Exhibit 10.1
SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
This SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT dated as of
January 16, 2007 (the "Agreement"), is executed by and among KABLE MEDIA
SERVICES, INC., a Delaware corporation ("KMS"), KABLE NEWS COMPANY, INC., an
Illinois corporation ("KNC"), KABLE DISTRIBUTION SERVICES, INC., a Delaware
corporation ("KDS"), KABLE NEWS EXPORT, LTD., a Delaware corporation ("KEXP"),
KABLE NEWS INTERNATIONAL, INC., a Delaware corporation ("▇▇▇▇"), ▇▇▇▇▇
FULFILLMENT SERVICES, INC., a Delaware corporation ("KFS"), KABLE FULFILLMENT
SERVICES OF OHIO, INC., a Delaware corporation ("KFSO"), PALM COAST DATA HOLDCO,
INC., a Delaware corporation ("PCD"), and PALM COAST DATA, LLC a Delaware
limited liability company ("PCD LLC") (collectively, the "Borrowers"), and
LASALLE BANK NATIONAL ASSOCIATION, a national banking association (the
"Lender"), whose address is ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
R E C I T A L S:
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A. The Lender and KNC, KDS, KEXP, ▇▇▇▇, KFS and KFSO are parties to Amended
and Restated Loan and Security Agreement dated as of April 28, 2005, as amended
by First Amendment to Amended and Restated Loan and Security Agreement dated
April 27, 2006 and as amended, modified or supplemented from time to time (the
"Existing Loan Agreement") and other agreements dated as of April 28, 2005.
B. The Borrowers have applied for a joint and several (i) revolving credit
facility from the Lender consisting of a revolving credit loan and letters of
credit in an aggregate principal amount of up to $35,000,000.00 to be used, in
part, to fund a portion of the acquisition by KMS of PCD and its subsidiary,
PCD, LLC and for working capital needs, (ii) secured term loan of $3,036,000.00,
(iii) a capital expenditure line of credit from the Lender in an amount of up to
$1,500,000.00 to finance the cost of new Equipment and (iv) a revolving credit
loan in an amount not to exceed the lesser of (A) $10,000,000.00 and (B) the
▇▇▇▇▇ Borrowing Base.
C. The Borrowers have requested that the Lender amend and restate the
Existing Loan Agreement to (i) cancel the existing credit facilities, (ii)
consolidate, in part, the revolving credit facilities and certain existing term
debt and (iii) add KMS, PCD and PCD, LLC as additional Borrowers.
D. The Lender is willing to do the same on the terms and subject to the
conditions contained herein and in the other agreements, documents and
instruments contemplated under the terms of this Agreement.
NOW THEREFORE, in consideration of the premises, and the mutual covenants
and agreements set forth herein, the Borrowers and the Lender agree as follows:
A G R E E M E N T S:
Section 1. DEFINITIONS.
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1.1 Defined Terms. For the purposes of this Agreement, the following
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capitalized words and phrases shall have the meanings set forth below.
"Account Debtor" shall mean any Person who is and/or may become obligated
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to any of the Borrowers under or on account of any of the Accounts.
"Accounts" shall mean trade accounts receivable of any of the Borrowers
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arising out of the bona fide sale of goods and/or performance of services in the
ordinary course of such Borrower's business which have been invoiced by such
Borrower.
"Acquisition" shall mean any transaction or series of related transactions
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for the purpose of or resulting, directly or indirectly, in (a) the acquisition
of all or substantially all of the assets of a Person, or of all or
substantially all of any business or division of a Person, (b) the acquisition
of in excess of 50% of the Capital Securities of any Person, or otherwise
causing any Person to become a Subsidiary, or (c) a merger or consolidation or
any other combination with another Person (other than a Person that is already a
Subsidiary).
"Affiliate" of any Person shall mean (a) any other Person which, directly
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or indirectly, controls or is controlled by or is under common control with such
Person, (b) any officer or director of such Person, and (c) with respect to the
Lender, any entity administered or managed by the Lender, or an Affiliate or
investment advisor thereof and which is engaged in making, purchasing, holding
or otherwise investing in commercial loans. A Person shall be deemed to be
"controlled by" any other Person if such Person possesses, directly or
indirectly, power to direct or cause the direction of the management and
policies of such Person whether by contract, ownership of voting securities,
membership interests or otherwise.
"Applicable Margin" shall mean, for any day, the rate per annum added to
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LIBOR or Fixed LIBOR to determine the Facility A Interest Rate, Facility C
Interest Rate and Facility D Interest Rate as determined by the ratio of average
daily Senior Debt of the Borrowers for the prior fiscal quarter to EBITDA for
the prior twelve months as set forth below opposite the level (the "Level") then
in effect; it being understood that the Applicable Margin for (i) LIBOR Loans
and Fixed LIBOR Loans shall be the percentage set forth under the column
"LIBOR", (ii) Prime Rate Loans shall be the percentage set forth under the
column "Prime", and (iii) the Non-Utilization Fee Rate shall be the percentage
set forth under the column "Non-Use Fee":
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Ratio of Average Daily Spread over: Spread over: Non-Use Fee
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Level Senior Debt/TTM EBITDA LIBOR Prime (Revolvers A
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and D)
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I > 2.25 to 1 250 bps 0 bps 25 bps
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II > 1.50 to 1 and < 2.25 to 1 225 bps 0 bps 25 bps
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III > 1.00 to 1 and < 1.50 to 1 200 bps 0 bps 25 bps
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IV > .50 to 1 and < 1.00 to 1 175 bps 0 bps 25 bps
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V < .50 to 1 150 bps 0 bps 25 bps
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provided that until receipt of the January 31, 2007 financial statements and
compliance certificate, the applicable interest rate margins shall be those
corresponding to Level III.
"Asset Disposition" shall mean the sale, lease, assignment or other
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transfer for value (each a "Disposition") by the Borrowers to any Person (other
than any other Borrower or any Subsidiary that becomes a Borrower) of any asset
or right of the Borrowers (including, the loss, destruction or damage of any
thereof or any actual or threatened (in writing to the Borrowers) condemnation,
confiscation, requisition, seizure or taking thereof), other than (a) the
Disposition of any asset which is to be replaced, and is in fact replaced,
within one hundred eighty (180) days with another asset performing the same or a
similar function unless Borrowers reasonably decide they no longer need it for
the continued operation of their business, (b) the sale or lease of Inventory in
the ordinary course of business, (c) leases and licenses in the ordinary course
of business, (d) Investments permitted under this Agreement, (e) use of cash in
the ordinary course of business, (f) Restricted Payments permitted under this
Agreement and (g) other Dispositions in any fiscal year the net proceeds of
which do not in the aggregate exceed One Million Dollars ($1,000,000) provided,
that the Borrowers may exceed such limit upon prior receipt of written consent
thereto from the Lender.
"Bankruptcy Code" shall mean the United States Bankruptcy Code, as now
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existing or hereafter amended.
"▇▇▇▇▇" shall mean ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Verlag Beteilgungs GMBH, a German
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corporation authorized to do business in New Jersey.
"▇▇▇▇▇ Accounts" shall mean all accounts receivable of KDS from wholesalers
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or other direct customers of KDS representing a right to payment of a monetary
obligation as shown on KDS' statements to such wholesalers or other customers
arising solely from the distribution, sale or other disposition by KDS of
magazines provided by ▇▇▇▇▇ in connection with the ▇▇▇▇▇ Distribution Agreement.
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"▇▇▇▇▇ Borrowing Base" shall mean 40% of the unpaid amount of all otherwise
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eligible ▇▇▇▇▇ Accounts (subject to the ▇▇▇▇▇ Sublimit Amount).
"▇▇▇▇▇ Distribution Agreement" shall mean the Distribution Agreement dated
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as of January 3, 2006 between ▇▇▇▇▇ and KDS, as the same may be amended,
supplemented or otherwise modified from time to time.
"▇▇▇▇▇ Event of Default" shall mean a material default as defined in the
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▇▇▇▇▇ Distribution Agreement or other default by KDS under the ▇▇▇▇▇
Distribution Agreement if it becomes the basis of an Act of Enforcement (as
defined in the Intercreditor Agreement).
"▇▇▇▇▇ Sublimit Amount" means a maximum advance under the Facility D Loan
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for ▇▇▇▇▇ Accounts of $10,000,000.
"Borrowing Base" shall mean an amount equal to the lesser of (i)
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$35,000,000 and (ii) the total of (a) 85% of the unpaid amount (net of such
reserves and allowances as the Lender deems necessary in its reasonable
discretion) of all Eligible Domestic Accounts plus (b) 60% of the unpaid amount
(net of such reserves and allowances as the Lender deems necessary in its
reasonable discretion) of all Eligible Foreign Accounts (subject to a maximum
advance of US$3,000,000). Lender reserves the right to amend the initial advance
rate of the Borrowing Base for PCD, LLC Accounts within thirty (30) days of the
completion of the field audit examination of PCD, LLC.
"Borrowing Base Certificate" shall mean a certificate to be signed by the
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Borrowers certifying to the accuracy of the Borrowing Base amount and the ▇▇▇▇▇
Borrowing Base, in form reasonably satisfactory to the Lender.
"Business Day" shall mean any day other than a Saturday, Sunday or a legal
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holiday on which banks are authorized or required to be closed for the conduct
of commercial banking business in Chicago, Illinois or solely to establish
LIBOR, in London, England.
"Canadian Subsidiary" shall mean Kable News Company of Canada, Ltd., a
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corporation organized under the laws of the Province of Ontario, Canada.
"Capital Expenditures" shall mean all expenditures (including Capitalized
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Lease Obligations) which, in accordance with GAAP, would be required to be
capitalized and shown on the consolidated balance sheet of the Borrowers, but
excluding expenditures made in connection with the replacement, substitution or
restoration of assets to the extent financed (i) from insurance proceeds (or
other similar recoveries) paid on account of the loss of or damage to the assets
being replaced or restored or (ii) with awards of compensation arising from the
taking by eminent domain or condemnation of the assets being replaced.
"Capital Lease" shall mean, as to any Person, a lease of any interest in
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any kind of property or asset, whether real, personal or mixed, or tangible or
intangible, by such Person, as lessee, that is, or should be, in accordance with
Financial Accounting Standards Board Statement No. 13, as amended from time to
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time, or, if such statement is not then in effect, such statement of GAAP as may
be applicable, recorded as a "capital lease" on the balance sheet of such Person
prepared in accordance with GAAP.
"Capital Securities" shall mean, with respect to any Person, all shares,
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interests, participations or other equivalents (however designated, whether
voting or non-voting) of such Person's capital, whether now outstanding or
issued or acquired after the date hereof, including common shares, preferred
shares, membership interests in a limited liability company, limited or general
partnership interests in a partnership or any other equivalent of such ownership
interest.
"Capitalized Lease Obligations" shall mean, as to any Person, all rental
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obligations of such Person, as lessee under a Capital Lease which are or will be
required to be capitalized on the balance sheet of such Person.
"Cash Collateralize" shall mean to deliver cash collateral to the Lender,
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to be held as cash collateral for outstanding Letters of Credit, pursuant to
documentation reasonably satisfactory to the Lender. Derivatives of such term
have corresponding meanings.
"Cash Equivalent Investment" shall mean, at any time, (a) any evidence of
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Debt, maturing not more than one year after such time, issued or guaranteed by
the United States government or any agency thereof, (b) commercial paper,
maturing not more than one year from the date of issue, or corporate demand
notes, in each case (unless issued by the Lender or its holding company) rated
at least A-l by Standard & Poor's Ratings Services, a division of The
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc. or P-l by ▇▇▇▇▇'▇ Investors Service, Inc., (c) any
certificate of deposit, time deposit or banker's acceptance, maturing not more
than one year after such time, or any overnight Federal Funds transaction that
is issued or sold by the Lender or its holding company (or by a commercial
banking institution that is a member of the Federal Reserve System and has a
combined capital and surplus and undivided profits of not less than
$500,000,000), (d) any repurchase agreement entered into with the Lender, or
other commercial banking institution of the nature referred to in clause (c),
which (i) is secured by a fully perfected security interest in any obligation of
the type described in any of clauses (a) through (c) above, and (ii) has a
market value at the time such repurchase agreement is entered into of not less
than 100% of the repurchase obligation of the Lender, or other commercial
banking institution, thereunder, (e) money market accounts or mutual funds which
invest primarily in assets satisfying the foregoing requirements, and (f) other
short term liquid investments approved in writing by the Lender.
"Change of Control" shall mean the occurrence of any of the following
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events: (a) KMS shall cease to own and control, directly or indirectly, 100% of
the outstanding Capital Securities of KDS; (b) KDS shall cease to, directly or
indirectly, own and control 100% of each class of the outstanding Capital
Securities of KEXP and ▇▇▇▇ or of the surviving or resulting corporation in the
event of their merger or consolidation; (c) KMS shall cease to own and control,
directly or indirectly, 100% of the outstanding Capital Securities of KNC; (d)
KNC shall cease to, directly or indirectly, own and control 100% of each class
of the outstanding Capital Securities of KFS and KFSO or of the surviving or
resulting corporation in the event of their merger or consolidation or (e) the
granting by KMS, directly or indirectly, of a security interest in its ownership
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interest in any of the Borrowers, which could result in a change in the identity
of the individuals or entities in control of such Borrower. For the purpose
hereof, the terms "control" or "controlling" shall mean the possession of the
power to direct, or cause the direction of, the management and policies of the
Borrower(s) by contract or voting of securities or ownership interests.
"Collateral" shall mean, with respect to any Borrower, any and all of their
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respective property, of any kind or description, tangible or intangible,
wheresoever located and whether now existing or hereafter arising or acquired,
along with the products and proceeds therefrom, including, but not limited to,
the following:
(a) all property of, or for the account of, such Borrower now or
hereafter coming into the possession, control or custody of, or in transit
to, the Lender or any agent or bailee for the Lender or any parent,
Affiliate or Subsidiary of the Lender or any participant with the Lender in
the Loans (whether for safekeeping, deposit, collection, custody, pledge,
transmission or otherwise), including all earnings, dividends, interest, or
other rights in connection therewith and the products and proceeds
therefrom, including the proceeds of insurance thereon; and
(b) the additional property of such Borrower, whether now existing or
hereafter arising or acquired, and wherever now or hereafter located,
together with all additions and accessions thereto, substitutions,
betterments and replacements therefor, products and Proceeds therefrom, and
all of such Borrower's books and records and recorded data relating thereto
(regardless of the medium of recording or storage), together with all of
the Borrower's right, title and interest in and to all computer software
required to utilize, create, maintain and process any such records or data
on electronic media, identified and set forth as follows:
(i) All Accounts and all Goods whose sale, lease or other
disposition by such Borrower has given rise to Accounts and have been
returned to, or repossessed or stopped in transit by, such Borrower,
or rejected or refused by an Account Debtor;
(ii) All Inventory, including, without limitation, raw materials,
work-in-process and finished goods;
(iii) All Goods (other than Inventory), including, without
limitation, embedded software, Equipment, vehicles, furniture and
Fixtures;
(iv) All Software and computer programs;
(v) All Securities, Investment Property, Financial Assets and
Deposit Accounts;
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(vi) All Chattel Paper, Electronic Chattel Paper, Instruments,
Documents, Letter of Credit Rights, all proceeds of letters of credit,
Health-Care-Insurance Receivables, Supporting Obligations, notes
secured by real estate, Commercial Tort Claims, intellectual property
including copyrights and General Intangibles, including Payment
Intangibles; and
(vii) All Proceeds (whether Cash Proceeds or Noncash Proceeds) of
the foregoing property, including, without limitation, all insurance
policies and proceeds of insurance payable by reason of loss or damage
to the foregoing property, including unearned premiums, and of eminent
domain or condemnation awards.
Notwithstanding the foregoing, Collateral shall not include (A) any real
property of any of the Borrowers, (B) any property of or for account of, or any
Borrower's interest in the Capital Securities of any other Borrower or any
Subsidiary of any Borrower, including the Canadian Subsidiary.
"Collateral Access Agreement" shall mean an agreement in form and substance
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reasonably satisfactory to the Lender pursuant to which a mortgagee or lessor of
real property on which Collateral is stored or otherwise located, or a
warehouseman, processor or other bailee of Inventory or other property owned by
the Borrowers, acknowledges the Liens of the Lender and waives any Liens held by
such Person on such property, and, in the case of any such agreement with a
mortgagee or lessor, permits the Lender reasonable access to and use of such
real property following the occurrence and during the continuance of an Event of
Default, to assemble, complete and sell any collateral stored or otherwise
located thereon.
"Compliance Certificate" shall mean a Compliance Certificate in
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substantially the form of Exhibit A.
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"Contingent Liability" and "Contingent Liabilities" shall mean,
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respectively, each obligation and liability of the Borrowers and all such
obligations and liabilities of the Borrowers incurred pursuant to any agreement,
undertaking or arrangement by which the Borrower: (a) guarantees, endorses or
otherwise becomes or is contingently liable upon (by direct or indirect
agreement, contingent or otherwise, to provide funds for payment, to supply
funds to, or otherwise to invest in, a debtor, or otherwise to assure a creditor
against loss) the indebtedness, dividend, obligation or other liability of any
other Person in any manner (other than by endorsement of instruments in the
course of collection), including without limitation, any indebtedness, dividend
or other obligation which may be issued or incurred at some future time; (b)
guarantees the payment of dividends or other distributions upon the shares or
ownership interest of any other Person; (c) undertakes or agrees (whether
contingently or otherwise): (i) to purchase, repurchase, or otherwise acquire
any indebtedness, obligation or liability of any other Person or any property or
assets constituting security therefor, (ii) to advance or provide funds for the
payment or discharge of any indebtedness, obligation or liability of any other
Person (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain solvency, assets, level of income,
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working capital or other financial condition of any other Person, or (iii) to
make payment to any other Person other than for value received; (d) agrees to
lease property or to purchase securities, property or services from such other
Person with the purpose or intent of assuring the owner of such indebtedness or
obligation of the ability of such other Person to make payment of the
indebtedness or obligation; (e) to induce the issuance of, or in connection with
the issuance of, any letter of credit for the benefit of such other Person; or
(f) undertakes or agrees otherwise to assure a creditor against loss. The amount
of any Contingent Liability shall (subject to any limitation set forth herein)
be deemed to be the outstanding principal amount (or maximum permitted principal
amount, if larger) of the indebtedness, obligation or other liability guaranteed
or supported thereby.
"Cost of Funds Rate" shall mean a fixed rate of interest based upon the
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then-current cost of funds index of the Lender for a four-year period.
"Debt" shall mean, as to any Person, without duplication, (a) all
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indebtedness of such Person; (b) all borrowed money of such Person (including
principal, interest, fees and charges), whether or not evidenced by bonds,
debentures, notes or similar instruments; (c) all obligations to pay the
deferred purchase price of property or services; (d) all obligations, contingent
or otherwise, with respect to the maximum face amount of all letters of credit
(whether or not drawn), bankers' acceptances and similar obligations issued for
the account of such Person (including the Letters of Credit), and all unpaid
drawings in respect of such letters of credit, bankers' acceptances and similar
obligations; (e) all indebtedness secured by any Lien on any property owned by
such Person, whether or not such indebtedness has been assumed by such Person
(provided, however, if such Person has not assumed or otherwise become liable in
respect of such indebtedness, such indebtedness shall be deemed to be in an
amount equal to fair market value of the property subject to such Lien at the
time of determination); (f) the aggregate amount of all Capitalized Lease
Obligations of such Person; (g) all Contingent Liabilities of such Person,
whether or not reflected on its balance sheet; (h) all Hedging Obligations of
such Person; (i) all Debt of any partnership of which such Person is a general
partner unless it is non-recourse to the general partner; and (j) all monetary
obligations of such Person under (i) a so-called synthetic, off-balance sheet or
tax retention lease, or (ii) an agreement for the use or possession of property
(other than an operating lease) creating obligations that do not appear on the
balance sheet of such Person but which, upon the insolvency or bankruptcy of
such Person, would be characterized as the indebtedness of such Person (without
regard to accounting treatment). Notwithstanding the foregoing, Debt shall not
include (A) trade payables and accrued expenses incurred by such Person in
accordance with customary practices and in the ordinary course of business of
such Person, or (B) accumulated other comprehensive loss with respect to any
unpaid liabilities relating to any Employee Plan of any Borrower as would be
shown on a consolidated balance sheet of the Borrowers prepared in accordance
with GAAP.
"Default Rate" shall mean a per annum rate of interest equal to the Prime
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Rate plus two percent (2.00%).
"Depreciation" shall mean the total amounts added to depreciation,
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amortization, obsolescence, valuation and other proper reserves, as reflected on
each of the Borrower's financial statements and determined in accordance with
GAAP.
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"EBITDA" shall mean, for any specified period, the sum of the following for
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such period: (a) Net Income, plus (b) Interest Charges; plus (c) federal and
state income taxes (including the Illinois replacement tax); plus (d)
Depreciation; plus (e) non-cash management compensation expense; plus (f) all
other non-cash charges, in each case to the extent included in determining Net
Income for such period. For purposes of determining compliance with Section 10.3
of this Agreement as of the end of any fiscal quarter, EBITDA for the 12-month
period ending at the end of any such fiscal quarter shall include on a pro-forma
bases EBITDA of PCD for any portion of such 12-month period that is prior to the
acquisition by KMS of PCD and PCD, LLC. For the purpose hereof, EBITDA of PCD
for the 12-month period preceding such acquisition shall be deemed to be
$7,000,000, accumulated ratably over such 12-month period.
"Eligible Account" and "Eligible Accounts" shall mean each Account and all
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such Accounts (exclusive of sales, excise or other similar taxes) owing to any
of the Borrowers which meets each of the following requirements:
(a) it is genuine in all respects and has arisen in the ordinary
course of the Borrower's business from (i) the performance of services by
the Borrowers, which services have been fully performed, acknowledged and
accepted by the Account Debtor or (ii) the sale, license, assignment or
lease of Goods or Software by the Borrowers, including C.O.D. sales, which
Goods have been completed in accordance with the Account Debtor's
specifications (if any) and delivered to and accepted by the Account
Debtor, and the Borrowers have possession of, or have delivered to the
Lender at the Lender's request, shipping and delivery receipts evidencing
such delivery;
(b) it is subject to a perfected (except in the case of Eligible
Foreign Accounts), first priority Lien in favor of the Lender and is not
subject to any other assignment, claim or Lien;
(c) it is the valid, legally enforceable and unconditional obligation
of the Account Debtor with respect thereto, and is not subject to the
fulfillment of any condition whatsoever or any counterclaim, credit (except
as provided in subsection (h) of this definition), trade or volume
discount, allowance, discount, rebate or adjustment by the Account Debtor
with respect thereto, or to any claim by such Account Debtor denying
liability thereunder in whole or in part and, with respect to any Account
other than a Account, the Account Debtor has not refused to accept and/or
has not returned or offered to return any of the Goods or services which
are the subject of such Account;
(d) the Account Debtor with respect thereto is a resident or citizen
of, and is located within, the United States, Canada (other than Quebec or
Inuit), Australia, Belgium, the Caribbean Islands of the Bahamas, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, the United Kingdom,
Germany, Spain, Switzerland, Norway, Portugal, Sweden, Greece, Italy,
Singapore, Mexico or New Zealand, unless the sale of goods or services
giving rise to such Account is on letter of credit, banker's acceptance or
other credit support terms reasonably satisfactory to the Lender;
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(e) it is not an Account (i) arising from a "sale on approval", "sale
or return", "consignment", or "guaranteed sale", or are subject to any
other repurchase or return agreement or (ii) arising from a "▇▇▇▇ and
hold";
(f) it is not an Account with respect to which possession and/or
control of the goods sold giving rise thereto is held, maintained or
retained by the Borrower (or by any agent or custodian of the Borrower) for
the account of, or subject to, further and/or future direction from the
Account Debtor with respect thereto;
(g) it arises out of contracts with the United States or any
department, agency or instrumentality thereof (including the branches of
the United States military) but only to the extent that such Accounts do
not exceed an aggregate face amount of $1,000,000, unless the Borrowers
have assigned its right to payment of such Account to the Lender pursuant
to the Assignment of Claims Act of 1940, and evidence (reasonably
satisfactory to the Lender) of such assignment has been delivered to the
Lender, or any state, county, city or other governmental body, or any
department, agency or instrumentality thereof (to the extent that such
Accounts exceed an aggregate face amount of $1,000,000);
(h) if the Borrower maintains a credit limit for an Account Debtor,
the aggregate dollar amount of Accounts due from such Account Debtor,
including such Account, does not exceed such credit limit;
(i) if the Account is evidenced by chattel paper or an instrument, the
originals of such chattel paper or instrument shall have been endorsed
and/or assigned and delivered to the Lender or, in the case of electronic
chattel paper, shall be in the control of the Lender, in each case in a
manner satisfactory to the Lender;
(j) it is an Account stated in a monthly statement or an Account
invoiced (and dated as of such date) and, in each case, sent to the Account
Debtor thereof within the Borrowers' normal monthly billing cycle, but in
no event later than thirty (30) days after the shipment and delivery to the
Account Debtor of the Goods giving rise thereto or the performance of the
services giving rise thereto and (i) as to KDS and its Subsidiaries which
is due and payable within ninety (90) days past the original invoice date
(otherwise known as the monthly statement date) thereof, (ii) in the case
of Accounts pertaining to KNC, KFS, KFSO and PCD LLC the Account is
evidenced by an invoice which is due and payable within forty-five (45)
days after the invoice date and is no more than sixty (60) days past the
due date of the invoice, and (iii) in the case of Eligible Foreign
Accounts, is evidenced by an invoice which is due and payable within one
hundred and twenty (120) days after the invoice date, in each case
according to the original terms of sale;
(k) it is not an Account with respect to an Account Debtor that is
located in any jurisdiction which has adopted a statute or other
requirement with respect to which any Person that obtains business from
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within such jurisdiction must file a notice of business activities report
or make any other required filings in a timely manner in order to enforce
its claims in such jurisdiction's courts unless (i) such notice of business
activities report has been duly and timely filed or the Borrower is exempt
from filing such report and has provided the Lender with satisfactory
evidence of such exemption or (ii) the failure to make such filings may be
cured retroactively by the Borrower for a nominal fee;
(l) the Account Debtor with respect thereto is not any of the
Borrowers or an Affiliate of a Borrower;
(m) such Account does not arise out of a contract or order which, by
its terms, forbids or makes void or unenforceable the assignment thereof by
the Borrowers to the Lender and is not unassignable to the Lender for any
other reason;
(n) there is no bankruptcy, insolvency or liquidation proceeding
pending by or against the Account Debtor with respect thereto, nor has the
Account Debtor suspended business, made a general assignment for the
benefit of creditors or failed to pay its debts generally as they come due,
and/or no condition or event has occurred having a material adverse effect
on the Account Debtor which would require the Accounts of such Account
Debtor to be deemed uncollectible in accordance with GAAP;
(o) it is not owed by an Account Debtor with respect to which thirty
percent (30.00%) or more of the aggregate amount of outstanding Accounts
owed at such time by such Account Debtor is classified as ineligible under
clause (j) of this definition;
(p) if the aggregate amount of all Accounts owed by the Account Debtor
thereon exceeds thirty percent (30.00%), of the aggregate amount of all
Accounts of such Borrowers at such time, then all Accounts owed by such
Account Debtor to such Borrowers in excess of such amount shall be deemed
ineligible; provided, that, upon the combination of any two Account Debtors
who have Accounts owing to the Borrowers by reason of a merger, acquisition
or otherwise, the Account Debtors shall be treated as separate entities for
a period of three (3) months for the purpose of determining Eligible
Accounts pursuant to this clause (p); provided, further, that if the
aggregate amount of Accounts owed by such Account Debtors during such three
(3) month period exceeds sixty percent (60.00%) of the aggregate amount of
all Accounts of the Borrowers at such time, then all Accounts owed by such
Account Debtors to the Borrowers in excess of such amount shall be deemed
ineligible;
(q) it is an Account otherwise eligible hereunder, to the extent of
any excess of any reserve, as calculated in accordance with the applicable
Borrowing Base Certificate, created by the Borrowers for future return of
Goods or any adjustments in estimated returns of Goods as compared to
actual returns of Goods to date;
(r) it is an Account with respect to which the Borrower is or may
become liable to the Account Debtor for goods sold or services rendered by
11
such Account Debtor to any of the Borrowers, but only to the extent in
excess of the Borrowers' then aggregate liability to such Account Debtor;
and
(s) it does not violate the negative covenants and does satisfy the
affirmative covenants of the Borrowers contained in this Agreement.
An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account. Further, with respect to any Account, if the Lender at any
time hereafter determines in its reasonable discretion that the prospect of
payment or performance by the Account Debtor with respect thereto is materially
impaired for any reason whatsoever, such Account shall cease to be an Eligible
Account after notice of such determination is given to the Borrowers. Lender
reserves the right to amend the criteria for and definition of Eligible Accounts
of PCD and PCD, LLC within thirty (30) days of completion of the Lender's
initial field audit of PCD, LLC.
"Eligible Costs" means with respect to Facility C Loan, ninety percent
---------------
(90%) of the Lender-approved invoices (which shall not include transportation or
installation costs) for Collateral up to an amount not to exceed the balance of
the Facility C Loan Commitment.
"Eligible Domestic Accounts" shall mean all accounts whereby the Account
----------------------------
Debtor is a resident or citizen of, and is located within, the United States or
Canada (other than Quebec or Inuit).
"Eligible Foreign Accounts" shall mean all Eligible Accounts whereby the
---------------------------
Account Debtor is a resident or citizen of and is located within, Australia,
Belgium, the Caribbean Islands of the Bahamas, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇, the United Kingdom, Germany, Spain, Switzerland, Norway,
Portugal, Sweden, Greece, Italy, Singapore, Mexico or New Zealand, .
"Employee Plan" includes any pension, stock bonus, employee stock ownership
-------------
plan, retirement, profit sharing, deferred compensation, stock option, bonus or
other incentive plan, whether qualified or nonqualified, or any disability,
medical, dental or other health plan, life insurance or other death benefit
plan, vacation benefit plan, severance plan or other employee benefit plan or
arrangement, including, without limitation, those pension, profit-sharing and
retirement plans of the Borrowers described from time to time in the financial
statements of the Borrowers and any pension plan, welfare plan, defined benefit
plans (as defined in ERISA) or any multiemployer plan, maintained or
administered by any Borrower or to which any Borrower is a party or has any
liability or by which any Borrower is bound.
"Environmental Laws" shall mean all present or future federal, state or
-------------------
local laws, statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative or judicial orders, consent agreements,
directed duties, requests, licenses, authorizations and permits of, and
agreements with, any governmental authority, in each case relating to any matter
arising out of or relating to public health and safety, or pollution or
protection of the environment or workplace, including any of the foregoing
12
relating to the presence, use, production, generation, handling, transport,
treatment, storage, disposal, distribution, discharge, emission, release,
threatened release, control or cleanup of any Hazardous Substance.
"Equipment" shall mean "equipment" as defined in the UCC that is owned by
---------
any Borrower, including, without limitation, any and all of such Borrower's
machinery, equipment, vehicles, fixtures, furniture, computers, appliances,
tools, and other tangible personal property (other than inventory), whether
located on such Borrower's premises or located elsewhere, together with any and
all accessions, parts and appurtenances thereto, whether presently owned or
hereafter acquired by such Borrower.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended from time to time.
"Event of Default" shall mean any of the events or conditions which are set
----------------
forth in Section 11 hereof.
"Facility A Interest Rate" shall mean the Borrowers' option of (i) a
---------------------------
floating per annum rate of interest equal to the Prime Rate plus the Applicable
Margin or (ii) the LIBOR Rate plus the Applicable Margin or (iii) the Fixed
LIBOR Rate.
"Facility A Loan" and "Facility A Loans" shall mean, respectively, each
--------------- ----------------
direct advance and the aggregate of all such direct advances made by the Lender
to the Borrowers under and pursuant to this Agreement, as set forth in Section
2.1 of this Agreement.
"Facility A Loan Availability" shall mean, at any time, an amount equal to
----------------------------
the Facility A Loan Commitment minus the Letter of Credit Obligations.
"Facility A Loan Commitment" shall mean Thirty Five Million and 00/100
---------------------------
Dollars ($35,000,000), subject to the Letter of Credit Commitment, as such
amount may be reduced pursuant to Section 2.1(c)(ii) hereof.
"Facility A Maturity Date" shall mean, the earlier of (i) May 1, 2010 and
-------------------------
(ii) the acceleration of such Loan upon the occurrence of an Event of Default
affecting such Loan, unless extended by the Lender pursuant to any modification,
extension or renewal note executed by the Borrowers and accepted by the Lender
in its sole and absolute discretion in substitution for a Facility A Revolving
Note.
"Facility A Revolving Note" shall mean a revolving note in the form of
---------------------------
Exhibit B hereto, dated as of the date hereof, in the amount of the Facility A
Loan Commitment and maturing on the Facility A Maturity Date, duly executed by
the Borrowers and payable to the order of the Lender, together with any and all
renewal, extension, modification or replacement notes executed by the Borrowers
and delivered to the Lender and given in substitution therefor.
"Facility B Interest Rate" shall mean 6.4% per annum.
------------------------
13
"Facility B Loan" shall mean the term loan consolidating the aggregate of
---------------
all prior direct advances made by the Lender under the Existing Loan Agreement,
as set forth in Section 2.2 of this Agreement.
"Facility B Loan Commitment" shall mean Three Million Thirty Six Thousand
---------------------------
and 00/100 Dollars ($3,036,000.00).
"Facility B Maturity Date" shall mean, the earlier of (i) December 31, 2009
------------------------
and (ii) the acceleration of such Loan upon the occurrence of an Event of
Default affecting such Loan, unless extended by the Lender pursuant to any
modification, extension or renewal note executed by the Borrowers and accepted
by the Lender in its sole and absolute discretion in substitution for a Facility
B Term Note.
"Facility B Term Note" shall mean a term note in the form of Exhibit C
----------------------
hereto, dated as of the date hereof, in the amount of the Facility B Loan
Commitment and maturing on Facility B Maturity Date, duly executed by the
Borrowers and payable to the order of the Lender, together with any and all
renewal, extension, modification or replacement notes executed by the Borrowers
and delivered to the Lender and given in substitution therefor.
"Facility C CapEx Note" shall mean a capital expenditure note in the form
---------------------
of Exhibit D hereto, dated as of the date hereof, in the amount of the Facility
C Loan Commitment and maturing on the Facility C Maturity Date, duly executed by
the Borrowers and payable to the order of the Lender, together with any and all
renewal, extension, modification or replacement notes executed by the Borrowers
and delivered to the Lender and given in substitution therefor.
"Facility C Interest Rate" shall mean the Borrowers' option of (i) a
---------------------------
floating per annum rate of interest equal to the Prime Rate plus the Applicable
Margin, (ii) the LIBOR Rate plus the Applicable Margin or (iii) the Fixed LIBOR
Rate.
"Facility C Loan" and "Facility C Loans" shall mean, respectively, each
--------------- ----------------
direct advance and the aggregate of all such direct advances made by the Lender
to the Borrowers under and pursuant to this Agreement, as set forth in Section
2.3 of this Agreement.
"Facility C Loan Commitment" shall mean One Million Five Hundred Thousand
---------------------------
and 00/100 Dollars ($1,500,000.00), as such amount may be reduced pursuant to
Section 2.3 hereof.
"Facility C Maturity Date" shall mean, the earlier of (i) May 1, 2010 and
-------------------------
(ii) the acceleration of such Loan upon the occurrence of an Event of Default
affecting such Loan, unless extended by the Lender pursuant to any modification,
extension or renewal note executed by the Borrowers and accepted by the Lender
in its sole and absolute discretion in substitution for a Facility C CapEx Note.
14
"Facility D Interest Rate" shall mean the Borrowers' option of (i) a
---------------------------
floating per annum rate of interest equal to the Prime Rate, (ii) the LIBOR Rate
or (iii) the Fixed LIBOR Rate.
"Facility D Loan" and "Facility D Loans" shall mean, respectively, each
--------------- ----------------
direct advance and the aggregate of all such direct advances made by the Lender
to the Borrowers under and pursuant to this Agreement, as set forth in Section
2.4 of this Agreement.
"Facility D Loan Availability" shall mean, at any time, an amount equal to
----------------------------
the lesser of: (a) Facility D Loan Commitment or (b) the ▇▇▇▇▇ Sublimit Amount.
"Facility D Loan Commitment" shall mean Ten Million and 00/100 Dollars
---------------------------
($10,000,000), as such amount may be reduced pursuant to Section 2.4 hereof.
"Facility D Maturity Date" shall mean, the earlier of (i) May 1, 2010 and
-------------------------
(ii) the acceleration of such Loan upon the occurrence of an Event of Default
affecting such Loan, unless extended by the Lender pursuant to any modification,
extension or renewal note executed by the Borrowers and accepted by the Lender
in its sole and absolute discretion in substitution for a Facility D Revolving
Note.
"Facility D Revolving Note" shall mean a revolving note in the form of
---------------------------
Exhibit E hereto, dated as of the date hereof, in the amount of the Facility D
Loan Commitment and maturing on the Facility D Maturity Date, duly executed by
the Borrowers and payable to the order of the Lender, together with any and all
renewal, extension, modification or replacement notes executed by the Borrowers
and delivered to the Lender and given in substitution therefor.
"Fixed LIBOR Loan" shall mean a Loan bearing interest at the Fixed LIBOR
-----------------
Rate made pursuant to Section 2.1(b) in the case of a Facility A Loan, Section
2.3(b) in the case of a Facility C Loan and Section 2.4(b) in the case of a
Facility D Loan.
"Fixed LIBOR Rate" shall mean, for each Fixed LIBOR Loan, a rate of
------------------
interest equal to LIBOR for a 30 day interest period on the first Business Day
of a month plus the Applicable LIBOR Margin.
"Funded Debt" shall mean, as to any Person, all Debt of such Person that
------------
matures more than one year from the date of its creation (or is renewable or
extendible, at the option of such Person, to a date more than one year from such
date).
"GAAP" shall mean generally accepted accounting principles set forth from
----
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S. accounting
profession), which are applicable to the circumstances as of the date of
determination, provided, however, that interim financial statements or reports
15
shall be deemed in compliance with GAAP despite the absence of footnotes and
fiscal year-end adjustments as required by GAAP.
"Hazardous Substances" shall mean (a) any petroleum or petroleum products,
---------------------
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, dielectric fluid containing levels of
polychlorinated biphenyls, radon gas and mold; (b) any chemicals, materials,
pollutant or substances defined as or included in the definition of "hazardous
substances", "hazardous waste", "hazardous materials", "extremely hazardous
substances", "restricted hazardous waste", "toxic substances", "toxic
pollutants", "contaminants", "pollutants" or words of similar import, under any
applicable Environmental Law; and (c) any other chemical, material or substance,
the exposure to, or release of which is prohibited, limited or regulated by any
governmental authority or for which any duty or standard of care is imposed
pursuant to, any Environmental Law.
"Hedging Agreement" shall mean any interest rate, currency or commodity
------------------
swap agreement, cap agreement or collar agreement, and any other agreement or
arrangement designed to protect a Person against fluctuations in interest rates,
currency exchange rates or commodity prices.
"Hedging Obligation" shall mean, with respect to any Person, any liability
-------------------
of such Person under any Hedging Agreement.
"Indemnified Party" and "Indemnified Parties" shall mean, respectively,
------------------ --------------------
each of the Lender and any parent corporation, Affiliate or Subsidiary of the
Lender, and each of their respective officers, directors, employees, attorneys
and agents, and all of such parties and entities.
"Intellectual Property" shall mean the collective reference to all rights,
----------------------
priorities and privileges relating to intellectual property, whether arising
under United States, multinational or foreign laws or otherwise, including
copyrights, patents, service marks and trademarks, and all registrations and
applications for registration therefor and all licensees thereof, trade names,
domain names, technology, know-how and processes, and all rights to ▇▇▇ at law
or in equity for any infringement or other impairment thereof, including the
right to receive all proceeds and damages therefrom.
"Intercreditor Agreement" shall mean the Intercreditor Agreement, dated as
-----------------------
of February 6, 2006, by and among Lender, ▇▇▇▇▇ and KDS as amended by First
Amendment To Intercreditor Agreement dated as of April 27, 2006, and amended,
modified or supplemented from time to time.
"Interest Charges" shall mean, for any period, the sum of: (a) all
-----------------
interest, charges and related expenses payable with respect to that fiscal
period to a lender in connection with borrowed money or the deferred purchase
price of assets that are treated as interest in accordance with GAAP, plus (b)
----
16
the portion of Capitalized Lease Obligations with respect to that fiscal period
that should be treated as interest in accordance with GAAP, plus (c) all charges
paid or payable (without duplication) during that period with respect to any
Hedging Agreements, plus (d) all debt, discount and expense amortized or
----
required to be amortized in the determination of Net Income for such period.
"Investment" shall mean, with respect to any Person, any investment in
----------
another Person (other than a Borrower or a Subsidiary of a Borrower that becomes
a Borrower under this Agreement), whether by acquisition of any debt or equity
security, by making any loan or advance, by becoming obligated with respect to a
Contingent Liability in respect of obligations of such other Person (other than
travel and similar advances to employees in the ordinary course of business);
provided, that any advance made to a publisher in the ordinary course of
business in an amount not to exceed $1,500,000 in the aggregate and $500,000 to
any one publisher shall not be considered an Investment hereunder.
"Lender Product Agreements" shall mean those certain agreements entered
--------------------------
into from time to time by the Borrowers with the Lender or any Affiliate of the
Lender concerning Lender Products.
"Lender Product Obligations" shall mean all obligations, liabilities,
----------------------------
contingent reimbursement obligations, fees, and expenses owing by the Borrowers
to the Lender or any Affiliate of the Lender pursuant to or evidenced by the
Lender Product Agreements and irrespective of whether for the payment of money,
whether direct or indirect, absolute or contingent, due or to become due, now
existing or hereafter arising.
"Lender Products" shall mean any service or facility extended to the
----------------
Borrowers by the Lender or any Affiliate of the Lender, including: (a) credit
cards, (b) credit card processing services, (c) debit cards, (d) purchase cards,
(e) ACH Transactions, (f) cash management, including controlled disbursement,
accounts or services, (g) Rate Management Transactions or (h) Hedging
Agreements.
"Letter of Credit" and "Letters of Credit" shall mean any Letter of Credit
---------------- -----------------
issued on behalf of Borrowers in accordance with Section 2.7of this Agreement.
"Letter of Credit Application" shall mean, with respect to any request for
-----------------------------
the issuance of a Letter of Credit, a letter of credit application in the form
being used by the Lender at the time of such request for the type of Letter of
Credit requested.
"Letter of Credit Commitment" shall mean Two Hundred Fifty Thousand Dollars
---------------------------
(US$250,000).
"Letter of Credit Fee Rate" means 1.5% per annum.
-------------------------
"Letter of Credit Maturity Date" shall mean the Facility A Maturity Date.
------------------------------
"Letter of Credit Obligations" shall mean, at any time, an amount equal to
-----------------------------
the aggregate of the original face amounts of all Letters of Credit minus the
17
sum of (i) the amount of any reductions in the original face amount of any
Letter of Credit which did not result from a draw thereunder, (ii) the amount of
any payments made by the Lender with respect to any draws made under a Letter of
Credit for which the Borrowers have reimbursed the Lender, (iii) the amount of
any payments made by the Lender with respect to any draws made under a Letter of
Credit which have been converted to a Facility A Loan as set forth in Section
2.5 and (iv) the portion of any issued but expired Letter of Credit which has
not been drawn by the beneficiary thereunder. For purposes of determining the
outstanding Letter of Credit Obligations at any time, the Lender's acceptance of
a draft drawn on the Lender pursuant to a Letter of Credit shall constitute a
draw on the applicable Letter of Credit at the time of such acceptance.
"Liabilities" shall mean at all times all liabilities of the Borrowers that
-----------
would be shown as such on a balance sheet of the Borrowers prepared in
accordance with GAAP.
"LIBOR" shall mean, with respect to any LIBOR Interest Period, a rate of
-----
interest equal to (a) the per annum rate of interest at which United States
dollar deposits for a period equal to the relevant LIBOR Interest Period are
offered in the London Interbank Eurodollar market at 11:00 a.m. (London time)
two Business Days prior to the commencement of such interest period (or three
Business Days prior to the commencement of such Interest Period if banks in
London, England were not open and dealing in offshore United States dollars on
such second preceding Business Day), as displayed in the Bloomberg Financial
Markets system (or other authoritative source selected by the Lender in its sole
discretion), divided by (b) a number determined by subtracting from 1.00 the
then stated maximum reserve percentage for determining reserves to be maintained
by member banks of the Federal Reserve System for Eurocurrency funding or
liabilities as defined in Regulation D (or any successor category of liabilities
under Regulation D), or, if LIBOR is not determinable in accordance with the
foregoing, as LIBOR is otherwise determined by the Lender in its reasonable
discretion. The Lender's determination of LIBOR shall be conclusive, absent
manifest error.
"LIBOR Interest Period" shall mean, as to any LIBOR Loan, a period of
-----------------------
either overnight or of thirty (30), sixty (60), ninety (90) or one hundred
eighty (180) days commencing on a Business Day as selected by the Borrowers
pursuant to this Agreement, as the case may be; provided that:
(a) if any LIBOR Interest Period would otherwise end on a day
that is not a Business Day, such LIBOR Interest Period shall be
extended to the following Business Day unless the result of such
extension would be to carry such LIBOR Interest Period into another
calendar month, in which event such Interest Period shall end on the
preceding Business Day;
(b) any LIBOR Interest Period that begins on a day for which
there is no numerically corresponding day in the calendar month at the
end of such Interest Period shall end on the last Business Day of the
calendar month at the end of such Interest Period; and
18
(c) the Borrowers may not select any LIBOR Interest Period for a
Facility A Loan, Facility C Loan or Facility D Loan beyond the
scheduled Maturity Date.
"LIBOR Loan" or "LIBOR Loans" shall mean that portion, and collectively
---------- ------------
those portions, of the aggregate outstanding principal balance of the Loans that
bear interest at a LIBOR Rate for the Facility A Loans, the Facility C Loans or
the Facility D Loans, as applicable.
"LIBOR Rate" shall mean, for each LIBOR Loan, a rate of interest equal to
----------
LIBOR for the relevant LIBOR Interest Period plus the Applicable LIBOR Margin.
"Lien" shall mean, with respect to any Person, any interest granted by such
----
Person in any real or personal property, asset or other right owned or being
purchased or acquired by such Person (including, without limitation, an interest
in respect of a Capital Lease) which secures payment or performance of any
obligation and shall include any mortgage, lien, encumbrance, title retention
lien, charge or other security interest of any kind, whether arising by
contract, as a matter of law, by judicial process or otherwise.
"Loan Documents" shall mean each of the agreements, documents, instruments
--------------
and certificates set forth in Section 3.1 hereof, and any and all such other
instruments, documents, certificates and agreements from time to time executed
and delivered by the Borrowers or any of their Affiliates for the benefit of the
Lender pursuant to any of the foregoing, and all amendments, restatements,
supplements and other modifications thereto.
"Loans" shall mean, collectively, all Facility A Loans, the Facility B
-----
Loan, all Facility C Loans, all Facility D Loans and all other extensions of
credit made by the Lender to the Borrowers and all Letter of Credit Obligations,
under and pursuant to this Agreement.
"Lockbox" shall have the meaning set forth in Section 6.9(a) hereof.
-------
"Lockbox Account" shall have the meaning set forth in Section 6.9(a)
----------------
hereof.
"Lockbox Agreement" shall have the meaning set forth in Section 3.1(o)
------------------
hereof.
"Master Letter of Credit Agreement" shall mean, at any time, with respect
----------------------------------
to the issuance of Letters of Credit, a Master Letter of Credit Agreement in the
form being used by the Lender at such time.
"Material Adverse Effect" shall mean (a) a material adverse change in, or a
-----------------------
material adverse effect upon, the assets, business, properties, condition
(financial or otherwise) or results of operations of the Borrowers taken as a
whole which, if quantifiable, does or would be reasonably expected to result in
a reduction in retained earnings of more than Three Million Dollars ($3,000,000)
after taking into account all deductions, credits, or other tax benefits allowed
with respect to the event (b) a material impairment of the ability of the
Borrowers to perform any of the Obligations under any of the Loan Documents, or
(c) a material adverse effect on (i) any substantial portion of the Collateral
19
of the Borrowers, (ii) the legality, validity, binding effect or enforceability
against the Borrowers of any of the Loan Documents, (iii) the perfection or
priority of the Liens on any substantial portion of the Collateral granted to
the Lender under any Loan Document by the Borrowers, or (iv) the rights or
remedies of the Lender with respect to the Borrowers under any Loan Document.
"Maturity Date" shall mean, collectively, the Facility A Maturity Date, the
-------------
Facility B Maturity Date, the Facility C Maturity Date, the Facility D Maturity
Date and Letter of Credit Maturity Date.
"Merger Agreement" shall mean the Agreement and Plan of Merger by and among
----------------
AMREP Corporation, ▇▇▇▇ ▇▇▇▇▇ Acquisition, Inc., KMS, PCD, PCD LLC, and the
Sellers set forth in the agreement dated as of November 7, 2006
"Net Income" shall mean, with respect to the Borrowers for any period, the
----------
consolidated net income (or loss) of the Borrowers for such period as determined
in accordance with GAAP, excluding any gains or losses (within the meaning of
GAAP) from Asset Dispositions, any extraordinary gains or losses and any gains
or losses from discontinued operations (within the meaning of GAAP).
"Non-Excluded Taxes" shall have the meaning set forth in Section 2.8
-------------------
hereof.
"Non-Utilization Fee" shall have the meaning set forth in Section 8.23
--------------------
hereof.
"Note" and "Notes" shall mean, respectively, each of and collectively, the
---- -----
Facility A Revolving Note, the Facility B Term Note, the Facility C CapEx Note
and the Facility D Revolving Note.
"Obligations" shall mean the Loans, as evidenced by any Note, all interest
-----------
accrued thereon (including interest which would be payable as post-petition
interest in connection with any bankruptcy or similar proceeding, whether or not
permitted as a claim thereunder), any fees due the Lender hereunder, any
expenses incurred by the Lender hereunder and any and all other liabilities and
obligations of the Borrowers to the Lender under this Agreement and any other
Loan Document, including any reimbursement obligations of the Borrowers in
respect of Letters of Credit and surety bonds, all Hedging Obligations of the
Borrowers existing or entered onto during the term of this Agreement which are
owed to the Lender or any Affiliate of the Lender, and all Lender Product
Obligations of the Borrowers existing or entered into during the term of this
Agreement, all in each case howsoever created, arising or evidenced, whether
direct or indirect, absolute or contingent, now or hereafter existing, or due or
to become due, together with any and all renewals or extensions thereof.
"Obligor" shall mean the Borrowers, any accommodation endorser, third party
-------
pledgor, or any other party other than the Principal Shareholder liable with
respect to the Obligations.
20
"OFAC" shall have the meaning specified in Section 8.3 of this Agreement.
----
"Organizational Identification Number" means, with respect to each
----------------------------------------
Borrower, the organizational identification number assigned to such Borrower by
the applicable governmental unit or agency of the jurisdiction of organization
of such Borrower.
"Other Taxes" shall mean any present or future stamp or documentary taxes
-----------
or any other excise or property taxes, charges or similar levies which arise
from the execution, delivery, enforcement or registration of, or otherwise with
respect to, this Agreement or any of the other Loan Documents.
"Permitted Business" shall mean any business conducted by one or more of
-------------------
the Borrowers on the closing date and all other businesses reasonably related
thereto.
"Permitted Liens" shall mean (a) Liens for federal or other material Taxes,
---------------
assessments or other governmental charges not at the time delinquent or
thereafter payable without penalty or being contested in good faith by
appropriate proceedings and, in each case, for which the affected Person
maintains adequate reserves in accordance with GAAP and in respect of which no
Lien has been filed; (b) Liens arising in the ordinary course of business (such
as (i) Liens of carriers, warehousemen, lessors, mechanics and materialmen and
other similar Liens, and (ii) Liens in the form of deposits or pledges incurred
in connection with worker's compensation, unemployment compensation and other
types of social security (excluding Liens arising under ERISA) or in connection
with surety bonds, bids, performance bonds and similar obligations) for sums not
overdue or being contested in good faith by appropriate proceedings and not
involving any advances or borrowed money or the deferred purchase price of
property or services, which do not in the aggregate materially detract from the
value of the property or assets of the Borrowers or materially impair the use
thereof in the operation of the Borrower's business and, in each case, for which
it maintains adequate reserves in accordance with GAAP and in respect of which
no Lien has been filed; (c) Liens described on Schedule 9.2 as of the closing
------------
date and the replacement, extension or renewal of any such Lien upon or in the
same property subject thereto arising out of the extension, renewal or
replacement of the Debt secured thereby (without increase in the amount
thereof); (d) attachments, appeal bonds, judgments and other similar Liens, for
sums not exceeding Five Hundred Thousand and 00/100 Dollars ($500,000.00)
arising in connection with court proceedings, provided the execution or other
--------
enforcement of such Liens is effectively stayed and the claims secured thereby
are being actively contested in good faith and by appropriate proceedings and to
the extent such judgments or awards do not constitute an Event of Default under
Section 11.8 hereof; (e) easements, rights of way, restrictions, minor defects
------------
or irregularities in title and other similar Liens not interfering in any
material respect with the ordinary conduct of the business of the Borrowers; (f)
subject to the limitation set forth in Section 9.1(e), Liens arising in
---------------
connection with Capitalized Lease Obligations (and attaching only to the
property being leased and products and proceeds thereof); (g) subject to the
limitation set forth in Section 9.1(e), Liens that constitute purchase money
---------------
security interests on any property securing Debt incurred for the purpose of
financing all or any part of the cost of acquiring such property, provided that
--------
any such Lien attaches to such property within twenty (20) days of the
21
acquisition thereof and attaches solely to the property so acquired; (h) Liens
granted to the Lender hereunder and under the Loan Documents; (i) usual and
customary rights of set off; (j) other Liens which in the aggregate secure
Obligations not exceeding Five Hundred Thousand and 00/100 Dollars ($500,000.00)
and (k) Liens covering the ▇▇▇▇▇ Accounts and their proceeds securing the
obligations of KDS under the ▇▇▇▇▇ Distribution Agreement.
"Permitted Perfection Limitations" shall mean a limitation on the perfected
--------------------------------
status of Collateral to the extent that (a) perfection would require a notation
on the records of the issuer of title (such as motor vehicle titles) and no
notation is requested or made or (b) the laws of a jurisdiction outside of the
United States of America governs the issue of perfection.
"Person" shall mean any natural person, partnership, limited liability
------
company, limited liability partnership, corporation, trust, joint venture, joint
stock company, association, unincorporated organization, government or agency or
political subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.
"Prime Loan" or "Prime Loans" shall mean that portion, and collectively
---------- ------------
those portions, of the aggregate outstanding principal balance of the Loans that
bear interest at the Prime Rate.
"Prime Rate" shall mean the floating per annum rate of interest which at
----------
any time, and from time to time, shall be most recently announced by the Lender
as its Prime or Base Rate, which is not intended to be the Lender's lowest or
most favorable rate of interest at any one time. The effective date of any
change in the Prime Rate shall for purposes hereof be the date the Prime Rate is
changed by the Lender. The Lender shall not be obligated to give notice of any
change in the Prime Rate.
"Principal Shareholder" shall mean AMREP Corporation, an Oklahoma
-----------------------
corporation.
"Rate Management Transaction" shall mean any transaction (including an
-----------------------------
agreement with respect thereto) now existing or hereafter entered into between
Borrower and Lender which is a rate swap, basis swap, forward rate transaction,
commodity swap, commodity option, equity or equity index swap, equity or equity
index option, bond option, interest rate option, foreign exchange transaction,
cap transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
these transactions) or any combination thereof, whether linked to one or more
interest rates, foreign currencies, commodity prices, equity prices or other
financial measures.
"Regulatory Change" shall mean the introduction of, or any change in any
------------------
applicable law, treaty, rule, regulation or guideline or in the interpretation
or administration thereof by any governmental authority or any central bank or
other fiscal, monetary or other authority having jurisdiction over the Lender or
its lending office.
22
"Senior Debt" means all Debt of Borrowers other than Subordinated Debt.
-----------
"Shareholder's Equity" shall mean at any time the total assets minus the
---------------------
total liabilities adjusted to eliminate the effect of net accumulated other
comprehensive loss with respect to any unpaid liabilities related to any
Employee Plan as would be shown on a consolidated balance sheet of Borrowers
prepared in accordance with GAAP.
"Subordinated Debt" shall mean that portion of the Debt of the Borrowers
------------------
which is subordinated to the Obligations in a manner reasonably satisfactory to
the Lender, including, but not limited to, right and time of payment of
principal and interest.
"Subsidiary" and "Subsidiaries" shall mean, respectively, with respect to
---------- ------------
any Person, each and all such corporations, partnerships, limited partnerships,
limited liability companies, limited liability partnerships, joint ventures or
other entities of which or in which such Person owns, directly or indirectly,
such number of outstanding Capital Securities as have more than fifty percent
(50.00%) of the ordinary voting power for the election of directors or other
managers of such corporation, partnership, limited liability company or other
entity. Unless the context otherwise requires, each reference to Subsidiaries
herein shall be a reference to Subsidiaries of the Borrower.
"Taxes" shall mean any and all present and future taxes, duties, levies,
-----
imposts, deductions, assessments, charges or withholdings, and any and all
liabilities (including interest and penalties and other additions to taxes) with
respect to the foregoing.
"Total Debt" shall mean all Debt of the Borrowers, determined on a
-----------
consolidated basis, excluding (i) Contingent Liabilities (except to the extent
constituting Contingent Liabilities in respect of the Debt of a Person other
than Borrowers), (ii) Hedging Obligations, (iii) Debt of Borrowers to other
Borrowers and Debt of Subsidiaries to Borrowers, and (iv) contingent obligations
in respect of undrawn Letters of Credit.
"UCC" shall mean the Uniform Commercial Code in effect in the state of
---
Illinois from time to time.
"United States Treasury Securities" means actively traded United States
-----------------------------------
Treasury bonds, bills and notes.
"Unmatured Event of Default" shall mean any event which, with the giving of
--------------------------
notice, the passage of time or both, would constitute an Event of Default.
"Voidable Transfer" shall have the meaning set forth in Section 13.22
------------------ --------------
hereof.
"Wholly-Owned Subsidiary" shall mean any Subsidiary of which or in which
------------------------
one or more of the Borrowers own, directly or indirectly, one hundred percent
(100%) of the Capital Securities of such Subsidiary.
23
1.2 Accounting Terms. Any accounting terms used in this Agreement which are
----------------
not specifically defined herein shall have the meanings customarily given them
in accordance with GAAP. Calculations and determinations of financial and
accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to the Lender pursuant
hereto shall be made and prepared, both as to classification of items and as to
amount, in accordance with GAAP as used in the preparation of the financial
statements of the Borrowers on the date of this Agreement except as otherwise
required by changes in GAAP. If any changes in accounting principles or
practices from those used in the preparation of the financial statements are
hereafter occasioned by the promulgation of rules, regulations, pronouncements
and opinions by or required by the Securities and Exchange Commission, the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or any successor thereto or agencies with similar
functions), which results in a material change in the method of accounting in
the financial statements required to be furnished to the Lender hereunder or in
the calculation of financial covenants, standards or terms contained in this
Agreement, the parties hereto agree to enter into good faith negotiations to
amend such provisions so as equitably to reflect such changes to the end that
the criteria for evaluating the financial condition and performance of the
Borrowers will be the same after such changes as they were before such changes;
and if the parties fail to agree on the amendment of such provisions, the
Borrowers will furnish financial statements in accordance with such changes, but
shall provide calculations for all financial covenants, perform all financial
covenants and otherwise observe all financial standards and terms in accordance
with applicable accounting principles and practices in effect immediately prior
to such changes. Calculations with respect to financial covenants required to be
stated in accordance with applicable accounting principles and practices in
effect immediately prior to such changes shall be reviewed and certified by the
Borrower's accountants. Calculations of all accounting items included within
each financial covenant or other determination set forth in this Agreement shall
be on a consolidated basis for the Borrowers.
1.3 Other Terms Defined in UCC. All other capitalized words and phrases
---------------------------
used herein and not otherwise specifically defined herein shall have the
respective meanings assigned to such terms in the UCC, to the extent the same
are used or defined therein.
1.4 Other Interpretive Provisions.
-----------------------------
(a) The meanings of defined terms are equally applicable to the
singular and plural forms of the defined terms. Whenever the context so
requires, the neuter gender includes the masculine and feminine, the single
number includes the plural, and vice versa, and in particular the word
"Borrower" shall be so construed.
(b) Section and Schedule references are to this Agreement unless
otherwise specified. 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
24
(c) The term "including" is not limiting, and means "including,
without limitation".
(d) In the computation of periods of time from a specified date to a
later specified date, the word "from" means "from and including"; the words
"to" and "until" each mean "to but excluding", and the word "through" means
"to and including".
(e) Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement and the other Loan Documents) and
other contractual instruments shall be deemed to include all subsequent
amendments, restatements, supplements and other modifications thereto, but
only to the extent such amendments, restatements, supplements and other
modifications are not prohibited by the terms of any Loan Document, and
(ii) references to any statute or regulation shall be construed as
including all statutory and regulatory provisions amending, replacing,
supplementing or interpreting such statute or regulation.
(f) To the extent any of the provisions of the other Loan Documents
are inconsistent with the terms of this Agreement, the provisions of this
Agreement shall govern.
(g) This Agreement and the other Loan Documents may use several
different limitations, tests or measurements to regulate the same or
similar matters. All such limitations, tests and measurements are
cumulative and each shall be performed in accordance with its terms.
Section 2. COMMITMENT OF THE LENDER.
------------------------
2.1 Facility A Loans.
----------------
(a) Facility A Loan Commitment. Subject to the terms and conditions of
--------------------------
this Agreement and the other Loan Documents, and in reliance upon the
representations and warranties of the Borrowers set forth herein and in the
other Loan Documents, the Lender agrees to make such Facility A Loans at
such times as the Borrowers may from time to time request until, but not
including, the Facility A Maturity Date, and in such amounts as the
Borrowers may from time to time request, provided, however, that the
aggregate principal balance of all Facility A Loans outstanding at any time
shall not exceed the Facility A Loan Availability. Facility A Loans made by
the Lender may be repaid and, subject to the terms and conditions hereof,
borrowed again up to, but not including the Facility A Maturity Date unless
the Facility A Loans are otherwise accelerated, terminated or extended as
provided in this Agreement. The Facility A Loans shall be used by the
Borrowers for the purpose of refinancing an existing line of credit, to
provide for short term working capital needs and fund the acquisition of
PCD and PCD, LLC.
(b) Facility A Loan Interest and Payments. Except as otherwise
-----------------------------------------
provided in this Section 2.1(b), the principal amount of the Facility A
---------------
25
Loans outstanding from time to time shall bear interest at the applicable
Facility A Interest Rate. Borrowers may elect the 30 day Fixed LIBOR Rate
effective the first Business Day of a month and may then draw upon and pay
down Facility A Loans at that rate during the month without premium or
penalty. Notwithstanding the foregoing, accrued and unpaid interest on the
unpaid principal balance of all Facility A Loans outstanding from time to
time shall be due and payable monthly, in arrears, commencing on the last
Business Day of January, 2007 and continuing on the last Business Day of
each calendar month thereafter, and on the Facility A Maturity Date.
Accrued and unpaid interest on the unpaid principal balance of all Facility
A Loans outstanding from time to time which are LIBOR Loans shall be
payable on the last Business Day of each LIBOR Interest Period (provided,
however, that for LIBOR Interest Periods of six months, accrued interest
shall also be paid on the date which is three months from the first day of
such LIBOR Interest Period), commencing on the first such date to occur
after the date hereof, on the date of any principal repayment of a LIBOR
Loan and on the Facility A Maturity Date. Any amount of principal or
interest on the Facility A Loans which is not paid when due, whether at
stated maturity, by acceleration or otherwise, shall bear interest payable
on demand at the Default Rate.
(c) Facility A Loan Principal Payments.
----------------------------------
(i) Facility A Loan Mandatory Payments. All Facility A Loans
------------------------------------
hereunder shall be repaid by the Borrowers on the Facility A Maturity
Date for Facility A Loans, unless payable sooner pursuant to the
provisions of this Agreement. In the event the aggregate outstanding
principal balance of all Facility A Loans and Letter of Credit
Obligations hereunder exceeds the Facility A Loan Commitment, the
Borrowers shall, without notice or demand of any kind, immediately
make such repayments of the Facility A Loans or take such other
actions as are satisfactory to the Lender as shall be necessary to
eliminate such excess. Also, if the Borrowers choose not to convert
any Facility A Loan which is a LIBOR Loan to a Prime Loan as provided
in Section 2.5(a), then such Facility A Loan shall be due and payable
--------------
on the last Business Day of the then existing LIBOR Interest Period or
on such earlier date as required by law, all without further demand,
presentment, protest or notice of any kind, all of which are hereby
waived by the Borrower.
(ii) Optional Prepayments; Voluntary Reductions or Termination of
------------------------------------------------------------
the Facility A Loan Commitment. The Borrowers may from time to time
-------------------------------
prepay the Facility A Loans, in whole or in part, without any
prepayment penalty whatsoever, provided that any prepayment of the
entire principal balance shall include accrued interest on such
Facility A Loans to the date of such prepayment. The Borrowers may
from time to time on at least five Business Days' prior written notice
received by the Lender permanently reduce the Facility A Loan
Commitment to an amount not less than the amounts then outstanding
under any Facility A Loans plus the outstanding amount of all Letter
of Credit Obligations. Any such reduction shall be in an amount not
less than $100,000 or a higher integral multiple of $50,000.
Concurrently with any reduction of the Facility A Loan Commitment to
26
zero, the Borrowers shall pay all interest on the Facility A Loans,
all Non-Utilization Fees and all letter of credit fees and shall Cash
Collateralize in full all Letters of Credit Obligations.
2.2 Facility B Loan.
---------------
(a) Facility B Loan Commitment. Subject to the terms and conditions of
--------------------------
this Agreement and the other Loan Documents, and in reliance upon the
representations and warranties of the Borrowers set forth herein and in the
other Loan Documents, the Lender agrees to make a Facility B Loan equal to
the Facility B Loan Commitment. The Facility B Loan shall be available to
the Borrowers in a single principal advance on such date as the conditions
set forth in Section 3 shall have been satisfied or waived. The Facility B
Loan shall be used by the Borrowers for consolidating the aggregate unpaid
amount of all prior direct advances made by the Lender under the terms
loans provided under the Existing Loan Agreement. The Facility B Loan may
be prepaid in whole or in part at any time without penalty, but shall be
due in full on the Facility B Maturity Date, unless the credit extended
under the Facility B Loan is otherwise accelerated, terminated or extended
as provided in this Agreement.
(b) Facility B Loan Interest and Principal Payments. The outstanding
------------------------------------------------
principal balance of the Facility B Loan shall be repaid in equal monthly
installments of principal each in the amount of Eighty Four Thousand Three
Hundred Thirty Three and 33/100 Dollars ($84,333.33) plus interest at the
Facility B Interest Rate, beginning on the last Business Day of January
2007, and continuing on the last day of each month thereafter, with a final
payment of all outstanding principal and accrued interest due on the
Facility B Maturity Date. Principal amounts repaid on the Facility B Term
Note may not be borrowed again. Any amount of principal or interest on the
Facility B Loan which is not paid when due, whether at stated maturity, by
acceleration or otherwise, shall bear interest payable on demand at the
Default Rate.
(c) Facility B Loan Optional Prepayments. Provided that no Event of
--------------------------------------
Default then exists under this Agreement or the Loans, the Borrowers may
voluntarily prepay the principal balance of the Facility B Loan, in whole
or in part, without any prepayment penalty whatsoever, at any time on or
after the date hereof. Each prepayment of the Facility B Loan shall be
applied to the scheduled installments of the Facility B Loan in inverse
order of maturity.
2.3 Facility C Loans.
----------------
(a) Facility C Loan Commitment. Provided that an Event of Default or
---------------------------
any event which with notice, lapse of time or both would constitute an
Event of Default does not then exist, the Lender shall extend to the
Borrowers the Facility C Loan Commitment. Subject to the terms and
conditions of this Agreement, from the date hereof through but not
including May 1, 2008, the Lender shall from time to time make advances to
the Borrowers hereunder in an aggregate amount not to exceed the lesser of
(i) the Facility C Loan Commitment and (ii) the Eligible Costs. The
27
aggregate amount available under Facility C hereunder shall not exceed the
Facility C Loan Commitment. Each advance under Facility C hereunder shall
be called a "Facility C Loan". The Facility C Loans shall be evidenced by
the Facility C CapEx Note in the amount of the Facility C Loan Commitment.
No advance under Facility C may have a maturity date later than the
Facility C Maturity Date.
(b) Facility C Loan Interest and Principal Payments.
-----------------------------------------------
(i) The Borrowers shall pay all interest at the applicable
Facility C Interest Rate selected pursuant to Section 2.3(e) monthly
in arrears on each Facility C Loan beginning on the last Business Day
of the first full calendar month after such Facility C Loan was made
hereunder and continuing on the last Business Day of each calendar
month thereafter until all amounts due thereunder have been paid in
full. Borrowers may elect the 30 day Fixed LIBOR Rate effective the
first Business Day of a month and may then draw upon and pay down
Facility C Loans at that rate during the month without premium or
penalty. Accrued and unpaid interest on the unpaid principal balance
of all Facility C Loans outstanding from time to time which are LIBOR
Loans shall be payable on the last Business Day of each LIBOR Interest
Period (provided, however, that for LIBOR Interest Periods of six
months, accrued interest shall also be paid on the date which is three
months from the first day of such LIBOR Interest Period), commencing
on the first such date to occur after the date hereof, on the date of
any principal repayment of a LIBOR Loan and on the Facility C Maturity
Date.
(ii) In addition to the interest payments set forth in (i) above,
commencing on the last Business Day of the first full calendar month
after each Facility C CapEx Note was initially funded (the "Facility C
Funding Date") and continuing on the last Business Day of each
calendar month through and including the Facility C Maturity Date for
such Facility C CapEx Note, the Borrowers shall make equal monthly
principal payments in the amount necessary to amortize fully such
Facility C CapEx Note over a period of not more than forty-eight (48)
months. The Borrowers shall pay the outstanding principal of and
interest on the Facility C CapEx Note not later than on the Facility C
Maturity Date.
(iii) The Borrowers may from time to time prepay the Facility C
Loans, in whole or in part, without any prepayment penalty whatsoever,
provided that any prepayment of the entire principal balance shall
include accrued interest on such Facility C Loans to the date of such
prepayment.
(c) Timing of Loans and Advances. Requests by the Borrowers for loans
----------------------------
or advances under Facility C Loans shall be made in writing at least two
(2) Business Days prior to each proposed advance on forms reasonably
acceptable to the Lender, but, at the Lender's sole discretion, the Lender
may make an advance to the Borrowers upon the oral request of the
Borrowers, subject to confirmation by the Borrowers in writing. Each such
request shall be in the minimum amount of $100,000 and $50,000 increments
28
in excess thereof and shall be accompanied or preceded by invoices and
certificates setting forth, in form and substance reasonably satisfactory
to the Lender, the amount of Eligible Costs upon which the requested loan
or advance is to be based. Not more than two (2) Business Days after the
Lender's receipt of such request for advance, the Lender shall provide the
Borrowers with notice of the amount of Eligible Costs approved by the
Lender for such advance. As a condition to the Lender making an advance
with respect to a Facility C Loan, the Borrowers shall deliver to the
Lender the applicable invoices and certificates relating thereto. The
Borrowers consent to the Lender filing further Uniform Commercial Code
financing statements attaching such invoices and certificates.
(d) One Loan or Advance. All Facility C Loans shall constitute one
-------------------
obligation secured by the Lender's Lien in the Borrower Collateral and by
all other Liens now or hereafter granted by the Borrowers to the Lender.
(e) Applicable Rate. The Borrowers agree to pay interest on the daily
----------------
balance of each Facility C Loan. The Borrowers shall make an interest rate
election per Facility C CapEx Loan selecting one of the following three
interest rate modes to apply to the Facility C Loan for the period
commencing on the date of the funding of the Facility C Loan through the
Facility C Maturity Date or Facility C Maturity Date for such Facility C
Loan, as applicable:
(i) a variable interest rate equal to the Prime Rate;
(ii) the LIBOR Rate; or
(iii) the Fixed LIBOR Rate
The foregoing notwithstanding, after the occurrence and during the
continuance of an Event of Default under this Agreement, the rate per annum
on such Facility C Loan shall be equal to the Default Rate.
(f) Computation of Interest. In computing interest on a Facility C
------------------------
Loan, (i) the date of funding of such Facility C Loan shall be included and
(ii) the date of payment of such Facility C Loan shall be excluded;
provided that if a Facility C Loan is repaid on the same day on which it is
made, one day's interest shall be paid on such Facility C Loan.
2.4 Facility D Loans.
----------------
(a) Facility D Loan Commitment. Subject to the terms and conditions of
--------------------------
this Agreement and the other Loan Documents, and in reliance upon the
representations and warranties of the Borrowers set forth herein and in the
other Loan Documents, the Lender agrees to make such Facility D Loans at
such times as the Borrowers may from time to time request until, but not
including, the Facility D Maturity Date, and in such amounts as the
Borrowers may from time to time request, provided, however, that the
aggregate principal balance of all Facility D Loans outstanding at any time
shall not exceed the Facility D Loan Availability. Facility D Loans made by
29
the Lender may be repaid and, subject to the terms and conditions hereof,
borrowed again up to, but not including the Facility D Maturity Date unless
the Facility D Loans are otherwise accelerated, terminated or extended as
provided in this Agreement. The Facility D Loans shall be used by the
Borrowers for the purpose of financing payments under the ▇▇▇▇▇
Distribution Agreement.
(b) Facility D Loan Interest and Payments. Except as otherwise
-----------------------------------------
provided in this Section 2.4(b), the principal amount of the Facility D
Loans outstanding from time to time shall bear interest at the applicable
Facility D Interest Rate. Borrowers may elect the 30 day Fixed LIBOR Rate
effective the first Business Day of a month and may then draw upon and pay
down Facility D Loans at that rate during the month without premium or
penalty. Notwithstanding the foregoing, accrued and unpaid interest on the
unpaid principal balance of all Facility D Loans outstanding from time to
time shall be due and payable monthly, in arrears, commencing on the last
Business Day of January, 2007 and continuing on the last Business Day of
each calendar month thereafter, and on the Facility D Maturity Date.
Accrued and unpaid interest on the unpaid principal balance of all Facility
D Loans outstanding from time to time which are LIBOR Loans shall be
payable on the last Business Day of each LIBOR Interest Period (provided,
however, that for LIBOR Interest Periods of six months, accrued interest
shall also be paid on the date which is three months from the first day of
such LIBOR Interest Period), commencing on the first such date to occur
after the date hereof, on the date of any principal repayment of a LIBOR
Loan and on the Facility D Maturity Date. Any amount of principal or
interest on the Facility D Loans which is not paid when due, whether at
stated maturity, by acceleration or otherwise, shall bear interest payable
on demand at the Default Rate.
(c) Facility D Loan Principal Payments.
----------------------------------
(i) Facility D Loan Mandatory Payments. All Facility D Loans
------------------------------------
hereunder shall be repaid by the Borrowers on the Facility D Maturity
Date, unless payable sooner pursuant to the provisions of this
Agreement. In the event the aggregate outstanding principal balance of
all Facility D Loans exceeds the Facility D Loan Availability, the
Borrowers shall, without notice or demand of any kind, immediately
make such repayments of the Facility D Loans or take such other
actions as are satisfactory to the Lender as shall be necessary to
eliminate such excess. Also, if the Borrowers choose not to convert
any Facility D Loan which is a LIBOR Loan to a Prime Loan as provided
in Section 2.5(a), then such Facility D Loan shall be due and payable
on the last Business Day of the then existing LIBOR Interest Period or
on such earlier date as required by law, all without further demand,
presentment, protest or notice of any kind, all of which are hereby
waived by the Borrower.
(ii) Optional Prepayments; Voluntary Reductions or Termination of
------------------------------------------------------------
the Facility D Loan Commitment. The Borrowers may from time to time
-------------------------------
prepay the Facility D Loans, in whole or in part, without any
prepayment penalty whatsoever, provided that any prepayment of the
entire principal balance shall include accrued interest on such
Facility A Loans to the date of such prepayment. The Borrowers may
30
from time to time on at least five Business Days' prior written notice
received by the Lender permanently reduce the Facility D Loan
Commitment to an amount not less than the amounts then outstanding
under all Facility D Loans. Any such reduction shall be in an amount
not less than $100,000 or a higher integral multiple of $50,000.
Concurrently with any reduction of the Facility D Loan Commitment to
zero, the Borrowers shall pay all interest on the Facility D Loans and
Non-Utilization Fees.
2.5 Additional LIBOR Loan Provisions.
--------------------------------
(a) LIBOR Unavailability. If the Lender determines in its reasonable
---------------------
good faith judgment (which determination shall be conclusive, absent
manifest error) prior to the commencement of any LIBOR Interest Period that
(i) the making or maintenance of any LIBOR Loan or Fixed LIBOR Loan would
violate any applicable law, rule, regulation or directive, whether or not
having the force of law, (ii) United States dollar deposits in the
principal amount, and for periods equal to the LIBOR Interest Period for
funding any LIBOR Loan or any Fixed LIBOR Loan are not available in the
London Interbank Eurodollar market in the ordinary course of business,
(iii) by reason of circumstances affecting the London Interbank Eurodollar
market, adequate and fair means do not exist for ascertaining the LIBOR
Rate to be applicable to the relevant LIBOR Loan or the Fixed LIBOR Rate to
be applicable to the relevant Fixed LIBOR Loan, or (iv) the LIBOR Rate does
not accurately reflect the cost to the Lender of a LIBOR Loan or the Fixed
LIBOR Rate does not accurately reflect the cost to the Lender of a Fixed
LIBOR Loan, the Lender shall promptly notify the Borrowers thereof and, so
long as the foregoing conditions continue, none of the Loans may be
advanced as a LIBOR Loan thereafter. In addition, at the Borrowers' option,
each existing LIBOR Loan shall be immediately (i) converted to a Prime
Loan, or (ii) due and payable without further demand, presentment, protest
or notice of any kind, all of which are hereby waived by the Borrowers.
(b) Regulatory Change. In addition, if, after the date hereof, a
------------------
Regulatory Change shall, in the reasonable good faith judgment of the
Lender, make it unlawful for the Lender to make or maintain the LIBOR Loans
or the Fixed LIBOR Loans, then the Lender shall promptly notify the
Borrowers, and none of the Loans may be advanced as a LIBOR Loan or Fixed
LIBOR Loans thereafter. In addition, at the Borrowers' option, as
applicable, each existing LIBOR Loan and Fixed LIBOR Loan shall be
immediately (i) converted to a Prime Loan (in the case of any LIBOR Loan,
on the last Business Day of the then existing LIBOR Interest Period or on
such earlier date as required by law), or (ii) due and payable without
further demand (in the case of any LIBOR Loan, on the last Business Day of
the then existing LIBOR Interest Period or on such earlier date as required
by law), all without presentment, protest or notice of any kind, all of
which are hereby waived by the Borrowers.
(c) LIBOR Indemnity. If any Regulatory Change, or compliance by the
---------------
Lender or any Person controlling the Lender with any request or directive
of any governmental authority, central bank or comparable agency (whether
31
or not having the force of law) issued or promulgated after the date of
this Agreement shall (i) impose, modify or deem applicable any assessment,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of or loans by, or any other acquisition of
funds or disbursements by, the Lender; (ii) subject the Lender, any LIBOR
Loan or any Fixed LIBOR Loan to any tax, duty, charge, stamp tax or fee or
change the basis of taxation of payments to the Lender of principal or
interest due from the Borrowers to the Lender hereunder (other than a
change in the taxation of the overall net income of the Lender); or (iii)
impose on the Lender any other condition regarding such LIBOR Loan or Fixed
LIBOR Loan or the Lender's funding thereof, and the Lender shall determine
in its reasonable good faith judgment (which determination shall be
conclusive, absent manifest error) that the result of the foregoing is to
increase the cost to, or to impose a cost on, the Lender or such
controlling Person of making or maintaining such LIBOR Loan or to reduce
the amount of principal or interest received by the Lender hereunder, then
the Borrowers shall pay to the Lender or such controlling Person, on
demand, such additional amounts as the Lender shall, from time to time,
determine are sufficient to compensate and indemnify the Lender for such
increased cost or reduced amount; provided that (i) the Lender provides
Borrowers notice thereof within thirty (30) days of such Regulatory Change
or applicable request or directive and (ii) if the Lender or such
controlling Person could mitigate the amount by changing its lending office
or taking similar action, it will do so as long as there are no detrimental
consequences to the Lender or such controlling Person.
2.6 Interest and Fee Computation; Collection of Funds. Except as otherwise
--------------------------------------------------
set forth herein, all interest and fees shall be calculated on the basis of a
year consisting of 360 days and shall be paid for the actual number of days
elapsed. Principal payments submitted in funds not immediately available shall
continue to bear interest until collected. If any payment to be made by the
Borrowers hereunder or under any Note shall become due on a day other than a
Business Day, such payment shall be made on the next succeeding Business Day and
such extension of time shall be included in computing any interest in respect of
such payment. Notwithstanding anything to the contrary contained herein, the
final payment due under any of the Loans must be made by wire transfer or other
immediately available funds. All payments made by the Borrowers hereunder or
under any of the Loan Documents shall be made without setoff, counterclaim, or
other defense. To the extent permitted by applicable law, all payments hereunder
or under any of the Loan Documents (including any payment of principal,
interest, or fees) to, or for the benefit, of any Person shall be made by the
Borrowers free and clear of, and without deduction or withholding for, or
account of, any taxes now or hereinafter imposed by any taxing authority.
2.7 Letters of Credit. Subject to the terms and conditions of this
-------------------
Agreement and upon (i) the execution by the Borrowers and the Lender of a Master
Letter of Credit Agreement in form and substance reasonably acceptable to the
Lender (together with all amendments, modifications and restatements thereof,
the "Master Letter of Credit Agreement"), and (ii) the execution and delivery by
the Borrowers, and the acceptance by the Lender, in its sole and absolute
discretion, of a Letter of Credit Application, the Lender agrees to issue for
32
the account of the Borrowers such Letters of Credit in the standard form of the
Lender and otherwise in form and substance reasonably acceptable to the Lender,
from time to time during the term of this Agreement, provided that the Letter of
Credit Obligations may not at any time exceed the Letter of Credit Commitment
and provided further, that no Letter of Credit shall have an expiration date
later than the Letter of Credit Maturity Date. The amount of any payments made
by the Lender with respect to draws made by a beneficiary under a Letter of
Credit for which the Borrowers have failed to reimburse the Lender upon the
earlier of (i) the Lender's demand for repayment, or (ii) five (5) days from the
date of such payment to such beneficiary by the Lender, shall be deemed to have
been converted to a Facility A Loan as of the date such payment was made by the
Lender to such beneficiary. Upon the occurrence and during the continuance of an
Event of a Default and at the option of the Lender, all Letter of Credit
Obligations shall be converted to Facility A Loans consisting of Prime Loans,
all without demand, presentment, protest or notice of any kind, all of which are
hereby waived by the Borrowers. To the extent the provisions of the Master
Letter of Credit Agreement differ from, or are inconsistent with, the terms of
this Agreement, the provisions of this Agreement shall govern.
2.8 Taxes.
-----
(a) All payments made by the Borrowers under this Agreement shall be
made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
governmental authority, excluding net income taxes and franchise taxes
(imposed in lieu of net income taxes) imposed on the Lender as a result of
a present or former connection between the Lender and the jurisdiction of
the governmental authority imposing such tax or any political subdivision
or taxing authority thereof or therein (other than any such connection
arising solely from the Lender having executed, delivered or performed its
obligations or received a payment under, or enforced, this Agreement or any
other Loan Document). If any such non-excluded taxes, levies, imposts,
duties, charges, fees, deductions or withholdings (collectively,
"Non-Excluded Taxes") or Other Taxes are required to be withheld from any
amounts payable to the Lender hereunder, the amounts so payable to the
Lender shall be increased to the extent necessary to yield to the Lender
(after payment of all Non-Excluded Taxes and Other Taxes) interest or any
such other amounts payable hereunder at the rates or in the amounts
specified in this Agreement, provided, however, that the Borrowers shall
not be required to increase any such amounts payable to the Lender with
respect to any Non-Excluded Taxes that are attributable to the Lender's
failure to comply with the requirements of Section 2.8(c).
(b) The Borrowers shall pay any Other Taxes to the relevant
governmental authority in accordance with applicable law.
(c) At the request of the Borrowers and at the Borrowers' sole cost,
the Lender shall take reasonable steps to (i) contest its liability for any
Non-Excluded Taxes or Other Taxes that have not been paid, or (ii) seek a
refund of any Non-Excluded Taxes or Other Taxes that have been paid.
33
(d) Whenever any Non-Excluded Taxes or Other Taxes are payable by the
Borrowers, as promptly as possible thereafter the Borrowers shall send to
the Lender a certified copy of an original official receipt received by the
Borrowers showing payment thereof. If the Borrowers fails to pay any
Non-Excluded Taxes or Other Taxes when due to the appropriate taxing
authority or fails to remit to the Lender the required receipts or other
required documentary evidence or if any governmental authority seeks to
collect a Non-Excluded Tax or Other Tax directly from the Lender for any
other reason, the Borrowers shall indemnify the Lender on an after-tax
basis for any incremental taxes, interest or penalties that may become
payable by the Lender.
(e) The agreements in this Section shall survive the satisfaction and
payment of the Obligations and the termination of this Agreement.
2.9 Security Interest. The Loans and Letters of Credit shall be secured by
-----------------
the Lender's priority security interest in and Lien upon all of the Collateral
and by all other security interests, Liens, claims and encumbrances heretofore,
now or at any time or times hereafter granted by the Borrowers to the Lender,
subject to the Intercreditor Agreement.
Section 3. CONDITIONS OF BORROWING.
-----------------------
Notwithstanding any other provision of this Agreement, the Lender shall not
be required to disburse or make all or any portion of the Loans to the
Borrowers, if any of the following conditions pertaining to such Borrowers shall
have occurred.
3.1 Loan Documents. The Borrowers shall have failed to execute and deliver
--------------
to the Lender any of the following Loan Documents, all of which must be
reasonably satisfactory to the Lender and the Lender's counsel in form,
substance and execution:
(a) Second Amended and Restated Loan and Security Agreement. Two
------------------------------------------------------------
copies of this Agreement.
(b) Facility A Revolving Note. The Facility A Revolving Note.
-------------------------
(c) Facility B Term Note. The Facility B Term Note.
--------------------
(d) Facility C CapEx Note. The Facility C CapEx Note.
---------------------
(e) Facility D Revolving Note. The Facility D Revolving Note.
-------------------------
(f) Master Letter of Credit Agreement. Master Letter of Credit
-------------------------------------
Agreement prepared by and reasonably acceptable to the Lender, duly
executed by the Borrowers in favor of the Lender.
34
(g) Subordination Agreement. A Subordination Agreement dated as of the
-----------------------
date of this Agreement, from each holder of Subordinated Debt, in the form
prepared by and reasonably acceptable to the Lender in the form of Exhibit
-------
F hereto.
-
(h) Patent and Trademark Security Agreement. Amended and Restated
------------------------------------------
Patent and Trademark Security Agreement prepared by and reasonably
acceptable to the Lender, duly executed by the Borrowers in favor of the
Lender in the form of Exhibit G hereto.
---------
(i) Copyright Security Agreement. Copyright Security Agreement
--------------------------------
prepared by and reasonably acceptable to the Lender, in favor of the Lender
in the form of Exhibit H hereto.
---------
(j) Collateral Access Agreement. If and when requested by Lender, a
-----------------------------
Collateral Access Agreement from the owner, lessor or mortgagee, as the
case may be, of any real estate whereon any Collateral is stored or
otherwise located, in the form prepared by and reasonably acceptable to the
Lender, except where the Borrowers have used commercially reasonable
efforts to obtain the same and are unable to do so.
(k) Borrowing Base Certificates. A Borrowing Base Certificate in the
----------------------------
form prepared by the Lender and attached as Exhibit I hereto, certified as
accurate by the applicable Borrowers, and acceptable to the Lender in its
sole discretion.
(l) Search Results; Lien Terminations. Copies of UCC search reports
-----------------------------------
dated such a date as is reasonably acceptable to the Lender, listing all
effective financing statements which name the Borrowers and any of their
Subsidiaries, under their present names and any previous names, as debtors,
together with (i) copies of such financing statements, (ii) payoff letters
evidencing repayment in full of all existing Debt to be repaid with the
Loans, the termination of all agreements relating thereto and the release
of all Liens granted in connection therewith, with UCC or other appropriate
termination statements and documents effective to evidence the foregoing
(other than Permitted Liens), and (iii) such other UCC termination
statements as the Lender may reasonably request.
(m) Organizational and Authorization Document. Copies of (i) the
--------------------------------------------
Articles or Certificate of Incorporation or Articles or Certificate of
Organization of each Borrower; (ii) resolutions of the board of directors,
managers or members of the Borrowers approving and authorizing such
Person's execution, delivery and performance of the Loan Documents to which
it is party and the transactions contemplated thereby; (iii) signature and
incumbency certificates of the officers or managers of the Borrowers
executing any of the Loan Documents, each of which the applicable Borrower
hereby certifies to be true and complete, and in full force and effect
without modification, it being understood that the Lender may conclusively
rely on each such document and certificate until actually advised by the
Borrowers of any changes therein; and (iv) good standing certificates in
the state of organization of the Borrowers and in each other state in which
a Borrower does business.
35
(n) Insurance. Evidence satisfactory to the Lender of the existence of
---------
insurance required to be maintained pursuant to Section 8.6, together with
evidence that the Lender has been named as a loss payee on all related
insurance policies (except that with respect to policies relating to PCD,
LLC or PCD, Borrowers shall have thirty (30) days after closing to provide
such evidence).
(o) Lockbox Agreement. The Master Cash Management Service Agreement
------------------
and Supplement to the Master Cash Management Service Agreement Re:
Wholesale Lockbox and Lockbox Related Services, entered into in connection
with the Existing Loan Agreement is in full force and effect.
(p) Opinion of Borrowers' Counsel. An opinion of counsel to the
--------------------------------
Borrowers in the form prepared by and in substance reasonably acceptable to
Lender's counsel.
(q) Evidence of Palm Data Acquisition. A certified copy of the
-------------------------------------
Certificate of Merger or other documentation reasonably satisfactory to
Lender and its counsel that the acquisition of PCD and PCD, LLC by KMS has
closed.
(r) Additional Documents. Such other certificates, financial
----------------------
statements, schedules, resolutions, opinions of counsel, notes and other
documents which are provided for hereunder or which the Lender shall
require.
3.2 Event of Default. Any Event of Default, or Unmatured Event of Default
----------------
shall have occurred and be continuing.
3.3 Material Adverse Effect. The occurrence of a Material Adverse Effect.
-----------------------
3.4 Litigation. Any litigation or governmental proceeding shall have been
----------
instituted against any Borrower or any of its officers or shareholders having a
Material Adverse Effect.
3.5 Representations and Warranties. Any representation or warranty of any
-------------------------------
Borrower contained herein or in any Loan Document shall be untrue or incorrect
in any material respect as of the date of any Loan as though made on such date,
except to the extent such representation or warranty expressly relates to an
earlier date.
Section 4. NOTES EVIDENCING LOANS.
----------------------
4.1 Facility A Revolving Notes. The Facility A Loans and the Letter of
----------------------------
Credit Obligations shall be evidenced by the Facility A Revolving Note. At the
time of the initial disbursement of a Facility A Loan and at each time any
additional Facility A Loan shall be requested hereunder or a repayment made in
whole or in part thereon, a notation thereof shall be made on the books and
records of the Lender. All amounts recorded shall be, absent manifest error,
conclusive and binding evidence of (i) the principal amount of the Facility A
Loans advanced hereunder and the amount of all Letter of Credit Obligations,
(ii) any accrued and unpaid interest owing on the Facility A Loans, and (iii)
36
all amounts repaid on the Facility A Loans or the Letter of Credit Obligations.
The failure to record any such amount or any error in recording such amounts
shall not, however, limit or otherwise affect the obligations of the Borrowers
under the Facility A Revolving Note to repay the principal amount of the
Facility A Loans, together with all interest accruing thereon.
4.2 Facility B Term Note. The Facility B Term Loan shall be evidenced by
--------------------
the Facility B Term Note.
4.3 Facility C CapEx Notes. The Facility C Loans shall be evidenced by the
----------------------
Facility C CapEx Note. At the time of the initial disbursement of a Facility C
Loan and at each time any additional Facility C Loan shall be requested
hereunder or a repayment made in whole or in part thereon, a notation thereof
shall be made on the books and records of the Lender. All amounts recorded shall
be, absent manifest error, conclusive and binding evidence of (i) the principal
amount of the Facility C Loans advanced hereunder, (ii) any accrued and unpaid
interest owing on the Facility C Loans, and (iii) all amounts repaid on the
Facility C Loans. The failure to record any such amount or any error in
recording such amounts shall not, however, limit or otherwise affect the
obligations of the Borrowers under the Facility C CapEx Notes and repay the
principal amount of the Facility C Loans, together with all interest accruing
thereon.
4.4 Facility D Revolving Note. The Facility D Loans shall be evidenced by
--------------------------
the Facility D Revolving Note. At the time of the initial disbursement of a
Facility D Loan and at each time any additional Facility D Loan shall be
requested hereunder or a repayment made in whole or in part thereon, a notation
thereof shall be made on the books and records of the Lender. All amounts
recorded shall be, absent manifest error, conclusive and binding evidence of (i)
the principal amount of the Facility D Loans advanced hereunder, (ii) any
accrued and unpaid interest owing on the Facility D Loans, and (iii) all amounts
repaid on the Facility D Loans. The failure to record any such amount or any
error in recording such amounts shall not, however, limit or otherwise affect
the obligations of the Borrowers under the Facility D Revolving Note to repay
the principal amount of and all interest on the Facility Loans.
Section 5. MANNER OF BORROWING.
-------------------
5.1 Borrowing Procedures. Each Facility A Loan, Facility C Loan or Facility
--------------------
D Loan may be advanced either as a Prime Loan, a Fixed LIBOR Loan or a LIBOR
Loan, provided, however, that at any time, the Borrowers may identify no more
than five (5) Facility A Loans, five (5) Facility C Loans and five (5) Facility
D Loans which may be LIBOR Loans and Borrowers may have only one (1) Fixed LIBOR
Loan Facility A Loan, one (1) Fixed LIBOR Loan Facility C Loan and one (1) Fixed
LIBOR Loan Facility D Loan at any one time. Each Facility A Loan and Facility D
Loan shall be made available to the Borrowers upon any written, electronic or
telecopy loan request which the Lender in good faith believes to emanate from a
properly authorized representative of the Borrowers, whether or not that is in
fact the case. Each such notice shall be effective upon receipt by the Lender,
37
shall be irrevocable, and shall specify the date, amount and type of borrowing
and, in the case of a LIBOR Loan, the initial LIBOR Interest Period therefor.
The Borrowers shall select LIBOR Interest Periods so as not to require a payment
or prepayment of any LIBOR Loan during a LIBOR Interest Period for such LIBOR
Loan. The final LIBOR Interest Period for any LIBOR Loan must be such that its
expiration occurs on or before the Maturity Date of such Loan. A request for a
Prime Loan or an overnight LIBOR Loan Rate must be received by the Lender no
later than 11:00 a.m. Chicago, Illinois time, on the day it is to be funded. A
request for a LIBOR Loan (other than an overnight rate) or a Fixed LIBOR Loan
must be (i) received by the Lender no later than 11:00 a.m. Chicago, Illinois
time, three days before the day it is to be funded, and (ii) in an amount equal
to One Hundred Thousand and 00/100 Dollars ($100,000.00) or a higher integral
multiple of One Hundred Thousand and 00/100 Dollars ($100,000.00). The proceeds
of each Facility A Loan shall be made available at the office of the Lender by
credit to the account of the Borrowers or by other means requested by the
Borrowers and acceptable to the Lender. The Borrowers do hereby irrevocably
confirm, ratify and approve all such advances by the Lender and do hereby
indemnify the Lender against losses and expenses (including court costs,
attorneys' and paralegals' fees) and shall hold the Lender harmless with respect
thereto.
5.2 LIBOR Conversion and Continuation Procedures. (a) Upon notice to the
----------------------------------------------
Lender as set forth above, the Borrowers may, subject to the terms and
conditions of this Agreement, (i) elect, as of any Business Day, to convert any
Facility A Loan , Facility C Loan or Facility D Loan that is a Prime Loan into a
LIBOR Loan or a Fixed LIBOR Loan; or (ii) convert any LIBOR Loan into a Prime
Loan or a Fixed LIBOR Loan and convert any Fixed LIBOR Loan into a Prime Loan or
a LIBOR Loan. Such notice shall specify: (A) the proposed date of conversion;
(B) the aggregate amount of Loans to be converted; and (B) the type of Facility
A Loans, Facility C Loans or Facility D Loans, as applicable, resulting from the
proposed conversion.
(b) Unless the Borrowers request that a LIBOR Loan be converted to a
Prime Loan or a Fixed LIBOR Loan in accordance with Section 5.2(a), upon
---------------
the completion of the relevant LIBOR Interest Period for such LIBOR Loan
all LIBOR Loans shall automatically be continued with the same LIBOR
Interest Period as the LIBOR Interest Period then ended.
5.3 Letters of Credit. All Letters of Credit shall bear such application,
-----------------
issuance, renewal, negotiation and other fees and charges, and bear such
interest as charged by the Lender or otherwise payable pursuant to the Master
Letter of Credit Agreement. In addition to the foregoing, all standby Letters of
Credit issued under and pursuant to this Agreement shall bear an annual issuance
fee equal to one and one-half percent (1.50%) of the face amount of such standby
Letter of Credit, payable by the Borrowers, as applicable, quarterly, in
advance, until (i) such Letter of Credit has expired or has been returned to the
Lender, or (ii) the Lender has paid the beneficiary thereunder the full face
amount of such Letter of Credit.
5.4 Automatic Debit. In order to effectuate the timely payment of any of
----------------
the Obligations when due, the Borrowers hereby authorize and direct the Lender,
at the Lender's option, to debit the amount of the Obligations from any ordinary
deposit account of the applicable Borrowers, or as applicable, hereunder to pay
the amount of the Obligations.
38
5.5 Discretionary Disbursements. The Lender, in its sole and absolute
----------------------------
discretion, may immediately upon notice to the applicable Borrowers, disburse
any or all proceeds of the Loans made or available to the applicable Borrowers
pursuant to this Agreement to pay any fees, costs, expenses or other amounts
required to be paid by the applicable Borrowers hereunder and not so paid. All
monies so disbursed shall be a part of the Obligations, payable by the
applicable Borrowers on demand from the Lender.
Section 6. SECURITY FOR THE OBLIGATIONS.
----------------------------
6.1 Security for Obligations. As security for the payment and performance
-------------------------
of the Obligations each of the Borrowers does hereby pledge, assign, transfer
and deliver to the Lender and do hereby grant to the Lender a continuing and
unconditional first priority security interest in and to the Collateral subject
to Permitted Liens and Permitted Perfection Limitations.
6.2 Possession and Transfer of Collateral. Unless an Event of Default
-----------------------------------------
exists hereunder, the Borrowers shall be entitled to possession and use of the
Collateral (other than Instruments or Documents, Tangible Chattel Paper, and
other Collateral required to be delivered to the Lender pursuant to this Section
6). The cancellation or surrender of any Note, upon payment or otherwise, shall
not affect the right of the Lender to retain the related Collateral for any
other Obligations of the applicable Borrowers. Borrowers shall not effect any
Asset Disposition involving Collateral.
6.3 Financing Statements. The Borrowers shall, at the Lender's request, at
--------------------
any time and from time to time, execute and deliver to the Lender such financing
statements, amendments and other documents and do such acts as the Lender deems
reasonably necessary in order to establish and maintain valid, attached and
perfected first priority security interests in the Collateral in favor of the
Lender, free and clear of all Liens and claims and rights of third parties
whatsoever, except Permitted Liens. The Borrowers hereby irrevocably authorize
the Lender at any time, and from time to time, to file in any jurisdiction any
initial financing statements and amendments thereto without the signature of the
applicable Borrower that (a) indicate the Collateral (i) is comprised of all
assets of such Borrower or words of similar effect, regardless of whether any
particular asset comprising a part of the Collateral falls within the scope of
Article 9 of the Uniform Commercial Code of the jurisdiction wherein such
financing statement or amendment is filed, or (ii) as being of an equal or
lesser scope or within greater detail as the grant of the security interest set
forth herein, and (b) contain any other information required by Section 5 of
Article 9 of the Uniform Commercial Code of the jurisdiction wherein such
financing statement or amendment is filed regarding the sufficiency or filing
office acceptance of any financing statement or amendment, including (i) whether
the applicable Borrower is an organization, the type of organization and any
Organizational Identification Number issued to such Borrower, and (ii) in the
case of a financing statement filed as a fixture filing or indicating Collateral
as as-extracted collateral or timber to be cut, a sufficient description of the
39
real property to which the Collateral relates. The Borrowers hereby agree that a
photocopy or other reproduction of this Agreement is sufficient for filing as a
financing statement and the Borrowers authorize the Lender to file this
Agreement as a financing statement in any jurisdiction. The Borrowers agree to
furnish any such information to the Lender promptly upon request. The Borrowers
further ratify and affirm their authorization for any financing statements
and/or amendments thereto, executed and filed by the Lender in any jurisdiction
prior to the date of this Agreement. In addition, the Borrowers shall make
appropriate entries on their books and records disclosing the Lender's security
interests in the Collateral.
6.4 Additional Collateral. The Borrowers shall deliver to the Lender
----------------------
immediately upon its demand, such other collateral (such additional collateral
shall under no circumstances include any real property of any of the Borrowers
or any property of, or for the account of, or any Borrower's interest in the
Capital Securities of any Borrower or any Affiliate or Subsidiary of any
Borrower) as the Lender may from time to time request, should the value of the
Collateral, in the Lender's reasonable discretion, decline, deteriorate,
depreciate or become impaired, and do hereby grant to the Lender a continuing
security interest in such other collateral, which, when pledged, assigned and
transferred to the Lender shall be and become part of the Collateral. The
Lender's security interests in all of the foregoing Collateral shall be valid,
complete and perfected whether or not covered by a specific assignment.
6.5 Preservation of the Collateral. The Lender may, but is not required, to
------------------------------
take such actions from time to time as the Lender deems appropriate to maintain
or protect the Collateral. The Lender shall have exercised reasonable care in
the custody and preservation of the Collateral if the Lender takes such action
as the Borrowers shall reasonably request in writing which is not inconsistent
with the Lender's status as a secured party, but the failure of the Lender to
comply with any such request shall not necessarily be deemed a failure to
exercise reasonable care; provided, however, the Lender's responsibility for the
safekeeping of the Collateral shall (i) be deemed reasonable if such Collateral
is accorded treatment substantially equal to that which the Lender accords its
own property, and (ii) not extend to matters beyond the control of the Lender,
including, without limitation, acts of God, war, insurrection, riot or
governmental actions. In addition, any failure of the Lender to preserve or
protect any rights with respect to the Collateral against prior or third
parties, or to do any act with respect to preservation of the Collateral, not so
requested by the Borrowers, shall not necessarily be deemed a failure to
exercise reasonable care in the custody or preservation of the Collateral. The
Borrowers shall have the sole responsibility for taking such action as may be
necessary, from time to time, to preserve all rights of the Borrowers and the
Lender in the Collateral against prior or third parties.
6.6 Other Actions as to any and all Collateral. The Borrowers further agree
------------------------------------------
to take any other action reasonably requested by the Lender to ensure the
attachment, perfection and first priority of, and the ability of the Lender to
enforce, the Lender's security interest in any and all of the Collateral subject
to Permitted Liens and Permitted Perfection Limitations including, without
limitation, (a) causing the Lender's name to be noted as secured party on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of the Lender to enforce, the
Lender's security interest in such Collateral, (b) complying with any provision
of any statute, regulation or treaty of the United States as to any Collateral
if compliance with such provision is a condition to attachment, perfection or
priority of, or ability of the Lender to enforce, the Lender's security interest
in such Collateral, (c) using commercially reasonable efforts to obtain
40
governmental and other third party consents and approvals, including without
limitation any consent of any licensor, lessor or other Person obligated on
Collateral, (d) obtaining waivers from mortgagees and landlords in form and
substance reasonably satisfactory to the Lender, and (e) taking all actions
required by the UCC in effect from time to time or by other law, as applicable
in any relevant UCC jurisdiction, or by other law as applicable in any foreign
jurisdiction. The Borrowers further agree to indemnify and hold the Lender
harmless against claims of any Persons not a party to this Agreement concerning
disputes arising over the Collateral.
6.7 Collateral in the Possession of a Warehouseman or Bailee. If any of the
--------------------------------------------------------
Collateral at any time is in the possession of a warehouseman or bailee, the
applicable Borrower shall at any time that Lender so requires notify the Lender
thereof, and shall use commercially reasonable efforts to obtain a Collateral
Access Agreement.
6.8 Lockbox Arrangement. (a) Each Borrower shall direct all of its Account
-------------------
Debtors to make all payments on the Accounts directly to a post office box (the
"Lockbox") designated by, and under the exclusive control of, the Lender.
Pursuant to the Lockbox Agreement, the Borrowers (except KMS, PCD and PCD, LLC)
have established the Lockbox and an account (the "Lockbox Account") in the
Borrowers' names with the Lender into which all payments received in the Lockbox
shall be deposited, and into which the Borrowers (except PCD, LLC until October,
2007 at which time PCD, LLC will execute the Lockbox Agreement) will immediately
deposit all payments made for Inventory sold by the Borrowers or the performance
of services by the Borrowers, and received by the Borrowers in the identical
form in which such payments were made, whether by cash or check. If the
Borrowers or any director, officer, employee, agent of the Borrowers, or any
other Person acting for or in concert with the Borrowers shall receive any
monies, checks, notes, drafts or other payments relating to or as proceeds of
Accounts or other Collateral, the Borrowers and each such Person shall receive
all such items in trust for, and as the sole and exclusive property of, the
Lender and, immediately upon receipt thereof, shall remit the same (or cause the
same to be remitted) in kind to the Lockbox Account. The Borrowers agree that
all payments made to such Lockbox and Lockbox Account or otherwise received by
the Lender, whether in respect of the Accounts or as proceeds of other
Collateral or otherwise, will be applied in accordance with Section 12.8 of this
Agreement. The Borrowers agree to pay all reasonable fees, costs and expenses
which the Lender incurs in connection with opening and maintaining the Lockbox
and the Lockbox Account and depositing for collection by the Lender any check or
other item of payment received by the Lender on account of the Obligations. All
of such fees, costs and expenses shall constitute Obligations hereunder, shall
be payable to the Lender by the Borrowers upon demand, and, until paid, shall
bear interest at the Default Rate and if not paid within thirty (30) days shall
be treated as a Facility A Advance. All checks, drafts, instruments and other
items of payment or proceeds of Collateral shall be endorsed by the Borrowers to
the Lender, and, if that endorsement of any such item shall not be made for any
reason, the Lender is hereby irrevocably authorized to endorse the same on the
Borrowers' behalf. For the purpose of this section, the Borrowers irrevocably
hereby make, constitute and appoint the Lender (and all Persons designated by
the Lender for that purpose) as the Borrowers' true and lawful attorney and
agent-in-fact (i) to endorse the Borrowers' name upon such items of payment
and/or proceeds of Collateral and upon any Chattel Paper, document, instrument,
41
invoice or similar document or agreement relating to any Account of the
Borrowers or goods pertaining thereto; (ii) to take control in any manner of any
item of payment or proceeds thereof; and (iii) to have access to any lock box or
postal box into which any of the Borrower's mail is deposited, and open and
process all mail addressed to the Borrowers and deposited therein.
6.9 Letter-of-Credit Rights. Borrowers represent and warrant to Lender that
-----------------------
they have no material Letter of Credit Rights. If a Borrower at any time is a
beneficiary under a material letter of credit now or hereafter issued in favor
of such Borrower, such Borrower shall promptly notify the Lender thereof and, at
the request and option of the Lender, such Borrower shall, pursuant to an
agreement in form and substance reasonably satisfactory to the Lender, either
(i) arrange for the issuer and any confirmer of such letter of credit to consent
to an assignment to the Lender of the proceeds of any drawing under the letter
of credit, or (ii) arrange for the Lender to become the transferee beneficiary
of the letter of credit, with the Lender agreeing, in each case, that the
proceeds of any drawing under the letter to credit are to be applied as provided
in this Agreement.
6.10 Release of Collateral. At any time that any of the Collateral is sold
---------------------
or otherwise transferred to a Person (other than to a Borrower or any Subsidiary
of a Borrower) in compliance with the terms of this agreement (any such
Collateral being the "Sold Collateral"), the Liens on the Sold Collateral
created by this Agreement shall be released and terminated immediately, and
Lender shall take such actions as may be necessary to cause the Liens of record
with respect to the Sold Collateral to be released within twenty (20) days after
Lender receives written notice from Borrowers that such sale or transfer has
occurred.
6.11 Electronic Chattel Paper and Transferable Records. Borrowers represent
-------------------------------------------------
and warrant to Lender that they have no Electronic Chattel Paper in excess of
$100,000. If a Borrower at any time holds or acquires an interest in any
electronic chattel paper or any "transferable record", as that term is defined
in Section 201 of the federal Electronic Signatures in Global and National
Commerce Act, or in Section 16 of the Uniform Electronic Transactions Act as in
effect in any relevant jurisdiction in excess of $100,000 such Borrower shall
promptly notify the Lender thereof and, at the request of the Lender, shall take
such action as the Lender may reasonably request to vest in the Lender control
under Section 9-105 of the UCC of such electronic chattel paper or control under
Section 201 of the federal Electronic Signatures in Global and National Commerce
Act or, as the case may be, Section 16 of the Uniform Electronic Transactions
Act, as so in effect in such jurisdiction, of such transferable record. The
Lender agrees with the Borrowers that the Lender will arrange, pursuant to
procedures satisfactory to the Lender and so long as such procedures will not
result in the Lender's loss of control, for the Borrowers to make alterations to
the electronic chattel paper or transferable record permitted under Section
9-105 of the UCC or, as the case may be, Section 201 of the federal Electronic
Signatures in Global and National Commerce Act or Section 16 of the Uniform
Electronic Transactions Act for a party in control to make without loss of
control.
Section 7. REPRESENTATIONS AND WARRANTIES.
------------------------------
42
To induce the Lender to make Loans to the Borrowers, each Borrower makes
the following representations and warranties, to the Lender, each of which shall
survive the execution and delivery of this Agreement.
7.1 Borrower Organization and Name. (a) Each Borrower is a corporation or
--------------------------------
limited liability company duly organized, existing and in good standing under
the laws of the state of its organization, with full and adequate power to carry
on and conduct its business as presently conducted and is validly existing and
in good standing under the laws of the jurisdiction of its organization. Each
Borrower is duly licensed or qualified in all foreign jurisdictions wherein the
nature of its activities require such qualification or licensing, except for
such jurisdictions where the failure to so qualify would not have a Material
Adverse Effect. The Borrowers' Organizational Identification Numbers are as set
forth on Schedule 7.1 attached hereto. The exact legal name of the Borrowers are
as set forth in the first paragraph of this Agreement, and except as set forth
on Schedule 7.1 attached hereto, as of the date of this Agreement the Borrowers
do not conduct, nor have they during the last five (5) years prior to the date
of this Agreement conducted, business under any other names or trade names.
7.2 Authorization. The Borrowers have full right, power and authority to
-------------
enter into this Agreement, to make the borrowings and execute and deliver the
Loan Documents as provided herein and to perform all of their duties and
obligations under this Agreement and the other Loan Documents. The execution and
delivery of this Agreement and the other Loan Documents will not, nor will the
observance or performance of any of the matters and things herein or therein set
forth, violate or contravene any provision of law in any material respect or of
the articles of incorporation or bylaws of the Borrowers. All necessary and
appropriate action has been taken on the part of the Borrowers to authorize the
execution and delivery of this Agreement and the Loan Documents.
7.3 Validity and Binding Nature. This Agreement and the other Loan
------------------------------
Documents are the legal, valid and binding obligations of the Borrowers,
enforceable against the Borrowers in accordance with their terms, subject to
bankruptcy, insolvency and similar laws affecting the enforceability of
creditors' rights generally and to general principles of equity.
7.4 Consent; Absence of Breach. The execution, delivery and performance of
--------------------------
this Agreement, the other Loan Documents and any other documents or instruments
to be executed and delivered by the Borrowers in connection with the Loans, and
the borrowings by the Borrowers hereunder, do not and will not (a) require any
consent, approval, authorization of, or filings with, notice to or other act by
or in respect of, any governmental authority or any other Person (other than any
consent or approval which has been obtained and is in full force and effect);
(b) conflict with (i) in any material respect any provision of law or any
applicable regulation, order, writ, injunction or decree of any court or
governmental authority, (ii) the articles or certificate of incorporation or
organization or bylaws or operating agreement of the Borrowers or any of their
Subsidiaries, or (iii) in any material respect any material agreement,
indenture, instrument or other document, or any judgment, order or decree, which
is binding upon the Borrowers or any of their Subsidiaries or any of their
43
respective properties or assets; or (c) require, or result in, the creation or
imposition of any Lien on any asset of the Borrowers or any of their
Subsidiaries, other than Liens in favor of the Lender created pursuant to this
Agreement.
7.5 Ownership of Properties; Liens. The Borrowers are the owners or lessees
------------------------------
of all of their respective material properties and assets, real and personal,
tangible and intangible, of any nature whatsoever (including material patents,
trademarks, trade names, service marks and copyrights), free and clear of all
Liens, charges and claims (including infringement claims with respect to
patents, trademarks, service marks, copyrights and the like), other than
Permitted Liens.
7.6 Equity Ownership. All issued and outstanding Capital Securities of the
----------------
Borrowers and each of their Subsidiaries are duly authorized and validly issued,
fully paid, non-assessable, and free and clear of all Liens other than Permitted
Liens and Liens in favor of the Lender, if any, and such securities were issued
in compliance with all applicable state and federal laws concerning the issuance
of securities. As of the date hereof, there are no pre-emptive or other
outstanding rights, options, warrants, conversion rights or other similar
agreements or understandings for the purchase or acquisition of any Capital
Securities of the Borrowers and each of its Subsidiaries.
7.7 Intellectual Property. With respect to all material Intellectual
----------------------
Property used by the Borrowers, the Borrowers own and possess or have a license
or other right to use all such Intellectual Property as are necessary for the
conduct of the businesses of the Borrowers, without any infringement upon rights
of others which would reasonably be expected to have a Material Adverse Effect
upon the Borrowers, and no material claim has been asserted and is pending by
any Person challenging or questioning the use of any such Intellectual Property
or the validity or effectiveness of any such Intellectual Property where such
claim would reasonably be expected to have a Material Adverse Effect nor do they
know of any valid basis for any such claim.
7.8 Financial Statements. All financial statements submitted to the Lender
--------------------
have been prepared in accordance with GAAP on a basis, except as otherwise noted
therein or on Schedule 3.4 to the Merger Agreement, with respect to the
financial statements of PCD, consistent with the previous fiscal year and
present fairly in all material respects in accordance with GAAP the financial
condition of the Borrowers and the results of the operations for the Borrowers
as of such date and for the periods indicated. Since the date of the most recent
financial statement submitted by the Borrowers to the Lender, there has been no
change in the financial condition or in the assets or liabilities of the
Borrowers having a Material Adverse Effect.
7.9 Litigation and Contingent Liabilities. There is no litigation,
----------------------------------------
arbitration proceeding, demand, charge, claim, petition or governmental
investigation or proceeding pending, or to the knowledge of the Borrowers,
threatened, against the Borrowers, which, would reasonably be expected to have a
Material Adverse Effect upon the Borrowers ("Proceedings"), except as set forth
in Schedule 7.9 or disclosed in the Principal Shareholder's Securities and
------------
Exchange Commission reports. Borrowers will provide prompt written notice to
Lender if any such report contains information with respect to previously
undisclosed Proceedings. Other than any liability incident to such litigation or
proceedings, the Borrowers have no material guarantee obligations, contingent
44
liabilities, liabilities for taxes, or any long-term leases or unusual forward
or long-term commitments, including any interest rate or foreign currency swap
or exchange transaction or other obligation in respect of derivatives, that are
not fully-reflected or fully reserved to the extent required by GAAP or that
reasonably would be expected to result in a Material Adverse Effect.
7.10 Event of Default. (a) No Event of Default or Unmatured Event of
-----------------
Default exists or would result from the incurrence by the Borrowers of any of
the Obligations pertaining to the Borrowers hereunder or under any of the other
Loan Documents, and the Borrowers are not in default (without regard to grace or
cure periods) under any other contract or agreement to which it is a party, the
effect of which would have a Material Adverse Effect upon the Borrowers.
7.11 Adverse Circumstances. No condition, circumstance, event, agreement,
---------------------
document, instrument, restriction, litigation or proceeding (or threatened
litigation or proceeding or basis therefor) exists which (i) would have a
Material Adverse Effect upon the Borrowers, or (ii) constitutes a Event of
Default or a Unmatured Event of Default.
7.12 Environmental Laws and Hazardous Substances. The Borrowers have not
--------------------------------------------
generated, used, stored, treated, transported, manufactured, handled, produced
or disposed of any Hazardous Substances, on or off any of the premises of the
Borrowers (whether or not owned by it) in any manner which at any time violates
any Environmental Law or any license, permit, certificate, approval or similar
authorization, which violation would have a Material Adverse Effect. The
Borrowers comply in all material respects with all Environmental Laws and all
licenses, permits certificates, approvals and similar authorizations thereunder
except where failure to comply would not have a Material Adverse Effect. In each
case which would have a Material adverse effect: (i) there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other Person, nor is any pending or,
to the best of the Borrower's knowledge, threatened, and the Borrowers shall
immediately notify the Lender upon becoming aware of any such investigation,
proceeding, complaint, order, directive, claim, citation or notice, and shall
take prompt and appropriate actions to respond thereto, with respect to any
non-compliance with, or violation of, the requirements of any Environmental Law
by the Borrowers or the release, spill or discharge, threatened or actual, of
any Hazardous Material or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Material or any other environmental, health or safety matter, which affects the
Borrowers or its business, operations or assets or any properties at which the
Borrowers have transported, stored or disposed of any Hazardous Substances. The
Borrowers have no material liability, contingent or otherwise, in connection
with a release, spill or discharge, threatened or actual, of any Hazardous
Substances or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Material. The
Borrowers further agree to allow the Lender or its agent reasonable access to
the properties of the Borrowers and its Subsidiaries to confirm compliance with
all Environmental Laws, and the Borrowers shall, following determination by the
Lender that there is material non-compliance, or any condition which requires
any action by or on behalf of the Borrowers in order to avoid any material
non-compliance, with any Environmental Law, at the Borrower's sole expense,
45
cause an independent environmental engineer acceptable to the Lender to conduct
such tests of the relevant site as are appropriate, and prepare and deliver a
report setting forth the result of such tests, a proposed plan for remediation
and an estimate of the costs thereof.
7.13 Solvency, etc. As of the date hereof, and immediately prior to and
--------------
after giving effect to the issuance of each Letter of Credit and each Loan
hereunder and the use of the proceeds thereof, (a) the fair value of the
Borrowers' assets are greater than the amount of their liabilities (including
disputed, contingent and unliquidated liabilities) as such value is established
and liabilities evaluated as required under the Section 548 of the Bankruptcy
Code, (b) the present fair saleable value of the Borrowers' assets are not less
than the amount that will be required to pay the probable liability on their
debts as they become absolute and matured, (c) the Borrowers are able to realize
upon their assets and pay their debts and other liabilities (including disputed,
contingent and unliquidated liabilities) as they mature in the normal course of
business, (d) the Borrowers do not intend to, and do not believe that they will,
incur debts or liabilities beyond their ability to pay as such debts and
liabilities mature, and (e) the Borrowers are not engaged in business or a
transaction, and are not about to engage in business or a transaction, for which
their property would constitute unreasonably small capital.
7.14 ERISA Obligations. All Employee Plans meet the minimum funding
------------------
standards of Section 302 of ERISA and Section 412 of the Internal Revenue Code
where applicable, and each Employee Plan that is intended to be qualified within
the meaning of Section 401 of the Internal Revenue Code is qualified. No
withdrawal liability has been incurred under any Employee Plan and no
"reportable event" or "prohibited transaction" (as such terms are defined in
ERISA), has occurred with respect to any Employee Plan, unless in the case of
any prohibited transaction such transaction is the subject of a statutory or
administrative exemption. The Borrowers have promptly paid and discharged all
obligations and liabilities arising under ERISA of a character which if unpaid
or unperformed might result in the imposition of a Lien against any of its
properties or assets.
7.15 Labor Relations. Except as would not reasonably be expected to have a
---------------
Material Adverse Effect, (i) there are no strikes, lockouts or other labor
disputes against the Borrowers or, to the best knowledge of the Borrowers,
threatened, (ii) hours worked by and payment made to employees of the Borrowers
have not been in violation of the Fair Labor Standards Act or any other
applicable law, and (iii) no unfair labor practice complaint is pending against
the Borrowers or, to the best knowledge of the Borrowers, threatened before any
governmental authority.
7.16 Security Interest. This Agreement creates a valid security interest in
-----------------
favor of the Lender in the Collateral to the extent the same may be created by
written agreement and, when properly perfected by filing in the appropriate
jurisdictions, or by possession or Control of such Collateral by the Lender or
delivery of such Collateral to the Lender, shall constitute a valid, perfected,
first-priority security interest in such Collateral subject in each case to the
Intercreditor Agreement, Permitted Liens and Permitted Perfection Limitations.
7.17 Lending Relationship. The relationship hereby created between the
---------------------
Borrowers and the Lender is and has been conducted on an open and arm's length
46
basis in which no fiduciary relationship exists, and the Borrowers have not
relied and are not relying on any such fiduciary relationship in executing this
Agreement and in consummating the Loans. The Lender represents that it will
receive any Note payable to its order as evidence of a bank loan.
7.18 Business Loan. The Loans, including interest rate, fees and charges as
-------------
contemplated hereby, (i) are business loans within the purview of 815 ILCS
205/4(1)(c), as amended from time to time, (ii) are an exempted transaction
under the Truth In Lending Act, 12 U.S.C. 1601 et seq., as amended from time to
time, and (iii) do not, and when disbursed shall not, violate the provisions of
the Illinois usury laws, any consumer credit laws or the usury laws of any state
which may have jurisdiction over this transaction, the Borrowers or any property
securing the Loans.
7.19 Taxes. Except as set forth in Schedule 7.19 attached hereto, the
----- --------------
Borrowers have timely filed all federal or material tax returns and reports
required by law to have been filed by them and have paid all federal and other
material taxes, governmental charges and assessments due and payable with
respect to such returns, except any such taxes or charges which are being
diligently contested in good faith by appropriate proceedings and for which
adequate reserves in accordance with GAAP shall have been set aside on its
books, are insured against or bonded over to the satisfaction of the Lender and
the contesting of such payment does not create a Lien on the Collateral which is
not a Permitted Lien. There is no material controversy or objection pending, or
to the knowledge of the Borrowers, threatened in respect of any tax returns of
the Borrowers. The Borrowers have made adequate reserves on their books and
records in accordance with GAAP for all taxes that have accrued but which are
not yet due and payable. The failure to file the tax returns as disclosed on
Schedule 7.19 will not result in the occurrence of a Material Adverse Effect.
-------------
7.20 Compliance with Regulation U. No portion of the proceeds of the Loans
----------------------------
shall be used by the Borrowers, or any Affiliate of the Borrowers, either
directly or indirectly, for the purpose of purchasing or carrying any margin
stock, within the meaning of Regulation U as adopted by the Board of Governors
of the Federal Reserve System or any successor thereto.
7.21 Governmental Regulation. The Borrowers and their Subsidiaries are not,
-----------------------
or after giving effect to any loan, will not be, subject to regulation under the
Federal Power Act, the ICC Termination Act of 1995 or the Investment Company Act
of 1940 or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.
7.22 Bank Accounts. Except as listed on Schedule 7.22 attached hereto, all
------------- -------------
concentration Deposit Accounts and concentration operating bank accounts of the
Borrowers and their Subsidiaries (other than the Canadian Subsidiary) are
located at the Lender.
7.23 Place of Business. On the date of this Agreement, the principal place
-----------------
of business, the location of books and records and the location of all
Collateral, if other than at such principal place of business, is as set forth
on Schedule 7.23 attached hereto and made a part hereof, and the applicable
--------------
Borrowers shall promptly notify the Lender of any change in such locations. The
Borrowers will not remove or permit the Collateral to be removed from such
47
locations without the prior written consent of the Lender, except for Inventory
or non-material assets sold or disposed of in the usual and ordinary course of
the Borrower's business.
7.24 Complete Information. This Agreement and all financial statements,
---------------------
schedules, certificates and agreements previously or contemporaneously herewith
furnished in writing by the Borrowers to the Lender for purposes of, or in
connection with, this Agreement and the transactions contemplated hereby is, and
all written information hereafter furnished by or on behalf of the Borrowers to
the Lender pursuant hereto or in connection herewith will be, true and accurate
in every material respect on the date as of which such information is dated or
certified, and this Agreement foes not omit any material fact necessary to make
such information not misleading in any material respect in light of the
circumstances under which made (it being recognized by the Lender that any
projections and forecasts provided by the Borrowers are based on good faith
estimates and assumptions believed by the Borrowers to be reasonable as of the
date of the applicable projections or assumptions and that actual results during
the period or periods covered by any such projections and forecasts may differ
from projected or forecasted results).
7.25 Subordinated Debt. The subordination provisions of the Subordination
------------------
Agreement are enforceable against the holders of the Subordinated Debt by the
Lender. The Obligations constitute Senior Debt entitled to the benefits of the
subordination provisions contained in the Subordination Agreement. The Borrowers
acknowledge that the Lender is entering into this Agreement and is making the
Loans in reliance upon the subordination provisions of the Subordination
Agreement and this Section 7.25.
------------
Section 8. AFFIRMATIVE COVENANTS.
---------------------
48
Each Borrower makes the following covenants.
8.1 Compliance with Lender Regulatory Requirements; Increased Costs. If the
---------------------------------------------------------------
Lender shall reasonably determine that any Regulatory Change, or compliance by
the Lender or any Person controlling the Lender with any request or directive
issued or promulgated after the date hereof (whether or not having the force of
law) of any governmental authority, central bank or comparable agency has or
would have the effect of reducing the rate of return on the Lender's or such
controlling Person's capital as a consequence of the Lender's obligations
hereunder or under any Letter of Credit to a level below that which the Lender
or such controlling Person could have achieved but for such Regulatory Change or
compliance (taking into consideration the Lender's or such controlling Person's
policies with respect to capital adequacy) by an amount deemed by the Lender or
such controlling Person to be material or would otherwise reduce the amount of
any sum received or receivable by the Lender under this Agreement or under any
Note with respect thereto, then from time to time, upon demand by the Lender
(which demand shall be accompanied by a statement setting forth the basis for
such demand and a calculation of the amount thereof in reasonable detail), the
Borrowers shall pay directly to the Lender or such controlling Person such
additional amount as will compensate the Lender for such increased cost or such
reduction, so long as such amounts have accrued on or after the day which is one
hundred eighty days (180) days prior to the date on which the Lender first made
demand.
8.2 Borrower Existence. Each Borrower shall at all times preserve and
-------------------
maintain (a) its existence and good standing in the jurisdiction of its
organization, and (b) its qualification to do business and good standing in each
jurisdiction where the nature of its business makes such qualification necessary
(other than such jurisdictions in which the failure to be qualified or in good
standing would not reasonably be expected to have Material Adverse Effect).
Borrower shall at all times continue as a going concern in a Permitted Business
provided any Borrower may merge with or into another Borrower so long as, if KMS
is a party to the merger, KMS is the survivor. If a Borrower does not have an
Organizational Identification Number and later obtains one, such Borrower shall
promptly notify the Lender of such Organizational Identification Number.
8.3 Compliance With Laws. Each Borrower shall use the proceeds of the Loans
--------------------
for working capital, the acquisition of PCD and PCD, LLC and other general
corporate or business purposes not in contravention of any requirements of law
and not in violation of this Agreement, and shall comply in all respects,
including the conduct of its business and operations and the use of its
properties and assets, with all applicable laws, rules, regulations, decrees,
orders, judgments, licenses and permits, except where failure to comply would
not reasonably be expected to have a Material Adverse Effect. In addition, and
without limiting the foregoing sentence, each Borrower shall (a) ensure that no
person who owns a controlling interest in or otherwise controls such Borrower is
or 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,
(b) not use or permit the use of the proceeds of the Loans to violate any of the
49
foreign asset control regulations of OFAC or any enabling statute or Executive
Order relating thereto, and (c) comply with all applicable Bank Secrecy Act
("BSA") laws and regulations, as amended.
8.4 Payment of Taxes and Liabilities. Each Borrower shall pay and
------------------------------------
discharge, prior to delinquency and before penalties accrue thereon, all
property and other taxes, and all governmental charges or levies against it or
any of the Collateral, as well as claims of any kind which, if unpaid, could
become a Lien on any of its property; provided that the foregoing shall not
require such Borrower to pay any such tax or charge so long as it shall contest
the validity thereof in good faith by appropriate proceedings and shall set
aside on its books adequate reserves with respect thereto to the extent required
by GAAP and, in the case of a claim which could become a Lien on any of the
Collateral, such contest proceedings stay the foreclosure of such Lien or the
sale of any portion of the Collateral to satisfy such claim.
8.5 Maintain Property. Each Borrower shall at all times maintain, preserve
-----------------
and keep its material plant, properties and Equipment, including, but not
limited to, any Collateral, in satisfactory repair, working order and condition,
normal wear and tear excepted, and shall from time to time make all needful and
proper repairs, renewals, replacements, and additions thereto so that at all
times the efficiency thereof shall be fully preserved and maintained. Each
Borrower shall permit the Lender to examine and inspect such plant, properties
and Equipment, including, but not limited to, any Collateral, and at all
reasonable times during normal business hours and upon reasonable prior notice.
8.6 Maintain Insurance. The Borrowers will keep its and each of its
-------------------
Subsidiaries' insurable properties adequately insured at all times by
financially sound and reputable insurers; maintain such other insurance to such
extent and against such risks as is reasonable and prudent, including commercial
general liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of any
properties owned, occupied or controlled by it, director and officer liability
insurance and business interruption insurance; and maintain such other insurance
as may be required by applicable law, in each case naming the Lender as a loss
payee, lien holder/mortgagee or additional insured. Each Borrower shall furnish
to the Lender a certificate setting forth in reasonable detail the nature and
extent of all insurance maintained by such Borrower, which shall be reasonably
acceptable in all respects to the Lender. Each Borrower shall cause each issuer
of an insurance policy to provide the Lender with an endorsement (i) showing the
Lender as lender loss payee with respect to each policy of property or casualty
insurance; and (ii) providing that thirty (30) days notice will be given to the
Lender prior to any cancellation of, material reduction or change in coverage
provided by or other material modification to such policy. Borrowers shall have
thirty (30) days from the closing date to provide Lender certificates of
insurance and endorsements with respect to PCD and PCD, LLC.
In the event a Borrower either fails to provide the Lender with evidence of
the insurance coverage required by this Section or at any time hereafter shall
fail to obtain or maintain any of the policies of insurance required above, or
to pay any premium in whole or in part relating thereto, then the Lender,
without waiving or releasing any obligation or default by such Borrower
50
hereunder, may at any time (but shall be under no obligation to so act), obtain
and maintain such policies of insurance and pay such premiums and take any other
action with respect thereto, which the Lender deems advisable. This insurance
coverage (a) may, but need not, protect such Borrower's interests in such
property, including, but not limited to, the Collateral, and (b) may not pay any
claim made by, or against, such Borrower in connection with such property,
including, but not limited to, the Collateral. Such Borrower may later cancel
any such insurance purchased by the Lender, but only after providing the Lender
with evidence that such Borrower has obtained the insurance coverage required by
this Section. If the Lender purchases insurance for the Collateral, such
Borrower will be responsible for the costs of that insurance, including interest
and any other charges that may be imposed with the placement of the insurance,
until the effective date of the cancellation or expiration of the insurance. The
costs of the insurance may be added to the principal amount of the Loans owing
hereunder by such Borrower. The costs of the insurance may be more than the cost
of the insurance such Borrower may be able to obtain on its own.
8.7 ERISA Liabilities; Employee Plans. Each Borrower shall (i) keep in full
---------------------------------
force and effect any and all Employee Plans which are presently in existence or
may, from time to time, come into existence under ERISA, and not withdraw from
any such Employee Plans, unless such withdrawal can be effected or such Employee
Plans can be terminated without liability to the Borrower in excess of One
Million dollars ($1,000,000.00) after taking into account all deductions,
credits, or other tax benefits allowed with respect to the termination; (ii)
make contributions to all of such Employee Plans in a timely manner and in a
sufficient amount to comply with the standards of ERISA; including the minimum
funding standards of ERISA; (iii) comply with all material requirements of ERISA
which relate to such Employee Plans; (iv) notify the Lender immediately upon
receipt by the Borrowers of any notice concerning the imposition of any
withdrawal liability or of the institution of any proceeding or other action
which may result in the termination of any such Employee Plans or the
appointment of a trustee to administer such Employee Plans; (v) promptly advise
the Lender of the occurrence of any "Reportable Event" or "Prohibited
Transaction" (as such terms are defined in ERISA), with respect to any such
Employee Plans; and (vi) amend any Employee Plan that is intended to be
qualified within the meaning of Section 401 of the Internal Revenue Code to the
extent necessary to keep the Employee Plan qualified, and to cause the Employee
Plan to be administered and operated in a manner that does not cause the
Employee Plan to lose its qualified status.
8.8 Financial Statements. Each Borrower shall at all times maintain a
---------------------
system of accounting consistent with their existing practices as modified from
time to time in accordance with GAAP and generally accepted accounting
standards, on the accrual basis of accounting and in all respects in accordance
with GAAP, and KMS shall furnish to the Lender or its authorized representatives
such information regarding the business affairs, operations and financial
condition KMS and its Subsidiaries, including, but not limited to:
(a) within five (5) Business Days of when available, and in any event,
within one hundred and twenty (120) days after the close of each fiscal
year, (i) a copy of the annual audited consolidated financial statements of
the Borrowers, containing a balance sheet, statement of income and retained
earnings and statement of cash flows for the fiscal year then ended and
(ii) such other information (including non-financial information) as the
51
Lender may request, in reasonable detail, all such financial statements to
be prepared in accordance with GAAP consistently applied and such financial
statements to be reported on and accompanied by the unqualified opinion of
McGladrey & ▇▇▇▇▇▇ LLP or such other independent certified public
accountants selected by Borrowers and reasonably acceptable to Lender
together with (i) a certificate from such accountants to the effect that,
in making the examination necessary for the signing of such annual audit
report, such accountants have not become aware of any Event of Default that
has occurred and is continuing, or, if such accountants have become aware
of any such event, describing it and the steps, if any, being taken to cure
it and (ii) the computations of such accountants evidencing compliance by
the Borrowers with the financial covenants contained in Section 10 of this
----------
Agreement;
(b) Intentionally Omitted.
(c) within five (5) Business Days of when available, and in any event,
within forty-five (45) days following the end of the fiscal quarters ending
in July, October and January of each year and within sixty (60) days
following the end of the fiscal quarter ending in April of each year, (i) a
copy of the consolidated financial statements of the Borrowers regarding
such fiscal quarter, including a balance sheet, statement of income and
retained earnings and statement of cash flows for the fiscal quarter then
ended, and (ii) such other information (including non-financial
information) as the Lender may reasonably request, in reasonable detail,
prepared and certified as true and correct by the applicable Borrowers'
treasurer or chief financial officer; and
No change with respect to such accounting principles shall be made by the
Borrowers without giving prior notification to the Lender. The Borrowers
represent and warrant to the Lender that the financial statements delivered to
the Lender at or prior to the execution and delivery of this Agreement and to be
delivered at all times thereafter accurately reflect and will accurately reflect
the financial condition of the Borrowers in all material respects in accordance
with GAAP except as disclosed on Schedule 3.4 to the Merger Agreement, with
respect to the financial statements of PCD. The Lender shall have the right at
reasonable times during normal business hours to inspect the books and records
of the Borrowers and make extracts therefrom, but, except after the occurrence
and during the continuation of an Event of Default, no more frequently than once
per calendar year. All such inspections shall be at the Lender's expense;
provided that no Event of Default or Unmatured Event of Default exists.
8.9 Supplemental Financial Statements. Each Borrower shall immediately upon
---------------------------------
receipt thereof, provide to the Lender copies of interim and supplemental
reports if any, submitted to such Borrower by independent accountants in
connection with any interim audit or review of the books of such Borrower.
8.10 Borrowing Base Certificates. KMS shall, within thirty (30) days after
---------------------------
the end of each month, deliver to the Lender a Borrowing Base Certificate
separately detailing Eligible Domestic Accounts, Eligible ▇▇▇▇▇ Accounts and
52
Eligible Foreign Accounts dated as of the last Business Day of such month,
certified as true and correct by an authorized representative of the applicable
Borrowers and reasonably acceptable to the Lender in accordance with this
Agreement; provided, however, at any time an Event of Default exists, the Lender
may require the Borrowers to deliver Borrowing Base Certificates more
frequently.
8.11 Aged Accounts Schedule. Each Borrower shall, within thirty (30) days
----------------------
after the end of each month, deliver to the Lender an aged schedule of the
Accounts of such Borrower, listing the name and amount due from each Account
Debtor and showing the aggregate amounts due from (a) 0-30 days, (b) 31-60 days,
(c) 61-90 days and (d) more than 90 days, and certified as accurate by such
Borrower's treasurer or chief financial officer.
8.12 Covenant Compliance Certificate. The Borrowers shall, within
-----------------------------------
forty-five 45 days of the end of each of their first three fiscal quarters and
within sixty 60 days of the end of their fourth fiscal quarters, deliver to the
Lender a duly completed compliance certificate, certified as true and correct by
an appropriate officer of such Borrower (but without personal liability),
containing a computation of each of the financial covenants set forth in Section
-------
10 and stating that such Borrowers have not become aware of any Event of Default
--
or Unmatured Event of Default, that has occurred and is continuing or, if there
is any such Event of Default or Unmatured Event of Default describing it and the
steps, if any, being taken to cure it.
8.13 Field Audits. The Borrowers shall permit the Lender to inspect the
-------------
Inventory, other assets and/or other business operations of the Borrowers, to
perform appraisals of the Equipment of the Borrowers and to inspect, audit,
check and make copies of, and extracts from, the books, records, computer data,
computer programs, journals, orders, receipts, correspondence and other data
relating to Inventory, Accounts and any other Collateral, the results of which
must be satisfactory to the Lender in the Lender's sole and absolute discretion.
All such inspections or audits by the Lender shall be at the Lender's expense,
provided that no Event of Default or Unmatured Event of Default exists.
Notwithstanding the foregoing, the Borrowers shall reimburse the Lender for the
expense of one inspection or audit to be performed on PCD, LLC on or before
February 28, 2007 up to a maximum amount of $10,000.
8.14 Other Reports. Each Borrower shall, within such period of time as the
-------------
Lender may reasonably specify, deliver to the Lender such other schedules and
reports as the Lender may reasonably require, including copies of invoices on
all machinery and equipment purchased.
8.15 Collateral Records. Each Borrower shall keep full and accurate books
-------------------
and records relating to the Collateral to the extent necessary to prepare
accurate balance sheets in accordance with GAAP and shall ▇▇▇▇ such books and
records to indicate the Lender's Lien in the Collateral.
8.16 Intellectual Property. Each Borrower shall maintain, preserve and
----------------------
renew all material Intellectual Property necessary for the conduct of its
business except where the failure to do so would not reasonably be expected to
have a Material Adverse Effect.
53
8.17 Notice of Proceedings. Each Borrower, promptly upon becoming aware,
----------------------
shall give written notice to the Lender of any litigation, arbitration or
governmental investigation or proceeding not previously disclosed by the
Borrowers to the Lender which has been instituted or, to the knowledge of such
Borrower, is threatened against such Borrower or any of its Subsidiaries or to
which any of their respective properties is subject which would reasonably be
expected to have a Material Adverse Effect.
8.18 Notice of Event of Default or Material Adverse Effect. The Borrowers
------------------------------------------------------
shall, immediately after the commencement thereof, give notice to the Lender in
writing of the occurrence of any Event of Default or any Unmatured Event of
Default, or the occurrence of any condition or event having a Material Adverse
Effect.
8.19 Environmental Matters. If any release or threatened release or other
----------------------
disposal of Hazardous Substances shall occur or shall have occurred on any real
property or any other assets of a Borrower or any of its Subsidiaries, such
Borrower shall cause the prompt containment and removal of such Hazardous
Substances and the remediation of such real property or other assets as
necessary to comply with all Environmental Laws and to preserve the value of
such real property or other assets unless the failure to do so would not
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, each Borrower shall comply in all material respects
with any Federal or state judicial or administrative order requiring the
performance at any real property of the Borrowers of activities in response to
the release or threatened release of a Hazardous Substance. To the extent that
the transportation of Hazardous Substances is permitted by this Agreement, each
Borrower shall, and shall cause its Subsidiaries to, dispose of such Hazardous
Substances, or of any other wastes, only at licensed disposal facilities
operating in compliance with Environmental Laws in all material respects.
8.20 Further Assurances. Each Borrower shall take such actions as are
-------------------
necessary or as the Lender may reasonably request from time to time to ensure
that its Obligations under the Loan Documents are secured by substantially all
of the assets of such Borrower and its Subsidiaries (other than any real
property of any of the Borrowers or any property of, or for the account of, or
the Borrowers' interests in the Capital Securities of any of its Subsidiaries)
subject to Permitted Liens and Permitted Perfection Limitations, in each case as
the Lender may reasonably determine, including (a) the execution and delivery of
security agreements, pledge agreements, mortgages, deeds of trust, financing
statements and other documents, and the filing or recording of any of the
foregoing, and (b) the delivery of Collateral with respect to which perfection
is obtained by possession.
8.21 Lockbox Agreement. Prior to October 2007, PCD, LLC shall become a
------------------
party to the Lockbox Agreement.
8.22 Banking Relationship. Each Borrower covenants and agrees, at all times
--------------------
during the term of this Agreement, to utilize the Lender as its primary bank of
account and depository for all financial services, including all receipts,
disbursements, cash management and related service.
54
8.23 Non-Utilization Fee. The Borrowers agree to pay to the Lender a
--------------------
Non-Utilization fee equal to one-quarter of one percent per annum of the total
of (i) the Facility A Loan Commitment, minus (ii) the sum of (A) the daily
average of the aggregate principal amount of all Facility A Loans outstanding,
plus (B) the daily average of the aggregate amount of the Letter of Credit
Obligations, and (ii) on the Facility D Loan Commitment, minus (ii) the sum of
the daily average of the aggregate principal amount of all Facility D Loans
outstanding which non-utilization fees shall be (x) calculated on the basis of a
year consisting of 365 days, (y) paid for the actual number of days elapsed, and
(z) payable quarterly in arrears on the last business day of each April, July,
October and January, commencing on January 31, 2007, and on the Facility A
Maturity Date and the Facility D Maturity Date.
Section 9. NEGATIVE COVENANTS.
------------------
Each Borrower makes the following covenants.
9.1 Debt. Each Borrower shall not either directly or indirectly, create,
----
assume, incur or have outstanding any Debt (including purchase money
indebtedness), or become liable, whether as endorser, guarantor, surety or
otherwise, for any debt or obligation of any other Person, except:
(a) the Obligations under this Agreement and the other Loan Documents;
(b) obligations of such Borrower for Taxes, assessments, municipal or
other governmental charges;
(c) obligations of such Borrower for accounts payable, other than for
money borrowed, incurred in the ordinary course of business;
(d) Hedging Obligations incurred in favor of the Lender or an
Affiliate thereof for bona fide hedging purposes and not for speculation;
(e) Capitalized Lease Obligations and Debt for Capital Expenditures
incurred after the date of this Agreement, provided that, the aggregate
amount of all such Debt incurred at any time shall not exceed $3,000,000
per year other than the Loans;
(f) Debt of any Borrower to any other Borrower;
(g) Debt described on Schedule 9.1 and any extension, renewal or
refinancing thereof so long as the principal amount thereof is not
increased;
(h) Contingent Liabilities of any Borrower or any Subsidiary of any
Borrower; and
55
(i) Debt of any Borrower which is subordinated in writing to the
payment of such Borrower's Obligations under this Agreement and the other
Loan Documents in substantially the form of Exhibit F to this Agreement.
---------
9.2 Encumbrances. Each Borrower shall not either directly or indirectly,
------------
create, assume, incur or suffer or permit to exist any Lien or charge of any
kind or character upon any asset of such Borrower, whether owned at the date
hereof or hereafter acquired, except for Permitted Liens.
9.3 Investments. Each Borrower shall not, either directly or indirectly,
-----------
make or have outstanding any Investment, except:
(a) the acquisition of PCD and PCD, LLC;
(b) contributions by such Borrower to the capital of any Subsidiary
which has granted a first perfected security interest in substantially all
of its/their assets in favor of the Lender (other than assets excluded from
the definition of Collateral);
(c) Investments constituting Debt permitted by Section 9.1;
-----------
(d) Contingent Liabilities constituting Debt permitted by Section 9.1
-----------
or Liens permitted by Section 9.2;
-----------
(e) Cash Equivalent Investments;
(f) bank deposits in the ordinary course of business, provided that on
or after October 31, 2007 the aggregate amount of all such deposits which
are maintained with any bank other than the Lender shall not at any time
exceed $100,000;
(g) Investments in securities of Account Debtors received pursuant to
any plan of reorganization or similar arrangement upon the bankruptcy or
insolvency of such account debtors;
(g) Investments by a Borrower in any other Borrower; and
(h) Loans to publisher customers in an amount not exceeding
$500,000.00 to any one publisher and not exceeding $1,500,000.00
outstanding at any one time; and
(i) Investments listed on Schedule 9.3 as of the closing date;
------------
provided, however, that (i) any Investment which when made complies with the
requirements of the definition of the term "Cash Equivalent Investment" may
continue to be held notwithstanding that such Investment if made thereafter
would not comply with such requirements; and (ii) no Investment otherwise
permitted by subsections (b) or (c) shall be permitted to be made if,
56
immediately before or after giving effect thereto, any Event of Default or
Unmatured Event of Default exists.
9.4 Transfer; Merger; Sales. Each Borrower shall not, whether in one
-------------------------
transaction or a series of related transactions, (a) be a party to any merger or
consolidation, or purchase or otherwise acquire all or substantially all of the
assets or any Capital Securities of any class of, or any partnership or joint
venture interest in, any other Person (other than to effect an Investment or
Acquisition permitted by this Agreement), except for any such merger,
consolidation, sale, transfer, conveyance, lease or assignment of or by any
Wholly-Owned Subsidiary into such Borrower or a merger of two Borrowers or a
merger or consolidation to effect an Acquisition permitted by this Agreement,
(b) pledge, sell, transfer, convey or lease all or any substantial part of its
assets or Capital Securities (including the sale of Capital Securities of any
Subsidiary), except for sales of Inventory in the ordinary course of business,
(c) create any new Subsidiaries or (d) sell or assign, with or without recourse,
any receivables.
9.5 Issuance of Capital Securities. Each Borrower shall not issue any
--------------------------------
Capital Securities other than (a) any issuance of shares of such Borrower's
common Capital Securities pursuant to any employee or director option program,
benefit plan or compensation program, or (b) any issuance of Capital Securities
by a Subsidiary to a Borrower.
9.6 Distributions. (a) Subject to the requirements of Section 10 hereof,
-------------
the Borrowers may make any payments of management fees or similar payments to
the Principal Shareholder and distributions, dividends, stock, repurchases to
any of its equityholders, provided that (i) such distributions or dividends are
from net income or retained earnings, and (ii) no Unmatured Event of Default or
Event of Default exists as of the date of such distribution or dividend or would
otherwise be created thereby. Notwithstanding the foregoing, any Borrower may
make tax allocation payments to the Principal Shareholder so long as the
allocations reasonably reflect economic reality, any Subsidiary may pay
dividends or make other distributions payable to any Borrower, and Borrowers may
make payments to the extent permitted under the Subordination Agreement(s)
(b) The Borrowers shall not purchase or redeem any of their respective
equity interests or any warrants, options or other rights in respect
thereof except from another Borrower and in compliance with Section 10.
9.7 Transactions with Affiliates. Each Borrower shall not, directly or
------------------------------
indirectly, enter into or permit to exist any transaction with any of its
Affiliates or with any director, officer or employee of such Borrower other than
transactions in the ordinary course of the business of such Borrower and upon
fair and reasonable terms which, if requested by the Lender, shall be fully
disclosed to the Lender and are no less favorable to such Borrower than would be
obtained in a comparable arm's length transaction with a Person that is not an
Affiliate of such Borrower (other than payment of dividends, distributions,
stock repurchases or Investments permitted by this Agreement).
57
9.8 Unconditional Purchase Obligations. Each Borrower shall not enter into
----------------------------------
or be a party to any contract for the purchase of materials, supplies or other
property or services if such contract requires that payment be made by it
regardless of whether delivery is ever made of such materials, supplies or other
property or services.
9.9 Cancellation of Debt. Each Borrower shall not cancel any claim or debt
--------------------
owing to it, except for reasonable consideration or in the ordinary course of
business.
9.10 Inconsistent Agreements. Each Borrower shall not enter into any
------------------------
agreement containing any provision which would (a) be violated or breached in
any material respect by any borrowing by such Borrower hereunder or by the
performance by such Borrower of any of its Obligations hereunder or under any
other Loan Document, (b) prohibit such Borrower from granting to the Lender a
Lien on any of its assets or (c) create or permit to exist or become effective
any encumbrance or restriction on the ability of any Subsidiary to (i) pay
dividends or make other distributions to such Borrower, or pay any Debt owed to
such Borrower, (ii) make loans or advances to such Borrower, or (iii) transfer
any of its assets or properties to such Borrower, other than (A) customary
restrictions and conditions contained in agreements relating to the sale of all
or a substantial part of the assets of any Subsidiary, provided that such
restrictions and conditions apply only to the Subsidiary or assets to be sold
and such sale is permitted by this Agreement, (B) restrictions or conditions
imposed by any agreement relating to purchase money Debt, Capital Leases and
other secured Debt permitted by this Agreement if such restrictions or
conditions apply only to the property or assets securing such Debt, and
(C) customary provisions in leases and other contracts restricting the
assignment thereof.
9.11 Use of Proceeds. No Borrower or any of such Borrower's Subsidiaries or
---------------
Affiliates shall use any portion of the proceeds of the Loans, either directly
or indirectly, for the purpose of purchasing any securities underwritten by ABN
AMRO Incorporated, an Affiliate of the Lender.
9.12 Intentionally deleted.
9.13 Business Activities; Change of Legal Status and Organizational
---------------------------------------------------------------------
Documents. Each Borrower shall not (a) engage in any line of business other than
---------
the Permitted Businesses, (b) without providing prior written notice to the
Lender, change its name, its Organizational Identification Number, if it has
one, its type of organization, its jurisdiction of organization or other legal
structure, or (c) permit its charter, bylaws or other organizational documents
to be amended or modified in any way which could reasonably be expected to
materially adversely affect the interests of the Lender.
Section 10. FINANCIAL COVENANTS.
-------------------
10.1 Shareholder's Equity. As of the end of each fiscal quarter, the
---------------------
Borrowers shall maintain consolidated Shareholder's Equity in an amount not less
than $40,000,000.00.
58
10.2 Fixed Charge Coverage. As of the end of each fiscal quarter for the
----------------------
trailing twelve months, the Borrowers shall maintain a ratio of (a) EBITDA
eliminating the effect of any extraordinary items as determined in accordance
with GAAP minus the sum, without duplication, of (i) all income taxes paid or
-----
payable by the Borrowers (including pursuant to tax sharing agreements with the
Principal Shareholder) with respect to their income, (ii) all Capital
Expenditures of the Borrowers to the extent not financed with Funded Debt (iii)
principal payments on Subordinated Debt, and (iv) all dividends paid in cash by
the Borrowers during such period to (b) the sum of (i) Interest Charges plus
----
(ii) required payments of principal of Funded Debt (excluding principal due on
the Facility A Maturity Date) and (iii) interest payments on Subordinated Debt
of not less than 1.15 to 1.00.
10.3 Senior Debt to EBITDA Ratio. The Borrowers shall not permit the Senior
---------------------------
Debt to EBITDA ratio as of the last day of any fiscal quarter to exceed the
applicable ratio set forth below for such computation period:
Computation Senior Debt to
Periods Ending EBITDA Ratio
-------------- ------------
1/31/2007,4/30/2007,7/31/2007, 3.0
10/31/2007 and 1/31/2008
4/30/08,7/31/2008,10/31/2008 and 1/31/2009 2.5
4/30/09 and thereafter 2.0
Section 11. EVENTS OF DEFAULT.
-----------------
Except as otherwise provided in this Agreement, the Borrowers, without
notice or demand of any kind, shall be in default under this Agreement upon the
occurrence of any of the following events (each an "Event of Default").
11.1 Nonpayment of Obligations. Any amount due and owing on any Note or any
-------------------------
of the Obligations, whether by its terms or as otherwise provided herein, is not
paid within five (5) days after notice from the Lender that such amount was not
paid when due.
11.2 Misrepresentation. Any written warranty, representation, certificate
-----------------
or statement of any Borrower in this Agreement, the other Loan Documents or any
other agreement with the Lender shall be false in any material respect when made
or deemed made, or if any financial data or any other information now or
hereafter furnished to the Lender by or on behalf of any Borrower shall prove to
be false, inaccurate or misleading in any material respect.
11.3 Nonperformance. Any failure to perform or default in the performance
--------------
of any covenant, condition or agreement contained in this Agreement and, if
capable of being cured, such failure to perform or default in performance
continues for a period of five (5) days after the Borrowers receive notice or
knowledge from any source of such failure to perform or default in performance,
or in the other Loan Documents or any other agreement with the Lender and such
59
failure to perform or default in performance continues beyond any applicable
grace or cure period.
11.4 Default under Loan Documents. Any event of default under any of the
------------------------------
other Loan Documents, all of which covenants, conditions and agreements
contained therein are hereby incorporated in this Agreement by express
reference, shall be and constitute an Event of Default under this Agreement and
any other of the Obligations if the default continues for fifteen (15) days
after notice of the default.
11.5 Default under Other Debt. Any default by any Borrower in the payment
-------------------------
of any Debt for any other obligation in an amount exceeding Three Hundred and
Fifty Thousand and 00/100ths ($350,000.00) beyond any period of grace provided
with respect thereto or in the performance of any other term, condition or
covenant contained in any agreement (including, but not limited to any capital
or operating lease or any agreement in connection with the deferred purchase
price of property) under which any such obligation is created, the effect of
which default is to cause or permit the holder of such obligation (or the other
party to such other agreement) to cause such obligation to become due prior to
its stated maturity or terminate such other agreement.
11.6 Other Material Obligations. Any default in the payment when due, or in
--------------------------
the performance or observance of, any material obligation of, or condition
agreed to by, any Borrower with respect to any material purchase or lease of
goods or services where such default, singly or in the aggregate with all other
such defaults, might reasonably be expected to have with respect a Material
Adverse Effect.
11.7 Bankruptcy, Insolvency, etc. Any Borrower becomes insolvent or
-----------------------------
generally fails to pay, or admits in writing its inability or refusal to pay,
debts as they become due; or any Borrower applies for, consents to, or
acquiesces in the appointment of a trustee, receiver or other custodian for such
Borrower or any property thereof, or makes a general assignment for the benefit
of creditors; or, in the absence of such application, consent or acquiescence, a
trustee, receiver or other custodian is appointed for any Borrower or for a
substantial part of the property of any thereof and is not discharged within
sixty (60) days; or any bankruptcy, reorganization, debt arrangement, or other
case or proceeding under any bankruptcy or insolvency law, or any dissolution or
liquidation proceeding, is commenced in respect of any Borrower, and if such
case or proceeding is not commenced by such Borrower, it is consented to or
acquiesced in by such Borrower, or remains undismissed for sixty (60) days; or
any Borrower takes any action to authorize, or in furtherance of, any of the
foregoing.
11.8 Judgments. The entry of any non-appealable final judgment, decree,
---------
levy, attachment, garnishment or other process, or the filing of any Lien
against any Borrower in respect of the foregoing which is not fully covered by
insurance and such judgment or other process shall not have been, within sixty
(60) days from the entry thereof, (i) bonded over to the satisfaction of the
Lender, (ii) vacated, or (iii) discharged.
11.9 Change in Control. The occurrence of any Change in Control.
-----------------
60
11.10 Collateral Impairment. The entry of any judgment, decree, levy,
----------------------
attachment, garnishment or other process, or the filing of any Lien against, any
of the Collateral or any collateral under a separate security agreement securing
any of the Obligations and such judgment or other process shall not have been,
within sixty (60) days from the entry thereof, (i) bonded over to the
satisfaction of the Lender and appealed, (ii) vacated, or (iii) discharged, or
the loss, theft, destruction, seizure or forfeiture, or the occurrence of any
material deterioration or impairment of any of the Collateral or any of the
collateral under any security agreement securing any of the Obligations, or any
material decline or depreciation in the value or market price thereof (whether
actual or reasonably anticipated), which causes the Collateral, in the sole
opinion of the Lender acting in good faith, to become unsatisfactory as to value
or character, or which causes the Lender to reasonably believe that it is
insecure and that the likelihood for repayment of the Obligations is or will
soon be impaired, time being of the essence. The cause of such deterioration,
impairment, decline or depreciation shall include, but is not limited to, the
failure by the Borrowers to do any act deemed reasonably necessary by the Lender
to preserve and maintain the value and collectability of the Collateral.
11.11 Material Adverse Effect. The occurrence of any development, condition
-----------------------
or event which has a Material Adverse Effect.
For the avoidance of doubt and notwithstanding any other provision of this
Agreement, the parties hereto expressly covenant and agree that for the purposes
of this Agreement and the other Loan Documents, all Loans (a) shall be fully
cross-collateralized by all of the assets of the Borrowers, (b) cross-defaulted
with each other, except that a ▇▇▇▇▇ Event of Default will not constitute an
Event of Default under this Agreement; it being understood, however, that in the
event of a ▇▇▇▇▇ Event of Default Lender may (i) apply the remaining ▇▇▇▇▇
Collateral proceeds under the circumstances contemplated under Section
4(a)(ii)(3) of the Intercreditor Agreement, (ii) cease funding under Facility D
and (iii) accelerate the Facility D Loan, and (c) the Facility D Loans shall be
secured solely by the ▇▇▇▇▇ Accounts, but the ▇▇▇▇▇ Accounts shall also secure
the Facility A Loans, the Facility B Loans and the Facility C Loans, in each
case as governed by the Intercreditor Agreement.
61
Section 12. REMEDIES.
--------
Upon the occurrence of an Event of Default, the Lender shall have all
rights, powers and remedies set forth in the Loan Documents, in any written
agreement or instrument (other than this Agreement or the Loan Documents)
relating to any of the Obligations or any security therefor, as a secured party
under the UCC or as otherwise provided at law or in equity. Without limiting the
generality of the foregoing, the Lender may, at its option upon the occurrence
of an Event of Default, declare its commitments to the Borrowers to be
terminated and all Obligations to be immediately due and payable, provided,
however, that upon the occurrence of an Event of Default under Section 11.7, all
------------
commitments of the Lender to the Borrowers shall immediately terminate and all
Obligations shall be automatically due and payable, all without demand, notice
or further action of any kind required on the part of the Lender. The Borrowers
hereby waive any and all presentment, demand, notice of dishonor, protest, and
all other notices and demands in connection with the enforcement of Lender's
rights under the Loan Documents, and hereby consent to, and waive notice of
release, with or without consideration, of any of the Borrowers or of any
Collateral, notwithstanding anything contained herein or in the Loan Documents
to the contrary. Lender shall use commercially reasonable efforts to notify the
Principal Shareholder prior to exercising any of the remedies available to
Lender under this Section 12; provided, however, that Lender shall not be liable
for failure to deliver notice, and the failure of Lender to notify the Principal
Shareholder shall not in any way limit or impair Lender's rights and remedies
under this Agreement.
12.1 Possession and Assembly of Collateral. From and after an Event of
----------------------------------------
Default, the Lender may, without notice, demand or legal process of any kind,
take possession of any or all of the Collateral (in addition to Collateral of
which the Lender already has possession), wherever it may be found, and for that
purpose may pursue the same wherever it may be found, and may at any time enter
into any of the Borrowers' premises where any of the Collateral may be or is
supposed to be, and search for, take possession of, remove, keep and store any
of the Collateral until the same shall be sold or otherwise disposed of and the
Lender shall have the right to store and conduct a sale of the same in any of
the Borrower's premises without cost to the Lender. At the Lender's request,
from and after an Event of Default, the Borrowers will, at the Borrowers' sole
expense, assemble the Collateral and make it available to the Lender at a place
or places to be designated by the Lender which is reasonably convenient to the
Lender and the Borrowers.
12.2 Sale of Collateral. From and after an Event of Default, the Lender may
------------------
sell any or all of the Collateral at public or private sale, upon such terms and
conditions as the Lender may deem proper, and the Lender may purchase any or all
of the Collateral at any such sale. The Borrowers acknowledge that the Lender
may be unable to effect a public sale of all or any portion of the Collateral
because of certain legal and/or practical restrictions and provisions which may
be applicable to the Collateral and, therefore, may be compelled to resort to
one or more private sales to a restricted group of offerees and purchasers. The
Borrowers consent to any such private sale so made even though at places and
upon terms less favorable than if the Collateral were sold at public sale. The
Lender shall have no obligation to clean-up or otherwise prepare the Collateral
for sale. The Lender may apply the net proceeds, after deducting all costs,
expenses, attorneys' and paralegals' fees incurred or paid at any time in the
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collection, protection and sale of the Collateral and the Obligations, to the
payment of any Note and/or any of the other Obligations, returning the excess
proceeds, if any, to the Borrowers. The Borrowers shall remain liable for any
amount remaining unpaid after such application, with interest at the Default
Rate. Any notification of intended disposition of the Collateral required by law
shall be conclusively deemed reasonably and properly given if given by the
Lender at least ten (10) calendar days before the date of such disposition. The
Borrowers hereby confirm, approve and ratify all acts and deeds of the Lender
relating to the foregoing, and each part thereof, and expressly waive any and
all claims of any nature, kind or description which it has or may hereafter have
against the Lender or its representatives, by reason of taking, selling or
collecting any portion of the Collateral. The Borrowers consent to releases of
the Collateral at any time (including prior to default) and to sales of the
Collateral in groups, parcels or portions, or as an entirety, as the Lender
shall deem appropriate. The Borrowers expressly absolve the Lender from any loss
or decline in market value of any Collateral by reason of delay in the
enforcement or assertion or nonenforcement of any rights or remedies under this
Agreement.
12.3 Standards for Exercising Remedies. To the extent that applicable law
----------------------------------
imposes duties on the Lender to exercise remedies in a commercially reasonable
manner, each of the Borrowers acknowledges and agrees that it is not
commercially unreasonable for the Lender (a) to fail to incur expenses
reasonably deemed significant by the Lender to prepare Collateral for
disposition or otherwise to complete raw material or work-in-process into
finished goods or other finished products for disposition, (b) to fail to obtain
third party consents for access to Collateral to be disposed of, or to obtain
or, if not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against Account Debtors
or other Persons obligated on Collateral or to remove liens or encumbrances on
or any adverse claims against Collateral, (d) to exercise collection remedies
against Account Debtors and other Persons obligated on Collateral directly or
through the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other Persons, whether or not in the same business as the Borrowers, for
expressions of interest in acquiring all or any portion of the Collateral, (g)
to hire one or more professional auctioneers to assist in the disposition of
Collateral, whether or not the collateral is of a specialized nature, (h) to
dispose of Collateral by utilizing internet sites that provide for the auction
of assets of the types included in the Collateral or that have the reasonable
capability of doing so, or that match buyers and sellers of assets, (i) to
dispose of assets in wholesale rather than retail markets, (j) to disclaim
disposition warranties, including, without limitation, any warranties of title,
(k) to purchase insurance or credit enhancements to insure the Lender against
risks of loss, collection or disposition of Collateral or to provide to the
Lender a guaranteed return from the collection or disposition of Collateral, or
(l) to the extent deemed appropriate by the Lender, to obtain the services of
other brokers, investment bankers, consultants and other professionals to assist
the Lender in the collection or disposition of any of the Collateral. The
Borrowers acknowledges that the purpose of this section is to provide
non-exhaustive indications of what actions or omissions by the Lender would not
be commercially unreasonable in the Lender's exercise of remedies against the
Collateral and that other actions or omissions by the Lender shall not be deemed
commercially unreasonable solely on account of not being indicated in this
section. Without limitation upon the foregoing, nothing contained in this
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section shall be construed to grant any rights to the Borrowers or to impose any
duties on the Lender that would not have been granted or imposed by this
Agreement or by applicable law in the absence of this section.
12.4 UCC and Offset Rights. From and after an Event of Default, the Lender
---------------------
may exercise, from time to time, any and all rights and remedies available to it
under the UCC or under any other applicable law in addition to, and not in lieu
of, any rights and remedies expressly granted in this Agreement or in any other
agreements between any Borrower and the Lender, and may, without demand or
notice of any kind, appropriate and apply toward the payment of such of the
Obligations, whether matured or unmatured, including costs of collection and
attorneys' and paralegals' fees, and in such order of application as the Lender
may, from time to time, elect, any indebtedness of the Lender to any Borrower,
however created or arising, including, but not limited to, balances, credits,
deposits, accounts or moneys of such Obligor in the possession, control or
custody of, or in transit to the Lender. The Borrowers, on behalf of themselves
and each Obligor, hereby waive the benefit of any law that would otherwise
restrict or limit the Lender in the exercise of its right, which is hereby
acknowledged, to appropriate at any time hereafter any such indebtedness owing
from the Lender to any Obligor.
12.5 Additional Remedies. From and after an Event of Default, the Lender
--------------------
shall have the right and power to:
(a) instruct the Borrowers, at their own expense, to notify any
parties obligated on any of the Collateral, including, but not limited to,
any Account Debtors, to make payment directly to the Lender of any amounts
due or to become due thereunder, or the Lender may directly notify such
obligors of the security interest of the Lender, and/or of the assignment
to the Lender of the Collateral and direct such obligors to make payment to
the Lender of any amounts due or to become due with respect thereto, and
thereafter, collect any such amounts due on the Collateral directly from
such Persons obligated thereon;
(b) enforce collection of any of the Collateral, including, but not
limited to, any Accounts, by suit or otherwise, or make any compromise or
settlement with respect to any of the Collateral, or surrender, release or
exchange all or any part thereof, or compromise, extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder;
(c) take possession or control of any proceeds and products of any of
the Collateral, including the proceeds of insurance thereon;
(d) extend, renew or modify for one or more periods (whether or not
longer than the original period) any Note, any other of the Obligations,
any obligation of any nature of any other obligor with respect to any Note
or any of the Obligations;
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(e) grant releases, compromises or indulgences with respect to any
Note, any of the Obligations, any extension or renewal of any of the
Obligations, any security therefor, or to any other obligor with respect to
any Note or any of the Obligations;
(f) transfer the whole or any part of securities which may constitute
Collateral into the name of the Lender or the Lender's nominee without
disclosing, if the Lender so desires, that such securities so transferred
are subject to the security interest of the Lender, and any corporation,
association, or any of the managers or trustees of any trust issuing any of
such securities, or any transfer agent, shall not be bound to inquire, in
the event that the Lender or such nominee makes any further transfer of
such securities, or any portion thereof, as to whether the Lender or such
nominee has the right to make such further transfer, and shall not be
liable for transferring the same;
(g) vote the Collateral;
(h) make an election with respect to the Collateral under Section 1111
of the Bankruptcy Code or take action under Section 364 or any other
section of the Bankruptcy Code; provided, however, that any such action of
the Lender as set forth herein shall not, in any manner whatsoever, impair
or affect the liability of the Borrowers hereunder, nor prejudice, waive,
nor be construed to impair, affect, prejudice or waive the Lender's rights
and remedies at law, in equity or by statute, nor release, discharge, nor
be construed to release or discharge, the Borrowers, any guarantor or other
Person liable to the Lender for the Obligations; and
(i) at any time, and from time to time, accept additions to, releases,
reductions, exchanges or substitution of the Collateral, without in any way
altering, impairing, diminishing or affecting the provisions of this
Agreement, the Loan Documents, or any of the other Obligations, or the
Lender's rights hereunder, under any Note or under any of the other
Obligations.
Each of the Borrowers hereby ratify and confirm whatever the Lender may do
in compliance with applicable law with respect to the Collateral and agrees that
the Lender shall not be liable for any error of judgment or mistakes of fact or
law with respect to actions taken in good faith in connection with the
Collateral.
12.6 Attorney-in-Fact. Each Borrower hereby irrevocably makes, constitutes
----------------
and appoints the Lender (and any officer of the Lender or any Person designated
by the Lender for that purpose) as such Borrower's true and lawful proxy and
attorney-in-fact (and agent-in-fact) in such Borrower's name, place and stead,
with full power of substitution, to (i) take such actions as are permitted in
this Agreement, (ii) execute such financing statements and other documents and
to do such other acts as the Lender may reasonably require to perfect and
preserve the Lender's security interest in, and to enforce such interests in the
Collateral, and (iii) carry out any remedy provided for in this Agreement,
including, without limitation, endorsing such Borrower's name to checks, drafts,
instruments and other items of payment, and proceeds of the Collateral,
executing change of address forms with the postmaster of the United States Post
65
Office serving the address of such Borrower, changing the address of the
Borrower to that of the Lender, opening all envelopes addressed to such Borrower
and applying any payments contained therein to the Obligations. Each Borrower
hereby acknowledges that the constitution and appointment of such proxy and
attorney-in-fact are coupled with an interest and are irrevocable. Each Borrower
hereby ratifies and confirms all that such attorney-in-fact may do or cause to
be done by virtue of any provision of this Agreement.
12.7 No Marshaling. The Lender shall not be required to marshal any present
-------------
or future collateral security (including but not limited to this Agreement and
the Collateral) for, or other assurances of payment of, the Obligations or any
of them or to resort to such collateral security or other assurances of payment
in any particular order. To the extent that it lawfully may, each of the
Borrowers hereby agrees that it will not invoke any law relating to the
marshaling of collateral which might cause delay in or impede the enforcement of
the Lender's rights under this Agreement or under any other instrument creating
or evidencing any of the Obligations or under which any of the Obligations is
outstanding or by which any of the Obligations is secured or payment thereof is
otherwise assured, and, to the extent that it lawfully may, the Borrowers hereby
irrevocably waives the benefits of all such laws.
12.8 Application of Proceeds. The Lender will within a time period
-------------------------
consistent with the terms of the Lockbox Agreement after receipt of cash or
solvent credits from collection of items of payment, proceeds of Collateral or
any other source pertaining to the Borrowers, apply the whole or any part
thereof against the Obligations of the Borrowers secured hereby. After the
occurrence and during the continuation of an Event of Default, the Lender shall
further have the exclusive right to determine how, when and what application of
such payments and such credits shall be made on the Obligations, and such
determination shall be conclusive upon the Borrowers. After the occurrence and
during the continuation of an Event of Default, any proceeds of any disposition
by the Lender of all or any part of the Collateral may be first applied by the
Lender to the payment of expenses incurred by the Lender in connection with the
Collateral, including attorneys' fees and legal expenses as provided for in
Section 13 hereof. Any excess proceeds shall be promptly remitted to the
Borrowers
12.9 No Waiver. No Event of Default shall be waived by the Lender except in
---------
writing. No failure or delay on the part of the Lender in exercising any right,
power or remedy hereunder shall operate as a waiver of the exercise of the same
or any other right at any other time; nor shall any single or partial exercise
of any such right, power or remedy preclude any other or further exercise
thereof or the exercise of any other right, power or remedy hereunder. There
shall be no obligation on the part of the Lender to exercise any remedy
available to the Lender in any order. The remedies provided for herein are
cumulative and not exclusive of any remedies provided at law or in equity. Each
of the Borrowers agrees that in the event that the Borrowers fail to perform,
observe or discharge any of their respective Obligations or liabilities under
this Agreement or any other agreements with the Lender, no remedy of law will
provide adequate relief to the Lender, and further agrees that the Lender shall
be entitled to temporary and permanent injunctive relief in any such case
without the necessity of proving actual damages.
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12.10 Letters of Credit. With respect to all Letters of Credit for which
-----------------
presentment for honor shall not have occurred at the time of an acceleration
pursuant to this Section 12, the Borrowers shall at such time deposit in a cash
----------
collateral account opened by the Lender an amount equal to the Letter of Credit
Obligations then outstanding. Amounts held in such cash collateral account shall
be applied by the Lender to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay the
Obligations, in such order of application as the Lender may, in its sole
discretion, from time to time elect. After all such Letters of Credit shall have
expired or been fully drawn upon, all commitments to make Loans hereunder have
terminated and all other Obligations have been indefeasibly satisfied and paid
in full in cash, the balance, if any, in such cash collateral account shall be
returned to the Borrowers or such other Person as may be lawfully entitled
thereto.
Section 13. MISCELLANEOUS.
-------------
13.1 Obligations Absolute. None of the following shall affect the
---------------------
Obligations of the Borrowers to the Lender under this Agreement or the Lender's
rights with respect to the Collateral:
(a) acceptance or retention by the Lender of other property or any
interest in property as security for the Obligations;
(b) release by the Lender of the Borrowers or all or any part of the
Collateral or of any party liable with respect to the Obligations;
(c) release, extension, renewal, modification or substitution by the
Lender of any Note, or any note evidencing any of the Obligations, or the
compromise of the liability of the Borrowers of the Obligations; or
(d) failure of the Lender to resort to any other security or to pursue
the Borrowers or any other obligor liable for any of the Obligations before
resorting to remedies against the Collateral.
13.2 Termination. This Agreement shall not terminate until the termination
-----------
of and the full and complete performance and indefeasible satisfaction of all
the Obligations (other than contingent indemnification obligations and any
matters which expressly survive pursuant to Section 14.3 hereof), whereupon
Lender shall promptly cause to be assigned, transferred and delivered, against
receipt but without any recourse, warranty or representation whatsoever, any
remaining Collateral to or on the order of the Borrowers. Lender shall also
execute and deliver to each Borrower upon such termination such UCC termination
statements and such other documentation as shall be reasonably requested by such
Borrower to effect the termination and release of the Liens and security
interests in favor of Lender affecting the Collateral.
13.3 Entire Agreement. This Agreement and the other Loan Documents (i) are
----------------
valid, binding and enforceable against the Borrowers and the Lender in
67
accordance with their respective provisions and no conditions exist as to their
legal effectiveness; (ii) constitute the entire agreement between the parties
with respect to the subject matter hereof and thereof; and (iii) are the final
expression of the intentions of the Borrowers and the Lender. No promises,
either expressed or implied, exist between the Borrowers and the Lender, unless
contained herein or therein. This Agreement, together with the other Loan
Documents, supersedes all negotiations, representations, warranties,
commitments, term sheets, discussions, negotiations, offers or contracts (of any
kind or nature, whether oral or written) prior to or contemporaneous with the
execution hereof with respect to any matter, directly or indirectly related to
the terms of this Agreement and the other Loan Documents. This Agreement and the
other Loan Documents are the result of negotiations among the Lender, the
Borrowers and the other parties thereto, and have been reviewed (or have had the
opportunity to be reviewed) by counsel to all such parties, and are the products
of all parties. Accordingly, this Agreement and the other Loan Documents shall
not be construed more strictly against the Lender merely because of the Lender's
involvement in their preparation.
13.4 Amendments; Waivers. No delay on the part of the Lender in the
--------------------
exercise of any right, power or remedy shall operate as a waiver thereof, nor
shall any single or partial exercise by the Lender of any right, power or remedy
preclude other or further exercise thereof, or the exercise of any other right,
power or remedy. No amendment, modification or waiver of, or consent with
respect to, any provision of this Agreement or the other Loan Documents shall in
any event be effective unless the same shall be in writing and acknowledged by
the Lender and the Borrowers, and then any such amendment, modification, waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
13.5 WAIVER OF DEFENSES. EACH OF THE BORROWERS, ON BEHALF OF ITSELF AND ANY
------------------
FUTURE GUARANTOR OF ANY OF THE OBLIGATIONS, WAIVES EVERY PRESENT AND FUTURE
DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY NOW HAVE
OR HEREAFTER MAY HAVE TO ANY ACTION BY THE LENDER IN ENFORCING THIS AGREEMENT.
PROVIDED THE LENDER ACTS IN GOOD FAITH, EACH OF THE BORROWERS RATIFIES AND
CONFIRMS WHATEVER THE LENDER MAY DO PURSUANT TO THE TERMS OF THIS AGREEMENT.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDER GRANTING ANY FINANCIAL
ACCOMMODATION TO THE BORROWERS.
13.6 FORUM SELECTION AND CONSENT TO JURISDICTION. ANY LITIGATION BASED
---------------------------------------------
HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE COURTS
OF THE STATE OF ILLINOIS OR IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN
DISTRICT OF ILLINOIS; PROVIDED THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR
OPERATE TO PRECLUDE THE LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION
IN ANY OTHER JURISDICTION. EACH OF THE BORROWERS HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF ILLINOIS
AND OF THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS
68
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE. EACH OF THE BORROWERS
FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY REGISTERED MAIL,
POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF ILLINOIS.
EACH OF THE BORROWERS HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST
EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
13.7 WAIVER OF JURY TRIAL. THE LENDER AND EACH OF THE BORROWERS, AFTER
---------------------
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE IRREVOCABLY, ANY RIGHT TO A TRIAL
BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS
AGREEMENT, ANY NOTE, ANY OTHER LOAN DOCUMENT, ANY OF THE OTHER OBLIGATIONS, THE
COLLATERAL, OR ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR
WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR
ARISING FROM ANY LENDING RELATIONSHIP EXISTING IN CONNECTION WITH ANY OF THE
FOREGOING, OR ANY COURSE OF CONDUCT OR COURSE OF DEALING IN WHICH THE LENDER AND
THE BORROWERS ARE ADVERSE PARTIES, AND EACH AGREES THAT ANY SUCH ACTION OR
PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY. THIS PROVISION
IS A MATERIAL INDUCEMENT FOR THE LENDER GRANTING ANY FINANCIAL ACCOMMODATION TO
THE BORROWERS.
13.8 Assignability. The Lender may at any time assign the Lender's rights
-------------
in this Agreement, the other Loan Documents, the Obligations, or any part
thereof and transfer the Lender's rights in any or all of the Collateral, and
the Lender thereafter shall be relieved from all liability with respect to such
Collateral; provided, that, at any time prior to the occurrence and continuance
of an Event of Default, the Lender shall obtain the prior written consent of the
Borrowers, which consent shall not be unreasonably withheld or delayed, to such
assignment or transfer. In addition, the Lender may at any time without the
consent of the Borrowers sell a participation in the Loans to one other party;
provided, that such participation shall only transfer voting rights limited to
changes in principal amounts, rates, fees and term. The Lender may with the
prior written consent of the Borrowers sell participations in the Loans to more
than one other party. The Borrowers may not sell or assign this Agreement, or
any other agreement with the Lender or any portion thereof, either voluntarily
or by operation of law, without the prior written consent of the Lender. This
Agreement shall be binding upon the Lender and the Borrowers and their
respective legal representatives and successors. All references herein to the
Borrowers shall be deemed to include any successors, whether immediate or
remote. In the case of a joint venture or partnership, the term "Borrowers"
shall be deemed to include all joint venturers or partners thereof, who shall be
jointly and severally liable hereunder.
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13.9 Confirmations. The Borrowers and the Lender agree from time to time,
-------------
upon written request received by it from the other, to confirm to the other in
writing the aggregate unpaid principal amount of each of the Loans.
13.10 Confidentiality. The Lender agrees to use commercially reasonable
---------------
efforts (equivalent to the efforts the Lender applies to maintain the
confidentiality of its own confidential information) to maintain as confidential
all information provided to them by the Borrowers and designated as
confidential, except that the Lender may disclose such information (a) to
Persons employed or engaged by the Lender in evaluating, approving, structuring,
enforcing or administering the Loans who agree to maintain confidentiality; (b)
to any permitted assignee or participant or potential assignee or participant
that has agreed to comply with the covenant contained in this Section 13.10 (and
-------------
any such assignee or participant or potential assignee or participant may
disclose such information to Persons employed or engaged by them as described in
clause (a) above); (c) as required or requested by any federal or state
regulatory authority or examiner, or any insurance industry association, or as
reasonably believed by the Lender to be compelled by any court decree, subpoena
or legal or administrative order or process but in such case, Lender shall
endeavor to give the Borrowers prior written notice of such disclosure; (d) as,
on the advice of the Lender's counsel, is required by law; (e) in connection
with the exercise of any right or remedy under the Loan Documents or in
connection with any litigation to which the Lender and the Borrowers are a
party; (f) to any nationally recognized rating agency that requires access to
information about the Lender's investment portfolio in connection with ratings
issued with respect to the Lender; or (g) that ceases to be confidential through
no fault of the Lender.
13.11 Binding Effect. This Agreement shall become effective upon execution
--------------
by the Borrowers and the Lender. If this Agreement is not dated or contains any
blanks when executed by the Borrowers, the Lender is hereby authorized, without
notice to the Borrowers, to date this Agreement as of the date when it was
executed by the Borrowers, and to complete any such blanks according to the
terms upon which this Agreement is executed.
13.12 Governing Law. This Agreement, the Loan Documents and any Note shall
-------------
be delivered and accepted in and shall be deemed to be contracts made under and
governed by the internal laws of the State of Illinois (but giving effect to
federal laws applicable to national banks) applicable to contracts made and to
be performed entirely within such state, without regard to conflict of laws
principles.
13.13 Enforceability. Wherever possible, each provision of this Agreement
--------------
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by,
unenforceable or invalid under any jurisdiction, such provision shall as to such
jurisdiction, be severable and be ineffective to the extent of such prohibition
or invalidity, without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
13.14 Survival of Borrower Representations. All covenants, agreements,
-------------------------------------
representations and warranties made by the Borrowers herein shall,
70
notwithstanding any investigation by the Lender, be deemed material and relied
upon by the Lender and shall survive the making and execution of this Agreement
and the Loan Documents and the issuance of any Note, and shall be deemed to be
continuing representations and warranties until such time as the Borrowers have
fulfilled all of their applicable Obligations to the Lender, and the Lender has
been indefeasibly paid in full in cash. The Lender, in extending financial
accommodations to the Borrowers, is expressly acting and relying on the
aforesaid representations and warranties.
13.15 Extensions of Lender's Commitment. This Agreement shall secure and
----------------------------------
govern the terms of (i) any extensions or renewals of the Lender's commitment
hereunder, and (ii) any replacement note executed by the Borrowers and accepted
by the Lender in its sole and absolute discretion in substitution for any Note.
13.16 Time of Essence. Time is of the essence in making payments of all
----------------
amounts due the Lender under this Agreement and in the performance and
observance by the Borrowers of each covenant, agreement, provision and
term of this Agreement.
13.17 Counterparts; Facsimile Signatures. This Agreement may be executed in
----------------------------------
any number of counterparts and by the different parties hereto on separate
counterparts and each such counterpart shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same Agreement.
Receipt of an executed signature page to this Agreement by facsimile or other
electronic transmission shall constitute effective delivery thereof. Electronic
records of executed Loan Documents maintained by the Lender shall be deemed to
be originals thereof.
13.18 Notices. Except as otherwise provided herein, the Borrowers waives
-------
all notices and demands in connection with the enforcement of the Lender's
rights hereunder. All notices, requests, demands and other communications
provided for hereunder shall be in writing and addressed as follows:
If to the Borrowers: Kable Media Services, Inc.
Kable News Company, Inc.,
Kable Distribution Services, Inc.,
Kable News Export, Ltd.
Kable News International, Inc.
Kable Fulfillment Services, Inc.,
Kable Fulfillment Services of Ohio, Inc.
Palm Coast Data Holdco, Inc.
Palm Coast Data, LLC
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▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
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with a courtesy copy to: Amrep Corporation
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▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a courtesy copy to: Drinker ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
One ▇▇▇▇▇ Square
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: F. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, III, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No. (▇▇▇) ▇▇▇-▇▇▇▇
If to the Lender: LaSalle Bank National Association
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a courtesy copy to: ▇▇▇▇▇ & ▇▇▇▇▇, LLC
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this subsection. All notices addressed as above shall be deemed to have been
properly given (i) if served in person, upon acceptance or refusal of delivery;
(ii) if mailed by certified or registered mail, return receipt requested,
postage prepaid, on the third (3rd) day following the day such notice is
deposited in any post office station or letter box; or (iii) if sent by
recognized overnight courier, on the first (1st) day following the day such
notice is delivered to such carrier. No notice to or demand on the Borrowers in
any case shall entitle the Borrowers to any other or further notice or demand in
similar or other circumstances.
13.19 Release of Claims Against Lender. In consideration of the Lender
----------------------------------
making the Loans, the Borrowers and all other Obligors do each hereby release
and discharge the Lender of and from any and all claims, harm, injury, and
damage of any and every kind, known or unknown, legal or equitable, which any
Obligor may have against the Lender from the date of their respective first
72
contact with the Lender until the date of this Agreement including, but not
limited to, any claim arising from any reports (environmental reports, surveys,
appraisals, etc.) prepared by any parties hired or recommended by the Lender.
The Borrowers and all other Obligors confirm to Lender that they have reviewed
the effect of this release with competent legal counsel of their choice, or have
been afforded the opportunity to do so, prior to execution of this Agreement and
the Loan Documents and do each acknowledge and agree that the Lender is relying
upon this release in extending the Loans to the Borrowers.
13.20 Costs, Fees and Expenses. The Borrowers shall pay or reimburse the
-------------------------
Lender for all reasonable costs, fees and expenses incurred by the Lender or for
which the Lender becomes obligated in connection with the negotiation,
preparation, consummation, collection of the Obligations or enforcement of this
Agreement, the other Loan Documents and all other documents provided for herein
or delivered or to be delivered hereunder or in connection herewith (including
any amendment, supplement or waiver to any Loan Document), or during any
workout, restructuring or negotiations in respect thereof, including, without
limitation, reasonable consultants' fees and attorneys' fees and time charges of
counsel to the Lender, which shall also include attorneys' fees and time charges
of attorneys who may be employees of the Lender or any Affiliate of the Lender,
plus costs and expenses of such attorneys or of the Lender; search fees, costs
and expenses; and all taxes payable in connection with this Agreement or the
other Loan Documents, whether or not the transaction contemplated hereby shall
be consummated. In furtherance of the foregoing, the Borrowers shall pay any and
all stamp and other taxes, UCC search fees, filing fees and other costs and
expenses in connection with the execution and delivery of this Agreement, any
Note and the other Loan Documents to be delivered hereunder, and agree to save
and hold the Lender harmless from and against any and all liabilities with
respect to or resulting from any delay in paying or omission to pay such costs
and expenses. That portion of the Obligations consisting of costs, expenses or
advances to be reimbursed by the Borrowers to the Lender pursuant to this
Agreement or the other Loan Documents which are not paid on or prior to the date
hereof shall be payable by the Borrowers to the Lender on demand. If at any time
or times hereafter the Lender: (a) employs counsel for advice or other
representation (i) with respect to this Agreement or the other Loan Documents,
(ii) to represent the Lender in any litigation, contest, dispute, suit or
proceeding or to commence, defend, or intervene or to take any other action in
or with respect to any litigation, contest, dispute, suit, or proceeding
(whether instituted by the Lender, the Borrowers, or any other Person) in any
way or respect relating to this Agreement, the other Loan Documents or the
Borrower's business or affairs, or (iii) to enforce any rights of the Lender
against the Borrowers or any other Person that may be obligated to the Lender by
virtue of this Agreement or the other Loan Documents; (b) takes any action to
protect, collect, sell, liquidate, or otherwise dispose of any of the
Collateral; and/or (c) attempts to or enforces any of the Lender's rights or
remedies under the Agreement or the other Loan Documents, the costs and expenses
incurred by the Lender in any manner or way with respect to the foregoing, shall
be part of the Obligations, payable by the Borrowers to the Lender on demand.
13.21 Indemnification. The Borrowers agree to defend (with counsel
---------------
reasonably satisfactory to the Lender), protect, indemnify, exonerate and hold
harmless each Indemnified Party from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
73
costs, expenses and distributions of any kind or nature (including, without
limitation, the disbursements and the reasonable fees of counsel for each
Indemnified Party thereto, which shall also include, without limitation,
reasonable attorneys' fees and time charges of attorneys who may be employees of
any Indemnified Party), which may be imposed on, incurred by, or asserted
against, any Indemnified Party (whether direct, indirect or consequential and
whether based on any federal, state or local laws or regulations, including,
without limitation, securities laws, Environmental Laws, commercial laws and
regulations, under common law or in equity, or based on contract or otherwise)
in any manner relating to or arising out of this Agreement or any of the Loan
Documents, or any act, event or transaction related or attendant thereto, the
preparation, execution and delivery of this Agreement and the Loan Documents,
including, but not limited to, the making or issuance and management of the
Loans, the use or intended use of the proceeds of the Loans, the enforcement of
the Lender's rights and remedies under this Agreement, the Loan Documents, any
Note, any other instruments and documents delivered hereunder, or under any
other agreement between the Borrowers and the Lender; provided, however, that
the Borrowers shall not have any obligations hereunder to any Indemnified Party
with respect to matters determined by a court of competent jurisdiction by final
and nonappealable judgment to have been caused by or resulting from the willful
misconduct or gross negligence of such Indemnified Party. To the extent that the
undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, the Borrowers shall
satisfy such undertaking to the maximum extent permitted by applicable law. Any
liability, obligation, loss, damage, penalty, cost or expense covered by this
indemnity shall be paid to each Indemnified Party on demand, and failing prompt
payment, together with interest thereon at the Default Rate from the date
incurred by each Indemnified Party until paid by the Borrowers, shall be added
to the Obligations of the Borrowers and be secured by the Collateral. The
provisions of this Section shall survive the satisfaction and payment of the
other Obligations and the termination of this Agreement.
13.22 Revival and Reinstatement of Obligations. If the incurrence or
-------------------------------------------
payment of the Obligations by any Obligor or the transfer to the Lender of any
property should for any reason subsequently be declared to be void or voidable
under any state or federal law relating to creditors' rights, including
provisions of the Bankruptcy Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a "Voidable Transfer"), and if the Lender is required to
repay or restore, in whole or in part, any such Voidable Transfer, or elects to
do so upon the reasonable advice of its counsel, then, as to any such Voidable
Transfer, or the amount thereof that the Lender is required or elects to repay
or restore, and as to all reasonable costs, expenses, and attorneys fees of the
Lender, the Obligations shall automatically shall be revived, reinstated, and
restored and shall exist as though such Voidable Transfer had never been made.
13.23 Customer Identification - USA Patriot Act Notice. The Lender hereby
-------------------------------------------------
notifies the Borrowers that pursuant to the requirements of the USA Patriot Act
(Title III of Pub. L. 107-56, signed into law October 26, 2001) (the "Act"), and
the Lender's policies and practices, the Lender is required to obtain, verify
and record certain information and documentation that identifies the Borrowers,
74
which information includes the name and address of the Borrowers and such other
information that will allow the Lender to identify the Borrowers in accordance
with the Act.
13.24 Interpretation. If any provision in this Agreement requires judicial
--------------
interpretation, the judicial body interpreting or construing such provision
shall not apply the assumption that the terms hereof shall be more strictly
construed against one party because of the rule that an instrument must be
construed more strictly against the party which itself or through its agents
prepared the same; the parties hereby agreeing that all parties and their agents
have participated in the preparation hereof equally.
13.25 Fraudulent Transfer. In order to avoid any possibility that this
--------------------
Agreement or any other Loan Document may be ruled by a court of competent
jurisdiction to be a fraudulent transfer or conveyance with respect to a
Borrower, each Borrower and Lender hereby agree that, notwithstanding any other
provision of this Agreement or any other Loan Document to the contrary, the
maximum liability of a Borrower hereunder shall be limited to the greater of (a)
the proceeds of the credit extended by Lender to the Borrowers under this
Agreement and the other Loan Documents to the extent such proceeds are advanced,
transferred or applied to or for the benefit of such Borrower, and (b)
ninety-five percent (95.00%) of the difference between (i) the present fair
salable value of such Borrower's assets as of the date of this Agreement or such
other date as may be applicable under law, minus (ii) the amount of all
liabilities of such Borrower, including probable exposure under contingent
liabilities (including the amount under clause (a) above, but excluding any
other probable exposure of such Borrower to Lender hereunder), as of such date.
SECTION 14 CROSS-GUARANTY AND SURETYSHIP WAIVERS
------------------------------------------------
14.1 Cross-Guaranty. In addition to, and without in any way limiting any
--------------
Borrower's primary, direct, joint or several liability for any of the
Obligations but subject to section 13.25, each Borrower (on a joint and several
basis with the other Borrowers) hereby absolutely, unconditionally and
irrevocably guaranties to the Lender the full and punctual payment and
satisfaction of the Obligations of each and every other Borrower as and when
due, whether at stated maturity, by acceleration or otherwise, and agrees to pay
and satisfy in full any and all expenses that may be paid or incurred by the
Lender in the collection of all or any portion of the Obligations or the
exercise or enforcement of any one or more of the other rights, powers,
privileges, remedies and interests of the Lender under this Agreement or any
other Loan Document, irrespective of the manner or success of any such
collection, exercise or enforcement, and whether or not such expenses constitute
part of the Obligations (together with the balance of this Subsection, the other
Subsections of this Section and the general terms and provisions of this
Agreement, collectively, the "Cross-Guaranty").
14.2 Continuing Agreement, Payment in Accordance with Terms, Etc. Each
---------------------------------------------------------------
Borrower covenants and agrees that: (a) its joint and several liability for and
Cross-Guaranty hereunder is a continuing liability for and guaranty of the full
and timely payment and satisfaction of the Obligations, and such Borrower is not
guarantying collectibility only, in each case whether the Obligations are now or
hereafter existing, acquired or created, and irrespective of the fact that from
75
time to time under the terms and provisions of this Agreement and the other Loan
Documents monies may be advanced, repaid and readvanced and the outstanding
balance of the Loan may be zero; (b) its obligations under its Cross-Guaranty
are part of the "Obligations" under this Agreement and are secured by the
Collateral; (c) the Cross-Guaranty may not be revoked or terminated by any
Borrower until such time as the monetary Obligations shall have been fully paid
and satisfied (other than any contingent indemnification, defense or similar
obligation that by its express terms extends beyond such payment); (d) none of
the Obligations shall be deemed to have been otherwise fully paid and satisfied
so long as the Lender shall have any remaining commitment under this Agreement
or any other Loan Documents; and (e) the Obligations will be paid and satisfied
in full in accordance with the terms and provisions of this Agreement and the
other Loan Documents without regard to any applicable law now or hereafter in
effect in any jurisdiction that might cause or permit to be invoked any
alteration by any guarantor, pledgor or other surety (including any Borrower to
the extent a guarantor or otherwise determined to be a surety, each a "Surety"),
any Borrower or any other Person (other than the Lender) in the time, amount or
manner of payment of any of their respective obligations to the Lender under any
of this Agreement and the other Loan Documents.
14.3 Agreement Absolute, Survival of Representations, Etc. Each of the
--------------------------------------------------------
payment obligations, cross guaranties, collateral grants, representations and
warranties (as of the date(s) made or deemed made), covenants, waivers and other
agreements and obligations of each Borrower (whether individual, joint, several
or otherwise) contained in this Agreement and the other Loan Documents: (a) are
and shall be absolute, irrevocable and unconditional, and shall survive and
remain and continue in full force and effect in accordance with their respective
terms and provisions, in each case without regard to (among other things) any
invalidity, illegality, non-binding effect or unenforceability (in whole or in
part) for any reason whatsoever of this Agreement or any other Loan Documents,
or of any of the other terms and provisions of this Agreement, including
(without limitation) by reason of the absence (in whole or in part) of any
required authentication, authority, capacity, consent, consideration,
disclosure, equivalent value, filing, notice, recordation, signature, writing or
other action, or the presence (in whole or in part) of any contractual conflict,
defense, illegality, misconduct, misrepresentation, mistake, prohibition,
restriction or right of reimbursement, recoupment or setoff; (b) are and shall
be absolute, irrevocable and unconditional with regard to, and shall survive and
remain and continue in full force and effect in accordance with their respective
terms and provisions following and without regard to, each of the following
(among other things), (i) the execution and delivery of this Agreement or any
other Loan Documents and the performance or non-performance of any Obligations
or the obligations of any Surety under the Cross-Guaranty or any other Loan
Documents ("Surety's Obligations"), (ii) any advance, accrual, payment,
repayment or readvance of any amount under any other Loan Document, or any
request or notice with respect thereto, or the inception, creation, acquisition,
increase, decrease, satisfaction or existence from time to time of any
Obligations or Surety's Obligations under any other Loan Document, in each case
irrespective of the fact that from time to time the outstanding balance of the
Loan and other monetary Obligations may be zero, (iii) any waiver, modification,
extension, renewal, consolidation, spreading, amendment or restatement of or
other change in any term or provision of (A) this Agreement or any other Loan
Document or (B) any one or more of the Loan or other Obligations or any Surety's
Obligations, including (without limitation) any extension or other change in the
76
time, manner, place or other term of payment or performance of any of the
foregoing, in each case except as and to the extent expressly modified by the
terms and provisions of any such extension, change, waiver, modification,
renewal, consolidation, spreading, amendment or restatement, (iv) any full,
partial or non-exercise of any of the rights, powers, privileges, remedies and
interests of the Lender under any other Loan Document or applicable law, against
the Borrower, any Surety or any other Person or with respect to any of the
Obligations, any Surety's Obligations, any other obligations or any collateral
or security interest therein, which exercise or enforcement may be delayed,
discontinued or otherwise not pursued or exhausted for any or no reason
whatsoever, or which may be waived, omitted or otherwise not exercised or
enforced (whether intentionally or otherwise), (v) any surrender, repossession,
sequestration, foreclosure, conveyance or assignment (by deed in lieu or
otherwise), sale, lease or other realization, dealing, liquidation or
disposition respecting any collateral or setoff respecting any account or other
asset in accordance with this Agreement, any other Loan Document or applicable
law (except as and to the extent the Obligations have been permanently reduced
by the application of the net proceeds thereof), (vi) the perfected or
non-perfected status or priority of any mortgage or other security interest in
any such collateral, which may be held without recordation, filing or other
perfection (whether intentionally or otherwise), (vii) any release, settlement,
adjustment, subordination or impairment of all or any part of the Obligations,
any Surety's Obligations, any other obligations or any collateral or any
security interest therein under or with respect to this Agreement, any other
Loan Document or applicable law, whether intentionally or otherwise (except as
and to the extent expressly modified by the terms and provisions of any such
release, settlement or adjustment), (viii) any extension, stay, moratorium or
statute of limitations or similar time constraint under any applicable law, (ix)
any investigation, analysis or evaluation by the Lender or its designees of the
assets, business, cash flow, expenses, income, liabilities, operations,
properties, prospects, reputation or condition (financial or otherwise) of any
Borrower, any Surety, or any other Person, (x) any application to any
obligations of any Borrower or any Surety other than any Obligations or Surety's
Obligations of (A) any payments from such Person not specifically designated for
application to the Obligations or Surety's Obligations or (B) any proceeds of
collateral from such Person other than from the Collateral, (xi) any sale,
conveyance, assignment, participation or other transfer by the Lender (in whole
or in part) to any other Person of any one or more of this Agreement or any of
this Agreement and the other Loan Documents or any one or more of the rights,
powers, privileges, remedies or interests of the Lender herein or therein, or
(xii) any act or omission on the part of the Lender or any other Person or any
other act, event or circumstance that otherwise might constitute a legal or
equitable defense, counterclaim or discharge of a borrower, co-obligor,
indemnitor, guarantor, pledgor or surety; in each case in such manner and order,
upon such terms and provisions and subject to such conditions as the Lender may
deem necessary or desirable in its sole and absolute discretion, without notice
to or further assent from any Borrower, any Surety, or any other Person (except
for such notices as may be expressly required to be given to such party under
this Agreement or applicable other Loan Document), and without affecting any of
the rights, powers, privileges, remedies and other interests of the Lender under
this Agreement, the other Loan Documents and applicable law; and (c) shall
remain and continue in full force and effect without regard to any of the
foregoing acts, events or circumstances until all of the Obligations have been
77
fully paid and satisfied (other than any contingent indemnification, defense or
similar obligation that by its express terms extends beyond such payment);
provided, however, that each Borrower retains the defense of payment.
14.4 Waivers of Notice, Etc. Each Borrower hereby absolutely,
--------------------------
unconditionally, irrevocably and expressly waives forever each and all of the
following except to the extent notice thereof is expressly required by this
Agreement, any other Loan Document or applicable law: (a) acceptance and notice
of any acceptance of this Agreement or any other Loan Document; (b) notice of
any action taken or omitted in reliance hereon; (c) presentment and notice of
any presentment; (d) demand for payment and notice of any such demand; (e)
dishonor and notice of any dishonor; (f) protest and notice of any protest; (g)
notice of any request for, any change in or any making, repayment or remaking of
any loan, advance or other extension of credit at any time under this Agreement
or any other Loan Document; (h) notice of any nonpayment or other event that
constitutes, or with the giving of notice or the passage of time (or both) would
constitute, any nonpayment, nonperformance, misrepresentation or other breach or
default under this Agreement or any other Loan Document; (i) notice of any
material and adverse effect, whether individually or in the aggregate, or other
information respecting (A) the assets, business, cash flow, expenses, income,
liabilities, operations, properties, prospects, reputation or condition
(financial or otherwise) of any Borrower, any Surety or any other Person, (B)
the ability of any of them to pay or otherwise satisfy (as and when due) any of
their respective obligations under any of this Agreement and the other Loan
Documents, or (C) any collateral securing the obligations of any of them under
this Agreement and the other Loan Documents or its value or the validity,
enforceability, perfection or priority of any security interest of the Lender
therein; (j) notice of any act, event or circumstance described in subsection
(b) of the immediately preceding Section (i.e., Agreement Absolute, Survival of
Representations, Etc.) ; and (k) any other proof, notice or demand of any kind
whatsoever with respect to any or all of the Obligations or Surety's Obligations
or promptness in making any claim or demand under this Agreement or any other
Loan Document.
14.5 No Personal Liability. For the avoidance of doubt and notwithstanding
---------------------
anything in this Agreement to the contrary, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, the directors
of the Principal Shareholder and the directors of the Borrowers ("Non-Liable
Parties") shall have no personal liability by reason of this Agreement for any
of the Obligations of any Borrower, including payment of principal, interest or
any other amounts due Lender. The Lender shall have no recourse against the
Non-Liable Parties, any entity controlling any Borrower (other than a Borrower),
or their respective partners, directors, officers, members, managers, employees
or agents for failure to pay principal and interest evidenced by the Notes or
other costs or expenses under this Agreement or for the Borrowers' failure to
perform their obligations hereunder and under the Loan Documents. The Lender
shall never demand, claim or institute any suit, claim or demand at law or in
equity against any of the Non-Liable Parties. Nothing contained in this
paragraph shall be deemed to release, affect or impair the Obligations of the
Borrowers or the Collateral or the Lender's rights to enforce its remedies under
this Agreement.
[SIGNATURE PAGES FOLLOW]
78
IN WITNESS WHEREOF, the Borrowers and the Lender have executed this Amended
and Restated Loan and Security Agreement as of the date first above written.
---------------------------------------------------------------------------------------------------------------------
KABLE MEDIA SERVICES, INC., KABLE NEWS COMPANY, INC.,
a Delaware corporation a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------- -----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Vice President Senior Vice President
---------------------------------------------------------------------------------------------------------------------
KABLE NEWS EXPORT, LTD., KABLE NEWS INTERNATIONAL, INC., a Delaware corporation
a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
----------------------------------------- Treasurer
▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Vice President
---------------------------------------------------------------------------------------------------------------------
KABLE FULFILLMENT SERVICES, INC., a Delaware corporation KABLE FULFILLMENT SERVICES OF OHIO, INC., a Delaware
corporation
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Vice President -----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Vice President
---------------------------------------------------------------------------------------------------------------------
KABLE DISTRIBUTION SERVICES, INC., a Delaware corporation PALM COAST DATA, LLC a Delaware limited liability
company
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
Senior Vice President -----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇,
President
---------------------------------------------------------------------------------------------------------------------
PALM COAST DATA HOLDCO, INC., a Delaware corporation
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇▇▇,
President
---------------------------------------------------------------------------------------------------------------------
79
Agreed and accepted:
LASALLE BANK NATIONAL ASSOCIATION,
a national banking association
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, First Vice President
80