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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
WESTERN PUBLISHING GROUP, INC.
(Exact name of registrant as specified in its charter)
September 29, 1995
Date of Report (Date of earliest event reported)
Delaware 0-14399 06-1104930
(State of other juris- (Commission I.R.S. Employer
diction of incorporation) File Number) (Identification No.)
444 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
(212) 688-4500
(Registrant's telephone number, including area code)
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Item 5. Other Events.
On September 29, 1995, Western Publishing Company, Inc. ("WPC"), a
wholly-owned subsidiary of Western Publishing Group, Inc. (the
"Company") entered into a Receivables Purchasing Agreement (the
"Agreement") with Heller Financial, Inc. (the "Purchaser"). Under the
terms of the Agreement, the Purchaser will purchase in pools, certain
trade accounts receivable from WPC on a revolving basis, up to a
maximum of $62.5 million outstanding at any one time. The pools
purchased will be on a non-recourse basis for credit losses and subject
to a discount fee based on a seventy-five day collection cycle. The
advance rate for pools purchased will be 80% of the accounts receivable
sold, except for the last pool, where the purchase advance percentage
will not be less than 75%. The obligations under the Agreement are
guaranteed by the Company.
Item 7. Financial Statements and Exhibits
(c) Exhibits:
Exhibit 10.98 -- Receivables Purchasing Agreement and related
transaction documents dated as of September 29, 1995
between Western Publishing Company, Inc. and Heller
Financial, Inc.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTERN PUBLISHING GROUP, INC.
September 29, 1995 /s/ Steven M. Grossman
----------------------
Steven M. Grossman
Chief Financial Officer
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Exhibit Index
Exhibit Sequential
No. Description of Exhibit Page No.
------- ---------------------- ----------
10.98 Receivables Purchasing Agreement
and related transaction documents
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[Execution Copy]
RECEIVABLES PURCHASING AGREEMENT
Dated September __, 1995
Between
WESTERN PUBLISHING COMPANY, INC.
as Seller
and
HELLER FINANCIAL, INC.
as Purchaser
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RECEIVABLES PURCHASING AGREEMENT
Dated September __, 1995
WESTERN PUBLISHING COMPANY, INC., a Delaware corporation (the
"Seller"), and HELLER FINANCIAL, INC., a Delaware corporation (the "Purchaser"),
agree as follows:
WHEREAS, Seller desires to sell, transfer, assign and convey
Pools (as defined in Exhibit A) of certain Eligible Receivables (as defined in
Exhibit A) from time to time to Purchaser on the terms and conditions set forth
herein;
WHEREAS, Purchaser has agreed to buy such Pools of Eligible
Receivables from Seller on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, and other good and
valuable consideration, the receipt of sufficiency of which is hereby
acknowledged, Seller and Purchaser agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Certain Defined Terms. The terms defined in
Exhibit A are used in this Agreement as so defined.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
Section 2.01. Purchase and Sale of Receivables. On the terms
and subject to the conditions of this Agreement and without recourse (except to
the extent specifically provided herein), Seller may sell, transfer, assign and
convey (but shall have no obligation to sell, transfer, assign and convey) to
Purchaser, and Purchaser shall purchase from Seller from time to time on a
Funding Date prior to the Termination Date, Eligible Receivables;
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provided, however, that (i) the Aggregate Amount of each Pool to be sold and
purchased shall be at least $1,000,000, and (ii) that after giving effect to
such sale and purchase on any such Funding Date, the Facility Limit shall
not be exceeded. Eligible Receivables to be sold hereunder on a Funding Date
shall be identified on a Schedule of Eligible Receivables (substantially in
the form of Exhibit C hereto) and attached to a Bill of Sale (substantially in
the form of Exhibit B hereto).
(a) Sale of Pools of Eligible Receivables. On each Funding
Date, Seller shall sell, transfer, assign and otherwise convey to Purchaser,
without recourse to Seller (except as specifically provided herein) (i) all
right, title and interest of Seller in and to the Pool of Eligible Receivables
identified on the Schedule of Eligible Receivables attached to the applicable
Bill of Sale, and all moneys due or to become due with respect thereto; and (ii)
the Related Security of any and all of the foregoing ((i) and (ii) collectively,
the "Conveyed Property").
(b) Purchaser Does Not Assume Obligations. The foregoing
sales, transfers, assignments, and conveyances do not constitute and are not
intended to result in a creation or an assumption by Purchaser of any obligation
of Seller in connection with the Purchased Receivables or any agreement or
instrument relating thereto, including, without limitation, any obligation to
any Obligors.
(c) Purchase of Pools. In consideration of the sale of the
Purchased Receivables and other Conveyed Property sold by Seller to Purchaser on
the Closing Date and on each Funding Date, as the case may be, Purchaser shall
pay to Seller the Purchase Price of each Pool of Purchased Receivables in the
manner set forth below. The Purchaser shall pay the Initial Installment portion
of the Purchase Price for each Pool as adjusted pursuant to Sections 2.01(d) and
5.01(i)(A) on the Funding Date for such Pool. The Balance Payment portion of the
Purchase Price for a Pool, other than the Last Pool, shall be payable as
follows: (i) if on any date prior to Completion of such Pool, the aggregate
amount of Collections with respect to such Pool of Purchased Receivables
received and actually paid to Purchaser as provided in Section 3.01 of the
Servicing Agreement is equal to or greater than the sum of the Initial
Installment plus the Discount Fee with respect to such Pool of Purchased
Receivables, (A) within two (2) Business
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Days of such date, Purchaser shall pay to Seller in cash (in the manner
described in Section 3.01 of the Servicing Agreement, for so long as Seller
is acting as the Servicer thereunder) the portion of the Balance Payment, if
any, with respect to such Pool which has been collected as of such date and
(B) thereafter, Purchaser shall pay to Seller (without duplication) in cash
(in the manner described in Section 3.01 of the Servicing Agreement, for so
long as Seller is acting as the Servicer thereunder) on the second Business Day
of each week the portion of the Balance Payment, if any, with respect to such
Pool which was collected during the prior week (if not already paid pursuant to
preceding clause (A)), and (ii) without duplication, within two (2) Business
Days of Completion, Purchaser shall pay to Seller in cash (in the manner
described in Section 3.01 of the Servicing Agreement, for so long as Seller is
acting as the Servicer thereunder) the balance of the Balance Payment due
after giving effect to all previous payments in respect of the Balance
Payment for such Pool under clause (i) alone. If the Repurchase Amount to be
deducted pursuant to subparagraph (6) of the definition of Balance Payment
exceeds the remaining Balance Payment after making the adjustments in
subparagraphs (2) through (5) of the definition of Balance Payment and Seller
has not repurchased any Nonperforming Receivables by the Repurchase Date in a
manner set forth in Section 5.01(i) then a Revolving Loan under Tranche A of the
Credit Agreement in the amount of such excess shall automatically be deemed to
have been made, without notice in the amount of any outstanding Repurchase
Amount on the Repurchase Date. The Balance Payment for the Last Pool shall be
payable on the date of Completion thereof.
(d) Adjustment of the Initial Installment. (i) There shall be
an adjustment to the Initial Installment of each Pool of Purchased Receivables
(each such Pool which has been so adjusted an "Adjusted Pool"), other than the
Initial Installment of the first Pool of Purchased Receivables (which shall not
be subject to adjustment pursuant to this Section 2.01(d)) and the Last Pool
(which shall be adjusted as described below), to reflect the collection cycle of
all Pools of Purchased Receivables (through the Initial Installment Adjustment
Date of each such Pool) which have reached their Initial Installment Adjustment
Date prior to the Funding Date of the current Pool and for which no adjustment
has been made in a prior Adjusted Pool. To the extent that any Pools of
Purchased Receivables (other than Toys-R-Us Receivables) have reached their
Initial Installment Adjustment Level
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subsequent to the Funding Date for the most recent Adjusted Pool in less than
or more than 75 days of their Funding Dates, and to the extent any Pools of
Purchased Receivables consisting of Toys-R-Us Receivables have reached their
Initial Installment Adjustment Level subsequent to the Funding Date for the
most recent Adjusted Pool, in less than or more than the collection cycle
contemplated under the definition of Toys-R-Us Receivables with regard to Pools
of Toys-R-Us Receivables, the Initial Installment of the next Pool, except
for the Last Pool, will be adjusted to reflect the time value of the weighted
average period by which the collection cycle of such Pools (determined
based on the Initial Installment Adjustment Dates for such Pools) either
exceeded or was less than such targets.
(ii) With respect to the Last Pool, the Initial
Installment of the Last Pool shall be adjusted as follows:
(A) the Initial Installment of the Last Pool shall be
adjusted in accordance with the provisions of Section
2.01(d)(i) with respect to all Pools which have reached their
Initial Installment Adjustment Level as of the Funding Date of
the Last Pool and for which no adjustment has been made in a
prior Adjusted Pool in accordance with the provisions of
Section 2.01(d)(i); and
(B) the Initial Installment of the Last Pool shall
also be adjusted for all Pools which have not reached their
Initial Installment Adjustment Level as of the Funding Date of
the Last Pool by assuming such Pools will have a weighted
average collection cycle equal to that of all Pools
(determined based on the Initial Installment Adjustment Dates
for such Pools) which theretofore have reached their Initial
Installment Adjustment Levels during the term of the
Agreement.
Notwithstanding the foregoing, in no event shall any reduction to the Initial
Installment of the Last Pool result in the Purchase Advance Percentage of the
Last Pool being less than seventy-five (75%). If as of the Funding Date of the
Last Pool, no Pools have reached Completion, the Initial Installment of the Last
Pool shall be adjusted based on the time value of the weighted average
collection
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cycle experienced by Seller with respect to the Approved Obligors whose
Receivables comprise the Last Pool in the immediately preceding eighteen (18)
month period as evidenced by Seller's accounts receivable records.
(e) Last Pool. At any time (i) Seller intends that a Pool of
Purchased Receivables shall be the final Pool of Purchased Receivables sold by
Seller to Purchaser under this Agreement and (ii) as of the Funding Date for
such Pool there will be (A) Pools which have not reached Completion or (B) Pools
which have reached Completion, but for which no adjustment has been made to a
subsequent Pool pursuant to Section 2.01(d) which would reduce the Initial
Installment of a subsequent Pool, then Seller must identify in the Funding
Certificate relating to such Pool that such Pool shall be the final Pool (such
Pool is the "Last Pool"). The Last Pool must be in an Aggregate Amount of not
less than the lower of (i) 50% of the Aggregate Amount of all Pools sold in the
twelve month period preceding the Funding Date of the Last Pool and (ii) $2
million, provided that the Last Pool shall in no event be in an Aggregate Amount
of less than $1 million. Notwithstanding anything to the contrary herein, Seller
agrees that at any time the conditions set forth in clauses (A) and (B) of this
Section 2.01(e) exist, it must prior to the Termination Date sell to Purchaser a
Last Pool in accordance with the terms hereof. Seller and Purchaser agree that
Seller's designation of a Pool as the Last Pool shall not preclude Seller from
selling Purchaser additional Pools so long as Seller complies with the
requirements of this Agreement relating to a Last Pool prior to the Termination
Date.
(f) Accounting Records. In connection with the sale and
assignment of Purchased Receivables hereunder, Seller agrees, at its own
expense, on each Funding Date, to indicate or cause to be indicated clearly and
unambiguously in its accounting records that such Purchased Receivables and the
other Conveyed Property described in Section 2.01 have been sold to Purchaser
pursuant to this Agreement as of the applicable Funding Date.
(g) True Sale. It is the express intent of Seller and
Purchaser that the assignment and conveyance of the Purchased Receivables and
other Conveyed Property by Seller to Purchaser pursuant to this Agreement be
construed as a sale of such Purchased Receivables and Conveyed Property by
Seller to Purchaser. Notwithstanding
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the foregoing, it is the further intention of Seller and Purchaser that, if a
court of competent jurisdiction were to determine that such assignment and
conveyance is not a sale, such conveyance shall be deemed a grant of the
first priority security interest in such Purchased Receivables and
Conveyed Property by Seller to Purchaser to secure a debt (i.e., the
purchase price of the Purchased Receivables and Conveyed Property) or other
obligation of Seller to Purchaser.
(h) Taxation. Both Seller and Purchaser agree that neither of
them will take or assert any position on any filings made with any federal or
state taxing authorities which is inconsistent with the characterization of the
assignment and conveyance of the Purchased Receivables as a sale, provided that
Heller shall not be requested to contest any adverse determination by any such
taxing authorities unless it has received an indemnity reasonably satisfactory
to it.
ARTICLE III
CONDITIONS OF PURCHASE AND SALE OF RECEIVABLES
SECTION 3.01. Conditions Precedent to the Initial Purchase and
Sale of Receivables. The purchase and sale of the first Pool of Eligible
Receivables hereunder is subject to the condition precedent that Purchaser shall
have received on or before the Closing Date the following, each (unless
otherwise indicated) in form and substance reasonably acceptable to Purchaser:
(a) Certificate of Incorporation of Seller certified by
the Secretary of State of Delaware;
(b) Good Standing Certificate of Seller issued by the
Secretary of State of Delaware;
(c) Certificate of Incorporation of Parent certified by
the Secretary of State of Delaware;
(d) Good Standing Certificate of Parent issued by the
Secretary of State of Delaware;
(e) A copy of the resolutions of the Board of Directors of
Seller, certified by its Secretary or Assistant Secretary, approving
this Agreement and the other documents to be executed and delivered by
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Seller hereunder and the transactions contemplated hereby;
(f) A certificate of the Secretary or Assistant Secretary of
Seller certifying the names and true signatures of the officers
authorized on its behalf to execute this Agreement and the other
documents to be executed and delivered by Seller hereunder (on which
certificate Purchaser may conclusively rely until such time as it shall
receive from Seller a revised certificate meeting the requirements of
this subsection (f));
(g) A copy of the resolutions of the Board of Directors of
Parent approving the Parent Guaranty and the other documents to be
executed and delivered by Parent hereunder and the transactions
contemplated thereby, certified by its Secretary or Assistant
Secretary;
(h) A certificate of the Secretary or Assistant Secretary of
Parent certifying the names and true signatures of the officers
authorized on its behalf to sign the Parent Guaranty and the other
documents to be executed and delivered by it hereunder (on which
certificate Purchaser may conclusively rely until such time as it shall
receive from Parent a revised certificate meeting the requirements of
this subsection (h));
(i) Evidence reasonably satisfactory to Purchaser of the
filing of Financing Statements (Form UCC-1), dated a date reasonably
close to the Closing Date, naming Seller as the assignor of Purchased
Receivables and Related Security and Purchaser as assignee, or other
similar instruments or documents as may be necessary or appropriate
under the UCC of all appropriate jurisdictions or any comparable law to
perfect Purchaser's interests in all Purchased Receivables and Related
Security in which an interest may be assigned to Purchaser hereunder;
(j) Certified copies of Requests for Information or Copies
(Form UCC-11) (or a similar search report certified by a party
acceptable to Purchaser), dated a date reasonably close to the Closing
Date, listing all effective financing statements which name Seller
(under its present name and any previous names) as debtor and which are
filed
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in the jurisdictions in which filings were made pursuant to
subsection (i) above, together with copies of such financing statements
(none of which shall cover any Eligible Receivables or Contracts);
(k) A copy of the Parent Guaranty duly executed by
Parent;
(l) A copy of the Servicing Agreement duly executed by
Seller and Purchaser;
(m) A copy of the consolidated financial statements of Parent
and its Subsidiaries for their fiscal year ended on January 28, 1995,
certified by its independent certified public accountants; a copy of
the quarterly consolidating financial statements of Parent and its
Subsidiaries for the periods ended April and July 1995, certified by
Parent's chief financial officer; a copy of the quarterly consolidated
financial statements of Parent and its Subsidiaries, for the periods
ended April and July 1995, reviewed by its independent certified public
accountant and copies of the consolidated and consolidating monthly
financial statements of Parent and its Subsidiaries for the months
February, March, May and June 1995, certified by the Parent's chief
financial officer;
(n) Opinions of Morgan, Lewis & Bockius, counsel to
Seller and Parent in form and substance acceptable to Purchaser;
(o) Evidence of payment to Purchaser of Three Hundred
Sixty Thousand U.S. Dollars ($360,000) representing a nonrefundable
receivables transactions fee;
(p) A copy of the Credit Agreement duly executed by
Seller and Purchaser;
(q) Payment of all reasonable legal fees and other fees and
out-of-pocket expenses as to which Purchaser has presented bills or
invoices prior to the Closing Date.
(r) A copy of Seller's Credit and Collection Policies
existing on the Closing Date; and
(s) Schedule of Approved Obligors.
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SECTION 3.02. Conditions Precedent to each Purchase and Sale
of Eligible Receivables. Each purchase and sale of Eligible Receivables
hereunder shall be subject to the conditions precedent that:
(a) at least one (1) business day prior to a Funding Date,
Seller shall deliver to Purchaser a written statement in the form of
Exhibit D hereto (the "Funding Certificate") designating such Funding
Date, setting forth Eligible Receivables to be sold on such Funding
Date (indicating the name of each Approved Obligor, the Related
Security, if any, to each Eligible Receivable and listing separately
the Aggregate Amount of each such Eligible Receivable and of the Pool).
(b) on each Funding Date the following statements shall be
true after giving effect to the purchase and sale of each Pool on such
Funding Date (and Seller by accepting the Initial Installment of each
such transaction shall be deemed to have certified that):
(i) The representations and warranties contained
in Section 4.01 are correct on and as of such Funding Date as
though specifically made on and as of such Funding Date;
(ii) No event has occurred and is continuing, or
would result from such purchase and sale of the Pool, which
constitutes an Event of Termination or would constitute an
Event of Termination but for the requirement that notice be
given or time elapse or both, and no Default or Event of
Default shall exist under the Credit Agreement;
(iii) The aggregate Initial Installments paid by
Purchaser under this Agreement and under the Penn Agreement,
if executed, on Purchased Receivables (as defined herein and
therein) in Pools which have not reached Completion, less any
Collections received with respect to such Pools and actually
paid to Purchaser, does not exceed $50,000,000 (the "Facility
Limit").
(c) A Bill of Sale covering the Eligible Receivables as set
forth in the Schedule of Eligible Receivables to be sold and purchased
on that Funding
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Date be duly executed by Seller and delivered to Purchaser.
(d) Seller shall have delivered to Purchaser an invoice
register in connection with the particular Pool of Eligible Receivables
to be sold and purchased, in the form of a diskette or magnetic tape,
or in such other form and substance reasonably acceptable to Purchaser,
showing each Approved Obligor's name, the invoice date, invoice number
and net invoice amount of each Eligible Receivable to be sold and
purchased and any other information concerning each such account as
Purchaser may reasonably require.
(e) The Collections on the Eligible Receivables in the Pool to
be sold and purchased shall be payable to a post office lock-box
maintained at a Lock-Box Bank for which a Blocked Account Agreement is
in effect.
(f) In the case of any Receivables to be sold hereunder which
are Government Receivables, Seller shall have taken all steps necessary
to comply with the Assignment of Claims Act of 1940, as amended, and
all other applicable law prior to such sale.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of Seller.
Seller represents and warrants as follows:
(a) Seller is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware
and is duly qualified to transact business, and is in good standing, in
every jurisdiction where the failure to be so qualified would
materially adversely affect (i) the collectibility of any Purchased
Receivable or (ii) the ability of Seller to perform its obligations
hereunder.
(b) The execution, delivery and performance by Seller of this
Agreement, each Bill of Sale and all other instruments and documents to
be delivered hereunder, and the transactions contemplated hereby
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and thereby, are within Seller's corporate powers, have been
duly authorized by all necessary corporate action, do not
contravene Seller's charter, bylaws or any contractual restriction
binding on or affecting Seller, do not contravene or require
compliance with (except to the extent Seller has complied therewith)
any applicable law and do not result in or require the creation of any
lien, security interest or other charge or encumbrance (excluding any
lien, security interest or other charge or encumbrance created
hereunder) upon or with respect to any of its properties.
(c) 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, delivery and performance by Seller
of this Agreement, any Bill of Sale or any other document or instrument
to be delivered hereunder except for the filing of the UCC Financing
Statements referred to in Article III and any approvals, authorizations
and filings related to Government Receivables referred to in Section
3.02, all of which, either at the Closing Date or at any Funding Date,
as the case may require, shall have been duly made and shall be in full
force and effect.
(d) This Agreement constitutes, and each Bill of Sale when
delivered hereunder shall constitute, the legal, valid and binding
obligation of Seller enforceable against Seller in accordance with its
respective terms, subject to the effect of general principles of equity
(regardless of whether considered in a proceeding in equity or at law)
and of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors' rights generally.
(e) Seller is not engaged in, or a party to or, to its
knowledge threatened with, any legal action, suit, investigation or
other proceeding by or before any court, arbitrator or administrative
agency, which in any manner may materially adversely affect the
performance of its obligations under this Agreement, and Seller does
not know of any basis for any such legal action, suit, investigation or
proceeding. There are no outstanding or, to Seller's knowledge,
threatened or contemplated governmental orders, directives or actions,
rulings, decrees, judgments or
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stipulations which in any manner may materially adversely affect
the performance of Seller's obligations under this Agreement.
(f) Each Scheduled and each Purchased Receivable shall be an
Eligible Receivable and no effective financing statement or other
instrument similar in effect covering any Scheduled or Purchased
Receivable shall at any time be on file in any recording office except
such as may be filed in favor of Purchaser in accordance with this
Agreement.
(g) All Related Security is free and clear of any Adverse
Claim except as created hereby and no effective financing statement or
other instrument similar in effect covering any Related Security shall
at any time be on file in any recording office except such as may be
filed in favor of Purchaser in accordance with this Agreement.
(h) No Weekly Settlement Report (if prepared by Seller or to
the extent that information contained therein is supplied by Seller),
information, exhibit, financial statement, document, book, record or
report or other materials furnished or to be furnished by Seller to
Purchaser in connection with this Agreement is or shall be inaccurate
in any material respect as of the date it is or shall be dated or as of
the date so furnished, or contains or shall contain any material
misstatement of fact or omits or shall omit to state a material fact or
any fact necessary to make the statements contained therein not
materially misleading.
(i) The chief executive offices of Seller are located at the
address of Seller referred to in Section 11.02 hereof and the principal
place of business and the offices where Seller keeps all its books,
records and documents evidencing Eligible Receivables, the related
Contracts and Related Security, if any, are located at the addresses
specified in Exhibit E hereto (or at such other locations, notified to
Purchaser in accordance with Section 5.01(f).
(j) No change has or shall have occurred in Seller's and
Parent's property, assets, business or financial condition or capital,
organization or legal structure which would have a Material Adverse
Effect.
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(k) Any Pool that contains Toys-R-Us Receivables shall
not include Receivables of any other Obligor whatsoever.
(l) All Receivables sold hereunder to Purchaser have been and
will be transferred to Purchaser in good faith and for fair
consideration or reasonably equivalent value and without intent to
hinder, delay or defraud creditors of Seller.
ARTICLE V
GENERAL COVENANTS OF SELLER
SECTION 5.01. Affirmative Covenants of Seller. So long as
Purchaser shall have any interest in any Purchased Receivables or until the
Termination Date, whichever is later, Seller shall, unless Purchaser shall
otherwise consent in writing:
(a) Compliance with Laws, Etc. Comply with all applicable
laws, rules, regulations, orders and provisions with respect to it, its
business and properties and all Purchased Receivables, related
Contracts and Related Security except to the extent such noncompliance
would not have a Material Adverse Effect.
(b) Preservation of Corporate Existence. Preserve and maintain
Seller's corporate existence, rights, franchises and privileges in the
jurisdiction of its incorporation, and qualify to transact business and
remain so qualified and in good standing as a foreign corporation in
each jurisdiction where the failure to preserve and maintain such
existence, rights, franchises, privileges and qualification would have
a Material Adverse Effect on (i) the interests of Purchaser, (ii) the
collectibility of any Purchased Receivable or (iii) the ability of
Seller to perform its obligations hereunder.
(c) Audits; Verification. As often as is commercially
reasonable, following three (3) Business Days' prior written notice to
Seller, during regular business hours, permit Purchaser, or its agents
or representatives, (i) to examine and make abstracts from all books,
records and documents (including, without limitation, computer tapes
and disks) in the
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possession or under the control of Seller relating to the Purchased
Receivables, including, without limitation, the related Contracts,
and, if an Event of Termination has occurred and is
continuing, to make copies of any of the foregoing with respect
to Purchased Receivables; and (ii) to visit the principal
place of business of Seller for the purpose of examining
such materials described in clause (i) above, and to discuss
matters relating to Purchased Receivables and Conveyed Property
or Seller's performance hereunder with any of the officers or
employees of Seller having knowledge of such matters.
If Seller fails to repurchase a Nonperforming Receivable
within 15 calendar days of its becoming a Nonperforming Receivable,
Seller will deliver to Purchaser upon request and to the address then
indicated merchandise with a value equivalent to that of the unpaid
Repurchase Amount of such Nonperforming Receivable F.O.B. Western.
At the request of Purchaser prior to the occurrence of an
Event of Termination, the status of the Purchased Receivables shall be
subject to verification in the manner herein provided. Purchaser shall
not have any direct contact with any Approved Obligor in connection
with any Purchased Receivables or Eligible Receivables. All customer
contacts with any Approved Obligor shall be made by employees of
Seller's accounts receivable department. At the request of Purchaser,
verification as to the status of payment of any Purchased Receivables
shall be made by telephone or by mail in a manner that shall allow a
representative of Purchaser to monitor the proceedings by which
verification is conducted. After an Event of Termination, Purchaser
will provide Seller with a list of Purchased Receivables with respect
to which any amounts are outstanding at the time. Seller shall have two
(2) Business Days within which to review such list of Purchased
Receivables and to notify Purchaser of any inaccuracy in such list
believed by Seller in good faith to exist. On the close of business on
such second Business Day the list shall be deemed to be accurate except
to the extent of any specific objection thereto made by Seller and
Purchaser may notify every Approved Obligor of a Purchased Receivable
on such list of the fact that Seller has transferred and assigned the
applicable Purchased Receivables and Related Security
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to Purchaser using copies of the form letter attached hereto as
Exhibit F. Purchaser may verify such Purchased Receivables in any
manner which Purchaser, in its sole discretion, deems appropriate.
If any items on such list of Purchased Receivables is subject to
a timely objection by Seller, Purchaser and Seller shall cooperate
to expeditiously and in good faith resolve the item, but not later
than ten (10) Business Days after objection is made by Seller.
After the earlier of (i) resolution of any objection or (ii) the
expiration of the ten (10) Business Day period, Purchaser may send
notices and perform verifications as provided above.
(d) Keeping of Records and Books of Account. Maintain and
implement administrative and operating procedures (including, without
limitation, an ability to recreate records evidencing Seller's
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.
(e) Performance and Compliance with Receivables and Contracts.
At Seller's expense, timely and fully perform and comply with all
material provisions, covenants and other promises required to be
observed by Seller under the Contracts related to Purchased
Receivables.
(f) Location of Records. Keep its principal place of business
and chief executive offices, and the offices where it keeps its records
concerning its Receivables and all Contracts and Related Security
related thereto (and all original documents relating thereto), at the
address(es) of Seller referred to in Section 4.01(i) or, upon 30 days'
prior written notice to Purchaser, at such other locations in a
jurisdiction where all action required by Section 5.01(k) shall have
been taken and completed.
(g) Credit and Collection Policies. Comply in all
material respects with its Credit and Collection Policy in regard to
each Purchased Receivable, Related Security and related Contracts.
(h) Collections. Instruct all Approved Obligors to
cause all Collections with respect to
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Purchased Receivables to be deposited directly with the appropriate
Lock-Box Bank(s).
(i) Repurchase of Nonperforming Receivables. Seller hereby
covenants and agrees to repurchase from Purchaser each Nonperforming
Receivable within 15 calendar days of its becoming a Nonperforming
Receivable ("Repurchase Date"), but in any event before the Completion
of the applicable Pool at the "Repurchase Amount". The Repurchase
Amount as to any Nonperforming Receivable shall be equal to the sum of
(i) the amount of the Initial Installment for such Nonperforming
Receivable (calculated without giving effect to any adjustments made to
the Initial Installment under any provision of this Agreement); plus
(ii) the amortized portion of the Discount Fee for such Nonperforming
Receivable (calculated as if such Nonperforming Receivable were paid on
the date of repurchase); plus (iii) an amount equal to the difference
between the amounts described in clauses (i) and (ii) and the Aggregate
Amount of such Nonperforming Receivable, provided that the aggregate
amount of the portion of the Repurchase Amount described in clauses (i)
and (ii) shall be reduced by any Collections received and paid to
Purchaser with respect to such Nonperforming Receivable. The portion of
the Repurchase Amount described in clause (iii) above shall be paid by
offsetting such amount against the Balance Payment due for the Pool
that includes such Nonperforming Receivable as provided in clause (4)
of the definition of Balance Payment. The portion of the Repurchase
Amount described in clauses (i) and (ii) shall be paid, at the election
of Seller, in one of the following ways, or in any combination thereof
(and in each case on or prior to the applicable Repurchase Date): (A)
an offset to the Initial Installment of the next Pool to be purchased
(such offset to be in the amount of such portion of the Repurchase
Amount) if, and only if, by the time a Purchased Receivable becomes a
Nonperforming Receivable Seller has determined there will be a sale of
another Pool the Initial Installment of which (after taking in account
any adjustment thereto under Section 2.01(d) hereof) is at least equal
to such portion of the Repurchase Amount to be offset and such sale
actually takes place on or before the Repurchase Date; or (B) a cash
payment from Seller to Purchaser; or (C) transfer to Purchaser of
Eligible Receivables from an Approved
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Obligor so as to preserve the economics of the transactions
anticipated by the parties hereto; or (D) to the extent possible,
an offset to the Balance Payment then due and payable by Purchaser
to Seller as provided in clause (6) of the definition of Balance
Payment. If Seller fails to specify its choice in the notice given to
Purchaser under Section 5.02(d), clause (D) above shall apply. If
the portion of the Repurchase Amount described in clause (i) and
(ii) exceeds the amount of Balance Payment then due and payable by
Purchaser to Seller and available under clause (6) of the
definition of Balance Payment and Seller does not effect the payment
of the Repurchase Amount by the Repurchase Date through one of the
other alternatives provided above, such excess amount shall
automatically be deemed to be a Revolving Loan under Tranche A of
the Revolving Loan Commitment pursuant to the Credit Agreement,
without notice on the date the Nonperforming Receivable is
required to be repurchased. On and after the Termination Date all
payments referred to in this Section 5.01(i) shall be made in cash.
(j) Seller to Act as Servicer. Seller agrees to act as
Servicer under the Servicing Agreement if Purchaser so requests. If for
any reason Seller does not act as Servicer, Seller and Purchaser both
acting in good faith shall enter into a servicing agreement pursuant to
which a Servicer acceptable to Purchaser shall be appointed to service
all Receivables of Seller and all Purchased Receivables. Such
arrangements shall continue only until all obligations of Seller
hereunder and under the Credit Agreement are discharged.
(k) Further Action. Seller agrees that from time to time, at
its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that Purchaser
may reasonably request in order to perfect, protect or more fully
evidence the Purchased Receivables held by Purchaser hereunder, or to
enable Purchaser to exercise or enforce any of its rights hereunder.
Without limiting the generality of the foregoing, Seller will upon the
request of Purchaser: (i) execute and file such financing or
continuation statements, or amendments thereto or assignments thereof,
and such other instruments or notices, as
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may be necessary or appropriate, (ii) at any time after Seller is
no longer Servicer mark conspicuously each Contract with a
legend, acceptable to Purchaser, evidencing the interests of
Purchaser in each of the Purchased Receivables and (iii) mark
its master data processing records evidencing such Purchased
Receivables and related Contracts with such legend. The Seller
hereby authorizes Purchaser, if Seller fails to do so pursuant to
clause (i) of the preceding sentence, to file one or more
financing or continuation statements, and amendments thereto and
assignments thereof, relative to all or any of the
Purchased Receivables and the Related Security now existing or
hereafter arising without the signature of the Seller where
permitted by law. If Seller fails to perform any of its agreements
or obligations under this Agreement, Purchaser may (but shall not
be required to) itself perform, or cause performance of, such
agreement or obligation, and the reasonable expenses of Purchaser
incurred in connection therewith shall be payable by Seller.
SECTION 5.02. Reporting Requirements of Seller. So long as
Purchaser shall have any interest in any Purchased Receivables or until the
Termination Date, whichever is later, Seller shall, unless Purchaser consents in
writing, furnish to Purchaser:
(a) promptly after the filing thereof, copies of all filings
by Seller or any Subsidiary of Seller of any notice of a "Reportable
Event" as defined in subsections (b)(4), (b)(5) and (b)(6) of Section
4043 of ERISA, but excluding any such filings which relate to a
Reportable Event reasonably expected to have a de minimis effect on the
financial condition and operations of Seller and the consolidated
Subsidiaries of Seller and promptly after receipt thereof, copies of
any written communication from the Pension Benefit Guaranty Corporation
or any other agency of the federal government with respect to any
filing described above;
(b) as soon as possible and in any event within ten (10)
Business Days after the occurrence of each Event of Termination or each
event which, with the giving of notice or lapse of time or both, would
constitute an Event of Termination, the statement of the chief
financial officer of Seller setting forth details of such Event of
Termination or event and the
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remedial action which Seller proposes to take with respect thereto;
(c) as soon as possible and in any event contemporaneously
with the filing by Parent of its report on SEC Form 10-K, the
consolidating financial statements of the Parent and its Subsidiaries
for their most recent fiscal year, certified by the chief financial
officer of the Parent together with the consolidated financial
statements of the Parent and its Subsidiaries for their most recent
fiscal year, certified by its independent certified public accountants.
Seller shall also deliver to Purchaser as soon as available and in any
event within 30 days of the end of each fiscal month, the consolidating
monthly financial statements of Parent and its Subsidiaries certified
by the chief financial officer of the Parent (except for the months of
January, April, July and October). Seller shall also deliver to
Purchaser quarterly (April, July, and October) consolidating financial
statements of the Parent and its Subsidiaries for each fiscal quarter
certified by the chief financial officer of the Parent together with
consolidated quarterly financial statements of the Parent and its
Subsidiaries reviewed by its independent certified public accountants,
which deliveries must be made contemporaneously with the filing by the
Parent of its report on SEC Form 10-Q;
(d) immediate written notice of the occurrence of (i) any
breach of Seller's representations and warranties, including but not
limited to any assertion by any Approved Obligor of any dispute (bona
fide or otherwise) or other defense to payment of Purchased Receivables
contained in Pools which have not reached Completion, (ii) Seller's
intention to permit any credit, discount, allowance or offset to any
Obligor such that when aggregated with all other credits, discounts,
allowances or offsets previously permitted with respect to other
Purchased Receivables in the same Pool, and with any Approved Obligor's
return of, or desire to return any merchandise purchased from Seller in
connection with any Purchased Receivable(s) exceeds 15% of the
Aggregate Amount of all Purchased Receivables in such Pool which have
not previously become Nonperforming Receivables. If any of the
foregoing results in a Purchased Receivable becoming a Nonperforming
Receivable such notice shall indicate the manner in
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which the Repurchase Amount shall be paid and the date of repurchase
(which shall not be later than the Completion of the applicable
Pool);
(e) a Weekly Settlement Report;
(f) promptly, from time to time, such other information,
documents, records or reports respecting any Eligible Receivable(s),
Approved Obligor(s), Contract(s), Adverse Claim(s), current Credit and
Collection Policy, Related Security or the financial condition or
operations of Seller as Purchaser may from time to time reasonably
request in order to protect Purchaser's interests under or contemplated
by this Agreement.
SECTION 5.03. Negative Covenants of Seller. So long as
Purchaser shall have any interest in any Purchased Receivables or until the
Termination Date, whichever is later, Seller shall not, without the prior
written consent of Purchaser:
(a) Sales, Liens, Etc. Except as otherwise provided herein,
(i) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create or suffer to exist any Adverse Claim upon or with
respect to any Purchased Receivable, related Contract or Related
Security, to the extent of Seller's interest in such Related Security,
or any Lock-Box Bank account to which any Collections of any Purchased
Receivable are sent other than (A) liens for taxes, assessments or
levies not yet due and payable, (B) materialmen's, workmen's and
similar liens imposed by operation of law, or (ii) assign any right to
receive income in respect of any of the foregoing.
(b) Change in Payment Instructions to Obligors. Add any bank
as a Lock-Box Bank (other than a bank named in the definition of the
term Lock-Box Bank) or terminate any existing Lock-Box Agreement or
Blocked Account Agreement or make any change in its instructions to
Obligors, Approved Obligors or Lock-Box Banks regarding payments to be
made to Seller or to any Lock-Box Bank, unless (i) Purchaser shall have
received thirty (30) Business Days prior written notice specifying any
such additions, terminations or changes and (ii) such additions,
terminations or changes would not result in an unreasonable increase
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in the cost or difficulty of collecting and identifying payments due
from Obligors or Approved Obligors.
(c) Change in Corporate Name. Make any change to Seller's
corporate name unless, prior to the effective date of any such name
change, Seller delivers to Purchaser such Financing Statements (Forms
UCC-1 and UCC-3) duly executed by Seller which Purchaser may request to
reflect such name change, together with such other documents and
instruments that Purchaser may reasonably request in connection with
such name change.
(d) Increase in Debt. Incur any Debt except to the extent, if
any, provided herein and under the Credit Agreement or to the extent
permitted under Section 3.9 of the Indenture, including any Debt
secured by liens permitted under Section 3.8 of the Indenture.
SECTION 5.04. Changes in Fundamental Policies and Procedures.
(a) So long as Purchaser shall have any interest in any Purchased Receivables or
until the Termination Date, whichever is later, this Section 5.04 shall govern
Seller's right to:
(i) Extend, amend or otherwise modify the terms of any
Purchased Receivable, or amend, modify or waive any term or condition
of any Contract related thereto; and
(ii) Make any change in (A) any material Credit and Collection
Policy or (B) any form of Contract, if any, related to Receivables
which change would, in any case, impair the collectibility of any
Purchased Receivable.
Any change, amendment, modification or extension described in clauses (i) and
(ii) above is hereinafter referred to as a "Fundamental Change."
(b) On or before the effective date of each Fundamental Change
occurring prior to the Termination Date, Seller promptly shall notify Purchaser
in writing of the complete details of such Fundamental Change. Such notice shall
include the statement that Purchaser will either have to grant its consent or
indicate its disapproval of such Fundamental Change within five (5)
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Business Days following the receipt of such notice. Purchaser shall not
unreasonably withhold its consent to any Fundamental Change. In the event
Purchaser does not consent to such Fundamental Change, then and at all
times prior to the Termination Date, all Receivables to which such
Fundamental Change applies or which are affected thereby shall cease to be
Eligible Receivables as of the date of Purchaser's disapproval of such
Fundamental Change. In the event Purchaser does not respond within such
five (5) Business Day period, Purchaser shall be deemed to have consented to
such Fundamental Change.
(c) At all times on or after the Termination Date, Seller
shall make no Fundamental Change which might affect any Purchased Receivable
still outstanding without the prior written consent of Purchaser.
ARTICLE VI
OBLIGORS
SECTION 6.01. Concentration Limit. On any Funding Date, with
respect to each Approved Obligor, the ratio of (i) the Aggregate Amount of the
outstanding Purchased Receivables of such Approved Obligor under the Receivables
Purchasing Agreement and the Penn Agreement, if executed, (taking into account
the Eligible Receivables of such Approved Obligor to be included in any Pool to
be purchased on such Funding Date) to (ii) the Aggregate Amount of the
outstanding Purchased Receivables of all Approved Obligors under the Receivables
Purchasing Agreement and the Penn Agreement, if executed, (taking into account
the Eligible Receivables of all Approved Obligors to be included in any Pool to
be purchased on such Funding Date) shall not exceed the Concentration Limit
applicable to such Approved Obligor.
SECTION 6.02. Additional Approved Obligors. Seller may request
of Purchaser in writing that additional Obligors of Seller become Approved
Obligors. Purchaser shall have the right to accept or decline in good faith any
such request. Purchaser shall also have the right at any time upon one (1)
Business Day advance written notice to Seller to disapprove of any Approved
Obligor whenever Purchaser shall determine in good faith that such Approved
Obligor does not meet Purchaser's reasonable eligibility requirements for credit
approval. Purchaser's good faith exercises of its acceptance or declination of
Obligors of
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Seller as Approved Obligors and Purchaser's determinations of
eligibility requirements for Purchaser's credit approval shall be based
on standards no different than Purchaser would otherwise apply in connection
with Purchaser's other clients.
ARTICLE VII
EVENTS OF TERMINATION
SECTION 7.01. Events of Termination. If any of the
following events (each an "Event of Termination") shall occur:
(a) Seller shall fail to make any payment to be made by it
hereunder when due at any time when the Tranche A Commitment under the
Credit Agreement is fully utilized; or
(b) Any representation or warranty made or deemed to be made
by Seller (or any of its officers) under or in connection with this
Agreement or any certificate or report delivered pursuant hereto shall
prove to have been false or incorrect in any material respect when
made; or
(c) (i) Seller shall fail to perform or observe any other
term, covenant or agreement contained in this Agreement on its part to
be performed or observed and any such failure shall remain unremedied
for ten (10) Business Days after written notice thereof shall have been
given by Purchaser to Seller; or (ii) Seller shall fail to perform or
observe any term, covenant or agreement contained in any other Related
Transactions Documents on its part to be performed or observed and any
such failure shall remain unremedied for any applicable grace period;
or
(d) [intentionally omitted]
(e) (i) Seller, Parent or any Subsidiary of Seller or Parent
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 against Seller, Parent or any Subsidiary
of Seller or Parent, or by Seller, Parent or any Subsidiary of
Seller or Parent,
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seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement,
adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, or
other similar official for it or for any substantial part of its
property which is not dismissed within ninety (90) days in the case
of any such proceedings initiated against Seller or the Parent; or
(ii) Seller, Parent or any Subsidiary of Seller or Parent shall
take any corporate action to authorize any of the actions set forth
in clause (i) above in this subsection (e); or
(f) There shall have occurred any event which materially
adversely affects the collectibility of any material portion of
Purchased Receivables or there shall have occurred any other event
which materially adversely affects the ability of Seller to perform
hereunder or under the Servicing Agreement (including, without
limitation, the ability of Seller to collect the Purchased
Receivables); or
(g) Seller shall, at any time, cease to be a Subsidiary
of Parent;
(h) Parent shall terminate, revoke, rescind, disaffirm or
otherwise fail to honor or perform any of its obligations under Parent
Guaranty, or notice is received by Purchaser of Parent's intention to
take any of the aforementioned actions;
(i) The fair saleable value of the assets on a going concern
basis of Seller and its Subsidiaries on a consolidated basis is not in
excess of the total amount of their liabilities, as of each Funding
Date, or Seller has a negative net worth either on the Closing Date or
on any Funding Date; or
(j) If an Event of Default has occurred and is
continuing under any agreement to which Seller and Purchaser are a
party;
then, and in any such event, Purchaser may by notice to Seller declare the
Termination Date to have occurred, except that, in the case of any event
described in subsection (e) above, the Termination Date shall be deemed
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to have occurred automatically upon the occurrence of such event. Upon the
occurrence of the Termination Date, Purchaser shall have, in addition to all
other rights and remedies under this Agreement or otherwise, all other
rights and remedies provided under the UCC of the applicable jurisdiction and
other applicable laws, which rights shall be cumulative. Without limiting the
foregoing or the general applicability of Article IX hereof, Purchaser may
elect to assign its rights hereunder and to any Purchased Receivables to
its assignee(s) following the occurrence of any Event of Termination.
ARTICLE VIII
PARTICIPATIONS
SECTION 8.01. Participations. Purchaser retains the right at
any time and from time to time to sell participation interests in any amount in
any Pool of Purchased Receivables to one or more participants as Purchaser may
deem desirable; provided that Purchaser shall at all times remain such
participant's agent with respect to such Pool and Seller shall continue to deal
directly with Purchaser in connection with any rights such participant may have
under this Agreement. Purchaser shall give to Seller ten (10) days' prior
written notice of any such sale of a participating interest, identifying the
participant and shall provide to Seller any information with respect to such
participant reasonably requested by Seller. Seller shall have the right to
approve or disapprove of such participant which approval shall not be
unreasonably withheld. Prior to the release of any information regarding any
Approved Obligor to any potential participant, such potential participant shall
execute a confidentiality agreement in form and substance acceptable to Seller
and Purchaser.
ARTICLE IX
INDEMNIFICATION
SECTION 9.01. Indemnities. (a) In addition to the payment of
expenses and fees provided for elsewhere in this Agreement Seller agrees to
indemnify, pay and hold Purchaser, its officers, directors, employees, agents,
auditors, Affiliates and attorneys (the "Indemnitees") harmless from and against
any and all liabilities,
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obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature
whatsoever (including reasonable fees and disbursements of counsel for such
Indemnitees) in connection with any investigative, administrative or
judicial proceeding commenced or threatened, regardless of whether
such Indemnitee shall be designated a party thereto) that may be imposed on,
incurred by, or asserted against the Indemnitee in any manner relating to or
arising out of this Agreement, the Related Transactions Documents or the
consummation of the transactions contemplated by this Agreement, provided
that Seller shall have no obligation to an Indemnitee hereunder with respect
to liabilities arising from the gross negligence or willful misconduct of
that Indemnitee as determined by a court of competent jurisdiction. This
Section 9.01 shall survive the termination of this Agreement.
(b) If any action or proceeding shall be instituted involving
any Indemnitee(s) in respect of which indemnity may be sought against Seller
under Section 9.01(a), such Indemnitee(s) shall promptly notify Seller in
writing and Seller shall, subject to the following sentence, assume the defense
thereof on behalf of such Indemnitee(s), including the employment of counsel
(reasonably satisfactory to such Indemnitee(s)) and payment of all reasonable
fees and expenses. Any Indemnitee(s) shall have the right to employ separate
counsel in any such action or proceeding and participate in the defense thereof,
but the fees and expenses of such separate counsel shall be at the expense of
such Indemnitee(s) unless (i) the employment of such separate counsel has been
specifically authorized by Seller in its sole discretion or (ii) the named
parties to any such action or proceeding (including any impleaded parties)
include such Indemnitee(s) and Seller, and such Indemnitee(s) shall have been
advised by its counsel that there may be one or more legal defenses available to
such Indemnitee(s) which are different from or additional to those available to
Seller (in which case Seller shall not have the right to assume the defense of
such action on behalf of such Indemnitee(s)). If any one or more Indemnitees
engages legal counsel in accordance with clause (ii) of the preceding sentence,
in no event shall Seller be required to pay the legal expenses of more than one
collective legal counsel for all such Indemnitees. An Indemnitee(s) shall be
entitled to employ its own counsel at the reasonable expense of Seller in all
events during
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the pendency of any bankruptcy proceeding involving Seller and in respect of
any action or proceeding commenced against any Indemnitee under or in respect
of the Indenture. At any time after Seller has assumed the defense of any
action or proceeding involving any Indemnitee(s) in respect of which
indemnity under Section 9.01(a) has been sought against Seller,
such Indemnitee(s) may elect, by written notice to Seller, to withdraw its
request for indemnity and thereafter the defense of such action or proceeding
shall be maintained by counsel of such Indemnitee(s)' choosing and at such
Indemnitee(s)' expense. In no event shall Seller enter into any settlement
agreement without the prior written consent of Purchaser, which consent
shall not be unreasonably withheld, unless such settlement involves only the
payment of money which Seller has fully funded.
ARTICLE X
TERM
SECTION 10.01. Term. This Agreement shall have a term of two
(2) years from the Closing Date provided that Seller shall have the right to
terminate this Agreement at any time upon ten (10) days prior written notice to
Purchaser and that Purchaser shall have the right to terminate this Agreement as
of the end of one (1) year from the Closing date upon ten (10) days prior
written notice to Seller.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Amendments and Waivers. No amendment,
modification, or termination, or waiver or consent of any provision of this
Agreement, shall be effective unless the same shall be in writing and signed by
Purchaser, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
SECTION 11.02. Notices. Any notice or other communication
required shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied, sent by overnight courier
service or U.S. mail and shall be deemed to have been
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given when received by any person at the address specified below.
Notices shall be addressed as follows:
If to Seller: Western Publishing Company, Inc.
c/o Western Publishing Group, Inc.
444 Madison Avenue, Suite 601
New York, NY 10022
ATTN: Steven M. Grossman
Telecopy: (212) 888-5025
With copies to: Western Publishing Group, Inc.
444 Madison Avenue, Suite 601
New York, NY 10022
ATTN: Steven M. Grossman
Telecopy: (212) 888-5025
and
Morgan Lewis & Bockius
101 Park Avenue
New York, NY 10178
ATTN: Michael A. Chapnick, Esq.
Telecopy: (212) 309-6273
If to Purchaser: Heller Financial, Inc.
101 Park Avenue
New York, NY 10178
ATTN: CAMG Portfolio Manager
Telecopy: (212) 880-2057
SECTION 11.03. No Waiver; Remedies. No failure or delay on the
part of Purchaser to exercise, or any partial exercise of, any power, right, or
privilege hereunder or under any other related Agreement shall impair such
power, right, or privilege or be construed to be a waiver of any Default or
Event of Default. All rights and remedies existing hereunder or under any other
Related Transactions Documents are cumulative to and not exclusive of any rights
or remedies otherwise available.
SECTION 11.04. Binding Effect; Assignability. This Agreement
shall be binding upon and inure to the
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benefit of the parties hereto and their respective successors and assigns
except that Seller shall not assign its rights or obligations hereunder.
SECTION 11.05. Survival. All agreements, representations and
warranties made herein shall survive the execution and delivery of this
Agreement and the termination of this Agreement. Notwithstanding anything in
this Agreement or implied by law to the contrary, the agreements of Seller set
forth in Section 5.04(c) and 9.01 shall survive any termination of this
Agreement, the Closing Date or any Funding Date, as the case may be.
SECTION 11.06. Governing Law. This Agreement shall be governed
by and shall be construed and enforced in accordance with, the internal laws of
the State of New York without regard to conflicts of laws principles, provided
that, except to the extent that the validity or perfection of the interests of
Purchaser in the Purchased Receivables, or remedies hereunder, in respect
thereof, are governed by the laws of a jurisdiction other than the State of New
York.
SECTION 11.07. Costs, Expenses and Taxes. In addition to the
rights of indemnification granted to Purchaser under Section 9.01 hereof, Seller
agrees to pay on normal business terms all reasonable out-of-pocket costs and
expenses incurred by Purchaser in connection with the preparation, execution,
delivery and administration (including periodic auditing not to exceed two times
in any twelve (12) month period) of this Agreement, the other documents to be
delivered in connection herewith and any amendments thereto including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel (including
fees allocable to in-house counsel) for Purchaser with respect thereto and with
respect to advising Purchaser as to its respective rights and remedies under
this Agreement, and all reasonable costs and expenses (including such reasonable
counsel fees and expenses) incurred in connection with the enforcement of this
Agreement and/or the other documents to be delivered in connection herewith.
SECTION 11.08. Confidentiality. Unless otherwise required by
applicable law or regulation, Purchaser agrees to use its best efforts to
maintain the confidentiality of the identities of Approved Obligors and of the
volume of business and terms of any business done by Approved Obligors with
Seller. Purchaser shall have no
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obligation of confidentiality in respect of any information which may be
generally available to Purchaser or becomes available to the public through
no violation of this Section 11.08.
SECTION 11.09. Execution in Counterparts. This Agreement may
be executed in any number of counterparts, each of which when so executed shall
be deemed to be an original and all of which when taken together shall
constitute one and the same Agreement.
SECTION 11.10. Consent to Jurisdiction and Service of
Process.
(A) SELLER AND PURCHASER HEREBY IRREVOCABLY SUBMIT TO THE
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 AND SELLER AND PURCHASER HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVE ANY OBJECTION EITHER OF THEM 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. ANY JUDICIAL PROCEEDING BY
SELLER OR PURCHASER AGAINST THE OTHER OR AGAINST ANY AFFILIATE INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH ANY DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW
YORK EXCEPT THAT PURCHASER MAY BRING SUIT IN ANY JURISDICTION NECESSARY TO
REALIZE ITS RIGHT IN THE CONVEYED PROPERTY.
(B) SELLER DESIGNATES AND APPOINTS PARENT AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY SELLER WHICH IRREVOCABLY AGREES IN
WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS
IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY SELLER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A
COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO SELLER
AT ITS ADDRESS AS PROVIDED IN SECTION 11.02 EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY SELLER REFUSES TO
ACCEPT SERVICE, SELLER HEREBY AGREES THAT SERVICE UPON IT BY CERTIFIED MAIL
RETURN RECEIPT SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
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SECTION 11.11. Waiver of Jury Trial. SELLER AND PURCHASER
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, OR ANY DEALINGS BETWEEN THEM
RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. SELLER AND PURCHASER ALSO
WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS
WAIVER, BE REQUIRED OF PURCHASER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. SELLER AND PURCHASER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE
TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. SELLER AND PURCHASER
FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL
COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING
THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER SHALL
APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO
THIS AGREEMENT. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
SECTION 11.12. Severability. The invalidity, illegality, or
unenforceability in any jurisdiction of any provision of this Agreement shall
not affect or impair the remaining provisions of this Agreement, or such
provision or obligation in any other jurisdiction.
SECTION 11.13. Headings. Section and subsection headings
are included herein for convenience of reference only and shall not constitute
a part of this Agreement for any other purposes or be given substantive
effect.
<PAGE>
IN WITNESS WHEREOF, Seller and Purchaser have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
WESTERN PUBLISHING COMPANY, INC.
By /s/ Steven M. Grossman
------------------------
Steven M. Grossman
Executive Vice President
HELLER FINANCIAL, INC.
By /s/ Frank Bongiovanni
------------------------
Frank Bongiovanni,
Executive Vice President
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Table of Exhibits
Exhibit A Definitions
Exhibit B Bill of Sale
Exhibit C Form of Schedule of Eligible Receivables
Exhibit D Funding Certificate
Exhibit E Address List
Exhibit F Notification Letter
<PAGE>
EXHIBIT A
1. Certain Defined Terms. As used in the Receivables Purchasing
Agreement, the Credit Agreement, the Penn Agreement, if executed, the
Servicing Agreement and the Security Agreement, unless otherwise specified,
the following terms shall have the following meanings (such meanings to be
equally applicable to both the singular and plural forms of the terms
defined):
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter created or acquired by Grantor for which the account debtor is
located in the United States including, without limitation, all of the
following now owned or hereafter created or acquired by Grantor: (a) accounts
receivable arising from the sale, lease or exchange of goods or other
property by Grantor and/or the performance of services by Grantor; (b)
Grantor's rights in, to and under all purchase orders for which Grantor is
Seller or provider of goods, services or other property; (c) Grantor's rights
to any goods, services or other property represented by any of the foregoing
(including returned or repossessed goods and unpaid sellers' rights of
rescission, replevin, reclamation and rights to stoppage in transit); and (d)
Proceeds of any of the foregoing and all collateral security and guaranties
of any kind given by any Person with respect to any of the foregoing;
provided, however, Accounts shall in no event include any accounts sold to
Heller, or otherwise the subject of the transactions contemplated by the
Receivables Purchasing Agreement.
"Adverse Claim" means a lien, security interest or similar charge or
encumbrance or any other right or claim of any Person.
"Affiliate" means any Person (other than Heller): (a) directly or
indirectly controlling, controlled by, or under common control with, Western;
(b) directly or indirectly owning or holding five percent (5%) or more of any
equity interest in Western (other than a person entitled to file a Schedule
13G under the Securities Exchange Act of 1934); or (c) five percent (5%) or
more of whose voting stock or other equity interest is directly or indirectly
owned or held by Western. For purposes of this definition, "control"
(including with correlative meanings, the terms "controlling," "controlled
by" and "under common control with") means the possession directly or
indirectly of the power to direct or cause the direction of the management
and
<PAGE>
policies of a Person, whether through the ownership of voting securities
or by contract or otherwise.
"Aggregate Amount" means the aggregate net invoice dollar amount of a
Pool of Eligible Receivables or of one or more Eligible Receivables, as the
case may be (i.e., as reduced by any credits, discounts, allowances or
deductions then entitled to be taken by the Approved Obligor of any such
Eligible Receivable) on the Funding Date for such Pool, which amount is set
forth in the Funding Certificate relating to such Pool of Purchased
Receivables.
"Agreement" means the agreement in which the term is used (including all
schedules, exhibits, annexes and appendices thereto).
"Approved Obligor" means each of Western's customers approved by
Purchaser as of the Closing Date and every other customer, who is approved by
Purchaser thereafter pursuant to Section 6.02 of the Receivables Purchasing
Agreement.
"Asset Disposition" means the disposition whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise of any of the
following: all or substantially all of the assets of Western or any of its
Subsidiaries other than sales of inventory in the ordinary course of business
and dispositions of obsolete equipment not used or useful in their respective
business.
"Balance Payment" means with respect to any Pool of Purchased
Receivables an amount equal to:
(1) the Aggregate Amount for such Pool;
(2) minus the Initial Installment for such Pool before any adjustment
pursuant to Section 2.01(d) or Section 5.01(i)(A);
(3) minus the Discount Fee for such Pool;
(4) minus an amount equal to the portion of any Repurchase Amount
of any Nonperforming Receivable in such Pool calculated under clause
(iii) of Section 5.01(i);
(5) minus the amount of any credit, discount, allowance or offset
granted by Seller subsequent to determining the Aggregate Amount of such Pool
and the
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amount which relates to any merchandise sold to and returned by an
Approved Obligor as to any Purchased Receivable included in such Pool (to the
extent such Purchased Receivable does not become a Nonperforming Receivable
by virtue thereof); and
(6) minus to the extent of the remaining Balance Payment, if any, after
making the subtractions in the foregoing subparagraphs (2)-(5) inclusive, an
amount equal to the portion of any Repurchase Amount of any Nonperforming
Receivable in such Pool calculated under clauses (i) and (ii) of Section
5.01(i), except to the extent of such portion of such Repurchase Amount which
Seller has previously paid to Purchaser or for which Purchaser previously has
received credit pursuant to Section 5.01(i)(A), (B), or (C).
"Bankruptcy Code" means Title 11 of the United States Code entitled
"Bankruptcy", as amended from time to time or any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect and all rules and
regulations promulgated thereunder.
"Base Rate" means that variable rate of interest per annum equal to the
"prime rate" or equivalent rate of interest announced from time to time by
The Chase Manhattan Bank, N.A. (with the understanding that any such rate may
merely be a reference rate and may not necessarily represent the lowest or
best interest rate actually charged to any customer by such bank).
"Bill of Sale" means a document (substantially in the form of Exhibit B
attached to the Receivables Purchasing Agreement) evidencing the sale,
transfer and assignment of Eligible Receivables and Related Security from
Western to Heller.
"Blocked Account" means each demand deposit account into which the
Lock-Box Banks deposit items pursuant to the respective Lock-Box Agreements
and as to which Heller is authorized to issue a Control Election pursuant to
the Blocked Account Agreements, as in effect from time to time.
"Blocked Account Agreements" means an agreement entered into between
Western and Heller with respect to each Blocked Account and acknowledged by
each Lock-Box Bank, respectively, as in effect from time to time.
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"Borrower" shall have the meaning ascribed to that term in the preamble
of the Credit Agreement.
"Business Day" means any day on which banks are not required and
authorized to close in Illinois, New York or Pennsylvania.
"Closing Date" means September 29, 1995.
"Collateral" means, collectively: (a) the Credit Agreement Collateral
and the Receivables Agreement Collateral (each as defined in Section 2 of the
Security Agreement), collectively; and (b) any property or interest provided
in addition to or in substitution for any of the foregoing.
"Collections" means, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all cash proceeds of any Related Security with respect to such
Receivable.
"Completion" means, with respect to a Pool, the earlier of (i) the date
all amounts due on the Purchased Receivables in such Pool have been (x)
collected, (y) deemed uncollectible due to the Obligor's financial inability
to pay and/or (z) determined to be Nonperforming Receivables and (ii) 120
days after the Funding Date of the Pool (in the case of Receivables other
than Toys-R-Us Receivables) and in the case of Toys-R-Us Receivables, 45 days
after the due date of Toys-R-Us Receivables.
"Concentration Account" means account number 001-065076 at Chemical
Bank.
"Concentration Limit" means (a) with respect to Wal-Mart, forty-five
percent (45%); (b) with respect to Toys-R-Us, forty percent (40%); and (c)
with respect to any Approved Obligor other than Wal-Mart or Toys-R-Us, thirty
percent (30%).
"Contract" means any agreement, if any, between Western and any Obligor
pursuant to or under which such Obligor shall be obligated to pay for
merchandise or services from time to time.
"Control Election" has the meaning assigned to that term in the Blocked
Account Agreements.
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"Conveyed Property" has the meaning assigned to that term in Section
2.01(a) of the Receivables Purchasing Agreement.
"Credit Agreement" means the Credit Agreement between Heller and
Western, dated September 29, 1995.
"Credit Agreement Obligations" has the meaning assigned to that term in
Section 2(a) of the Security Agreement.
"Credit and Collection Policy" means those credit and collection
policies and practices of Western relating to Contracts existing on the
Closing Date in the form delivered to Purchaser prior to the Closing Date,
all as modified from time to time in compliance with Section 5.04 of the
Receivables Purchasing Agreement.
"Debt" has the meaning given to the term "Indebtedness" in the
Indenture.
"Default" means a condition or event that, after notice or lapse of time
or both, would constitute an Event of Default if that condition or event were
not cured or removed within any applicable grace or cure period.
"Defaulted Receivable" means any Receivable: (i) as to which any
payment, or part thereof, remains unpaid for 45 days from the original due
date for such payment, or (ii) as to which the Obligor thereof has taken any
action, or suffered any event, of the type described in Section 7.01(e) of
the Receivables Purchasing Agreement or (iii) which, consistent with the
Credit and Collection Policy, would be written off Western's books as
uncollectible.
"De Minimis Collateral" has the meaning assigned to that term in Section
4.2 of the Security Agreement.
"Discount Fee" means, subject to adjustment as set forth below (i) with
respect to Pools under the Receivables Purchasing Agreement and the Penn
Agreement, if executed, until $50,000,000 of aggregate Initial Installments
have been paid under such agreements, an amount equal to one and nine-tenths
percent (1.9%) (or 0.0253334% per day based on a 75-day collection cycle) of
the Aggregate Amount of each Purchased Receivable in such Pool, and (ii)
after $50,000,000 of aggregate Initial Installment have been paid under such
agreements, an amount equal to two and fifteen
5
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hundredths percent (2.15%) (or 0.0286667% per day based on a 75-day collection
cycle) of the Aggregate Amount of each Purchased Receivable in such Pool. With
respect to Pools of Toys-R-Us Receivables the relevant percentage shall be
calculated by multiplying the applicable daily rate times the number of days
from the Funding Date of such Pool to the date such Toys-R-Us Receivable is due.
In the event that on any Funding Date, the Base Rate exceeds 9%, the Discount
Fees applicable to Pools sold on such Funding Date shall be increased by five
(5) basis points (0.05%) (or 0.000666667% per day based on a 75-day collection
cycle) for each 25 basis points by which the Base Rate on such Funding Date
exceeds 9% per annum (with no fractional adjustments).
"Disputed Receivable" means any Receivable which is subject to (i) any
dispute, claim, offset or defense asserted by the Obligor to payment thereof
(other than a discharge of the Obligor in bankruptcy), or (ii) any other
claim resulting from the sale of merchandise or rendering of services related
to such Receivable or the furnishing of or failure to furnish such
merchandise or services, but excluding any cash discount, if any, available
to the Obligor of a Receivable pursuant to the Credit and Collection Policy.
"Eligible Receivable" means a Receivable:
(i) the Obligor of which is one of Western's Approved Obligors;
(ii) which is a Receivable representing the extension of credit by
Western under a Contract in connection with the credit sale by Western to an
Approved Obligor of merchandise or services;
(iii) which is not a Defaulted Receivable;
(iv) which is either a Toys-R-Us Receivable, or a Receivable of an
Approved Obligor required to be paid in full within seventy-five (75) days of
the original invoice date thereof;
(v) which is an "account" or a "general intangible" within the meaning
of Section 9-106 of the New York Uniform Commercial Code;
(vi) which is denominated and payable only in United States dollars in
the United States;
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(vii) which is not a Disputed Receivable;
(viii) which arises under a Contract which has been duly authorized and
which, together with such Receivable, is in full force and effect and
constitutes the legal, valid and binding obligation of the Approved Obligor
of such Receivable enforceable against such Approved Obligor in accordance
with its terms;
(ix) which, together with the Contract related thereto, does not
contravene in any material respect any laws, rules or regulations applicable
thereto (including, without limitation, laws, rules and regulations relating
to truth in lending, fair credit billing, fair credit reporting, equal credit
opportunity, fair debt collection practices and privacy) and with respect to
which no party to the Contract related thereto is in violation of any such
law, rule or regulation in any material respect;
(x) which satisfies substantially all applicable requirements of the
Credit and Collection Policy;
(xi) which is owned by Western free and clear of any Adverse Claim,
except as created by the Receivables Purchasing Agreement; and
(xii) as to which Heller has not notified Western that Heller has
determined, in accordance with Section 6.02 of the Receivables Purchasing
Agreement that such Receivable (or class of Receivables) is not acceptable
for purchase thereunder.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974
and all Regulations relating to it, as amended from time to time.
"ERISA Debt" means liabilities in respect of unfunded vested benefits
under plans covered by Title IV of ERISA.
"Event of Termination" has the meaning assigned to that term in Section
7.01 of the Receivables Purchasing Agreement.
"Expiry Date" means the earlier of (a) the suspension (subject to
reinstatement) of the Revolving Loan Commitment pursuant to subsection 6.2 of
the Credit Agreement, (b) the acceleration of the Obligations pursuant
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to subsection 6.3 of the Credit Agreement or (c) the Termination Date.
"Facility Limit" means the amount described in Section 3.02(b)(iii) of
the Receivables Purchasing Agreement.
"Fundamental Change" has the meaning assigned to such term in Section
5.04(a) of the Receivables Purchasing Agreement.
"Funding Certificate" has the meaning assigned to such term in Section
3.02(a) of the Receivables Purchasing Agreement.
"Funding Date" shall mean each date any Pool is purchased either under
the Receivables Purchasing Agreement or under the Penn Agreement, if
executed.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect as of the date of the Indenture with respect
to negative covenants and restrictions and as in effect from time to time
with respect to reporting requirements.
"Government Receivables" means a Receivable evidencing a claim against
the United States Government which is subject to the Assignment of Claims Act
of 1940, 31 USC Section 3727.
"Grantor" means Western Publishing Company, Inc., a Delaware
corporation.
"Heller" means Heller Financial, Inc., a Delaware corporation, also
referred to as Purchaser.
"Heller's Account" has the meaning assigned to that term in the Blocked
Account Agreements.
"Indenture" means the Indenture between the Parent and the Marine
Midland Bank, as Trustee, dated as of September 15, 1992, as amended and
supplemented through the Closing Date.
"Initial Installment" means with respect to any Pool of Purchased
Receivables, the portion of the Purchase Price equal to the product of (i)
the Purchase Advance Percentage for such Pool multiplied by (ii) the
Aggregate Amount of such Pool.
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"Initial Installment Adjustment Date" means with respect to any Pool,
the date on which the Initial Installment Adjustment Level is reached with
respect to such Pool.
"Initial Installment Adjustment Level" means with respect to any Pool,
an amount of collections received with respect to such Pool which equals the
sum of the Initial Installment for such Pool (without giving effect to any
adjustment made on the Funding Date for such Pool pursuant to Section
2.01(d)) plus the aggregate Discount Fee for all Purchased Receivables in
such Pool.
"Inventory" means all raw materials, and finished goods now owned or
hereafter acquired by Grantor, located in the United States, including,
without limitation, finished goods, raw materials, products intended for
sale, rent, lease or other disposition and goods which are returned to or
repossessed by Grantor; provided, however, inventory shall not include (i)
work in process, (ii) any inventory goods or products manufactured for or on
behalf of any Subsidiaries, divisions or customers of Grantor not located in
the United States or (iii) any inventory packaging materials or supplies.
"Last Pool" has the meaning assigned to that term in Section 2.01(e).
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind, whether voluntary or involuntary, (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest).
"Loan Documents" means the Credit Agreement, the Notes, the Security
Documents, the Parent Guaranty and all other instruments, documents and
agreements executed by or on behalf of any Loan Party and delivered
concurrently with the Credit Agreement or at any time thereafter to or for
the benefit of Heller in connection with the Revolving Loans and other
transactions contemplated by the Credit Agreement, all as amended,
supplemented or modified from time to time.
"Loan Party" means, collectively, Parent, Western and Penn, if the Penn
Agreement is executed.
"Lock-Box Agreement" means those agreement(s), in form and substance
reasonably acceptable to Heller, entered into from time to time among Western
and the Lock-Box Banks
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providing for the maintenance of lock boxes with the U.S. Post Office.
"Lock-Box Bank" means (i) Chemical Bank, NationsBank and The First
National Bank of Chicago, and (ii) any other bank with whom Western enters
into a Lock-Box Agreement and a Blocked Account Agreement in either case, at
such time as Western and such bank have executed both a Lock-Box Agreement
and a Blocked Account Agreement.
"Material Adverse Effect" means (a) a material adverse effect upon the
business, operations, material properties, assets or financial condition of
Western or Parent or (b) the material impairment of the ability of Western or
Parent to perform its obligations under any Related Transactions Documents to
which it is a party or (c) or the impairment of the ability of Heller to
enforce any Related Transactions Documents or collect any of the Obligations.
In determining whether any individual event would result in a Material
Adverse Effect, notwithstanding that such event does not of itself have such
effect, a Material Adverse Effect shall be deemed to have occurred if the
cumulative effect of such event and all other then existing events would
result in a Material Adverse Effect.
"Maximum Secured Amount" means $12.5 million less any amounts of Credit
Agreement Obligations satisfied by Heller's exercising its rights against or
otherwise realizing upon the Credit Agreement Collateral.
"Minimum Collateral Coverage" means at least $15,000,000 Accepted Value
of Credit Agreement Collateral in which Heller has a perfected first priority
security interest (subject to Permitted Encumbrances). "Accepted Value" means
in the case of Accounts, excluding Government Receivables as to which Western
has not complied with the Assignment of Claims Act of 1940, 100% of net book
value, and in the case of Inventory, 50% of net book value, in each case
determined in accordance with GAAP.
"Nonperforming Receivable" means a Purchased Receivable (a) with respect
to which there has occurred any breach of Western's representations and
warranties under Section 4.01 of the Receivables Purchasing Agreement with
respect thereto, or (b) that becomes a Disputed Receivable subsequent to the
Funding Date on which it became a Purchased Receivable, or (c) with respect
to which Western has granted any credit, discount, allowance or offset or
that relates to any merchandise sold to and returned by an
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Approved Obligor if the aggregate amount of all such discounts, allowances and
offsets and reductions due to the returns of merchandise with respect to all
Purchased Receivables in the same Pool exceeds 15% of the Aggregate Amount of
all Purchased Receivables in such Pool, which are not deemed Nonperforming
Receivables pursuant to clauses (a) or (b) hereof.
"Note" or "Notes" means one or more of the promissory notes of Western
payable to Heller and substantially in the form of Exhibit 10.1(A) as
attached to the Credit Agreement, or any combination thereof.
"Obligations" means all obligations, liabilities and indebtedness of
every nature of each Loan Party from time to time owed to Heller under the
Loan Documents and/or the Related Transactions Documents (other than
Obligations arising under the Receivables Purchasing Agreement as a result of
the transactions thereunder being deemed to be Loans) including the principal
amount of all debts, claims and indebtedness, accrued and unpaid interest and
all fees, costs and expenses, whether primary, secondary, direct, contingent,
fixed or otherwise, heretofore, now and/or from time to time hereafter owing,
due or payable whether before or after the filing of a proceeding under the
Bankruptcy Code by or against Western; provided, however that as used in the
Security Agreement the term "Obligations" means the Credit Agreement
Obligations and the Receivables Agreement Loans, collectively.
"Obligor" means a Person obligated to make payments to Seller pursuant
to a Contract.
"Outstanding Balance" means the outstanding principal balance of any
Eligible Receivable at any time.
"Parent" means Western Publishing Group, Inc., a Delaware corporation.
"Parent Guaranty" means that certain Guaranty dated the Closing Date,
executed by Parent in favor of Heller and delivered to Heller.
"Penn" means Penn Corporation, a Delaware corporation and a wholly-owned
Subsidiary of Parent.
"Penn Agreement" means a receivables purchasing agreement substantially
in the form of the Receivables
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Purchasing Agreement which may be entered into in the future between Penn and
Heller.
"Permitted Encumbrances" means the following:
(1) Liens in favor of Heller;
(2) Liens permitted under Section 3.8 of the Indenture; and
(3) Liens arising in connection with leases of property incurred in the
ordinary course of business.
"Person" means and includes natural persons, corporations, limited
liability companies, limited partnerships, general partnerships, joint stock
companies, joint ventures, associations, companies, trusts, banks, trust
companies, land trusts, business trusts or other organizations, whether or
not legal entities, and governments and agencies and political subdivisions
thereof and their respective permitted successors and assigns (or in the case
of a governmental person, the successor functional equivalent of such
Person).
"Pool" means one or more Eligible Receivables sold on a Funding Date and
identified in the same Bill of Sale.
"Proceeds" means all proceeds of, and all other profits, rentals or
receipts, in whatever form arising from the collection, sale, lease,
exchange, assignment, licensing or other disposition of, or realization upon,
any Collateral or the proceeds thereof, including, without limitation, all
claims of Grantor against third parties for loss of, damage to or destruction
of, or for proceeds payable under, or unearned premiums with respect to,
policies of insurance with respect to any Collateral, and any condemnation or
requisition payments with respect to any Collateral, in each case whether now
existing or hereafter arising.
"Purchase Advance Percentage" of any Pool means 80%; provided, however,
that as to the first Pool such term means the lower of (i) 80% and (ii) the
amount derived by subtracting from 100% the highest actual monthly dilution
experienced by Western in the three (3) fiscal months ended two fiscal months
prior to the fiscal month in which the first Funding Date occurs.
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<PAGE>
"Purchased Receivable" means an Eligible Receivable due from an Approved
Obligor and purchased under the Receivables Purchasing Agreement by Heller.
"Purchase Price" means for any Pool of Purchased Receivables, an amount
equal to the Initial Installment for such Pool plus the Balance Payment, if
any, for such Pool.
"Receivable" means the indebtedness of any Obligor under a Contract,
whether constituting an account or general intangible, arising from a sale of
merchandise and/or services by Western to such Obligor, and includes the
right to payment of any interest or finance charges, if any, and other
obligations of such Obligor with respect thereto.
"Receivables Agreement Loans" has the meaning assigned to that term in
Section 2 (b) of the Security Agreement.
"Receivables Concentration Account" means the Blocked Account (number
006-185452 at Chemical Bank) into which Lock-Box Banks deposit Collections of
Purchased Receivables pursuant to instructions of Western in accordance with
the Servicing Agreement.
"Receivables Purchasing Agreement" means the Receivables Purchasing
Agreement entered into between Western and Heller dated September 29, 1995.
"Related Security" means with respect to any Receivable:
(i) all of Western's interest in the merchandise (including returned
merchandise and rights of reclamation and replevin), if any, relating to the
sale which gave rise to such Receivable;
(ii) all other security interests or liens and property subject thereto
from time to time purporting to secure payment of such Receivable, whether
pursuant to the Contract related to such Receivable or otherwise;
(iii) the assignment to Heller of all UCC financing statements covering
any collateral securing payment of such Receivable;
(iv) all guaranties, insurance proceeds and other agreements or
arrangements of whatever character from
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time to time supporting or securing payment of such Receivable whether pursuant
to the Contract related to such Receivable or otherwise; and
(v) all proceeds of the foregoing;
"Related Transactions" means the execution and delivery of the Related
Transactions Documents and the payment of all fees, costs and expenses
associated with all of the foregoing.
"Related Transactions Documents" means the Loan Documents, the
Receivables Purchasing Agreement, the Servicing Agreement, the Security
Agreement, the Parent Guaranty, the Security Documents and all other
agreements, instruments and documents executed or delivered in connection
with the Related Transactions.
"Repurchase Amount" has the meaning assigned to such term in Section
5.01(i) of the Receivables Purchasing Agreement.
"Repurchase Date" has the meaning assigned to such term in Section
5.01(i) of the Receivables Purchasing Agreement.
"Restricted Junior Payment" means: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of
stock of Borrower or any of its Subsidiaries now or hereafter outstanding,
except a dividend payable solely in shares of that class of stock to the
holders of that class; (ii) any redemption, conversion, exchange, retirement,
sinking fund or similar payment, purchase or other acquisition for value,
direct or indirect, of any shares of any class of stock of Borrower or any of
its Subsidiaries now or hereafter outstanding; (iii) any payment or
prepayment of principal of, premium, if any, redemption, conversion,
exchange, purchase, retirement, defeasance, sinking fund or similar payment
with respect to, any Subordinated Debt; and (iv) any payment made to retire,
or to obtain the surrender of, any outstanding warrants, options or other
rights to acquire shares of any class of stock of Western or any of its
Subsidiaries now or hereafter outstanding.
"Scheduled Receivable" means any Eligible Receivable listed in a Funding
Certificate.
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"Schedule of Eligible Receivables" means a document substantially in the
form of Exhibit C attached to the Receivables Purchasing Agreement listing
the Eligible Receivables, the respective Approved Obligors, the Related
Security, if any, and the Aggregate Amount of each Eligible Receivable to be
sold on any given Funding Date.
"Security Agreement" means the Security Agreement between Western and
Heller, dated September 29, 1995.
"Security Documents" means all instruments, documents and agreements
executed by or on behalf of any Loan Party to guaranty or provide collateral
security with respect to the Obligations including, without limitation, the
Security Agreement, any other security agreement or pledge agreement, any
guaranty of the Obligations, any mortgage, and all instruments, documents and
agreements executed pursuant to the terms of the foregoing.
"Security Interests" means the security interests granted pursuant to
Section 2 of the Security Agreement, as well as all other security interests
created or assigned as additional security for the Obligations as used in the
Security Agreement pursuant to the provisions of the Security Agreement and
the other Loan Documents.
"Servicer" means Western in its capacity as servicer under the Servicing
Agreement, or any Successor Servicer (as defined in the Servicing Agreement)
appointed pursuant to the Servicing Agreement.
"Servicing Agreement" means the Servicing Agreement dated as of the
Closing Date between the Servicer and Heller, as the same may be amended,
supplemented or otherwise modified from time to time.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, or other entity the outstanding securities or interests of which
having ordinary voting power to elect a majority of the board of directors or
similar governing body of such corporation, partnership or other entity
(whether or not any other class of securities has or might have voting power
by reason of the happening of a contingency) are at the time 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 together.
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<PAGE>
"Termination Date" means the earliest to occur of (i) the date of
termination of the Receivables Purchasing Agreement pursuant to its Section
7.01, or (ii) the date of termination of the Receivables Purchasing Agreement
pursuant to its Section 10.01.
"Toys-R-Us Receivable" means an Eligible Receivable arising from sales
by Western to Toys'R'Us, Inc. that either (i) has its due date on December
31st, due to having its invoice date on or between March 1st and September
30th, or that (ii) has its due date on May 31st due to having its invoice
date on or between October 1st and February 29th.
"UCC" means the Uniform Commercial Code as in effect on the date hereof
in the State of New York, as amended from time to time, and any successor
statute; provided that, if by reason of mandatory provisions of law, the
perfection or the effect of perfection or non-perfection of the security
interests in any collateral is governed by the Uniform Commercial Code as in
effect on or after the date hereof in any other jurisdiction, "UCC" means the
Uniform Commercial Code as in effect in such other jurisdiction for purposes
of the provision hereof relating to such perfection or effect of perfection
or non-perfection.
"Weekly Reporting Period" means a seven-day period commencing on
Saturday and ending on Friday of the following week.
"Weekly Settlement Report" means a report to be delivered by Western or
by Servicer on behalf of Western to Purchaser each Wednesday, or in case such
day is not a Business Day then the next succeeding Business Day, for the most
recently ended Weekly Reporting Period showing, as to all Purchased
Receivables, all amounts collected and deposited with the Lock Box Banks
during such Weekly Reporting Period, all amounts transferred from the Lock
Box Banks to Seller, all amounts remitted by Western to Heller and the amount
of any checks that are returned or otherwise dishonored and as to which the
Lock Box Banks had previously made funds available.
"Western" means Western Publishing Company, Inc., a Delaware
corporation, also referred to as Borrower, Grantor, Seller or Servicer as the
case may be.
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2. Other Terms. All accounting terms not specifically defined herein
shall be construed in accordance with GAAP. All terms used in Article 9 of
the UCC, and not specifically defined herein, are used herein as defined in
such Article 9.
17
Exhibit B
BILL OF SALE
The undersigned hereby sells, transfers, assigns and conveys on the date
hereof all its right, title and interest in and to the Eligible Receivables
identified in the attached Schedule of Eligible Receivables, including all
Related Security, if any, in existence as of the date hereof and as described
in the attached Schedule of Eligible Receivables and all moneys due or to
become due with respect thereto, to Heller Financial, Inc., ("Purchaser")
pursuant to the Receivables Purchasing Agreement between Western Publishing
Company, Inc. ("Seller") and Heller Financial Inc., dated September 29, 1995.
This Bill of Sale is made in consideration of the payment of $ .
This sale is made without recourse except with regard to Nonperforming
Receivables and except that the undersigned hereby represents and warrants
that it is the owner of the Eligible Receivables and the Related Security
referred to above and that it has not created any Adverse Claim upon or with
respect to such Eligible Receivable.
All the capitalized terms used and not otherwise defined herein have the
same meaning as they have under Exhibit A to the Receivables Purchasing
Agreement.
This Bill of Sale shall be governed by, and construed in accordance
with, the laws of the State of New York, without reference to any conflicts
of laws principles.
IN WITNESS WHEREOF, the undersigned has caused this bill of Sale to be
duly executed and delivered by its duly authorized officer on the date
specified below.
Western Publishing Company, Inc.
By ________________________________
Name:
Title:
[Date]
Exhibit C
Schedule of Eligible Receivables sold and purchased as of _________
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Date of Type of Value (estimated)
Aggregate Billing Due Payment Initial Related if necessary) of
Debtor Amount Statement Date Term Installment* Security Related Security
</TABLE>
Capitalized terms used herein without definition have the meanings ascribed
thereto in Exhibit A of the Receivables Purchasing Agreement between Western
Publishing Company, Inc. and Heller Financial, Inc. dated as of September 29,
1995.
*Aggregate Amount Only
The information required on this form may be computer generated.
EXHIBIT D
FUNDING CERTIFICATE
Notice is hereby given pursuant to Section 3.02(a) of the Receivables
Purchasing Agreement dated as of September 29, 1995 (the "Purchasing
Agreement") between Western Publishing Company, Inc. ("Western") and Heller
Financial, Inc. ("Heller") that on _________________, 199 _, Western will sell
to Heller the Pool of Eligible Receivables identified on Schedule I* attached
hereto.
Dated:
Very truly yours,
WESTERN PUBLISHING COMPANY, INC.
By: _____________________________
Name:
Title:
- --------------------
* Schedule I shall be in the form of Exhibit C to the Purchasing Agreement.
Exhibit E
Chief Executive Office: Western Publishing Company, Inc.
c/o Western Publishing Group, Inc.
444 Madison Avenue, Suite 601
New York, NY 10022
Principal Place of Western Publishing Company, Inc.
Business: 1220 Mound Avenue
Racine, Wisconsin 53404
Exhibit F
Re: Notice of Purchase and Sale of Receivable
Dear Customer:
We have sold, transferred, assigned and conveyed to Heller Financial,
Inc., 101 Park Avenue, New York, N.Y. 10178 all of our right to receive
payments from you for the invoices listed on Exhibit A hereto. Please be
further advised that we have sold, transferred, assigned and conveyed all of
our security interests securing the aforementioned payment.
On behalf of Heller Financial, Inc., we request you to send, from the date
hereof, all payments due based on the aforementioned invoices listed on Exhibit
A and only those invoices so listed and all proceeds of the related security
to First National Bank of Chicago, One First National Plaza, Illinois 60670 for
the credit and advice of Heller Financial, Inc., Reference Heller Eastern
CAMG, ABA #0710-0001-3, Account No. 059-27196 for the benefit of Western
Publishing Company, Inc. Any other correspondence regarding such payment should
be forwarded to Heller Financial, Inc. at the aforementioned address. You are
authorized to rely on a photocopy of this letter.
Very truly yours,
[Execution Copy]
SERVICING AGREEMENT
Between
HELLER FINANCIAL, INC.
Owner
and
WESTERN PUBLISHING COMPANY, INC.
Servicer
Dated September__, 1995
<PAGE>
SERVICING AGREEMENT
This Servicing Agreement ("Servicing Agreement") is made this
__th day of September, 1995 by and between Heller Financial, Inc., a Delaware
corporation ("Heller"), and Western Publishing Company, Inc., a Delaware
corporation ("Western" or "Servicer").
PRELIMINARY STATEMENT
WHEREAS, Heller and Western have entered into a Receivables
Purchasing Agreement, dated the date hereof, pursuant to which Western may sell,
and Heller may purchase, certain accounts receivable; and
WHEREAS, Western and Heller desire to enter into this
Servicing Agreement to, among, other things, manage, administer, service and
make Collections on certain Purchased Receivables; and
WHEREAS, Schedules of Eligible Receivables as purchased and
sold under Bills of Sale on the applicable Funding Date shall be substantially
in the form of Exhibit C attached to the Receivables Purchasing Agreement; and
WHEREAS, Heller is willing to permit Servicer to undertake and
perform certain duties, including, but not limited to, making Collections on
Purchased Receivables, sending notices to Obligors and Approved Obligors with
regard to Receivables and Purchased Receivables, pursuing delinquent and
Nonperforming Receivables and producing certain reports; and
WHEREAS, Servicer desires to provide such services to Heller;
NOW, THEREFORE, in consideration of the covenants and
conditions contained in this Servicing Agreement and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Western and Heller, intending to be legally bound, hereby agree as follows:
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<PAGE>
ARTICLE I
DEFINITIONS
Defined Terms. Capitalized and defined terms contained in this
Servicing Agreement without definitions have the meanings given them in Exhibit
A to the Receivables Purchasing Agreement.
ARTICLE II
ADMINISTRATION AND SERVICING OF RECEIVABLES
Section 2.01. Appointment and Duties of Servicer.
(a) Heller hereby appoints Western as Servicer under this
Servicing Agreement. Servicer shall perform the services required of it pursuant
to the terms of this Servicing Agreement. In performing its duties hereunder,
Servicer shall have full power and authority to do or cause to be done any and
all things in connection with such servicing and administration which it may
deem necessary, appropriate or desirable in accordance with the standard of care
specified herein.
(b) The sole consideration payable to Servicer for performance
of its duties under this Servicing Agreement shall be the agreements of, and any
payments of the purchase prices of Purchased Receivables by, Heller under the
Receivables Purchasing Agreement. Notwithstanding the foregoing, upon the
Completion of the Last Pool, the Purchaser shall pay the Servicer an incentive
fee (the "Incentive Fee") in an amount equal to 80% of the time value of the
weighted average period by which the collection cycle for the Last Pool and all
Pools which had not reached Completion as of the Funding Date of the Last Pool
are less than 75 days. Except as provided in the preceding sentences, Heller
shall not have any liability to Western for payment of any compensation for
services rendered by Western hereunder. Servicer shall not have, and expressly
waives, all rights of set off it may have as to Heller's moneys or other
personal property (tangible or intangible) whatsoever that may from time to time
be in the possession of Servicer.
(c) Heller shall be entitled to terminate the services
of Servicer, at any time on or after the occurrence of an Event of Termination.
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<PAGE>
(d) Servicer, in the limited capacity of its making
Collections of Purchased Receivables pursuant to Section 2.02 hereof, shall be
acting as agent for Heller, and shall be deemed to be holding such Collections,
moneys or other personal property (tangible or intangible) whatsoever in trust
on behalf of Heller.
(e) In the event Servicer shall for any reason no longer be
acting as such (including by reason of an Event of Default as specified in
Section 5.01 hereof), any Successor Servicer (as defined in Section 5.02(c))
appointed by Heller (or, if Heller chooses not to appoint a Successor Servicer,
Heller) shall thereupon assume all of the rights and obligations of Servicer
under this Servicing Agreement. Heller or any Successor Servicer, as the case
may be, shall be deemed to have assumed all of Servicer's interest and
obligations hereunder and to have replaced Servicer as a party to this Servicing
Agreement to the same extent as if this Servicing Agreement had been assigned to
the Successor Servicer, except that Servicer shall not thereby be relieved of
any liability or obligations on its part under this Servicing Agreement arising
prior to such replacement. Servicer shall, at its expense, deliver to the
Successor Servicer all documents and records relating to this Servicing
Agreement and the Receivables then being serviced hereunder and an accounting of
amounts collected and held by it and otherwise use its best efforts to effect
the orderly and efficient transfer of this Servicing Agreement to the Successor
Servicer. Upon assuming its duties hereunder, any Successor Servicer shall be
deemed Servicer hereunder.
Section 2.02. Collection of Receivables; Reporting
Obligations.
(a) Servicer, as agent for Heller, shall be responsible for
the collection of payments called for under the terms and provisions of the
Purchased Receivables and Related Security and the Contracts, as and when the
same shall become due and shall follow such collection procedures as are
consistent with the standard of care set forth in Section 2.13 hereof. Without
the prior written consent of Heller, Servicer may not, after an Event of
Termination or prior to an Event of Termination except as contemplated by the
Receivables Purchasing Agreement, (i) grant extensions, rebates or adjustments
on a Purchased Receivable; (ii) waive any late payment charge or any other fees
that may be collected in the ordinary course of servicing a Purchased
Receivable; (iii) agree to any alteration of the payment
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<PAGE>
terms of any Purchased Receivable; or (iv) otherwise amend or modify the
terms of any Purchased Receivable.
(b) Servicer shall provide daily reports substantially in the
form of Exhibit A hereto and weekly reports substantially in the form of Exhibit
B hereto, in each case under a certificate of the chief financial officer,
controller or director of credit of Servicer substantially in the form of
Exhibit C hereto, to Heller regarding payments received from or on behalf of
Approved Obligors and deposited in Heller's Account representing Collections
with respect to Purchased Receivables. Daily reports shall be delivered by 2:00
p.m. New York time on each Business Day (with information on Collections being
current as of the second preceding Business Day and the third preceding Business
Day as to amounts deposited in Chemical Bank) and weekly reports shall be
delivered by 2:00 p.m. New York time on the third Business Day after the close
of the reporting period. All reports delivered hereunder shall be in the form of
a diskette, magnetic tape or such other form as shall be reasonably acceptable
to Heller. Delivery of a Weekly Settlement Report shall be deemed to satisfy the
weekly report requirement hereunder.
Section 2.03. Nonperforming Receivables. Promptly upon
Servicer obtaining actual or constructive knowledge that any Purchased
Receivable is a Nonperforming Receivable, Servicer shall give written notice
thereof to Heller.
Section 2.04. Maintenance of Security Interests in Conveyed
Property. Servicer shall, in accordance with its customary servicing procedures,
take or cause to be taken such steps as may be necessary to maintain perfection
of the respective interests of Heller in the Conveyed Property.
Section 2.05. Covenants of Servicer.
(a) Servicer shall (1) not release any Related Security in
whole or in part except in the event of payment in full of the related Purchased
Receivable by the Obligor thereunder or upon repurchase of the respective
Purchased Receivable by Western in its capacity as Seller under the Receivables
Purchasing Agreement, (2) not impair the rights of Heller in the Purchased
Receivables or Related Security, (3) not sell, pledge, assign, or transfer to
any other Person, or grant, create, incur, assume, or suffer to exist
4
<PAGE>
any lien on any Purchased Receivable or Related Security, (4) immediately
notify Heller of the existence of any lien on any Purchased Receivable or
Related Security of which it has knowledge, (5) defend at the request of
Heller the perfected security interest of Heller in, to, and under the
Purchased Receivables or Related Security against all claims of third
parties claiming through or under Servicer, (6) deposit into the Deposit
Account all Collections and payments received by Servicer with respect to
any Purchased Receivable, (7) promptly notify Heller of the occurrence of (A)
any Event of Default hereunder or (B) any breach by Western of any of its
covenants or representations and warranties contained in the Receivables
Purchasing Agreement to the extent it has knowledge thereof, and (8) make, at
the request of Heller and only so long as it has received reasonable
assurances that it will be reimbursed for all out of pocket costs, any
filings, reports, notices or applications and seek any consents or
authorizations from any and all government agencies, tribunals or authorities in
accordance with the UCC and any state license or registration authority on
behalf of Heller as may be necessary or advisable or reasonably requested by
Heller to create, maintain and protect Heller's ownership of and title to
Purchased Receivables and Heller's interest in the Related Security, or as may
be required by such government agencies, tribunals or authorities.
(b) Servicer shall respond to reasonable directions or
requests for information that Heller may have with respect to the administration
of the Purchased Receivables or the handling of any Related Security.
Section 2.06. Repurchase of Nonperforming Receivables.
Servicer shall transfer an amount equivalent to the portion, if any, of the
Repurchase Amount with respect to all Nonperforming Receivables repurchased in
accordance with clause (B) of Section 5.01 (i) of the Receivables Purchasing
Agreement from collections on Accounts that are not Purchased Receivables to
Heller's Account as soon as they are made available by the Lock Box Bank at
which the Receivables Concentration Account is maintained.
Section 2.07. Servicer's Monthly Statement as to Compliance.
Servicer shall deliver to Heller, on or before the 15th day of each fiscal
month, beginning October 1995, a certificate of its chief financial officer,
controller or director of credit dated effective as of the last day of the
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<PAGE>
immediately preceding fiscal month, stating, as to each signer thereof, that (i)
a review of the activities of Servicer during the preceding fiscal month and of
performance under this Servicing Agreement has been made under such officer's
supervision and (ii) to the best of such officer's knowledge and based on such
review, Servicer has fulfilled all its obligations under this Servicing
Agreement throughout such month, or, if there has been a default in the
fulfillment of any such obligation, specifying each such default known to such
officer and the nature and status thereof and remedies therefor being pursued.
Section 2.08. [Intentionally Omitted]
Section 2.09. Costs and Expenses. Servicer shall be
responsible for all costs and expenses incurred by it in carrying out its duties
hereunder, including, without limitation, all fees and expenses of independent
accountants and payments of all fees and expenses incurred in connection with
the enforcement of Purchased Receivables (including enforcement of Nonperforming
Receivables). The compensation to be paid to Western described in Section
2.01(b) shall constitute the sole compensation to be paid to Western in respect
of its duties hereunder except to the extent of Section 2.05(a)(8).
Section 2.10. Documents Held by Servicer; Indication of
Heller's Ownership.
(a) Servicer shall maintain the following documents in its
files or have the following otherwise immediately accessible to Heller on
computer screen with respect to each Eligible Receivable and each Purchased
Receivable:
(i) Original or copy of each Contract, if any;
(ii) Copies of all correspondence to the applicable
Obligor pertaining to such Eligible Receivable or Purchased
Receivable, as the case may be;
(iii) Copies of records of all transactions with each
Lock-Box Bank relating to each Purchased Receivable;
(iv) Copy of notice to the applicable Obligor or Approved
Obligor given after the occurrence of an Event
6
<PAGE>
of Termination regarding sale of the Purchased Receivable to Heller
to the extent Heller has delivered such notice in accordance with
the Receivables Purchasing Agreement and provided a copy thereof to
Servicer; and
(v) Such other documents as Servicer may customarily retain
in connection with its normal accounts receivable servicing activities
under this Servicing Agreement.
Servicer shall keep satisfactory books and records pertaining
to each Purchased Receivable as will enable Heller to determine the status of
each Purchased Receivable and shall make periodic reports in accordance with
this Servicing Agreement. Such records may not be destroyed or otherwise
disposed of until all obligations to Heller under the Receivables Purchasing
Agreement, this Servicing Agreement, the Credit Agreement, the Security
Agreement and any other agreement between Western and Heller have been satisfied
and discharged in full. All documents, regardless of whether developed or
originated by Servicer reasonably required to document or to properly administer
any Purchased Receivable remain at all times the property of Heller except to
the extent that such Purchased Receivable becomes a Nonperforming Receivable and
is repurchased by Western in accordance with the terms of the Receivables
Purchasing Agreement. Servicer shall not acquire any property rights with
respect to such records, and shall not have the right to possession of them
except as, and subject to the conditions, stated in this Servicing Agreement.
Servicer shall bear the entire cost of restoration in the event any records
pertaining to any Purchased Receivable shall become damaged, lost or destroyed.
(b) Servicer hereby agrees that the computer files and other
physical records in connection with Purchased Receivables maintained by Servicer
shall bear a legend or other indication reflecting that the Purchased
Receivables are owned by Heller.
Section 2.11. Possession of Documents. Unless otherwise
specified herein, Servicer shall maintain physical possession of the instruments
and documents listed in paragraph 2.10(a) above; such other instruments or
documents that modify or supplement the terms or conditions of any of the
foregoing; and, all other instruments and documents generated by or coming into
the possession of Servicer
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<PAGE>
(including, but not limited to, ledger sheets, payment records,
correspondence and current and historical computerized data files) that are
required to document or service any Purchased Receivable. Collectively, all
of the documents described or referred to in this Section 2.11 with respect to
any Purchased Receivables are referred to as "Receivable Documents." All
Receivable Documents shall remain the property of Heller so long as the
Purchased Receivable relating thereto is outstanding or until the
Purchased Receivable becomes a Nonperforming Receivable and is repurchased by
Western in accordance with the terms of the Receivables Purchasing Agreement, if
earlier. Servicer shall retain all Receivable Documents for its normal retention
period of five years. Upon reasonable request and prior notice Servicer will
make Receivable Documents accessible to Heller and will provide Heller with
copies of any Receivable Documents requested. Servicer will notify Heller before
it destroys any Receivable Documents any time before the five year period has
ended and give Heller an opportunity to make copies at that time.
Section 2.12. Warranties and Representations With Respect to
Documents. Servicer hereby warrants and represents that each Receivable
Document: (i) conforms in all material respects to all applicable federal, state
and local laws and regulations; (ii) is enforceable in accordance with the terms
thereof; and (iii) in the event that Servicer is required to enforce any of such
Receivable Documents, the enforcement thereof by Servicer will not subject
Servicer to liability under any federal, state or local law, provided such
enforcement by Servicer is conducted in accordance with the provisions of this
Servicing Agreement and Servicer's normal operating procedures.
Section 2.13. Standard of Care. In performing its duties and
obligations hereunder and in administering and enforcing the servicing relating
to the Purchased Receivables pursuant to this Servicing Agreement, Servicer
shall comply with all applicable state and federal laws and regulations and will
exercise that degree of skill and care consistent with the degree of skill and
care that Servicer exercises with respect to similar Receivables owned and/or
serviced by it and that is consistent with prudent industry standards
(including, without limitation, Western's Credit and Collection Policy), and
will apply in performing such duties and obligations, those standards, policies
and procedures consistent with the standards, policies and
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<PAGE>
procedures Servicer applies with respect to similar Receivables owned or
serviced by it; provided, however, that notwithstanding the foregoing, Servicer
shall not, except pursuant to an order from a court of competent jurisdiction
or governmental regulatory authority or as otherwise required by applicable
law or regulation, release or waive the right to collect the unpaid balance on
any Purchased Receivable. In performing its duties and obligations
hereunder and in administering and enforcing the servicing relating to the
Purchased Receivables pursuant to this Servicing Agreement, Servicer shall
comply with all applicable federal and state laws and regulations, shall
maintain all state and federal licenses and franchises necessary for it to
perform its servicing responsibilities hereunder, and shall not impair the
rights of Heller.
Section 2.14. Inspection and Audit Rights; Verification. (a)
As often as is commercially reasonable, upon three (3) Business Days written
notice, Servicer shall afford Heller and its authorized agents reasonable access
during normal business hours to all of Servicer's books of account, reports,
records and computer files at the principal place of business of the Servicer or
Parent relating to the Purchased Receivables and shall cause its personnel to
assist in any examination of such records by Heller, to make copies and extracts
therefrom, to cause such books to be audited by independent certified public
accountants selected by Heller up to two times in each calendar year. Any
reasonable expense incident to the exercise by Heller of any right under this
section 2.14 shall be borne by Servicer. The examination referred to in this
Section 2.14 will be conducted in a manner which does not unreasonably interfere
with Servicer's normal operations or customer or employee relations. Without
otherwise limiting the scope of the examination, Heller may, using generally
accepted audit procedures, verify (solely in the manner provided in Section
2.14(b) prior to occurrence and continuance of an Event of Default) the status
of each Purchased Receivable and review the Receivable Documents and records
relating thereto for conformity to reports prepared pursuant to this Servicing
Agreement and compliance with the standards represented in this Servicing
Agreement as to each Purchased Receivable.
(b) At the request of Heller prior to the occurrence of an
Event of Termination, the status of any Purchased Receivable shall be subject to
verification in the manner hereinafter provided. Servicer will cooperate with
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any reasonable verification requested by Heller. Heller shall not have any
direct communication with any Approved Obligor concerning any Eligible
Receivable or any Purchased Receivable. All contacts with Obligors and approved
Obligors shall be made by employees of Western's accounts receivable department.
Upon the request of Heller, verifications will be made by telephone or mail in a
manner that will allow a representative of Heller to monitor the proceedings by
which any verification is conducted.
Section 2.15. Enforcement.
(a) Servicer shall, consistent with the standard of care
required by Section 2.13 hereof, act with respect to the Purchased Receivables
in such manner as will, in good faith and in the reasonable judgment of
Servicer, maximize the amount to be received by Heller with respect thereto.
(b) Servicer shall provide any assistance reasonably requested
by Heller in enforcing or collecting upon any Purchased Receivable, provided
that in no event shall Servicer be required to sue to enforce or collect upon a
Purchased Receivable in Seller's name.
(c) Servicer shall exercise any rights of recourse against
third persons that exist with respect to any Purchased Receivable or Related
Security in accordance with the standard of care required by Section 2.13
hereof.
(d) Without the prior written consent of Heller or as
otherwise provided herein or in the Receivables Purchasing Agreement, Servicer
shall not permit any rescission or cancellation of any Purchased Receivable nor
may Servicer take any action with respect to any Purchased Receivable or the
Related Security which would materially impair the rights of Heller therein or
in the proceeds thereof.
Section 2.16. Satisfaction of Purchased Receivables. Upon
payment in full of any Purchased Receivable, Servicer shall be authorized to
execute an instrument in satisfaction of such Purchased Receivable and to take
such other actions and execute such documents as it deems necessary to discharge
the Obligor or Approved Obligor thereunder and eliminate the Related Security
related thereto. Servicer shall, in accordance with the standard of care
required by Section 2.13 hereof, determine when a Purchased Receivable has been
paid in full.
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ARTICLE III
ACCOUNTS; COLLECTIONS; CASH SETTLEMENT PROCEDURES
Section 3.01. Cash Settlement Procedures .
(a) Prior to the occurrence of an Event of Default under the
Credit Agreement, all collections of Purchased Receivables and collections of
Accounts shall be processed as provided in this subsection (a):
(i) Western shall maintain the Lock Boxes pursuant to the Lock
Box Agreements. Moneys deposited in the depository accounts maintained by the
Lock Box Banks, other than the Receivables Concentration Account, shall be
transferred to the Receivables Concentration Account as soon as funds on
collected items are made available by the respective Lock Box Banks. Western
shall give instructions to such Lock Box Banks, which instructions shall be
irrevocable unless changed with the written approval of Heller, to give effect
to the intent of the preceding sentence. Funds received into the Receivables
Concentration Account shall be transferred as soon as they are made available by
the Lock Box Bank at which the Receivables Concentration Account is maintained
and they have been identified and allocated between Purchased Receivables and
Non-Purchased Receivables as follows: first, to the extent such funds represent
collections on Purchased Receivables to Heller's Account by wire transfer of
immediately available funds, and second, to the Concentration Account. Heller
shall only be deemed to have received payments in respect of amounts due under
Purchased Receivables to the extent funds are deposited in Heller's Account
(except as expressly provided to the contrary in paragraph (a)(ii) below).
Collections received on Accounts that are identified as to specific invoices
shall be allocated to the Accounts evidenced by such invoices. If collections
received on Accounts are not so identified, they shall be allocated to the
oldest invoices outstanding, except to the extent any such invoice is subject to
an existing dispute, is the subject of a grant of any discount, allowance or
other reduction, or has been, or should have been, reversed or adjusted in the
ordinary course of business. In the event that any Approved Obligor shall make a
partial payment on the Accounts as to which it is the obligor, such payment
shall be allocated pro rata to Purchased Receivables and to Accounts retained by
Western.
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(ii) Heller's obligations under Section 2.01(c) of the
Receivables Purchasing Agreement to pay the Balance Payment of any Pool prior to
Completion shall be satisfied by the receipt by Western of collections
representing such amounts and the receipt of such funds shall constitute a full
offset of a corresponding amount of the Balance Payment. No transfer of cash
from Western to Heller or from Heller to Western shall be required to effect the
foregoing offset. The parties shall make appropriate notations in their records
to reflect (x) the receipt by Western of the collections, (y) the deemed receipt
by Heller of the collections from Western as Servicer and (z) the deemed receipt
by Western of the corresponding Balance Payment. If, after Completion of any
Pool, Western receives any additional collections in respect of the Purchased
Receivables (excluding Non-Performing Receivables as to which Western has
fulfilled its obligations to repurchase) included in such Pool, Western shall
promptly transfer an amount equal to such collections to Heller in accordance
with the provisions of paragraph (a)(i) above. Notwithstanding anything to the
contrary contained in this subparagraph (ii), if any offset is to be made
against a Balance Payment as contemplated by Clause (6) of the definition of
Balance Payment, then Western shall remit funds representing the amount of such
offset to Heller in order to give effect to such offset as contemplated by
section 5.01(i) of the Receivables Purchasing Agreement.
(iii) If any Lock Box Bank makes funds available to Western in
respect of any Item deposited in the respective depository account, and such
Item is subsequently returned or dishonored, reimbursement of the Lock Box Bank
shall be made as hereafter provided. For convenience of administration, Western
shall make any necessary reimbursements to the appropriate Lock Box Bank in
accordance with the terms of the Lock Box Agreements and/or Blocked Account
Agreements, as applicable. Thereafter, the parties shall determine as
expeditiously as possible whether any such Item related to a Purchased
Receivable. If such Item related to a Purchased Receivable, then the amount of
such dishonored or returned Item shall be for the account of Heller and Heller
shall reimburse Western, (but only to the extent that Heller actually received
the proceeds of such Item) the amount of such returned Item and any costs and
expenses incurred and paid by Western to the Lock Box Bank in connection with
such returned Item. All returned or dishonored Items relating to Accounts that
are not Purchased Receivables shall be for the account of Western, and Heller
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shall have no reimbursement obligation in respect thereof. Notwithstanding
anything to the contrary herein contained if an Item pertaining to a Purchased
Receivable was dishonored or returned in any circumstance that would have caused
such Purchased Receivable to be a Nonperforming Receivable, Heller shall have no
obligation to reimburse Western in respect thereof. If Heller is required to
reimburse Western as to any Item the corresponding payment on the underlying
Purchased Receivable shall be deemed not to be a collection received by Heller.
(b) After the occurrence of an Event of Default under the
Credit Agreement, all collections of Purchased Receivables and collections of
Accounts shall be processed as provided in Section 3.01(a) until such time as a
Control Election is in effect and thenceforth as provided in this subsection
(b):
(i) Western shall maintain the Lock Boxes pursuant to the Lock
Box Agreements. Moneys deposited in the depository accounts maintained by the
Lock Box Banks shall be transferred as set forth in the Blocked Account
Agreements to Heller's Account as soon as funds on collected items are made
available by wire transfer of immediately available funds by the respective Lock
Box Banks. So long as Western is the Servicer, Western and Heller shall
cooperate in good faith to identify funds as promptly as practicable
representing collections in respect of Purchased Receivables and shall apply
such amounts, including the portion thereof constituting Balance Payments, if
any, then due in accordance with the terms of the Receivables Purchasing
Agreement. If Western is no longer the Servicer, the Servicer shall identify
funds (in the same manner as is required of Western in its capacity as Servicer)
representing collections in respect of Purchased Receivables and non-Purchased
Receivables and shall apply such amounts including the portion thereof
constituting Balance Payments, if any, then due to Western in accordance with
the provisions of the Receivables Purchasing Agreement. Western and Heller shall
also cooperate in good faith to identify funds representing collections on
Accounts that are not Purchased Receivables, up to $12,500,000 (less any net
amounts realized on other collateral dispositions under the Security Agreement)
of which shall be held as cash collateral under and in accordance with the terms
of subsection (c) below. Any additional amounts received in respect of such
Accounts shall be transferred to the Concentration Account. Heller shall only be
deemed to have
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received payments in respect of amounts due under Purchased
Receivables to the extent funds are deposited in Heller's Account. All
collections on Accounts shall be allocated as contemplated in the last three
sentences of subsection (a)(i) above.
(ii) If any Lock Box Bank makes funds available to Heller in
respect of any Item deposited in the respective depository account, and such
Item is subsequently returned or dishonored, reimbursement of the Lock Box Bank
shall be made as hereinafter provided. For convenience of administration,
Western shall make any necessary reimbursements to the appropriate Lock Box Bank
in accordance with the terms of the Lock Box Agreements and/or Blocked Account
Agreements, as applicable. Thereafter, the parties shall determine as
expeditiously as possible whether such Item related to a Purchased Receivable.
If such Item related to a Purchased Receivable, then the amount of such
dishonored or returned item shall be for the account of Heller and Heller shall
reimburse Western, (but only to the extent that Heller actually received the
proceeds of such Item) the amount of such returned Item and any costs and
expenses incurred and paid by Western to the Lock Box Bank in connection with
such returned Item. All returned or dishonored Items relating to Accounts that
are not Purchased Receivables shall be for the account of Western, and Heller
shall have no reimbursement obligation in respect thereof. Notwithstanding
anything to the contrary contained herein, if an Item pertaining to a Purchased
Receivable was dishonored or returned in any circumstance that would have caused
such Purchased Receivable to be a Nonperforming Receivable, Heller shall have no
obligation to reimburse Western in respect thereof. If Heller is required to
reimburse Western as to any Item the corresponding payment on the underlying
Purchased Receivable shall be deemed not to be a collection received by Heller.
In the event that Western fails to make any reimbursement to the applicable Lock
Box Bank in the first instance, and in accordance with the Blocked Account
Agreements the applicable Lock Box Bank exercises setoff rights against the
Blocked Account or its rights to cause Heller to reimburse the Lock Box Bank as
provided in the Blocked Account Agreements, Western shall be obligated to
reimburse Heller on demand for its share of amounts reimbursed to the Lock Box
Bank as determined by Heller.
(c) Any funds held as cash collateral hereunder whether (i)
derived from cash collections described in
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subsection (b) above after a Control Election is in effect, or (ii)
deposited with Heller to secure outstanding Lender Guarantees upon the
Expiry Date as contemplated by the Credit Agreement shall be subject to
this subsection (c). Whenever any Credit Agreement Obligation is due and
payable to Heller it may apply cash collateral held by it in satisfaction of
such Credit Agreement Obligation. No prior notice of such application need
be given to Western. Heller shall, however, give reasonably prompt written
notice of such application of collateral within three (3) Business Days
thereof. Failure to give such notice shall not have any effect on such
application of collateral or Heller's right to make future applications of such
collateral. From time to time, Heller shall release to Western the amount by
which the funds held as cash collateral exceed the sum, without duplication, of
(i) the excess of (x) the aggregate amount of all Initial Installments plus
all Discount Fees on Pools that have not reached Completion over (y) the
aggregate amount of all Collections received and paid to Heller in respect of
such Pools, plus (ii) the aggregate amount of all outstanding Credit Agreement
Obligations, plus (iii) at any time after the Expiry Date, 105% of outstanding
Lender Guaranties. The determination of amounts to be released from cash
collateral shall be made on each Business Day and if Heller has not transferred
funds in any such amount in accordance with Western's wire instructions on or
before the third Business Day after the date of determination (in the same
manner the application of collections is required of Western in its capacity as
Servicer), Heller shall also pay interest on such amount at the federal funds
rate plus two percent per annum until such amount is paid.
Funds held as cash collateral shall be invested in Cash
Equivalents, as defined below, as directed in writing by Western. All income
earned on such investments and all gains and losses with respect thereto
(including any that result from the application thereof to Credit Agreement
Obligations or the release of cash collateral to Western as hereinabove
provided) shall be for the account of Western. Income earned on any such
investments and actually received by Heller shall at the direction of Western be
reinvested or paid to Western periodically, but not less often than monthly.
Heller shall cooperate with Western in the liquidation of investments so as to
mitigate any loss to be borne by Western.
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"Cash Equivalents" means: (i) marketable direct obligations
issued or unconditionally guarantied by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one (1) year from the date of acquisition
thereof; (ii) commercial paper maturing no more than one (1) year from the date
issued and, at the time of acquisition, having a rating of at least A-1 from
Standard & Poor's Corporation or at least P-1 from Moody's Investors Service,
Inc.; (iii) certificates of deposit or bankers' acceptances maturing within one
(1) year from the date of issuance thereof issued by, or overnight reverse
repurchase agreements from, any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000; (iv) time deposits
maturing no more than thirty (30) days from the date of creation thereof with
commercial banks having membership in the Federal Deposit Insurance Corporation
in amounts not exceeding the lesser of $100,000 or the maximum amount of
insurance applicable to the aggregate amount of Borrower's deposits at such
institution; and (v) deposits or investments in mutual or similar funds offered
or sponsored by brokerage or other companies having membership in the Securities
Investor Protection Corporation in amounts not exceeding the lesser of $100,000
or the maximum amount of insurance applicable to the aggregate amount of
Borrower's deposits at such institution.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.01. Representations and Warranties of Servicer.
Servicer hereby represents, warrants and covenants to Heller that, as of the
date of this Servicing Agreement and for so long as Servicer shall continue to
act as Servicer hereunder:
(a) Servicer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware;
(b) All necessary corporate, regulatory or other action has
been taken to authorize and empower Servicer and the officers or
representatives acting on Servicer's behalf, and Servicer has full
power and
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authority, to execute, deliver and perform this Servicing Agreement;
(c) The execution and delivery of this Servicing Agreement by
Servicer and its performance and compliance with the terms of this
Servicing Agreement will not violate Servicer's certificate of
incorporation or bylaws or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default)
under, or result in the breach of, any material contract, indenture,
loan, credit agreement or any other material agreement or instrument to
which Servicer is a party or which may be applicable to Servicer or any
of its assets;
(d) This Servicing Agreement constitutes a valid, legal and
binding obligation of Servicer, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the enforcement of
creditors' rights generally and to general principles of equity;
(e) Servicer is not in violation of, and the execution,
delivery and performance of this Servicing Agreement by Servicer will
not constitute a violation with respect to, any order or decree of any
court or any order, regulation or demand of any federal, state,
municipal or governmental agency, which violation might have
consequences that would materially and adversely affect the financial
condition or operations of Servicer or its properties or might have
consequences that would materially affect the performance of its duties
hereunder;
(f) No proceeding of any kind including, but not limited to,
litigation, arbitration, judicial or administrative is pending or, to
Servicer's knowledge, threatened against or contemplated by Servicer
which would under any circumstance have a Material Adverse Effect; and
(g) No information, certificate of an officer, statement
furnished in writing or report delivered to Heller by Servicer will, to
the knowledge of Servicer, contain any untrue statement of a material
fact or omit a material fact necessary to make the information,
certificate, statement or report not misleading.
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Section 4.02. Survival of Representations and Warranties. The
representations and warranties set forth in this Article IV are continuous and
shall survive termination of this Servicing Agreement. Upon discovery by
Servicer of a breach of any of the foregoing representations and warranties,
Servicer shall give prompt written notice thereof to Heller; provided, however,
that failure to give such notice shall not affect the rights of Heller with
respect to such breach.
ARTICLE V
DEFAULT, REMEDIES AND INDEMNITY
Section 5.01. Events of Default. Any of the following acts or
occurrences shall constitute an Event of Default under this Servicing Agreement:
(a) any failure by Servicer to make any payment, transfer or
deposit of Collections to Heller on or before the date such payment,
transfer or deposit of Collections is required to be made, as the case
may be and such failure shall continue for two (2) Business Days after
such date, provided that at the time such payment, transfer or deposit
is made Servicer shall also pay to Heller interest at the Base Rate on
the overdue amount from the date it was required to be paid,
transferred or deposited until the date it was made;
(b) failure on the part of Servicer to either duly observe or
perform in any material respect any other covenants or agreements of
Servicer set forth in this Servicing Agreement which continues
unremedied for a period of ten (10) Business Days after the date on
which written notice of such failure, requiring the same to be
remedied, shall have been given to Servicer by Heller;
(c) any representation, warranty or certification made by
Servicer in this Servicing Agreement or any certificate delivered
pursuant to this Servicing Agreement shall prove to have been incorrect
in any material respect when made;
(d) Servicer shall consent to the appointment of a conservator
or receiver or liquidator in any insolvency, marshalling of assets and
liabilities or
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similar proceedings of or relating to Servicer, or relating to all
or substantially all of its property, or a decree or order of a
court or agency or supervisory authority having jurisdiction in the
premises for the appointment of a conservator or receiver or
liquidator in any insolvency, readjustment of debt, marshalling of
assets and liabilities or similar proceedings, or for the winding-up or
liquidation of its affairs, shall have been entered against Servicer
and such decree or order shall have remained in force undischarged or
unstayed for a period of 90 days; or Servicer shall admit in writing
its inability to pay its debts generally as they become due, file or
suffer filing of a petition or commence or suffer commencement of an
action to take advantage of any applicable insolvency or reorganization
statute which is not dismissed within 90 days in the case of any such
proceedings initiated against the Servicer, make any assignment for the
benefit of its creditors or voluntarily suspend payment of its
obligations; or
(f) an Event of Termination shall occur under the
Receivables Purchasing Agreement.
Section 5.02. Remedies.
(a) If an Event of Default shall have occurred and be
continuing then, by notice given in writing to Servicer by Heller (a
"Termination Notice"), all of the rights and duties of Servicer hereunder shall
be governed by this Section 5.02.
(b) After receipt by Servicer of a Termination Notice all
authority and power of Servicer under this Servicing Agreement shall pass to and
be vested in a servicer, if any, or in Heller (each a "Successor Servicer");
and, without limitation, Heller is hereby authorized and empowered (upon the
failure of Servicer to cooperate in a prompt manner) to execute and deliver, on
behalf of Servicer, as attorney-in-fact or otherwise, all documents and other
instruments upon the failure of Servicer to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things necessary or
appropriate to effect the purposes of such transfer of servicing rights.
Servicer hereby agrees to cooperate with Heller and such Successor Servicer, if
any, in effecting the termination of the responsibilities and rights of Servicer
to conduct servicing under this Servicing Agreement
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including, without limitation, the transfer to such Successor Servicer of
all authority of Servicer to service Purchased Receivables and Related
Security provided for under this Servicing Agreement including, without
limitation, the right to receive all Collections, all authority over all
Collections which shall on the date of transfer be held by Servicer for
deposit or which have been deposited by Servicer in Heller's Account or
which shall thereafter be received with respect to Purchased Receivables,
and in assisting the Successor Servicer. Servicer shall promptly transfer
its electronic records relating to Purchased Receivables to the Successor
Servicer in such form as the Successor Servicer may reasonably request and
shall promptly transfer to the Successor Servicer, if any, or to Heller,
as the case may be, all other records, correspondence and documents
necessary for the continued servicing of the Purchased Receivables in the
manner and at such times as the Successor Servicer shall reasonably request.
Servicer shall give notices of the transfer of servicing to the Obligors in
the manner and at such times as the Successor Servicer shall reasonably
request and, without limiting the foregoing, each Successor Servicer is
hereby authorized and empowered as attorney-in-fact or otherwise to
execute and deliver all such notices on behalf of Servicer.
(c) On and after the receipt by Servicer of a Termination
Notice pursuant to this Section 5.02, Servicer shall continue to perform all
servicing functions under this Servicing Agreement until the date specified in
the Termination Notice or otherwise specified by Heller in writing. Heller shall
as promptly as possible after the giving of a Termination Notice either (i)
undertake the duties of Servicer hereunder or (ii) appoint a Successor Servicer
and such Successor Servicer shall accept its appointment by a written assumption
in a form acceptable to Heller. In the event that a Successor Servicer has not
been appointed by Heller or has not accepted its appointment at the time when
Servicer ceases to act as Servicer, Heller without further action shall
automatically become the Successor Servicer. At any time after termination of
Servicer, Heller shall have the right to send, or cause to be sent, to each
Obligor and Approved Obligor of a Purchased Receivable, a written notice of the
name and mailing address of the Successor Servicer to whom payments on the
Purchased Receivables are to be made.
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(d) Upon its appointment the Successor Servicer shall be the
successor in all respects to Servicer with respect to servicing functions under
this Servicing Agreement and shall be subject to all the responsibilities,
duties and liabilities of Servicer (arising on and after the time of such
appointment) relating thereto placed on Servicer by the terms and provisions
hereof, and all references in this Servicing Agreement to Servicer shall be
deemed to refer to the Successor Servicer unless the context otherwise requires.
Section 5.03. Effect of Termination of this Agreement. All
authority and power granted to Servicer or the Successor Servicer under this
Servicing Agreement shall automatically cease and terminate upon termination of
this Agreement (pursuant to Section 2.01(c) or 5.02) and shall pass to and be
vested in Heller and, without limitation, Heller is hereby authorized and
empowered to execute and deliver, on behalf of Servicer and the Successor
Servicer, as attorney-in-fact or otherwise, all documents and other instruments,
and to do and accomplish all other acts or things necessary or appropriate to
effect the purposes of such transfer of servicing rights hereunder. Each of
Servicer and the Successor Servicer agrees to cooperate with Heller in effecting
the termination of the responsibilities and rights of Servicer and the Successor
Servicer to conduct servicing of the Purchased Receivables and Related Security.
Each of Servicer and the Successor Servicer shall transfer its records relating
to the Purchased Receivables and Related Security to Heller in such form as
Heller may reasonably request and to the extent Servicer can reasonably provide
such materials shall transfer all other records, correspondence and documents to
Heller in the manner and at such times as Heller shall reasonably request.
Section 5.04. Indemnity by Servicer. Servicer shall indemnify
and hold Heller harmless against any liability, loss, damage, penalty, fine,
forfeiture, reasonable legal or accounting fees, court reporting expenses,
expert witness fees, and all other commercially reasonable fees or out of pocket
costs of any kind, judgments or expenses, resulting from or arising out of a
breach of this Servicing Agreement by Servicer. The rights of Heller to
indemnity, reimbursement or limitation on its liability pursuant to this Section
5.04 shall survive any Event of Default, the transfer of the rights, duties and
obligations of Servicer to a Successor Servicer and the termination of this
Servicing Agreement.
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ARTICLE VI
TERMINATION OF SERVICING AGREEMENT
Section 6.01. Term. Unless earlier terminated in accordance
with the provisions of Section 2.01(c) and 5.02, this Servicing Agreement shall
remain in effect until all payments due Heller under the Receivables Purchasing
Agreement have been made and the Receivables Purchasing Agreement has been
terminated in accordance with the terms thereof.
Section 6.02. Effect of Termination. Upon termination of this
Servicing Agreement in accordance with Section 2.01(c) and 5.02, Servicer shall
promptly deliver to Heller all Receivables Documents and any related files and
correspondence in its possession as are related to the management of the
Purchased Receivables and any Related Security and the services provided
hereunder all as more particularly set forth in Section 5.03. Any matters
pending at the effective termination date will continue to be processed in an
orderly and timely fashion; it being intended, however, that Collections of all
Purchased Receivables and any Related Security shall be transferred to Heller as
promptly as practicable and in any event within thirty (30) days after the
termination date. All reasonable expenses related to the foregoing shall be
borne by Servicer.
ARTICLE VII
MISCELLANEOUS PROVISIONS
Section 7.01. Amendments and Waivers. No amendment,
modification, or termination, or waiver or consent of any provision of this
Agreement, shall be effective unless the same shall be in writing and signed by
Heller, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
Section 7.02. No Waiver; Remedies. No failure or delay on the
part of Heller to exercise, or any partial exercise of, any power, right, or
privilege hereunder or under any other related Transactions Documents shall
impair such power, right, or privilege or be construed to be a waiver of any
Default or Event of Default. All rights and remedies existing hereunder or under
any other related
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Transactions Documents are cumulative to and not exclusive of any rights or
remedies otherwise available.
Section 7.03. Notices. Any notice or other communication
required shall be in writing addressed to the respective party as set forth
below and may be personally served, telecopied, sent by overnight courier
service or U.S. mail and shall be deemed to have been given when received by any
person at the address specified below.
To Heller: Heller Financial, Inc.
101 Park Avenue
New York, New York 10178
Attention: CAMG Portfolio Manager
Telecopy: (212) 880-2057
To Servicer: Western Publishing Company, Inc.
c/o Western Publishing Group, Inc.
444 Madison Avenue, Suite 601
New York, NY 10022
ATTN: Steven M. Grossman
Telecopy: (212) 888-5025
With copies to: Western Publishing Group, Inc.
444 Madison Avenue, Suite 601
New York, NY 10022
ATTN: Steven M. Grossman
Telecopy: (212) 888-5025
and
Morgan Lewis & Bockius
101 Park Avenue
New York, NY 10178
ATTN: Michael A. Chapnick, Esq.
Telecopy: (212) 309-6273
Section 7.04. Severability. The invalidity, illegality, or
unenforceability in any jurisdiction of any provision of this
Servicing Agreement shall not affect or
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impair the remaining provisions of this Servicing Agreement, or such
provision or obligation in any other jurisdiction.
Section 7.05. No Offset. Prior to the termination of this
Servicing Agreement, the obligations of Servicer under this Servicing Agreement
shall not be subject to any defense, counterclaim or right of offset against
Heller whether in respect of this Servicing Agreement, the Receivables
Purchasing Agreement, the Credit Agreement, any Receivable or Purchased
Receivable or Related Security or otherwise.
Section 7.06. Assignment and Binding Effect. This Servicing
Agreement may be assigned by Servicer only with the written consent of Heller.
This Servicing Agreement may be assigned by Heller. In the event of an
assignment, all provisions of this Servicing Agreement shall be binding upon and
inure to the benefit of the respective successors and assigns of the parties
hereto.
Section 7.07. Headings. Section and subsection headings are
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purposes or be given substantive effect.
Section 7.08. Legal Holidays. In the case where the date on
which any action required to be taken, document required to be delivered or
payment required to be made is not a Business Day such action, delivery or
payment need not be made on that date, but may be made on the next succeeding
Business Day.
Section 7.09. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which when so executed shall be
deemed to be an original and all of which when taken together shall constitute
one and the same Agreement.
Section 7.10. Governing Law. This Servicing Agreement shall be
governed by and shall be construed and enforced in accordance with, the internal
laws of the State of New York without regard to conflicts of laws principles.
Section 7.11. Parties. This Servicing Agreement shall inure
solely to the benefit of and shall be binding upon the parties hereto, and their
respective permitted successors, legal representatives and assigns, and no other
person shall have or be construed to have any equitable
24
<PAGE>
right, remedy or claim under or in respect of or by virtue of this Servicing
Agreement or any provision contained herein.
Section 7.12. Consent to Jurisdiction and Service of Process.
(A) SERVICER AND HELLER HEREBY IRREVOCABLY SUBMIT TO THE
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 AND SERVICER AND HELLER HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN
RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVE ANY OBJECTION EITHER OF THEM 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. ANY JUDICIAL PROCEEDING BY
SERVICER OR HELLER AGAINST THE OTHER OR ANY AFFILIATE INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK.
(B) SERVICER DESIGNATES AND APPOINTS PARENT AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY SERVICER, WHICH IRREVOCABLY AGREES IN
WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS
IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY SERVICER, TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT.
A COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
SERVICER, AT SERVICER'S ADDRESS AS PROVIDED IN SECTION 7.03 EXCEPT THAT UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY SERVICER
REFUSES TO ACCEPT SERVICE, SERVICER HEREBY AGREES THAT SERVICE UPON IT BY
CERTIFIED MAIL RETURN RECEIPT SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN
SHALL AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
Section 7.13. Waiver of Jury Trial. SERVICER AND HELLER HEREBY
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS SERVICING AGREEMENT, OR ANY DEALINGS BETWEEN
SERVICER AND HELLER RELATING TO THE SUBJECT MATTER OF THIS AGREEMENT. SERVICER
AND HELLER ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT,
BUT FOR THIS WAIVER, BE REQUIRED OF HELLER. THE SCOPE OF THIS WAIVER IS INTENDED
TO
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<PAGE>
BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT
AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS. SERVICER AND SELLER ACKNOWLEDGE THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH
WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. SELLER AND
HELLER FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. THIS WAIVER IS IRREVOCABLE,
MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THE WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS
TO THIS SERVICING AGREEMENT. IN THE EVENT OF LITIGATION, THIS SERVICING
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
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<PAGE>
IN WITNESS WHEREOF, Heller and Servicer have caused this
Servicing Agreement to be duly executed by their respective authorized officers
on the date first above written.
HELLER FINANCIAL, INC.
By /s/ Frank Bongiovanni
------------------------
Frank Bongiovanni
Executive Vice President
WESTERN PUBLISHING COMPANY, INC.,
as Servicer
By /s/ Steven M. Grossman
-------------------------
Steven M. Grossman
Executive Vice President
27
<PAGE>
EXHIBITS
A Daily Report [Form]
B Weekly Report [Form]
C Certificate of the chief financial officer, controller or director of
credit [Form] [re payments received from or on behalf of Approved
Obligors and deposited in the Deposit Account representing Collections
(which is to accompany each Daily and Weekly Report (see Sec.
2.02(b)).]
<PAGE>
EXHIBIT A - TO SERVICING AGREEMENT
Daily Cash Application and Adjustment Report
[Name of Customer]
Period: _______________ thru ______________
<TABLE>
<CAPTION>
Account Invoice Invoice Date Check Payment Customer
Number Number Amount Closed Due Date Number Date Reference Sub Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Chain Total: _______________________
Report Total:
[This form may be computer generated.]
<PAGE>
EXHIBIT B - TO SERVICING AGREEMENT
Weekly Cash Application and Adjustment Report
[Name of Customer]
Period: _______________ thru ______________
<TABLE>
<CAPTION>
Account Invoice Invoice Date Check Payment Customer
Number Number Amount Closed Due Date Number Date Reference Sub Total
<S> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
Chain Total: _______________________
Report Total: ______________________
[This form may be computer generated.]
<PAGE>
EXHIBIT C TO SERVICING AGREEMENT
CERTIFICATE
I, ____________________________________, the Chief Financial
Officer/Controller/Director of Credit of Western Publishing Company, Inc. (the
"Company") do hereby certify that annexed hereto is a true and correct
daily/weekly report pursuant to Section 2.03(b) of the Servicing Agreement dated
as of September 29, 1995 between the Company and Heller Financial, Inc. for
__________________________________, 199____/the week ending
_____________________________, 199____.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on
_____________________________, 199____.
WESTERN PUBLISHING COMPANY, INC.
By:____________________________
Name:
Title:
<PAGE>
[Execution Copy]
CREDIT AGREEMENT
Dated September , 1995
Between
WESTERN PUBLISHING COMPANY, INC.
as Borrower
and
HELLER FINANCIAL, INC.
as Lender
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1 AMOUNTS AND TERMS OF LOANS................................................. 1
1.1 Loans........................................................... 1
1.2 Interest and Related Fees....................................... 3
1.3 Other Fees and Expenses......................................... 5
1.4 Payments........................................................ 6
1.5 Term of this Agreement.......................................... 6
1.6 Borrower's Loan Account......................................... 7
1.7 Capital Adequacy and Other
Adjustments................................................. 7
1.8 Taxes........................................................... 8
SECTION 2 AFFIRMATIVE COVENANTS...................................................... 10
2.1 Compliance With Laws............................................ 10
2.2 Maintenance of Properties;
Insurance..................................................... 11
2.3 Inspection...................................................... 11
2.4 Corporate Existence, Etc........................................ 11
2.5 Further Assurances.............................................. 11
SECTION 3 NEGATIVE COVENANTS......................................................... 12
3.1 Debt............................................................ 12
3.2 Liens and Related Matters....................................... 13
3.3 Restricted Junior Payments...................................... 13
3.4 Restriction on Fundamental Changes.............................. 14
3.5 Disposal of Assets or Subsidiary Stock.......................... 14
3.6 Transactions with Affiliates.................................... 14
3.7 Press Release; Public Offering Materials........................ 15
SECTION 4 REPORTING.................................................................. 15
4.1 Financial Statements and Other Reports.......................... 15
4.2 Accounting Terms................................................ 17
SECTION 5 REPRESENTATIONS AND WARRANTIES............................................. 17
5.1 Disclosure...................................................... 18
5.2 No Material Adverse Effect...................................... 18
5.3 No Default...................................................... 18
5.4 Organization, Powers, Capitalization and Good Standing.......... 18
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.5 Financial Statements............................................ 19
5.6 Intellectual Property........................................... 19
5.7 Investigations, Audits, Etc..................................... 19
5.8 Solvency........................................................ 19
SECTION 6 DEFAULT, RIGHTS AND REMEDIES............................................... 20
6.1 Event of Default................................................ 20
6.2 Suspension of Commitments....................................... 24
6.3 Acceleration.................................................... 24
6.4 Performance by Heller........................................... 25
SECTION 7 CONDITIONS TO REVOLVING LOANS.............................................. 25
7.1 Conditions to Initial Revolving Loan(s)......................... 25
7.2 Conditions to All Loans......................................... 25
SECTION 8 PARTICIPATION.............................................................. 26
8.1 Participations.................................................. 26
SECTION 9 MISCELLANEOUS.............................................................. 27
9.1 Indemnities..................................................... 27
9.2 Amendments and Waivers.......................................... 28
9.3 Notices......................................................... 29
9.4 Failure of Indulgence Not Waiver; Remedies Cumulative........... 29
9.5 Marshalling, Payments Set Aside................................. 30
9.6 Severability.................................................... 30
9.7 Headings........................................................ 30
9.8 Applicable Law.................................................. 30
9.9 Successors and Assigns.......................................... 30
9.10 No Fiduciary Relationship....................................... 30
9.11 Construction.................................................... 30
9.12 Confidentiality................................................. 31
9.13 Consent to Jurisdiction and Service of Process.................. 31
9.14 Waiver of Jury Trial............................................ 32
9.15 Survival of Warranties and Certain Agreements................... 32
9.16 Entire Agreement................................................ 33
SECTION 10 DEFINITIONS................................................................ 33
10.1 Certain Defined Terms........................................... 33
10.2 Other Definitional Provisions................................... 33
</TABLE>
ii
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Schedules
5.2 List of events or changes in fact that had or would have a
Material Adverse Effect on any loan party.
5.3 List of waived violations, conflicts, breaches or
defaults.
5.4(B) Outstanding capital stock of Borrower owned by Parent.
5.4(D) List of jurisdictions in which Borrower is qualified to do
business.
5.6 Infringements of Borrower's Intellectual Property.
5.7 List of reviews and audits concerning Borrower or
Subsidiaries by IRS and other governmental investigations.
7.1 List of documents to be delivered to Heller precedent to
the making of the initial Revolving Loan or the issuing of
any Lender Guaranty on the first Funding Date.
Exhibits
A Definitions
10.1(A) Promissory Note.
iii
<PAGE>
This CREDIT AGREEMENT is dated September , 1995 and entered
into by and between WESTERN PUBLISHING COMPANY, INC., a Delaware corporation
("Borrower"), and HELLER FINANCIAL, INC., a Delaware corporation ("Heller").
R E C I T A L S:
WHEREAS, Borrower desires that Heller extend a certain
revolving credit facility to Borrower to provide funds for general corporate
purposes of Borrower; and
WHEREAS, Borrower desires to secure all of its Obligations
under the Loan Documents, and certain of its Obligations under the Receivables
Purchasing Agreement and the Servicing Agreement by granting to Heller a
security interest in and lien upon all of Borrower's accounts receivable (not
sold to Heller under the Receivables Purchasing Agreement) and raw materials and
finished goods inventory up to a maximum amount of $12,500,000; and
WHEREAS, Western Publishing Group, Inc. ("Parent") is
willing to guarantee all of the Obligations of Borrower to Heller under the
Loan Documents and the Related Transactions Documents;
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, Borrower and Heller agree as follows:
SECTION 1
AMOUNTS AND TERMS OF LOANS
1.1 Loans. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrower
contained herein:
(A) Revolving Loan. Heller agrees to lend to Borrower
from and including the Closing Date to but excluding the Expiry Date amounts up
to a maximum of $12,500,000 (the "Revolving Loan Commitment"). Advances or
amounts outstanding under the Revolving Loan Commitment will be called
"Revolving Loans". Revolving Loans may be repaid and reborrowed. The Revolving
Loans shall consist of two tranches, Tranche A under which Revolving Loans may
be made up to the Tranche A Commitment and Tranche B under which
2
<PAGE>
Lender Guaranties may be issued and Revolving Loans may be made in respect
thereof up to the Tranche B Commitment. The "Tranche A Commitment" shall be an
amount equal to the Revolving Loan Commitment minus (i) the aggregate
face amount of all outstanding Lender Guaranties hereunder and under the Penn
Credit Agreement, if executed, plus all other amounts due in respect thereof,
plus (ii) the aggregate amount of all Revolving Loans made pursuant to the
penultimate sentence of subsection 1.1(B) hereof and subsection 1.1(B) of the
Penn Credit Agreement, if executed, then outstanding. The "Tranche B
Commitment" shall be the amount specified in subsection 1.1(B). The Tranche A
Commitment shall be available only to fund the repurchase obligations of
Borrower under Section 5.01(i) of the Receivables Purchasing Agreement
and to pay to and reimburse Heller for all other amounts due to Heller under
the Receivables Purchasing Agreement and the Servicing Agreement. On the
fifteenth calendar day after a Purchased Receivable is determined to be a
Nonperforming Receivable if not previously repurchased under Section
5.01(i) of the Receivables Purchasing Agreement or on the tenth calendar
day after any other amount is due and payable by Borrower under the
Receivables Purchasing Agreement or the Servicing Agreement, and is
not theretofore paid, in either case a Revolving Loan under Tranche A
of the Revolving Loan Commitment shall automatically be deemed to have been
made in an amount equal to the Repurchase Amount in respect of such
Nonperforming Receivable or such other amount as is due and payable. Tranche A
Revolving Loans shall be repayable on demand by Heller. The Tranche B
Commitment shall be available only in connection with the issuance of Lender
Guaranties and shall be repayable on the Expiry Date. If at any time Revolving
Loans under Tranche A or Tranche B exceed the portion of the Revolving Loan
Commitment allocated thereto, or if the aggregate amount of all Revolving
Loans exceeds the Revolving Loan Commitment, such Revolving Loans must
be repaid to Heller by Borrower immediately in an amount sufficient to
eliminate any excess.
(B) Lender Guaranties. At Borrower's request, Heller will
provide Lender Guaranties up to an aggregate amount of $5,000,000, minus the
aggregate face amount of all outstanding Lender Guaranties under the Penn Credit
Agreement, if executed (the "Tranche B Commitment"). "Lender Guaranty" means a
letter of credit issued by Heller or a guaranty issued by Heller to induce a
bank selected by Borrower, reasonably acceptable to Heller, to issue a letter of
credit, or, without duplication, any payment made by
2
<PAGE>
Heller pursuant to any letter of credit subject to a Lender Guaranty which
has not been reimbursed by Borrower or charged to Borrower as a Revolving
Loan. In determining the amount of outstanding Lender Guaranties, the maximum
amount of any Heller guaranty to a bank issuing letters of credit on
behalf of Borrower will be considered outstanding unless such bank
reports periodic activity to Heller showing actual outstanding letters of
credit subject to Heller's Lender Guaranty. Lender Guaranties will only
be provided for letters of credit which expire within one (1) year after date
of issuance but not later than six (6) months after the date specified in
clause (c) of the definition of "Expiry Date", provided that upon the
occurrence of the Expiry Date Borrower shall deposit with Heller for
security purposes and subject to the provisions of the Security Agreement
an amount in cash equal to 105% of all outstanding Lender Guaranties.
Borrower shall give Heller five (5) Business Days' prior written notice
requesting a letter of credit issued by Heller or requesting Heller to issue
a guaranty to a bank that is not under a continuing agreement with Heller
with respect thereto. Heller shall not be obligated to issue such a guaranty
until Heller and the bank that will be issuing such letter of credit have
entered into an agreement, in form and substance reasonably satisfactory
to Heller and Borrower, which agreement will govern Heller's guaranty of
all letters of credit to be issued by such bank for the benefit of
Borrower. Thereafter, letters of credit may be issued by the bank if it
promptly gives notice to Heller. Such agreement between Heller and any bank
shall provide that Heller shall make payment on a guaranty of a letter of
credit only if the bank which is the beneficiary thereof shall have
demanded payment from Borrower and Borrower shall not have made payment
within one (1) Business Day of such demand. Borrower is irrevocably
and immediately responsible to Heller for reimbursement of any amount paid by
Heller under any Lender Guaranty. This reimbursement shall automatically
occur by a debit to the Revolving Loan without prior notice. Borrower shall
maintain an operating account at the issuing bank (if other than Heller) for
settlement of letters of credit and any related fees.
1.2 Interest and Related Fees.
(A) Interest. From the date each Revolving Loan is made
(or deemed made) and any other Obligation becomes due, the Obligations shall
bear interest at the sum of the Base Rate plus one and one-half percent (1.50%)
per annum.
3
<PAGE>
(B) Lender Guaranty Fee. On each date on which a Lender
Guaranty is issued Borrower shall pay to Heller an initial fee for such Lender
Guaranty equal to the face amount of such Lender Guaranty multiplied by
one-eighth of one percent (0.125%). Borrower shall also pay to Heller a fee for
each month (or portion thereof) during which such Lender Guaranty is outstanding
equal to the average daily outstanding amount of such Lender Guaranty multiplied
by one-eighth of one percent (0.125%), such fee payable quarterly in arrears on
the first day of each calendar quarter. Borrower shall also reimburse Heller for
any and all fees and expenses paid by Heller to the issuer of any letter of
credit guaranteed by a Lender Guaranty.
(C) Computation of Interest. Interest on all Revolving
Loans and any other Obligations shall be computed on the daily principal balance
on the basis of a three hundred sixty (360) day year for the actual number of
days elapsed in the period during which it accrues. The date of funding a
Revolving Loan shall be included in the calculation. The date of payment of a
Revolving Loan shall be excluded in the calculation. If a Revolving Loan is
repaid on the same day that it is made, one (1) day's interest shall be charged
and due therefor. Interest on all Revolving Loans is payable in arrears on the
first day of each month and on the Expiry Date, whether by acceleration or
otherwise.
(D) Default Rate of Interest. At the election of Heller,
after the occurrence of an Event of Default and for so long as it continues, the
Revolving Loans and other Obligations shall bear interest at a rate that is two
(2) percent (2.00%) plus the total rate of interest required under Section
1.2(A) above.
(E) Excess Interest. Under no circumstances will the rate
of interest chargeable hereunder be in excess of the maximum amount permitted by
law ("Excess Interest"). If any Excess Interest is provided for or determined by
a court of competent jurisdiction to have been provided for in this Agreement or
in any of the other Loan Documents, then in such event: (1) the provisions of
this subsection shall govern and control; (2) neither Borrower nor any other
Loan Party shall be obligated to pay any Excess Interest; (3) any Excess
Interest that Heller may have received hereunder shall be, at Heller's option,
(a) applied as a credit against the outstanding principal balance of the
Obligations or accrued and unpaid interest (not to exceed the maximum
4
<PAGE>
amount permitted by law), (b) refunded to the payor thereof, or (c) any
combination of the foregoing; (4) the interest rate(s) provided for
herein shall be automatically reduced to the maximum lawful rate allowed
from time to time under applicable law (the "Maximum Rate"), and this
Agreement and the other Loan Documents shall be deemed to have been and
shall be, reformed and modified to reflect such reduction; and (5) neither
Borrower nor any other Loan Party shall have any action against Heller for
any damages arising out of the payment or collection of any Excess
Interest. Notwithstanding the foregoing, if for any period of time
interest on any Obligation is calculated at the Maximum Rate rather than
the applicable rate under this Agreement, and thereafter such applicable
rate becomes less than the Maximum Rate, the rate of interest payable on such
Obligations shall remain at the Maximum Rate until Heller shall have
received the amount of interest Heller would have received during such period
on such Obligations had the rate of interest not been limited to the Maximum
Rate during such period.
1.3 Other Fees and Expenses.
(A) Expenses and Attorneys' Fees. Borrower agrees to pay
on ordinary business terms all reasonable fees, costs and expenses (including
reasonable attorneys' fees and disbursements) incurred by Heller in connection
with any matters contemplated by or arising out of the Loan Documents, in
connection with the examination, review, due diligence investigation,
documentation, negotiation and closing of the transactions contemplated herein.
In the event Borrower requests any amendments, modifications, extensions or
waivers with respect to the Loan Documents or any matters contemplated therein
Borrower agrees to pay on ordinary business terms all reasonable fees, costs and
expenses (including reasonable attorneys' fees and disbursements) incurred by
Heller. Borrower agrees to pay on ordinary business terms all reasonable fees
(including reasonable attorneys' fees and disbursements), costs and expenses
incurred by Heller in connection with any action to enforce any Loan Document or
to collect any payments due from Borrower. All fees, costs and expenses for
which Borrower is responsible under this subsection 1.3(A) shall be deemed part
of the Obligations when incurred, payable as provided herein and secured by the
Collateral.
(B) Closing Fee. Borrower shall pay to Heller a
non-refundable closing fee in the amount of $40,000 on the
5
<PAGE>
Closing Date. Heller will not request an additional Closing Fee from Penn in
the event Heller enters into a credit agreement substantially in the form
of this Agreement with Penn while this Agreement is in effect.
1.4 Payments. All payments by Borrower of the Obligations
shall be made in same day funds and delivered to Heller by wire transfer to the
following account or such other place as Heller may from time to time designate.
ABA No. 0710-0001-3
Account Number 059-27196
The First National Bank of Chicago
One First National Plaza
Chicago, IL 60670
Reference: Heller Eastern CAMG
for the benefit of Western Publishing
Company, Inc.
Borrower shall receive credit for such funds if received by 1:00 p.m. CST on
such day. In the absence of timely notice and receipt, such funds shall be
deemed to have been paid on the next Business Day. Whenever any payment to be
made hereunder shall be stated to be due on a day that is not a Business Day,
the payment may be made on the next succeeding Business Day and such extension
of time shall be included in the computation of the amount of interest and fees
due hereunder.
Borrower hereby authorizes Heller to make Revolving Loans for
the payment of interest and Lender Guaranty fees payable pursuant to subsection
1.2(B) and Lender Guaranty payments. Prior to an Event of Default, all other
fees, costs and expenses (including those of Heller's attorneys) reimbursable to
Heller pursuant to subsection 1.3(A) or elsewhere in any Loan Document or
Related Transactions Document may be debited to the respective Tranche of the
Revolving Loans after fifteen (15) days' notice to Borrower by Heller. After an
Event of Default, no such notice is required for any such debit.
1.5 Term of this Agreement. This Agreement shall be
effective until the earlier of (a) the date on which the Revolving Loans are
paid in full and all other Obligations have been satisfied and paid in full and
Borrower has terminated the Revolving Loan Commitment as hereinafter provided or
(b) the Expiry Date. Borrower may terminate the Revolving Loan Commitment in
whole, and not in
6
<PAGE>
part, on not less than ten (10) Business Days' prior written notice to
Heller, provided that (i) the Receivables Purchasing Agreement and the Penn
Agreement, if executed, are terminated effective as of the same time and
(ii) Borrower delivers to Heller cash or cash equivalents in an amount not
less than 105% of the amount of outstanding Lender Guaranties for security
purposes, subject to the provisions of the Security Agreement plus any
other amounts payable to Heller thereunder or in respect thereof. No such
termination shall impair or reduce any of the Obligations of Borrower
incurred prior to such termination hereunder or under the Receivables
Purchasing Agreement or the Penn Agreement, if executed. Upon the
termination of this Agreement, any unpaid Obligations shall be
immediately due and payable without notice or demand by Heller.
Notwithstanding termination of this Agreement, until all Obligations
(including Obligations contemplated by the succeeding sentence) have been
fully paid and satisfied, Heller shall be entitled to retain its security
interests in all Collateral granted under the Security Documents.
Notwithstanding the termination of this Agreement until all Pools have
reached Completion, if any Purchased Receivable becomes a Nonperforming
Receivable and is not purchased by Borrower pursuant to the Receivables
Purchasing Agreement a Revolving Loan under the Tranche A Commitment shall be
made as contempated by subsection 1.1(A) on the applicable Repurchase Date.
1.6 Borrower's Loan Account. Heller will maintain for
Borrower loan account records for (a) all Revolving Loans (including allocations
between Tranche A Revolving Loans and Tranche B Revolving Loans), interest
charges and payments thereof, (b) all Lender Guaranties, (c) the charging and
payment of all fees, costs and expenses and (d) all other debits and credits
pursuant to this Agreement. The balance in Borrower's loan account shall be
presumptive evidence of the amounts due and owing to Heller, provided that any
failure to so record shall not limit or affect Borrower's obligation to pay the
same. Within five (5) days of the first of each calendar month, Heller shall
provide a statement to Borrower for its loan account setting forth the principal
of each account and interest due thereon. Such statement will be presumed
accurate as binding evidence of the Obligation absent manifest error if neither
Borrower nor Heller have delivered a written objection within sixty (60) days
after receipt or mailing of any such statement. After the occurrence and during
the continuance of an Event of Default, Borrower irrevocably waives the right to
direct the
7
<PAGE>
application of any and all payments, and Borrower hereby irrevocably
agrees that Heller shall have the continuing exclusive right to apply and
reapply payments in any manner it deems appropriate.
1.7 Capital Adequacy and Other Adjustments. In the event
that Heller shall have determined (and shall have notified Borrower promptly
thereafter) that the adoption after the date hereof of any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by Heller or any corporation controlling Heller with any request or
directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) from any central bank or governmental
agency or body having jurisdiction does or shall have the effect of increasing
the amount of capital, reserves or other funds required to be maintained by
Heller or any corporation controlling Heller and thereby reducing the rate of
return on Heller's or such corporation's capital as a consequence of its
obligations hereunder, then Borrower shall from time to time within fifteen (15)
days after notice and demand from Heller (together with the certificate referred
to in the next sentence) pay to Heller, additional amounts sufficient to
compensate Heller for such reduction. If Heller shall have sold an interest to a
participant pursuant to Section 8.1 hereof, the amount due from Borrower under
this Section shall not be any greater than the amount which would have been due
if Heller had not sold an interest to such participant. A certificate as to the
amount of such cost and showing the basis of the computation of such cost
submitted by Heller to Borrower shall, absent manifest error, be sufficient to
create an obligation of Borrower to pay Heller. If thereafter Borrower shows or
Heller realizes that a computation error has occurred Heller shall refund
Borrower in the appropriate amount.
1.8 Taxes. (A) No Deductions. Any and all payments or
reimbursements made hereunder or under the Notes shall be made free and clear of
and without deduction for any and all taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto (collectively,
"tax liabilities") excluding taxes imposed on the net income of Heller by the
jurisdiction under the laws of which Heller is organized or any political
subdivision thereof and taxes
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imposed on its net income by the jurisdiction of Heller's applicable
lending office or any political subdivision thereof. If Borrower shall be
required by law to deduct any such amounts from or in respect of any sum
payable hereunder to Heller, then the sum payable hereunder shall be
increased as may be necessary so that, after making all required
deductions, Heller receives an amount equal to the sum it would have
received had no such deductions been made. Borrower hereby indemnifies
and agrees to hold Heller harmless from and against all tax liabilities.
If Heller shall have sold an interest to a participant pursuant to Section
8.1 hereof, the amount due from Borrower under this Section shall not be any
greater than the amount which would have been due if Heller had not sold an
interest to such participant.
(B) Changes in Tax Laws. In the event that, subsequent to the
Closing Date, (1) any changes in any existing law, regulation, treaty or
directive or in the interpretation or application thereof, (2) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (3) compliance by Heller with any request or directive (whether or
not having the force of law) from any governmental authority, agency or
instrumentality:
(a) does or shall subject Heller to any tax of any kind
whatsoever with respect to this Agreement, the other Loan Documents or
any Revolving Loans made or Lender Guaranties issued hereunder, or
change the basis of taxation of payments to Heller of principal, fees,
interest or any other amount payable hereunder (except for net income
taxes, or franchise taxes imposed in lieu of net income taxes, imposed
generally by federal, state or local taxing authorities with respect to
interest or commitment or other fees payable hereunder); or
(b) does or shall impose on Heller any other condition
or increased cost in connection with the transactions contemplated
hereby;
and the result of any of the foregoing is to increase the cost to Heller of
issuing any Lender Guaranties or making or continuing any Revolving Loans
hereunder, as the case may be, or to reduce any amount receivable hereunder,
then, in any such case, Borrower shall promptly pay to Heller, upon
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its demand, any additional amounts necessary to compensate Heller, on an
after-tax basis, for such additional cost or reduced amount receivable, as
reasonably determined by Heller with respect to this Agreement or the other
Loan Documents. If Heller becomes entitled to claim any additional amounts
pursuant to this subsection, it shall promptly notify Borrower of the event by
reason of which Heller has become so entitled. A certificate as to any
additional amounts payable pursuant to the foregoing sentence submitted by
Heller to Borrower shall, absent manifest error, be sufficient to create an
obligation of Borrower to pay Heller. If thereafter Borrower shows or Heller
realizes that a computation error has occurred, Heller shall refund Borrower
in the appropriate amount.
SECTION 2
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that so long as the Revolving
Loan Commitment is in effect and until payment in full to Heller of all
Obligations and termination of all Lender Guaranties, unless Heller shall
otherwise give its prior written consent, Borrower shall perform and comply
with, and shall cause each of the Loan Parties to perform and comply with, all
covenants in this Section 2 applicable to such Person.
2.1 Compliance With Laws. Borrower shall (a) comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority (including , without limitation, laws, rules regulations
and orders relating to taxes, employer and employee contributions, securities,
employee retirement and welfare benefits, environmental protection matters and
employee health and safety) as now in effect and which may be imposed in the
future in all jurisdictions in which Borrower is now doing business or may
hereafter be doing business, other than those laws, rules, regulations and
orders the noncompliance with which would not have, either individually or in
the aggregate, a Material Adverse Effect, and (b) maintain or obtain all
licenses and permits now held or hereafter required by Borrower for which the
loss, suspension, revocation or failure to obtain or renew, would have a
Material Adverse Effect. This subsection 2.1 shall not preclude Borrower from
contesting any taxes or other payments if they are being diligently contested in
good faith. Borrower represents and warrants that as of the date
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hereof, it (i) is in compliance with the requirements of all
applicable laws, rules, regulations and orders, of any governmental
authority as now in effect, except any of the foregoing as are being
contested in good faith by Borrower and (ii) maintains all licenses and
permits referred to above, except to the extent such noncompliance or failure
to maintain would not have a Material Adverse Effect.
2.2 Maintenance of Properties; Insurance. Borrower will
maintain or cause to be maintained in good repair, working order and condition
all material properties used in the business of Borrower and will make or cause
to be made all appropriate repairs, renewals and replacements thereof. Borrower
will maintain or cause to be maintained, with financially sound and reputable
insurers, public liability and property damage insurance with respect to its
business and material properties consistent with its historical practices with
respect to the maintenance of such types of insurance. Borrower shall cause
Heller to be named as additional insured on all insurance policies pursuant to
appropriate endorsements in form and substance reasonably satisfactory to
Heller. Borrower represents and warrants that it currently maintains all
material properties as set forth above and maintains all insurance described
above.
2.3 Inspection. (A) Before an Event of Default shall have
occurred Borrower shall upon three (3) Business Days prior written notice permit
any authorized representatives of Heller to visit and inspect any of the books,
records (including its financial and accounting records), and other documents
(including, without limitation, computer tapes and disks) in possession or under
control of Borrower or Parent at the principal place of business of Borrower or
Parent, and to make copies and take extracts therefrom, and to discuss its
affairs, finances and business with its officers.
(B) After an Event of Default will have occurred such visits
and inspections may be made without notice at such reasonable times during
normal business hours and as often as may be commercially reasonable.
2.4 Corporate Existence, Etc. Except as otherwise
permitted by subsection 3.4, Borrower shall at all times preserve and keep in
full force and effect its corporate existence and all rights and franchises
material to its business.
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2.5 Further Assurances.
(A) Borrower shall and shall cause each Loan Party to, from
time to time, execute such guaranties, financing statements, documents, security
agreements and reports as Heller at any time may reasonably request to evidence,
perfect or otherwise implement the guaranties and security for repayment of the
Obligations provided for in the Loan Documents; provided, however, that in no
event shall Heller be entitled to enforce its rights against the Collateral in
excess of the Maximum Secured Amount (except that this proviso shall not apply
to any security interest that may be deemed to have been granted in the
Purchased Receivables under the Receivables Purchasing Agreement).
(B) If Borrower transfers any assets to any of its
Subsidiaries other than in the ordinary course of business, it shall give Heller
prompt written notice of the assets so transferred. If Borrower transfers any of
the Collateral to any of its Subsidiaries, it shall give Heller prompt written
notice and, at Heller's request, Borrower shall cause such Subsidiaries promptly
to guarantee the Obligations and to grant to Heller, a security interest in the
Collateral so transferred to secure the Obligations; provided, however, that in
no event shall Heller be entitled to enforce its rights against the Collateral
in excess of the Maximum Secured Amount (except that this proviso shall not
apply to any security interest that may be deemed to have been granted under the
Receivables Purchasing Agreement). The documentation for such guaranty or
security shall be substantially similar to the Loan Documents executed
concurrently herewith with such modifications as are reasonably requested by
Heller.
SECTION 3
NEGATIVE COVENANTS
Borrower covenants and agrees that so long as the Revolving
Loan Commitment is in effect and until payment in full of all Obligations and
termination of all Lender Guaranties, unless Heller shall otherwise give its
prior written consent, Borrower shall comply with and shall cause each of the
other Loan Parties to comply with all covenants in this Section 3 applicable to
such Person.
3.1 Debt. Borrower shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly,
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create, incur, assume, guarantee, or otherwise become or remain directly
or indirectly liable with respect to any Debt except:
(A) the Obligations; and
(B) Debt secured by Permitted Encumbrances.
3.2 Liens and Related Matters.
(A) No Liens. Borrower shall not, and shall not permit any of
its Subsidiaries to, directly or indirectly, create, incur, assume or permit to
exist any Lien on or with respect to any property or asset (including any
document or instrument with respect to goods or accounts receivable) of Borrower
or any of its Subsidiaries, whether now owned or hereafter acquired, or any
income or profits therefrom, except Permitted Encumbrances.
(B) No Negative Pledges. Borrower shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, enter into or assume
any agreement (other than the Loan Documents and in the Indenture as such
instrument is in effect on the date hereof) prohibiting the creation or
assumption of any Lien upon its properties or assets, whether now owned or
hereafter acquired unless such agreement permits all Permitted Encumbrances.
(C) No Restrictions on Subsidiary Distributions to Borrower.
Except as provided herein and in the Indenture, Borrower shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of any such Subsidiary to:
(1) pay dividends or make any other distribution on any of such Subsidiary's
capital stock owned by Borrower or any Subsidiary of Borrower; (2) subject to
subordination provisions, pay any Debt owed to Borrower or any other Subsidiary;
(3) make loans or advances to Borrower or any other Subsidiary; or (4) transfer
any of its property or assets to Borrower or any other Subsidiary.
3.3 Restricted Junior Payments. Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly,
declare, order, pay, make or set apart any sum for any Restricted Junior
Payment except:
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(A) Borrower may make payments and distributions to Parent to
permit Parent to pay federal and state income taxes then due and owing,
franchise taxes and other similar licensing expenses incurred in the ordinary
course of business; provided, however, Borrower's contribution to taxes as a
result of the filing of a consolidated return by Parent shall not be greater,
nor the receipt of tax benefits less, than they would have been had Borrower not
filed a consolidated return with Parent;
(B) Subsidiaries of Borrower may make Restricted Junior
Payments with respect to their common stock to the extent necessary to permit
Borrower to pay the Obligations and to make any Restricted Junior Payments
permitted under clause (A) above and to permit Borrower to pay expenses incurred
in the ordinary course of business; and
(C) Borrower and its Subsidiaries may make Restricted Junior
Payments permitted by the Indenture.
3.4 Restriction on Fundamental Changes. Borrower shall not,
and shall not permit any of its Subsidiaries to, directly or indirectly: (a)
amend, modify or waive any term or provision of its articles of incorporation or
bylaws in any material respect, unless required by law; (b) enter into any
transaction of merger or consolidation except any Subsidiary of Borrower may be
merged with or into Borrower (provided that Borrower is the surviving entity) or
any other Subsidiary of Borrower and Borrower may merge into Parent (provided
that Parent is the surviving entity); (c) liquidate, wind-up or dissolve itself
(or suffer any liquidation or dissolution); or (d) acquire by purchase or
otherwise all or any substantial part of the business or assets of any other
Person if such acquisition would have a Material Adverse Effect.
3.5 Disposal of Assets or Subsidiary Stock. Borrower shall not
engage in Asset Dispositions unless the consideration received is at least equal
to the fair market value of such assets and is exclusively used by Borrower to
meet its Obligations and make payments under the Related Transactions Documents.
3.6 Transactions with Affiliates. Borrower shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, enter into
or permit to exist any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any
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Affiliate or with any director, officer or employee of any Loan Party,
except (a) as set forth in the most recent proxy statement delivered by
Borrower to Heller or (b) transactions pursuant to the reasonable requirements
of the business of Borrower or any of its Subsidiaries and upon fair and
reasonable terms which are no less favorable to Borrower or such Subsidiary
than obtained in a comparable arm's length transaction with a Person that is
not an Affiliate.
3.7 Press Release; Public Offering Materials. Borrower shall
not, and shall not permit its Subsidiaries to, disclose the name of Heller in
any press release or in any prospectus, proxy statement or other materials filed
with any governmental entity relating to a public offering of the capital stock
of any Loan Party without Heller's prior written consent which shall not be
unreasonably withheld.
SECTION 4
REPORTING
Borrower covenants and agrees that so long as the Revolving
Loan Commitment remains in effect and until payment in full of all Obligations
and termination of all Lender Guarantees, unless Heller shall otherwise give its
prior written consent, Borrower shall comply with and shall cause each of the
other Loan Parties to comply with all covenants in this Section 4 applicable to
such Person.
4.1 Financial Statements and Other Reports. Borrower shall
maintain, and cause each of its Subsidiaries to maintain, a system of accounting
established and administered in accordance with sound business practices to
permit preparation of financial statements in conformity with GAAP (it being
understood that monthly financial statements are not required to have footnote
disclosures). Borrower shall deliver to Heller each of the financial statements
and other reports described below.
(A) Financial Statements. As soon as available and in any
event contemporaneously with the filing by Parent of its report on SEC Form
10-K, Borrower shall deliver to Heller the consolidating financial statements of
Parent and its Subsidiaries for their most recent fiscal year, certified by the
chief financial officer of Parent together with the consolidated financial
statements of Parent and its
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Subsidiaries for their most recent fiscal year, certified by its independent
certified public accountants. As soon as available and in any event within 30
days of the end of each fiscal month, Borrower shall deliver to Heller the
consolidating monthly financial statements of Parent and its Subsidiaries
certified by the chief financial officer of Parent (except for the months of
January, April, July and October). As soon as available and in any event
contemporaneously with the filing by Parent of its report on SEC Form 10-Q for
the applicable quarter, Borrower shall deliver to Heller quarterly (April,
July, and October) consolidating financial statements of Parent and
its Subsidiaries for each fiscal quarter certified by the chief financial
officer of Parent together with consolidated quarterly financial statements
of Parent and its Subsidiaries reviewed by its independent certified public
accountants. All quarterly and annual consolidated financial statements shall
be accompanied by a management's discussion and analysis.
(B) SEC Filings and Press Releases. Promptly upon their
becoming available, Borrower will deliver copies of (1) all financial
statements, reports, notices and proxy statements sent or made available by
Parent, Borrower or any of their respective Subsidiaries to their security
holders, (2) all regular and periodic reports and all registration statements
and prospectuses, if any, filed by Parent, Borrower or any of their respective
Subsidiaries with any securities exchange or with the Securities and Exchange
Commission or any governmental or private regulatory authority, and (3) all
press releases and other statements made available by Parent, Borrower or any of
their respective Subsidiaries to the public concerning developments in the
business of any such Person.
(C) Events of Default, Etc. Promptly upon any officer of
Borrower obtaining knowledge of any of the following events or conditions,
Borrower shall deliver copies of all notices given or received by Borrower or
Parent with respect to any such event or condition and a certificate of
Borrower's chief executive officer specifying the nature and period of existence
of such event or condition and what action Borrower has taken, is taking and
proposes to take with respect thereto: (1) any condition or event that
constitutes an Event of Default or Default; (2) any notice that any Person has
given to Borrower or any of its Subsidiaries or any other action taken with
respect to a claimed default or event or condition of the type referred
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to in subsection 6.1(B); or (3) any event or condition that would
result in any Material Adverse Effect.
(D) Litigation. Promptly upon any executive officer of
Borrower obtaining knowledge of (1) the institution of any action, suit,
proceeding, governmental investigation or arbitration against or affecting any
Loan Party or any property of any Loan Party not previously disclosed by
Borrower to Heller or (2) any material development in any action, suit,
proceeding, governmental investigation or arbitration at any time pending
against or affecting any Loan Party or any property of any Loan Party which, in
each case, would have to be disclosed in accordance with Financial Accounting
Standards Board Opinion Number 5, Borrower shall promptly give notice thereof to
Heller and provide such other information as may be reasonably available to
Borrower to enable Heller and its counsel to evaluate such matter except such
information as may be subject to the attorney-client or other similar privilege.
(E) Supplemented Schedules; Notice of Corporate Changes.
Annually Borrower shall supplement in writing and deliver to Heller revisions of
the Schedules annexed to this Agreement to the extent necessary to disclose new
or changed facts or circumstances after the Closing Date to the extent failure
to supplement such Schedules would make any representation made herein untrue in
any material respect; provided that subsequent disclosures shall not constitute
a cure or waiver of any Default or Event of Default resulting from the matters
disclosed.
4.2 Accounting Terms. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings assigned
to such terms in conformity with GAAP as defined in Exhibit A.
SECTION 5
REPRESENTATIONS AND WARRANTIES
In order to induce Heller to enter into this Agreement, to
make Revolving Loans and to issue Lender Guaranties, Borrower represents and
warrants to Heller that the following statements are and, after giving effect to
the Related Transactions, will be true, correct and complete:
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5.1 Disclosure. No representation or warranty of any Loan
Party contained in this Agreement, the financial statements referred to in
subsection 5.5, the other Related Transactions Documents or any other document,
certificate or written statement furnished to Heller by or at the request of any
such Person for use in connection with the Loan Documents or the Related
Transactions Documents contains any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances in which the same were made.
5.2 No Material Adverse Effect. Since January 28, 1995 there
have been no events or changes in facts or circumstances affecting any Loan
Party which individually or in the aggregate have had or would have a Material
Adverse Effect and that have not been disclosed herein or in the attached
Schedule 5.2.
5.3 No Default. The consummation of the Related Transactions
does not and will not violate, conflict with, result in a breach of, or
constitute a default (with due notice or lapse of time or both) under any
material contract of any Loan Party except if such violations, conflicts,
breaches or defaults have either been waived on or before the Closing Date and
are disclosed on Schedule 5.3 or would not have a Material Adverse Effect.
5.4 Organization, Powers, Capitalization and Good
Standing.
(A) Organization and Powers. Borrower is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Borrower has all requisite corporate power and authority to own and
operate its properties, to carry on its business as now conducted and proposed
to be conducted, to enter into each Loan Document to which it is a party and to
incur the Obligations.
(B) Capitalization. All of the issued and outstanding capital
stock of Borrower is owned by Parent in the amounts set forth on Schedule
5.4(B). No shares of the capital stock of Borrower other than those described
above, are issued and outstanding. There are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the
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purchase or acquisition from Borrower of any shares of capital stock or
other securities.
(C) Binding Obligation. This Agreement is, the Loan Documents
and the other Related Transactions Documents when executed and delivered by
Borrower shall be, the legally valid and binding obligations of Borrower,
enforceable against Borrower in accordance with their respective terms.
(D) Qualification. Borrower is duly qualified and in good
standing wherever necessary to carry on its business and operations, except in
jurisdictions in which the failure to be qualified and in good standing would
not have a Material Adverse Effect. All jurisdictions in which Borrower is
qualified to do business are set forth on Schedule 5.4(D).
5.5 Financial Statements. All financial statements concerning
Borrower, Parent and their respective Subsidiaries which have been or will
hereafter be furnished by Borrower and its Subsidiaries to Heller pursuant to
this Agreement have been or shall be prepared in accordance with GAAP
consistently applied (except as disclosed therein) and do or shall present
fairly the financial condition of the corporations covered thereby as at the
dates thereof and the results of their operations for the periods then ended.
5.6 Intellectual Property. Borrower owns, is licensed to use
or otherwise has the right to use, all patents, trademarks, trade names,
copyrights, technology, know-how and processes used in or necessary for the
conduct of its business as currently conducted that are material to the
financial condition, business or operations of Borrower (collectively called
"Intellectual Property"). Except as disclosed in Schedule 5.6, the use of such
Intellectual Property by Borrower does not and has not been alleged by any
Person to infringe on the rights of any Person.
5.7 Investigations, Audits, Etc. Except as set forth on
Schedule 5.7, neither Borrower nor any of its Subsidiaries is the subject of any
review or audit by the Internal Revenue Service or any governmental
investigation concerning the violation or possible violation of any law.
5.8 Solvency. As of and from and after the date of this
Agreement and after giving effect to the consummation of the Related
Transactions, Borrower: (a)
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owns and shall own assets the fair saleable value on a going concern basis
of which are (i) greater than the total amount of liabilities
(including contingent liabilities) of Borrower and (ii) greater than the
amount that shall be required to pay the probable liabilities of Borrower's
then existing debts as they become absolute and matured considering
all financing alternatives and potential asset sales reasonably
available to Borrower; (b) has capital that is not unreasonably small in
relation to its business as presently conducted or any contemplated or
undertaken transaction; and (c) does not intend to incur and does not
believe that it will incur debts beyond its ability to pay such debts as they
become due. For purposes of this Section 5.8, intercompany liabilities
shall be considered equity.
SECTION 6
DEFAULT, RIGHTS AND REMEDIES
6.1 Event of Default. "Event of Default" shall mean
the occurrence or existence of any one or more of the following:
(A) Payment. Failure to pay any principal of any Revolving
Loan when due, or to repay Revolving Loans to reduce their balance as required
by subsection 1.1(A) or to reimburse Heller for any payment made by Heller under
or in respect of any Lender Guaranty when due or failure to pay, within five (5)
days after the due date, any interest on any Revolving Loan or any other amount
due under this Agreement or any Note or other Loan Document; or
(B) Default in Other Agreements. (1) Failure of Borrower or
Parent to pay when due or within any applicable grace period any principal or
interest on Debt (other than the Revolving Loans) or any Contingent Obligations
or (2) breach or default of Borrower or Parent with respect to any Debt (other
than the Revolving Loans) or any Contingent Obligations, if the effect of such
failure to pay, default or breach is to cause or to permit the holder or holders
then to cause, Debt having an individual principal amount in excess of
$5,000,000 to become or be declared due prior to its stated maturity; or
(C) Breach of Certain Provisions. Failure of Borrower
to perform or comply with any term or condition contained in subsection 2.3 or
Section 3; or
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(D) Breach of Warranty. Any representation, warranty,
certification or other statement made by Borrower or Parent in any Loan Document
or in any statement or certificate at any time given by Borrower or Parent in
writing pursuant or in connection with any Loan Document is false in any
material respect on the date made; or
(E) Other Defaults Under Loan Documents. Borrower or Parent
defaults in the performance of or compliance with any term contained in this
Agreement or the other Loan Documents and such default is not remedied or waived
within fifteen (15) days after receipt by Borrower of written notice from Heller
of such default (other than occurrences described in other provisions of this
subsection 6.1 for which a different grace or cure period is specified or which
constitute immediate Events of Default); provided, that, if the default is
capable of being cured and Borrower has commenced action to effect a cure and is
making a good faith effort to effect a cure, then the period to cure the default
shall be extended for an additional 15 days; or
(F) Involuntary Bankruptcy; Appointment of Receiver, Etc. (1)
A court enters a decree or order for relief with respect to Borrower or Parent
in an involuntary case under the Bankruptcy Code, which decree or order is not
stayed or other similar relief is not granted under any applicable federal or
state law; or (2) the continuance of any of the following events for forty-five
(45) days unless dismissed, bonded or discharged: (a) an involuntary case is
commenced against Borrower or Parent, under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or (b) a decree or
order of a court for the appointment of a receiver, liquidator, sequestrator,
trustee, custodian or other officer having similar powers over Borrower or
Parent, or over all or a substantial part of its property, is entered; or (c) an
interim receiver, trustee or other custodian is appointed without the consent of
Borrower or Parent, for all or a substantial part of the property of Borrower or
Parent; or
(G) Voluntary Bankruptcy; Appointment of Receiver, Etc. (1) An
order for relief is entered with respect to Borrower or Parent or Borrower or
Parent commences a voluntary case under the Bankruptcy Code, or consents to the
entry of an order for relief in an involuntary case or to the conversion of an
involuntary case to a voluntary case under any such law or consents to the
appointment of or taking possession by a receiver, trustee
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or other custodian for all or a substantial part of its property; or (2)
Borrower or Parent makes any assignment for the benefit of creditors; or
(3) the Board of Directors of Borrower or Parent adopts any resolution or
otherwise authorizes action to approve any of the actions referred to in
this subsection 6.1(G); or
(H) Governmental Liens. Any lien, levy or assessment is filed
or recorded with respect to or otherwise imposed upon all or any material part
of the Collateral or the assets of Borrower or Parent by the United States or
any department or instrumentality thereof or by any state, county, municipality
or other governmental agency (other than Permitted Encumbrances); or
(I) Judgment and Attachments. Any money judgment, writ or
warrant of attachment, or similar process (other than those described in
subsection 6.1(H)) involving (1) an amount in any individual case in excess of
$5,000,000 or (2) an amount in the aggregate at any time in excess of
$10,000,000 (in either case not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against
Borrower or Parent or any of its respective assets and remains undischarged,
unvacated, unbonded or unstayed for a period of thirty (30) days or in any event
later than five (5) Business Days prior to the date of any proposed sale
thereunder; or
(J) Dissolution. Any order, judgment or decree is entered
against Borrower or Parent decreeing the dissolution or split up of that Loan
Party and such order remains undischarged or unstayed for a period in excess of
fifteen (15) days; or
(K) Solvency. Borrower ceases to be solvent (as
represented by Borrower in subsection 5.8) or admits in writing its present or
prospective inability to pay its debts as they become due; or
(L) Injunction. Borrower or Parent is enjoined, restrained or
in any way prevented by the order of any court or any administrative or
regulatory agency from conducting all or any material part of its business and
such order would have a Material Adverse Effect and continues for more than
forty-five (45) days; or
(M) ERISA; Pension Plans. (1) Borrower or Parent fails to make
full payment when due of all amounts which,
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under the provisions of any employee benefit plans or any applicable
provisions of the Internal Revenue Code as amended from time to time
("IRC"), Borrower or Parent is required to pay as contributions thereto
and such failure results in or is likely to result in a Material Adverse
Effect; or (2) an accumulated funding deficiency in excess of $5,000,000
occurs or exists, whether or not waived, with respect to any employee benefit
plans; or (3) any employee benefit plans lose their status as a
qualified plan under the IRC which results in or would result in a
Material Adverse Effect; or
(N) EPA. Failure on the part of Borrower to: obtain or
maintain any operating licenses or permits required by environmental
authorities; begin, continue or complete any remediation activities as required
by any environmental authorities; store or dispose of any hazardous materials in
accordance with applicable environmental laws and regulations; or comply with
any other environmental laws; if such failure would have a Material Adverse
Effect; or
(O) Invalidity of Loan Documents. Any of the Loan Documents
for any reason, other than a partial or full release in accordance with the
terms thereof, ceases to be in full force and effect or is declared to be null
and void, or any Loan Party denies that it has any further liability under any
Loan Documents to which it is party, or gives notice to such effect; or
(P) Damage, Strike, Casualty. Any material damage to, or loss,
theft or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than forty-five (45) consecutive days, the
cessation or substantial curtailment of revenue producing activities at any
facility of Borrower or any of its Subsidiaries if any such event or
circumstance would have a Material Adverse Effect; or
(Q) Failure of Security. Borrower fails to maintain
the Minimum Collateral Coverage, for any reason other than the failure of
Heller to take any action within its control; or
(R) Business Activities. Parent engages in any type of
business activity other than the ownership of stock of Borrower and Penn and any
other Subsidiary, performance
23
<PAGE>
of its obligations under the Indenture and the Loan Documents to which it is
a party and other business reasonably engaged in by a holding company; or
(S) Change in Control. Parent ceases to beneficially own and
control, directly or indirectly, at least one hundred percent (100%) of the
issued and outstanding shares of each class of capital stock of Borrower
entitled (without regard to the occurrence of any contingency) to vote for the
election of a majority of the members of the board of directors of Borrower; or
(T) Default, Etc. Under Receivables Purchasing
Agreement or Servicing Agreement. An "Event of Termination" or an "Event of
Default" as such terms are defined in the Receivables Purchasing Agreement or
the Servicing Agreement shall have occurred; or
(U) Defaults as to Penn. So long as Parent shall be in default
in the performance of its obligations under the Parent Guaranty and a "Default"
or "Event of Default" as such terms are defined in the Penn Credit Agreement, if
executed, shall have occurred or an "Event of Termination" or an "Event of
Default" as such terms are defined in the Receivables Purchasing Agreement or
the Servicing Agreement to which Penn is a party, if executed, shall have
occurred.
6.2 Suspension of Commitments. Upon the occurrence of any
Default or Event of Default, Heller, without notice or demand, may immediately
cease making any additional Revolving Loan and issuing any Lender Guaranty and
the Revolving Loan Commitment shall be suspended; provided that, in the case of
a Default, if the subject condition or event is waived, cured or removed within
any applicable grace or cure period, the Revolving Loan Commitment shall be
reinstated. Heller, in its sole discretion, may alternatively suspend only a
portion of the Revolving Loan Commitment.
6.3 Acceleration. Upon the occurrence of any Event of Default
described in the foregoing subsection 6.1(F) or 6.1(G), the unpaid principal
amount of and accrued interest and fees on all Revolving Loans, payments under
all Lender Guaranties and all other Obligations shall automatically become
immediately due and payable without presentment, demand, protest, notice of
intent to accelerate, notice of acceleration or other requirements of any kind,
all of which are hereby expressly waived by
24
<PAGE>
Borrower, and the Revolving Loan Commitment shall thereupon terminate.
Upon the occurrence and during the continuance of any other Event of
Default, Heller may by written notice to Borrower (a) declare all or any
portion of the Revolving Loans and all or some of the other Obligations to
be, and the same shall forthwith become, immediately due and payable together
with accrued interest thereon, and the Revolving Loan Commitment shall
thereupon terminate and (b) demand that Borrower immediately deposit with
Heller an amount equal to 105% of the face amount of the Lender Guaranties
as security and subject to the provisions of the Security Agreement.
6.4 Performance by Heller. During the continuance of an Event
of Default, if Borrower shall fail to perform any covenant, duty or agreement
contained in any of the Loan Documents, Heller may perform or attempt to perform
such covenant, duty or agreement on behalf of Borrower after the expiration of
any cure or grace periods set forth herein. In such event, Borrower shall, at
the request of Heller, promptly pay any amount reasonably expended by Heller in
such performance or attempted performance by Heller, together with interest
thereon at the rate of interest in effect upon the occurrence of an Event of
Default as specified in subsection 1.2(D) from the date of such expenditure
until paid. Notwithstanding the foregoing, it is expressly agreed that Heller
shall not have any liability or responsibility for the performance of any
obligation of Borrower under this Agreement or any other Loan Document.
SECTION 7
CONDITIONS TO REVOLVING LOANS
The obligation of Heller to make any Revolving Loan and to
issue any Lender Guaranty are subject to satisfaction of all of the applicable
conditions set forth below.
7.1 Conditions to Initial Revolving Loan(s). The obligation of
Heller to make the initial Revolving Loan(s) or to issue any Lender Guaranty on
the first Funding Date (as defined below) are, in addition to the conditions
precedent specified in Section 7.2, subject to the delivery of all documents
listed on Schedule 7.1, all in form and substance acceptable to Heller.
25
<PAGE>
7.2 Conditions to All Loans. The obligation of Heller
to make any Revolving Loan or to issue any Lender Guaranty on any date
("Funding Date") are subject to the further conditions precedent set forth
below.
(A) Heller shall have received, in accordance with the
provisions of subsection 1.1, a notice requesting issuance of a Lender Guaranty.
(B) The representations and warranties contained in Section 5
of this Agreement and elsewhere herein and in the Loan Documents shall be (and
each request by Borrower for a Lender Guaranty and each Revolving Loan made
pursuant to subsection 1.1(A) shall constitute a representation and warranty by
Borrower that such representations and warranties are) true, correct and
complete in all material respects on and as of that Funding Date to the same
extent as though made on and as of that date, except for any representation or
warranty limited by its terms to a specific date and taking into account any
amendments to the Schedules or Exhibits as a result of any disclosures made in
writing by Borrower to Heller after the Closing Date and approved by Heller.
(C) No event shall have occurred and be continuing or would
result from the consummation of the Revolving Loan or issuance of the Lender
Guaranty request by Borrower that would constitute a Default or an Event of
Default.
(D) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain Heller from making
any Revolving Loan or issuing any Lender Guaranty hereunder.
SECTION 8
PARTICIPATION
8.1 Participations. Heller retains the right at any time and
from time to time to sell participation interests in any amount in the Revolving
Loans or its Revolving Loan Commitment to one or more participants as Heller may
deem desirable (subject to Parent's approval of such participant, which approval
shall not be unreasonably withheld); provided that Heller shall at all times
remain such participant's agent with respect to such interests in the Revolving
Loans or its Revolving Loan Commitment and
26
<PAGE>
Borrower shall continue to deal directly with Heller in connection with
any rights such participant may have under this Agreement. Heller shall give
to Borrower ten (10) days' prior written notice of any such sale of a
participating interest, identifying the participant and shall provide to
Borrower any information with respect to such participant reasonably
requested by Borrower. Borrower shall have the right to approve or
disapprove of such participant which approval shall not be
unreasonably withheld. Prior to the release of any information regarding any
Approved Obligor (as defined in the Receivables Purchasing Agreement)
to any potential participant, such potential participant shall
execute a confidentiality agreement in form and substance acceptable to
Borrower and Heller.
SECTION 9
MISCELLANEOUS
9.1 Indemnities. (a) In addition to the payment of expenses
and fees pursuant to Section 1.3, Borrower agrees to indemnify, pay, and hold
Heller, its officers, directors, employees, agents, auditors, Affiliates and
attorneys (the "Indemnitees") harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including
fees and disbursements of counsel for such Indemnitees) in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
regardless of whether such Indemnitee shall be designated a party thereto) that
may be imposed on, incurred by, or asserted against the Indemnitee in any manner
relating to or arising out of this Agreement or the other Loan Documents, the
consummation of the transactions contemplated by this Agreement or the use or
intended use of any Revolving Loan, provided, that Borrower shall have no
obligation to an Indemnitee hereunder with respect to liabilities arising from
the gross negligence or willful misconduct of that Indemnitee as determined by a
court of competent jurisdiction. This Section 9.1 shall survive the termination
of this Agreement.
(b) If any action or proceeding shall be
instituted involving any Indemnitee(s) in respect of which indemnity may be
sought against Borrower under Section 9.1(a), such Indemnitee(s) shall
promptly notify Borrower in writing and Borrower shall, subject to the
following
27
<PAGE>
sentence, assume the defense thereof on behalf of such Indemnitee(s),
including the employment of counsel (reasonably satisfactory to such
Indemnitee(s)) and payment of all reasonable fees and expenses. Any
Indemnitee(s) shall have the right to employ separate counsel in any such
action or proceeding and participate in the defense thereof, but the fees
and expenses of such separate counsel shall be at the expense of such
Indemnitee(s) unless (i) the employment of such separate counsel has
been specifically authorized by Borrower in its sole discretion or (ii)
the named parties to any such action or proceeding (including any
impleaded parties) include such Indemnitee(s) and Borrower, and such
Indemnitee(s) shall have been advised by its counsel that there may be one or
more legal defenses available to such Indemnitee(s) which are different from
or additional to those available to Borrower (in which case Borrower shall
not have the right to assume the defense of such action on behalf of such
Indemnitee(s)). If any one or more Indemnitees engages legal counsel in
accordance with clause (ii) of the preceding sentence, in no event shall
Borrower be required to pay the legal expenses of more than one collective
legal counsel for all such Indemnitees. An indemnitee(s) shall be entitled to
employ its own counsel at the reasonable expense of Borrower in all events
during the pendency of any bankruptcy proceeding involving Borrower and in
respect of any action or proceeding commenced against any Indemnitee under or
in respect of the Indenture. At any time after Borrower has assumed the
defense of any action or proceeding involving any Indemnitee(s) in
respect of which indemnity under Section 9.1(a) has been sought against
Borrower, such Indemnitee(s) may elect, by written notice to Borrower, to
withdraw its request for indemnity and thereafter the defense of such action
or proceeding shall be maintained by counsel of such Indemnitee(s)' choosing
and at such Indemnitee(s)' expense. In no event shall Borrower enter into any
settlement agreement without the prior written consent of Heller, which
consent shall not be unreasonably withheld, unless such settlement
involves only the payment of money which Borrower has fully funded.
9.2 Amendments and Waivers. No amendment, modification, or
termination, or waiver or consent of any provision of this Agreement or any Loan
Documents, shall be effective unless the same shall be in writing and signed by
Heller, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
28
<PAGE>
9.3 Notices. Any notice or other communication required shall
be in writing addressed to the respective party as set forth below and may be
personally served, telecopied, sent by overnight courier service or U.S. mail
and shall be deemed to have been given when received by any person at the
address specified below.
Notices shall be addressed as follows:
If to Borrower: Western Publishing Company, Inc.
c/o Western Publishing Group, Inc.
444 Madison Avenue, Suite 601
New York, NY 10022
ATTN: Steven M. Grossman
Telecopy: (212) 888-5025
With copies to: Western Publishing Group, Inc.
444 Madison Avenue, Suite 601
New York, NY 10022
ATTN: Steven M. Grossman
Telecopy: (212) 888-5025
and
Morgan Lewis & Bockius
101 Park Avenue
New York, NY 10178
ATTN: Michael A. Chapnick, Esq.
Telecopy: (212) 309-6273
If to Heller: HELLER FINANCIAL, INC.
101 Park Avenue
New York, NY 10178
ATTN: CAMG Portfolio Manager
Telecopy: (212) 880-2057
9.4 Failure of Indulgence Not Waiver; Remedies
Cumulative. No failure or delay on the part of Heller to exercise, or any
partial exercise of, any power, right, or privilege hereunder or under any other
Loan Document shall impair such power, right, or privilege or be construed to be
a waiver of any Default or Event of Default. All rights and remedies existing
hereunder or under any other Loan Document are cumulative to and not exclusive
of any rights or remedies otherwise available.
29
<PAGE>
9.5 Marshalling, Payments Set Aside. Heller shall not be
under any obligation to marshall any assets of Borrower in payment of any or
all of the Obligations. To the extent that Borrower makes a payment to Heller
or Heller enforces its Liens or exercises its right of setoff, and such
payment(s) or the proceeds of such enforcement or setoff is subsequently
invalidated, declared to be fraudulent or preferential, set aside, or
required to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable cause,
then to the extent of such recovery, the Obligations or part thereof
originally intended to be satisfied, and all Liens, rights and remedies
therefor, shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or setoff had not occurred.
9.6 Severability. The invalidity, illegality, or
unenforceability in any jurisdiction of any provision under the Loan
Documents shall not affect or impair the remaining provisions in the Loan
Documents, or such provision or obligation in any other jurisdiction.
9.7 Headings. Section and subsection headings are
included herein for convenience of reference only and shall not constitute
a part of this Agreement for any other purposes or be given substantive
effect.
9.8 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED
BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
9.9 Successors and Assigns. This agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns except that Borrower shall not assign its
rights or obligations hereunder.
9.10 No Fiduciary Relationship. No provision in the
Loan Documents and no course of dealing between the parties shall be deemed to
create any fiduciary duty by Heller to Borrower.
9.11 Construction. Heller and Borrower acknowledge that each
of them has had the benefit of legal counsel of its own choice and has been
afforded an opportunity to review the Loan Documents with its legal
30
<PAGE>
counsel and that the Loan Documents shall be constructed as if jointly drafted
by Heller and Borrower.
9.12 Confidentiality. Unless otherwise required by
applicable law or regulation, Heller agrees to use its best efforts to
maintain the confidentiality of the identities of Approved Obligors and of
the volume of business and terms of any business done by Approved Obligors
with Borrower. Heller shall have no obligation of confidentiality in
respect of any information which may be generally available to Heller or
becomes available to the public through no violation of this Section 9.12.
9.13 Consent to Jurisdiction and Service of Process.
(A) BORROWER AND HELLER HEREBY IRREVOCABLY SUBMIT TO THE
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 ANY
LOAN DOCUMENT AND BORROWER AND HELLER HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS
IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH
COURT AND IRREVOCABLY WAIVE ANY OBJECTION EITHER OF THEM 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. ANY JUDICIAL PROCEEDING BY
BORROWER OR HELLER AGAINST THE OTHER OR ANY AFFILIATE INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH
ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK EXCEPT
THAT HELLER MAY BRING SUIT IN ANY JURISDICTION NECESSARY TO REALIZE ITS RIGHTS
IN THE COLLATERAL.
(B) BORROWER DESIGNATES AND APPOINTS PARENT AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY BORROWER WHICH IRREVOCABLY AGREES IN
WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS
IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY BORROWER TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A
COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO
BORROWER AT BORROWER'S ADDRESS PROVIDED IN SUBSECTION 9.3 EXCEPT THAT UNLESS
OTHERWISE PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT
AFFECT THE VALIDITY OF SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY BORROWER
REFUSES TO ACCEPT SERVICE, BORROWER AND AGENT HEREBY AGREE THAT SERVICE UPON IT
BY CERTIFIED MAIL RETURN RECEIPT SHALL CONSTITUTE
31
<PAGE>
SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW.
9.14 Waiver of Jury Trial. BORROWER AND HELLER HEREBY WAIVE
THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY
DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER THEREOF AND THE
LENDER/BORROWER RELATIONSHIP ESTABLISHED THEREBY. BORROWER AND HELLER ALSO WAIVE
ANY BOND OR SURETY OR SECURITY UPON SUCH BOND WHICH MIGHT, BUT FOR THIS WAIVER,
BE REQUIRED OF HELLER. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW
AND STATUTORY CLAIMS. BORROWER AND HELLER ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS ALREADY
RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE
TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH OF BORROWER AND
HELLER FURTHER WARRANT AND REPRESENT THAT IT HAS REVIEWED THIS WAIVER WITH ITS
LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL
RIGHTS FOLLOWING CONSULTATION WITH ITS LEGAL COUNSEL. THIS WAIVER IS
IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS
OR MODIFICATIONS TO ANY LOAN DOCUMENT, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS
RELATING TO THE REVOLVING LOANS OR THE LENDER GUARANTIES. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
9.15 Survival of Warranties and Certain Agreements. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement, the making of any Revolving Loan,
issuance of any Lender Guaranty and the execution and delivery of the Notes.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in subsections 1.3(A) and 9.1 shall survive
the repayment of the Revolving Loans and the termination of this Agreement.
9.16 Entire Agreement. This Agreement, the Notes and the other
Loan Documents and the Related Transaction Documents referred to herein embody
the final, entire agreement among the parties hereto and supersede any and all
32
<PAGE>
prior commitments, agreements, representations, understandings, whether oral or
written, relating to the subject matter hereof and may not be contradicted or
varied by evidence of prior, contemporaneous or subsequent oral agreements or
discussions of the parties hereto. There are no oral agreements among the
parties hereto.
SECTION 10
DEFINITIONS
10.1 Certain Defined Terms. The terms defined in
Exhibit A are used in this Agreement as so defined.
10.2 Other Definitional Provisions. References to "Sections,"
"subsections," "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in Exhibit A may, unless the
context otherwise requires, be used in the singular or the plural depending on
the reference. In this Agreement, "hereof," "herein," "hereto," "hereunder" and
the like mean and refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word appears;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "including," "includes" and "include" shall be
deemed to be followed by the words "without limitation" when used in reference
to any date, the word "from" shall be deemed to include such date, and the word
"to" shall be deemed to exclude such date; references to agreements and other
contractual instruments shall be deemed to include subsequent amendments,
assignments, and other modifications thereto, but only to the extent such
amendments, assignments and other modifications are not prohibited by the terms
of this Agreement or any other Loan Document; references to Persons include
their respective permitted successors and assigns or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and
33
<PAGE>
all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.
Witness the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
HELLER FINANCIAL, INC.
/s/ Frank Bongiovanni
By____________________________
Frank Bongiovanni
Executive Vice President
WESTERN PUBLISHING COMPANY, INC.
/s/ Steven M. Grossman
By____________________________
Steven M. Grossman
Executive Vice President
34
Schedule 5.2
------------
Material Adverse Effects:
- ------------------------
None
<PAGE>
Schedule 5.3
------------
Waived Defaults:
- ---------------
None
<PAGE>
Schedule 5.4(B)
--------------
Capitalization:
- --------------
Percentage of Ownership
Number of Shares of of the Issued and
Issued and Outstanding Outstanding
Capital Stock of Capital Stock of
Western Publishing Western Publishing
Company, Inc. Company, Inc.
------------- -------------
Western Publishing Group, Inc. 100 100
<PAGE>
Schedule 5.4(D)
--------------
Qualification:
- -------------
Alabama Montana
Alaska Nebraska
Arizona Nevada
Arkansas New Hampshire
California New Jersey
Colorado New Mexico
Connecticut New York
Delaware North Carolina
District of Columbia North Dakota
Florida Ohio
Georgia Oklahoma
Hawaii Oregon
Idaho Pennsylvania
Illinois Rhode Island
Indiana South Carolina
Iowa South Dakota
Kansas Tennessee
Kentucky Texas
Louisiana Utah
Maine Vermont
Maryland Virginia
Massachusetts Washington
Michigan West Virginia
Minnesota Wisconsin
Mississippi Wyoming
Missouri
<PAGE>
Schedule 5.6
------------
Infringements of Borrower's Intellectual Property:
- -------------------------------------------------
None
<PAGE>
Schedule 5.7
------------
Investigations and Audits:
- -------------------------
1. Internal Revenue Service Audit of returns filed for Fiscal 1992,
Fiscal 1993, Fiscal 1994 and Fiscal 1995.
2. Borrower has been identified as a potentially responsible party under
the Comprehensive Environmental Response, Compensation, and Liability
Act at the following locations:
(a) FICA Landfill in Poughkeepsie, New York;
(b) Clint's Auto Salvage in Racine County, Wisconsin;
(c) Hertel Landfill in Plattekill, New York;
(d) Hunts Disposal Landfill in Caledonia, Wisconsin;
(e) Marina Cliffs Berrel Dump Site in South Milwaukee, Wisconsin; and
(f) Muskego Sanitary Landfill in Muskego, Wisconsin.
<PAGE>
Schedule 7.1
------------
CLOSING DOCUMENTS
Any documents listed below shall be duly executed, in form and
substance satisfactory to Heller, in quantities designated by Heller
(except for the Note, of which only the original shall be signed) and
shall be delivered to Heller on or before the closing date. Capitalized
terms used herein shall have the meanings set forth in Exhibit A to the
Receivables Purchasing Agreement.
Documents
(1) Receivables Purchasing Agreement
(2) Servicing Agreement
(3) Credit Agreement
(4) Security Agreement
(5) Parent Guaranty
(6) Certified copy of the Indenture
(6a)Blocked Account Agreements:
(i) Chemical Bank
(ii) The First National Bank of Chicago
(iii) NationsBank
(7) Revolving Note
(8) Western Incumbency Certificates. Certificate of the Secretary or
Assistant Secretary of Western certifying the names and true
signatures of the officers authorized on its behalf to execute the
Receivables Purchasing Agreement, the Related Transaction Documents and
the other documents to be executed and delivered by Western thereunder.
(9) Parent Incumbency Certificates. Certificate of the Secretary or
Assistant Secretary of Parent certifying the names and true
signatures of the officers authorized on its behalf to execute the
Parent Guaranty and the other documents to be executed and delivered
by Parent under the Related Transaction Documents.
(10) Western Resolutions. Resolutions of the Board of Directors of
Western, approving the Receivables Purchasing Agreement, the Servicing
Agreement, the Credit Agreement, The Security Agreement and the other
documents to be executed and delivered by Western under such Agreements
and the transactions contemplated thereby; Certified as of the Closing
Date by its corporate secretary or an assistant secretary as being in
full force and effect without modification or amendment.
(11) Parent Resolutions. Resolutions of the Board of Directors of Parent
approving the Parent Guaranty and the other documents to be executed and
delivered by Parent under the Related Transactions Documents and the
transactions contemplated thereby, certified as of the Closing Date by
its Secretary or Assistant Secretary;
(12) Certificates of Incorporation and Good Standing. Certified copies
of the certificates or articles of incorporation of Western and Parent,
together with good standing certificates from the respective states of
incorporation and the respective states in which the principal places of
business of each is located and from all states in which Western or
Parent are required to be qualified and/or licensed to do business
pursuant to Section 5.4(I) of the Credit Agreement, each to be dated a
recent date prior to the Closing Date.
(13) Bylaws. Copies of the bylaws of Western and Parent certified as of
the Closing Date by their respective corporate secretaries or an
assistant secretary.
(14) Security Interest, UCC Filings:
(i) UCC-1 forms prepared for filing in the required jurisdictions
(ii) Confirmation of filing of UCC-1 forms in each required
jurisdiction
(iii) Search report dated a recent date prior to the Closing Date
listing all effective financing statements which name Western
or Parent as debtor and which are filed in the required
jurisdictions together with copies of such financing statements
(none of which shall cover any Eligible Receivables or Contracts
or Collateral).
(15) Legal opinions of Morgan, Lewis & Bockius:
(a) True Sale
(b) Corporate
(16) Financial Statements.
-Copy of consolidated financial statements of Parent and its
Subsidiaries for their fiscal year ended January 28, 1995, certified by
its independent certified public accountant.
-Copy of the quarterly consolidating financial statements of Parent
and its Subsidiaries for the period ended April 1995, certified by
Parent's chief financial officer.
-Copy of the quarterly consolidated financial statements of Parent
and its Subsidiaries for the period ended April 1995, reviewed by its
independent certified public accountants.
-Copies of the consolidated and consolidating monthly financial
statements of Parent and its Subsidiaries for the months February,
March, May and June 1995, certified by the Parent's chief financial
officer.
(17) Evidence of payment of $40,000 of Western to Heller
(18) Notice of Schedule of Approved Obligors
<PAGE>
EXHIBIT A
_________
SEE EXHIBIT A TO THE
RECEIVABLES PURCHASING AGREEMENT
dated September 29, 1995
Between
Western Publishing Company, Inc.,
as Seller and
Heller Financial, Inc., as
Purchaser
EXHIBIT 10.1(A)
REVOLVING NOTE
______________
$12,500,000 New York, New York
September , 1995
FOR VALUE RECEIVED, the undersigned, WESTERN PUBLISHING COMPANY,
INC., A Delaware corporation, with its principal place of business at
1220 Mound Avenue, Racine, WI 53404 (hereinafter referred to as the
"Maker"), hereby promises to pay to the order of HELLER FINANCIAL,
INC., A Delaware corporation, with a place of business at 101 Park
Avenue, New York, NY 10178 (hereinafter together with any other holder
hereof referred to as the "Holder"), by wire transfer to Holder's
account, ABA No. 0710-0001-3, Account No. 59-27196 at First National
Bank of Chicago, One First National Plaza, Chicago, Illinois 60670, Reference:
Heller Financial for the benefit of Western Publishing Company, Inc. or
at such other place or places and to such account or accounts as Holder
may direct from time to time by notice to Maker in accordance with the
Credit Agreement (as hereinafter defined), in lawful money of the United
States in immediately available funds, the principal amount equal to
TWELVE MILLION AND FIVE HUNDRED THOUSAND DOLLARS ($12,500,000) or, if
less, the actual outstanding principal amount of advances under the
Revolving Loan Commitment (as defined in the Credit Agreement) advanced
or issued for the account of Maker by Holder pursuant to the Credit
Agreement, payable, subject to the fourth paragraph hereof, (x) in the
case of any Revolving Loan outstanding under the Tranche A Commitment
(as defined in the Credit Agreement), on demand, and (y) in the case of
any Revolving Loan outstanding under the Tranche B Commitment (as defined
in the Credit Agreement) on the Expiry Date as provided in the Credit
Agreement, but in no event later than September 29, 1997.
Interest shall accrue on the outstanding principal amount hereof
in accordance with the Credit Agreement and shall be payable on such
dates and in such amounts as determined in accordance with the Credit
Agreement. In no contingency or event whatsoever, shall the interest
rate charged pursuant to the terms of this Note exceed the maximum
amount of interest permitted by applicable law. In the event that a
court of competent jurisdiction determines that the Credit Agreement
provides for interest in excess of the maximum amount of interest
permitted by applicable law, the provisions of subsection 1.2(E) of the
Credit Agreement shall apply.
The date and amount of each advance under the Revolving Loan
Commitment and other financial accommodations made to Maker, each
payment and prepayment made on account of principal thereof and each
payment of interest thereon shall be recorded by Holder in its books and
records relating to the Revolving Loan, in accordance with subsection
1.6 of the Credit Agreement.
This Note is issued to evidence Revolving Loans made pursuant to
the provisions of subsection 1.1(A) and 1.1(B) of a Credit Agreement
dated as of September 29, 1995 by and between Maker and Holder (as from
time to time in effect, the "Credit Agreement") as to which reference is
hereby made for a statement of the terms, conditions and covenants under
which the indebtedness evidenced hereby was and will be made and is to be
repaid, including those related to the acceleration of the indebtedness
represented hereby upon the occurrence of an Event of Default (as defined
in the Credit Agreement) or upon the termination of the financing of
which this Note is part pursuant to the Credit Agreement. Payment of
this Note is secured by the Collateral (as defined in Section 10.1 to
the Credit Agreement), and any property or interest provided in addition
to or in substitution for any of the foregoing. This Note is subject to
mandatory prepayment as provided in the Credit Agreement.
Holder shall not be required to look to the Collateral for the
payment of this Note, but may proceed against Maker, in such manner as
it deems desirable. None of the rights or remedies of Holder hereunder
are to be deemed waived or affected by failure or delay on the part of
Holder to exercise the same. All remedies conferred upon Holder by this
Note or any of the Related Transactions Documents (as defined in Section
10.1 to the Credit Agreement) shall be cumulative and none is exclusive,
and such remedies may be exercised concurrently or consecutively at
Holder's option.
Maker hereby waives presentment, demand for payment, protest and
notice of protest, notice of dishonor and all other notices in
connection with this Note.
This Note has been executed and delivered in New York, New York
and shall be governed by the laws of the State of New York without
giving effect to principles of conflicts of law.
WITNESS the hand and seal of Maker.
WESTERN PUBLISHING COMPANY, INC.
/s/ Steven M. Grossman
By: __________________________
Steven M. Grossman
Executive Vice President
/s/ James A. Cohen, Esq.
Attest:________________________
Title: Secretary
[Execution Copy]
SECURITY AGREEMENT
Dated September __, 1995
Between
WESTERN PUBLISHING COMPANY, INC.
as Grantor
and
HELLER FINANCIAL, INC.
<PAGE>
This SECURITY AGREEMENT is dated September __, 1995 and
entered into by and between WESTERN PUBLISHING COMPANY, INC., a Delaware
corporation ("Western" or "Grantor"), and HELLER FINANCIAL, INC., a Delaware
corporation ("Heller"),
W I T N E S S E T H :
WHEREAS, Grantor and Heller are parties to a Credit Agreement
dated the date hereof (as the same may be amended and in effect from time to
time, the "Credit Agreement") providing for extensions of credit to be made to
Grantor by Heller;
WHEREAS, Grantor has entered into a Receivables Purchasing
Agreement with Heller dated the date hereof (as the same may be amended and in
effect from time to time, the "Receivables Purchasing Agreement"); and
WHEREAS, it is a condition precedent to Heller extending
Revolving Loans and issuing Lender Guaranties under the Credit Agreement that
Grantor shall have granted the security interests to Heller contemplated by this
Security Agreement;
NOW, THEREFORE, in consideration of the premises and in order
to induce Heller to extend Revolving Loans and to issue Lender Guaranties under
the Credit Agreement, Grantor hereby agrees with Heller as follows:
SECTION 1. Definitions
1.1 Certain Defined Terms. Terms defined in Exhibit A are
used in this Agreement as so defined.
1.2 Other Definition Provisions. For purposes of this Security
Agreement, all other terms not otherwise defined shall, unless the context
indicates otherwise, have the meanings assigned to such terms in accordance with
the applicable definition therefor (if any) contained in the UCC. References to
"Sections", "subsections", "Exhibits" and "Schedules" shall be to Sections,
subsections, Exhibits and Schedules, respectively, of this Security Agreement
unless otherwise specifically provided. Any of the terms defined in subsection
1.1 may, unless the context otherwise requires, be used in the singular or the
plural depending on the reference. All references to statutes and related
regulations shall include any amendments of the same and any successor statutes
and regulations.
<PAGE>
SECTION 2. Grant of Security Interests
(a) In order to secure to Heller the prompt, full and faithful
payment and performance of the Obligations under the Credit Agreement (as so
defined, the "Credit Agreement Obligations"), Grantor hereby grants to Heller a
continuing lien on and security interest in and to all right, title and interest
of Grantor in and to all of its right, title and interest in and to Accounts and
Inventory, wherever in the United States the same may now or hereafter be
located, now existing and/or owned or hereafter arising and/or acquired or in
which Grantor now has or hereafter may acquire an interest (to the extent of
such interest), in and to the depositary accounts referred to in the Blocked
Account Agreements and all funds deposited therein, and any and all Proceeds of
all or any of the foregoing property (the "Credit Agreement Collateral").
(b) In the event that the transactions under the Receivables
Purchasing Agreement are determined not to constitute "true sales" but instead
are determined to be secured loans, Grantor hereby grants to Heller a continuing
lien on and security interest in the Purchased Receivables and Related Security
and all Proceeds thereof (collectively, "Receivables Agreement Collateral") to
secure all amounts so determined to be loans ("Receivables Agreement Loans").
(c) Notwithstanding anything to the contrary contained herein
or in any other Loan Document, the enforcement by Heller of its rights hereunder
shall be limited to recovery of the Maximum Secured Amount, even if the Credit
Agreement Obligations secured hereby shall at any time exceed the Maximum
Secured Amount.
(d) To the extent necessary to protect, monitor and realize
upon any of its Collateral, Heller shall have nonexclusive access to all books,
records, blueprints, ledger cards, files, correspondence, computer programs,
tapes, disks and related data processing software that at anytime evidence or
contain information relating to the Collateral.
(e) Unless an Event of Default has occurred and is continuing,
Grantor shall be permitted to and shall use and dispose of the Collateral in
accordance with its ordinary business practices.
SECTION 3. Grantor Remains Liable
Anything herein to the contrary notwithstanding: (a) Grantor
shall remain liable under any contracts and agreements included in the
Collateral to the extent set forth therein to perform all of its duties and
obligations
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thereunder to the same extent as if this Security Agreement had not been
executed; (b) the exercise by Heller of any rights hereunder shall not
release Grantor from any of its duties or obligations under any contracts and
agreements included in the Collateral; and (c) Heller shall not have any
obligation or liability under any contracts and agreements included in the
Collateral by reason of this Security Agreement, nor shall Heller be obligated
to perform or fulfill any of the obligations or duties of Grantor thereunder or
(x) to make any inquiry as to the nature or sufficiency of any payment Grantor
may be entitled to receive thereunder, (y) to present or file any claim, or (z)
to take any action to collect or enforce any claim for payment assigned
hereunder.
SECTION 4. Representations and Warranties
Grantor represents and warrants to Heller as follows:
4.1 Binding Obligation. This Security Agreement is the legally
valid and binding obligation of Grantor, enforceable against Grantor in
accordance with its terms.
4.2 Location of Collateral; Office Locations. All of the
Collateral and the books and records relating to the Collateral is located at
the places specified on Schedule I attached hereto and made a part hereof;
provided, however, Schedule I need not set forth any locations of Collateral so
long as the aggregate value of the Collateral at such location does not exceed
$1,500,000 (the "De Minimis Collateral"). Schedule I includes and designates the
chief executive office and the principal place of business of Grantor.
4.3 No Fictitious Names. All Collateral is owned and held in
the name of Western.
4.4 Ownership of Collateral. Grantor is the legal and
beneficial owner of the Collateral now owned by it (other than Purchased
Receivables and Related Security), and will be the legal and beneficial owner of
the Collateral (other than Purchased Receivables and Related Security) hereafter
acquired, free and clear of all Liens, except for Permitted Encumbrances. No
financing statement or other instrument or recordation covering all or any part
of the Collateral is on file in any recording office, except such as may have
been filed in favor of Heller.
4.5 Perfection. This Security Agreement creates valid security
interests in the Collateral securing the payment of the Obligations. The
security interests created
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by this Security Agreement are valid, and upon the proper filing of UCC-1
financing statements, except for the Permitted Encumbrances, constitute
perfected and first priority security interests in the Collateral other than De
Minimis Collateral and Government Receivables securing the payment of the
Obligations. All filings and other actions necessary or appropriate to
perfect and protect the Security Interests have been duly taken, except in
respect of De Minimis Collateral and Government Receivables.
4.6 Inventory. Substantially all of the Inventory is of good
and merchantable quality, free from defects, and saleable in the ordinary course
of business. The sale by Heller of any Inventory, excluding Inventory subject to
limitations imposed by licenses granted by third parties or Inventory created as
Custom Publishing, after repossession will not violate the terms or conditions
of any agreement to which Grantor is a party or by the terms of which Grantor or
any of its assets or properties is bound.
4.7 Credit Agreement Warranties. Each representation and
warranty set forth in Section 5 of the Credit Agreement and in Section 4 of the
Receivables Purchasing Agreement is true and correct on and as of the date
hereof and on each date the same is made or deemed to be made thereunder to the
same extent as though made on and as of the date hereof and each other such
date, as applicable, except for any such representation or warranty limited by
its terms to a specific date and taking into account any amendments to the
Schedules or Exhibits to any thereof as a result of any disclosures made by
either Grantor to Heller after the date hereof and approved by Heller, and such
representations and warranties are hereby incorporated herein by this reference
with the same effect as though set forth in their entirety herein.
4.8 Accounts. The amount shown or that would be shown for
Accounts of Grantor in the most recent financial statements of Grantor delivered
to Heller pursuant to the Credit Agreement is accurate. Such Accounts and
Accounts acquired thereafter arose in the ordinary course of business and are to
the best of Grantor's knowledge fully collectible to the extent of the aggregate
recorded amount thereof less the amount of the allowances reserved against in
such financial statements, and none of the Accounts receivable is subject to any
material lien, set off, counterclaim, discount or other reduction or claimed
reduction in value which would reduce the value thereof other than returns of
merchandise in the ordinary course of business which are not material in the
context of the consolidated financial position of Grantor and its Subsidiaries
(as reflected in the consolidated financial statements of Grantor and its
Subsidiaries) taken as a whole.
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SECTION 5. Further Assurances; Covenants
5.1 Other Documents and Actions. Grantor shall, from time to
time, at its sole expense, (1) promptly execute and/or deliver, all further
instruments, documents, notices, assignments and consents and other written
matter (in each case in form and substance reasonably satisfactory to Heller)
and (2) promptly take all further action that may be necessary and may
reasonably be taken or that Heller may reasonably request, in order to perfect,
maintain and protect any security interest granted or purported to be granted
hereby or by the other Loan Documents or to enable Heller to exercise and
enforce its rights and remedies hereunder or under the other Loan Documents with
respect to any Collateral or other assets and property securing the Obligations
or to consummate the transactions contemplated in or by this Security Agreement
or the other Loan Documents, except that prior to the occurrence of an Event of
Default, no action need be taken to perfect the security interests granted
herein in respect of De Minimis Collateral or to comply with the federal
Assignment of Claims Act with respect to Government Receivables. Without
limiting the generality of the foregoing, Grantor shall: (a) execute and file,
record or register such UCC financing or continuation statements, or amendments
thereto, and such other instruments or notices, as may be necessary or
desirable, or as Heller may reasonably request, in order to perfect and preserve
the security interests granted or purported to be granted hereby or by the other
Loan Documents; (b) at any reasonable time and as often as is commercially
reasonable, upon three (3) Business Days prior written notice, allow inspection
of the books and records relating to the Collateral located at Grantor's or
Parent's principal place of business by Heller or persons designated by Heller;
(c) during the continuance of an Event of Default, (i) upon Heller's request,
appear in and defend any action or proceeding that may affect Grantor's title to
or Heller's security interest in the Collateral, and (ii) at any reasonable time
and as often as is commercially reasonable, upon three (3) Business Days prior
written notice, allow, inspection of the Inventory located at Grantor's or
Parent's principal place of business by Heller or persons designated by Heller;
and (d) promptly advise Heller if the amount of Collateral at any location not
set forth in Schedule I exceeds $1,500,000 and thereafter Grantor shall execute
and/or deliver such documents and take such action as Heller reasonably deems
necessary to perfect and protect the Security Interests in the Collateral at
such location.
5.2 Heller Authorized. Grantor hereby authorizes Heller to
file one or more financing or continuation statements, and amendments thereto,
relating to all or any
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part of the Collateral without the signature of Grantor where permitted by
law.
5.3 Trade Names, etc. Grantor shall give Heller thirty (30)
days' prior written notice of its intention to do business under or use any new
or additional trade name, trade style or fictitious business name if any
Collateral will be held or owned by Grantor under such name or style, and shall
register any such new or additional trade name, trade style or fictitious
business name in accordance with applicable law. In connection therewith,
Grantor shall execute and/or deliver such documents and take such actions as
Heller reasonably deems necessary to perfect and protect the Security Interests.
5.4 Business Locations. Grantor shall give Heller thirty (30)
days' prior written notice of any change in the location of Grantor's chief
executive office or any new location for any of the Collateral (except for
movement of Collateral to another location set forth in Schedule I or to a
location not required to be set forth therein (all of which locations shall be
in the continental United States of America)). In connection therewith, Grantor
shall execute and/or deliver such documents and take such actions as Heller
reasonably deems necessary to perfect and protect the Security Interests.
5.5 Bailees. If more than 10% of the Collateral is at any time
in the possession or control of any warehouseman, bailee or any of Grantor's
agents, processors or any similar party, Grantor shall give Heller prompt
written notice and, (i) upon the reasonable request of Heller, or (ii) at any
time an Event of Default has occurred and is continuing, notify such
warehouseman, bailee, agent, processor or similar party of the Security
Interests created hereby and shall instruct such Person to hold all such
Collateral for Heller's account subject to Heller's instructions and, if
requested by Heller to do so, cause any such warehouseman, bailee, agent,
processor or similar party to issue and deliver to Heller, in form and substance
acceptable to Heller, warehouse receipts (or the equivalent thereof) therefor in
Heller's name. So long as an Event of Default has not occurred and is
continuing, Heller shall enter into arrangements with Grantor to permit
Inventory evidenced by warehouse receipts to be transferred for sale or other
business purposes in the ordinary course of business.
5.6 Inventory Covenants. (A) If at any time (i) the Minimum
Collateral Coverage is not maintained or (ii) an Event of Default has occurred
and is continuing: (1) Grantor shall conduct a physical inventory, at which
Heller shall have the right to be present, at such intervals
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as Heller shall reasonably request (which will be at least annually), and shall
promptly supply Heller with a copy of the results of such Inventory; (2) if any
customer returns or rejects any Inventory at any time or times hereafter after
delivery thereof, which shipment has generated an Account or Accounts on
which such customer is obligated in excess of $10,000 individually or $50,000
in the aggregate, the Grantor shall promptly notify Heller of the same,
specifying the reason for such return or rejection and the location and
condition of the returned Inventory.
(B) If at any time during the term of this Security Agreement
any Inventory is placed by Grantor on consignment with any consignee and such
Inventory shall not be De Minimis Collateral, Grantor shall, prior to the
delivery of any such consigned Inventory: (1) provide Heller with all
consignment agreements and other instruments and documentation to be used in
connection with such consignment, all of which agreements, instruments and
documentation shall be acceptable in form and substance to Heller; (2) prepare,
execute and file appropriate financing statements with respect to any consigned
Inventory showing the consignee as debtor, Grantor as secured party and Heller
as assignee of secured party; (3) prepare, execute and file appropriate
financing statements with respect to any consigned Inventory showing Grantor as
debtor and Heller as secured party; (4) after all financing statements referred
to in clauses (2) and (3) above shall have been filed, conduct a search of all
filings made against the consignee in all jurisdictions in which the Inventory
to be consigned is to be located while on consignment, and deliver to Heller
copies of the results of all such searches; and (5) notify, in writing, all
creditors of the consignee which are or may be holders of security interests in
the Inventory to be consigned that Grantor expects to deliver certain Inventory
to the consignee, all of which Inventory shall be described in such notice by
item or type. Within fourteen (14) days after the last day of each month,
Grantor shall furnish to Heller a schedule showing all Inventory on consignment
as of the last day of such month, the respective locations of all such Inventory
and the Persons to whom such Inventory has been consigned.
5.7 Account Covenants. So long as an Event of Default or
Default is not continuing, Grantor shall continue to collect, at its own
expense, all amounts due or to become due to Grantor under the Accounts. If at
any time (i) the Minimum Collateral Coverage is not maintained or (ii) an Event
of Default has occurred and is continuing, in connection with such collections,
Grantor may take (and, at Heller's direction, shall take) such action as Grantor
or Heller may deem necessary or advisable to enforce collection of the Accounts.
Grantor shall (1) promptly upon such
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Grantor's learning thereof, inform Heller, in writing, of any material
delay in Grantor's performance of any of its obligations to any obligor of
any Account and of any assertion of any claims, offsets or counterclaims by
any obligor of any Account and of any allowances, credits and/or other
moneys granted by Grantor to any obligor of any Account, other than a cash
discount or allowance for prompt payment or for the purpose of collection and
settlement allowed by Grantor in the ordinary course of its business; and
(2) promptly upon Grantor's receipt or learning thereof, furnish to and
inform Heller of all material adverse information relating to the
financial condition of any obligor of any Account. Grantor shall permit or agree
to any extension, compromise, adjustment or settlement or make any change or
modification of any kind or nature with respect to any Account, including any of
the terms relating thereto, or allow any credit or discount thereon, except for
cash discounts and allowances for prompt payment and for the purpose of
collection or settlement allowed by Grantor in the ordinary course of business.
5.8 Insurance. Grantor shall maintain insurance with respect
to the Collateral in accordance with the terms of the Credit Agreement.
5.9 Taxes and Claims. Grantor will pay all taxes, assessments,
fees and governmental and other charges and claims in accordance with the terms
of the Credit Agreement.
5.10 Collateral Description. Grantor will deliver to Heller,
on request, on or before the fifteenth day of any fiscal month, a list of "sold
and open" Purchased Receivables and a summary aging of Approved Obligors as of
the end of the preceding fiscal month, and at any time that (i) an Event of
Default has occurred and is continuing or (ii) the Minimum Collateral Coverage
is not maintained, such other reports, evidence and information in connection
with the Collateral, all in reasonable detail, as from time to time may be
reasonably requested by Heller.
5.11 Use of Collateral. Grantor will not use or permit any
Collateral to be used in violation of any provision of this Security Agreement
or the other Loan Documents or to the best of Grantor's knowledge in violation
of any applicable law, rule, regulation, ordinance, order or requirement or any
policy of insurance covering any of the Collateral.
5.12 Records of Collateral. Grantor shall keep full and
accurate books and records relating to the Collateral and shall stamp or
otherwise mark such books and records in such manner as Heller may reasonably
request
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indicating that the Collateral is subject to the Security Interests.
SECTION 5A. Cash Settlement Procedures.
(a) Prior to the occurrence of an Event of Default under the
Credit Agreement, all collections of Purchased Receivables and collections of
Accounts shall be processed as provided in this subsection (a):
(i) Grantor shall maintain the Lock Boxes pursuant to the Lock
Box Agreements. Moneys deposited in the depository accounts maintained by the
Lock Box Banks, other than the Receivables Concentration Account, shall be
transferred to the Receivables Concentration Account as soon as funds on
collected items are made available by the respective Lock Box Banks. Grantor
shall give instructions to such Lock Box Banks, which instructions shall be
irrevocable unless changed with the written approval of Heller, to give effect
to the intent of the preceding sentence. Funds received into the Receivables
Concentration Account shall be transferred as soon as they are made available by
the Lock Box Bank at which the Receivables Concentration Account is maintained
and they have been identified and allocated between Purchased Receivables and
Non-Purchased Receivables as follows: first, to the extent such funds represent
collections on Purchased Receivables to Heller's Account by wire transfer of
immediately available funds, and second, to the Concentration Account. Heller
shall only be deemed to have received payments in respect of amounts due under
Purchased Receivables to the extent funds are deposited in Heller's Account
(except as expressly provided to the contrary in paragraph (a)(ii) below).
Collections received on Accounts that are identified as to specific invoices
shall be allocated to the Accounts evidenced by such invoices. If collections
received on Accounts are not so identified, they shall be allocated to the
oldest invoices outstanding, except to the extent any such invoice is subject to
an existing dispute, is the subject of a grant of any discount, allowance or
other reduction, or has been, or should have been, reversed or adjusted in the
ordinary course of business. In the event that any Approved Obligor shall make a
partial payment on the Accounts as to which it is the obligor, such payment
shall be allocated pro rata to Purchased Receivables and to Accounts retained by
Grantor.
(ii) Heller's obligations under Section 2.01(c) of the
Receivables Purchasing Agreement to pay the Balance Payment of any Pool prior to
Completion shall be satisfied by the receipt by Grantor of collections
representing such amounts and the receipt of such funds shall constitute a full
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offset of a corresponding amount of the Balance Payment. No transfer of cash
from Grantor to Heller or from Heller to Grantor shall be required to effect the
foregoing offset. The parties shall make appropriate notations in their records
to reflect (x) the receipt by Grantor of the collections, (y) the deemed receipt
by Heller of the collections from Grantor as Servicer and (z) the deemed receipt
by Grantor of the corresponding Balance Payment. If, after Completion of any
Pool, Grantor receives any additional collections in respect of the Purchased
Receivables (excluding Non-Performing Receivables as to which Grantor has
fulfilled its obligations to repurchase) included in such Pool, Grantor shall
promptly transfer an amount equal to such collections to Heller in accordance
with the provisions of paragraph (a)(i) above. Notwithstanding anything to the
contrary contained in this subparagraph (ii), if any offset is to be made
against a Balance Payment as contemplated by Clause (6) of the definition of
Balance Payment, then Grantor shall remit funds representing the amount of such
offset to Heller in order to give effect to such offset as contemplated by
section 5.01(i) of the Receivables Purchasing Agreement.
(iii) If any Lock Box Bank makes funds available to Grantor in
respect of any Item deposited in the respective depository account, and such
Item is subsequently returned or dishonored, reimbursement of the Lock Box Bank
shall be made as hereafter provided. For convenience of administration, Grantor
shall make any necessary reimbursements to the appropriate Lock Box Bank in
accordance with the terms of the Lock Box Agreements and/or Blocked Account
Agreements, as applicable. Thereafter, the parties shall determine as
expeditiously as possible whether any such Item related to a Purchased
Receivable. If such Item related to a Purchased Receivable, then the amount of
such dishonored or returned Item shall be for the account of Heller and Heller
shall reimburse Grantor, (but only to the extent that Heller actually received
the proceeds of such Item) the amount of such returned Item and any costs and
expenses incurred and paid by Grantor to the Lock Box Bank in connection with
such returned Item. All returned or dishonored Items relating to Accounts that
are not Purchased Receivables shall be for the account of Grantor, and Heller
shall have no reimbursement obligation in respect thereof. Notwithstanding
anything to the contrary herein contained if an Item pertaining to a Purchased
Receivable was dishonored or returned in any circumstance that would have caused
such Purchased Receivable to be a Nonperforming Receivable, Heller shall have no
obligation to reimburse Grantor in respect thereof. If Heller is required to
reimburse Grantor as to any Item the corresponding payment on the underlying
Purchased Receivable shall be deemed not to be a collection received by Heller.
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(b) After the occurrence of an Event of Default under the
Credit Agreement, all collections of Purchased Receivables and collections of
Accounts shall be processed as provided in Section 5A(a) until such time as a
Control Election is in effect and thenceforth as provided in this subsection
(b):
(i) Grantor shall maintain the Lock Boxes pursuant to the Lock
Box Agreements. Moneys deposited in the depository accounts maintained by the
Lock Box Banks shall be transferred as set forth in the Blocked Account
Agreements to Heller's Account as soon as funds on collected items are made
available by wire transfer of immediately available funds by the respective Lock
Box Banks. So long as Grantor is the Servicer, Grantor and Heller shall
cooperate in good faith to identify funds as promptly as practicable
representing collections in respect of Purchased Receivables and shall apply
such amounts, including the portion thereof constituting Balance Payments, if
any, then due in accordance with the terms of the Receivables Purchasing
Agreement. If Grantor is no longer the Servicer, the Servicer shall identify
funds (in the same manner as is required of Grantor in its capacity as Servicer)
representing collections in respect of Purchased Receivables and non-Purchased
Receivables and shall apply such amounts including the portion thereof
constituting Balance Payments, if any, then due to Grantor in accordance with
the provisions of the Receivables Purchasing Agreement. Grantor and Heller shall
also cooperate in good faith to identify funds representing collections on
Accounts that are not Purchased Receivables, up to $12,500,000 (less any net
amounts realized on other collateral dispositions under the Security Agreement)
of which shall be held as cash collateral under and in accordance with the terms
of subsection (c) below. Any additional amounts received in respect of such
Accounts shall be transferred to the Concentration Account. Heller shall only be
deemed to have received payments in respect of amounts due under Purchased
Receivables to the extent funds are deposited in Heller's Account. All
collections on Accounts shall be allocated as contemplated in the last three
sentences of subsection (a)(i) above.
(ii) If any Lock Box Bank makes funds available to Heller in
respect of any Item deposited in the respective depository account, and such
Item is subsequently returned or dishonored, reimbursement of the Lock Box Bank
shall be made as hereinafter provided. For convenience of administration,
Grantor shall make any necessary reimbursements to the appropriate Lock Box Bank
in accordance with the terms of the Lock Box Agreements and/or Blocked Account
Agreements, as applicable. Thereafter, the parties shall determine as
expeditiously as possible whether such Item related to a
11
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Purchased Receivable. If such Item related to a Purchased Receivable,
then the amount of such dishonored or returned item shall be for the account
of Heller and Heller shall reimburse Grantor, (but only to the extent that
Heller actually received the proceeds of such Item) the amount of such
returned Item and any costs and expenses incurred and paid by Grantor to the
Lock Box Bank in connection with such returned Item. All returned or
dishonored Items relating to Accounts that are not Purchased Receivables
shall be for the account of Grantor, and Heller shall have no reimbursement
obligation in respect thereof. Notwithstanding anything to the contrary
contained herein, if an Item pertaining to a Purchased Receivable was dishonored
or returned in any circumstance that would have caused such Purchased Receivable
to be a Nonperforming Receivable, Heller shall have no obligation to reimburse
Grantor in respect thereof. If Heller is required to reimburse Grantor as to
any Item the corresponding payment on the underlying Purchased Receivable
shall be deemed not to be a collection received by Heller. In the event that
Grantor fails to make any reimbursement to the applicable Lock Box Bank in the
first instance, and in accordance with the Blocked Account Agreements
the applicable Lock Box Bank exercises setoff rights against the Blocked
Account or its rights to cause Heller to reimburse the Lock Box Bank as
provided in the Blocked Account Agreements, Grantor shall be obligated
to reimburse Heller on demand for its share of amounts reimbursed to the
Lock Box Bank as determined by Heller.
(c) Any funds held as cash collateral hereunder whether (i)
derived from cash collections described in subsection (b) above after a Control
Election is in effect, or (ii) deposited with Heller to secure outstanding
Lender Guarantees upon the Expiry Date as contemplated by the Credit Agreement
shall be subject to this subsection (c). Whenever any Credit Agreement
Obligation is due and payable to Heller it may apply cash collateral held by it
in satisfaction of such Credit Agreement Obligation. No prior notice of such
application need be given to Grantor. Heller shall, however, give reasonably
prompt written notice of such application of collateral within three (3)
Business Days thereof. Failure to give such notice shall not have any effect on
such application of collateral or Heller's right to make future applications of
such collateral. From time to time, Heller shall release to Grantor the amount
by which the funds held as cash collateral exceed the sum, without duplication,
of (i) the excess of (x) the aggregate amount of all Initial Installments plus
all Discount Fees on Pools that have not reached Completion over (y) the
aggregate amount of all Collections received and paid to Heller in respect of
such Pools, plus (ii) the aggregate amount of all outstanding Credit Agreement
Obligations, plus (iii) at any time after
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<PAGE>
the Expiry Date, 105% of outstanding Lender Guaranties. The determination
of amounts to be released from cash collateral shall be made on each
Business Day and if Heller has not transferred funds in any such amount in
accordance with Grantor's wire instructions on or before the third Business
Day after the date of determination (in the same manner the application of
collections is required of Grantor in its capacity as Servicer), Heller shall
also pay interest on such amount at the federal funds rate plus two percent
per annum until such amount is paid.
Funds held as cash collateral shall be invested in Cash
Equivalents, as defined below, as directed in writing by Grantor. All income
earned on such investments and all gains and losses with respect thereto
(including any that result from the application thereof to Credit Agreement
Obligations or the release of cash collateral to Grantor as hereinabove
provided) shall be for the account of Grantor. Income earned on any such
investments and actually received by Heller shall at the direction of Grantor be
reinvested or paid to Grantor periodically, but not less often than monthly.
Heller shall cooperate with Grantor in the liquidation of investments so as to
mitigate any loss to be borne by Grantor.
"Cash Equivalents" means: (i) marketable direct obligations
issued or unconditionally guarantied by the United States Government or issued
by any agency thereof and backed by the full faith and credit of the United
States, in each case maturing within one (1) year from the date of acquisition
thereof; (ii) commercial paper maturing no more than one (1) year from the date
issued and, at the time of acquisition, having a rating of at least A-1 from
Standard & Poor's Corporation or at least P-1 from Moody's Investors Service,
Inc.; (iii) certificates of deposit or bankers' acceptances maturing within one
(1) year from the date of issuance thereof issued by, or overnight reverse
repurchase agreements from, any commercial bank organized under the laws of the
United States of America or any state thereof or the District of Columbia having
combined capital and surplus of not less than $500,000,000; (iv) time deposits
maturing no more than thirty (30) days from the date of creation thereof with
commercial banks having membership in the Federal Deposit Insurance Corporation
in amounts not exceeding the lesser of $100,000 or the maximum amount of
insurance applicable to the aggregate amount of Borrower's deposits at such
institution; and (v) deposits or investments in mutual or similar funds offered
or sponsored by brokerage or other companies having membership in the Securities
Investor Protection Corporation in amounts not exceeding the lesser of $100,000
or the maximum amount of insurance applicable to the aggregate amount of
Borrower's deposits at such institution.
13
<PAGE>
SECTION 6. Heller Appointed Attorney-in-Fact
Grantor hereby irrevocably appoints Heller (and all Persons
designated by Heller for that purpose) as Grantor's true and lawful
attorney-in-fact, with full authority and power in the place and stead of
Grantor and in the name of Grantor, Heller or otherwise, from time to time in
Heller's discretion from and after the occurrence and during the continuance of
an Event of Default, without notice to Grantor and at such time or times
thereafter as Heller may in its sole discretion determine, to take any action
and to execute any instrument that Heller may deem necessary to accomplish the
purposes of this Security Agreement and the other Loan Documents, including,
without limitation:
(a) to obtain and adjust insurance including insurance
required to be paid to Heller, to make, settle and adjust claims under
such policies of insurance and to make all determinations and decisions
with respect to such policies of insurance;
(b) to ask, demand, collect, enforce, sue for, recover,
compound, receive and give and receipts for moneys due and to become
due under or in respect of any of the Collateral;
(c) to receive, endorse, and collect any checks, drafts
or other instruments, documents and chattel paper, in connection with
clauses (a) and (b) above;
(d) to file any claims or take any action or institute any
proceedings (and to settle, adjust or compromise any such proceedings)
that Heller may deem necessary or appropriate for the collection of any
of the Collateral or otherwise to enforce the rights of Heller with
respect to any of the Collateral;
(e) to pay or discharge taxes or Liens levied or placed upon
or threatened against the Collateral, the legality or validity thereof
and the amounts necessary to discharge the same to be determined by
Heller in its sole discretion, and such payments made by Heller to
become obligations of Grantor to Heller, secured hereby and due and
payable immediately without demand;
(f) to sign and endorse any invoices, freight or express
bills, bills of lading, storage or warehouse receipts, assignments,
verifications and notices in connection with Accounts and other
documents relating to the Collateral; and
14
<PAGE>
(g) generally to sell, assign, transfer, pledge, make any
agreement with respect to or otherwise deal with any of the Collateral
as fully and completely as though Heller were the absolute owner
thereof for all purposes, and to do, at Heller's option and Grantor's
expense, at any time or from time to time, all acts and things that
Heller deems necessary to protect, preserve or realize upon the
Collateral.
Grantor hereby ratifies and approves all acts of such attorney made or taken
pursuant to this Section 6. Neither Heller nor any Person designated by Heller
shall be liable for any acts or omissions or for any error of judgment or
mistake of fact or law, other than Heller's or such Person's gross negligence or
willful misconduct as determined by a final nonappealable judgment of a court of
competent jurisdiction. The powers granted herein, being coupled with an
interest, are irrevocable so long as this Security Agreement shall remain in
force. In taking any actions under this Section 6, Heller shall at all times act
in a commercially reasonable manner in light of the Maximum Secured Amount and
the status of the transactions under the Receivables Purchasing Agreement.
SECTION 7. Transfers and Other Liens
If at any time the Minimum Collateral Coverage is not
maintained, except as otherwise permitted by the Credit Agreement, Grantor shall
not:
(a) Sell, assign (by operation of law or otherwise),
lease, transfer or otherwise dispose of, or grant any Person an option
with respect to, any of the Collateral; or
(b) Create, incur, assume or permit to exist, directly or
indirectly, any Lien (except for Permitted Encumbrances), on or with
respect to any of the Collateral (including any document or instrument
with respect to goods or accounts receivable) or be bound by or subject
to any agreement or option to do so.
SECTION 8. Remedies
If any Event of Default shall have occurred and be continuing,
Heller may exercise in respect of the Collateral and, in the case of the Credit
Agreement Collateral, such amount of the Credit Agreement Collateral as is
necessary in order to realize (in the exercise of commercial reasonableness) an
amount equal to the Maximum Secured Amount, in addition to all other rights and
remedies provided for herein or in the other Loan Documents or otherwise
15
<PAGE>
available to it, all the rights and remedies of a secured party under the UCC
(whether or not the UCC applies to the affected Collateral) or any other
applicable law and also may: (a) require Grantor to, and Grantor hereby agrees
that it shall make such amount of the Collateral as is commercially reasonable
in light of the Maximum Secured Amount and the status of the transactions under
the Receivables Purchasing Agreement available to Heller; (b) without notice or
demand or legal process, all of which are hereby expressly waived by Grantor,
permit Heller to realize upon such amount of the Collateral as is commercially
reasonable in light of the Maximum Secured Amount and the status of the
transactions under the Receivables Purchasing Agreement; and (c) without demand,
advertisement or notice, except any notice required by law all of which are
hereby expressly waived by Grantor, sell, lease, deliver, grant options to a
third party to purchase or lease or otherwise dispose of such amount of the
Collateral as is commercially reasonable in light of the Maximum Secured Amount
and the status of the transactions under the Receivables Purchasing Agreement in
one or more parcels at one or more public or private sales or other
dispositions, at any of the Heller's offices or elsewhere, at such time or
times, for cash, on credit or for future delivery or otherwise, and at such
price or prices and upon such other terms as may be commercially reasonable in
light of the Maximum Secured Amount and the status of the transactions under the
Receivables Purchasing Agreement it being understood that in all events Heller
shall be entitled to realize upon exercise of its remedies hereunder in respect
of Obligations under the Credit Agreement, the lessor of (x) such Obligations
then outstanding and (y) the Maximum Secured Amount. Grantor agrees that, to the
extent notice of sale shall be required by law, at least ten days notice to it
of the time and place of any public sale or the time at which any private sale
is to be made shall constitute commercially reasonable and fair notification. At
any sale of the Collateral, if permitted by law, Heller may bid (which bid may
be, in whole or in part, in the form of cancellation of indebtedness) for the
purchase of the Collateral or any portion thereof, and may be the purchaser
thereof, free from any right of redemption, for the account of Heller. Heller
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. Heller may postpone or adjourn any public or private
sale of any Collateral from time to time by announcement at the time and place
fixed therefor, and such sale may, without further notice, be made at the time
and place to which it was so postponed or adjourned. To the extent permitted by
law, Grantor hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any law now
16
<PAGE>
existing or hereafter enacted. Recourse to security shall not be required at
any time.
SECTION 9. Accounts
At any time upon the occurrence and during the continuance of
an Event of Default, (A) Grantor shall, at Heller's request, notify all obligors
thereof of the assignment of the Accounts to Heller and of Heller's security
interest therein and to direct such obligors to make all payments in respect of
Accounts to the Receivables Concentration Account and (B) Heller shall have the
right, in its sole and absolute discretion, without notice to Grantor, to
enforce collection of and collect any Accounts (by legal proceedings or
otherwise), to take control, in any manner, of any item of payment or proceeds
in respect of Accounts and adjust, settle or compromise the amount or payment of
any Accounts in each case in an amount not to exceed the Maximum Secured Amount.
Upon the occurrence of an Event of Default (i) all amounts and proceeds
(including instruments) received or held by or under the control of Grantor with
respect to Accounts shall be received and held in trust for the benefit of
Heller, shall be segregated from other funds or property of Grantor and shall be
forthwith paid over to Heller (or deposited in a bank account designated by
Heller) in the same form as so received (with any necessary endorsement) and
(ii) Grantor shall not permit or agree to any extension, compromise, adjustment
or settlement or make any change or modification of any kind or nature with
respect to any Account, including any of the terms relating thereto, or allow
any credit or discount thereon without the prior written consent of Heller.
Heller may endorse the Grantor's name to any of the proceeds described above
which come into Heller's possession or under Heller's control, and shall apply
such proceeds pursuant to Section 11. In taking any actions under this Section
9, Heller shall at all times act in a commercially reasonable manner in light of
the Maximum Secured Amount and the status of the transactions under the
Receivables Purchasing Agreement.
SECTION 10. Limitation on Duty of Heller with Respect
to Collateral
Beyond the safe custody thereof, Heller shall have no duty
with respect to any Collateral in its possession or control (or in the
possession or control of any agent or bailee) or with respect to any income
thereon or the preservation of rights against prior parties or any other rights
pertaining thereto. Heller shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession or control if
the Collateral is accorded treatment substantially equal to that which it
17
<PAGE>
accords its own property and if Heller acts in a commercially reasonable manner
in light of the Maximum Secured Amount and the status of the transactions under
the Receivables Purchasing Agreement. Heller shall not be liable or responsible
for any loss or damage to any of the Collateral, or for any diminution in the
value thereof, by reason of the act or omission of any warehouseman, carrier,
forwarding agency, consignee or other agent or bailee selected by Heller in good
faith.
SECTION 11. Application of Proceeds
Upon the occurrence and during the continuance of an Event of
Default, the proceeds of any sale of, or other realization upon, all or any part
of the Collateral, including the proceeds of payments of Accounts received by
Heller shall be applied: first, to all fees, costs and expenses incurred by
Heller (or for which Heller may become obligated) with respect to the Credit
Agreement, the other Loan Documents or the Collateral including, without
limitation, those described in subsection 1.3(A) of the Credit Agreement and in
Section 14 hereof; second, to all fees due and owing to Heller; third, to
accrued and unpaid interest on the Obligations (including any interest which,
but for the provisions of the Bankruptcy Code, would have accrued on such
amounts); fourth, to the principal amounts of the Obligations outstanding; and
fifth, to any other Obligations owing to Heller. Grantor shall remain liable for
any deficiency.
SECTION 12. Waivers
Except as may be otherwise specifically provided herein or in
any other agreement between Heller and Grantor which may be applicable, Grantor
waives any right, to the extent applicable law permits, to receive prior notice
of or a judicial or other hearing with respect to any action, prejudgment remedy
or proceeding by Heller to take possession, exercise control over, or dispose of
any item of Collateral in any instance (regardless of where the same may be
located) where such action is permitted under the terms of this Security
Agreement, any other Loan Document or by applicable law, or of the time, place
or terms of sale in connection with the exercise of Heller's rights hereunder,
and also waives, to the extent permitted by law, any bonds, security or sureties
required by any statute, rule or otherwise by law as an incident to any taking
of possession by Heller of property subject to Heller's lien. Grantor also
waives any damages (direct, consequential or otherwise) occasioned by the
enforcement of Heller's rights under this Security Agreement, including the
taking of possession of any Collateral or the filing of notice to any obligor of
any
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<PAGE>
Account or the collection of any Accounts, all to the extent that such
waiver is permitted by law, except to the extent arising from Heller's gross
negligence or willful misconduct or to the extent done in a manner which
violates the provisions hereof. These waivers and all other waivers provided for
in this Security Agreement and the other Loan Documents have been negotiated by
the parties hereto and thereto and Grantor acknowledges that it has been
represented by counsel of its own choice and has consulted such counsel with
respect to its rights hereunder and thereunder.
SECTION 13. Heller's Rights to Reject Assignment
Heller, in its sole and absolute discretion, without waiving
or releasing any obligation, liability or duty of Grantor under this Security
Agreement or the other Loan Documents or any Default or Event of Default, may at
any time or times hereafter, but shall be under no obligation to, pay, acquire
and/or accept an assignment of any security interest, lien, encumbrance or claim
asserted by any Person against the Collateral. All reasonable sums paid by
Heller in respect thereof and all reasonable costs, fees and expenses, including
reasonable attorney fees, court costs, expenses and other charges relating
thereto, incurred by Heller (or for which Heller becomes obligated) on account
thereof shall constitute Obligations, secured hereby and payable on demand by
Grantor to Heller.
SECTION 14. Expenses
Grantor shall pay all insurance expenses and all reasonable
expenses of protecting, storing, warehousing, appraising, insuring, handling,
maintaining and shipping the Collateral, all reasonable fees, costs and expenses
incurred in creating, perfecting and maintaining the Security Interests, any and
all excise, property, sales and use taxes imposed by any state, federal or local
authority on any of the Collateral, or with respect to periodic appraisals and
inspections of the Collateral, or with respect to the protection, collection
upon, sale or other disposition thereof or enforcing rights against the
Collateral, including the costs of taking, refurbishing, storing, guarding,
defending, preserving, insuring, preparing for sale and selling the Collateral
and costs incurred in any action to enforce collection of Accounts (whether or
not suit is brought). If Grantor fails to pay in accordance with ordinary
business terms any portion of the above expenses when due or to perform or
comply with any other obligation of Grantor under this Security Agreement or any
other Loan Document, Heller may, at its option, but shall not be required to,
pay or perform the same or take any action in connection with such performance
or compliance which Heller
19
<PAGE>
deems necessary, and charge Grantor's account for all reasonable costs and
expenses incurred therefor, and Grantor agrees to reimburse Heller therefor on
demand. All sums so paid or incurred by Heller for any of the foregoing, any
and all other sums for which Grantor may become liable hereunder and all
reasonable costs and expenses (including reasonable attorney fees, legal
expenses and court costs) incurred by Heller in enforcing or protecting the
Security Interests or any of their rights or remedies under this Security
Agreement shall be payable on demand, shall constitute Obligations, shall bear
interest until paid at the highest rate provided in the Credit Agreement and
shall be secured by the Collateral.
SECTION 15. Termination of Security Interests;
Release of Collateral
This Security Agreement, and all obligations of Grantor
hereunder, shall terminate after the Expiry Date upon the earlier of (i) payment
in full of all Obligations or (ii) receipt of cash proceeds from the disposition
of the Credit Agreement Collateral in an amount equal to the Maximum Secured
Amount and any appropriate amount from the Receivables Agreement Collateral
necessary to give effect to the status of the transactions under the Receivables
Purchasing Agreement, and after termination all right, title and interest of
Heller in and to the Collateral shall revert to the Grantor and its successors
and assigns. The Obligations shall not be deemed to be paid in full until such
time as all Pools have reached Completion and no further Revolving Loans may be
made under Tranche A of the Revolving Loan Commitment. Upon the termination of
Heller's security interest and the release of the Collateral Heller will, at the
written request and expense of Grantor, (a) promptly execute and deliver to
Grantor documents as Grantor shall reasonably request to evidence the
termination of security interest or the release of the Collateral, and (b)
promptly deliver or cause to be delivered to Grantor (without recourse and
without any representation or warranty) all property of Grantor then held by
Heller or any agent or nominee of Heller pursuant to this Security Agreement as
to which Heller's Security Interest has terminated pursuant to this Section 16.
If, at any time, all or part of any payment of the Obligations theretofore made
by Grantor or any other Person is rescinded or otherwise must be returned by
Heller for any reason whatsoever (including, without limitation, the insolvency,
bankruptcy or reorganization of Grantor or any other Person), this Security
Agreement shall continue to be effective or shall be reinstated, as the case may
be, as to the Obligations which were satisfied by the payment to be rescinded or
returned, all as though such payment had not been made.
20
<PAGE>
SECTION 16. Notices
All notices, approvals, requests, demands and other
communications required or permitted to be given hereunder shall be given (and
shall be effective) in accordance with the notice provision of the Credit
Agreement.
SECTION 17. Successors and Assigns
This Security Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns except
that Grantor may not assign its rights or obligations hereunder.
SECTION 18. Amendments and Waivers
No amendment, modification, termination or waiver of any
provision of this Security Agreement, or consent to any departure by Grantor
therefrom, shall in any event be effective unless the same shall be in writing
and signed by Heller, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 19. Applicable Law
THIS SECURITY AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES IN ALL RESPECTS, BUT
EXCLUDING PERFECTION, WHICH SHALL BE GOVERNED AND CONTROLLED BY THE LAWS OF THE
RELEVANT JURISDICTION.
SECTION 20. Failure or Indulgence Not
Waiver; Remedies Cumulative
No failure or delay on the part of Heller to exercise, or any
partial exercise of, any power, right or privilege under this Security
Agreement, or any other Loan Document shall impair such power, right or
privilege or be construed to be a waiver of any Default or Event of Default. All
rights and remedies existing under this Security Agreement, or any other Loan
Document are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
SECTION 21. Headings
Section and subsection headings contained in this Security
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Security Agreement for any other purpose or be given
any substantive effect.
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SECTION 22. Severability
The invalidity, illegality or unenforceability in any
jurisdiction of any provision in or obligation under this Security Agreement
shall not affect or impair the remaining provisions or obligations under this
Security Agreement or such provision or obligation in any other jurisdiction.
SECTION 23. Execution in Counterparts
This Agreement may be executed in any number of counterparts,
each of which when so executed in any number of counterparts, each of which when
so executed shall be deemed to be an original and all of which when taken
together shall constitute one and the same Agreement.
SECTION 24. Consent to Jurisdiction and Service of Process
(A) GRANTOR AND HELLER HEREBY IRREVOCABLY SUBMIT TO THE
JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT SITTING IN NEW
YORK, NEW YORK IN ANY ACTION OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT AND GRANTOR AND HELLER HEREBY IRREVOCABLY AGREE THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVE ANY OBJECTION EITHER OF THEM MAY NOW OR
HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDINGS BROUGHT
IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. ANY JUDICIAL
PROCEEDING BY GRANTOR OR HELLER AGAINST THE OTHER OR ANY AFFILIATE INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR
CONNECTED WITH THIS SECURITY AGREEMENT SHALL BE BROUGHT ONLY IN A COURT IN NEW
YORK, NEW YORK.
(B) GRANTOR DESIGNATES AND APPOINTS PARENT AND SUCH OTHER
PERSONS AS MAY HEREAFTER BE SELECTED BY GRANTOR WHICH IRREVOCABLY AGREES IN
WRITING TO SO SERVE AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS
IN ANY SUCH PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY
ACKNOWLEDGED BY GRANTOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A
COPY OF ANY SUCH PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO GRANTOR
AT GRANTOR'S ADDRESS PROVIDED IN SECTION 17 EXCEPT THAT UNLESS OTHERWISE
PROVIDED BY APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE
VALIDITY OF SERVICE, GRANTOR HEREBY AGREES THAT SERVICE UPON IT BY CERTIFIED
MAIL, RETURN RECEIPT, SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
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SECTION 25. Waiver of Jury Trial
GRANTOR AND HELLER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
SECURITY AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS, OR ANY DEALINGS BETWEEN
THEM RELATING TO THE SUBJECT MATTER THEREOF AND THE RELATIONSHIP ESTABLISHED
THEREBY. GRANTOR AND HELLER ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH
BOND WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF HELLER. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. GRANTOR AND HELLER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. EACH OF GRANTOR AND HELLER FURTHER WARRANT AND REPRESENT THAT
IT HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH ITS LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR AGREEMENTS RELATING TO THE CREDIT AGREEMENT. IN THE
EVENT OF LITIGATION THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL
BY THE COURT.
IN WITNESS WHEREOF, this Security Agreement has been duly
executed on the date and year first above written.
WESTERN PUBLISHING COMPANY, INC.
By: /s/ Steven M. Grossman
-------------------------
Steven M. Grossman
Executive Vice President
HELLER FINANCIAL, INC.
By: /s/ Frank Bongiovanni
------------------------
Frank Bongiovanni,
Executive Vice President
23
<PAGE>
EXHIBIT A
SEE EXHIBIT A TO THE
RECEIVABLES PURCHASING AGREEMENT
dated September 29, 1995
Between
Western Publishing Company, Inc.,
as Seller and
Heller Financial, Inc., as
Purchaser
<PAGE>
SCHEDULE I
Collateral Locations:
Accounts: Western Publishing Company, Inc.
1220 Mound Avenue
Racine, Wisconsin 53404
Inventory: Western Publishing Company, Inc.
1220 Mound Avenue
Racine, WI 53404
Western Publishing Company, Inc.
Woods Road
Cambridge, MD 21613
Western Publishing Company, Inc.
U.S. Highway 169, N.
Coffeyville, KS 67337
Western Publishing Company, Inc.
803 N. Englewood Drive
Crawfordsville, IN 47993
Western Publishing Company, Inc.
Foreign Trade Zone (FTZ)
1040 South 68th Place
West Allis, WI 53214
Logistics Distribution and Warehouse, Inc.
4400 S. Kansas Ave.
St. Francis, WI 53235
Chief Executive Office: Western Publishing Company, Inc.
c/o Western Publishing Group, Inc.
444 Madison Avenue, Suite 601
New York, NY 10022
Principal Place of
Business: Western Publishing Company, Inc.
1220 Mound Avenue
Racine, WI 53404
<PAGE>
SCHEDULE II
Trade Names and Fictitious Business Names
None
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PARENT CORPORATION GUARANTY
This PARENT CORPORATION GUARANTY (the "Guaranty") is dated September 29,
1995 and made by Western Publishing Group, Inc., a Delaware corporation with
its principal place of business at 444 Madison Avenue, New York, New York
10022 ("Guarantor"), to HELLER FINANCIAL, INC., a Delaware corporation with
a place of business at 101 Park Avenue, New York, New York 10178 ("Heller").
WHEREAS, pursuant to the Credit Agreement of even date herewith (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement") by and between Western Publishing Company, Inc., a Delaware
corporation ("Westerns or "Borrower"), and Heller, Heller has agreed to extend
certain revolving credit facilities to Borrower upon the terms and subject to
the conditions set forth therein (collectively, the "Loans");
WHEREAS, Guarantor will benefit from the Loans to be made to Borrower by
Heller pursuant to the Credit Agreement because, among other things, such Loans
and Lender Guaranties are necessary for the continued successful operation of
Borrower which, as a wholly-owned subsidiary of Guarantor, is an integral
component of Guarantor; and
WHEREAS, it is a condition precedent to Heller extending Loans and
Heller's issuing Lender Guaranties to Borrower under the Credit Agreement
that Guarantor shall have executed and delivered this Guaranty to Heller;
NOW, THEREFORE, in consideration of the premises and to induce Heller to
extent Loans and to issue Lender Guaranties under the Credit Agreement,
Guarantor hereby agrees with Heller as follows:
1. Definitions. Unless otherwise defined herein, words, terms and/or
phrases which are defined in the Credit Agreement and used herein are used as
so defined.
2. Guaranty. Guarantor hereby, unconditionally and irrevocably
guarantees, as a primary obliger and not merely as a surety, to Heller
and its successors, endorses, transferees and assigns, the prompt and
complete payment when due (whether at the stated maturity, by acceleration or
otherwise) of all Obligations without requiring any notice of nonpayment,
nonperformance or non-observance or proof of notice or demand in order to
charge Guarantor therefor, and Guarantor agrees to pay any and all reasonable
expenses (including reasonable attorneys' fees and disbursements)
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which may be paid or incurred by Heller in collecting any or all of the
Obligations and/or enforcing any rights under this Guaranty or under the
Obligations. Guarantor waives any and all notice of the creation or accrual of
any of the Obligations and notice of or proof of reliance by Heller upon this
Guaranty or acceptance of this Guaranty, and the Obligations, and any of them,
shall conclusively be deemed to have been created, contracted, incurred or
continued, as the case may be, in reliance upon this Guaranty, and all dealings
between Borrower or the Guarantor and Heller after the date hereof shall
likewise be conclusively presumed to have been had or consummated in reliance
upon this Guaranty.
Guarantor agrees that whenever at any time or from time to time it shall
make any payment to Heller on account of Guarantor's liability hereunder, it
shall notify Heller in writing that such payment is made under this Guaranty
for such purposes. No payment or payments made by either Borrower, Guarantor,
any other guarantor or any other Person or received or collected by Heller
from either Borrower, Guarantor, any other guarantor or any other Person by
virtue of any action or proceeding or any setoff or appropriation or
application at any time or from time to time in reduction of or in payment of
the Obligations shall be deemed to modify, reduce, release or otherwise
affect the liability of Guarantor hereunder which shall, notwithstanding any
such payment or payments, remain liable for the Obligations until the
Obligations are paid in full. Guarantor expressly agrees that Heller may,
without notice to the Guarantor but with the consent of Borrower modify the
Obligations of Borrower and grant extensions and concessions to Borrower in
respect thereof (including, without limitation, changes in the time, manner
or place of payment or any other term of any Obligations) without in any
manner affecting the liability of Guarantor hereunder.
This Guaranty shall remain in effect, all rights of Heller hereunder,
and all obligations of Guarantor under this Guaranty, shall be continuing,
absolute and unconditional notwithstanding: (a) any lack of validity or
enforceability of any Obligations, the Credit Agreement or any other Loan
Document; (b) the absence of any attempt to collect Obligations from any
Borrower, Guarantor, any other guarantor or any other Person or of any other
action to enforce the same; (c) any bankruptcy, reorganization or insolvency
of Borrower or Guarantor, or any successor or assignee thereof, or any
disaffirmance or abandonment by a trustee thereof; (d) any law, regulation or
order of any jurisdiction affecting any term of any Obligations or Heller's
rights with respect thereto; provided, however, effect shall be given to any
applicable statute of
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limitations; (e) any exchange or release of or the failure to perfect Heller's
security interest in any Collateral securing the Obligations; or (f) any other
circumstance which might otherwise constitute a defense, setoff or counterclaim
applicable to, or a discharge of, Borrower, Guarantor or any other guarantor.
3. Subrogation. Guarantor hereby agrees, notwithstanding anything to the
contrary in this Guaranty or any other Loan Document, that all claims (as
that term is defined in Title 11 of the United States Code) it may now have
or later have against Borrower for any payment or transfer of anything of
value Guarantor may make, or may be obligated to make, for any reason
whatsoever, including, without limitation, any and all rights of subrogation,
reimbursement, indemnity, exoneration and contribution which either Guarantor
may have now or hereafter have against Borrower or against any Collateral or
other security or guaranties given to or held by Heller in any respect
whatsoever shall be subordinated to payment in full of the Obligations. This
subordination shall inure to the benefit of Heller and its respective
successors and assigns.
4. Representations and Warranties. Guarantor represents and warrants to
Heller that:
(a) Guarantor (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and (ii) has
all requisite corporate power and authority to own and operate its
properties, to carry on its business as now conducted and proposed to be
conducted, to execute, deliver and perform this Guaranty;
(b) Guarantor is duly qualified and in good standing wherever
necessary to carry on its business and operations, except in jurisdictions
in which the failure to be qualified and in good standing would not have a
Material Adverse Effect;
(c) the execution, delivery and performance by Guarantor of this
Guaranty has been duly authorized by all necessary corporate action and
shareholder action;
(d) the execution, delivery and performance by Guarantor of this
Guaranty do not and shall not (1) violate any provision of law applicable
to Guarantor, the certificate of incorporation or bylaws of Guarantor, or
any order, judgment or decree of any court or other agency of government
binding on Guarantor; (2) conflict with, result in a breach of or
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constitute (with due notice or lapse of time or both) a default under any
material contractual obligation of Guarantor; (3) result in or require the
creation or imposition of any material Lien upon any of the properties or
assets of Guarantor (other than Liens in favor of Heller); or (4) require
any approval or consent of any Person under any material contractual
obligation of Guarantor except for such violations, conflicts, breaches,
Liens and defaults which would not have, and such approvals and consents
the absence of which would not have, a Material Adverse Effect;
(e) the execution, delivery and performance by Guarantor of this
Guaranty do not and shall not require any filing or registration with,
consent or approval or authorization of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or
regulatory body except for filings required by federal or state securities
laws (which filings have been made and true and complete copies of which
have been delivered to Heller), filings required in connection with the
perfection of security interests granted pursuant to Loan documents, and
other filings, authorizations, consents and approvals, all of which have
been made or obtained or the absence of which would not have a Material
Adverse Effect;
(f) this Guaranty is the legally valid and binding obligation of
Guarantor, enforceable against Guarantor, in accordance with its terms; and
(g) as of and from and after the date of this Agreement and after
giving effect to the consummation of the Related Transactions, Grantor: (a)
owns and shall own assets the fair saleable value on a going concern basis
of which are (i) greater than the total amount of liabilities (including
contingent liabilities) of Grantor and (ii) greater than the amount that
shall be required to pay the probable liabilities of Grantor's then
existing debts as they become absolute and matured considering all
financing alternatives and potential asset sales reasonably available to
Grantor; (b) has capital that is not unreasonably small in relation to its
business as presently conducted or any contemplated or undertaken
transaction; and (c) does not intend to incur and does not believe that it
will incur debts beyond its ability to pay such debts as they become due.
For purposes of this subsection (g) intercompany liabilities shall be
considered equity.
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5. Renewals, Extensions, Modifications, etc. Guarantor hereby
consents that, without the necessity of any reservation of rights against
Guarantor, (a) any demand made by Heller for payment of any of the
Obligations may be rescinded by Heller and any of the Obligations continued;
(b) the Obligations or the liability of any party upon or for any part
thereof or any collateral security thereof or guaranty thereof, may from time
to time, in whole or in part, be renewed, extended, modified, accelerated,
compromised, waived, surrendered or released by Heller; (c) the Credit
Agreement, the Notes, the other Loan Documents and any other instrument or
agreement evidencing, relating to, securing or guaranteeing any of the
Obligations, may be amended, modified, supplemented or terminated, in whole
or in part; and (d) any collateral security at any time held by Heller for
the payment of any of the Obligations may be sold, exchanged, waived,
surrendered or released, all without notice to or further assent by
Guarantor, who will remain bound hereunder as specified herein
notwithstanding any such renewal, extension, modification, acceleration,
compromise, amendment, supplement, termination, sale, exchange, waiver,
surrender or release. Guarantor acknowledges and agrees that Heller has no
obligation to provide Guarantor with any information regarding any Borrower
or any Obligation or any other guarantor of the Obligations and that
Guarantor has the ability to obtain without the assistance of Heller all such
information.
6. Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of Heller in the exercise of any power, right or
privilege under this Guaranty or any other Loan Document of which Guarantor
is a party and no course of dealing with respect thereto shall impair such
power, right or privilege or be construed to be a waiver of any default or
acquiescence therein, nor shall any single or partial exercise of any power,
right or privilege thereunder preclude any other or further exercise thereof
or the exercise of any other power, right or privilege. All rights and
remedies existing under this Guaranty and the other Loan Documents are
cumulative to, and not exclusive of, any rights and remedies provided by law
or otherwise available.
7. Waiver of Demand, Protest, Notice, etc. Except as otherwise
specifically provided in this Guaranty, Guarantor waives presentment, demand
and protest and notice of presentment, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all
notes, commercial paper, accounts, contract rights, documents, instruments,
chattel paper and guaranties at any
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time held by Heller on which Guarantor may in any way be liable.
8. Amendment and Waiver. No amendment, modification, termination, waiver
or consent of any provision of this Guaranty or any Loan Document shall be
effective unless the same shall be in writing and signed by Heller. Guarantor
hereby consents to any sale, assignment, transfer or other disposition
(including participations) by Heller subject to the provisions of subsection
8.1 of the Credit Agreement, at any time and from time to time hereafter, of
this Guaranty or any Loan Document including, without limitation, Heller's
rights, titles, interests, remedies, powers, duties and/or obligations
hereunder or thereunder, in each case, as provided in subsection 8.1 of the
Credit Agreement.
9. Severability. The invalidity, illegality or unenforceability in any
jurisdiction of any provision under the Loan Documents shall not affect or
impair the remaining provisions in the Loan Documents or of such provision or
obligation in any other jurisdiction.
10. Successors and Assigns. This Guaranty shall be binding upon and
inure to the benefit of the Guarantor, Heller and their respective successors
and assigns except that Guarantor shall not assign its rights or obligations
hereunder.
11. Applicable Law. THIS GUARANTY SHALL BE GOVERNED BY AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
12. Consent to Jurisdiction and Service of Process. GUARANTOR AND HELLER
HEREBY IRREVOCABLY SUBMIT TO THE 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 GUARANTY AND GUARANTOR AND
HELLER HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY
WAIVE ANY OBJECTION EITHER OF THEM 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. ANY JUDICIAL PROCEEDING BY GUARANTOR OR
HELLER AGAINST THE OTHER OR ANY AFFILIATE INVOLVING, DIRECTLY OR INDIRECTLY,
ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS
GUARANTY SHALL BE BROUGHT ONLY IN A COURT IN NEW YORK, NEW YORK. GUARANTOR
AND HELLER HEREBY AGREE THAT SERVICE UPON IT BY CERTIFIED MAIL RETURN RECEIPT
REQUESTED
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SHALL CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO
SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.
13. Waiver of Jury Trial. GUARANTOR AND HELLER HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS GUARANTY, OR ANY DEALINGS BETWEEN THEM RELATING TO THE
SUBJECT MATTER OF THIS GUARANTY AND THE RELATIONSHIP THAT IS BEING ESTABLISHED.
GUARANTOR AND HELLER ALSO WAIVE ANY BOND OR SURETY OR SECURITY UPON SUCH BOND
WHICH MIGHT, BUT FOR THIS WAIVER, BE REQUIRED OF HELLER. THE SCOPE OF THIS
WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE
FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT MATTER OF THIS GUARANTY,
INCLUDING WITHOUT LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS. GUARANTOR, AND HELLER
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS
RELATIONSHIP, THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS
GUARANTY AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED
FUTURE DEALINGS. GUARANTOR AND HELLER FURTHER WARRANT AND REPRESENT THAT EACH
HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JULY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT BE MODIFIED EITHER
ORALLY OR IN WRITING, AND THE WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY, OR TO ANY OTHER
DOCUMENTS OR AGREEMENTS RELATING TO THE CREDIT AGREEMENT. IN THE EVENT OF
LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.
14. NOTICES. Any notice or other communication required shall be in
writing addressed to the respective person as set forth below and may be
personally served, telecopied, or sent by overnight courier service or United
States mail and shall be deemed to have been given when received by any
person at the address specified below.
Notices shall be addressed as follows:
If to Guarantor: Western Publishing Group, Inc.
444 Madison Avenue, Suite 601
New York, New York 10022
Attention: Mr. Steven M. Grossman
Fax: (212) 888-5025
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with a copy to: Morgan Lewis & Bockius
101 Park Avenue
New York, New York 10178
Attention: Michael A. Chapnick, Esq.
Fax: (212) 309-6273
If to Heller: Heller Financial, Inc.
101 Park Avenue
New York, New York 10178
Attention: CAMG Portfolio Manager
Fax: (212) 880-2057
15. Headings. Section and subsection headings are included herein for
convenience of reference only and shall not constitute a part of this
Guaranty for any other purposes or be given any substantive effect.
16. Termination of Guaranty Agreement. This Guaranty and all obligations
of Guarantor hereunder shall terminate upon payment to Heller (or its
assignee) in full of all Obligations. If at any time all or part of any
payment of the Obligations theretofore made by Guarantor or any other Person
is rescinded or otherwise must be returned by Heller for any reason
whatsoever (including, without limitation, the insolvency, bankruptcy or
reorganization of Guarantor or any other Person), this Guaranty shall
continue to be effective or shall be reinstated as to the Obligations which
were satisfied by the payment to be rescinded or returned, all as though such
payment had not been made.
IN WITNESS WHEREOF, this Guaranty has been duly executed as of the date
first above written.
WESTERN PUBLISHING GROUP, INC.
/s/ Steven M. Grossman
By: _________________________
Name: Steven M. Grossman
Title: Executive Vice President
Agreed and Accepted this
__th day of September, 1995
HELLER FINANCIAL, INC.
/s/ Frank Bongiovanni
By: _______________________________
Name: Frank Bongiovanni
Title: Executive Vice President
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