EXHIBIT 10.1(b)
RECEIVABLES SALE AGREEMENT
Dated as of November 22, 2000
between
SCHOOL SPECIALTY, INC.,
as Originator
and
NEW SCHOOL, INC.,
as Buyer
RECEIVABLES SALE AGREEMENT
THIS RECEIVABLES SALE AGREEMENT, dated as of
November 22, 2000, is by and between School Specialty,
Inc., a Wisconsin corporation ("Originator"), and New
School, Inc., a Delaware corporation ("Buyer"). Unless
defined elsewhere herein, capitalized terms used in
this Agreement shall have the meanings assigned to such
terms in Exhibit I.
PRELIMINARY STATEMENTS
Originator now owns, and from time to time
hereafter will own, Receivables. Originator wishes to
sell and assign to Buyer, and Buyer wishes to purchase
from Originator, all of Originator's right, title and
interest in and to such Receivables, together with the
Related Security and Collections with respect thereto.
Originator and Buyer intend the transactions
contemplated hereby to be true sales of the Receivables
from Originator to Buyer, providing Buyer with the full
benefits of ownership of the Receivables, and
Originator and Buyer do not intend these transactions
to be, or for any purpose to be characterized as, loans
from Buyer to Originator.
Following the purchase of Receivables from
Originator, Buyer will sell undivided interests therein
and in the associated Related Security and Collections
pursuant to that certain Receivables Purchase Agreement
dated as of November 22, 2000 (as the same may from
time to time hereafter be amended, supplemented,
restated or otherwise modified, the "Purchase
Agreement") among Buyer, Originator, as Servicer,
Falcon Asset Securitization Corporation ("Falcon"), the
financial institutions from time to time party thereto
as "Financial Institutions" and Bank One, NA (Main
Office Chicago) ("Bank One") or any successor agent
appointed pursuant to the terms of the Purchase
Agreement, as agent for Falcon and such Financial
Institutions (in such capacity, the "Agent").
ARTICLE I
AMOUNTS AND TERMS
Section 1.1 Purchase of Receivables.
(a) Effective on the date hereof, in
consideration for the Purchase Price and upon the terms
and subject to the conditions set forth herein,
Originator does hereby sell, assign, transfer, set-over
and otherwise convey to Buyer, without recourse (except
to the extent expressly provided herein), and Buyer
does hereby purchase from Originator, all of
Originator's right, title and interest in and to all
Receivables existing as of the close of business on the
Business Day immediately prior to the date hereof and
all Receivables thereafter arising through and
including the Amortization Date, together, in each
case, with all Related Security relating thereto and
all Collections thereof. In accordance with the
preceding sentence, on the date hereof Buyer shall
acquire all of Originator's right, title and interest
in and to all Receivables existing as of the close of
business on the Business Day immediately prior to the
date hereof and thereafter arising through and
including the Amortization Date, together with all
Related Security relating thereto and all Collections
thereof; provided, that, Buyer shall be obligated to
pay the Purchase Price
therefor in accordance with Section 1.2. In connection
with the payment of the Purchase Price for any
Receivables purchased hereunder, Buyer may request that
Originator deliver, and Originator shall deliver, such
approvals, opinions, information, reports or documents
as Buyer may reasonably request. Originator shall not
have any right to modify or alter the terms of any sale
of the Receivables hereunder to Buyer or to substitute
or add any Receivable after such sale.
(b) It is the intention of the parties
hereto that the Purchase of Receivables made hereunder
shall constitute a "sale of accounts" (as such term is
used in Article 9 of the UCC), which sale is absolute
and irrevocable and provides Buyer with the full
benefits of ownership of the Receivables. Except for
the Purchase Price Credits owed pursuant to Section
1.3, the sale of Receivables hereunder is made without
recourse to Originator; provided, however, that (i)
Originator shall be liable to Buyer for all
representations, warranties and covenants made by
Originator pursuant to the terms of the Transaction
Documents to which Originator is a party, and (ii) such
sale does not constitute and is not intended to result
in an assumption by Buyer or any assignee thereof of
any obligation of Originator or any other Person
arising in connection with the Receivables, the related
Contracts and/or other Related Security or any other
obligations of Originator. In view of the intention of
the parties hereto that the Purchase of Receivables
made hereunder shall constitute a sale of such
Receivables rather than loans secured thereby,
Originator agrees that it will, on or prior to the date
hereof and in accordance with Section 4.1(e)(ii), ▇▇▇▇
its master data processing records relating to the
Receivables with a legend acceptable to Buyer and to
the Agent (as Buyer's assignee), evidencing that Buyer
has purchased such Receivables as provided in this
Agreement and to note in its financial statements that
its Receivables have been sold to Buyer. Upon the
request of Buyer or the Agent (as Buyer's assignee),
Originator will execute and file such financing or
continuation statements, or amendments thereto or
assignments thereof, and such other instruments or
notices, as may be necessary or appropriate to perfect
and maintain the perfection of Buyer's ownership
interest in the Receivables and the Related Security
and Collections with respect thereto, or as Buyer or
the Agent (as Buyer's assignee) may reasonably request.
Section 1.2 Payment for the Purchase.
(a) The Purchase Price for the Purchase of
Receivables in existence on the close of business on
the Business Day immediately preceding the date hereof
(the "Initial Cutoff Date") shall be payable in full by
Buyer to Originator on the date hereof, and shall be
paid to Originator in the following manner:
(i) by delivery of immediately available
funds, to the extent of funds made
available to Buyer in connection with
its subsequent sale of an interest in
such Receivables to the Purchasers under
the Purchase Agreement;
(ii) by delivery of the proceeds of a
subordinated revolving loan from
Originator to Buyer (each a
"Subordinated Loan") in an amount not to
exceed the lesser of (i) the remaining
unpaid portion of such Purchase Price
and (ii) the maximum Subordinated Loan
that could be borrowed without rendering
Buyer's Net Worth less than the Required
Capital Amount. The
Originator is hereby authorized by Buyer
to endorse on the schedule attached to
the Subordinated Note an appropriate
notation evidencing the date and amount
of each advance thereunder, as well as
the date of each payment with respect
thereto, provided that the failure to
make such notation shall not affect any
obligation of Buyer thereunder; and
(iii)the balance, unless Originator has
declared the Amortization Date to have
occurred pursuant to Section 5.2, by
accepting a contribution to its capital.
The Purchase Price for each Receivable coming into
existence after the Initial Cutoff Date shall be due
and owing in full by Buyer to Originator or its
designee on the date each such Receivable came into
existence (except that Buyer may, with respect to any
such Purchase Price, offset against such Purchase Price
any amounts owed by Originator to Buyer hereunder and
which have become due but remain unpaid) and shall be
paid to Originator in the manner provided in the
following paragraphs (b), (c) and (d).
(b) With respect to any Receivables coming
into existence after the date hereof, on each
Settlement Date, Buyer shall pay the Purchase Price
therefor in accordance with Section 1.2(d) and in the
following manner:
first, by delivery of immediately available
funds, to the extent of funds available to
Buyer from its subsequent sale of an interest
in the Receivables to the Agent for the
benefit of the Purchasers under the Purchase
Agreement or other cash on hand;
second, by delivery of the proceeds of a
Subordinated Loan, provided that the making
of any such Subordinated Loan shall be
subject to the provisions set forth in
Section 1.2(a)(ii); and
third, unless Originator has declared the
Amortization Date to have occurred pursuant
to Section 5.2, by accepting a contribution
to its capital in an amount equal to the
remaining unpaid balance of such Purchase
Price.
Subject to the limitations set forth in Section
1.2(a)(ii), Originator irrevocably agrees to advance
each Subordinated Loan requested by Buyer on or prior
to the Amortization Date. The Subordinated Loans shall
be evidenced by, and shall be payable in accordance
with the terms and provisions of the Subordinated Note
and shall be payable solely from funds which Buyer is
not required under the Purchase Agreement to set aside
for the benefit of, or otherwise pay over to, the
Purchasers.
(c) From and after the Amortization Date,
Originator shall not be obligated to (but may, at its
option): (i) sell Receivables to Buyer, or (ii)
contribute Receivables to Buyer's capital pursuant to
clause third of Section 1.2(b) unless Originator
reasonably determines that the Purchase Price therefor
will be satisfied with funds available to Buyer from
sales of interests in the Receivables pursuant to the
Purchase Agreement, Collections, proceeds of
Subordinated Loans or otherwise.
(d) Although the Purchase Price for each
Receivable coming into existence after the date hereof
shall be due and payable in full by Buyer to Originator
on the date such Receivable came into existence,
settlement of the Purchase Price between Buyer and
Originator shall be effected on a monthly basis on
Settlement Dates with respect to all Receivables coming
into existence during the same Collection Period and
based on the information contained in the Monthly
Report delivered by the Servicer pursuant to Article
VIII of the Purchase Agreement for the Collection
Period then most recently ended. Although settlement
shall be effected on Settlement Dates, increases or
decreases in the amount owing under the Subordinated
Note made pursuant to Section 1.2(b) and any
contribution of capital by Originator to Buyer made
pursuant to Section 1.2(b) shall be deemed to have
occurred and shall be effective as of the last Business
Day of the Collection Period to which such settlement
relates.
Section 1.3 Purchase Price Credit Adjustments.
If on any day:
(a) the Outstanding Balance of a Receivable is:
(i) reduced as a result of any
defective or rejected goods or
services, any discount or any
adjustment or otherwise by
Originator (other than cash
Collections on account of the
Receivables),
(ii) 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 transac
tion), or
(b) any of the representations and
warranties set forth in Article II are not true as of
the date when made with respect to any Receivable,
then, in such event, Buyer shall be entitled to a
credit (each, a "Purchase Price Credit") against the
Purchase Price otherwise payable hereunder equal to the
Outstanding Balance of such Receivable. If such
Purchase Price Credit exceeds the Original Balance of
the Receivables coming into existence on any day, then
Originator shall pay the remaining amount of such
Purchase Price Credit in cash within 5 Business Days
thereafter, provided that if the Amortization Date has
not occurred, Originator shall be allowed to deduct the
remaining amount of such Purchase Price Credit from any
indebtedness owed to it under the Subordinated Note.
Section 1.4 Payments and Computations,
Etc. All amounts to be paid or deposited by Buyer
hereunder shall be paid or deposited in accordance with
the terms hereof on the day when due in immediately
available funds to the account of Originator designated
from time to time by Originator or as otherwise
directed by Originator. In the event that any payment
owed by any Person hereunder becomes due on a day that
is not a Business Day, then such payment shall be made
on the next succeeding Business Day. If any Person
fails to pay any amount hereunder when due, such Person
agrees to pay, on demand, the Default Fee in respect
thereof until paid in full; provided, however, that
such Default Fee shall not at any time exceed the
maximum rate permitted by applicable law. All
computations of interest payable hereunder shall
be made on the basis of a year of 360 days for the
actual number of days (including the first but excluding
the last day) elapsed.
Section 1.5 Transfer of Records.
(a) In connection with the Purchase of
Receivables hereunder, Originator hereby sells,
transfers, assigns and otherwise conveys to Buyer all
of Originator's right and title to and interest in the
Records relating to all Receivables sold hereunder,
without the need for any further documentation in
connection with the Purchase. In connection with such
transfer, Originator hereby grants to each of Buyer,
the Agent and the Servicer an irrevocable,
non-exclusive license to use, without royalty or
payment of any kind, all software used by Originator to
account for the Receivables, to the extent necessary to
administer the Receivables, whether such software is
owned by Originator or is owned by others and used by
Originator under license agreements with respect
thereto, provided that should the consent of any
licensor of Originator to such grant of the license
described herein be required, Originator hereby agrees
that upon the request of Buyer (or the Agent as Buyer's
assignee), Originator will use its reasonable efforts
to obtain the consent of such third-party licensor.
The license granted hereby shall be irrevocable, and
shall terminate on the date this Agreement terminates
in accordance with its terms.
(b) Originator (i) shall take such action
requested by Buyer and/or the Agent (as Buyer's
assignee), from time to time hereafter, that may be
necessary or appropriate to ensure that Buyer and its
assigns under the Purchase Agreement have an
enforceable ownership interest in the Records relating
to the Receivables purchased from Originator hereunder,
and (ii) shall use its reasonable efforts to ensure
that Buyer, the Agent and the Servicer each has an
enforceable right (whether by license or sublicense or
otherwise) to use all of the computer software used to
account for the Receivables and/or to recreate such
Records.
Section 1.6 Characterization. If,
notwithstanding the intention of the parties expressed
in Section 1.1(b), any sale or contribution by
Originator to Buyer of Receivables hereunder shall be
characterized as a secured loan and not a sale or such
sale shall for any reason be ineffective or
unenforceable, then this Agreement shall be deemed to
constitute a security agreement under the UCC and other
applicable law. For this purpose and without being in
derogation of the parties' intention that the sale of
Receivables hereunder shall constitute a true sale
thereof, Originator hereby grants to Buyer a duly
perfected security interest in all of Originator's
right, title and interest in, to and under all
Receivables now existing and hereafter arising, all
Collections, Related Security and Records with respect
thereto, each Lock-Box and Collection Account, each
Transfer Agreement and all proceeds of the foregoing,
which security interest shall be prior to all other
Adverse Claims thereto. After the occurrence of an
Amortization Event, Buyer and its assigns shall have,
in addition to the rights and remedies which they may
have under this Agreement, all other rights and
remedies provided to a secured creditor after default
under the UCC and other applicable law, which rights
and remedies shall be cumulative.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties
of Originator. Originator hereby represents and
warrants to Buyer that:
(a) Corporate Existence and Power.
Originator is a corporation duly organized, validly
existing and in good standing or in active status under
the laws of its state of incorporation, and is duly
qualified to do business and is in good standing as a
foreign corporation, and has and holds all corporate
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
Originator of this Agreement and each other Transaction
Document to which it is a party, and the performance of
its obligations hereunder and thereunder and,
Originator's use of the proceeds of the Purchase made
hereunder, are within its corporate powers and
authority and have been duly authorized by all
necessary corporate action on its part. This Agree
ment and each other Transaction Document to which
Originator is a party have been duly executed and
delivered by Originator.
(c) No Conflict. The execution and delivery
by Originator 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 (or equivalent
organizational documents), (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 Originator
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
Originator 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
Originator's knowledge, threatened, against or affect
ing Originator, 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. Originator 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 Originator is a
party constitute the legal, valid and binding
obligations of Originator enforceable against
Originator 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 Originator or any
of its Affiliates to Buyer (or its assigns) 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 hereafter furnished by Originator or any of
its Affiliates to Buyer (or its assigns) 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 the
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 the
time each Receivable came into existence, Originator
shall be the legal and beneficial owner of each such
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 Originator'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 transfer to Buyer
(and Buyer shall acquire from Originator) legal and
equitable title to, with the right to sell and encumber
each Receivable existing and hereafter arising,
together with the Related Security and Collections 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 Buyer's ownership interest in
the Receivables, the Related Security and the
Collections.
(k) Places of Business. The principal
places of business and chief executive office of
Originator and the offices where it keeps all of its
Records are located at the address(es) listed on
Exhibit II or such other locations of which Buyer has
been notified in accordance with Section 4.2(a) in
jurisdictions where all action required by Section
4.2(a) has been taken and completed. Originator's
Federal Employer Identification Number and
organizational identification number (if any) is
correctly set forth on Exhibit II.
(l) Collections. The conditions and
requirements set forth in Section 4.1(j) 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
Originator at each Collection Bank and the post office
box number of each Lock-Box, are listed on Exhibit III.
(m) Material Adverse Effect. Since April
29, 2000 no event has occurred that would reasonably be
expected to have a Material Adverse Effect.
(n) Names. In the past five (5) years,
Originator 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 Buyer. Originator owns,
directly or indirectly, 100% of the issued and
outstanding capital stock of Buyer, 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 Buyer.
(p) Not a Holding Company or an Investment
Company. Originator 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. Originator 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. Originator 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.
Originator has paid all taxes (if any) payable in
connection with each Receivable on or prior to the date
such Receivable is purchased by Buyer.
(r) Compliance with Credit and Collection
Policy. Originator 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 4.2(c) and
in compliance with the notification requirements in
Section 4.1(a)(vii).
(s) Payments to Originator. With respect to
each Receivable transferred to Buyer hereunder, the
Purchase Price received by Originator constitutes
reasonably equivalent value in consideration therefor
and such transfer was not made for or on account of an
antecedent debt. No transfer by Originator of any
Receivable hereunder 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, enforce
able 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 it came into existence was an
Eligible Receivable on such date.
(v) Accounting. The manner in which
Originator accounts for the transactions contemplated
by this Agreement does not jeopardize the true sale
analysis
(w) Compliance with Representations. On and
as of the date of the Purchase, with respect to the
Receivables purchased on such date, and on and as of
the date each Receivable came into existence,
Originator hereby represents and warrants that all of
the other representations and warranties set forth in
this Article II are true and correct on and as of each
such date as though made on and as of each such date.
ARTICLE III
CONDITIONS OF PURCHASE
Section 3.1 Conditions Precedent to
Purchase. The Purchase under this Agreement is subject
to the conditions precedent that (a) Buyer shall have
received on or before the date of such purchase those
documents listed on Schedule A and (b) all of the
conditions to the initial purchase under the Purchase
Agreement shall have been satisfied or waived in
accordance with the terms thereof.
Section 3.2 Conditions Precedent to
Subsequent Payments. Buyer's obligation to pay for
Receivables coming into existence after the date hereof
shall be subject to the further conditions precedent
that (a) the Facility Termination Date shall not have
occurred; and (b) Buyer (or its assigns) shall have
received such other approvals, opinions or documents as
it may reasonably request. Originator represents and
warrants that the representations and warranties set
forth in Article II are true and correct on and as of
the date each Receivable came into existence as though
made on and as of such date.
ARTICLE IV
COVENANTS
Section 4.1 Affirmative Covenants of
Originator. Until the date on which this Agreement
terminates in accordance with its terms, Originator
hereby covenants as set forth below:
(a) Financial Reporting. Originator will
maintain, for itself and each of its Subsidiaries, a
system of accounting established and administered in
accordance with generally accepted accounting
principles, and furnish to Buyer (or its assigns):
(i) Annual Reporting. Within ninety (90)
days after the close of each of its respective
fiscal years, audited financial statements (which
shall include balance sheets, statements of income
and retained earnings and a statement of cash
flows) for Originator for such fiscal year
certified in a manner acceptable to Buyer (or its
assigns) by PricewaterhouseCoopers LLP or other
independent public accountants acceptable to Buyer
(or its assigns) 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.
(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 Originator as at the close of
each such period and statements of income and retained
earnings and a statement of cash flows for Originator
for the period from the beginning of such fiscal year
to the end of such quarter, all certified by its chief
financial officer.
(iii) Compliance Certificate. Together
with the financial statements required hereunder, a
compliance certificate in substantially the form of
Exhibit IV signed by Originator'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 of Originator, in their capacity as
shareholders, 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 Buyer,
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 indicating such change or amendment.
(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
Originator as Buyer (or its assigns) may from time to
time reasonably request in order to protect the
interests of Buyer (and its assigns) under or as
contemplated by this Agreement.
Information required to be delivered pursuant
to Section 4.1(a)(i), (ii), (iv) or (v) above shall be
deemed to have been delivered on the date on which
Buyer (or its assignee) is notified (which notification
may be by e-mail) that Originator has posted such
information on Originator's website on the Internet at
the website address at ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ or at
another website identified in a notice delivered to
Buyer (or its assignee) and accessible by Buyer (or its
assignee) without charge, provided that Originator
shall deliver paper copies of the information referred
to in Section 4.1(a)(i), (ii), (iv) or (v) to Buyer (or
its assignee) if Buyer (or its assignee) requests such
delivery.
(b) Notices. Originator will cause an
Authorized Officer to notify the Buyer (or its assigns)
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 Originator or any of
its Subsidiaries if the aggregate amount of all
judgments and decrees then outstanding against
Originator and its Subsidiaries exceeds $1,000,000, and
(2) the institution of any litigation, arbitration
proceeding or governmental proceeding against
Originator which could reasonably be expected to have a
Material Adverse Effect.
(iii) Material Adverse Effect. The occur
rence of any event or condition that has, or could
reasonably be expected to have, a Material Adverse
Effect.
(iv) 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 Originator is a debtor or
an obligor which could reasonably be expected to have a
Material Adverse Effect.
(v) Downgrade of the Originator. Any down
grade in the rating of any Indebtedness of the
Originator by Standard and 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. Originator 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. Originator 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. Originator will furnish to
Buyer (or its assigns) from time to time such
information with respect to it and the Receivables as
Buyer (or its assigns) may reasonably request.
Originator 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 Buyer (or
its assigns), upon reasonable notice and at the sole
cost of Originator, permit Buyer (or its assigns) or
their respective agents or representatives, (i) to
examine and make copies of and abstracts from all
Records in the possession or under the control of
Originator relating to the Receivables and the Related
Security, including, without limitation, the related
Contracts, and (ii) to visit the offices and properties
of Originator for the purpose of examining such
materials described in clause (i) above, and to discuss
matters relating to Originator's financial condition or
the Receivables and the Related Security or
Originator's performance under any of the Transaction
Documents or Originator's performance under the
Contracts and, in each case, with any of the officers
or employees of Originator having knowledge of such
matters.
(e) Keeping and Marking of Records and
Books.
(i) Originator will maintain and implement
administrative and operating procedures (including,
without limitation, an ability to recreate records
evidencing the 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). Originator will give Buyer (or its
assigns) notice of any material change in the
administrative and operating procedures referred to in
the previous sentence.
(ii) Originator will (A) on or prior to the
date hereof, ▇▇▇▇ its master data processing records
and other books and records relating to the Receivables
with a legend, acceptable to Buyer (or its assigns),
describing Buyer's ownership interests in the
Receivables and further describing the Purchaser
Interests of the Agent (on behalf of the Purchasers)
under the Purchase Agreement and (B) after the
occurrence of an Amortization Event that has not been
waived in accordance with the terms hereof, upon the
request of Buyer (or its assigns), (x) ▇▇▇▇ each
Contract with a legend describing Buyer's ownership
interests in the Receivables and further describing the
Purchaser Interests of the Agent (on behalf of the
Purchasers) and (y) deliver to Buyer (or its assigns)
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. Originator will 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 Transfer
Agreements. Originator will and will require each
Original Seller to, perform each of their respective
obligations and undertakings under and pursuant to the
Transfer Agreements, will purchase Receivables
thereunder in strict compliance with the terms thereof
and will vigorously enforce the rights and remedies
accorded to Originator under each Transfer Agreement.
Originator will take all actions to perfect and enforce
its rights and interests (and the rights and interests
of Buyer as assignee of Originator) under each Transfer
Agreement as Buyer (or its assigns) 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 Transfer Agreements.
(h) Ownership. Originator will take all
necessary action to (i) vest legal and equitable title
to the Receivables, the Related Security and the
Collections purchased under each Transfer Agreement
irrevocably in Originator, free and clear of any
Adverse Claims other than Adverse Claims in favor of
Buyer (or its assigns) (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 Originator'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 Originator therein as Buyer
may reasonably request), and (ii) establish and
maintain, irrevocably in Buyer, legal and equitable
title to the Receivables, the Related Security and the
Collections, free and clear of any Adverse Claims other
than Adverse Claims in favor of Buyer (and its assigns)
(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
Buyer'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 Buyer as Buyer (or its assigns) may
reasonably request).
(i) Purchasers' Reliance. Originator
acknowledges that the Agent and the Purchasers are
entering into the transactions contemplated by the
Purchase Agreement in reliance upon Buyer'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, Originator
will take all reasonable steps including, without limi
tation, all steps that Buyer or any assignee of Buyer
may from time to time reasonably request to maintain
Buyer's identity as a separate legal entity and to make
it manifest to third parties that Buyer is an entity
with assets and liabilities distinct from those of
Originator and any Affiliates thereof and not just a
division of Originator. Without limiting the gener
ality of the foregoing and in addition to the other
covenants set forth herein, Originator (i) will not
hold itself out to third parties as liable for the
debts of Buyer nor purport to own the Receivables and
other assets acquired by Buyer, (ii) will take all
other actions necessary on its part to ensure that
Buyer is at all times in compliance with the covenants
set forth in Section 7.1(i) of the Purchase Agreement
and (iii) will cause all tax liabilities arising in
connection with the transactions contemplated herein or
otherwise to be allocated between Originator and Buyer
on an arm's-length basis and in a manner consistent
with the procedures set forth in U.S. Treasury
Regulations 1.1502-33(d) and 1.1552-1.
(j) Collections. Originator 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 Originator or any Affiliate of Originator,
Originator will remit (or will cause all such payments
to be remitted) directly to a Collection Bank for
deposit into a Collection Account within two (2)
Business Days following receipt thereof and, at all
times prior to such remittance, Originator will itself
hold or, if applicable, will cause such payments to be
held in trust for the exclusive benefit of Buyer and
its assigns. Originator will transfer exclusive
ownership, dominion and control of each Lock-Box and
Collection Account to Buyer and, will 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
Buyer (or its assigns) as contemplated by this Agree
ment and the Purchase Agreement.
(k) Taxes. Originator will file all tax
returns and reports required by law to be filed by it
and promptly pay all taxes and governmental charges at
any time owing by it.
(l) Insurance. Originator will maintain in
effect, or cause to be maintained in effect, at
Originator's own expense, such casualty and liability
insurance as Originator deems appropriate in its good
faith business judgement. The foregoing requirements
shall not be construed to negate, reduce or modify, and
are in addition to, Originator's obligations hereunder.
Section 4.2 Negative Covenants of Originator.
Until the date on which this Agreement terminates in
accordance with its terms, Originator hereby covenants
that:
(a) Name Change, Offices and Records.
Originator 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 Buyer (or its assigns) at least thirty (30)
days' prior written notice thereof and (ii) delivered
to Buyer (or its assigns) all financing statements,
instruments and other documents requested by Buyer (or
its assigns) in connection with such change or
relocation.
(b) Change in Payment Instructions to
Obligors. Originator 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 Buyer (or
its assigns) 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
Originator 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. Originator will not 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 otherwise permitted in its capacity as
Servicer pursuant to Article VIII of the Purchase
Agreement, Originator will not 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. Originator 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 Buyer provided for
herein), and Originator will defend the right, title
and interest of Buyer in, to and under any of the
foregoing property, against all claims of third parties
claiming through or under Originator.
(e) Accounting for Purchase. Originator
will not, and will not permit any Affiliate to, account
for or treat (whether in financial statements or
otherwise) the transactions contemplated hereby in any
manner other than the sale of the Receivables and the
Related Security by Originator to Buyer or in any other
respect account for or treat the transactions con
templated hereby in any manner other than as a sale of
the Receivables and the Related Security by Originator
to Buyer except to the extent that such transactions
are not recognized on account of consolidated financial
reporting in accordance with generally accepted
accounting principles.
ARTICLE V
AMORTIZATION EVENTS
Section 5.1 Amortization Events. The
occurrence of any one or more of the following events
shall constitute an Amortization Event:
(a) Originator shall fail (i) to make any
payment or deposit required hereunder when due, or (ii)
to perform or observe any term, covenant or agreement
hereunder (other than as referred to in clause (i) of
this paragraph (a) and paragraph (d) hereof) or any
other Transaction Document to which it is a party and
such failure shall continue for three (3) consecutive
Business Days. Buyer (or its assigns) shall give
notice to Originator (which notice may be given
telephonically) of any payment to be made by Originator
to Buyer (or its assigns) hereunder which is not made
when due.
(b) Any representation, warranty,
certification or statement made by Originator in this
Agreement, any other Transaction Document or in any
other document delivered pursuant
hereto or thereto shall prove to have been incorrect
in any material respect when made or deemed made.
(c) Failure of Originator to pay any
Indebtedness in excess of $5,000,000 or the default by
Originator 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 Originator 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, except to the
extent that such failure to pay or perform is due to
the existence of a bona fide dispute (as determined
solely by the Agent), being contested by Originator in
good faith.
(d) (i) Originator shall generally not pay
its debts as such debts become due or shall admit in
writing its inability to pay its debts generally or
shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or
against Originator 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 (ii) Originator shall take any
corporate action to authorize any of the actions set
forth in the foregoing clause (i) of this subsection
(d).
(e) A Change of Control with respect to
Originator shall occur or Originator shall cease to own
directly, free and clear of all Adverse Claims, all of
the outstanding shares of Buyer.
(f) 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 Originator 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.
(g) As at the end of any fiscal quarter:
(i) the Consolidated Leverage Ratio of
Originator 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) of Originator shall be less than
2.0:1.0; or
(iii) Consolidated Net Worth (as
defined in the SSI Loan Agreement) of
Originator 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 5.2 Remedies. Upon the occurrence
and during the continuation of an Amortization Event,
Buyer may take any of the following actions: (i)
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 Originator;
provided, however, that upon the occurrence of an
Amortization Event described in Section 5.1(d), or of
an actual or deemed entry of an order for relief with
respect to Originator 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 Originator and
(ii) to the fullest extent permitted by applicable law,
declare that the Default Fee shall accrue with respect
to any amounts then due and owing by Buyer to
Originator. The aforementioned rights and remedies
shall be in addition to all other rights and remedies
of Buyer and its assigns available under 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 VI
INDEMNIFICATION
Section 6.1 Indemnities by Originator.
Without limiting any other rights that Buyer may have
hereunder or under applicable law, Originator hereby
agrees to indemnify Buyer and its 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 Buyer) 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 Buyer of an interest in the
Receivables, excluding, however:
(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 Intended Characterization;
provided, however, that nothing contained in this
sentence shall limit the liability of Originator or
limit the recourse of Buyer to Originator for amounts
otherwise specifically provided to be paid by
Originator under the terms of this Agreement. Without
limiting the generality of the foregoing
indemnification, Originator shall indemnify Buyer for
Indemnified Amounts (including, without limitation,
losses in respect of uncollectible receivables,
regardless of whether reimbursement therefor would
constitute recourse to Originator) resulting from:
(i) any representation or warranty made by
Originator (or any officers of
Originator) under or in connection with
this Agreement, any other Transaction
Document or any other information or
report delivered by Originator pursuant
hereto or thereto, which shall have been
false or incorrect when made or deemed
made;
(ii) the failure by Originator, to comply
with any applicable law, rule or
regulation with respect to any Receiv
able 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;
(iii) any failure of Originator to perform
its duties, covenants or other
obligations in accordance with the
provisions of this Agreement or any
other Transaction Document;
(iv) any products liability, personal injury
or damage suit, or similar claim arising
out of or in connection with
merchandise, insurance or services that
are the subject of any Contract;
(v) any dispute, claim, offset or defense
(other than discharge in bankruptcy, or
suspension of payments due to the
bankruptcy of, or a similar insolvency
proceeding with respect to, 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;
(vi) the commingling of Collections of
Receivables at any time with other
funds;
(vii) 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 the
Purchase, the ownership of the
Receivables or any other investigation,
litigation or proceeding relating to
Originator in which any Indemnified
Party becomes involved as a result of
any of the transactions contemplated
hereby;
(viii) 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;
(ix) any Amortization Event described in
Section 5.1(d);
(x) any failure of Originator to acquire and
maintain legal and equitable title to,
and ownership of any Receivable and the
Related Security and Collections with
respect thereto from Original Seller,
free and clear of any Adverse Claim
(other than as created hereunder); or
any failure of Originator to give
reasonably equivalent value to Original
Seller under the Transfer Agreement in
consideration of the transfer by
Original Seller of any Receivable, or
any attempt by any Person to void such
transfer under statutory provisions or
common law or equitable action;
(xi) any failure to vest and maintain vested
in Buyer, or to transfer to Buyer, legal
and equitable title to, and ownership
of, the Receivables, the Related
Security and the Collections, free and
clear of any Adverse Claim;
(xii) 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 the
Purchase or at any subsequent time;
(xiii) any action or omission by
Originator which reduces or impairs the
rights of Buyer with respect to any
Receivable or the value of any such
Receivable; and
(xiv) any attempt by any Person to void
the Purchase hereunder under statutory
provisions or common law or equitable
action.
Section 6.2 Other Costs and Expenses.
Originator shall pay to Buyer 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 Transaction Documents to be delivered
hereunder. Originator shall pay to Buyer on demand any
and all costs and expenses of Buyer, 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 amendment to or waiver of the provisions of this
Agreement or any other Transaction Document.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Waivers and Amendments. (a)
No failure or delay on the part of Buyer (or its
assigns) 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 signed by Originator and Buyer and, to the
extent required under the Purchase Agreement, the Agent
and the Financial Institutions or the Required
Financial Institutions.
Section 7.2 Notices. Except as provided
below, 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 (i) if
given by telecopy, upon the receipt thereof, or (ii) if
given by any other means, when received at the address
specified in this Section 7.2.
Section 7.3 Protection of Ownership
Interests of Buyer. (a) Originator 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
Buyer (or its assigns) may request, to perfect, protect
or more fully evidence Buyer's ownership interest, or
to enable Buyer (or its assigns) to exercise and
enforce their rights and remedies hereunder. At any
time, Buyer (or its assigns) may, at Originator's sole
cost and expense, direct Originator to notify the
Obligors of Receivables of the ownership interests of
Buyer under this Agreement and may also direct that
payments of all amounts due or that become due under
any or all Receivables be made directly to Buyer or,
after an Amortization Event, to Buyer's designee.
(b) If Originator fails to perform any of
its obligations hereunder, Buyer (or its assigns) may
(but shall not be required to) perform, or cause
performance of, such obligation, and Buyer's (or such
assigns') costs and expenses incurred in connection
therewith shall be payable by Originator as provided in
Section 6.2. Originator irrevocably authorizes Buyer
(and its assigns) at any time and from time to time in
the sole discretion of Buyer (or its assigns), and
appoints Buyer (and its assigns) as its attorney(s)-in
-fact, to act on behalf of Originator (i) to execute on
behalf of
Originator as debtor and to file financing statements
necessary or desirable in Buyer's (or its assigns')
sole discretion to perfect and to maintain the
perfection and priority of the interest of Buyer 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 Buyer (or its assigns) in
their sole discretion deem necessary or desirable to
perfect and to maintain the perfection and priority of
Buyer's interests in the Receivables. This appointment
is coupled with an interest and is irrevocable.
Section 7.4 Confidentiality. (a)
Originator shall maintain and shall cause each of its
employees and officers to maintain the confidentiality
of this Agreement and the other confidential
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 Originator and its officers and employees
may disclose such information to Originator's external
accountants and attorneys and as required by any
applicable law or order of any judicial or
administrative proceeding and to any "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, Originator hereby consents to the
disclosure of any nonpublic information with respect to
it (i) to Buyer, the Agent, the Financial Institutions
or Falcon by each other, (ii) by Buyer, the Agent or
the Purchasers to any prospective or actual assignee
or participant of any of them or (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 7.5 Bankruptcy Petition.
Originator and Buyer each 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, 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.
Section 7.6 CHOICE OF LAW. THIS AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
Section 7.7 CONSENT TO JURISDICTION.
ORIGINATOR HEREBY IRREVOCABLY SUBMITS TO THE NON-
EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR
NEW YORK STATE 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 ORIGINATOR
PURSUANT TO THIS AGREEMENT AND ORIGINATOR 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 BUYER (OR ITS ASSIGNS) TO
BRING PROCEEDINGS AGAINST ORIGINATOR IN THE COURTS OF
ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY
ORIGINATOR AGAINST BUYER (OR ITS ASSIGNS) OR ANY
AFFILIATE THEREOF INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS AGREEMENT OR ANY DOCUMENT EXECUTED
BY ORIGINATOR PURSUANT TO THIS AGREEMENT SHALL BE
BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
Section 7.8 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
ORIGINATOR PURSUANT TO THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER OR THEREUNDER.
Section 7.9 Integration; Binding Effect;
Survival of Terms.
(a) This Agreement, the Subordinated Note
and each Collection Account Agreement 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 re
spective 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 Originator
pursuant to Article II, (ii) the indemnification and
payment provisions of Article VI, and Section 7.5 shall
be continuing and shall survive any termination of this
Agreement.
Section 7.10 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.
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.
SCHOOL SPECIALTY, INC., as Originator
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: CFO
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
NEW SCHOOL, INC., as Buyer
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Treasurer
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: ▇▇▇-▇▇▇-▇▇▇▇
EXHIBIT I
Definitions
This is Exhibit I to the Agreement (as hereinafter
defined). As used in the Agreement and the Exhibits,
Schedules and Annexes thereto, capitalized terms have
the meanings set forth in this Exhibit I (such meanings
to be equally applicable to the singular and plural
forms thereof). If a capitalized term is used in the
Agreement, or any Exhibit, Schedule or Annex thereto,
and not otherwise defined therein or in this Exhibit I,
such term shall have the meaning assigned thereto in
Exhibit I to the Purchase Agreement.
"Agent" has the meaning set forth in the
Preliminary Statements to the Agreement.
"Agreement" means this Receivables Sale Agreement,
as it may be amended, restated or otherwise modified
and in effect from time to time.
"Amortization Date" means the earliest to occur of
(i) the Facility Termination Date, (ii) the Business
Day immediately prior to the occurrence of an
Amortization Event set forth in Section 5.1(d), (iii)
the Business Day specified in a written notice from
Buyer to Originator following the occurrence of any
other Amortization Event, and (iv) the date which is
thirty (30) Business Days after Buyer's receipt of
written notice from Originator that it wishes to
terminate the facility evidenced by this Agreement.
"Amortization Event" has the meaning set forth in
Section 5.1 of the Agreement.
"Authorized Officer" means, with respect to
Originator, its president, corporate controller,
treasurer or chief financial officer.
"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.
"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.
"Buyer" has the meaning set forth in the preamble
to the Agreement.
"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 25% or more of the
outstanding shares of voting stock of Originator.
"Credit and Collection Policy" means Originator's
credit and collection policies and practices relating
to Contracts and Receivables existing on the date
hereof and summarized in Exhibit V, as modified from
time to time in accordance with the Agreement.
"Default Fee" means a per annum rate of interest
equal to the sum of (i) the Base Rate, plus (ii) 2% per
annum.
"Dilutions" means, at any time, the aggregate
amount of reductions or cancellations described in
Section 1.3(a) of the Agreement.
"Discount Factor" means a percentage calculated to
provide Buyer with a reasonable return on its
investment in the Receivables after taking account of
(i) the time value of money based upon the anticipated
dates of collection of the Receivables and the cost to
Buyer of financing its investment in the Receivables
during such period and (ii) the risk of nonpayment by
the Obligors. Originator and Buyer may agree from time
to time to change the Discount Factor based on changes
in one or more of the items affecting the calculation
thereof, provided that any change to the Discount
Factor shall take effect as of the commencement of a
Collection Period, shall apply only prospectively and
shall not affect the Purchase Price payment in respect
of any Receivable which arose during any Collection
Period ending prior to the Collection Period during
which Originator and Buyer agree to make such change.
"Falcon" has the meaning set forth in the
Preliminary Statements to the Agreement.
"Federal Bankruptcy Code" means Title 11 of the
United States Code entitled "Bankruptcy", as amended
and any successor statute thereto.
"Intended Characterization" means, for income tax
purposes, the characterization of the acquisition by
the Purchasers of Purchaser Interests under the
Purchase Agreement as a loan or loans by the Purchasers
to Buyer secured by the Receivables, the Related
Security and the Collections.
"Material Adverse Effect" means a material adverse
effect on (i) the financial condition or operations of
Originator and its Subsidiaries taken as a whole, (ii)
the ability of Originator to perform its obligations
under the Agreement or any other Transaction Document,
(iii) the legality, validity or enforceability of the
Agreement or any other Transaction Document, (iv)
Originator's, Buyer's, the Agent's or any Purchaser's
interest in the Receivables generally or in any
significant portion of the Receivables, the Related
Security or Collections with respect thereto, or (v)
the collectibility of the Receivables generally or of
any material portion of the Receivables.
"Net Worth" means as of the last Business Day of
each Collection Period preceding any date of
determination, the excess, if any, of (a) the aggregate
Outstanding Balance of the Receivables at such time,
over (b) the sum of (i) the aggregate Capital
outstanding at such time, plus (ii) the aggregate
outstanding principal balance of the Subordinated Loans
(including any Subordinated Loan proposed to be made on
the date of determination).
"Original Balance" means, with respect to any
Receivable, the Outstanding Balance of such Receivable
on the date it was purchased by Buyer.
"Original Seller" means each of, Childcraft
Education Corp., a New York corporation, Classroom
▇▇▇▇▇▇.▇▇▇, LLC, a Delaware limited liability company,
Sportime, LLC, a Delaware limited liability company,
and Global Video, LLC, a Wisconsin limited liability
company, in their respective capacities as sellers
under the Transfer Agreements, and each other
Subsidiary of Originator, which is approved by the
Agent and which becomes an "Original Seller" pursuant
to a Transfer Agreement in form and substance
satisfactory to the Agent.
"Originator" has the meaning set forth in the
preamble to the Agreement.
"Potential Amortization Event" means an event
which, with the passage of time or the giving of
notice, or both, would constitute an Amortization
Event.
"Purchase" means the purchase under the Agreement
by Buyer from Originator of the Receivables, the
Related Security and the Collections related thereto,
together with all related rights in connection
therewith.
"Purchase Agreement" has the meaning set forth in
the Preliminary Statements to the Agreement.
"Purchase Price" means, with respect to any
Purchase on any date, the aggregate price to be paid by
Buyer to Originator for such Purchase in accordance
with Section 1.2 of the Agreement for the Receivables,
Collections and Related Security being sold to Buyer on
such date, which price shall equal (i) the product of
(x) the Original Balance of such Receivables,
multiplied by (y) one minus the Discount Factor then in
effect, minus (ii) any Purchase Price Credits to be
credited against the Purchase Price otherwise payable
in accordance with Section 1.3 of the Agreement.
"Purchase Price Credit" has the meaning set forth
in Section 1.3 of the Agreement.
"Purchaser" means Falcon or a Financial
Institution, as applicable.
"Receivable" means the indebtedness and other
obligations owed to Originator or an Original Seller
(without giving effect to any transfer or conveyance
under any Transfer Agreement or the Agreement) or Buyer
(after giving effect to the transfers under each
Transfer Agreement and the Agreement) whether
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
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.
"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, 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 con
tracts and agreements associated with such Receivable,
(iv) all Records and rights under the Contract(s)
related to such Receivable,
(v) all of Originator's interest in, to and under
each Transfer Agreement, and
(vi) all proceeds of any of the foregoing.
"Required Capital Amount" means, as of any date of
determination, an amount equal to 9% of the aggregate
Outstanding Balance of Receivables.
"Subordinated Loan" has the meaning set forth in
Section 1.2(a) of the Agreement.
"Subordinated Note" means a promissory note in
substantially the form of Exhibit VI hereto as more
fully described in Section 1.2 of the Agreement, as the
same may be amended, restated, supplemented or
otherwise modified from time to time.
"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.
"Transaction Documents" means, collectively, this
Agreement, each Transfer Agreement, the Servicing
Agreement, each Collection Account Agreement, the
Subordinated Note and all other instruments, documents
and agreements executed and delivered in connection
herewith.
"Transfer Agreement" means (i) each of those
certain Receivables Transfer Agreements dated as of
November [__], 2000, between Originator and each
Original Seller, and (ii) each other Receivables
Transfer Agreement entered into from time to time
between Originator and an Original Seller, approved by
the Agent, in form and substance satisfactory to the
Agent (as the same may be amended, restated,
supplemented or otherwise modified from time to time).
All accounting terms not specifically defined
herein shall be construed in accordance with generally
accepted accounting principles. All terms used in
Article 9 of the UCC in the State of Illinois, and not
specifically defined herein, are used herein as defined
in such Article 9.
EXHIBIT II
Places of Business; Locations of Records;
Federal Employer Identification Number(s); Other Names
Places of Business: ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Locations of Records:
Federal Employer Identification Number:
Organizational Identification Number: [none]
Corporate, Partnership Trade and Assumed Names:
EXHIBIT III
Lock-boxes; Collection Accounts; Collection Banks
EXHIBIT IV
Form of Compliance Certificate
This Compliance Certificate is furnished
pursuant to that certain Receivables Sale Agreement
dated as of November [ ], 2000, between School
Specialty, Inc. ("Originator") and New School, Inc.
(the "Agreement"). Capitalized terms used and not
otherwise defined herein are used with the meanings
attributed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected ______________ of
Originator.
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 Originator 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 a 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
below.
4. 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 Originator 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
, 20__.
_________________________
[Name]
EXHIBIT V
Credit and Collection Policy
EXHIBIT VI
Form of Subordinated Note
SUBORDINATED NOTE
November [__], 2000
1. Note. FOR VALUE RECEIVED, the undersigned, NEW
SCHOOL, INC., a Delaware corporation ("SPV"), hereby
unconditionally promises to pay to the order of SCHOOL
SPECIALTY, INC, a Wisconsin corporation ("Originator"),
in lawful money of the United States of America and in
immediately available funds, on the date following the
Amortization Date which is one year and one day after
the date on which (i) the Outstanding Balance of all
Receivables sold under the "Sale Agreement" referred to
below has been reduced to zero and (ii) Originator has
paid to the Buyer all indemnities, adjustments and
other amounts which may be owed thereunder in
connection with the Purchases (the "Collection Date"),
the aggregate unpaid principal sum outstanding of all
"Subordinated Loans" made from time to time by
Originator to SPV pursuant to and in accordance with
the terms of that certain Receivables Sale Agreement
dated as of November [__], 2000, between Originator and
SPV (as amended, restated, supplemented or otherwise
modified from time to time, the "Sale Agreement").
Reference to Section 1.2 of the Sale Agreement is
hereby made for a statement of the terms and conditions
under which the loans evidenced hereby have been and
will be made. All terms which are capitalized and used
herein and which are not otherwise specifically defined
herein shall have the meanings ascribed to such terms
in the Sale Agreement.
2. Interest. SPV further promises to pay interest on
the outstanding unpaid principal amount hereof from the
date hereof until payment in full hereof at a rate
equal to the Base Rate; provided, however, that if SPV
shall default in the payment of any principal hereof,
SPV promises to pay, on demand, interest at the rate of
the Base Rate plus 2.00% per annum on any such unpaid
amounts, from the date such payment is due to the date
of actual payment. Interest shall be payable on the
first Business Day of each month in arrears; provided,
however, that SPV may elect on the date any interest
payment is due hereunder to defer such payment and upon
such election the amount of interest due but unpaid on
such date shall constitute principal under this
Subordinated Note. The outstanding principal of any
loan made under this Subordinated Note shall be due and
payable on the Collection Date and may be repaid or
prepaid at any time without premium or penalty.
3. Principal Payments. Originator is authorized and
directed by SPV to enter on the grid attached hereto,
or, at its option, in its books and records, the date
and amount of each loan made by it which is evidenced
by this Subordinated Note and the amount of each
payment of principal made by SPV, and absent manifest
error, such entries shall constitute prima facie
evidence of the accuracy of the information so entered;
provided that neither the failure of Originator to make
any such entry or any error therein shall expand, limit
or affect the obligations of SPV hereunder.
4. Subordination. The indebtedness evidenced by this
Subordinated Note is subordinated to the prior payment
in full of all of SPV's recourse obligations under that
certain Receivables Purchase Agreement dated as of
November [__], 2000, by and among SPV, Originator, as
Servicer, various "Purchasers" from time to time party
thereto, and Bank One, NA (Main Office Chicago), as the
"Agent" (as amended, restated, supplemented or
otherwise modified from time to time, the "Purchase
Agreement"). The subordination provisions contained
herein are for the direct benefit of, and may be
enforced by, the Agent and the Purchasers and/or any of
their respective assignees (collectively, the "Senior
Claimants") under the Purchase Agreement. Until the
date on which all "Capital" outstanding under the
Purchase Agreement has been repaid in full and all
other obligations of SPV and/or the Servicer thereunder
and under the "Fee Letter" referenced therein (all such
obligations, collectively, the "Senior Claim") have
been indefeasibly paid and satisfied in full,
Originator shall not demand, accelerate, ▇▇▇ for, take,
receive or accept from SPV, directly or indirectly, in
cash or other property or by set-off or any other
manner (including, without limitation, from or by way
of collateral) any payment or security of all or any of
the indebtedness under this Subordinated Note or
exercise any remedies or take any action or proceeding
to enforce the same; provided, however, that (i)
Originator hereby agrees that it will not institute
against SPV any proceeding of the type described in
Section 5.1(d) of the Sale Agreement unless and until
the Collection Date has occurred and (ii) nothing in
this paragraph shall restrict SPV from paying, or
Originator from requesting, any payments under this
Subordinated Note so long as SPV is not required under
the Purchase Agreement to set aside for the benefit of,
or otherwise pay over to, the funds used for such pay
ments to any of the Senior Claimants and further
provided that the making of such payment would not
otherwise violate the terms and provisions of the
Purchase Agreement. Should any payment, distribution
or security or proceeds thereof be received by
Originator in violation of the immediately preceding
sentence, Originator agrees that such payment shall be
segregated, received and held in trust for the benefit
of, and deemed to be the property of, and shall be
immediately paid over and delivered to the Agent for
the benefit of the Senior Claimants.
5. Bankruptcy; Insolvency. Upon the occurrence of
any proceeding of the type described in Section 5.1(d)
of the Sale Agreement involving SPV as debtor, then and
in any such event the Senior Claimants shall receive
payment in full of all amounts due or to become due on
or in respect of Capital and the Senior Claim
(including "CP Costs" and "Yield" as defined and as
accruing under the Purchase Agreement after the
commencement of any such proceeding, whether or not any
or all of such CP Costs or Yield is an allowable claim
in any such proceeding) before Originator is entitled
to receive payment on account of this Subordinated
Note, and to that end, any payment or distribution of
assets of SPV of any kind or character, whether in
cash, securities or other property, in any applicable
insolvency proceeding, which would otherwise be payable
to or deliverable upon or with respect to any or all
indebtedness under this Subordinated Note, is hereby
assigned to and shall be paid or delivered by the
Person making such payment or delivery (whether a
trustee in bankruptcy, a receiver, custodian or
liquidating trustee or otherwise) directly to the Agent
for application to, or as collateral for the payment
of, the Senior Claim until such Senior Claim shall have
been paid in full and satisfied.
6. Amendments. This Subordinated Note shall not be
amended or modified except in accordance with Section
7.1 of the Sale Agreement. The terms of this
Subordinated Note may not be amended or otherwise
modified without the prior written consent of the Agent
for the benefit of the Purchasers.
7. GOVERNING LAW. THIS SUBORDINATED NOTE SHALL BE
INTERPRETED AND THE RIGHTS AND LIABILITIES OF THE
PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS
AND DECISIONS OF THE STATE OF NEW YORK. WHEREVER
POSSIBLE EACH PROVISION OF THIS SUBORDINATED NOTE SHALL
BE INTERPRETED IN SUCH MANNER AS TO BE EFFECTIVE AND
VALID UNDER APPLICABLE LAW, BUT IF ANY PROVISION OF
THIS SUBORDINATED NOTE SHALL BE PROHIBITED BY OR
INVALID UNDER APPLICABLE LAW, SUCH PROVISION SHALL BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR
INVALIDITY, WITHOUT INVALIDATING THE REMAINDER OF SUCH
PROVISION OR THE REMAINING PROVISIONS OF THIS
SUBORDINATED NOTE.
8. Waivers. All parties hereto, whether as makers,
endorsers, or otherwise, severally waive presentment
for payment, demand, protest and notice of dishonor.
Originator additionally expressly waives all notice of
the acceptance by any Senior Claimant of the
subordination and other provisions of this Subordinated
Note and expressly waives reliance by any Senior
Claimant upon the subordination and other provisions
herein provided.
9. Assignment. This Subordinated Note may not be
assigned, pledged or otherwise transferred to any party
other than Originator without the prior written consent
of the Agent, and any such attempted transfer shall be
void.
NEW SCHOOL, INC.
By:___________________________
Title:
SCHEDULE
TO
SUBORDINATED NOTE
SUBORDINATED LOANS AND PAYMENTS OF PRINCIPAL
Amount of Amount of Unpaid
Subordinated Principal Principal Notation
Loan Paid Balance made by
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_________________________________________________________________
_______ _____________ __________ ___________ _____________
SCHEDULE A
DOCUMENTS TO BE DELIVERED TO BUYER
ON OR PRIOR TO THE PURCHASE
[attached]
TABLE OF CONTENTS
PRELIMINARY STATEMENTS 2
ARTICLE I AMOUNTS AND TERMS 2
Section 1.1 Purchase of Receivables 2
Section 1.2 Payment for the Purchase 3
Section 1.3 Purchase Price Credit Adjustments 5
Section 1.4 Payments and Computations, Etc 5
Section 1.5 Transfer of Records 6
Section 1.6 Characterization 6
ARTICLE II REPRESENTATIONS AND WARRANTIES 7
Section 2.1 Representations and Warranties of Originator 7
ARTICLE III CONDITIONS OF PURCHASE 10
Section 3.1 Conditions Precedent to Purchase 10
Section 3.2 Conditions Precedent to Subsequent Payments 10
ARTICLE IV COVENANTS 11
Section 4.1 Affirmative Covenants of Originator 11
Section 4.2 Negative Covenants of Originator 15
ARTICLE V AMORTIZATION EVENTS 16
Section 5.1 Amortization Events 16
Section 5.2 Remedies 18
ARTICLE VI INDEMNIFICATION 18
Section 6.1 Indemnities by Originator 18
Section 6.2 Other Costs and Expenses 20
ARTICLE VII MISCELLANEOUS 21
Section 7.1 Waivers and Amendments 21
Section 7.2 Notices 21
Section 7.3 Protection of Ownership Interests of Buyer 21
Section 7.4 Confidentiality 22
Section 7.5 Bankruptcy Petition 22
Section 7.6 CHOICE OF LAW 23
Section 7.7 CONSENT TO JURISDICTION 23
Section 7.8 WAIVER OF JURY TRIAL 23
Section 7.9 Integration; Binding Effect; Survival of Terms 23
Section 7.10 Counterparts; Severability; Section References 24
Exhibits and Schedules
Exhibit I - Definitions
Exhibit II - Principal Place of Business;
Location(s) of Records; Federal
Employer Identification Number;
Other Names
Exhibit III - Lock-Boxes; Collection Accounts;
Collection Banks
Exhibit IV - Form of Compliance Certificate
Exhibit V - Credit and Collection Policy
Exhibit VI - Form of Subordinated Note
Schedule A List of Documents to Be Delivered
to Buyer Prior to the Purchase