate, in reasonable
detail, setting forth the computation of the amount
demanded, Seller shall pay to the Agent, for the
benefit of the relevant Funding Source, such amounts
charged to such Funding Source or such amounts to
otherwise compensate such Funding Source for such
increased cost or such reduction. Notwithstanding the
foregoing, Seller shall have no liability for any such
amounts for which a Funding Source is seeking
compensation if such Funding Source had actual
knowledge of such Regulatory Change more than ninety
(90) days prior to the date such Funding Source demands
compensation pursuant to this Section 10.2 with respect
to such Regulatory Change.
(b) If any Funding Source shall give a notice
seeking any amount pursuant to Section 10.02(a) (such a
Funding Source, a "Claimant"), such Claimant shall be
obliged, at the request of Seller, Falcon or the Agent,
to assign all of its rights and obligations hereunder to
(i) another Financial Institution or (ii) another
funding entity nominated by Seller or the Agent that is
acceptable to Falcon and willing to participate in this
Agreement through the Liquidity Termination Date in the
place of such Claimant; provided that the replacement
Financial Institution otherwise satisfies the
requirements of Section 12.1(b).
Section 10.3 Other Costs and Expenses. Seller
shall pay to the Agent and Falcon on demand all costs
and out-of-pocket expenses in connection with the
preparation, execution, delivery and administration of
this Agreement, the transactions contemplated hereby
and the other documents to be delivered hereunder,
including without limitation, the cost of Falcon's
auditors auditing the books, records and procedures of
Seller, reasonable fees and out-of-pocket expenses of
legal counsel for Falcon and the Agent (which such
counsel may be employees of Falcon or the Agent) with
respect thereto and with respect to advising Falcon and
the Agent as to their respective rights and remedies
under this Agreement. Seller shall pay to the Agent on
demand any and all costs and expenses of the Agent and
the Purchasers, if any, including reasonable counsel
fees and expenses in connection with the enforcement of
this Agreement and the other documents delivered
hereunder and in connection with any restructuring or
workout of this Agreement or such documents, or the
administration of this Agreement following an
Amortization Event.
ARTICLE XI
THE AGENT
SECTION 11.1 Authorization and Action. Each
Purchaser hereby designates and appoints Bank One to
act as its agent hereunder and under each other
Transaction Document, and authorizes the Agent to take
such actions as agent on its behalf and to exercise
such powers as are delegated to the Agent by the terms
of this Agreement and the other Transaction Documents
together with such powers as are reasonably incidental
thereto. The Agent shall not have any duties or
responsibilities, except those expressly set forth
herein or in any other Transaction Document, or any
fiduciary relationship with any Purchaser, and no
implied covenants, functions, responsibilities, duties,
obligations or liabilities on the part of the Agent
shall be read into this Agreement or any other
Transaction Document or otherwise exist for the Agent.
In performing its functions and duties hereunder and
under the other Transaction Documents, the Agent shall
act solely as agent for the Purchasers and does not
assume nor shall be deemed to have assumed any
obligation or relationship of trust or agency with or
for any Seller Party or any of such Seller Party's
successors or assigns. The Agent shall not be required
to take any action that exposes the Agent to personal
liability or that is contrary to this Agreement, any
other Transaction Document or applicable law. The
appointment and authority of the Agent hereunder shall
terminate upon the payment in full of all Aggregate
Unpaids. Each Purchaser hereby authorizes the Agent to
execute each of the Uniform Commercial Code financing
statements, the Fee Letter and the Collection Account
Agreements on behalf of such Purchaser (the terms of
which shall be binding on such Purchaser).
Section 11.2 Delegation of Duties. The Agent may
execute any of its duties under this Agreement and each
other Transaction Document by or through agents or
attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such
duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-
fact selected by it with reasonable care.
Section 11.3 Exculpatory Provisions. Neither
the Agent nor any of its directors, officers, agents or
employees shall be (i) liable for any action lawfully
taken or omitted to be taken by it or them under or in
connection with this Agreement or any other Transaction
Document (except for its, their or such Person's own
gross negligence or willful misconduct), or (ii)
responsible in any manner to any of the Purchasers for
any recitals, statements, representations or warranties
made by any Seller Party contained in this Agreement,
any other Transaction Document or any certificate,
report, statement or other document referred to or
provided for in, or received under or in connection
with, this Agreement, or any other Transaction Document
or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement, or any
other Transaction Document or any other document
furnished in connection herewith or therewith, or for
any failure of any Seller Party to perform its
obligations hereunder or thereunder, or for the
satisfaction of any condition specified in Article VI,
or for the perfection, priority, condition, value or
sufficiency of any collateral pledged in connection
herewith. The Agent shall not be under any obligation
to any Purchaser to ascertain or to inquire as to the
observance or performance of any of the agreements or
covenants contained in, or conditions of, this
Agreement or any other Transaction Document, or to
inspect the properties, books or records of the Seller
Parties. The Agent shall not be deemed to have
knowledge of any Amortization Event or Potential
Amortization Event unless the Agent has received notice
from Seller or a Purchaser.
Section 11.4 Reliance by Agent. The Agent shall
in all cases be entitled to rely, and shall be fully
protected in relying, upon any 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 Seller),
independent accountants and other experts selected by
the Agent. The Agent shall in all cases be fully
justified in failing or refusing to take any action
under this Agreement or any other Transaction Document
unless it shall first receive such advice or
concurrence of Falcon or the Required Financial
Institutions or all of the Purchasers, as applicable,
as it deems appropriate and it shall first be
indemnified to its satisfaction by the Purchasers,
provided that unless and until the Agent shall have
received such advice, the Agent may take or refrain
from taking any action, as the Agent shall deem
advisable and in the best interests of the Purchasers.
The Agent shall in all cases be fully protected in
acting, or in refraining from acting, in accordance
with a request of Falcon or the Required Financial
Institutions or all of the Purchasers, as applicable,
and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the
Purchasers.
Section 11.5 Non-Reliance on Agent and Other
Purchasers. Each Purchaser expressly acknowledges that
neither the 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 Agent hereafter taken, including, without
limitation, any review of the affairs of any Seller
Party, shall be deemed to constitute any representation
or warranty by the Agent. Each Purchaser represents
and warrants to the Agent that it has and will,
independently and without reliance upon the Agent or
any other Purchaser and based on such documents and
information as it has deemed appropriate, made its own
appraisal of and investigation into the business,
operations, property, prospects, financial and other
conditions and creditworthiness of Seller and made its
own decision to enter into this Agreement, the other
Transaction Documents and all other documents related
hereto or thereto.
Section 11.6 Reimbursement and Indemnification.
The Financial Institutions agree to reimburse and
indemnify the Agent and its officers, directors,
employees, representatives and agents ratably according
to their Pro Rata Shares, to the extent not paid or
reimbursed by the Seller Parties (i) for any amounts for
which the Agent, acting in its capacity as Agent, is
entitled to reimbursement by the Seller Parties hereunder
and (ii) for any other expenses incurred by the Agent, in
its capacity as Agent and acting on behalf of the
Purchasers, in connection with the administration and
enforcement of this Agreement and the other Transaction
Documents.
Section 11.7 Agent in its Individual Capacity.
The Agent and its Affiliates may make loans to, accept
deposits from and generally engage in any kind of
business with Seller or any Affiliate of Seller as
though the Agent were not the Agent hereunder. With
respect to the acquisition of Purchaser Interests
pursuant to this Agreement, the Agent shall have the
same rights and powers under this Agreement in its
individual capacity as any Purchaser and may exercise
the same as though it were not the Agent, and the terms
"Financial Institution," "Purchaser," "Financial
Institutions" and "Purchasers" shall include the Agent
in its individual capacity.
Section 11.8 Successor Agent. The Agent may,
upon ten days' notice to Seller and the Purchasers, and
the Agent will, upon the direction of all of the
Purchasers (other than the Agent, in its individual
capacity) resign as Agent. If the Agent shall resign,
then the Required Financial Institutions during such ten-
day period shall appoint from among the Purchasers a
successor agent. If for any reason no successor Agent
is appointed by the Required Financial Institutions
during such ten-day period, then effective upon the
termination of such ten-day period, the Purchasers
shall perform all of the duties of the Agent hereunder
and under the other Transaction Documents and Seller
and the Servicer (as applicable) shall make all
payments in respect of the Aggregate Unpaids directly
to the applicable Purchasers and for all purposes shall
deal directly with the Purchasers. After the
effectiveness of any retiring Agent's resignation
hereunder as Agent, the retiring Agent shall be
discharged from its duties and obligations hereunder
and under the other Transaction Documents and the
provisions of this Article XI and Article X shall
continue in effect for its benefit with respect to any
actions taken or omitted to be taken by it while it was
Agent under this Agreement and under the other
Transaction Documents.
ARTICLE XII
ASSIGNMENTS; PARTICIPATIONS
SECTION 12.1 Assignments.
(a) Seller and each Financial Institution
hereby agree and consent to the complete or partial
assignment by Falcon of all or any portion of its
rights under, interest in, title to and obligations
under this Agreement to the Financial Institutions
pursuant to Section 13.1 or to any other Person, and
upon such assignment, Falcon shall be released from its
obligations so assigned. Further, Seller and each
Financial Institution hereby agree that any assignee of
Falcon of this Agreement or all or any of the Purchaser
Interests of Falcon shall have all of the rights and
benefits under this Agreement as if the term "Falcon"
explicitly referred to such party, and no such
assignment shall in any way impair the rights and
benefits of Falcon hereunder. Neither Seller nor the
Servicer shall have the right to assign its rights or
obligations under this Agreement.
(b) Any Financial Institution may at any time and
from time to time assign to one or more Persons
("Purchasing Financial Institutions") all or any part of
its rights and obligations under this Agreement pursuant
to an assignment agreement, substantially in the form set
forth in Exhibit VII hereto (the "Assignment Agreement")
executed by such Purchasing Financial Institution and
such selling Financial Institution. The consent of
Falcon and Seller shall be required prior to the
effectiveness of any such assignment. Each assignee of a
Financial Institution must (i) have a short-term debt
rating of A-1 or better by Standard & Poor's Ratings
Group and P-1 by ▇▇▇▇▇'▇ Investor Service, Inc. and (ii)
agree to deliver to the Agent, promptly following any
request therefor by the Agent or Falcon, an
enforceability opinion in form and substance satisfactory
to the Agent and Falcon. Upon delivery of the executed
Assignment Agreement to the Agent, such selling Financial
Institution shall be released from its obligations
hereunder to the extent of such assignment. Thereafter
the Purchasing Financial Institution shall for all
purposes be a Financial Institution party to this
Agreement and shall have all the rights and obligations
of a Financial Institution under this Agreement to the
same extent as if it were an
original party hereto and no further consent or action
by Seller, the Purchasers or the Agent shall be required.
(c) Each of the Financial Institutions agrees
that in the event that it shall cease to have a short-term
debt rating of A-1 or better by Standard & Poor's Ratings
Group and P-1 by ▇▇▇▇▇'▇ Investor Service, Inc. (an
"Affected Financial Institution"), such Affected
Financial Institution shall be obliged, at the request
of Falcon or the Agent, to assign all of its rights and
obligations hereunder to (x) another Financial
Institution or (y) another funding entity nominated by
the Agent and acceptable to Falcon, and willing to
participate in this Agreement through the Liquidity
Termination Date in the place of such Affected
Financial Institution; provided that the Affected
Financial Institution receives payment in full,
pursuant to an Assignment Agreement, of an amount equal
to such Financial Institution's Pro Rata Share of the
Aggregate Capital and Yield owing to the Financial
Institutions and all accrued but unpaid fees and other
costs and expenses payable in respect of its Pro Rata
Share of the Purchaser Interests of the Financial
Institutions.
Section 12.2 Participations. Any Financial
Institution may, in the ordinary course of its business
at any time sell to one or more Persons (each a
"Participant") participating interests in its Pro Rata
Share of the Purchaser Interests of the Financial
Institutions, its obligation to pay Falcon its
Acquisition Amounts or any other interest of such
Financial Institution hereunder. Notwithstanding any
such sale by a Financial Institution of a participating
interest to a Participant, such Financial Institution's
rights and obligations under this Agreement shall
remain unchanged, such Financial Institution shall
remain solely responsible for the performance of its
obligations hereunder, and Seller, Falcon and the Agent
shall continue to deal solely and directly with such
Financial Institution in connection with such Financial
Institution's rights and obligations under this
Agreement. Each Financial Institution agrees that any
agreement between such Financial Institution and any
such Participant in respect of such participating
interest shall not restrict such Financial
Institution's right to agree to any amendment,
supplement, waiver or modification to this Agreement,
except for any amendment, supplement, waiver or
modification described in Section 14.1(b)(i).
ARTICLE XIII
LIQUIDITY FACILITY
SECTION 13.1 Transfer to Financial Institutions.
Each Financial Institution hereby agrees, subject to
Section 13.4, that immediately upon written notice from
Falcon delivered on or prior to the Liquidity
Termination Date, it shall acquire by assignment from
Falcon, without recourse or warranty, its Pro Rata
Share of one or more of the Purchaser Interests of
Falcon as specified by Falcon. Each such assignment by
Falcon shall be made pro rata among all of the
Financial Institutions, except for pro rata assignments
to one or more Terminating Financial Institutions
pursuant to Section 13.6. Each such Financial
Institution shall, no later than 1:00 p.m. (Chicago
time) on the date of such assignment, pay in
immediately available funds (unless another form of
payment is otherwise agreed between Falcon and any
Financial Institution) to the Agent at an account
designated by the Agent, for the benefit of Falcon, its
Acquisition Amount. Unless a Financial Institution has
notified the Agent that it does not intend to pay its
Acquisition Amount, the Agent may assume that such
payment has been made and may, but
shall not be obligated to, make the amount of such
payment available to Falcon in reliance upon such
assumption. Falcon hereby sells and assigns to the
Agent for the ratable benefit of the Financial
Institutions, and the Agent hereby purchases and
assumes from Falcon, effective upon the receipt by
Falcon of the Falcon Transfer Price, the Purchaser
Interests of Falcon which are the subject of any
transfer pursuant to this Article XIII.
Section 13.2 Transfer Price Reduction Yield.
If the Adjusted Funded Amount is included in the
calculation of the Falcon Transfer Price for any
Purchaser Interest, each Financial Institution agrees
that the Agent shall pay to Falcon the Reduction
Percentage of any Yield received by the Agent with
respect to such Purchaser Interest.
Section 13.3 Payments to Falcon. In consideration
for the reduction of the Falcon Transfer Prices by the
Falcon Transfer Price Reductions, effective only at
such time as the aggregate amount of the Capital of the
Purchaser Interests of the Financial Institutions
equals the Falcon Residual, each Financial Institution
hereby agrees that the Agent shall not distribute to
the Financial Institutions and shall immediately remit
to Falcon any Yield, Collections or other payments
received by it to be applied pursuant to the terms
hereof or otherwise to reduce the Capital of the
Purchaser Interests of the Financial Institutions.
Section 13.4 Limitation on Commitment to Purchase
from Falcon. Notwithstanding anything to the contrary
in this Agreement, no Financial Institution shall have
any obligation to purchase any Purchaser Interest from
Falcon, pursuant to Section 13.1 or otherwise, if:
(i) Falcon shall have voluntarily commenced
any proceeding or filed any petition under any bankruptcy,
insolvency or similar law seeking the dissolution,
liquidation or reorganization of Falcon or taken any
corporate action for the purpose of effectuating any of
the foregoing; or
(ii) involuntary proceedings or an involuntary
petition shall have been commenced or filed against Falcon
by any Person under any bankruptcy, insolvency or similar
law seeking the dissolution, liquidation or reorganization
of Falcon and such proceeding or petition shall have not
been dismissed.
Section 13.5 Defaulting Financial Institutions.
If one or more Financial Institutions defaults in its
obligation to pay its Acquisition Amount pursuant to
Section 13.1 (each such Financial Institution shall be
called a "Defaulting Financial Institution" and the
aggregate amount of such defaulted obligations being
herein called the "Falcon Transfer Price Deficit"),
then upon notice from the Agent, each Financial
Institution other than the Defaulting Financial
Institutions (a "Non-Defaulting Financial Institution")
shall promptly pay to the Agent, in immediately
available funds, an amount equal to the lesser of (x)
such Non-Defaulting Financial Institution's
proportionate share (based upon the relative
Commitments of the Non-Defaulting Financial
Institutions, after excluding the Commitment of any
Approved Unconditional Liquidity Providers) of the
Falcon Transfer Price Deficit and (y) the unused
portion of such Non-Defaulting Financial Institution's
Commitment; provided, however, that if an Approved
Unconditional Liquidity Provider is the Defaulting
Financial Institution, the Non-Defaulting Financial
Institutions shall have no obligation to pay any amount
to the Agent pursuant to this Section 13.5 as a result
of a default by such Approved Unconditional Liquidity
Provider;
provided, further, that in no event shall any Approved
Unconditional Liquidity Provider be required to make
any payment as a Non-Defaulting Financial Institution
pursuant to this Section 13.5. A Defaulting Financial
Institution shall forthwith upon demand pay to the
Agent for the account of the Non-Defaulting Financial
Institutions all amounts paid by each Non-Defaulting
Financial Institution on behalf of such Defaulting
Financial Institution, together with interest thereon,
for each day from the date a payment was made by a Non-
Defaulting Financial Institution until the date such
Non-Defaulting Financial Institution has been paid such
amounts in full, at a rate per annum equal to the
Federal Funds Effective Rate plus two percent (2%). In
addition, without prejudice to any other rights that
Falcon may have under applicable law, each Defaulting
Financial Institution shall pay to Falcon forthwith upon
demand, the difference between such Defaulting Financial
Institution's unpaid Acquisition Amount and the amount
paid with respect thereto by the Non-Defaulting
Financial Institutions, together with interest thereon,
for each day from the date of the Agent's request for
such Defaulting Financial Institution's Acquisition
Amount pursuant to Section 13.1 until the date the
requisite amount is paid to Falcon in full, at a rate
per annum equal to the Federal Funds Effective Rate
plus two percent (2%).
Section 13.6 Terminating Financial Institutions.
(a) Each Financial Institution hereby agrees
to deliver written notice to the Agent not more than 30
Business Days and not less than 5 Business Days prior
to the Liquidity Termination Date indicating whether
such Financial Institution intends to renew its
Commitment hereunder. If any Financial Institution
fails to deliver such notice on or prior to the date
that is 5 Business Days prior to the Liquidity
Termination Date, such Financial Institution will be
deemed to have declined to renew its Commitment (each
Financial Institution which has declined or has been
deemed to have declined to renew its Commitment
hereunder, a "Non-Renewing Financial Institution").
The Agent shall promptly notify Falcon and Seller of
each Non-Renewing Financial Institution and Falcon, in
its sole discretion, may (A) to the extent of
Commitment Availability, declare that such Non-Renewing
Financial Institution's Commitment shall, to such
extent, automatically terminate on a date specified by
Falcon on or before the Liquidity Termination Date or
(B) upon one (1) Business Days' notice to such Non-
Renewing Financial Institution assign to such Non-
Renewing Financial Institution on a date specified by
Falcon its Pro Rata Share of the aggregate Purchaser
Interests then held by Falcon, subject to, and in
accordance with, Section 13.1. In addition, Falcon
may, in its sole discretion, at any time (x) to the
extent of Commitment Availability, declare that any
Affected Financial Institution's Commitment shall
automatically terminate on a date specified by Falcon
or (y) assign to any Affected Financial Institution on
a date specified by Falcon its Pro Rata Share of the
aggregate Purchaser Interests then held by Falcon,
subject to, and in accordance with, Section 13.1 (each
Affected Financial Institution or each Non-Renewing
Financial Institution is hereinafter referred to as a
"Terminating Financial Institution"). The parties
hereto expressly acknowledge that any declaration of
the termination of any Commitment, any assignment
pursuant to this Section 13.6 and the order of priority
of any such termination or assignment among Terminating
Financial Institutions shall be made by Falcon in its
sole and absolute discretion.
(b) Upon any assignment to a Terminating
Financial Institution as provided in this Section 13.6,
any remaining Commitment of such Terminating Financial
Institution shall automatically terminate. Upon
reduction to zero of the Capital of all of the
Purchaser Interests of a Terminating Financial
Institution (after application of Collections thereto
pursuant to Sections
2.2 and 2.3) all rights and obligations of such
Terminating Financial Institution hereunder shall be
terminated and such Terminating Financial Institution
shall no longer be a "Financial Institution" hereunder;
provided, however, that the provisions of Article X
shall continue in effect for its benefit with respect
to Purchaser Interests held by such Terminating
Financial Institution prior to its termination as a
Financial Institution.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1 Waivers and Amendments.
(a) No failure or delay on the part of the
Agent or any Purchaser in exercising any power, right or
remedy under this Agreement shall operate as a waiver
thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other further
exercise thereof or the exercise of any other power,
right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any
rights or remedies provided by law. Any waiver of this
Agreement shall be effective only in the specific
instance and for the specific purpose for which given.
(b) No provision of this Agreement may be
amended, supplemented, modified or waived except in
writing in accordance with the provisions of this Section
14.1(b). Falcon, Seller and the Agent, at the direction
(or with the consent) of the Required Financial
Institutions, may enter into written modifications or
waivers of any provisions of this Agreement, provided,
however, that no such modification or waiver shall:
(i) without the consent of each affected
Purchaser, (A) extend the Liquidity Termination Date or
the date of any payment or deposit of Collections by
Seller or the Servicer, (B) reduce the rate or extend
the time of payment of Yield or any CP Costs (or any
component of Yield or CP Costs), (C) reduce any fee
payable to the Agent for the benefit of the Purchasers,
(D) except pursuant to Article XII hereof, change the
amount of the Capital of any Purchaser, any Financial
Institution's Pro Rata Share (except pursuant to
Sections 13.1 or 13.5) or any Financial Institution's
Commitment, (E) amend, modify or waive any provision of
the definition of Required Financial Institutions or
this Section 14.1(b), (F) consent to or permit the
assignment or transfer by Seller of any of its rights
and obligations under this Agreement, (G) change the
definition of "Aggregate Reserve", "Concentration
Limit", "Days Collections Outstanding", "Default
Ratio", "Delinquency Ratio", "Dilution Horizon Ratio",
"Dilution Ratio", "Dilution Reserve", "Dilution
Reserve Ratio", "Dilution Trigger Ratio", "Eligible
Receivable", "Loss Reserve", "Net Receivables Balance",
"Run Off Ratio", or "Yield/Servicing Reserve" or (H)
amend or modify any defined term (or any defined term
used directly or indirectly in such defined term) used
in clauses (A) through (G) above in a manner that would
circumvent the intention of the restrictions set forth
in such clauses; or
(ii) without the written consent of the then
Agent, amend, modify or waive any provision of this
Agreement if the effect thereof is to affect the rights
or duties of such Agent.
Notwithstanding the foregoing, (i) without the consent
of the Financial Institutions, but with the consent of
Seller, the Agent may amend this Agreement solely to
add additional Persons as Financial Institutions
hereunder and (ii) the Agent, the Required Financial
Institutions and Falcon upon prior written notice to
Seller may enter into amendments to modify any of the
terms or provisions of Article XI, Article XII, Section
14.13 or any other provision of this Agreement without
the consent of Seller, provided that such amendment has
no negative impact upon Seller. Any modification or
waiver made in accordance with this Section 14.1 shall
apply to each of the Purchasers equally and shall be
binding upon Seller, the Purchasers and the Agent.
Section 14.2 Notices. Except as provided in this
Section 14.2, all communications and notices provided
for hereunder shall be in writing (including bank wire,
telecopy or electronic facsimile transmission or
similar writing) and shall be given to the other
parties hereto at their respective addresses or
telecopy numbers set forth on the signature pages
hereof or at such other address or telecopy number as
such Person may hereafter specify for the purpose of
notice to each of the other parties hereto. Each such
notice or other communication shall be effective when
received at the address specified in this Section 14.2.
Seller hereby authorizes the Agent to effect purchases
and Tranche Period and Discount Rate selections based
on telephonic notices made by any Person whom the Agent
in good faith believes to be authorized by and acting
on behalf of Seller. Upon request by the Agent, Seller
agrees to deliver promptly to the Agent a written
confirmation of each telephonic notice signed by an
Authorized Officer of Seller; provided, however, the
absence of such confirmation shall not affect the
validity of such notice. If the written confirmation
differs from the telephonic notice, the written
confirmation shall govern absent manifest error.
Section 14.3 Ratable Payments. If any Purchaser,
whether by setoff or otherwise, has payment made to it
with respect to any portion of the Aggregate Unpaids
owing to such Purchaser (other than payments received
pursuant to Section 10.2 or 10.3) in a greater
proportion than that received by any other Purchaser
entitled to receive a ratable share of such Aggregate
Unpaids, such Purchaser agrees, promptly upon demand,
to purchase for cash without recourse or warranty a
portion of such Aggregate Unpaids held by the other
Purchasers so that after such purchase each Purchaser
will hold its ratable proportion of such Aggregate
Unpaids; provided that if all or any portion of such
excess amount is thereafter recovered from such
Purchaser, such purchase shall be rescinded and the
purchase price restored to the extent of such recovery,
but without interest.
Section 14.4 Protection of Ownership Interests of
the Purchasers.
(a) Seller agrees that from time to time, at
its expense, it will promptly execute and deliver all
instruments and documents, and take all actions, that
may be necessary or desirable, or that the Agent may
request, to perfect, protect or more fully evidence the
Purchaser Interests, or to enable the Agent or the
Purchasers to exercise and enforce their rights and
remedies hereunder. At any time, the Agent may, or the
Agent may direct Seller or the Servicer to, notify the
Obligors of Receivables, at Seller's expense, of the
ownership or security interests of the Purchasers under
this Agreement and may also direct, after the
occurrence of an Amortization Event that has not been
waived in writing in accordance with the terms hereof,
that payments of all amounts due or that become due
under any or all Receivables be made directly to
the Agent or its designee. Seller or the Servicer (as
applicable) shall, at any Purchaser's request, withhold
the identity of such Purchaser in any such notification.
(b) If any Seller Party fails to perform any
of its obligations hereunder, the Agent or any Purchaser
may (but shall not be required to) perform, or cause
performance of, such obligations, and the Agent's or
such Purchaser's costs and expenses incurred in
connection therewith shall be payable by Seller as
provided in Section 10.3. Each Seller Party
irrevocably authorizes the Agent at any time and from
time to time in the sole discretion of the Agent, and
appoints the Agent as its attorney-in-fact, to act on
behalf of such Seller Party (i) to execute on behalf of
Seller as debtor and to file financing statements
necessary or desirable in the Agent's sole discretion
to perfect and to maintain the perfection and priority
of the interest of the Purchasers in the Receivables
and (ii) to file a carbon, photographic or other
reproduction of this Agreement or any financing
statement with respect to the Receivables as a
financing statement in such offices as the Agent in its
sole discretion deems necessary or desirable to perfect
and to maintain the perfection and priority of the
interests of the Purchasers in the Receivables. This
appointment is coupled with an interest and is
irrevocable.
Section 14.5 Confidentiality.
(a) Each Seller Party and each Purchaser
shall maintain and shall cause each of its employees
and officers to maintain the confidentiality of this
Agreement and the other confidential or proprietary
information with respect to the Agent and Falcon and
their respective businesses obtained by it or them in
connection with the structuring, negotiating and
execution of the transactions contemplated herein,
except that such Seller Party and such Purchaser and
its officers and employees may disclose such
information to such Seller Party's and such Purchaser's
external accountants and attorneys and as required by
any applicable law or order of any judicial or
administrative proceeding and to the "Lenders" and the
"Administrative Agent" under the SSI Loan Agreement to
the extent required pursuant thereto (but excluding, in
any event, the Fee Letter).
(b) Anything herein to the contrary
notwithstanding, each Seller Party hereby consents to
the disclosure of any nonpublic information with respect
to it (i) to the Agent, the Financial Institutions or
Falcon by each other, (ii) by the Agent or the Purchasers
to any prospective or actual assignee or participant of
any of them and (iii) by the Agent to any rating agency,
Commercial Paper dealer or provider of a surety,
guaranty or credit or liquidity enhancement to Falcon
or any entity organized for the purpose of purchasing,
or making loans secured by, financial assets for which
Bank One acts as the administrative agent and to any
officers, directors, employees, outside accountants and
attorneys of any of the foregoing. In addition, the
Purchasers and the Agent may disclose any such
nonpublic information pursuant to any law, rule,
regulation, direction, request or order of any
judicial, administrative or regulatory authority or
proceedings (whether or not having the force or effect
of law).
Section 14.6 Bankruptcy Petition. Seller, the
Servicer, the Agent and each Financial Institution
hereby covenants and agrees that, prior to the date
that is one year and one day after the payment in full
of all outstanding senior indebtedness of Falcon or any
Unconditional Liquidity Provider, it will not institute
against, or join any other Person in instituting
against, Falcon or any such entity any bankruptcy,
reorganization, arrangement, insolvency or liquidation
proceedings or other similar proceeding under the laws
of the United States or any state of the United States.
Section 14.7 Limitation of Liability. Except
with respect to any claim arising out of the willful
misconduct or gross negligence of Falcon, the Agent or
any Financial Institution, no claim may be made by any
Seller Party or any other Person against Falcon, the
Agent or any Financial Institution or their respective
Affiliates, directors, officers, employees, attorneys
or agents for any special, indirect, consequential or
punitive damages in respect of any claim for breach of
contract or any other theory of liability arising out
of or related to the transactions contemplated by this
Agreement, or any act, omission or event occurring in
connection therewith; and each Seller Party hereby
waives, releases, and agrees not to ▇▇▇ upon any claim
for any such damages, whether or not accrued and
whether or not known or suspected to exist in its
favor.
Section 14.8 CHOICE OF LAW. THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
Section 14.9 CONSENT TO JURISDICTION. EACH SELLER
PARTY HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK
COURT SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR ANY DOCUMENT EXECUTED BY SUCH PERSON PURSUANT TO
THIS AGREEMENT AND EACH SELLER PARTY HEREBY IRREVOCABLY
AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW
OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT
SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN
SHALL LIMIT THE RIGHT OF THE AGENT OR ANY PURCHASER TO
BRING PROCEEDINGS AGAINST ANY SELLER PARTY IN THE
COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL
PROCEEDING BY ANY SELLER PARTY AGAINST THE AGENT OR ANY
PURCHASER OR ANY AFFILIATE OF THE AGENT OR ANY
PURCHASER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED
WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED BY SUCH
SELLER PARTY PURSUANT TO THIS AGREEMENT SHALL BE
BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
Section 14.10 WAIVER OF JURY TRIAL. EACH PARTY
HERETO HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
AGREEMENT, ANY DOCUMENT EXECUTED BY ANY SELLER PARTY
PURSUANT TO THIS AGREEMENT OR THE RELATIONSHIP
ESTABLISHED HEREUNDER OR THEREUNDER.
Section 14.11 Integration; Binding Effect; Survival
of Terms.
(a) This Agreement and each other Transaction
Document contain the final and complete integration of all
prior expressions by the parties hereto with respect to the
subject matter hereof and shall constitute the entire
agreement among the parties hereto with respect to the
subject matter hereof superseding all prior oral or
written understandings.
(b) This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their
respective successors and permitted assigns (including
any trustee in bankruptcy). This Agreement shall create
and constitute the continuing obligations of the parties
hereto in accordance with its terms and shall remain in
full force and effect until terminated in accordance
with its terms; provided, however, that the rights and
remedies with respect to (i) any breach of any
representation and warranty made by any Seller Party
pursuant to Article V, (ii) the indemnification and
payment provisions of Article X, and Sections 14.5 and
14.6 shall be continuing and shall survive any
termination of this Agreement.
Section 14.12 Counterparts; Severability; Section
References. 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. Any provisions of this Agreement which
are prohibited or unenforceable in any jurisdiction
shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any
jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
Unless otherwise expressly indicated, all references
herein to "Article," "Section," "Schedule" or "Exhibit"
shall mean articles and sections of, and schedules and
exhibits to, this Agreement.
Section 14.13 Bank One Roles. Each of the Financial
Institutions acknowledges that Bank One acts, or may in
the future act, (i) as administrative agent for Falcon
or any Financial Institution, (ii) as issuing and
paying agent for the Commercial Paper, (iii) to provide
credit or liquidity enhancement for the timely payment
for the Commercial Paper and (iv) to provide other
services from time to time for Falcon or any Financial
Institution (collectively, the "Bank One Roles").
Without limiting the generality of this Section 14.13,
each Financial Institution hereby acknowledges and
consents to any and all Bank One Roles and agrees that
in connection with any Bank One Role, Bank One may
take, or refrain from taking, any action that it, in
its discretion, deems appropriate, including, without
limitation, in its role as administrative agent for
Falcon, and the giving of notice to the Agent of a
mandatory purchase pursuant to Section 13.1.
Section 14.14 Characterization.
(a) It is the intention of the parties hereto
that each purchase hereunder shall constitute and be
treated as an absolute and irrevocable sale, which
purchase shall provide the applicable Purchaser with the
full benefits of ownership of the applicable Purchaser
Interest. Except as specifically provided in this
Agreement, each sale of a Purchaser Interest hereunder
is made without recourse to Seller; provided, however,
that (i) Seller shall be liable to each Purchaser and
the Agent for all representations, warranties,
covenants and indemnities made by Seller pursuant to
the terms of this Agreement, and (ii) such sale does
not constitute and is not intended to result in an
assumption by any Purchaser or the Agent or any
assignee thereof of any
obligation of Seller or Originator or any other person
arising in connection with the Receivables, the Related
Security, or the related Contracts, or any other
obligations of Seller or Originator.
(b) In addition to any ownership interest which
the Agent may from time to time acquire pursuant hereto,
Seller hereby grants to the Agent for the ratable
benefit of the Purchasers a valid and perfected
security interest in all of Seller's right, title and
interest in, to and under the following assets now
existing or hereafter arising: all Receivables, the
Collections, each Lock-Box, each Collection Account,
all Related Security, all other rights and payments
relating to such Receivables, and all proceeds of any
of the foregoing, and all other assets in which the
Agent has acquired, may hereafter acquire and/or
purports to have acquired an interest hereunder, prior
to all other liens on and security interests therein to
secure the prompt and complete payment of the Aggregate
Unpaids. The Agent and the Purchasers shall have, in
addition to the rights and remedies that they may have
under this Agreement, all other rights and remedies
provided to a secured creditor under the UCC and other
applicable law, which rights and remedies shall be
cumulative.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed and delivered by their
duly authorized officers as of the date hereof.
NEW SCHOOL, INC., as Seller
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
SCHOOL SPECIALTY, INC.,
as Servicer
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: CFO
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
FAX: ▇▇▇-▇▇▇-▇▇▇▇
FALCON ASSET SECURITIZATION CORPORATION
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Authorized Signatory
Address: c/o Bank One, NA (Main Office Chicago),
as Agent
Asset Backed Finance
Suite IL1-0079, 1-19
1 Bank ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
FAX: (▇▇▇) ▇▇▇-▇▇▇▇
BANK ONE, NA (MAIN OFFICE CHICAGO), as a
Financial Institution and as Agent
By: /s/ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
Address: Bank One, NA (Main Office Chicago)
Asset Backed Finance
Suite IL1-0596, 1-21
1 Bank ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
EXHIBIT I
DEFINITIONS
As used in this Agreement, the following terms
shall have the following meanings (such meanings to be
equally applicable to both the singular and plural
forms of the terms defined):
"Accrual Period" means each calendar month,
provided that the initial Accrual Period hereunder
means the period from (and including) the date of the
initial purchase hereunder to (and including) the last
day of the calendar month thereafter.
"Acquired Unit" means any division, unit or
business which is merged, consolidated, amalgamated
with, or acquired by, the Originator or any Original
Seller pursuant to an Acquisition; provided, however,
that no such division, unit or business shall be an
Acquired Unit if such division, unit or business (i) is
merged, consolidated, amalgamated with or acquired by
the Originator, (ii) shall have reported gross revenues
of less than $60,000,000 in its most recently ended
fiscal year at the time of such merger, consolidation,
amalgamation or acquisition, (iii) is engaged in a
business similar to that of the Originator or any
Original Seller as of the date hereof, and (iv) is
included in the Originator's "SFD" reporting system.
"Acquisition" means any merger, consolidation or
amalgamation or other acquisition of assets of any
other Person by the Originator or any Original Seller.
"Acquisition Amount" means, on the date of any
purchase from Falcon of one or more Purchaser Interests
pursuant to Section 13.1, (a) with respect to each
Financial Institution (other than any Unconditional
Liquidity Provider), the lesser of (i) such Financial
Institution's Pro Rata Share of the sum of (A) the
lesser of (1) the Adjusted Liquidity Price of each such
Purchaser Interest and (2) the Capital of each such
Purchaser Interest and (B) all accrued and unpaid CP
Costs for each such Purchaser Interest and (ii) such
Financial Institution's unused Commitment and (b) with
respect to each Unconditional Liquidity Provider, the
lesser of (x) such Unconditional Liquidity Provider's
Pro Rata Share of the sum of (1) the Capital of each
such Purchaser Interest and (2) all accrued and unpaid
CP Costs for each such Purchaser Interest and (y) such
Unconditional Liquidity Provider's unused Commitment.
"Acquisition Receivable" means any indebtedness
owed to an Acquired Unit, or which arises in connection
with the business operations of an Acquired Unit
following the date of the applicable Acquisition, which
constitutes a "Receivable". Such Receivables shall
remain "Acquisition Receivables" until the date on
which the Agent notifies the Originator that such
Receivables shall no longer constitute "Acquisition
Receivables".
"Adjusted Funded Amount" means, in determining the
Falcon Transfer Price for any Purchaser Interest, an
amount equal to the sum of (a) the Adjusted Liquidity
Price of each such Purchaser Interest and (b) an amount
equal to each Unconditional Liquidity Provider's Pro
Rata Share of the excess, if any, of (i) the Capital of
each such Purchaser Interest over (ii) the Adjusted
Liquidity Price of each such Purchaser Interest.
"Adjusted Liquidity Price" means an amount equal to:
RI*[DC+[NDR/1.05]]
where:
RI = the undivided percentage
interest evidenced by such Purchaser Interest.
DC = the Deemed Collections.
NDR = the Outstanding Balance of all
Receivables as to which any payment, or part thereof,
has not remained unpaid for 121 days or more from the
original invoice date for such payment.
Each of the foregoing shall be determined from the most
recent Monthly Report or Semi-Monthly Report received
from the Servicer.
"Adverse Claim" means a lien, security interest,
charge or encumbrance, or other similar right or claim
in, of or on any Person's assets or properties in favor
of any other Person.
"Affected Financial Institution" has the meaning
specified in Section 12.1(c).
"Affiliate" means, with respect to any Person, any
other Person directly or indirectly controlling,
controlled by, or under direct or indirect common
control with, such Person or any Subsidiary of such
Person. A Person shall be deemed to control another
Person if the controlling Person owns 25% or more of
any class of voting securities of the controlled Person
or possesses, directly or indirectly, the power to
direct or cause the direction of the management or
policies of the controlled Person, whether through
ownership of stock, by contract or otherwise.
"Agent" has the meaning set forth in the preamble
to this Agreement.
"Aggregate Capital" means, on any date of
determination, the aggregate amount of Capital of all
Purchaser Interests outstanding on such date.
"Aggregate Reduction" has the meaning specified in
Section 1.3.
"Aggregate Reserves" means, on any date of
determination, the sum of the Loss Reserve, the
Yield/Servicing Reserve and the Dilution Reserve.
"Aggregate Unpaids" means, at any time, an amount
equal to the sum of all Aggregate Capital and all other
unpaid Obligations (whether due or accrued) at such
time.
"Agreement" means this Receivables Purchase
Agreement, as it may be amended or modified and in
effect from time to time.
"Allowance for Doubtful Accounts" has the meaning
specified for such term under GAAP.
"Amortization Date" means the earliest to occur of
(i) the day on which the condition precedent set forth
in Section 6.2(iii) is not satisfied, (ii) the Business
Day immediately prior to the occurrence of an
Amortization Event set forth in Section 9.1(d)(ii),
(iii) the Business Day specified in a written notice
from the Agent following the occurrence of any other
Amortization Event, and (iv) the date which is thirty
(30) Business Days after the Agent's receipt of written
notice from Seller that it wishes to terminate the
facility evidenced by this Agreement.
"Amortization Event" has the meaning specified in
Article IX.
"Approved Unconditional Liquidity Provider" means
an Unconditional Liquidity Provider which has received
approval from Standard & Poor's Ratings Group and
▇▇▇▇▇'▇ Investors Service, Inc. to be relieved from any
obligation to pay amounts as a Non-Defaulting Financial
Institution pursuant to Section 13.5 hereof.
"Assignment Agreement" has the meaning set forth
in Section 12.1(b).
"Authorized Officer" means, with respect to any
Person, its president, corporate controller, treasurer
or chief financial officer.
"Bank One" means Bank One, NA (Main Office
Chicago) in its individual capacity and its successors.
"Base Rate" means a rate per annum equal to the
corporate base rate, prime rate or base rate of
interest, as applicable, announced by Bank One or Bank
One Corporation from time to time, changing when and as
such rate changes.
"Broken Funding Costs" means for any Purchaser
Interest which: (i) has its Capital reduced without
compliance by Seller with the notice requirements
hereunder or (ii) does not become subject to an
Aggregate Reduction following the delivery of any
Reduction Notice or (iii) is assigned under Article
XIII or terminated prior to the date on which it was
originally scheduled to end; an amount equal to the
excess, if any, of (A) the CP Costs or Yield (as
applicable) that would have accrued during the
remainder of the Tranche Periods or the tranche periods
for Commercial Paper determined by the Agent to relate
to such Purchaser Interest (as applicable) subsequent
to the date of such reduction, assignment or
termination (or in respect of clause (ii) above, the
date such Aggregate Reduction was designated to occur
pursuant to the Reduction Notice) of the Capital of
such Purchaser Interest if such reduction, assignment
or termination had not occurred or such Reduction
Notice had not been delivered, over (B) the sum of (x)
to the extent all or a portion of such Capital is
allocated to another Purchaser Interest, the amount of
CP Costs or Yield actually accrued during the remainder
of such period on such Capital for the new Purchaser
Interest, and (y) to the extent such Capital is not
allocated to another Purchaser Interest, the income, if
any, actually received during the remainder of such
period by the holder of such Purchaser Interest from
investing the portion of such Capital not so allocated;
provided, that such portion of Capital shall be
invested within one (1) Business Day after receipt
thereof. In the event that the amount referred to in
clause (B) exceeds the amount referred to in clause
(A), the relevant Purchaser or Purchasers agree to pay
to Seller the amount
of such excess promptly upon demand. All Broken Funding
Costs shall be due and payable hereunder upon demand.
"Business Day" means any day on which banks are
not authorized or required to close in New York, New
York or Chicago, Illinois and The Depository Trust
Company of New York is open for business, and, if the
applicable Business Day relates to any computation or
payment to be made with respect to the LIBO Rate, any
day on which dealings in dollar deposits are carried on
in the London interbank market.
"Capital" of any Purchaser Interest means, at any
time, (A) the Purchase Price of such Purchaser
Interest, minus (B) the sum of the aggregate amount of
Collections and other payments received by the Agent
which in each case are applied to reduce such Capital
in accordance with the terms and conditions of this
Agreement; provided that such Capital shall be restored
(in accordance with Section 2.5) in the amount of any
Collections or other payments so received and applied
if at any time the distribution of such Collections or
payments are rescinded, returned or refunded for any
reason.
"Change of Control" means the acquisition by any
Person, or two or more Persons acting in concert, of
beneficial ownership (within the meaning of Rule 13d-3
of the Securities and Exchange Commission under the
Securities Exchange Act of 1934) of 20% or more of the
outstanding shares of voting stock of any Seller Party.
"Charged-Off Receivable" means a Receivable: (i)
as to which the Obligor thereof has taken any action,
or suffered any event to occur, of the type described
in Section 9.1(d) (as if references to Seller Party
therein refer to such Obligor); (ii) as to which the
Obligor thereof, if a natural person, is deceased,
(iii) which, consistent with the Credit and Collection
Policy, would be written off Seller's books as
uncollectible, (iv) which has been identified by Seller
as uncollectible or (v) as to which any payment, or
part thereof, remains unpaid for 121 days or more from
the original invoice date for such payment.
"Childcraft Receivables" means all Receivables for
which the Original Seller is Childcraft Education
Corp., a New York corporation.
"Collection Account" means each concentration
account, depositary account, lock-box account or
similar account in which any Collections are collected
or deposited and which is listed on Exhibit IV.
"Collection Account Agreement" means an agreement
substantially in the form of Exhibit VI among
Originator, Seller, the Agent, a Collection Bank and an
Original Seller, if applicable.
"Collection Bank" means, at any time, any of the
banks holding one or more Collection Accounts.
"Collection Notice" means a notice, in
substantially the form of Annex A to Exhibit VI, from
the Agent to a Collection Bank.
"Collection Period" means, for any Seller Party,
each fiscal month of such Seller Party.
"Collections" means, with respect to any
Receivable, all cash collections and other cash
proceeds in respect of such Receivable, including,
without limitation, all yield, Finance Charges or other
related amounts accruing in respect thereof and all
cash proceeds of Related Security with respect to such
Receivable.
"Commercial Paper" means promissory notes of
Falcon issued by Falcon in the commercial paper market.
"Commitment" means, for each Financial
Institution, the commitment of such Financial
Institution to purchase Purchaser Interests from (i)
Seller and (ii) Falcon, in an amount not to exceed (i)
in the aggregate, the amount set forth opposite such
Financial Institution's name on Schedule A to this
Agreement, as such amount may be modified in accordance
with the terms hereof (including, without limitation,
any termination of Commitments pursuant to Section 13.6
hereof) and (ii) with respect to any individual
purchase hereunder, its Pro Rata Share of the Purchase
Price therefor.
"Commitment Availability" means at any time the
positive difference (if any) between (a) an amount
equal to the aggregate amount of the Commitments minus
an amount equal to 2% of such aggregate Commitments at
such time minus (b) the Aggregate Capital at such time.
"Concentration Limit" means, at any time, for any
Obligor, 2% of the Outstanding Balance of all Eligible
Receivables at such time.
"Consolidated Leverage Ratio" shall mean, as of
the last day of any fiscal quarter, the ratio of
Consolidated Funded Debt (as defined in the SSI Loan
Agreement) on such day to Consolidated EBITDA (as
defined in the SSI Loan Agreement) for the period of
four consecutive fiscal quarters ending on such day.
"Contingent Obligation" of a Person means any
agreement, undertaking or arrangement by which such
Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of,
or otherwise becomes or is contingently liable upon,
the obligation or liability of any other Person, or
agrees to maintain the net worth or working capital or
other financial condition of any other Person, or
otherwise assures any creditor of such other Person
against loss, including, without limitation, any
comfort letter, operating agreement, take-or-pay
contract or application for a letter of credit.
"Contract" means, with respect to any Receivable,
any and all instruments, agreements, invoices or other
writings pursuant to which such Receivable arises or
which evidences such Receivable.
"CP Costs" means, for each day, the sum of (i)
discount or yield accrued on Pooled Commercial Paper on
such day, plus (ii) any and all accrued commissions in
respect of placement agents and Commercial Paper
dealers, and issuing and paying agent fees incurred, in
respect of such Pooled Commercial Paper for such day,
plus (iii) other costs associated with funding small or
odd-lot amounts with respect to all receivable purchase
facilities which are funded by Pooled Commercial Paper
for such day, minus (iv) any accrual of income net of
expenses received on such day from investment of
collections received under all receivable purchase
facilities funded substantially with Pooled Commercial
Paper, minus (v) any payment
received on such day net of expenses in respect of
Broken Funding Costs related to the prepayment of any
Purchaser Interest of Falcon pursuant to the terms of
any receivable purchase facilities funded substantially
with Pooled Commercial Paper. In addition to the
foregoing costs, if Seller shall request any Incremental
Purchase during any period of time determined by the
Agent in its sole discretion to result in incrementally
higher CP Costs applicable to such Incremental Purchase
the Agent shall notify Seller of such higher CP Costs
and, absent the cancellation of such Incremental Purchase
by Seller, the Capital associated with any such
Incremental Purchase shall, during such period, be deemed
to be funded by Falcon in a special pool (which may
include capital associated with other receivable purchase
facilities) for purposes of determining such additional
CP Costs applicable only to such special pool and charged
each day during such period against such Capital.
"Credit and Collection Policy" means Seller's
credit and collection policies and practices relating
to Contracts and Receivables existing on the date
hereof and summarized in Exhibit VIII hereto, as
modified from time to time in accordance with this
Agreement.
"Days Collections Outstanding" means, for any
Collection Period, the product, expressed in days, of
(i) the aggregate Outstanding Balance of all
Receivables on the first day of such Collection Period,
divided by (ii) the aggregate amount of all Collections
received during such Collection Period, times (iii) 30
days.
"Deemed Collections" means the aggregate of all
amounts Seller shall have been deemed to have received
as a Collection of a Receivable. Seller shall be
deemed to have received a Collection in full of a
Receivable if at any time (i) the Outstanding Balance
of any such Receivable is either (x) reduced as a
result of any defective or rejected goods or services,
any discount or any adjustment or otherwise by Seller
(other than cash Collections on account of the
Receivables) or (y) reduced or canceled as a result of
a setoff in respect of any claim by any Person (whether
such claim arises out of the same or a related
transaction or an unrelated transaction) or (ii) any of
the representations or warranties in Article V are no
longer true with respect to the affected Receivable.
"Default Fee" means with respect to any amount due
and payable by Seller in respect of any Aggregate
Unpaids, an amount equal to interest on any such unpaid
Aggregate Unpaids at a rate per annum equal to 2% above
the Base Rate.
"Default Ratio" means, as at the last day of any
Collection Period, a percentage equal to (i) the sum of
(A) the aggregate Outstanding Balance of all Defaulted
Receivables as of such day plus (B) the aggregate
Outstanding Balance of all Receivables (other than
Defaulted Receivables) that became Charged-Off
Receivables during such Collection Period, divided by
(ii) the aggregate Outstanding Balance of all
Receivables as of such day.
"Defaulted Receivable" means a Receivable as to
which any payment, or part thereof, remains unpaid for
121 days or more from the original invoice date for
such payment.
"Defaulting Financial Institution" has the meaning
set forth in Section 13.5.
"Delinquency Ratio" means, at any time, a
percentage equal to (i) the aggregate Outstanding
Balance of all Receivables that were Delinquent
Receivables at such time divided by (ii) the aggregate
Outstanding Balance of all Receivables at such time.
"Delinquent Receivable" means a Receivable as to
which any payment, or part thereof, remains unpaid for
91 days or more but less than 121 days from the
original invoice date for such payment.
"Designated Obligor" means an Obligor indicated by
the Agent to Seller in writing.
"Dilution Horizon Ratio" means, as of any date as
set forth in the most recent Monthly Report, a ratio
computed by dividing (i) the aggregate of all
Receivables generated during the two (2) most recently
ended Collection Periods by (ii) the aggregate
Outstanding Balance of non-Defaulted Receivables as at
the last day of the most recently ended Collection
Period.
"Dilution Ratio" means, for any Collection Period,
a percentage equal to (i) the product of 1.13
multiplied by the aggregate amount of Dilutions with
respect to Traditional Receivables and Childcraft
Receivables during such Collection Period, divided by
(ii) the aggregate Receivables generated during the
Collection Period which immediately preceded such
Collection Period.
"Dilution Reserve" means, on any date, an amount
equal to the product of (i) the greater of (a) 15.0%
and (b) the Dilution Reserve Ratio then in effect times
(ii) the Net Receivables Balance as of the close of
business on the immediately preceding Business Day.
"Dilution Reserve Ratio" means, as of any date, an
amount calculated as follows:
DRR = [(2.0 x ADR) + [(HDR-ADR) x (HDR/ADR)]] x DHR
where:
DRR = the Dilution Reserve Ratio;
ADR = the average of the Dilution
Ratios for the past twelve
Collection Periods;
HDR = the highest average Dilution Ratio
for any two (2) consecutive
Collection Periods during the most
recent twelve months; and
DHR = the Dilution Horizon Ratio.
The Dilution Reserve Ratio shall be calculated monthly
in each Monthly Report and such Dilution Reserve Ratio
shall, absent manifest error, be effective from the
corresponding Settlement Date until the next succeeding
Settlement Date.
"Dilution Trigger Ratio" means, for any Collection
Period, a percentage equal to (i) the aggregate amount
of Dilutions with respect to Traditional Receivables
and Childcraft
Receivables during such Collection Period, divided by
(ii) the aggregate Outstanding Balance of all
Receivables on the first day of such Collection Period.
"Dilutions" means, at any time, the aggregate
amount of reductions or cancellations described in
clause (i) of the definition of "Deemed Collections".
"Discount Rate" means, the LIBO Rate or the Base
Rate, as applicable, with respect to each Purchaser
Interest of the Financial Institutions.
"Eligible Receivable" means, at any time, a
Receivable:
(i) the Obligor of which (a) if a natural
person, is a resident of the United States or, if a
corporation or other business organization, is organized
under the laws of the United States or any political
subdivision thereof and has its chief executive office
in the United States; (b) is not an Affiliate of any of
the parties hereto; (c) is not a Designated Obligor; and
(d) is not a government or a governmental subdivision
or agency, other than a school district,
(ii) which is not a Charged-Off Receivable,
(iii) which by its terms is due and payable
(i) within 30 days of the original invoice date therefor
and has not had its payment terms extended, or (ii)
more than 30 days after the original invoice date,
provided that, the Outstanding Balance of such
Receivable, when added to the Outstanding Balance of
all Receivables which by their terms are due more than
30 days after the original invoice date shall not
exceed 3.0% of the Outstanding Balance of all
Receivables at such time,
(iv) which is an "account" within the meaning
of Section 9-105 of the UCC of all applicable
jurisdictions,
(v) which is denominated and payable only in
United States dollars in the United States,
(vi) which arises under a Contract in
substantially the form of one of the form contracts set
forth on Exhibit IX hereto or otherwise approved by the
Agent in writing, which, together with such Receivable,
is in full force and effect and constitutes the legal,
valid and binding obligation of the related Obligor
enforceable against such Obligor in accordance with its
terms subject to no offset, counterclaim or other defense,
(vii) which arises under a Contract which (A)
does not require the Obligor under such Contract to
consent to the transfer, sale or assignment of the rights
and duties of Originator or any of its assignees under
such Contract and (B) does not contain a confidentiality
provision that purports to restrict the ability of any
Purchaser to exercise its rights under this Agreement,
including, without limitation, its right to review the
Contract,
(viii) which arises under a Contract that
contains an obligation to pay a specified sum of money,
contingent only upon the sale of goods or the provision
of services by Originator,
(ix) which, together with the Contract related
thereto, does not contravene any law, rule or regulation
applicable thereto (including, without limitation, any
law, rule and regulation relating to truth in lending,
fair credit billing, fair credit reporting, equal
credit opportunity, fair debt collection practices and
privacy) and with respect to which no part of the
Contract related thereto is in violation of any such
law, rule or regulation,
(x) which satisfies all applicable requirements
of the Credit and Collection Policy,
(xi) which was generated in the ordinary course
of Originator's business, and is not an Acquisition
Receivable
(xii) which arises solely from the sale of goods
or the provision of services to the related Obligor by
Originator, or an Original Seller and not by any other
Person (in whole or in part),
(xiii) as to which the Agent has not notified
Seller that the Agent has determined that such Receivable
or class of Receivables is not acceptable as an Eligible
Receivable, including, without limitation, because such
Receivable arises under a Contract that is not
acceptable to the Agent,
(xiv) which is not subject to any right of
rescission, set-off, counterclaim, any other defense
(including defenses arising out of violations of usury
laws) of the applicable Obligor against Originator (or
an Original Seller) or any other Adverse Claim, and the
Obligor thereon holds no right as against Originator
(or an Original Seller) to cause Originator (or an
Original Seller) to repurchase the goods or merchandise
the sale of which shall have given rise to such
Receivable (except with respect to sale discounts
effected pursuant to the Contract, or defective goods
returned in accordance with the terms of the Contract),
provided, that that portion of any such Receivable
which is in excess of the amount of such right of
rescission, set-off, counterclaim or defense shall be
an Eligible Receivable,
(xv) as to which Originator has satisfied and
fully performed all obligations on its part with respect
to such Receivable required to be fulfilled by it, and no
further action is required to be performed by any Person
with respect thereto other than payment thereon by the
applicable Obligor, and
(xvi) all right, title and interest to and in
which has been validly transferred by Originator directly
to Seller under and in accordance with the Receivables
Sale Agreement, and Seller has good and marketable
title thereto free and clear of any Adverse Claim.
"ERISA" means the Employee Retirement Income
Security Act of 1974, as amended from time to time.
"Facility Account" means Seller's Account No. __-
_____ at Bank One.
"Facility Termination Date" means the earlier of
(i) the Liquidity Termination Date and (ii) the
Amortization Date.
"Falcon" has the meaning set forth in the preamble
to this Agreement.
"Falcon Residual" means the sum of the Falcon
Transfer Price Reductions.
"Falcon Transfer Price" means, with respect to the
assignment by Falcon of one or more Purchaser Interests
to the Agent for the benefit of one or more of the
Financial Institutions pursuant to Section 13.1, the
sum of (i) the lesser of (a) the Capital of each such
Purchaser Interest and (b) the Adjusted Funded Amount
of each such Purchaser Interest and (ii) all accrued
and unpaid CP Costs for each such Purchaser Interest.
"Falcon Transfer Price Deficit" has the meaning
set forth in Section 13.5.
"Falcon Transfer Price Reduction" means in
connection with the assignment of a Purchaser Interest
by Falcon to the Agent for the benefit of the Financial
Institutions, the excess (if any) of (i) the Capital
of such Purchaser Interest over (ii) the Adjusted
Funded Amount for such Purchaser Interest.
"Federal Bankruptcy Code" means Title 11 of the
United States Code entitled "Bankruptcy," as amended
and any successor statute thereto.
"Federal Funds Effective Rate" means, for any
period, a fluctuating interest rate per annum for each
day during such period equal to (a) the weighted
average of the rates on overnight federal funds
transactions with members of the Federal Reserve System
arranged by federal funds brokers, as published for
such day (or, if such day is not a Business Day, for
the preceding Business Day) by the Federal Reserve Bank
of New York in the Composite Closing Quotations for
U.S. Government Securities; or (b) if such rate is not
so published for any day which is a Business Day, the
average of the quotations at approximately 10:30 a.m.
(Chicago time) for such day on such transactions
received by the Agent from three federal funds brokers
of recognized standing selected by it.
"Fee Letter" means that certain letter agreement
dated as of the date hereof among Seller, Originator
and the Agent, as it may be amended or modified and in
effect from time to time.
"Finance Charges" means, with respect to a
Receivable, any finance, interest, late payment charges
or similar charges owing by an Obligor pursuant to the
related Contract.
"Financial Institutions" has the meaning set forth
in the preamble in this Agreement.
"Funding Agreement" means this Agreement and any
agreement or instrument executed by any Funding Source
with or for the benefit of Falcon.
"Funding Source" means (i) any Financial
Institution or (ii) any insurance company, bank or
other funding entity providing liquidity, credit
enhancement or back-up purchase support or facilities
to Falcon.
"GAAP" means generally accepted accounting
principles in effect in the United States of America as
of the date of this Agreement with such changes therein
as are required or permitted by GAAP.
"Incremental Purchase" means a purchase of one or
more Purchaser Interests which increases the total
outstanding Aggregate Capital hereunder.
"Indebtedness" of a Person means such Person's (i)
obligations for borrowed money, (ii) obligations
representing the deferred purchase price of property or
services (other than accounts payable arising in the
ordinary course of such Person's business payable on
terms customary in the trade), (iii) obligations,
whether or not assumed, secured by liens or payable out
of the proceeds or production from property now or
hereafter owned or acquired by such Person, (iv)
obligations which are evidenced by notes, acceptances,
or other instruments, (v) capitalized lease
obligations, (vi) net liabilities under interest rate
swap, exchange or cap agreements, (vii) Contingent
Obligations and (viii) liabilities in respect of
unfunded vested benefits under plans covered by Title
IV of ERISA.
"Independent Director" shall mean a member of the
Board of Directors of Seller who is not at such time,
and has not been at any time during the preceding five
(5) years, (A) a director, officer, employee or
affiliate of Seller, Originator, or any of their
respective Subsidiaries or Affiliates, or (B) the
beneficial owner (at the time of such individual's
appointment as an Independent Director or at any time
thereafter while serving as an Independent Director) of
any of the outstanding common shares of Seller,
Originator, or any of their respective Subsidiaries or
Affiliates, having general voting rights;
"LIBO Rate" means the rate per annum equal to the
sum of (i) (a) the applicable British Bankers'
Association Interest Settlement Rate for deposits in
U.S. dollars appearing on Reuters Screen FRBD as of
11:00 a.m. (London time) two Business Days prior to the
first day of the relevant Tranche Period, and having a
maturity equal to such Tranche Period, provided that,
(i) if Reuters Screen FRBD is not available to the
Agent for any reason, the applicable LIBO Rate for the
relevant Tranche Period shall instead be the applicable
British Bankers' Association Interest Settlement Rate
for deposits in U.S. dollars as reported by any other
generally recognized financial information service as
of 11:00 a.m. (London time) two Business Days prior to
the first day of such Tranche Period, and having a
maturity equal to such Tranche Period, and (ii) if no
such British Bankers' Association Interest Settlement
Rate is available to the Agent, the applicable LIBO
Rate for the relevant Tranche Period shall instead be
the rate determined by the Agent to be the rate at
which Bank One offers to place deposits in U.S. dollars
with first-class banks in the London interbank market
at approximately 11:00 a.m. (London time) two Business
Days prior to the first day of such Tranche Period, in
the approximate amount to be funded at the LIBO Rate
and having a maturity equal to such Tranche Period,
divided by (b) one minus the maximum aggregate reserve
requirement (including all basic, supplemental,
marginal or other reserves) which is imposed against
the Agent in respect of Eurocurrency liabilities, as
defined in Regulation D of the Board of Governors of
the Federal Reserve System as in effect from time to
time (expressed as a decimal), applicable to such
Tranche Period plus (ii) 1.50% per annum. The LIBO
Rate shall be rounded, if necessary, to the next higher
1/16 of 1%.
"Liquidity Termination Date" means November [__],
2001.
"Lock-Box" means each locked postal box with
respect to which a bank who has executed a Collection
Account Agreement has been granted exclusive access for
the purpose of retrieving and processing payments made
on the Receivables and which is listed on Exhibit IV.
"Loss Reserve" means, at any time, an amount equal
to the greater of (i) 3 times the Allowance for
Doubtful Accounts of the Seller Parties as of the close
of business of the Servicer on such date, and (ii) 10%
of the Net Receivables Balance as of the close of
business of the Servicer on such date.
"Loss-to-Liquidation Ratio" means, for any
Collection Period, a percentage equal to (i) the
aggregate amount of Receivables which were written off
Seller's books as uncollectible during such Collection
Period and during the two immediately preceding
Collection Periods, divided by (ii) the aggregate
amount of Collections during such Collection Period and
the two immediately preceding Collection Periods.
"Material Adverse Effect" means a material adverse
effect on (i) the financial condition or operations of
any Seller Party and its Subsidiaries taken as a whole,
(ii) the ability of any Seller Party to perform its
obligations under this Agreement, (iii) the legality,
validity or enforceability of this Agreement or any
other Transaction Document, (iv) any Purchaser's
interest in the Receivables generally or in any
significant portion of the Receivables, the Related
Security or the Collections with respect thereto, or
(v) the collectibility of the Receivables generally or
of any material portion of the Receivables.
"Monthly Report" means a report, in substantially
the form of Exhibit X hereto (appropriately completed),
furnished by the Servicer to the Agent pursuant to
Section 8.5.
"Monthly Reporting Date" means each of the dates
appearing on Schedule C that is identified as a
"Monthly Reporting Date".
"Net Receivables Balance" means, at any time, the
aggregate Outstanding Balance of all Eligible
Receivables at such time reduced by the aggregate
amount by which the Outstanding Balance of all Eligible
Receivables of each Obligor and its Affiliates exceeds
the Concentration Limit for such Obligor.
"Non-Defaulting Financial Institution" has the
meaning set forth in Section 13.5.
"Non-Renewing Financial Institution" has the
meaning set forth in Section 13.6(a).
"Obligations" shall have the meaning set forth in
Section 2.1.
"Obligor" means a Person obligated to make
payments pursuant to a Contract.
"Original Seller" has the meaning set forth in the
Receivables Sale Agreement.
"Originator" means SSI, in its capacity as seller
under the Receivables Sale Agreement.
"Outstanding Balance" of any Receivable at any
time means the then outstanding principal balance
thereof.
"Participant" has the meaning set forth in Section
12.2.
"Person" means an individual, partnership,
corporation (including a business trust), limited
liability company, joint stock company, trust,
unincorporated association, joint venture or other
entity, or a government or any political subdivision or
agency thereof.
"Pooled Commercial Paper" means Commercial Paper
notes of Falcon subject to any particular pooling
arrangement by Falcon, but excluding Commercial Paper
issued by Falcon for a tenor and in an amount
specifically requested by any Person in connection with
any agreement effected by Falcon.
"Potential Amortization Event" means an event
which, with the passage of time or the giving of
notice, or both, would constitute an Amortization
Event.
"Proposed Reduction Date" has the meaning set
forth in Section 1.3.
"Pro Rata Share" means, for each Financial
Institution, a percentage equal to (i) the Commitment
of such Financial Institution, divided by (ii) the
aggregate amount of all Commitments of all Financial
Institutions hereunder, adjusted as necessary to give
effect to the application of the terms of Sections 13.5
or 13.6.
"Purchase Limit" means $50,000,000.
"Purchase Notice" has the meaning set forth in
Section 1.2.
"Purchase Price" means, with respect to any
Incremental Purchase of a Purchaser Interest, the
amount paid to Seller for such Purchaser Interest which
shall not exceed the least of the amount requested by
Seller in the applicable Purchase Notice, the unused
portion of the Purchase Limit on the applicable
purchase date and the excess, if any, of the Net
Receivables Balance (less the Aggregate Reserves) on
the applicable purchase date over the aggregate
outstanding amount of Aggregate Capital determined as
of the date of the most recent Monthly Report or Semi-
Monthly Report, taking into account such proposed
Incremental Purchase.
"Purchasers" means Falcon and each Financial
Institution.
"Purchaser Interest" means, at any time, an
undivided percentage ownership interest (computed as
set forth below) associated with a designated amount of
Capital, selected pursuant to the terms and conditions
hereof in (i) each Receivable arising prior to the time
of the most recent computation or recomputation of such
undivided interest, (ii) all Related Security with
respect to each such Receivable, and (iii) all
Collections with respect to, and other proceeds of,
each such Receivable. Each such undivided percentage
interest shall equal:
C/NRB-AR
where:
C = the Capital of such Purchaser Interest.
AR = the Aggregate Reserves.
NRB = the Net Receivables Balance.
Such undivided percentage ownership interest shall be
initially computed on its date of purchase.
Thereafter, until the Amortization Date, each Purchaser
Interest shall be automatically recomputed (or deemed
to be recomputed) on each day prior to the Amortization
Date. The variable percentage represented by any
Purchaser Interest as computed (or deemed recomputed)
as of the close of the business day immediately
preceding the Amortization Date shall remain constant
at all times thereafter.
"Purchasing Financial Institution" has the meaning
set forth in Section 12.1(b).
"Receivable" means all indebtedness and other
obligations owed to Seller, Originator or an Original
Seller (at the time it arises, and before giving effect
to any transfer or conveyance under any Transfer
Agreement, the Receivables Sale Agreement or hereunder)
or in which Seller, Originator or an Original Seller
has a security interest or other interest, including,
without limitation, any indebtedness, obligation or
interest constituting an account, chattel paper,
instrument, payment intangible or general intangible,
arising in connection with the sale of goods or the
rendering of services by Originator or an Original
Seller and further includes, without limitation, the
obligation to pay any Finance Charges with respect
thereto. Indebtedness and other rights and obligations
arising from any one transaction, including, without
limitation, indebtedness and other rights and
obligations represented by an individual invoice, shall
constitute a Receivable separate from a Receivable
consisting of the indebtedness and other rights and
obligations arising from any other transaction;
provided further, that any indebtedness, rights or
obligations referred to in the immediately preceding
sentence shall be a Receivable regardless of whether
the account debtor or Seller treats such indebtedness,
rights or obligations as a separate payment obligation.
"Receivables Sale Agreement" means that certain
Receivables Sale Agreement, dated as of the date
hereof, between Originator and Seller, as the same may
be amended, restated or otherwise modified from time to
time.
"Records" means, with respect to any Receivable,
all Contracts and other documents, books, records and
other information (including, without limitation,
computer programs, tapes, disks, punch cards, data
processing software and related property and rights)
relating to such Receivable, any Related Security
therefor and the related Obligor.
"Reduction Notice" has the meaning set forth in
Section 1.3.
"Reduction Percentage" means, for any Purchaser
Interest acquired by the Financial Institutions from
Falcon for less than the Capital of such Purchaser
Interest, a percentage equal to a fraction the
numerator of which is the Falcon Transfer Price
Reduction for such Purchaser Interest and the
denominator of which is the Capital of such Purchaser
Interest.
"Regulatory Change" has the meaning set forth in
Section 10.2(a).
"Reinvestment" has the meaning set forth in
Section 2.2.
"Related Security" means, with respect to any
Receivable:
(i) all security interests or liens and
property subject thereto from time to time, if any,
purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or
otherwise, together with all financing statements and
security agreements describing any collateral securing
such Receivable,
(ii) all guaranties, letters of credit,
insurance and other agreements or arrangements of
whatever character from time to time supporting or
securing payment of such Receivable whether pursuant to
the Contract related to such Receivable or otherwise,
(iii) all service contracts and other
contracts and agreements associated with such Receivable,
(iv) all Records and all rights under the
Contract(s) related to such Receivable,
(v) all of Seller's right, title and interest
in, to and under the Receivables Sale Agreement and each
Transfer Agreement in respect of such Receivable, and
(vi) all proceeds of any of the foregoing.
"Required Financial Institutions" means, at any
time, Financial Institutions with Commitments in excess
of 66-2/3% of the Purchase Limit.
"Restricted Junior Payment" means (i) any dividend
or other distribution, direct or indirect, on account
of any shares of any class of capital stock of Seller
now or hereafter outstanding, except a dividend payable
solely in shares of that class of stock or in any
junior class of stock of Seller, (ii) any redemption,
retirement, sinking fund or similar payment, purchase
or other acquisition for value, direct or indirect, of
any shares of any class of capital stock of Seller now
or hereafter outstanding, (iii) any payment or
prepayment of principal of, premium, if any, or
interest, fees or other charges on or with respect to,
and any redemption, purchase, retirement, defeasance,
sinking fund or similar payment and any claim for
rescission with respect to the Subordinated Loans (as
defined in the Receivables Sale Agreement), (iv) any
payment made to redeem, purchase, repurchase or retire,
or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire shares of
any class of capital stock of Seller now or hereafter
outstanding, and (v) any payment of management fees by
Seller (except for reasonable management fees to the
Originator or its Affiliates in reimbursement of actual
management services performed).
"Run-Off Ratio" means, for any Collection Period,
a percentage equal to (i) the aggregate Outstanding
Balance of all Delinquent Receivables as at the last
day of such Collection Period, divided by (ii) the
Outstanding Balance of all Receivables as to which any
payment, or part thereof, remained unpaid for 30 or
fewer days from the original invoice date for such
payment on the last day of the Collection Period
occurring 3 Collection Periods prior to such Collection
Period.
"Seller" has the meaning set forth in the preamble
to this Agreement.
"Seller Interest" means, at any time, an undivided
percentage ownership interest of Seller in the
Receivables, Related Security and all Collections with
respect thereto equal to (i) one, minus (ii) the
aggregate of the Purchaser Interests.
"Seller Parties" has the meaning set forth in the
preamble to this Agreement.
"Semi-Monthly Report" means a report, in
substantially the form of Exhibit XI hereto
(appropriately completed), furnished by the Servicer to
the Agent pursuant to Section 8.5.
"Semi-Monthly Reporting Date" means each of the
dates appearing on Schedule C that is identified as a
"Semi-Monthly Reporting Date"
"Servicer" means at any time the Person (which may
be the Agent) then authorized pursuant to Article VIII
to service, administer and collect Receivables.
"Servicing Fee" has the meaning set forth in
Section 8.6.
"Settlement Date" means (A) the third Business Day
following the Monthly Reporting Date, and (B) the last
day of the relevant Tranche Period in respect of each
Purchaser Interest of the Financial Institutions.
"Settlement Period" means (A) in respect of each
Purchaser Interest of Falcon, the immediately preceding
Accrual Period, and (B) in respect of each Purchaser
Interest of the Financial Institutions, the entire
Tranche Period of such Purchaser Interest.
"SSI" has the meaning set forth in the preamble to
this Agreement.
"SSI Loan Agreement" means that Amended and
Restated Credit Agreement dated as of September 30,
1998 (as amended from time to time) among SSI, the
Guarantors and Lenders identified therein, and Bank of
America, N.A. (formerly known as NationsBank, N.A.), as
Administrative Agent.
"Subsidiary" of a Person means (i) any corporation
more than 50% of the outstanding securities having
ordinary voting power of which shall at the time be
owned or controlled, directly or indirectly, by such
Person or by one or more of its Subsidiaries or by such
Person and one or more of its Subsidiaries, or (ii) any
partnership, association, limited liability company,
joint venture or similar business organization more
than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or
controlled. Unless otherwise expressly provided, all
references herein to a "Subsidiary" shall mean a
Subsidiary of Seller.
"Termination Date" has the meaning set forth in
Section 2.2.
"Termination Percentage" has the meaning set forth
in Section 2.2.
"Terminating Financial Institution" has the
meaning set forth in Section 13.6(a).
"Terminating Tranche" has the meaning set forth in
Section 4.3(b).
"Traditional Receivables" means Receivables
arising from a line of business identified as
"Traditional", "Sax" or "▇▇▇▇" by the Originator and
which are included on the Originator's "SFD" reporting
system.
"Tranche Period" means, with respect to any
Purchaser Interest held by a Financial Institution:
(a) if Yield for such Purchaser Interest is
calculated on the basis of the LIBO Rate, a period of
one, two, three or six months, or such other period as
may be mutually agreeable to the Agent and Seller,
commencing on a Business Day selected by Seller or the
Agent pursuant to this Agreement. Such Tranche Period
shall end on the day in the applicable succeeding
calendar month which corresponds numerically to the
beginning day of such Tranche Period, provided, however,
that if there is no such numerically corresponding day in
such succeeding month, such Tranche Period shall end on
the last Business Day of such succeeding month; or
(b) if Yield for such Purchaser Interest is
calculated on the basis of the Base Rate, a period
commencing on a Business Day selected by Seller and
agreed to by the Agent, provided no such period shall
exceed one month.
If any Tranche Period would end on a day which is not a
Business Day, such Tranche Period shall end on the next
succeeding Business Day, provided, however, that in the
case of Tranche Periods corresponding to the LIBO Rate,
if such next succeeding Business Day falls in a new
month, such Tranche Period shall end on the immediately
preceding Business Day. In the case of any Tranche
Period for any Purchaser Interest which commences
before the Amortization
Date and would otherwise end on a date occurring after
the Amortization Date, such Tranche Period shall end on
the Amortization Date. The duration of each Tranche
Period which commences after the Amortization Date shall
be of such duration as selected by the Agent.
"Transaction Documents" means, collectively, this
Agreement, each Purchase Notice, the Receivables Sale
Agreement, each Transfer Agreement, the Servicing
Agreement, each Collection Account Agreement, the Fee
Letter, the Subordinated Note (as defined in the
Receivables Sale Agreement) and all other instruments,
documents and agreements executed and delivered in
connection herewith.
"Transfer Agreement" has the meaning set forth in
the Receivables Sale Agreement.
"UCC" means the Uniform Commercial Code as from
time to time in effect in the specified jurisdiction.
"Unconditional Liquidity Provider" means a
Financial Institution that is identified by the Agent
or by Bank One as an entity which will not under any
circumstance receive any Falcon Transfer Price
Reduction hereunder.
"Yield" means for each respective Tranche Period
relating to Purchaser Interests of the Financial
Institutions, an amount equal to the product of the
applicable Discount Rate for each Purchaser Interest
multiplied by the Capital of such Purchaser Interest
for each day elapsed during such Tranche Period,
annualized on a 360 day basis.
"Yield/Servicing Reserve" means, on any date, an
amount equal to 2.0% multiplied by the Net Receivables
Balance as of the close of business of the Servicer on
such date.
All accounting terms not specifically defined
herein shall be construed in accordance with GAAP. All
terms used in Article 9 of the UCC in the State of
Illinois, and not specifically defined herein, are used
herein as defined in such Article 9.
EXHIBIT II
FORM OF PURCHASE NOTICE
[Date]
Bank One, NA (Main Office Chicago), as Agent
1 Bank One Plaza, 21st Floor
Asset-Backed Finance
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Re: PURCHASE NOTICE
Ladies and Gentlemen:
Reference is hereby made to the Receivables
Purchase Agreement, dated as of November [__], 2000, by
and among New School, Inc., a Delaware corporation (the
"Seller"), School Specialty, Inc., as Servicer, the
Financial Institutions, Falcon Asset Securitization
Corporation ("Falcon"), and Bank One, NA (Main Office
Chicago), as Agent (the "Receivables Purchase
Agreement"). Capitalized terms used herein shall have
the meanings assigned to such terms in the Receivables
Purchase Agreement.
The Agent is hereby notified of the following
Incremental Purchase:
Purchase Price: $____________________________
Date of Purchase: ____________________________
Requested Discount Rate: [LIBO Rate] [Base Rate]
[Pooled Commercial Paper rate]
Please credit the Purchase Price in immediately
available funds to our Facility Account:
[Account Name]
[Account No.]
Please advise [Name] at telephone no ( )_________________ if
Falcon will not be making this purchase.
In connection with the Incremental Purchase to be
made on the above listed "Date of Purchase" (the
"Purchase Date"), the Seller hereby certifies that the
following statements are true
on the date hereof, and will be true on the Purchase
Date (before and after giving effect to the proposed
Incremental Purchase):
(i) the representations and warranties of
the Seller set forth in Section 5.1 of the Receivables
Purchase Agreement are true and correct on and as of
the Purchase Date as though made on and as of such date;
(ii) no event has occurred and is continuing,
or would result from the proposed Incremental Purchase,
that will constitute an Amortization Event or a Potential
Amortization Event;
(iii) the Facility Termination Date has not
occurred, the Aggregate Capital does not exceed the
Purchase Limit and the aggregate Purchaser Interests do
not exceed 100%; and
(iv) the amount of Aggregate Capital is
$_________ after giving effect to the Incremental Purchase
to be made on the Purchase Date.
Very truly yours,
NEW SCHOOL, INC.
By:____________________________
Name:
Title:
EXHIBIT III
PLACES OF BUSINESS OF THE SELLER PARTIES;
LOCATIONS OF RECORDS;
FEDERAL EMPLOYER IDENTIFICATION NUMBER(S);
ORGANIZATIONAL IDENTIFICATION NUMBER(S)
Chief Executive Office and
Principal Place of Business:
Seller: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Servicer: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Locations of Records:
Seller's Federal Identification Number:
Seller's Organizational Identification Number:
[None]
EXHIBIT IV
NAMES OF COLLECTION BANKS; COLLECTION ACCOUNTS
Lock-Box Related Collection Account
EXHIBIT V
FORM OF COMPLIANCE CERTIFICATE
To: Bank One, NA (Main Office Chicago), as Agent
This Compliance Certificate is furnished pursuant
to that certain Receivables Purchase Agreement dated
as of November [__], 2000 among New School, Inc. (the
"Seller"), School Specialty, Inc. (the "Servicer"), the
Purchasers party thereto and Bank One, NA (Main Office
Chicago), as agent for such Purchasers (the
"Agreement").
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected [__________________] of
Seller.
2. I have reviewed the terms of the Agreement and
I have made, or have caused to be made under my
supervision, a detailed review of the transactions and
conditions of Seller and its Subsidiaries during the
accounting period covered by the attached financial
statements.
3. The examinations described in paragraph 2 did
not disclose, and I have no knowledge of, the existence
of any condition or event which constitutes an
Amortization Event or Potential Amortization Event, as
each such term is defined under the Agreement, during
or at the end of the accounting period covered by the
attached financial statements or as of the date of this
Certificate, except as set forth in paragraph 5 below.
4. Schedule I attached hereto sets forth financial
data and computations evidencing the compliance with
certain covenants of the Agreement, all of which data
and computations are true, complete and correct.
5. Described below are the exceptions, if any, to
paragraph 3 by listing, in detail, the nature of the
condition or event, the period during which it has
existed and the action which Seller has taken, is
taking, or proposes to take with respect to each such
condition or event:_____________________________________
________________________________________________________
________________________________________________________
________________________________________________________
The foregoing certifications, together with the
computations set forth in Schedule I hereto and the
financial statements delivered with this Certificate in
support hereof, are made and delivered this [___] day
of [______________].
SCHEDULE I TO COMPLIANCE CERTIFICATE
A. Schedule of Compliance as of __________, ____ .
Unless otherwise defined herein, the terms used in
this Compliance Certificate have the meanings
ascribed thereto in the Agreement.
This schedule relates to the month ended: __________
EXHIBIT VI
FORM OF COLLECTION ACCOUNT AGREEMENT
[On letterhead of Originator]
___________,_____
[Lock-Box Bank/Concentration Bank/Depositary Bank]
Re: School Specialty, Inc.
Ladies and Gentlemen:
Reference is hereby made to P.O. Box #________
in [city, state, zip code] (the "Lock-Box") of which
you have exclusive control for the purpose of receiving
mail and processing payments therefrom pursuant to that
certain [name of lock-box agreement) between you and
the undersigned ("Originator") dated _____________ (the
"Agreement"). You hereby confirm your agreement to
perform the services described therein. Among the
services you have agreed to perform therein, is to
endorse all checks and other evidences of payment, and
credit such payments to Originator's checking account
no._____________ maintained with you in the name of
Originator (the "Lock-Box Account").
Originator hereby informs you that pursuant
to that certain Receivables Sale Agreement, dated as of
November [__], 2000 between Originator and New School,
Inc. (the "Seller"), Originator has transferred all of
its right, title and interest in and to, and exclusive
ownership and control of, the Lock-Box and the Lock-Box
Account to Seller. Originator and Seller hereby
request that the name of the Lock-Box Account be
changed to "School Specialty, Inc., as Servicer."
Originator and Seller hereby irrevocably
instruct you, and you hereby agree, that upon receiving
notice from Bank One, NA (Main Office Chicago) ("Bank
One") in the form attached hereto as Annex A: (i) the
name of the Lock-Box Account will be changed to Bank
One for itself and as agent (or any designee of Bank
One) and Bank One will have exclusive ownership of and
access to the Lock-Box and the Lock-Box Account, and
neither Falcon, Seller, nor any of their respective
affiliates will have any control of the Lock-Box or the
Lock-Box Account or any access thereto, (ii) you will
either continue to send the funds from the Lock-Box to
the Lock-Box Account, or will redirect the funds as
Bank One may otherwise request, (iii) you will transfer
monies on deposit in the Lock-Box Account, at any time,
as directed by Bank One, (iv) all services to be
performed by you under the Agreement will be performed
on behalf of Bank One, and (v) all correspondence or
other mail which you have agreed to send to the
Originator or Seller will be sent to Bank One at the
following address:
Bank One, NA (Main Office Chicago)
Suite _____, ▇▇▇▇ ▇▇▇▇▇
▇ ▇▇▇▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ 60670-_____
Attention: Credit Manager, Asset Backed
Securities Division
Moreover, upon such notice, Bank One for
itself and as agent will have all rights and remedies
given to Originator (and Seller, as Originator's
assignee) under the Agreement. Seller agrees, however,
to continue to pay all fees and other assessments due
thereunder at any time.
You hereby acknowledge that monies deposited
in the Lock-Box Account or any other account
established with you by Bank One for the purpose of
receiving funds from the Lock-Box are subject to the
liens of Bank One for itself and as agent, and will not
be subject to deduction, set-off, banker's lien or any
other right you or any other party may have against
Originator or Seller except that you may debit the Lock-
Box Account for any items deposited therein that are
returned or otherwise not collected and for all
charges, fees, commissions and expenses incurred by you
in providing services hereunder, all in accordance with
your customary practices for the charge back of
returned items and expenses.
THIS LETTER AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER WILL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF ILLINOIS. This letter agreement
may be executed in any number of counterparts and all
of such counterparts taken together will be deemed to
constitute one and the same instrument.
This letter agreement contains the entire
agreement between the parties, and may not be altered,
modified, terminated or amended in any respect, nor may
any right, power or privilege of any party hereunder be
waived or released or discharged, except upon execution
by all parties hereto of a written instrument so
providing. In the event that any provision in this
letter agreement is in conflict with, or inconsistent
with, any provision of the Agreement, this letter
agreement will exclusively govern and control. Each
party agrees to take all actions reasonably requested
by any other party to carry out the purposes of this
letter agreement or to preserve and protect the rights
of each party hereunder.
Please indicate your agreement to the terms of
this letter agreement by signing in the space provided
below. This letter agreement will become effective
immediately upon execution of a counterpart of this
letter agreement by all parties hereto.
Very truly yours,
SCHOOL SPECIALTY, INC.
By:___________________________
Name:
Title:
NEW SCHOOL, INC.
By:___________________________
Name:
Title:
Acknowledged and agreed to
this _____ day of ________
[COLLECTION BANK]
By:____________________________
Name:
Title:
BANK ONE, NA (MAIN OFFICE CHICAGO), as
Agent
By:____________________________
Name:
Title:
ANNEX A
FORM OF NOTICE
[On letterhead of Bank One]
___________,_____
[Collection Bank/Depositary Bank/Concentration Bank]
Re: School Specialty, Inc./New School, Inc.
Ladies and Gentlemen:
We hereby notify you that we are exercising
our rights pursuant to that certain letter agreement
among School Specialty, Inc., New School, Inc., you and
us, to have the name of, and to have exclusive
ownership and control of, account number ______________
(the "Lock-Box Account") maintained with you, transferred
to us. [Lock-Box Account will henceforth be a zero-
balance account, and funds deposited in the Lock-Box
Account should be sent at the end of each day to
___________.] You have further agreed to perform all other
services you are performing under that certain agreement
dated _______________ between you and [Originator] on our
behalf.
We appreciate your cooperation in this matter.
Very truly yours,
BANK ONE, NA (MAIN OFFICE CHICAGO)
(for itself and as agent)
By:______________________________
Title:___________________________
EXHIBIT VII
FORM OF ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (this
"Assignment Agreement") is entered into as of the ___
day of ____________, ____, by and between
_____________________ ("Assignor") and
__________________ ("Assignee").
PRELIMINARY STATEMENTS
A. This Assignment Agreement is being
executed and delivered in accordance with Section
12.1(b) of that certain Receivables Purchase Agreement
dated as of November [__], 2000 by and among New
School, Inc., School Specialty, Inc., as Servicer,
Falcon Asset Securitization Corporation, Bank One, NA
(Main Office Chicago), as Agent, and the Financial
Institutions party thereto (as amended, modified or
restated from time to time, the "Purchase Agreement").
Capitalized terms used and not otherwise defined herein
are used with the meanings set forth or incorporated by
reference in the Purchase Agreement.
B. Assignor is a Financial Institution
party to the Purchase Agreement, and Assignee wishes to
become a Financial Institution thereunder; and
C. Assignor is selling and assigning to
Assignee an undivided ____________% (the "Transferred
Percentage") interest in all of Assignor's rights and
obligations under the Purchase Agreement and the
Transaction Documents, including, without limitation,
Assignor's Commitment and (if applicable) the Capital
of Assignor's Purchaser Interests as set forth herein.
AGREEMENT
The parties hereto hereby agree as follows:
1. The sale, transfer and assignment
effected by this Assignment Agreement shall become
effective (the "Effective Date") two (2) Business Days
(or such other date selected by the Agent in its sole
discretion) following the date on which a notice
substantially in the form of Schedule II to this
Assignment Agreement ("Effective Notice") is delivered
by the Agent to Falcon, Seller, Assignor and Assignee.
From and after the Effective Date, Assignee shall be a
Financial Institution party to the Purchase Agreement
for all purposes thereof as if Assignee were an
original party thereto and Assignee agrees to be bound
by all of the terms and provisions contained therein.
2. If Assignor has no outstanding Capital
under the Purchase Agreement, on the Effective Date,
Assignor shall be deemed to have hereby transferred and
assigned to Assignee, without recourse, representation
or warranty (except as provided in paragraph 6 below),
and the Assignee shall be deemed to have hereby
irrevocably taken, received and assumed from Assignor,
the Transferred Percentage of Assignor's Commitment and
all rights and obligations associated therewith under
the terms of the Purchase Agreement, including,
without limitation, the Transferred Percentage of
Assignor's future funding obligations under Section 4.1
of the Purchase Agreement.
3. If Assignor has any outstanding Capital
under the Purchase Agreement, at or before 12:00 noon,
local time of Assignor, on the Effective Date Assignee
shall pay to Assignor, in immediately available funds,
an amount equal to the sum of (i) the Transferred
Percentage of the outstanding Capital of Assignor's
Purchaser Interests (such amount, being hereinafter
referred to as the "Assignee's Capital"); (ii) all
accrued but unpaid (whether or not then due) Yield
attributable to Assignee's Capital; and (iii) accruing
but unpaid fees and other costs and expenses payable in
respect of Assignee's Capital for the period commencing
upon each date such unpaid amounts commence accruing,
to and including the Effective Date (the "Assignee's
Acquisition Cost"); whereupon, Assignor shall be deemed
to have sold, transferred and assigned to Assignee,
without recourse, representation or warranty (except as
provided in paragraph 6 below), and Assignee shall be
deemed to have hereby irrevocably taken, received and
assumed from Assignor, the Transferred Percentage of
Assignor's Commitment and the Capital of Assignor's
Purchaser Interests (if applicable) and all related
rights and obligations under the Purchase Agreement and
the Transaction Documents, including, without
limitation, the Transferred Percentage of Assignor's
future funding obligations under Section 4.1 of the
Purchase Agreement.
4. Concurrently with the execution and
delivery hereof, Assignor will provide to Assignee
copies of all documents requested by Assignee which
were delivered to Assignor pursuant to the Purchase
Agreement.
5. Each of the parties to this Assignment
Agreement agrees that at any time and from time to time
upon the written request of any other party, it will
execute and deliver such further documents and do such
further acts and things as such other party may
reasonably request in order to effect the purposes of
this Assignment Agreement.
6. By executing and delivering this
Assignment Agreement, Assignor and Assignee confirm to
and agree with each other, the Agent and the Financial
Institutions as follows: (a) other than the
representation and warranty that it has not created any
Adverse Claim upon any interest being transferred
hereunder, Assignor makes no representation or warranty
and assumes no responsibility with respect to any
statements, warranties or representations made by any
other Person in or in connection with the Purchase
Agreement or the Transaction Documents or the
execution, legality, validity, enforceability,
genuineness, sufficiency or value of Assignee, the
Purchase Agreement or any other instrument or document
furnished pursuant thereto or the perfection, priority,
condition, value or sufficiency of any collateral; (b)
Assignor makes no representation or warranty and
assumes no responsibility with respect to the financial
condition of the Seller, any Obligor, any Seller
Affiliate or the performance or observance by the
Seller, any Obligor, any Seller Affiliate of any of
their respective obligations under the Transaction
Documents or any other instrument or document furnished
pursuant thereto or in connection therewith; (c)
Assignee confirms that it has received a copy of the
Purchase Agreement and copies of such other Transaction
Documents, and other documents and information as it
has requested and deemed appropriate to make its own
credit analysis and decision to enter into this
Assignment Agreement; (d) Assignee will, independently
and without reliance upon the Agent, Falcon, the Seller
or any other Financial Institution or Purchaser and
based on such documents
and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or
not taking action under the Purchase Agreement and the
Transaction Documents; (e) Assignee appoints and
authorizes the Agent to take such action as agent on its
behalf and to exercise such powers under the Transaction
Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably
incidental thereto; and (f) Assignee agrees that it will
perform in accordance with their terms all of the
obligations which, by the terms of the Purchase Agreement
and the other Transaction Documents, are required to be
performed by it as a Financial Institution or, when
applicable, as a Purchaser.
7. Each party hereto represents and
warrants to and agrees with the Agent that it is aware
of and will comply with the provisions of the Purchase
Agreement, including, without limitation, Sections 4.1,
13.1 and 14.6 thereof.
8. Schedule I hereto sets forth the revised
Commitment of Assignor and the Commitment of Assignee,
as well as administrative information with respect to
Assignee.
9. THIS ASSIGNMENT AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF ILLINOIS.
10. Assignee hereby covenants and agrees
that, prior to the date which is one year and one day
after the payment in full of all senior indebtedness
for borrowed money of Falcon, it will not institute
against, or join any other Person in instituting
against, Falcon any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or
other similar proceeding under the laws of the United
States or any state of the United States.
IN WITNESS WHEREOF, the parties hereto have
caused this Assignment Agreement to be executed by
their respective duly authorized officers of the date
hereof.
[ASSIGNOR]
By:______________________________
Title:
[ASSIGNEE]
By:______________________________
Title:
SCHEDULE I TO ASSIGNMENT AGREEMENT
LIST OF LENDING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT AMOUNTS
Date: _______________, ____
Transferred Percentage: ________%
▇-▇ ▇-▇ ▇-▇ ▇-▇
Assignor Commitment Commitment Outstanding Ratable
(prior to (after Capital Share of
giving giving (if any) Outstanding
effect to effect to Capital
the the
Assignment Assignment
Agreement) Agreement)
▇-▇ ▇-▇ ▇-▇
Assignee Commitment Outstanding Ratable
(after Capital Share of
giving (if any) Outstanding
effect to Capital
the
Assignment
Agreement)
Address for Notices
___________________
___________________
Attention:
Phone:
Fax:
SCHEDULE II TO ASSIGNMENT AGREEMENT
EFFECTIVE NOTICE
TO:________________________, Assignor
________________________
________________________
________________________
TO:________________________, Assignee
________________________
________________________
________________________
The undersigned, as Agent under the
Receivables Purchase Agreement dated as of November
[__], 2000 by and among New School, Inc., a Delaware
corporation, School Specialty, Inc., as Servicer,
Falcon Asset Securitization Corporation, Bank One, NA
(Main Office Chicago), as Agent, and the Financial
Institutions party thereto, hereby acknowledges receipt
of executed counterparts of a completed Assignment
Agreement dated as of ____________, ____ between
__________________, as Assignor, and
__________________, as Assignee. Terms defined in such
Assignment Agreement are used herein as therein defined.
1. Pursuant to such Assignment Agreement,
you are advised that the Effective Date will be
______________, ____.
2. Falcon hereby consents to the Assignment
Agreement as required by Section 12.1(b) of the
Receivables Purchase Agreement.
[3. Pursuant to such Assignment Agreement,
the Assignee is required to pay $____________ to
Assignor at or before 12:00 noon (local time of
Assignor) on the Effective Date in immediately
available funds.]
Very truly yours,
BANK ONE, NA (MAIN OFFICE CHICAGO),
individually and as Agent
By:______________________________
Title:___________________________
FALCON ASSET SECURITIZATION
CORPORATION
By:______________________________
Authorized Signatory
EXHIBIT VIII
CREDIT AND COLLECTION POLICY
See Exhibit V to Receivables Sale Agreement
EXHIBIT IX
FORM OF CONTRACT(S)
See Attached
EXHIBIT X
FORM OF MONTHLY REPORT
[In addition to such other information as may
be included on this exhibit, each Monthly Report should
set forth the following with respect to the related
Calculation Period (as defined in the Receivables Sale
Agreement): (i) the aggregate Outstanding Balance of
Receivables created and conveyed by Originator to
Seller in purchases pursuant to the Receivables Sale
Agreement during such Calculation Period, as well as
the Net Receivables Balance included therein, (ii) the
aggregate purchase price payable to Originator in
respect of such purchases, specifying the Discount
Factor (as defined in the Receivables Sale Agreement)
in effect for such Calculation Period and the aggregate
Purchase Price Credits (as defined in the Receivables
Sale Agreement) deducted in calculating such aggregate
purchase price, (iii) the aggregate amount of funds
received by the Servicer during such Calculation Period
which are to be applied as Reinvestments, (iv) the
increase or decrease in the amount outstanding under
the Subordinated Note (as defined in the Receivables
Sale Agreement) as of the end of such Calculation
Period after giving effect to the application of funds
toward the aggregate purchase price and the
restrictions on Subordinated Loans (as defined in the
Receivables Sale Agreement) set forth in Section
1.2(a)(ii) of the Receivables Sale Agreement, and (v)
the amount of any capital contribution made by
Originator to Seller as of the end of such Calculation
Period pursuant to Section 1.2(b) of the Receivables
Sale Agreement.]
The above is a true and accurate accounting
pursuant to the terms of the Receivables Purchase
Agreement dated November [__], 2000 (the "Agreement"),
by and among New School, Inc., School Specialty, Inc.
and Bank One, NA (Main Office Chicago), as Agent, and I
have no knowledge of the existence of any conditions or
events which constitute an Amortization Event or
Potential Amortization Event, as each such term is
defined under the Agreement, during or at the end of
the accounting period covered by this monthly report or
as of the date of this certificate, except as set forth
below.
By:__________________________
Name:________________________
Title:_______________________
Falcon Name:_________________
Date:________________________
EXHIBIT XI
FORM OF SEMI-MONTHLY REPORT
SCHEDULE A
COMMITMENTS OF FINANCIAL INSTITUTIONS
Financial Institution Commitment
Bank One, NA $51,000,000
SCHEDULE B
DOCUMENTS TO BE DELIVERED TO THE AGENT
ON OR PRIOR TO THE INITIAL PURCHASE
See Attached
SCHEDULE C
MONTHLY REPORTING DATES and SEMI-MONTHLY REPORTING DATES
See Attached
TABLE OF CONTENTS
Page #
ARTICLE I
PURCHASE ARRANGEMENTS 2
Section 1.1 Purchase Facility 2
Section 1.2 Increases 2
Section 1.3 Decreases 2
Section 1.4 Payment Requirements 3
ARTICLE II
PAYMENTS AND COLLECTIONS 3
Section 2.1 Payments 3
Section 2.2 Collections Prior to Amortization 4
Section 2.3 Collections Following Amortization 4
Section 2.4 Application of Collections 5
Section 2.5 Payment Recission 5
Section 2.6 Maximum Purchaser Interests 5
Section 2.7 Clean Up Call 5
ARTICLE III
FALCON FUNDING 6
Section 3.1 CP Costs 6
Section 3.2 CP Costs Payments 6
Section 3.3 Calculation of CP Costs 6
ARTICLE IV
FINANCIAL INSTITUTION FUNDING 6
Section 4.1 Financial Institution Funding 6
Section 4.2 Yield Payments 6
Section 4.3 Selection and Continuation of Tranche Periods. 7
Section 4.4 Financial Institution Discount Rates 7
Section 4.5 Suspension of the LIBO Rate. 7
ARTICLE V
REPRESENTATIONS AND WARRANTIES 8
Section 5.1 Representations and Warranties of the Seller Parties 8
Section 5.2 Financial Institution Representations and Warranties 12
ARTICLE VI
CONDITIONS OF PURCHASES 12
Section 6.1 Conditions Precedent to Initial Incremental Purchase 12
Section 6.2 Conditions Precedent to All Purchases and Reinvestments 12
ARTICLE VII
COVENANTS 13
Section 7.1 Affirmative Covenants of the Seller Parties 13
Section 7.2 Negative Covenants of the Seller Parties 20
ARTICLE VIII
ADMINISTRATION AND COLLECTION 23
Section 8.1 Designation of Servicer. 23
Section 8.2 Duties of Servicer 23
Section 8.3 Collection Notices 25
Section 8.4 Responsibilities of Seller 25
Section 8.5 Reports 25
Section 8.6 Servicing Fees 25
ARTICLE IX
AMORTIZATION EVENTS 25
Section 9.1 Amortization Events 25
Section 9.2 Remedies 27
ARTICLE X
INDEMNIFICATION 28
Section 10.1 Indemnities by The Seller Parties 28
Section 10.2 Increased Cost and Reduced Return 30
Section 10.3 Other Costs and Expenses 31
ARTICLE XI
THE AGENT 32
Section 11.1 Authorization and Action 32
Section 11.2 Delegation of Duties 32
Section 11.3 Exculpatory Provisions 32
Section 11.4 Reliance by Agent 33
Section 11.5 Non-Reliance on Agent and Other Purchasers 33
Section 11.6 Reimbursement and Indemnification 33
Section 11.7 Agent in its Individual Capacity 33
Section 11.8 Successor Agent 34
ARTICLE XII
ASSIGNMENTS; PARTICIPATIONS 34
Section 12.1 Assignments. 34
Section 12.2 Participations 35
ARTICLE XIII
LIQUIDITY FACILITY 35
Section 13.1 Transfer to Financial Institutions 35
Section 13.2 Transfer Price Reduction Yield 36
Section 13.3 Payments to Falcon 36
Section 13.4 Limitation on Commitment to Purchase from Falcon 36
Section 13.5 Defaulting Financial Institutions 36
Section 13.6 Terminating Financial Institutions. 37
ARTICLE XIV
MISCELLANEOUS 38
Section 14.1 Waivers and Amendments. 38
Section 14.2 Notices 39
Section 14.3 Ratable Payments 39
Section 14.4 Protection of Ownership Interests of the Purchasers. 39
Section 14.5 Confidentiality. 40
Section 14.6 Bankruptcy Petition 40
Section 14.7 Limitation of Liability 41
Section 14.8 CHOICE OF LAW 41
Section 14.9 CONSENT TO JURISDICTION 41
Section 14.10 WAIVER OF JURY TRIAL 41
Section 14.11 Integration; Binding Effect; Survival of Terms. 41
Section 14.12 Counterparts; Severability; Section References 42
Section 14.13 Bank One Roles 42
Section 14.14 Characterization. 42
Exhibits and Schedules
Exhibit I Definitions
Exhibit II Form of Purchase Notice
Exhibit III Places of Business of the Seller Parties; Locations of
Records; Federal Employer Identification Number(s);
Organizational Identification Numbers
Exhibit IV Names of Collection Banks; Collection Accounts
Exhibit V Form of Compliance Certificate
Exhibit VI Form of Collection Account Agreement
Exhibit VII Form of Assignment Agreement
Exhibit VIII Credit and Collection Policy
Exhibit IX Form of Contract(s)
Exhibit X Form of Monthly Report
Exhibit XI Form of Semi-Monthly Report
Schedule A Commitments
Schedule B Closing Documents
Schedule C Monthly Reporting Dates and Semi-Monthly Reporting Dates