Exhibit 10.1
CREDIT AGREEMENT
Buffalo, New York May 17, 2005
BORROWER: THE PEOPLES PUBLISHING GROUP, INC., a corporation organized under the
laws of the State of Delaware having its chief executive office at ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇. Attention: Office of CFO.
BANK: MANUFACTURERS AND TRADERS TRUST COMPANY, a New York banking corporation
with its chief executive ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇&▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. Attention:
Office of General Counsel.
The Bank and the Borrower agree as follows:
1. DEFINITIONS.
(a) "ADVANCE" means a Revolving Advance or the Term Advance.
(b) "AFFILIATE" means as to any Person, any other Person (i) which
directly or indirectly controls, is controlled by, or is under
common control with such Person, (ii) which beneficially owns or
holds 5% or more of any class of the voting or other equity
interests of such Person, or (iii) 5% or more of any class of voting
interests or other equity interests of which is beneficially owned
or held, directly or indirectly, by such Person. Control, as used in
this definition, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, including the power to elect a
majority of the directors or trustees of a corporation or trust, as
the case may be.
(c) "ANTI-TERRORISM LAWS" means any Laws relating to terrorism or money
laundering, including Executive Order No. 13224, the USA Patriot
Act, the Laws comprising or implementing the Bank Secrecy Act, and
the Laws administered by the United States Treasury Department's
Office of Foreign Asset Control (as any of the foregoing Laws may
from time to time be amended, renewed, extended, or replaced).
(d) "CREDIT" OR "CREDIT FACILITY" means any and all credit facilities
and any other financial accommodations made by the Bank in favor of
the Borrower whether now or hereafter in existence.
(e) "COLLATERAL" means all of the Borrower's assets which the Bank has
been granted a security interest pursuant to the Transaction
Documents.
(f) "DEBT" means as to any Person as of a given date, all items of
indebtedness or liability which in accordance with GAAP would be
included in determining total liabilities as shown on the
liabilities side of a balance sheet for such Person and shall also
include the aggregate payments required to be made by such Person at
any time under any lease that is considered a capitalized lease
under GAAP.
(g) "DEBT SERVICE COVERAGE RATIO" means EBITDA divided by the sum of
interest expense and scheduled principal reductions with respect to
the outstanding Debt for the period being tested.
(h) "EBITDA" means for any period the sum of (i) Earnings Before
Interest and Taxes for such period plus (ii) depreciation expenses
for such period, plus (iii) amortization expenses for such period,
excluding therefrom (a) non-operating gains (including, without
limitation, extraordinary or unusual gains, gains from
discontinuance of operations, gains arising from the sale of assets
and other nonrecurring gains) of the Borrower during the period
being tested and (b) similar non-operating losses (including,
without limitation, losses arising from the sale of assets and other
nonrecurring losses) of the Borrower during such period.
(i) "ENVIRONMENTAL LAW" means any federal, state, local or other
governmental statute, regulation, law or ordinance dealing with the
protection of human health and the environment.
(j) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
(k) "ERISA AFFILIATE means any trade or business (whether or not
incorporated) that is a member of a group which includes the
Borrower and which is treated as a single employer under Section 414
of the IRC.
(l) "EXECUTIVE ORDER NO. 13224" means the Executive Order No. 13224 on
Terrorist Financing, effective September 24, 2001, as the same has
been, or shall hereafter be, renewed, extended, amended or replaced.
(m) "GAAP" means, with respect to any date of determination, generally
accepted accounting principles as used by the Financial Accounting
Standards Board and/or the American Institute of Certified Public
Accountants consistently applied and maintained throughout the
periods indicated.
(n) "GUARANTOR(S)" means PEH and any other Person, including all
subsidiaries of Borrower, now or hereafter guarantying the
Obligations.
(o) "GUARANTY" means each unconditional continuing guaranty or
unconditional continuing guaranty by corporation executed by a
Guarantor in favor of the Bank (collectively, the "Guaranties")
(p) "HAZARDOUS SUBSTANCES" means pollutants, contaminants, hazardous
substances, hazardous wastes, petroleum and fractions thereof, and
all other chemicals, wastes, substances and materials listed in,
regulated by or identified in any Environmental Law.
(q) "INFRINGEMENT" OR "INFRINGING" when used with respect to
Intellectual Property Rights means any infringement or other
violation of Intellectual Property Rights.
(r) "INTELLECTUAL PROPERTY RIGHTS" means all actual or prospective
rights arising in connection with any intellectual property or other
proprietary rights, including all rights arising in connection with
copyrights, patents, service marks, trade dress, trade secrets,
trademarks, trade names or mask works.
(s) "IRC" means the Internal Revenue Code of 1986, as amended from time
to time.
(t) "LAW" means any law (including common law), constitution, statute,
treaty, regulation, rule, ordinance, opinion, release, ruling,
order, injunction, writ, decree, bond, judgment, authorization or
approval, lien or award by or settlement agreement with any official
body.
(u) "LIEN" means any security interest, mortgage, deed of trust, pledge,
lien, charge, encumbrance, title retention agreement or analogous
instrument or device, including the interest of each lessor under
any capitalized lease and the interest of any bondsman under any
payment or performance bond, in, of or on any assets or properties
of a Person, whether now owned or hereafter acquired and whether
arising by agreement of operation of law.
(v) "MATURITY DATE" means with respect to the Term Note, May 16, 2012
and with respect to the Revolving Note, May 16, 2010.
(w) "MAXIMUM LINE AMOUNT" means $7,000,000 unless said amount is reduced
pursuant to the Revolving Note, in which event it means such lower
amount.
(x) "MULTIEMPLOYER PLAN" means a multiemployer plan (as defined in
Section 4001(a)(3) of ERISA) to which the Borrower or any ERISA
Affiliate contributes or is obligated to contribute.
(y) "NET LOSS" means fiscal year-to-date after-tax net loss from
continuing operations as determined in accordance with GAAP.
(z) "OBLIGATIONS" means any and all indebtedness or other obligations of
the Borrower to the Bank in any capacity, now existing or hereafter
incurred, however created or evidenced, regardless of kind, class or
form, whether direct, indirect, absolute or contingent (including
obligations pursuant to any guaranty, endorsement, other assurance
of payment or otherwise), whether arising by reason of an extension
of credit, opening of a letter of credit, loan, equipment lease or
guarantee, under any interest or currency swap, future, option or
other similar agreement, or in any other manner, whether arising out
of overdrafts or deposit or other accounts or electronic funds
transfers (whether through automated clearing houses or otherwise),
whether joint or several, whether from time to time reduced and
thereafter increased, or entirely extinguished and thereafter
reincurred, together with all extensions, renewals and replacements
thereof, and all interest, fees, charges, costs or expenses which
accrue on or in connection with the foregoing, including any
indebtedness or obligations (i) not yet outstanding but contracted
for, or with regard to which any other commitment by the Bank
exists; (ii) arising prior to, during or after any pendency of any
bankruptcy, insolvency, receivership or other similar proceeding,
regardless of whether allowed or allowable in such proceeding; (iii)
owed by the Borrower to others and which the Bank obtained, or may
obtain, by assignment or otherwise; and (iv) payable under this
Agreement.
(aa) "OFFICER" means with respect to the Borrower, an officer if the
Borrower is a corporation, an manager if the Borrower is a limited
liability company, or a partner if the Borrower is a partnership.
(bb) "PEH" means Peoples Educational Holdings, a corporation organized in
the State of Delaware
(cc) "PENSION PLAN" means a pension plan (as defined in Section 3(2) of
ERISA) maintained for employees of the Borrower or any ERISA
Affiliate and covered by Title IV of ERISA.
(dd) "PERSON" means any individual, corporation, partnership, joint
venture, limited liability company, association, joint-stock
company, trust, unincorporated organization or government or any
agency or political subdivision thereof.
(ee) "PLAN" means an employee benefit plan (as defined in Section 3(3) of
ERISA) maintained for employees of the Borrower or any ERISA
Affiliate.
(ff) "PREMISES" means all locations where the Borrower conducts its
business or has any rights of possession, including the locations
described in Schedule titled "Premises" attached hereto.
(gg) "REPORTABLE EVENT" means a reportable event (as defined in Section
4043 of ERISA), other than an event for which the 30-day notice
requirement under ERISA has been waived in regulations issued by the
Pension Benefit Guaranty Corporation.
(hh) "REVOLVING NOTE" means the Borrower's revolving promissory note,
payable to the order of the Bank, as same may be renewed and amended
from time to time, and all replacements thereto.
(ii) "SENIOR FUNDED DEBT" means all long term Debt that is not
subordinated to the Bank or the Obligations.
(jj) "SUBSIDIARY" means any corporation or other business entity of which
at least fifty percent (50%) of the voting stock or other ownership
interest is owned by the Borrower directly or indirectly through one
or more Subsidiaries. If the Borrower has no Subsidiaries, the
provisions of this Agreement relating to the Subsidiaries shall be
disregarded, without affecting the applicability of such provisions
to the Borrower alone.
(kk) "TERM NOTE" means the Borrower's promissory note, payable to the
order of the Bank, as same may be renewed and amended from time to
time, and all replacements thereto.
(ll) "TERMINATION DATE" means the earliest of (i) the Maturity Date, (ii)
the date the Borrower terminates the Credit Facility, or (iii) the
date the Bank demands payment of the Obligations following an Event
of Default.
(mm) "TRANSACTION DOCUMENTS" means this Agreement and all documents,
instruments or other agreements by the Borrower in favor of the Bank
in connection (directly or indirectly) with the Obligations, whether
now or hereafter in existence, including promissory notes, security
agreements, guaranties and letter of credit reimbursement
agreements.
(nn) "UCC" means the Uniform Commercial Code as in effect in the State of
New York as the state whose laws shall govern this Agreement, or in
any other state whose laws are held to govern this Agreement or any
portion hereof.
1.1 "OTHER DEFINITIONAL TERMS; RULES OF INTERPRETATION". The words
"hereof", "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement. All accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with GAAP. All terms defined in
the UCC and not otherwise defined herein have the meanings assigned to them in
the UCC. References to Articles, Sections, subsections, Exhibits, Schedules and
the like, are to Sections and subsections of, or Exhibits or Schedules attached
to, this Agreement (as amended from time to time in accordance with this
Agreement) unless otherwise expressly provided. The words "include", "includes"
and "including" shall be deemed to be followed by the phrase "without
limitation". Unless the context in which used herein otherwise clearly requires,
"or" has the inclusive meaning represented by the phrase "and/or". Defined terms
include in the singular number the plural and in the plural number the singular.
Reference to any agreement (including the Transaction Documents), document or
instrument means such agreement, document or instrument as amended or modified
and in effect from time to time in accordance with the terms thereof (and, if
applicable, in accordance with the terms hereof and the other Transaction
Documents), except where otherwise explicitly provided, and reference to any
promissory note includes any promissory note which is an extension or renewal
thereof or a substitute or replacement therefor. Reference to any law, rule,
regulation, order, decree, requirement, policy, guideline, directive or
interpretation means as amended, modified, codified, replaced or reenacted, in
whole or in part, and in effect on the determination date, including rules and
regulations promulgated thereunder.
2. AMOUNT AND TERMS OF THE CREDIT FACILITY.
(a) REVOLVING ADVANCES. The Bank agrees, subject to the terms and
conditions of this Agreement, to make advances ("Revolving
Advances") to the Borrower from time to time from the date that all
of the conditions set forth in 4.1 are satisfied (the "Funding
Date") to and until (but not including) the Termination Date in an
amount not in excess of the Maximum Line Amount. The Bank shall have
no obligation to make a Revolving Advance to the extent that the
amount of the requested Revolving Advance exceeds the Maximum Line
Amount. The Borrower's obligation to pay the Revolving Advances
shall be evidenced by the Revolving Note and shall be secured by the
Collateral. Within the limits set forth in the Revolving Note, the
Borrower may borrow, prepay pursuant to the Revolving Note, and
reborrow.
(b) PROCEDURES FOR REQUESTING ADVANCES. The Borrower shall comply with
the following procedures in requesting Revolving Advances set forth
in the Revolving Note
(c) TERM ADVANCE. The Bank agrees, subject to the terms and conditions
of this Agreement and the Term Note, to make a single advance to the
Borrower on the Funding Date (the "Term Advance") in an amount of
$5,000,000. The Borrower's obligation to pay the Term Advance shall
be evidenced by the Term Note and shall be secured by the
Collateral.
(d) PAYMENT OF TERM NOTE. The outstanding principal balance of the Term
Note shall be due and payable as set forth in the Term Note.
(e) FEES.
(i) ORIGINATION FEE. The Borrower shall pay the Bank a fully earned
and non-refundable origination fee of $60,000, due and payable upon
the execution of this Agreement.
(ii) UNUSED LINE FEE. For the purposes of this Section 2(e), "Unused
Amount" means the Maximum Line Amount reduced by outstanding
Revolving Advances. The Borrower agrees to pay to the Bank an unused
line fee at the rate of one-eighth of one percent per annum on the
average daily Unused Amount from the date of this Agreement to and
including the Termination Date, due and payable monthly in arrears
on the first day of the month and on the Termination Date.
(f) USE OF PROCEEDS. The Borrower shall use the proceeds of Advances (a)
to pay in full any and all amounts owing by Borrower to ▇▇▇▇▇▇▇
▇▇▇▇▇, (b) to pay the fees and expenses of Borrower in connection
with the transactions contemplated hereunder and (c) for ordinary
working capital purposes including prepublication costs.
(g) LIABILITY RECORDS. The Bank may maintain from time to time, at its
discretion, records as to the Obligations. All entries made on any
such record shall be presumed correct until the Borrower establishes
the contrary. Upon the Bank's demand, the Borrower will admit and
certify in writing the exact principal balance of the Obligations
that the Borrower then asserts to be outstanding. Any billing
statement or accounting rendered by the Bank shall be conclusive and
fully binding on the Borrower unless the Borrower gives the Bank
specific written notice of exception within 30 days after receipt.
3. CONDITIONS PRECEDENT.
(a) CONDITIONS PRECEDENT TO MAKING THE INITIAL ADVANCES AND ISSUING
LETTERS OF CREDIT. The Bank's obligation to make the initial
Advances or to cause any Letters of Credit to be issued shall be
subject to the condition precedent that the Bank shall have received
all of the following, each properly executed by the appropriate
party and in form and substance satisfactory to the Bank:
(i) This Agreement.
(ii) The Revolving Note and the Term Note.
(iii) The Security Agreement.
(iv) The Security Agreement (Copyrights and Trademarks).
(v) A true and correct copy of any and all agreements pursuant to
which the Borrower's property is in the possession of any Person
other than the Borrower, together with, in the case of any goods
held by such Person for resale, (i) a consignee's acknowledgment and
waiver of Liens, (ii) UCC financing statements sufficient to protect
the Borrower's and the Bank's interests in such goods, and (iii) UCC
searches showing that no other secured party has filed a financing
statement against such Person and covering property similar to the
Borrower's other than the Borrower, or if there exists any such
secured party, evidence that each such secured party has received
notice from the Borrower and the Bank sufficient to protect the
Borrower's and the Bank's interests in the Borrower's goods from any
claim by such secured party.
(vi) An acknowledgment and waiver of Liens from each warehouse in
which the Borrower is storing inventory
(vii) Current searches of appropriate filing offices showing that
(i) no Liens have been filed and remain in effect against the
Borrower except Permitted Liens or Liens held by Persons who have
agreed in writing that upon receipt of proceeds of the initial
Advances, they will satisfy, release or terminate such Liens in a
manner satisfactory to the Bank, and (ii) the Bank has duly filed
all financing statements necessary to perfect the security interest,
to the extent the security interest is capable of being perfected by
filing.
(viii) A certificate of the Borrower's Secretary or Assistant
Secretary certifying that attached to such certificate are (i) the
resolutions of the Borrower's Directors, authorizing the execution,
delivery and performance of the Transaction Documents, (ii) true,
correct and complete copies of the Borrower's Governing Documents,
and (iii) examples of the signatures of the Borrower's Officers or
agents authorized to execute and deliver the Transaction Documents
and other instruments, agreements and certificates, including
Advance requests, on the Borrower's behalf.
(ix) A current certificate issued by the Secretary of State of
Delaware, certifying that the Borrower is in good standing under the
Law of the State of Delaware.
(x) Evidence that the Borrower is duly licensed or qualified to
transact business in all jurisdictions where the character of the
property owned or leased or the nature of the business transacted by
it makes such licensing or qualification necessary.
(xi) A certificate of an Officer of the Borrower confirming, in his
personal capacity, the representations and warranties set forth in
this Agreement.
(xii) A certificate of two Officers of the Borrower confirming, in
their personal capacity, that: (i) they have reviewed the balance
sheet and cash flow projections of Borrower, (ii) Borrower is
solvent after giving effect to the transactions and the Debt
contemplated by the Transaction Documents, (iii) Borrower has the
financial resources and anticipated ability to meet its obligations
and liabilities as they become due and does not have unreasonably
small capital base with which to engage in its anticipated business,
and (iv) the Transaction Documents were executed and delivered in
good faith and in exchange for reasonable equivalent value and fair
consideration.
(xiii) Certificates of the insurance required hereunder, with all
hazard insurance containing a lender's loss payable endorsement in
the Bank's favor and with all liability insurance naming the Bank as
an additional insured.
(xiv) Payment of the fees and commissions due under Section 2(e)
through the date of the initial Advance and expenses incurred by the
Bank through such date and required to be paid by the Borrower under
Section 7, including all legal expenses incurred through the date of
this Agreement.
(xv) Borrower's audited financials statements for the fiscal year
ending December 31, 2004, which financial statements shall include
the Borrower's balance sheet as at the end of such fiscal year and
the related statements of the Borrower's income, retained earnings
and cash flows for the fiscal year then ended. There shall have
occurred no material adverse change shall have occurred in the
financial condition, business, affairs, operations, or control of
Borrower, since the date of the delivery of such financial
statements to Bank.
(xvi) Such other documents as the Bank in its reasonable discretion
may require.
(b) CONDITIONS PRECEDENT TO ALL ADVANCES AND LETTERS OF CREDIT. The
Bank's obligation to make each Advance or to cause the issuance of a
Letter of Credit shall be subject to the further conditions
precedent that:
(i) the representations and warranties contained in Section 4 are
correct on and as of the date of such Advance as though made on and
as of such date, except to the extent that such representations and
warranties relate solely to an earlier date; and
(ii) no event has occurred and is continuing, or would result from
such Advance which constitutes a Default or an Event of Default.
4. REPRESENTATIONS AND WARRANTIES. The Borrower makes the following
representations and warranties and any "Additional Representations and
Warranties" on the schedule attached hereto and made part hereof (the
"Schedule"), all of which shall be deemed to be continuing representations
and warranties as long as this Agreement is in effect:
(a) GOOD STANDING; AUTHORITY. The Borrower and each Subsidiary (if
either is not an individual) is duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it was
formed. The Borrower and each Subsidiary is duly authorized to do
business in each jurisdiction in which failure to be so qualified
might have a material adverse effect on its business or assets and
has the power and authority to own each of its assets and to use
them in the ordinary course of business now and in the future.
(b) COMPLIANCE. The Borrower and each Subsidiary conducts its business
and operations and the ownership of its assets in compliance with
each applicable statute, regulation and other law, including
environmental laws. All approvals, including authorizations,
permits, consents, franchises, licenses, registrations, filings,
declarations, reports and notices (the "Approvals") necessary for
the conduct of the Borrower's and each Subsidiary's business and for
the Credit have been duly obtained and are in full force and effect.
The Borrower and each Subsidiary is
in compliance with the Approvals. The Borrower and each Subsidiary
(if either is not an individual) is in compliance with its
certificate of incorporation, by-laws, partnership agreement,
articles of organization, operating agreement or other applicable
organizational or governing document as may be applicable to the
Borrower or a Subsidiary depending on its organizational structure
("Governing Documents"). The Borrower and each Subsidiary is in
compliance with each agreement to which it is a party or by which it
or any of its assets is bound.
(c) LEGALITY. The execution, delivery and performance by the Borrower of
this Agreement and all related documents, including the Transaction
Documents, (i) are in furtherance of the Borrower's purposes and
within its power and authority; (ii) do not (A) violate any statute,
regulation or other law or any judgment, order or award of any
court, agency or other governmental authority or of any arbitrator
with respect to the Borrower or any Subsidiary or (B) violate the
Borrower's or any Subsidiary's Governing Documents (if either is not
an individual), constitute a default under any agreement binding on
the Borrower or any Subsidiary or result in a lien or encumbrance on
any assets of the Borrower or any Subsidiary; and (iii) if the
Borrower or any Subsidiary is not an individual, have been duly
authorized by all necessary organizational actions.
(d) FISCAL YEAR. The fiscal year of the Borrower is the calendar year
unless the following blank states otherwise: year ending_________,
20_____.
(e) TITLE TO ASSETS. The Borrower and each Subsidiary has good and
marketable title to each of its assets free of security interests,
mortgages or other liens or encumbrances, except as set forth on the
Schedule titled "Permitted Liens" or pursuant to the Bank's prior
written consent.
(f) JUDGMENTS AND LITIGATION. There is no pending or threatened claim,
audit, investigation, action or other legal proceeding or judgment,
order or award of any court, agency or other governmental authority
or arbitrator (any, an "Action") which involves the Borrower, its
Subsidiaries or their respective assets and might have a material
adverse effect upon the Borrower or any Subsidiary or threaten the
validity of the Credit, any Transaction Document or any related
document or action.
(g) FULL DISCLOSURE. Neither this Agreement nor any certificate,
financial statement or other writing provided to the Bank by or on
behalf of the Borrower or any Subsidiary contains any statement of
fact that is incorrect or misleading in any material respect or
omits to state any fact necessary to make any such statement not
incorrect or misleading. The Borrower has not failed to disclose to
the Bank any fact that might have a material adverse effect on the
Borrower or any Subsidiary.
(h) INTELLECTUAL PROPERTY RIGHTS.
(i) OWNED INTELLECTUAL PROPERTY. Schedule titled "Owned Intellectual
Property" is a complete list of all patents, applications for
patents, trademarks, applications to register trademarks, service
marks, applications to register service marks, mask works, trade
dress and copyrights for which the Borrower is the owner of record
(the "Owned Intellectual Property"). Except as disclosed on Schedule
titled "Owned Intellectual Property", (i) the Borrower owns the
Owned Intellectual Property free and clear of all restrictions
(including covenants not to ▇▇▇ a third party), court orders,
injunctions, decrees, writs or Liens, whether by written agreement
or otherwise, (ii) no Person other than the Borrower owns or has
been granted any right in the Owned Intellectual Property, (iii) all
Owned Intellectual Property is valid, subsisting and enforceable and
(iv) the Borrower has taken all commercially reasonable action
necessary to maintain and protect the Owned Intellectual Property.
(ii) INTELLECTUAL PROPERTY RIGHTS LICENSED FROM OTHERS. Schedule
titled "Licensed Intellectual Property" is a complete list of all
agreements under which the Borrower has licensed Intellectual
Property Rights from another Person ("Licensed Intellectual
Property") other than readily available, non-negotiated licenses of
computer software and other intellectual property used solely for
performing accounting, word processing and similar administrative
tasks ("Off-the-shelf Software") and a summary of any ongoing
payments the Borrower is obligated to make with respect thereto.
Except as disclosed on Schedule titled "Licensed Intellectual
Property" and in written agreements, copies of which have been given
to the Bank, the Borrower's licenses to use the Licensed
Intellectual Property are free and clear of all restrictions, Liens,
court orders, injunctions, decrees, or writs, whether by written
agreement or otherwise. Except as disclosed on Schedule titled
"Licensed Intellectual
Property", the Borrower is not obligated or under any liability
whatsoever to make any payments of a material nature by way of
royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any Intellectual Property Rights.
(iii) OTHER INTELLECTUAL PROPERTY NEEDED FOR BUSINESS. Except for
Off-the-shelf Software and as disclosed on Schedules titled Owned
Intellectual Property and Licensed Intellectual Property, the Owned
Intellectual Property and the Licensed Intellectual Property
constitute all Intellectual Property Rights used or necessary to
conduct the Borrower's business as it is presently conducted or as
the Borrower reasonably foresees conducting it.
(iv) INFRINGEMENT. Except as disclosed on Schedules titled "Owned
Intellectual Property" and "Licensed Intellectual Property", the
Borrower has no knowledge of, and has not received any written claim
or notice alleging, any Infringement of another Person's
Intellectual Property Rights (including any written claim that the
Borrower must license or refrain from using the Intellectual
Property Rights of any third party) nor, to the Borrower's
knowledge, is there any threatened claim or any reasonable basis for
any such claim.
(i) PLANS. Except as disclosed to the Bank in writing prior to the date
hereof, neither the Borrower nor any ERISA Affiliate (i) maintains
or has maintained any Pension Plan, (ii) contributes or has
contributed to any Multiemployer Plan or (iii) provides or has
provided post-retirement medical or insurance benefits with respect
to employees or former employees (other than benefits required under
Section 601 of ERISA, Section 4980B of the IRC or applicable state
law). Neither the Borrower nor any ERISA Affiliate has received any
notice or has any knowledge to the effect that it is not in full
compliance with any of the requirements of ERISA, the IRC or
applicable state law with respect to any Plan. No Reportable Event
exists in connection with any Pension Plan. Each Plan which is
intended to qualify under the IRC is so qualified, and no fact or
circumstance exists which may have an adverse effect on the Plan's
tax-qualified status. Neither the Borrower nor any ERISA Affiliate
has (i) any accumulated funding deficiency (as defined in Section
302 of ERISA and Section 412 of the IRC) under any Plan, whether or
not waived, (ii) any liability under Section 4201 or 4243 of ERISA
for any withdrawal, partial withdrawal, reorganization or other
event under any Multiemployer Plan or (iii) any liability or
knowledge of any facts or circumstances which could result in any
liability to the Pension Benefit Guaranty Corporation, the Internal
Revenue Service, the Department of Labor or any participant in
connection with any Plan (other than routine claims for benefits
under the Plan).
(j) ENVIRONMENTAL MATTERS
(i) To Borrower's knowledge, there are not present in, on or under
the Premises any Hazardous Substances in such form or quantity as to
create any material liability or obligation for either the Borrower
or the Bank under the common law of any jurisdiction or under any
Environmental Law, and no Hazardous Substances have ever been
stored, buried, spilled, leaked, discharged, emitted or released in,
on or under the Premises in such a way as to create any such
material liability.
(ii) Except as disclosed on Schedule titled "Premises", the Borrower
has not disposed of Hazardous Substances in such a manner as to
create any material liability under any Environmental Law.
(iii) To Borrower's knowledge with respect to the Premises and
except as disclosed on Schedule titled "Premises" with respect to
Borrower, there have not existed in the past, nor are there any
threatened or impending requests, claims, notices, investigations,
demands, administrative proceedings, hearings or litigation relating
in any way to the Premises or the Borrower, alleging material
liability under, violation of, or noncompliance with any
Environmental Law or any license, permit or other authorization
issued pursuant thereto.
(iv) Except as disclosed on Schedule titled "Premises", the
Borrower's businesses are and have in the past always been conducted
in accordance with all Environmental Laws and all licenses, permits
and other authorizations required pursuant to any Environmental Law
and necessary for the lawful and efficient operation of such
businesses are in the Borrower's possession and are in full force
and effect, nor has the Borrower been denied insurance on grounds
related to potential environmental liability. No permit required
under any Environmental Law is scheduled to expire within 12 months
and there is no threat that any such permit will be withdrawn,
terminated, limited or materially changed.
(v) To Borrower's best knowledge, the Premises are not and never
have been listed on the National Priorities List, the Comprehensive
Environmental Response, Compensation and Liability Information
System or any similar federal, state or local list, schedule, log,
inventory or database.
(k) FINANCIAL SOLVENCY. Both before and after giving effect to all of
the transactions contemplated in the Transaction Documents, none of
the Borrower or its Affiliates:
(i) Was or will be insolvent, as that term is used and defined in
Section 101(32) of the United States Bankruptcy Code and Section 2
of the Uniform Fraudulent Transfer Act;
(ii) Has unreasonably small capital or is engaged or about to engage
in a business or a transaction for which any remaining assets of the
Borrower or such Affiliate are unreasonably small;
(iii) By executing, delivering or performing its obligations under
the Transaction Documents or other documents to which it is a party
or by taking any action with respect thereto, intends to, nor
believes that it will, incur debts beyond its ability to pay them as
they mature;
(iv) By executing, delivering or performing its obligations under
the Transaction Documents or other documents to which it is a party
or by taking any action with respect thereto, intends to hinder,
delay or defraud either its present or future creditors; and
(v) At this time contemplates filing a petition in bankruptcy or for
an arrangement or reorganization or similar proceeding under any law
of any jurisdiction, nor, to the best knowledge of the Borrower, is
the subject of any actual, pending or threatened bankruptcy,
insolvency or similar proceedings under any law of any jurisdiction.
(l) ANTI-TERRORISM LAWS.
(i) General. Neither the Borrower nor any Affiliate of any Loan
Party, is in violation of any Anti-Terrorism Law or engages in or
conspires to engage in any transaction that evades or avoids, or has
the purpose of evading or avoiding, or attempts to violate, any of
the prohibitions set forth in any Anti-Terrorism Law.
(ii) Executive Order No. 13224. Neither the Borrower nor any
Affiliate, or their respective agents acting or benefiting in any
capacity in connection with the Credit Facility, or other
transactions hereunder, is any of the following (each a "Blocked
Person"):
(1) a Person that is listed in the annex to, or is otherwise
subject to the provisions of, the Executive Order No. 13224;
(2) a Person owned or controlled by, or acting for or on
behalf of, any Person that is listed in the annex to, or is
otherwise subject to the provisions of, the Executive Order No.
13224;
(3) a Person or entity with which any Bank is prohibited from
dealing or otherwise engaging in any transaction by any
Anti-Terrorism Law;
(4) a Person or entity that commits, threatens or conspires to
commit or supports "terrorism" as defined in the Executive Order No.
13224;
(5) a Person or entity that is named as a "specially
designated national" on the most current list published by the U.S.
Treasury Department Office of Foreign Asset Control at its official
website or any replacement website or other replacement official
publication of such list, or
(6) a person or entity who is affiliated or associated with a
person or entity listed above.
(iii) Neither Borrower nor any Affiliate or to the knowledge of
Borrower or any Affiliate, any of their respective agents acting in
any capacity in connection with the Credit Facility or other
transactions hereunder (i) conducts any business or engages in
making or receiving any contribution of funds, goods or services to
or for the benefit of any Blocked Person, or (ii) deals in, or
otherwise engages in any transaction relating to, any property or
interests in property blocked pursuant to the Executive Order No.
13224.
(m) UPDATE TO SCHEDULES.
Should any of the information or disclosures provided on any of the
Schedules attached hereto become outdated or incorrect in any material
respect, the Borrower shall promptly provide the Bank in writing with such
revisions or updates to such Schedule as may be necessary or appropriate
to update or correct same; provided, however, that no Schedule shall be
deemed to have been amended, modified or superseded by any such correction
or update, nor shall any breach of warranty or representation resulting
from the inaccuracy or incompleteness of any such Schedule be deemed to
have been cured thereby, unless and until the Bank, in its reasonable
discretion, shall have accepted in writing such revisions or updates to
such Schedule.
(n) COMPLIANCE WITH LAWS.
(i) The Borrower shall (i) comply, and cause each Subsidiary to
comply, with the requirements of applicable laws and regulations,
the non-compliance with which would materially and adversely affect
its business or its financial condition and (ii) use and keep the
Collateral, and require that others use and keep the Collateral,
only for lawful purposes, without violation of any federal, state or
local law, statute or ordinance.
(ii) Without limiting the foregoing undertakings, the Borrower
specifically agrees that it will comply, and cause each Subsidiary
to comply, with all applicable Environmental Laws and obtain and
comply with all permits, licenses and similar approvals required by
any Environmental Laws, and will not generate, use, transport,
treat, store or dispose of any Hazardous Substances in such a manner
as to create any material liability or obligation under the common
law of any jurisdiction or any Environmental Law.
(iii) The Borrower shall (i) ensure, and cause each Subsidiary to
ensure, that no Person shall be listed on the Specially Designated
Nationals and Blocked Person List or other similar lists maintained
by the Office of Foreign Assets Control ("OFAC"), the Department of
the Treasury or included in any Executive Orders, (ii) not use or
permit the use of the proceeds of the Credit Facility or any other
financial accommodation from the Bank to violate any of the foreign
asset control regulations of OFAC or other applicable law, (iii)
comply, and cause each Subsidiary to comply, with all applicable
Bank Secrecy Act laws and regulations, as amended from time to time,
and (iv) otherwise comply with the USA Patriot Act as required by
federal law and the Bank's policies and practices.
5. AFFIRMATIVE COVENANTS. So long as this Agreement is in effect, the
Borrower will comply with any "Additional Affirmative Covenants" contained
in the Schedule and shall:
(a) FINANCIAL STATEMENTS AND OTHER INFORMATION. Promptly deliver to the
Bank (i) within forty-five (45) days after the end of each of its
first three fiscal quarters, an unaudited consolidating and
consolidated financial statement of the Borrower and each Subsidiary
as of the end of such quarter, which financial statement shall
consist of income and cash flows for the quarter, for the
corresponding quarter in the previous fiscal year and for the period
from the end of the previous fiscal year, with a consolidating and
consolidated balance sheet as of the quarter end all in such detail
as the Bank may request and an accounts receivable aging summary and
a list of newly acquired Owned Intellectual Property and Licensed
Intellectual Property; (ii) within one hundred twenty (120) days
after the end of each fiscal year, consolidating and consolidated
statements of the Borrower's and each Subsidiary's income and cash
flows and its consolidating and consolidated balance sheet as of the
end of such fiscal year, setting forth comparative figures for the
preceding fiscal year and to be audited by an independent certified
public accountant acceptable to the Bank; all such statements shall
be certified by the Borrower's chief financial officer to be correct
and in accordance with the Borrower's and each Subsidiary's records
and to present fairly the results of the Borrower's and each
Subsidiary's operations and cash flows and its financial position at
year end, together with the report to the audit committee and the
management representation letter; and (iii) with each statement of
income, a certificate executed by the Borrower's chief executive and
chief financial officers or other such person responsible for the
financial management of the Borrower (A) setting forth the
computations required to establish the Borrower's compliance with
each financial covenant, if any, during the statement period, (B)
stating that the signers of the certificate have reviewed this
Agreement and the operations and condition (financial or other) of
the
Borrower and each of its Subsidiaries during the relevant period and
(C) stating that no Event of Default occurred during the period, or
if an Event of Default did occur, describing its nature, the date(s)
of its occurrence or period of existence and what action the
Borrower has taken with respect thereto. The Borrower shall also
promptly provide the Bank with copies of all annual reports, proxy
statements and similar information distributed to stockholders, and
copies of all filings with the Securities and Exchange Commission
and shall provide, in form satisfactory to the Bank, such additional
information, reports or other information as the Bank may from time
to time reasonably request regarding the financial and business
affairs of the Borrower or any Subsidiary, including quarterly
receipt of Form 10-QSB as submitted to the Securities and Exchange
Commission. In conjunction with the submission of the annual
financial statements, the Borrower shall submit detailed projections
outlining expected operating results for the next twelve (12) month
period.
(b) ACCOUNTING; TAX RETURNS AND PAYMENT OF CLAIMS. The Borrower and each
Subsidiary will maintain a system of accounting and reserves in
accordance with generally accepted accounting principles, has filed
and will file each tax return required of it and, except as
disclosed in the Schedule, has paid and will pay when due each tax,
assessment, fee, charge, fine and penalty imposed by any taxing
authority upon it or any of its assets, income or franchises, as
well as all amounts owed to mechanics, materialmen, landlords,
suppliers and the like in the normal course of business.
(c) INSPECTIONS. Promptly upon the Bank's request, the Borrower will
permit, and cause its Subsidiaries to permit, the Bank's officers,
attorneys or other agents to inspect its and its Subsidiary's
premises, examine and copy its records and discuss its and its
Subsidiary's business, operations and financial or other condition
with its and its Subsidiary's responsible officers and independent
accountants.
(d) OPERATING ACCOUNTS. Maintain, and cause its Subsidiaries to
maintain, all operating accounts with the Bank including cash
management relationship established at the Bank.
(e) NOTICE OF DEFAULTS AND MATERIAL ADVERSE CHANGES. Immediately upon
acquiring reason to know of (i) any Event of Default, (ii) any event
or condition that might have a material adverse effect upon the
Borrower or any Subsidiary or (iii) any Action, the Borrower will
provide to the Bank a certificate executed by the Borrower's senior
individual authorized to transact business on behalf of the
Borrower, specifying the date(s) and nature of the event or the
Action and what action the Borrower or its Subsidiary has taken or
proposes to take with respect to it.
(f) INSURANCE. Maintain its, and cause its Subsidiaries to maintain,
property in good repair and will on request provide the Bank with
evidence of insurance coverage satisfactory to the Bank, including
fire and hazard, liability, workers' compensation and business
interruption insurance and flood hazard insurance as required.
(g) FURTHER ASSURANCES. Promptly upon the request of the Bank, the
Borrower will execute, and cause its Subsidiaries to execute, and
deliver each writing and take each other action that the Bank deems
necessary or desirable in connection with any transaction
contemplated by this Agreement.
(h) INTELLECTUAL PROPERTY.
(i) Promptly upon knowledge thereof, the Borrower will deliver to
the Bank notice of (i) any Infringement of its Intellectual Property
Rights by others, (ii) claims that the Borrower is Infringing
another Person's Intellectual Property Rights and (iii) any
threatened cancellation, termination or material limitation of its
Intellectual Property Rights.
(ii) Promptly upon receipt, the Borrower will give the Bank copies
of all registrations and filings with respect to its Intellectual
Property Rights.
(i) ANTI-TERRORISM LAWS. The Borrower and its Affiliates and agents
shall not (i) conduct any business or engage in any transaction or
dealing with any Blocked Person, including the making or receiving
any contribution of funds, goods or services to or for the benefit
of any Blocked Person, (ii) deal in, or otherwise engage in any
transaction relating to, any property or interests in property
blocked pursuant to the Executive Order No. 13224; or (iii) engage
in or conspire to engage in any transaction that evades or avoids,
or has the purpose of evading or
avoiding, or attempts to violate, any of the prohibitions set forth
in the Executive Order No. 13224, the USA Patriot Act or any other
Anti-Terrorism Law. The Borrower shall deliver to Bank any
certification or other evidence requested from time to time by the
Bank in its sole discretion, confirming Borrower's compliance with
this Section i.
6. NEGATIVE COVENANTS. As long as this Agreement is in effect, the Borrower
shall not violate, and shall not suffer or permit any of its Subsidiaries
to violate, any of the following covenants and any "Additional Negative
Covenant" on the Schedule. The Borrower shall not:
(a) INDEBTEDNESS. Permit any indebtedness (including direct and
contingent liabilities) not described on the Schedule titled
"Permitted Indebtedness" except for trade indebtedness or current
liabilities for salary and wages incurred in the ordinary course of
business and not substantially overdue.
(b) GUARANTIES. Become a guarantor, a surety, or otherwise liable for
the debts or other obligations of another, whether by guaranty or
suretyship agreement, agreement to purchase indebtedness, agreement
for furnishing funds through the purchase of goods, supplies or
services (or by way of stock purchase, capital contribution, advance
or loan) for the purpose of paying or discharging indebtedness, or
otherwise, except as an endorser of instruments for the payment of
money deposited to its bank account for collection in the ordinary
course of business and except as may be specified in the Schedule
titled "Permitted Guaranties".
(c) LIENS. Permit any of its assets to be subject to any security
interest, mortgage or other lien or encumbrance, except as set forth
on the Schedule titled "Permitted Liens" and except for liens for
property taxes not yet due; pledges and deposits to secure
obligations or performance for workers' compensation, bids, tenders,
contracts other than notes, appeal bonds or public or statutory
obligations; and materialmens', mechanics', carriers' and similar
liens arising in the normal course of business.
(d) INVESTMENTS. Make any investment other than in FDIC insured deposits
or United States Treasury obligations of less than one year, or in
money market or mutual funds administering such investments, except
as set forth on the Schedule titled "Permitted Investments".
(e) LOANS. Make any loan, advance or other extension of credit except as
disclosed on the Schedule titled "Permitted Loans", except for
endorsements of negotiable instruments deposited to the Borrower's
deposit account for collection, trade credit in the normal course of
business and intercompany loans approved in writing by the Bank.
(f) DISTRIBUTIONS. Declare or pay any distribution, except for (i)
dividends payable solely in stock and (ii) except as set forth on
the Schedule titled "Permitted Distributions".
(g) CHANGES IN FORM. (i) Transfer or dispose of substantially all of its
assets, (ii) acquire substantially all of the assets of any other
entity, (iii) do business under or otherwise use any name other than
its true name or (iv) make any material change in its business,
structure, purposes or operations that might have a material adverse
effect on the Borrower or any of its Subsidiaries. If the Borrower
or any Subsidiary is not an individual, (i) participate in any
merger, consolidation or other absorption or (ii) make, terminate or
permit to be revoked any election pursuant to Subchapter S of the
Internal Revenue Code.
7. FINANCIAL COVENANTS. During the term of this Agreement, the Borrower shall
not violate, and shall not suffer or permit any of its Subsidiaries to
violate, any of the following covenants (complete applicable financial
covenant) or any Additional Financial Covenants on the Schedule. FOR
PURPOSES OF THIS SECTION, IF THE BORROWER HAS ANY SUBSIDIARIES ALL
REFERENCES TO THE BORROWER SHALL INCLUDE THE BORROWER AND ALL OF ITS
SUBSIDIARIES ON A CONSOLIDATED BASIS.
(a) MAXIMUM SENIOR FUNDED DEBT TO EBITDA. Maintain at the end of each
fiscal quarter, on a rolling four quarter basis, a consolidated
maximum ratio of Senior Funded Debt to EBITDA of no greater than
2.25 to 1.
(b) MINIMUM DEBT SERVICE COVERAGE RATIO. Maintain at the end of each
fiscal quarter on a rolling four-quarter basis a consolidated
minimum Debt Service Coverage of Ration of 1.35 to 1.00.
(c) MINIMUM EBITDA. Borrower shall maintain a minimum EBITDA of
sixty-five percent (65%) of management projections annually. Minimum
EBITDA for Borrower means the following for such fiscal year ends:
EBITDA FISCAL YEAR END
----------- ---------------
$ 5,596,000 2005
7,253,000 2006
9,792,000 2007
13,449,000 2008
Any material changes to management's projected EBITDA shall require
the Bank's review and approval, which approval shall not be
unreasonably withheld.
(d) MINIMUM STOCKHOLDERS' EQUITY. Borrower shall maintain at December
31, 2004 a minimum stockholders' equity of $ 8,551,211.00, to be
increased by forty percent (40%) of all future annual net income
beginning at December 31, 2005, to be tested annually.
(e) NET LOSSES. Borrower shall not permit a Net Loss, to be tested
annually at year's end.
8. DEFAULT.
(a) EVENTS OF DEFAULT. Any of the following events or conditions shall
constitute an "Event of Default": (i) failure by the Borrower to pay
when due (whether at the stated maturity, by acceleration, upon
demand or otherwise) the Obligations, or any part thereof, or there
occurs any event or condition which after notice, lapse of time or
after both notice and lapse of time will permit acceleration of any
Obligation; (ii) default by the Borrower in the performance of any
obligation, term or condition of this Agreement, the other
Transaction Documents or any other agreement with the Bank or any of
its Affiliates; (iii) failure by the Borrower to pay when due
(whether at the stated maturity, by acceleration, upon demand or
otherwise) any indebtedness or obligation owing to any third party
or any Affiliate, the occurrence of any event which could result in
acceleration of payment of any such indebtedness or obligation or
the failure to perform any agreement with any third party or any
Affiliate; (iv) the Borrower is dissolved, becomes insolvent,
generally fails to pay or admits in writing its inability generally
to pay its debts as they become due; (v) the Borrower makes a
general assignment, arrangement or composition agreement with or for
the benefit of its creditors or makes, or sends notice of any
intended, bulk sale; the sale, assignment, transfer or delivery of
all or substantially all of the assets of the Borrower to a third
party; or the cessation by the Borrower as a going business concern;
(vi) the Borrower files a petition in bankruptcy or institutes any
action under federal or state law for the relief of debtors or seeks
or consents to the appointment of an administrator, receiver,
custodian or similar official for the wind up of its business (or
has such a petition or action filed against it and such petition
action or appointment is not dismissed or stayed within forty-five
(45) days); (vii) the reorganization, merger, consolidation or
dissolution of the Borrower (or the making of any agreement
therefor); (viii) the death or judicial declaration of incompetency
of the Borrower, if an individual; (ix) the entry of any judgment or
order of any court, other governmental authority or arbitrator
against the Borrower; (x) falsity, omission or inaccuracy of facts
submitted to the Bank or any Affiliate (whether in a financial
statement or otherwise); (xi) an adverse change in the Borrower, its
business, assets, operations, affairs or condition (financial or
otherwise) from the status shown on any financial statement or other
document submitted to the Bank or any Affiliate, and which change
the Bank determines will have a material adverse affect on (a) the
Borrower, its business, assets, operations or condition (financial
or otherwise), or (b) the ability of the Borrower to pay or perform
the Obligations; (xii) any Plan of the Borrower fails to comply with
applicable law or has vested unfunded liabilities that, in the
opinion of the Bank, might have a material adverse effect on the
Borrower's ability to repay its debts; (xiii) any indication or
evidence received by the Bank that the Borrower may have directly or
indirectly been engaged in any type of activity which, in the Bank's
discretion, might result in the forfeiture or any property of the
Borrower to any governmental authority; (xiv) the occurrence of any
event described in Section 6(a)(i) through and including 6(a)(xiii)
with respect to any Subsidiary or to any endorser, guarantor or any
other party liable for, or whose assets or any interest therein
secures, payment of any of the Obligations; or (xiv)(a) any
direct or indirect sale, conveyance, assignment or other transfer of
or grant of a security interest in any ownership interest of
Borrower which results, or if any rights related thereto were
exercised would result, in PEH no longer controlling and owning,
directly or indirectly, 100% if the ownership interests of Borrower;
or (b) any direct or indirect sale, conveyance, assignment or other
transfer of or grant of a security interest in and any ownership
interest of PEH which would result in a change of 51% or more of the
controlling interest of PEH; or (c) if two or more Persons (or a
replacement who is reasonably satisfactory to the Bank) who are
Senior Managers as of the date hereof shall for any reason cease to
be Senior Managers of Borrower and/or PEH. For the purposes hereof,
the "Senior Managers" shall mean the chairman of the board, the
chief financial officer, the executive vice president and the senior
vice president.
(b) RIGHTS AND REMEDIES UPON DEFAULT. Upon the occurrence of any Event
of Default, the Bank without demand of performance or other demand,
presentment, protest, advertisement or notice of any kind (except
any notice required by law) to or upon the Borrower, any Subsidiary
or any other person (all and each of which demands, presentments,
protests, advertisements and notices are hereby waived), may
exercise all rights and remedies under the Borrower's or its
Subsidiaries' agreements with the Bank or its Affiliates, applicable
law, in equity or otherwise and may declare all or any part of any
Obligations not payable on demand to be immediately due and payable
without demand or notice of any kind and terminate any obligation it
may have to grant any additional loan, credit or other financial
accommodation to the Borrower or any Subsidiary. All or any part of
any Obligations whether or not payable on demand, shall be
immediately due and payable automatically upon the occurrence of an
Event of Default in Section 6(a)(vi) above. The provisions hereof
are not intended in any way to affect any rights of the Bank with
respect to any Obligations which may now or hereafter be payable on
demand.
9. EXPENSES. The Borrower shall pay to the Bank on demand all costs and
expenses (including all fees and disbursements of counsel retained for
advice, suit, appeal or other proceedings or purpose and of any experts or
agents it may retain), which the Bank may incur in connection with (i) the
administration of the Obligations, including any administrative fees the
Bank may impose for the preparation of discharges, releases or assignments
to third-parties; (ii) the enforcement and collection of any Obligations
or any guaranty thereof; (iv) the exercise, performance ,enforcement or
protection of any of the rights of the Bank hereunder; or (v) the failure
of the Borrower or any Subsidiary to perform or observe any provisions
hereof. After such demand for payment of any cost, expense or fee under
this Section or elsewhere under this Agreement, the Borrower shall pay
interest at the highest default rate specified in any instrument
evidencing any of the Obligations from the date payment is demanded by the
Bank to the date reimbursed by the Borrower. All such costs, expenses or
fees under this Agreement shall be added to the Obligations.
10. TERMINATION. This Agreement shall remain in full force and effect until
(i) all Obligations outstanding, or contracted or committed for (whether
or not outstanding), shall be finally and irrevocably paid in full and
(ii) all Transaction Documents have been terminated by the Bank.
11. RIGHT OF SETOFF. If an Event of Default occurs, the Bank shall have the
right to set off against the amounts owing under this Agreement and the
other Transaction Documents any property held in a deposit or other
account or otherwise with the Bank or its Affiliates or otherwise owing by
the Bank or its Affiliates in any capacity to the Borrower, its Subsidiary
or any guarantor of, or endorser of any of the Transaction Documents
evidencing, the Obligations. Such setoff shall be deemed to have been
exercised immediately at the time the Bank or such Affiliate elect to do
so.
12. MISCELLANEOUS.
(a) NOTICES. Any demand or notice hereunder or under any applicable law
pertaining hereto shall be in writing and duly given if delivered to
Borrower (at its address on the Bank's records) or to the Bank (at
the address on page one and separately to the Bank officer
responsible for Borrower's relationship with the Bank). Such notice
or demand shall be deemed sufficiently given for all purposes when
delivered (i) by personal delivery and shall be deemed effective
when delivered, or (ii) by mail or courier and shall be deemed
effective three (3) business days after deposit in an official
depository maintained by the United States Post Office for the
collection of mail or one (1) business day after delivery to a
nationally recognized overnight courier service (e.g., Federal
Express). Notice by e-mail is not valid notice under this or any
other agreement between Borrower and the Bank.
(b) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES. Any financial calculation
to be made, all financial statements and other financial information
to be provided, and all books and records, system of accounting and
reserves to be kept in connection with the provisions of this
Agreement, shall be in accordance with generally accepted accounting
principles consistently applied during each interval and from
interval to interval; provided, however, that in the event changes
in generally accepted accounting principles shall be mandated by the
Financial Accounting Standards Board or any similar accounting body
of comparable standing, or should be recommended by Borrower's
certified public accountants, to the extent such changes would
affect any financial calculations to be made in connection herewith,
such changes shall be implemented in making such calculations only
from and after such date as Borrower and the Bank shall have amended
this Agreement to the extent necessary to reflect such changes in
the financial and other covenants to which such calculations relate.
(c) INDEMNIFICATION. If after receipt of any payment of all, or any part
of, the Obligations, the Bank is, for any reason, compelled to
surrender such payment to any person or entity because such payment
is determined to be void or voidable as a preference, an
impermissible setoff, or a diversion of trust funds, or for any
other reason, the Transaction Documents shall continue in full force
and the Borrower shall be liable, and shall indemnify and hold the
Bank harmless for, the amount of such payment surrendered. The
provisions of this Section shall be and remain effective
notwithstanding any contrary action which may have been taken by the
Bank in reliance upon such payment, and any such contrary action so
taken shall be without prejudice to the Bank's rights under the
Transaction Documents and shall be deemed to have been conditioned
upon such payment having become final and irrevocable. The
provisions of this Section shall survive the termination of this
Agreement and the Transaction Documents.
(d) FURTHER ASSURANCES. From time to time, the Borrower shall take, and
cause its Subsidiaries to take, such action and execute and deliver
to the Bank such additional documents, instruments, certificates,
and agreements as the Bank may reasonably request to effectuate the
purposes of the Transaction Documents.
(e) CUMULATIVE NATURE AND NON-EXCLUSIVE EXERCISE OF RIGHTS AND REMEDIES.
All rights and remedies of the Bank pursuant to this Agreement and
the Transaction Documents shall be cumulative, and no such right or
remedy shall be exclusive of any other such right or remedy. In the
event of any unreconcilable inconsistencies, this Agreement shall
control. No single or partial exercise by the Bank of any right or
remedy pursuant to this Agreement or otherwise shall preclude any
other or further exercise thereof, or any exercise of any other such
right or remedy, by the Bank.
(f) GOVERNING LAW; JURISDICTION. This Agreement has been delivered to
and accepted by the Bank and will be deemed to be made in the State
of New York. Except as otherwise provided under federal law, this
Agreement will be interpreted in accordance with the laws of the
State of New York excluding its conflict of laws rules. BORROWER
HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY
STATE OR FEDERAL COURT IN THE STATE OF NEW YORK IN A COUNTY OR
JUDICIAL DISTRICT WHERE THE BANK MAINTAINS A BRANCH AND CONSENTS
THAT THE BANK MAY EFFECT ANY SERVICE OF PROCESS IN THE MANNER AND AT
BORROWER'S ADDRESS SET FORTH ABOVE FOR PROVIDING NOTICE OR DEMAND;
PROVIDED THAT NOTHING CONTAINED IN THIS AGREEMENT WILL PREVENT THE
BANK FROM BRINGING ANY ACTION, ENFORCING ANY AWARD OR JUDGMENT OR
EXERCISING ANY RIGHTS AGAINST BORROWER INDIVIDUALLY, AGAINST ANY
SECURITY OR AGAINST ANY PROPERTY OF BORROWER WITHIN ANY OTHER
COUNTY, STATE OR OTHER FOREIGN OR DOMESTIC JURISDICTION. Borrower
acknowledges and agrees that the venue provided above is the most
convenient forum for both the Bank and Borrower. Borrower waives any
objection to venue and any objection based on a more convenient
forum in any action instituted under this Agreement.
(g) JOINT AND SEVERAL; SUCCESSORS AND ASSIGNS. If there is more than one
Borrower, each of them shall be jointly and severally liable for all
amounts, which become due, and the performance of all obligations
under this Agreement, and the term "the Borrower" shall include each
as well as all of them. This Agreement shall be binding upon the
Borrower and upon its heirs and legal representatives, its
successors and assignees, and shall inure to the benefit of, and be
enforceable by, the Bank, its successors and assignees and each
direct or indirect assignee or other transferee of any of the
Obligations; provided, however, that this Agreement may not be
assigned by the Borrower without the prior written consent of the
Bank.
(h) WAIVERS; CHANGES IN WRITING. No failure or delay of the Bank in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to enforce
such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power. The Borrower
expressly disclaims any reliance on any course of dealing or usage
of trade or oral representation of the Bank (including
representations to make loans to the Borrower) and agrees that none
of the foregoing shall operate as a waiver of any right or remedy of
the Bank. No notice to or demand on the Borrower in any case shall
entitle the Borrower to any other or further notice or demand in
similar or other circumstances. No waiver of any provision of this
Agreement or consent to any departure by the Borrower therefrom
shall in any event be effective unless made specifically in writing
by the Bank and then such waiver or consent shall be effective only
in the specific instance and for the purpose for which given. No
modification to any provision of this Agreement shall be effective
unless made in writing in an agreement signed by the Borrower and
the Bank.
(i) INTERPRETATION. Unless the context otherwise clearly requires,
references to plural includes the singular and references to the
singular include the plural; references to "individual" shall mean a
natural person and shall include a natural person doing business
under an assumed name (e.g., a "DBA"); the word "or" has the
inclusive meaning represented by the phrase "and/or"; the word
"including", "includes" and "include" shall be deemed to be followed
by the words "without limitation"; and captions or section headings
are solely for convenience and not part of the substance of this
Agreement. Any representation, warranty, covenant or agreement
herein shall survive execution and delivery of this Agreement and
shall be deemed continuous. Each provision of this Agreement shall
be interpreted as consistent with existing law and shall be deemed
amended to the extent necessary to comply with any conflicting law.
If any provision nevertheless is held invalid, the other provisions
shall remain in effect. The Borrower agrees that in any legal
proceeding, a photocopy of this Agreement kept in the Bank's course
of business may be admitted into evidence as an original.
(j) WAIVER OF JURY TRIAL. THE BORROWER AND THE BANK HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVE ANY RIGHT TO TRIAL BY JURY THE
BORROWER AND THE BANK MAY HAVE IN ANY ACTION OR PROCEEDING, IN LAW
OR IN EQUITY, IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTIONS
RELATED HERETO. THE BORROWER REPRESENTS AND WARRANTS THAT NO
REPRESENTATIVE OR AGENT OF THE BANK HAS REPRESENTED, EXPRESSLY OR
OTHERWISE, THAT THE BANK WILL NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THIS JURY TRIAL WAIVER. THE BORROWER ACKNOWLEDGES THAT
THE BANK HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE PROVISIONS OF THIS SECTION.
ACKNOWLEDGMENT. Borrower acknowledges that it has read and understands all the
provisions of this Agreement, including the GOVERNING LAW, JURISDICTION and
WAIVER OF JURY TRIAL, and has been advised by counsel as necessary or
appropriate.
MANUFACTURERS AND TRADERS TRUST COMPANY
/s/ ▇▇▇ ▇. ▇▇▇▇▇
----------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
THE PEOPLES PUBLISHING GROUP, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial Officer
SCHEDULE
Additional Representations and Warranties (Section 4)
NONE
Additional Affirmative Covenants (Section 5)
NONE
Permitted Indebtedness (Section 6(a))
Existing and Future Capitalized Lease Obligations
Permitted Guaranties (Section 6(b))
NONE
Permitted Liens (Section 6(c))
Existing and Future Capitalized Lease Obligations
Permitted Investments (Section 6(d))
Indebtedness entitled to the full faith and credit of the United States.
Indebtedness which has at least the second highest rating of nationally
recognized rating agency.
Investments disclosed to Lender in writing existing on the date of this
Agreement.
Certificates of deposit or banker's acceptances issued by any commercial
bank organized under the law of the United States or any State thereof which has
(i) combined capital and surplus of at least $100,000,000, and (ii) a credit
rating with respect to its unsecured indebtedness from a nationally recognized
rating service that is satisfactory to the Lender.
Other readily marketable Investments in debt securities, certificates of
deposit, commercial paper or repurchase agreements (including any such
Investments issued or guaranteed by non-United States governments or stated in
non-United States currencies).
Purchases or redemption of shares of common stock of Peoples Educational
Holdings, Inc. so long as both before and after giving effect thereto, no Event
of Default will have occurred or be continuing.
Permitted Loans (Section 6(e))
Loans to executive officers as provided in existing employment agreements
and disclosed in Form 10-KSB filed March 25, 2005 with the SEC by Peoples
Educational Holdings, Inc.
Permitted Distributions (Section 6(f))
Cash dividends so long as both before and after giving effect thereto, no
Event of Default will have occurred or be continuing.
Owned Intellectual Property (Section 5(a))
Licensed Intellectual Property (Section 5(a))
NONE
Additional Financial Covenants (Section 7)
NONE