Exhibit 10.48
SUBROGATION AGREEMENT
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THIS SUBROGATION AGREEMENT (this "Agreement") is made effective as of
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the __ day of March, 1998, by and between Mellon Bank, N.A. ("Mellon") and Bank
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of America National Trust & Savings Association, individually ("Bank of
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America") and as agent ("Agent"), on behalf of all the lenders from time to time
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(the "Lenders") under that certain Credit Agreement dated as of the date hereof
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(as such agreement may be amended, supplemented or otherwise modified from time
to time, the "Credit Agreement") by and among Agent, the Lenders, KFI Holding
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Corporation, a Delaware corporation (the "Borrower"), Klearfold, Inc., a
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Pennsylvania corporation (the "Company") and AGI Incorporated, an Illinois
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corporation. Each term used but not otherwise defined herein shall have the
meaning ascribed to it by the Credit Agreement.
W I T N E S S E T H:
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WHEREAS, Mellon has established that certain Irrevocable Letter of
Credit No. S854302 dated as of August 21, 1997 in the amount of $4,078,440.00
(the "Mellon L/C"), for the account of Klearfold, Inc. (the "Company"), in favor
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of Mellon, as trustee (the "Trustee") under the Indenture of Trust dated as of
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August 1, 1997 between the Trustee and the Bucks County Industrial Development
Authority pursuant to which certain bonds (the "Bonds") were issued;
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WHEREAS, in connection with the issuance of the Mellon L/C, Mellon in
its capacity as letter of credit issuer and the Company entered into that
certain Letter of Credit and Reimbursement Agreement dated as of August 1, 1997
(the "Reimbursement Agreement");
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WHEREAS, in connection with the transactions contemplated under the
Credit Agreement, Bank of America has established a letter of credit dated of
even date herewith in substantially the form of Exhibit A hereto in the amount
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of $4,064,440.00 for the account of the Company and in favor of Mellon (the
"Backup L/C") in its capacity as letter of credit issuer which may be drawn upon
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by Mellon in the event that the Mellon L/C is drawn upon;
NOW, THEREFORE, in consideration of the mutual conditions and
agreements set forth in this Agreement, and for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, Mellon and the
Agent (on behalf of the Lenders) hereby agree as follows.
1. Subrogation. Upon satisfaction and payment to Mellon of all of
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the Company's obligations under the Reimbursement Agreement (the "Payment
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Date"), the Agent (on behalf of the Lenders) shall, with respect to any amounts
drawn upon by Mellon pursuant to the Backup L/C, be subrogated to all of
Mellon's right, title and interest in, to and under (i) the Reimbursement
Agreement, (ii) any pledge agreement pledging the Bonds to Mellon and any Bonds
pledged thereunder, and (iii) any other mortgages, deeds of trust, guarantees or
other security documents in favor of Mellon or funds or trust accounts of any
kind executed or created in connection with the Mellon L/C in favor of Mellon,
and the Reimbursement Agreement and the other agreements with respect to the
Bonds, including, but not limited to, any rights and remedies,
if any, Mellon may have in regard to any collateral security granted by the
Borrower, the Company or any other person or entity in connection with any of
the foregoing.
In furtherance of such subrogation rights, promptly following payment
by Bank of America to Mellon of the full amount drawn under the Backup L/C,
Mellon shall if requested by the Agent (a) assign to the Agent (on behalf of the
Lenders) with respect to any payment made by Mellon and pursuant to
documentation in form and substance reasonably acceptable to Agent and Mellon,
all of its right, title and interest in, to and under any pledge agreement, any
Bonds, any mortgages and all other ancillary loan and/or security agreements and
instruments executed by or in favor of Mellon in connection with the Mellon L/C,
including, without limitation, of all the agreements set forth on Exhibit B
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hereto (the "Mellon Security Agreements") and (b) shall not thereafter release
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any Bonds pledged to Mellon unless it receives the prior written consent of the
Agent. Any such Assignment shall be without any representation or warranty by
Mellon and without recourse to Mellon.
2. Back-up Letter of Credit. Agent agrees that as of the date
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hereof it shall deliver to Mellon a fully executed and effective Backup L/C
which was issued by Bank of America National Trust & Savings Association on the
date hereof.
3. Mellon Letter of Credit. Mellon hereby agrees that unless it has
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received the prior written consent of Agent or has attempted to draw against the
Backup L/C pursuant to conforming drawing certificates under such Backup L/C
(and Bank of America has failed to honor such draw) it shall not take any action
of any kind against any collateral or other property pledged or mortgaged to it
by the Borrower, the Company or in which it has been granted a security
interest, pursuant to any of the Mellon Security Agreements. Mellon further
agrees that if it draws against the Backup L/C due to the fact that the Backup
L/C will expire and no substitute L/C has been provided (all as more fully
described as one of the drawing conditions in the Backup L/C), then Mellon
agrees to hold all funds received under the Backup L/C solely as cash collateral
for its obligations under the Mellon L/C and to promptly after making such
drawing send written notice to the Trustee of the holders of the Bonds notifying
the Trustee that a default has occurred under the Reimbursement Agreement and
requesting the Trustee to make a drawing under the Mellon L/C.
4. Reinstatement of L/C Amounts; Amendment of Mellon Documents. (a)
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Mellon will not agree to reinstate any amounts drawn on the Mellon L/C without
the prior written consent of Agent, except for interest draws to the extent the
amount so drawn has been repaid to Mellon in cash by the Company or, the Agent
or the Lenders, and will take all steps necessary to ensure that no such
reinstatement shall occur thereunder including without limitation, providing
appropriate notices to the Trustee or otherwise in accordance with the Mellon
L/C.
(b) Mellon and the Company have entered into an amendment to the
Reimbursement Agreement (and the other documents in connection therewith) in
substantially the form of Exhibit C hereto, and agree that they will not further
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amend the Reimbursement Agreement, or the other documents in connection
therewith in any material respect without the prior written consent of Agent.
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(c) Notwithstanding anything herein to the contrary, Mellon will not
be required to take any action in contravention of its obligations under the
Bond Documents (as such term is defined in the Reimbursement Agreement).
5. Default Waiver. Mellon hereby waives any defaults or breaches
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existing as of the date hereof under the Reimbursement Agreement (and the other
documents in connection therewith), and acknowledges that the fact that the
Borrower and the Company have entered into the Credit Agreement and the other
documents in connection therewith or granted to Agent, on behalf of the Lenders,
a security interest in and lien upon substantially all their properties and
assets shall not constitute a default or breach under the Reimbursement
Agreement, the Mellon Security Agreements (or the other documents in connection
therewith).
6. Indemnity. Agent hereby agrees to indemnify Mellon for any
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liability, claims or expenses incurred by Mellon as a direct result of (i)
Mellon following the written instructions of Agent or (ii) any actions taken by
Agent in its capacity as a subrogee of Mellon under this Agreement; provided,
however, no indemnity will exist under this Section 6 for liabilities, claims or
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expenses caused by the gross negligence or willful misconduct of Mellon, or any
agent, employee or representative of Mellon.
7. Successors and Assigns. This Agreement shall be binding upon the
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parties hereto and their successors and assigns, but cannot be assigned without
the prior written consent of all parties hereto.
8. Severability. The illegality or unenforceability of any provision
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of this Agreement shall not in any way affect or impair the legality or
enforceability of the remaining provisions of this Agreement.
9. Governing Law. THIS AGREEMENT SHALL BE INTERPRETED AND THE RIGHTS
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AND LIABILITIES OF THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE INTERNAL
LAWS (AS OPPOSED TO THE CONFLICT OF LAWS PROVISIONS) OF THE COMMONWEALTH OF
PENNSYLVANIA.
10. Counterparts; Headings. This Agreement may be executed in any
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number of counterparts, and by the Agent, the Company, the Borrower, and Mellon
in separate counterparts, each of which shall be an original, but all of which
shall together constitute one and the same agreement. The headings and section
titles to the various paragraphs of this Agreement are only for the convenience
of the reader, and shall have no substantive effect or meaning of any kind in
interpreting the terms of this Agreement.
11. Release. The Company, the Borrower and the Agent and IMPAC
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Group, Inc. hereby agree that Mellon is released from and shall not be liable to
either of them in connection with Mellon's performance of its obligations under
this Agreement or from following the written instructions of Agent given
pursuant hereto.
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12. Capacity. Mellon is executing this Agreement solely in its
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capacity as issuer of the Mellon L/C and not as Trustee. This Agreement shall
not affect the rights or obligations of Mellon as Trustee.
(Signature Page Follows)
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their duly authorized officers on the date first
written above.
MELLON BANK, N.A.,
in its capacity as issuer of the Mellon L/C
By: Signature Illegible
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Name:
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Its: Vice President
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BANK OF AMERICA NATIONAL TRUST & SAVINGS
ASSOCIATION, as Agent on behalf of the
Lenders
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Its: Vice President
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ACKNOWLEDGED AND AGREED TO:
KLEARFOLD, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Its: President
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IMPAC GROUP, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
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Its: President
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EXHIBIT A
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Form of BofA Letter of Credit
EXHIBIT B
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Security Documents
[Mellon to complete]
EXHIBIT C
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Form of Amendment to Reimbursement Agreement