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SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
Dated as of August 21, 1998
between
PREMIER GRAPHICS, INC.,
as Borrower
THE LENDERS SIGNATORY HERETO FROM TIME TO TIME,
as Lenders,
and
GENERAL ELECTRIC CAPITAL CORPORATION,
as Agent and Lender
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TABLE OF CONTENTS
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Page
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1. AMOUNT AND TERMS OF TERM LOANS AND ACQUISITION LINE................................ 2
1.1 Term Loans................................................................. 2
1.2 Acquisition Line Advances.................................................. 3
1.3 Prepayments................................................................ 4
1.4 Interest................................................................... 5
1.5 Fees....................................................................... 7
1.6 Receipt of Payments........................................................ 8
1.7 Application and Allocation of Payments..................................... 8
1.8 Loan Account and Accounting................................................ 8
1.9 Indemnity.................................................................. 9
1.10 Access..................................................................... 10
1.11 Taxes...................................................................... 10
1.12 Additional Provisions...................................................... 11
1.13 Security Interest in the Collateral........................................ 13
1.14 Rights of Lender, Limitations on Obligations of Lender..................... 14
1.15 Single Loan................................................................ 15
2. CONDITIONS PRECEDENT............................................................... 15
2.1 Conditions to the Term Loan................................................ 15
2.2 Further Conditions to Each Loan............................................ 17
3. REPRESENTATIONS AND WARRANTIES...................................................... 18
3.1 Corporate Existence; Compliance with Law................................... 18
3.2 Executive Offices; Corporate or Other Names; FEIN.......................... 18
3.3 Corporate Power; Authorization; Enforceable Obligations.................... 18
3.4 Financial Statements and Projections....................................... 19
3.5 Material Adverse Change.................................................... 19
3.6 Ownership of Property; Liens............................................... 19
3.7 Restrictions; No Default; Material Contracts............................... 20
3.8 Labor Matters.............................................................. 20
3.9 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.. 20
3.10 Government Regulation...................................................... 21
3.11 Margin Regulations......................................................... 21
3.12 Taxes...................................................................... 21
3.13 ERISA...................................................................... 22
3.14 No Litigation.............................................................. 23
3.15 Brokers.................................................................... 23
3.16 Patents, Trademarks, Copyrights and Licenses............................... 23
3.17 Full Disclosure............................................................ 24
3.18 Hazardous Materials........................................................ 24
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3.19 Insurance Policies......................................................... 24
3.20 Deposit and Disbursement Accounts.......................................... 24
3.21 Subordinated Notes......................................................... 25
3.22 Representations and Warranties Regarding the Collateral.................... 25
4. FINANCIAL STATEMENTS AND INFORMATION............................................... 27
4.1 Reports and Notices........................................................ 27
4.2 Communication with Accountants............................................. 27
5. AFFIRMATIVE COVENANTS.............................................................. 27
5.1 Maintenance of Existence and Conduct of Business........................... 27
5.2 Payment of Charges and Claims.............................................. 27
5.3 Books and Records.......................................................... 28
5.4 Litigation................................................................. 28
5.5 Insurance.................................................................. 28
5.6 Compliance with Laws....................................................... 29
5.7 Agreements................................................................. 29
5.8 Supplemental Disclosure.................................................... 30
5.9 Environmental Matters...................................................... 30
5.10 Landlord's and Mortgagee's Agreements...................................... 30
5.11 Certain Obligations Respecting Subsidiaries................................ 30
5.12 Application of Proceeds.................................................... 31
5.13 Fiscal Year................................................................ 31
5.14 Casualty and Condemnation.................................................. 31
5.15 Covenants Regarding the Collateral......................................... 32
5.16 Agent's Appointment as Attorney-in-Fact.................................... 35
5.17 Maintenance Covenant....................................................... 37
5.18 Year 2000 Problems......................................................... 37
5.19 Interest Rate Protection................................................... 38
6. NEGATIVE COVENANTS................................................................. 38
6.1 Mergers, Subsidiaries, Etc................................................. 38
6.2 Investments................................................................ 38
6.3 Indebtedness............................................................... 38
6.4 Affiliate and Employee Loans and Transactions; Employment Agreements....... 38
6.5 Capital Structure and Business............................................. 39
6.6 Guaranteed Indebtedness.................................................... 39
6.7 Liens...................................................................... 39
6.8 Sale of Assets............................................................. 40
6.9 Material Contracts......................................................... 40
6.10 ERISA...................................................................... 40
6.11 Financial Covenants........................................................ 40
6.12 Hazardous Materials........................................................ 41
6.13 Sale-Leasebacks............................................................ 42
6.14 Cancellation of Indebtedness............................................... 42
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6.15 Restricted Payments........................................................ 42
6.16 Real Property Leases....................................................... 42
6.17 Bank Accounts.............................................................. 42
6.18 Subordinated Notes......................................................... 42
6.19 No Speculative Transactions................................................ 43
6.20 Margin Regulations......................................................... 43
6.21 Limitation on Negative Pledge Clauses...................................... 43
6.22 Accounting Changes......................................................... 43
6.23 EBITDA..................................................................... 43
6.24 Fixed Charge Coverage Ratio................................................ 43
6.25 Leverage Ratio............................................................. 44
7. TERM............................................................................... 44
7.1 Duration................................................................... 44
7.2 Survival of Obligations.................................................... 45
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES............................................. 45
8.1 Events of Default.......................................................... 45
8.2 Remedies................................................................... 49
8.3 Grant of License to Use Patent and Trademark Collateral.................... 51
8.4 Waivers by Borrower........................................................ 51
9. SUCCESSOR AND ASSIGNS.............................................................. 51
10. ASSIGNMENTS AND PARTICIPATIONS; APPOINTMENT OF AGENT.............................. 52
10.1 Assignment and Participations.............................................. 52
10.2 Appointment of Agent....................................................... 53
10.3 Agent's Reliance, Etc...................................................... 54
10.4 GE Capital and Affiliates.................................................. 55
10.5 Indemnification............................................................ 55
10.6 Successor Agent............................................................ 55
10.7 Setoff and Sharing of Payments............................................. 56
10.8 Advances; Payments; Non-Funding Lenders; Information; Actions in Concert... 57
11. MISCELLANEOUS..................................................................... 59
11.1 Complete Agreement; Modification of Agreement.............................. 59
11.2 Amendments and Waiver...................................................... 59
11.3 Fees and Expenses.......................................................... 61
11.4 No Waiver.................................................................. 62
11.5 Remedies................................................................... 62
11.6 Severability............................................................... 62
11.7 Conflict of Terms.......................................................... 62
11.8 Right of Set-off........................................................... 62
11.9 Authorized Signature....................................................... 63
11.10 GOVERNING LAW.............................................................. 63
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11.11 Notices.................................................................... 64
11.12 Section Titles............................................................. 65
11.13 Counterparts............................................................... 65
11.14 Time of the Essence........................................................ 65
11.15 WAIVER OF JURY TRIAL....................................................... 65
11.16 NO ORAL AGREEMENTS......................................................... 66
11.17 Release.................................................................... 66
11.18 Amendment and Restatement.................................................. 66
11.19 References................................................................. 66
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SECOND AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
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THIS SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, dated as of
August 21, 1998, between PREMIER GRAPHICS, INC., a Delaware corporation (the
"Borrower"), and GENERAL ELECTRIC CAPITAL CORPORATION, a New York corporation
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(in its individual capacity, "GE Capital"), for itself, as Lender, and as Agent
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for Lenders, and the other Lenders signatory hereto from time to time.
RECITALS
A. Borrower and GE Capital, for itself and as agent for certain
participants (in such capacities, "Original Lender") entered into that certain
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Term and CAPEX Loan and Security Agreement dated as of June 19, 1997, as
thereafter amended from time to time, including, without limitation, as amended
by that certain First Amendment to Term and CAPEX Loan and Security Agreement
dated as of September 26, 1997 (as amended, the "Original Agreement").
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B. Borrower and Original Lender amended, restated and modified (but did
not extinguish) the Original Loan Agreement by entering into that certain
Amended and Restated Loan and Security Agreement, dated as of December 16, 1997,
as thereafter amended from time to time, including without limitation, as
amended by (i) that certain First Amendment to Loan and Security Agreement dated
as of ▇▇▇▇▇ ▇, ▇▇▇▇, (▇▇) that certain Second Amendment to Loan and Security
Agreement dated as of ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇▇) that certain Third Amendment to Loan
and Security Agreement dated as of May 8, 1998, and (iv) that certain Fourth
Amendment to Loan and Security Agreement dated as of June 15, 1998 (as amended,
the "Restated Loan Agreement").
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C. Borrower has requested that GE Capital increase the credit facilities
under the Restated Loan Agreement and extend its relationship with Borrower, and
GE Capital is willing to do so upon the terms and conditions set forth herein.
D. In connection with the increase and extension of the relationship
between Borrower and GE Capital and the formation of the relationship between
Borrower and the other Lenders, the parties hereto wish to completely amend,
restate and modify (but not extinguish) the Restated Loan Agreement through the
execution of this Agreement, which will supersede all prior agreements among the
parties hereto.
E. Capitalized terms used herein shall have the meanings ascribed to them
on Annex A. All Schedules, Annexes, Attachments and Exhibits hereto, or
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expressly identified to this Agreement, are incorporated herein by reference,
and taken together, shall constitute but a single agreement. Unless otherwise
expressly set forth herein, or in a written amendment referring to such
Schedules and Annexes, all Schedules and Annexes referred to herein shall mean
the Schedules as in effect at the Closing Date. As used herein, the plural
shall include the
singular, the singular includes the plural, and pronouns in any gender
(masculine, feminine or neuter) all apply to all genders. These Recitals shall
be construed as part of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained and other good and valuable consideration (the receipt and
sufficiency of which are hereby acknowledged), the parties hereto intending to
be legally bound agree as follows:
1. AMOUNT AND TERMS OF TERM LOANS AND ACQUISITION LINE
1.1 Term Loans.
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(a) Subject to the terms and conditions hereof, each Lender agrees to
make (i) a term loan ("Term Loan A") to Borrower on the Closing Date in the
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principal amount of its Term Loan A Commitment; (ii) a term loan ("Term Loan B")
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to Borrower on the Closing Date in the principal amount of its Term Loan B
Commitment, and (iii) a term loan ("Term Loan C") to Borrower on the Closing
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Date in the principal amount of its Term Loan C Commitment (Term Loan A, Term
Loan B and Term Loan C, collectively, the "Term Loan"). The obligations of each
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Lender hereunder shall be several and not joint. The Term Loan shall be secured
by all of the Collateral. Borrower may not reborrow any amount repaid with
respect to the Term Loan.
(b) Each Term Loan A made by a Lender shall be evidenced by a single
promissory note executed by Borrower in favor of such Lender substantially in
the form of Exhibit A-1 hereto, dated the date hereof, payable to such Lender in
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a principal amount equal to the amount of such Lender's Term Loan A Commitment
and otherwise duly completed (all such notes, collectively, "Note A"). Each
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Term Loan B shall be evidenced by a single promissory note executed by Borrower
in favor of such Lender substantially in the form of Exhibit A-2 hereto, dated
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the date hereof, payable to such Lender in a principal amount equal to the sum
of the amount of such Lender's Term Loan B Commitment and otherwise duly
completed (all such notes, collectively, "Note B"). Each Term Loan C made by a
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Lender shall be evidenced by a single promissory note executed by Borrower in
favor of such Lender substantially in the form of Exhibit A-3 hereto, dated the
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date hereof, payable to such Lender in a principal amount equal to the amount of
such Lender's Term Loan C Commitment and otherwise duly completed (all such
notes, collectively, "Note C"). Each such Note shall represent the obligation
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of Borrower to pay the amount of the applicable Lender's applicable Term Loan
Commitment to Borrower, together with interest thereon as prescribed in Section
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1.4. The date, amount and interest rate of the Term Loan made by each Lender
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and each payment of principal with respect thereto shall be recorded on the
books and records of Agent which books and records shall constitute prima facie
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evidence of the accuracy of the information therein recorded.
(i) The unpaid principal amount of the Term Loan A shall be repayable
in twenty (20) consecutive quarterly installments on the first day of each
January, April, July and October of each year, commencing October 1, 1998, as
follows:
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Payment Date Installment Amount
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October 1, 1998 $1,120,000
January 1, 1999 $1,120,000
April 1, 1999 $1,120,000
July 1, 1999 $1,120,000
October 1, 1999 $1,260,000
January 1, 2000 $1,260,000
April 1, 2000 $1,260,000
July 1, 2000 $1,260,000
October 1, 2000 $1,400,000
January 1, 2001 $1,400,000
April 1, 2001 $1,400,000
July 1, 2001 $1,400,000
October 1, 2001 $1,540,000
January 1, 2002 $1,540,000
April 1, 2002 $1,540,000
July 1, 2002 $1,540,000
October 1, 2002 $1,680,000
January 1, 2003 $1,680,000
April 1, 2003 $1,680,000
July 1, 2003 $1,680,000
(ii) The unpaid principal amount of the Term Loan B shall be repayable
in a single installment which shall be due on the Termination Date.
(iii) The unpaid principal amount of the Term Loan C shall be
repayable in a single installment which shall be due on the Termination Date.
(iv) Notwithstanding the foregoing clauses (i)-(iii), the aggregate
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outstanding balance of the Term Loan A, the Term Loan B and the Term Loan C
shall each be due and payable in full in immediately available funds on the
Termination Date, if not sooner paid in full.
(v) Each payment of principal with respect to the Term Loan A, the
Term Loan B or the Term Loan C shall be paid to Agent for the ratable benefit of
each Lender making a Term Loan A, a Term Loan B or a Term Loan C, respectively,
ratably in proportion to each such Lender's respective Term Loan A Commitment,
Term Loan B Commitment or Term Loan C Commitment.
(d) The Borrower shall use the proceeds of the Term Loan to refinance
existing indebtedness of the Borrower and finance the general corporate needs of
Borrower.
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1.2 Acquisition Line Advances.
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(a) Upon and subject to the terms and conditions hereof, each Lender
agrees to make available, from time to time, until August 20, 2003, for
Borrower's use and upon the request of Borrower therefor to Agent, its Pro Rata
Share of advances (each, an "Acquisition Line Advance") to finance Eligible
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Acquisitions. The Pro Rata Share of the aggregate amount of outstanding
Acquisition Line Advances of any Lender shall not at any time exceed its
separate Acquisition Line Commitment. The obligations of each Lender hereunder
shall be several and not joint. Each Acquisition Line Advance shall be secured
by all of the Collateral. Each Lender's Acquisition Line Commitment shall be
permanently reduced by the amount of each Acquisition Line Advance made by it
hereunder, and Borrower may not reborrow any amount repaid with respect to any
Acquisition Line Advance.
(b) Borrower shall give Agent notice of each borrowing and on the
dates specified for such borrowing, pursuant to Section 10.8, each acquisition
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Line Lender shall make available to Agent such Acquisition Line Lender's Pro
Rata Share of the Acquisition Line Advance or Advances to be made on such date
to the Borrower, in immediately available funds. Agent shall notify each other
Lender of the consummation of each Eligible Acquisition financed hereby.
(c) Borrower shall execute and deliver to each Lender a note to
evidence the Acquisition Line Commitment of that Lender. Each such note shall
be in the principal amount of the Acquisition Line Commitment of the applicable
Lender, dated the Closing Date and substantially in the form of Exhibit A-4
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(each, an "Acquisition Line Note" and, collectively, the "Acquisition Line
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Note"). Each Acquisition Line Note shall represent the obligation of Borrower
to pay the amount of each Lender's Acquisition Line Commitment or, if less, the
applicable Lender's Pro Rata Share of the aggregate unpaid Acquisition Line
Advances together with interest thereon as prescribed in Section 1.4. The date,
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amount and interest rate of each Acquisition Line Advance made by each Lender
and each payment of principal with respect thereto shall be recorded on the
books and records of Agent which books and records shall constitute prima facie
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evidence of the accuracy of the information therein recorded.
(d) The unpaid principal balance of each Acquisition Line Advance
shall be repayable in equal consecutive quarterly installments in an amount
equal to one-fortieth (1/40) of the principal amount of such Acquisition Line
Advance each which shall be due commencing on the first day of the calendar
quarter immediately following the date of such Acquisition Line Advance, and
shall continue to be due on the first day of each calendar quarter thereafter
together with a final installment of principal on each such Acquisition Line
Advance which shall be due on the Termination Date in an amount equal to the
entire remaining unpaid principal balance of all outstanding Acquisition Line
Advances.
1.3 Prepayments.
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(a) General. Any full or partial prepayment of principal on any Term
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Loan or any Acquisition Line Advance shall be subject to the following terms and
conditions:
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(i) (A) Borrower may, at any time on at least ten (10) days' prior
written notice to Agent voluntarily prepay all or part of the Loans, provided
that (A) any such prepayment shall be in a minimum amount of $500,000 and (B)
any voluntary prepayment in whole or in part of any Loan made prior to the third
anniversary of the Closing Date will obligate Borrower to pay the appropriate
Prepayment Fee and/or Breakage Cost if applicable as provided in Section 1.5,
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and
(B) a prepayment of all or any part of any Loan which constitutes a
LIBOR Loan may be made only on the last day of the Interest Period applicable
thereto and if any such prepayment is made on a day that is not the last day of
the applicable Interest Period, Borrower shall be obligated to pay to the
Lenders any additional amounts due under Section 1.12 hereof; and
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(ii) Any partial prepayment of the Loans (whether voluntary or
mandatory) shall be applied to installments of principal due thereon among Note
A, Note B, Note C and the Acquisition Line Notes in proportion to the relative
principal amounts of Loans outstanding under each in their inverse order of
maturity.
(b) Mandatory Repayments.
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(i) Borrower shall prepay the Term Loan and/or the Acquisition Line
Advances in amounts equal to fifty percent (50%) of Borrower's Excess Cash Flow
with respect to each Fiscal Year of Borrower during the term hereof, such
prepayments to be made within five (5) Business Days following the due date for
delivery by Borrower to Agent of the annual financial statements required by
Section 4.1 hereof and each such prepayment shall be applied to the installments
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of principal due under Note A, Note B, Note C and the Acquisition Line Notes
(allocated among Note A, Note B, Note C and the Acquisition Line Notes in
proportion to the relative principal amounts of Loans outstanding under each) in
the inverse order of their respective maturities until payment thereof in full.
(ii) Immediately upon receipt by any Loan Party of Net Proceeds of any
asset disposition (which shall include, without limitation, any sale of assets
or properties or any loss, destruction or condemnation thereof, except as
otherwise provided in Section 5.5) or any sale of Stock or debt securities of
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any Subsidiary or Loan Party, Borrower shall prepay the Loans as and when
received by Borrower as a mandatory prepayment of the Loans an amount equal to
the greater of (x) the Net Proceeds received by Borrower from such sale or
disposition or (y) the depreciated value of such assets or properties according
to Agent's internal analysis. Each such prepayment shall be applied to the
installments of principal due under Note A, Note B, Note C and the Acquisition
Line Notes (allocated among Note A, Note B, Note C and the Acquisition Line
Notes in proportion to the relative principal amounts of Loans outstanding under
each) in the inverse order of their respective maturities until payment thereof
in full.
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1.4 Interest.
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(a) Borrower shall pay interest on the Loans to Agent, for the ratable
benefit of Lenders in accordance with the various Loans being made by each
Lender, in arrears on the first (1st) day of each calendar month, commencing
with the calendar month following the calendar month in which the Closing Date
occurs, and continuing to be due on the first (1st) day of each succeeding
calendar month thereafter; provided, however, that (i) accrued interest on any
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LIBOR Loan shall be payable by Borrower to Agent, for the ratable benefit of
Lenders in accordance with the various Loans being made by each Lender, in
arrears on the last day of the Interest Period applicable thereto and (ii) in
all cases accrued and unpaid interest on the Term Loan and all of the
Acquisition Line Advances shall be payable by Borrower to Agent, for the ratable
benefit of Lenders in accordance with the various Loans being made by each
Lender, on the Termination Date. If any interest on the Term Loan or any of the
Acquisition Line Advances accrues or remains payable after the Termination Date,
such interest shall be payable by Borrower upon demand.
(b) Borrower shall be obligated to pay interest to Agent, for the
ratable benefit of Lenders in accordance with the various Loans being made by
each Lender, on the outstanding principal balance of each Loan from the date
such Loan is made until such Loan is repaid in full, with respect to each Loan,
at a floating rate equal, to the sum of the Adjusted LIBOR for the applicable
Interest Period, plus the Applicable Margin therefor (each such Loan bearing
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interest based upon the Adjusted LIBOR is hereinafter referred to as a "LIBOR
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Loan"); provided, however, that (A) no Interest Period may extend beyond the
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Termination Date, and (B) any prepayment of a LIBOR Loan may be made by Borrower
only on the last day of the Interest Period applicable thereto and if any such
prepayment is made on a day that is not the last day of the applicable Interest
Period, Borrower shall pay to Agent, for the ratable benefit of Lenders in
accordance with the various Loans being made by each Lender, any additional
amount due under Section 1.12 below. Upon determining the Adjusted LIBOR for an
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Interest Period requested by Borrower, the Agent shall promptly notify Borrower
of such determination, and such determination shall, in the absence of manifest
error, be final, conclusive and binding for all purposes hereunder.
(c) All computations of interest hereunder or under the other Loan
Documents shall be made by Agent on the basis of a three hundred and sixty (360)
day year, in each case for the actual number of days occurring in the period for
which such interest is payable. Each determination by Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(d) So long as any Event of Default shall have occurred and be
continuing, the interest rate applicable to the Loans or other Obligations shall
be increased by two percentage points (2%) per annum above the then highest rate
otherwise applicable to the Loans (the "Default Rate"), payable on demand of
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Agent.
(e) Notwithstanding anything to the contrary set forth in this Section
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1.4, if, at any time until payment in full of all of the Obligations, the rate
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of interest payable hereunder by
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Borrower exceeds the highest rate of interest permissible under any law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto (the "Maximum Lawful Rate"), then in such event and so long
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as the Maximum Lawful Rate would be so exceeded, the rate of interest payable
hereunder by Borrower shall be equal to the Maximum Lawful Rate; provided,
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however, that if at any time thereafter the rate of interest payable by
Borrower hereunder is less than the Maximum Lawful Rate, Borrower shall
continue to pay interest hereunder at the Maximum Lawful Rate until such time as
the total interest received by Agent, on behalf of Lenders, from the making of
advances hereunder to Borrower is equal to the total interest which would have
been received had the interest rate payable hereunder by Borrower been (but for
the operation of this paragraph) the interest rate payable since the Closing
Date as otherwise provided in this Agreement. Thereafter, the interest rate
payable by Borrower hereunder shall be the rate of interest otherwise provided
in this Section 1.4, unless and until the rate of interest again exceeds the
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Maximum Lawful Rate, in which event this paragraph shall again apply. In no
event shall the total interest received by any Lender pursuant to the terms of
this Agreement or any other Loan Document exceed the amount which such Lender
could lawfully have received had the interest due hereunder been calculated for
the full term hereof or thereof at the Maximum Lawful Rate. All interest paid
by, charged to or collected from Borrower hereunder or under any other Loan
Document shall, to the maximum extent permitted by applicable law, be amortized,
allocated and spread throughout the full term of the Obligation on which it
accrued. In the event the Maximum Lawful Rate is calculated pursuant to this
paragraph, such interest shall be calculated at a daily rate equal to the
Maximum Lawful Rate divided by the number of days in the year in which such
calculation is made. In the event that a court of competent jurisdiction,
notwithstanding the provisions of this Section 1.4(e), shall make a final
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determination that a Lender has received interest hereunder or under any of the
Loan Documents from Borrower in excess of the Maximum Lawful Rate, Agent shall,
to the extent permitted by applicable law, promptly apply such excess first to
any interest due from Borrower and not yet paid hereunder, then to the
outstanding principal of the Obligations of Borrower, then to Fees and any other
unpaid Obligations owed by Borrower and thereafter shall refund any excess to
Borrower or as a court of competent jurisdiction may otherwise order.
1.5 Fees.
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(a) Borrower shall pay to GE Capital, individually, the Fees specified
in the Fee Letter, at the times specified for payment therein.
(b) If Borrower prepays all or any portion of a LIBOR Loan, Borrower
shall pay a breakage fee (the "Breakage Cost") payable to Agent for the benefit
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of the affected Lenders, in an amount equal to the present value of all
remaining scheduled interest payments on the Loan prepaid. For purposes of this
paragraph, the present value of each scheduled interest payment shall be
determined by discounting such scheduled interest payment to the date the
prepayment is made at the Prepayment Treasury Rate (hereinafter defined) in
effect on the date such prepayment is made plus fifty (50) basis points. The
term "Prepayment Treasury Rate", as used in this paragraph, means with respect
to each scheduled interest payment, the yield which shall be imputed, by linear
interpolation, from the current weekly yields of those United States Treasury
Notes having maturities as close as practicable to the date of the prepayment of
the
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Term Loan, as published in the most recent Federal Reserve Statistical Release
H.15 (519) or any successor publication thereto. The Breakage Cost for any
partial prepayments shall be determined in the same manner as provided above,
but such principal so prepaid shall, notwithstanding anything to the contrary
contained herein, be deemed (for purposes of calculating the Breakage Cost)
applied to the principal payments in inverse order of maturity.
1.6 Receipt of Payments. Borrower shall make each payment under this
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Agreement not later than 11:00 a.m. (New York time) on the day when due in
lawful money of the United States of America in immediately available funds to
the Collection Account. For purposes of computing interest and fees (a) all
payments (including cash sweeps) consisting of cash, wire, or electronic
transfers in immediately available funds shall be deemed received on the day of
deposit in the Collection Account prior to 11:00 a.m. (New York time) and notice
to Agent of such deposit and (b) all payments consisting of checks, drafts, or
similar non-cash items shall be deemed received upon receipt of good funds
following deposit in the Collection Account (together with notice to Agent of
such deposit).
1.7 Application and Allocation of Payments. All payments and prepayments
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applied to a particular Loan shall be applied ratably to the portion thereof
held by each Lender as determined by its Pro Rata Share of such Loan. Borrower
irrevocably waives the right to direct the application of any and all payments
at any time or times hereafter received from or on behalf of Borrower, and
Borrower irrevocably agrees that Agent shall have the continuing exclusive right
to apply (subject to any agreement among any of the Lenders and acknowledged by
Agent that modifies the order or right of payment of any of the Loans) any and
all such payments against the then due and payable Obligations of Borrower and
(to the extent there are no then due and payable Obligations) in repayment of
the Term Loan and the Acquisition Line Advances as Agent may deem advisable
notwithstanding any previous entry by Agent in the Loan Account or any other
books and records. In the absence of a specific determination by Agent with
respect thereto, the same shall be applied in the following order: (i) then due
and payable Fees, expenses and other Obligations owing to the Agent; (ii) then
due and payable Fees and expenses of the Lenders; (iii) then due and payable
interest payments on Note A, Note B, Note C and the Acquisition Line Note, on a
pari passu basis (unless otherwise specified in any agreement among any of the
Lenders and acknowledged by Agent); (iv) Obligations to the Lenders other than
Fees, expenses and interest and principal payments; and (v) then due and payable
principal payments on Note A, Note B, Note C and the Acquisition Line Note, on a
pari passu basis (unless otherwise specified in any agreement among any of the
Lenders and acknowledged by Agent).
1.8 Loan Account and Accounting. Agent shall maintain a loan account (the
---------------------------
"Loan Account") on its books to record: all Acquisition Line Advances and the
------------
Term Loan, all payments made by Borrower, and all other debits and credits as
provided in this Agreement with respect to the Loans or any other Obligations.
All entries in the Loan Account shall be made in accordance with Agent's
customary accounting practices as in effect from time to time. The balance in
the Loan Account, as recorded on Agent's most recent printout or other written
statement, shall, absent manifest error, be presumptive evidence of the amounts
due and owing to Agent and Lenders by Borrower; provided that any failure to so
--------
record or any error in so recording shall not limit or otherwise affect any
Borrower's duty to pay the Obligations. Agent
8
shall render to Borrower a monthly accounting of transactions with respect to
the Loans setting forth the balance of the Loan Account. Unless Borrower
notifies Agent in writing of any objection to any such accounting (specifically
describing the basis for such objection), within thirty (30) days after the date
thereof, each and every such accounting shall (absent manifest error) be deemed
final, binding and conclusive upon Borrower in all respects as to all matters
reflected therein. Only those items expressly objected to in such notice shall
be deemed to be disputed by Borrower. Agent's determination, based upon the
facts available, of any disputed item shall (absent manifest error) be final,
binding and conclusive on Borrower. Notwithstanding any provision herein
contained to the contrary, any Lender may elect (which election may be revoked)
to dispense with the issuance of Notes to that Lender and may rely on the Loan
Account as evidence of the amount of Obligations from time to time owing to it.
1.9 Indemnity.
---------
(a) BORROWER SHALL INDEMNIFY AND HOLD EACH OF AGENT, LENDERS AND THEIR
RESPECTIVE AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS AND AGENTS
(EACH, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL SUITS,
------------------
ACTIONS, COSTS, FINES, DEFICIENCIES, PENALTIES, PROCEEDINGS, CLAIMS, DAMAGES,
LOSSES, LIABILITIES AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES AND
DISBURSEMENTS AND OTHER COSTS OF INVESTIGATIONS OR DEFENSE, INCLUDING THOSE
INCURRED UPON ANY APPEAL) (EACH, A "CLAIM") WHICH MAY BE INSTITUTED OR ASSERTED
-----
AGAINST OR INCURRED BY SUCH INDEMNIFIED PERSON AS THE RESULT OF CREDIT HAVING
BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR IN CONNECTION WITH OR ARISING OUT OF THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THEREUNDER, INCLUDING ANY AND ALL ENVIRONMENTAL LIABILITIES AND
COSTS, PROVIDED, THAT BORROWER SHALL NOT BE LIABLE FOR ANY INDEMNIFICATION TO
--------
SUCH INDEMNIFIED PERSON WITH RESPECT TO ANY PORTION OF ANY SUCH CLAIM WHICH
RESULTS SOLELY FROM SUCH INDEMNIFIED PERSON'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT AS DETERMINED BY A FINAL JUDGMENT OF A COURT OF COMPETENT
JURISDICTION. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY OTHER
PARTY HERETO, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OF SUCH PERSON
OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A
RESULT OF CREDIT HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THE LOAN
DOCUMENTS OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.
(b) In any suit proceeding or action brought by the Lender relating to
any Account, Chattel Paper, Contract, General Intangible, Instrument, Equipment
or Document for any sum owing thereunder, or to enforce any provision of any
Account, Chattel Paper, Contract, General Intangible, Instrument or Document,
Borrower shall save, indemnify and keep Agent and
9
Lenders harmless from and against all expense, loss or damage suffered by reason
of any defense, setoff, counterclaim, recoupment or reduction of liability
whatsoever of the obligor thereunder arising out of a breach by Borrower of any
obligation thereunder or arising out of any other agreement, indebtedness or
liability at any time owing to, or in favor of, such obligor or its successors
from Borrower, all such obligations of Borrower shall be and remain enforceable
against, and only against, Borrower and shall not be enforceable against Agent
or any Lender.
(c) Borrower hereby acknowledges and agrees that neither Agent nor any
Lender (as of the date hereof) (i) is now or ever has been in control of any of
the Subject Property or the affairs of any Loan Party, and (ii) has the capacity
through the provisions of the Loan Documents to influence conduct with respect
to the ownership, operation or management of any of the Subject Property.
1.10 Access. Borrower shall, and shall cause each of its Subsidiaries to:
------
(i) provide access during normal business hours to Agent and any of its
officers, employees and agents, as frequently as Agent determines to be
appropriate, upon reasonable advance notice (unless a Default shall have
occurred and be continuing, in which event no notice shall be required and Agent
shall have access at any and all times), to the properties, facilities and
managers (whom Borrower shall instruct and authorize to cooperate with and
provide requested information to Agent) of Borrower or any of its Subsidiaries;
(ii) permit Agent and any of its officers, employees and agents to inspect,
audit and make extracts from all of Borrower's records, files and books of
account; and (iii) permit Agent, to conduct audits to inspect, review and
evaluate the Collateral, and Borrower agrees to render to Agent at Borrower's
cost and expense, such clerical and other assistance as may be reasonably
requested with regard thereto. If a Default or Event of Default shall have
occurred and be continuing or if access is necessary to preserve or protect the
Collateral as determined by Agent, Borrower shall provide such access to Agent
and to each Lender at all times and without advance notice. Furthermore, so
long as any Event of Default shall have occurred and be continuing, Borrower
shall provide Agent and each Lender with access to their suppliers and
customers. Borrower shall, and shall cause each of its Subsidiaries to, make
available to Agent and its counsel, as quickly as practicable under the
circumstances, originals or copies of all books, records, board minutes,
contracts, insurance policies, environmental audits, business plans, files,
financial statements (actual and pro forma), filings with federal, state and
local regulatory agencies, and other instruments and documents which Agent may
request. Borrower shall deliver any document or instrument reasonably necessary
for Agent, as it may from time to time request, to obtain records from any
service bureau or other Person which maintains records for Borrower, and shall
maintain duplicate records or supporting documentation on media, including,
without limitation, computer tapes and discs owned by Borrower. Borrower shall
instruct its certified public accountants and its banking and other financial
institutions to make available to Agent such information and records as Agent
may reasonably request. Agent will give Lenders at least ten (10) days' prior
written notice of regularly scheduled audits. Representatives of other Lenders
may accompany Agent's representatives on regularly scheduled audits at no charge
to Borrower.
10
1.11 Taxes.
-----
(a) Any and all payments by or on behalf of Borrower hereunder or
under the Notes, or any other Loan Document, shall be made, in accordance with
this Section 1.11, free and clear of and without deduction for any and all
------------
present or future Taxes. If Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under any Note or any
other Loan Document to the Lender, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 1.11) Agent or Lenders,
------------
as applicable, receive an amount equal to the sum they would have received had
no such deductions been made, (ii) Borrower shall make such deductions, and
(iii) Borrower shall pay the full amount deducted to the relevant taxing or
other authority in accordance with applicable law.
(b) In addition, Borrower agrees to pay any present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or from the execution,
delivery or registration of, or otherwise with respect to, this Agreement
(hereinafter referred to as "Other Taxes").
-----------
(c) Borrower shall indemnify and pay, within ten (10) days of demand
therefor, Agent and each Lender for the full amount of Taxes or Other Taxes
(including without limitation, any Taxes or Other Taxes imposed by any
jurisdiction on amounts payable under this Section 1.11) paid by Agent or such
------------
Lender, as appropriate, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted.
(d) Within thirty (30) days after the date of any such payment of
Taxes or Other Taxes, Borrower shall furnish to Agent, at its address referred
to in Section 11.11, the original or a certified copy of a receipt evidencing
-------------
payment thereof.
(e) If Agent or any Lender subsequently receives from a taxing
authority a refund of any Tax or Other Tax previously paid by Borrower and for
which Borrower has indemnified Agent or any Lender pursuant to this Section
-------
1.11, Agent or such Lender, as applicable, shall within thirty (30) days after
----
receipt of such refund, and to the extent permitted by applicable law, pay to
Borrower the net amount of any such refund after deducting taxes and expenses
attributable thereto.
(f) Each Lender organized under the laws of a jurisdiction outside the
United States (a "Foreign Lender") as to which payments to be made under this
--------------
Agreement or under the Notes are exempt from United States withholding tax under
an applicable statute or tax treaty shall provide to Borrower and Agent a
properly completed and executed IRS Form 4224 or Form 1001 or other applicable
form, certificate or document prescribed by the IRS or the United States
certifying as to such Foreign Lender's entitlement to such exemption (a
"Certificate of Exemption"). Any foreign Person that seeks to become a Lender
-------------------------
under this Agreement shall provide a Certificate of Exemption to Borrower and
Agent prior to becoming a Lender
11
hereunder. No foreign Person may become a Lender hereunder if such Person is
unable to deliver a Certificate of Exemption.
1.12 Additional Provisions.
---------------------
(a) If any Lender shall have determined that any law, treaty,
governmental (or quasi-governmental) rule, regulation, guideline or order
regarding capital adequacy, reserve requirements or similar requirements or
compliance by any Lender with any request or directive regarding capital
adequacy, reserve requirements or similar requirements (whether or not having
the force of law), in each case, adopted after the Closing Date, from any
central bank or other Governmental Authority increases or would have the effect
of increasing the amount of capital, reserves or other funds required to be
maintained by such Lender and thereby reducing the rate of return on such
Lender's capital as a consequence of its obligations hereunder, then Borrower
shall from time to time upon demand by such Lender (with a copy of such demand
to Agent) pay to Agent, for the account of such Lender, additional amounts
sufficient to compensate such Lender for such reduction. A certificate as to
the requirement that reduces the rate of return, the amount of that reduction
and showing in reasonable detail the basis of the computation thereof submitted
by such Lender to Borrower and to Agent shall, absent manifest error, be final,
conclusive and binding for all purposes.
(b) If, due to either (i) the introduction of or any change in any law
or regulation (or any change in the interpretation thereof) or (ii) the
compliance with any guideline or request from any central bank or other
Governmental Authority (whether or not having the force or law), in each case
adopted after the Closing Date, there shall be any increase in the cost to any
Lender of agreeing to make or making, funding or maintaining any Loan, then
Borrower shall from time to time, upon demand by such Lender (with a copy of
such demand to Agent), pay to Agent for the account of such Lender additional
amounts sufficient to compensate such Lender for such increased cost. A
certificate as to the law, regulation or request that results in such increased
cost, the amount of such increased cost and showing in reasonable detail the
basis of the computation thereof, submitted to Borrower and to Agent by such
Lender, shall be conclusive and binding on Borrower for all purposes, absent
manifest error. Each Lender agrees that, as promptly as practicable after it
becomes aware of any circumstances referred to above which would result in any
such increased cost, the affected Lender shall, to the extent not inconsistent
with such Lender's internal policies of general application, use reasonable
commercial efforts to minimize costs and expenses incurred by it and payable to
it by Borrower pursuant to this Section 1.12(b).
---------------
(c) Notwithstanding anything to contrary contained herein, if the
introduction of or any change in any law or regulation (or any change in the
interpretation thereof) shall make it unlawful, or any central bank or other
Governmental Authority shall assert that it is unlawful, for any Lender to agree
to make or to make or to continue to fund or maintain any LIBOR Loan, then,
unless that Lender is able to make or to continue to fund or to maintain such
LIBOR Loan at another branch or office of that Lender without, in that Lender's
opinion, adversely affecting it or its Loans or the income obtained therefrom,
on notice thereof and demand therefor by such Lender to Borrower through Agent,
(i) the obligation of such Lender to agree to make or to make
12
or to continue to fund or maintain LIBOR Loans shall terminate and (ii) Borrower
shall forthwith prepay in full all outstanding LIBOR Loans owing by Borrower to
such Lender, together with interest accrued thereon, unless Borrower, within
------
five (5) Business Days after the delivery of such notice and demand, converts
all such Loans into a Loan bearing interest based on the Base Rate.
(d) In order to induce each Lender to fund and maintain its share of
any LIBOR Loan on the terms provided herein, and in consideration of each
Lender's entering into funding arrangements from time to time in contemplation
thereof, Borrower agrees that if any LIBOR Loan is repaid or prepaid in full or
in part on any day other than the last day of the Interest Period therefor (if
such repayment or prepayment is voluntarily made by Borrower), Borrower shall
pay to any Lender, upon the request of such Lender, such amount or amounts as
shall compensate such Lender for any loss, cost or expense incurred by such
Lender (as determined by such Lender in its sole judgment) by reason of the
liquidation or re-employment of funds acquired or committed to be acquired by
such Lender to fund or maintain its share of such LIBOR Loan, pursuant to such
Lender's customary funding arrangements. The amount of any such loss or expense
shall include the excess, if any, of (i) such Lender's cost or deemed cost of
obtaining funding for the amount necessary to fund or maintain its share of such
LIBOR Loan for the Interest Period applicable thereto over (ii) the return such
Lender will receive on its re-employment of such funds, each as determined by
such Lender in its sole judgment. Without limiting the generality of the
foregoing, such Lender may compute such loss or expense on the basis of such
funds having been borrowed by such Lender at a rate equal to the interest rate
on United States Treasury bills or notes with a maturity that most closely
approximates the end of the relevant Interest Period as quoted by Telerate News
Service (page 5) at the close of business on the first (1st) day of the Interest
Period in respect of such LIBOR Loan, and on the reinvestment by such Lender of
such funds in United States Treasury bills or notes with a maturity that most
closely approximates the end of the relevant Interest Period as quoted by
Telerate News Service (page 5) at the close of business on the date of repayment
or prepayment of such LIBOR Loan (or as such United States Treasury ▇▇▇▇ or note
rates are quoted by such other nationally-recognized quote service as may be
specified by Agent to the Borrower from time to time). Each such request shall
be accompanied by a certificate of the requesting Lender setting forth in
reasonable detail the basis for computing the amount of such loss or expense,
and each such certificate shall, in the absence of manifest error, be
conclusive.
(e) The calculation of all amounts payable under this Agreement with
respect to any LIBOR Loan shall be made as though each Lender had actually
funded its share of such LIBOR Loan through the purchase of deposits in the
relevant market and in an amount equal to the amount of its share of such LIBOR
Loan and having a maturity comparable to the relevant Interest Period and
through the transfer of such loan from an offshore office of such Lender to a
domestic office of such Lender in the United States of America; provided,
--------
however, that each Lender may fund its share of each of the LIBOR Loans in any
manner it sees fit and the foregoing assumptions shall be used only for
calculation of amounts which may be payable by Borrower under this Agreement
with respect thereto.
13
1.13 Security Interest in the Collateral.
-----------------------------------
(a) To secure the prompt and complete payment, performance and
observance of all of the Obligations, and to induce Agent and Lenders to enter
into this Agreement and to make the Term Loan and the Acquisition Line Advances
available to the Borrower, Borrower hereby grants to Agent, for itself and
Lenders, a security interest in all of Borrower's right, title and interest in,
to and under the following, whether now owned by or owing to, or hereafter
acquired by or arising in favor of Borrower (including, without limitation,
under any trade names, styles or divisions thereof), and whether owned, leased
or consigned by or to Borrower, and regardless of where located:
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Documents;
(v) all General Intangibles;
(vi) all Instruments;
(vii) all Inventory;
(viii) all Equipment;
(ix) all Intellectual Property;
(x) all Investment Property;
(xi) all money, cash or any Cash Equivalents of Borrower;
(xii) all other Goods and interests in property of any kind,
nature or description whatsoever, whether tangible or intangible, whether real
or personal, and whether now or hereafter owned or existing, leased, consigned
by or to, or acquired by, Borrower and wherever located; and
(xiii) to the extent not otherwise included, all Proceeds of
any of the foregoing and all accessions to, substitutions and replacements for,
and rents, profits and products of, each of the foregoing.
(b) In addition, to secure the prompt and complete payment,
performance and observance of the Obligations and in order to induce Lenders as
aforesaid, Borrower hereby grants to Agent, for itself and Lenders, a security
interest in all property of Borrower held by
14
Agent including, without limitation, all property of every description now or
hereafter in the possession or custody of, or in transit to Agent for any
purpose, including safekeeping, collection or pledge, for the account of
Borrower, or as to which Borrower may have any right or power.
1.14. Rights of Lender, Limitations on Obligations of Lender.
------------------------------------------------------
(a) It is expressly agreed by Borrower that, anything herein to the
contrary notwithstanding, Borrower shall remain liable under each of its
Contracts and each of its Licenses to observe and perform all the conditions and
obligations to be observed and performed by it thereunder and Agent shall have
no obligation or liability under any Contract or License by reason of or arising
out of this Agreement or the granting herein of a security interest herein or
the receipt by Agent of any payment relating to any Contract or License pursuant
hereto, nor shall Agent be required or obligated in any manner to perform or
fulfill any of the obligations of Borrower under or pursuant to any Contract or
License, or to make any payment, or to make any inquiry as to the nature or the
sufficiency of any payment received by it or the sufficiency of any performance
by any party under any Contract or License, or to present or file any claim, or
to take any action to collect or enforce any performance or the payment of any
amounts which may have been assigned to it or to which it may be entitled at any
time or times.
(b) Upon repayment of all obligations to Revolving Lender and
termination of the Revolving Credit Facility, Agent may after the occurrence and
during the continuation of any Event of Default and without prior notice to
Borrower, notify Account Debtors, parties to the Contracts, and obligors in
respect of Instruments that the Accounts and the right, title and interest of
Borrower in and under such Contracts and Instruments have been assigned to
Agent, for itself and Lenders, and that payments shall be made directly to
Agent. Upon the request of Agent, Borrower shall so notify such Account
Debtors, parties to Contracts, and obligors in respect of Instruments. Upon
repayment of all obligations to Revolving Lender and termination of the
Revolving Credit Facility, Agent may notify Account Debtors in respect of
Chattel Paper that the right, title and interest of Borrower in and under such
Chattel Paper have been assigned to Agent, for itself and Lenders, and that
payments shall be made directly to Agent.
(c) Agent shall have the right from time to time to make test
verifications of the Accounts and physical verifications and appraisals of the
Inventory and other Collateral in any manner and through any medium that it
considers advisable, and Borrower agrees to furnish all such assistance and
information as Agent may require in connection therewith. Agent may at any time
in Agent's own name or in the name of Borrower communicate with Account Debtors,
parties to Contracts and obligors in respect of Instruments to verify with such
Persons, to Agent's satisfaction, the existence, amount and terms of any
Accounts, Contracts, Instruments or Chattel Paper. Upon the occurrence and
continuation of any Event of Default, Borrower, at its own expense, shall cause
the certified independent public accountant then engaged by Borrower, to prepare
and deliver to Agent at any time and from time to time promptly upon Agent's
request the following reports: (i) a reconciliation of all Accounts; (ii) an
aging of all Accounts; (iii) trial balances; and (iv) a test verification of
such Accounts as Agent may request. Borrower, at its own expense, shall cause
its certified independent public accountants to deliver to Agent the
15
results of any physical verification of all or any portion of its Inventory made
or observed by such accountants when and if such verification is conducted.
1.15 Single Loan. All Loans to each Borrower and all of the other
-----------
Obligations of each Borrower arising under this Agreement and the other Loan
Documents shall constitute one general obligation of that Borrower secured,
until the Termination Date, by all of its Collateral.
2. CONDITIONS PRECEDENT
2.1 Conditions to the Term Loan. Notwithstanding any other provision of
---------------------------
this Agreement and without affecting in any manner the rights of Agent and
Lenders hereunder, Borrower shall have no rights under this Agreement (but shall
have all applicable obligations hereunder), and Lenders shall not be obligated
to advance the Term Loan, make any Acquisition Line Advance or to take, fulfill,
or perform any other action hereunder, until the following conditions have been
fulfilled to the satisfaction of Agent:
(a) This Agreement or counterparts hereof shall have been duly
executed by, and delivered to, Borrower, Agent and Lenders.
(b) Agent shall have received all the Loan Documents and such other
documents, instruments, certificates, opinions and agreements as Agent shall
request in connection with the transactions contemplated by this Agreement,
including without limitation all documents, instruments, agreements and other
materials listed in the Schedule of Documents each in form and substance
satisfactory to Agent.
(c) Agent shall have received evidence satisfactory to Agent that
Borrower has obtained consents and acknowledgments of all Persons whose consents
and acknowledgments may be required, including, but not limited to, all
requisite Governmental Authorities, to the terms and to the execution and
delivery, of this Agreement and the other Loan Documents and the consummation of
the transactions contemplated hereby and thereby.
(d) Agent shall have received evidence satisfactory to it that the
insurance policies provided for in Section 5.5 and Annex D are in full force and
----------- -------
effect, together with appropriate evidence showing loss payable and/or
additional insured clauses or endorsements, as appropriate, in favor of Agent,
for itself and Lenders, and in form and substance satisfactory to Agent.
(e) Borrower shall have paid all Fees, costs, and expenses of closing
(including fees and expenses of consultants and counsel to Agent and Lenders
presented as of the Closing Date).
(f) No action, proceeding, investigation, regulation or legislation
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or any of the other Loan Documents or the consummation of the
16
transactions contemplated hereby and thereby and which, in Agent's sole
judgment, would make it inadvisable to consummate the transactions contemplated
by this Agreement or any of the other Loan Documents.
(g) Agent, in its sole judgment, shall not have determined that (i)
Borrower shall have made any Restricted Payment; (ii) any material increase in
liabilities, liquidated or contingent, of Borrower or Holdings, or material
decrease in the assets of Borrower or Holdings, shall have occurred since their
respective last audited financial statements; (iii) any Material Adverse Effect
shall have occurred since Borrower's last certified and audited financial
statements; (iv) any material adverse effect on the industry of Borrower shall
have occurred; or (v) any change in loan syndication, financial or capital
markets conditions generally that would materially impair the ability of Agent
to syndicate the Loans.
(h) There exists no default or event of default under any of the
Subordinated Notes.
(i) Agent shall be satisfied, in its sole judgment, with the
corporate, capital, tax, legal and management structure of each Loan Party, and
shall be satisfied, in its sole judgment exercised reasonably, with the nature
and status of all contractual obligations, securities, labor, tax, ERISA,
employee benefit, environmental, health and safety matters, in each case,
involving or affecting any Loan Party.
(j) Agent shall have received evidence satisfactory to it that the
Revolving Credit Facility is in full force and effect and shall have determined
that immediately after giving effect to any reduction of principal outstanding
under the Revolving Credit Facility, but without giving effect to the borrowing
limits thereunder, the available funds under the Revolving Credit Facility
(computed on the basis of all of the Borrower's current debts, obligations and
accounts payable having been paid in due course) shall not be less than
$15,000,000.
(k) Agent shall be satisfied that the merger of ▇▇▇▇▇▇▇▇ with and into
Borrower shall have been consummated on terms and pursuant to documents in form
and substance satisfactory to Agent.
2.2 Further Conditions to each Loan. It shall be a further condition to
-------------------------------
the funding of the initial Loans and each subsequent Acquisition Line Advance,
and to the continuation of any Loan as a LIBOR Loan, that the following
statements shall be true on the date of each such funding or continuation, as
the case may be:
(a) Each Loan Party's representations and warranties contained herein
or in any of the Loan Documents shall be true and correct on and as of such date
and the Closing Date as though made on or incurred on and as of such date,
except to the extent that any such representation or warranty expressly relates
to an earlier date and except for changes therein permitted or contemplated by
this Agreement.
17
(b) No event shall have occurred and be continuing, or would result
from such funding or continuation, which constitutes a Default.
(c) No event or circumstance having a Material Adverse Effect shall
have occurred since the date hereof.
(d) With respect to each Acquisition Line Advance, Agent, in its sole
discretion, shall have determined that the proposed acquisition constitutes an
Eligible Acquisition and Agent shall have received all documents, instruments,
certificates and agreements, and evidence of all such matters, as Agent or any
Lender shall request in connection with the applicable Eligible Acquisition; and
Agent and Agent's counsel shall have conducted all such due diligence reviews,
audits and investigations as they shall deem necessary or appropriate in
connection therewith and Agent shall be satisfied, in its sole discretion, with
all of the foregoing.
The request and acceptance by Borrower of the proceeds of any Acquisition Line
Advance or the continuation of any Loan into, or as, a LIBOR Loan, as the case
may be, shall be deemed to constitute, as of the date of such request or
acceptance, (i) a representation and warranty by Borrower that the conditions in
this Section 2.2 have been satisfied and (ii) a confirmation by Borrower of the
-----------
granting and continuance of the Agent's Liens pursuant to the Collateral
Documents.
3. REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement and to make the
Loans, Borrower represents and warrants to Agent and each Lender (each and all
of which representations and warranties shall survive the execution and delivery
of this Agreement) that:
3.1 Corporate Existence; Compliance with Law. Each Loan Party (i) is a
----------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and is duly qualified to do business
and is in good standing in each other jurisdiction where its ownership or lease
of property or the conduct of its business requires such qualification; (ii) has
the requisite corporate power and authority and the legal right to own, pledge,
mortgage or otherwise encumber and operate its properties, to lease the property
it operates under lease, and to conduct its business as now, heretofore and
proposed to be conducted; (iii) has all licenses, permits, consents or approvals
from or by, and has made all filings with, and has given all notices to, all
Governmental Authorities having jurisdiction, to the extent required for such
ownership, operation and conduct; (iv) is in compliance with its certificate or
articles of incorporation and by-laws; and (v) is in compliance in all material
respects with all applicable provisions of law.
3.2 Executive Offices; Corporate or Other Names; FEIN. The current
-------------------------------------------------
locations of each Loan Party's executive offices and principal place of business
is set forth in Schedule 3.2, and, except as set forth on Schedule 3.2, such
------------ ------------
location has not changed during the preceding twelve months. During the prior
five (5) years, except as set forth on Schedule 3.2, no Loan
------------
18
Party has been known as or used any corporate, fictitious or trade name other
than the names of the Loan Parties set forth on Schedule 3.2. In addition,
------------
Schedule 3.2 lists the federal employer identification number of each Loan
------------
Party.
3.3 Corporate Power; Authorization; Enforceable Obligations. The
-------------------------------------------------------
execution, delivery and performance by each Loan Party of the Loan Documents and
all other instruments and documents to be delivered by such Loan Party hereunder
and thereunder to the extent it is a party thereto and the creation of all Liens
provided for herein and therein: (i) are within such Loan Party's corporate
power; (ii) have been duly authorized by all necessary corporate and shareholder
action; (iii) are not in contravention of any provision of such Loan Party's
certificates or articles of incorporation or by-laws or other organizational
documents; (iv) will not violate any law or regulation, or any order or decree
of any court or governmental instrumentality; (v) will not conflict with or
result in the breach or termination of, constitute a default under or accelerate
any performance required by, any indenture, mortgage, deed of trust, lease,
agreement or other instrument to which any Loan Party is a party or by which any
Loan Party or any of its property is bound; (vi) will not result in the creation
or imposition of any Lien upon any of the property of any Loan Party other than
those in favor of Agent, on behalf of itself and Lenders, all pursuant to the
Loan Documents; and (vii) do not require the consent or approval of any
Governmental Authority or any other Person, except those referred to in Section
-------
2.1(c), all of which will have been duly obtained, made or complied with prior
------
to the Closing Date and which are in full force and effect. At or prior to the
Closing Date, each of the Loan Documents shall have been duly executed and
delivered for the benefit of or on behalf of each Loan Party which is a party
thereto and each shall then constitute a legal, valid and binding obligation of
such Loan Party to the extent it is a party thereto, enforceable against such
Loan Party in accordance with its terms.
3.4 Financial Statements and Projections. Borrower has delivered the
------------------------------------
financial statements and Projections identified on Schedule 3.4, and each such
------------
financial statement and Projection complies with the description thereof
contained on Schedule 3.4.
------------
3.5 Material Adverse Change. As of the date hereof, no Loan Party has any
-----------------------
material obligations, contingent liabilities, or liabilities for Charges, long-
term leases or unusual forward or long-term commitments which are not reflected
in the audited consolidated December 31, 1997 balance sheet of Holdings. As of
the date hereof, there has been no material deviation from the Projections
provided to Agent. Except as otherwise permitted hereunder or as set forth on
Schedule 3.5, no dividends, advances or other distributions have been declared,
------------
paid or made upon any Stock of Borrower and, since December 31, 1997, no shares
of Stock of Borrower have been, or are now required to be, redeemed, retired,
purchased or otherwise acquired for value by Borrower. Since December 31, 1997,
no event has occurred which would result in a Material Adverse Effect.
3.6 Ownership of Property; Liens. Except as described on Schedule 3.6,
---------------------------- ------------
the real estate listed on Schedule 3.6 constitutes all of the real property
------------
owned, leased, or used in its business by the Loan Parties. Each Loan Party
holds (i) good and marketable fee simple title to all of its real estate
described on
19
Schedule 3.6, (ii) valid and marketable leasehold interests in all of such Loan
------------
Party's Leases (both as lessor and lessee, sublessee or assignee) described on
Schedule 3.6 and (iii) good and marketable title to, or valid leasehold
------------
interests in, all of its other properties and assets. None of the properties and
assets of any Loan Party are subject to any Liens, except (x) Permitted
Encumbrances and Liens set forth on Schedule 6.7 and (y) from and after the
------------
Closing Date, the Lien in favor of Agent, on behalf of itself and Lenders,
pursuant to the Collateral Documents. Each Loan Party has received all deeds,
assignments, waivers, consents, non-disturbance and recognition or similar
agreements, bills of sale and other documents, and duly effected all recordings,
filings and other actions necessary to establish, protect and perfect such Loan
Party's right, title and interest in and to all such real estate and other
assets or property. Except as described on Schedule 3.6, (i) no Loan Party or,
------------
to Borrower's Knowledge, any other party to any such Lease described on Schedule
--------
3.6 is in default of its obligations thereunder or has delivered or received any
---
notice of default under any such Lease, and no event has occurred which, with
the giving of notice, the passage of time, or both, would constitute a default
under any such Lease; no Loan Party owns or holds, or is obligated under or a
party to, any option, right of first refusal or any other contractual right to
purchase, acquire, sell, assign or dispose of any real property owned or leased
by such Loan Party except as set forth on Schedule 3.6; and (iii) no portion of
------------
any real property owned or leased by any Loan Party has suffered any material
damage by fire or other casualty loss which has not heretofore been completely
repaired and restored to its original condition. All material permits required
to have been issued or appropriate to enable the real property owned or leased
by any Loan Party to be lawfully occupied and used for all of the purposes for
which they are currently occupied and used, have been lawfully issued and are,
as of the date hereof, in full force and effect.
3.7 Restrictions; No Default; Material Contracts. No contract, lease,
--------------------------------------------
agreement or other instrument to which any Loan Party is a party or by which it
or any of its properties or assets is bound or affected and no provision of any
charter, corporate restriction, applicable law or governmental regulation has
resulted in or will result in a Material Adverse Effect. No Loan Party is in
default and, to Borrower's Knowledge, no third party is in default, under or
with respect to any material contract, agreement, lease or other instrument to
which any Loan Party is a party. No Default has occurred and is continuing.
Schedule 3.7, as supplemented from time to time by written disclosures to the
------------
Lender, sets forth a complete and accurate list of all Material Contracts of the
Borrower and each of its Subsidiaries.
3.8 Labor Matters. Except as set forth on Schedule 3.8, there are no
------------- ------------
strikes or other labor disputes against any Loan Party that are pending or, to
Borrower's Knowledge, threatened. Hours worked by and payment made to employees
of each Loan Party have not been in violation of the Fair Labor Standards Act or
any other applicable law dealing with such matters which would have a Material
Adverse Effect. All material payments due from any Loan Party on account of
employee health and welfare insurance have been paid or accrued as a liability
on the books of such Loan Party. Except as set forth on Schedule 3.8, no Loan
------------
Party has any obligation under any collective bargaining agreement, management
agreement, or any employment agreement, and a correct and complete copy of each
agreement listed on Schedule 3.8 has been provided to Agent. There is no
------------
organizing activity involving any Loan Party pending or, to Borrower's
Knowledge, threatened by any labor union or group of employees. Except as set
forth on Schedule 3.14, there are no representation proceedings pending or, to
-------------
Borrower's Knowledge, threatened with the National Labor Relations Board, and no
labor organization or group of
20
employees of any Loan Party has made a pending demand for recognition, and,
there are no complaints or charges against any Loan Party pending or threatened
to be filed with any federal, state, local or foreign court, govern mental
agency or arbitrator based on, arising out of, in connection with, or otherwise
relating to the employment or termination of employment by any Loan Party of any
individual.
3.9 Ventures, Subsidiaries and Affiliates; Outstanding Stock and
------------------------------------------------------------
Indebtedness. Except as set forth on Schedule 3.9, Borrower has no
------------ ------------
Subsidiaries, is not engaged in any joint venture or partnership with any other
Person, and is not an Affiliate of any other Person. The Stock of each Loan
Party owned by each of the stockholders thereof named on Schedule 3.9
------------
constitutes all of the issued and outstanding Stock of such Loan Party. Except
as set forth on Schedule 3.9, there are no outstanding rights to purchase
------------
options, warrants or similar rights or agreements pursuant to which any Loan
Party may be required to issue, sell or purchase any Stock or other equity
security. Schedule 3.9 lists all outstanding Stock of each Loan Party as of the
------------
Closing Date. Schedule 6.3 lists all Indebtedness of each Loan Party as of the
------------
Closing Date.
3.10 Government Regulation. No Loan Party is (i) an "investment company"
---------------------
or an "affiliated person" of, or "promoter" or "principal underwriter" for, an
"investment company," as such terms are defined in the Investment Company Act of
1940 as amended; (ii) is subject to regulation under the Public Utility Holding
Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or any
other federal or state statute that restricts or limits such Loan Party's
ability to incur Indebtedness, pledge its assets, or to perform its obligations
hereunder, or under any other Loan Document, and the making of the Loans by
Lenders, the application of the proceeds and repayment thereof by each Loan
Party, and the consummation of the transactions contemplated by this Agreement
and the other Loan Documents, will not violate any provision of any such statute
or any rule, regulation or order issued by the Securities and Exchange
Commission.
3.11 Margin Regulations. No Loan Party is engaged in the business of
------------------
extending credit for the purpose of purchasing or carrying Margin Stock and no
proceeds of the Loans or any other extensions of credit under this Agreement
will be used to purchase or carry any Margin Stock or to extend credit to others
for the purpose of purchasing or carrying any Margin Stock. Following
application of the proceeds of each Loan, none of the assets (either of Borrower
only or of Borrower and its Subsidiaries on a consolidated basis) subject to the
provisions of Section 6.3, 6.7 or 6.22 will be Margin Stock. Borrower will not
------------------------
take or permit to be taken any action which might cause any Loan Document or any
document or instrument delivered pursuant hereto or thereto violate any
regulation of the Board of Governors of the Federal Reserve Board.
3.12 Taxes. All federal, state, local and foreign tax returns, reports and
-----
statements, including, but not limited to, information returns (Form 1120-S)
required to be filed by each Loan Party, have been filed with the appropriate
Governmental Authority and all Charges and other impositions shown thereon to be
due and payable have been paid prior to the date on which any fine, penalty,
interest or late charge may be added thereto for nonpayment thereof, or any such
fine, penalty, interest, late charge or loss has been paid. Each Loan Party has
paid when due and payable all material Charges required to be paid by it.
Proper and accurate amounts have
21
been withheld by each Loan Party from their respective employees for all periods
in full and complete compliance with the tax, social security and unemployment
withholding provisions of applicable federal, state, local and foreign law and
such withholdings have been timely paid to the respective Governmental
Authorities. Schedule 3.12 sets forth those taxable years for which any of the
-------------
tax returns of each Loan Party are currently being audited by the IRS or any
other applicable Governmental Authority; and any assessments or threatened
assessments in connection with such audit or otherwise currently outstanding.
Except as described in Schedule 3.12, no Loan Party has executed or filed with
-------------
the IRS or any other Governmental Authority any agreement or other document
extending, or having the effect of extending, the period for assessment or
collection of any Charges. No Loan Party has filed a consent pursuant to IRC
Section 341(f) or agreed to have IRC Section 341(f) (2) apply to any
dispositions of subsection (f) assets (as such term is defined in IRC Section
341(f)(4)). None of the property owned by any Loan Party is property which is
required to treat as being owned by any other Person pursuant to the provisions
of IRC Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, and
in effect immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of IRC Section 168(h). No Loan
Party has agreed or been requested to make any adjustment under IRC Section 481
(a) by reason of a change in accounting method or otherwise. No Loan Party has
any obligation under any written tax sharing agreement except as described on
Schedule 3.12.
-------------
3.13 ERISA. Schedule 3.13 lists all Plans maintained or contributed to by
----- -------------
any Loan Party and all Qualified Plans maintained or contributed to by any ERISA
Affiliate, and separately identifies the Title IV Plans, Multiemployer Plans,
any multiple employer plans subject to Section 4064 of ERISA, unfunded Pension
Plans, Welfare Plans and Retiree Welfare Plans. IRS determination letters
regarding the qualified status under Section 401 of the IRC of each Qualified
Plan have been received as of the dates listed on Schedule 3.13. Each of the
-------------
Qualified Plans has subsequently been amended to comply with the Tax Reform Act
of 1986 and to make other necessary or desirable changes. To the Knowledge of
Borrower, the Qualified Plans as amended continue to qualify under Section 401
of the IRC, the trusts created thereunder continue to be exempt from tax under
the provisions of Section 501(a) of the IRC, and nothing has occurred which
would cause the loss of such qualification or tax-exempt status. Each Qualified
Plan so amended will be submitted to the IRS for a determination letter as to
the ongoing qualified status of the Plan under the IRC within the applicable IRC
401(b) remedial amendment period for the Tax Reform Act of 1986; and each such
Plan shall be amended, including retroactive amendments, as required during such
determination letter process to maintain the qualified status of such Plans. To
the Knowledge of Borrower, each Plan is in compliance in all material respects
with the applicable provisions of ERISA and the IRC, including the filing of all
reports required under the IRC or ERISA which are true and correct as of the
date filed, and all required contributions and benefits have been paid in
accordance with the provisions of each such Plan. No Loan Party or other ERISA
Affiliate, with respect to any Qualified Plan, has failed to make any
contribution or pay any amount due as required by Section 412 of the IRC or
Section 302 of ERISA. With respect to all Retiree Welfare Plans, the present
value of future anticipated expenses pursuant to the latest actuarial
projections of liabilities does not exceed $100,000.00, and copies of such
latest projections have been provided to Agent; with respect to Pension Plans,
other than Qualified Plans and the unfunded Pension Plans listed in Schedule
--------
22
3.13, the present value of the liabilities for current participants thereunder
----
using interest assumptions described in IRC 411(a)(ii) does not exceed
$100,000.00. No Loan Party has engaged in a prohibited transaction, as defined
in Section 4975 of the IRC or Section 406 of ERISA, in connection with any Plan
which would subject any such Person (after giving effect to any exemption) to a
material tax on prohibited transactions imposed by Section 4975 of the IRC or
any other material liability.
Except as set forth on Schedule 3.13: (i) no Title IV Plan has any
-------------
Unfunded Pension Liability; (ii) no ERISA Event or event described in Section
4062 (e) of ERISA with respect to any Title IV Plan has occurred or is
reasonably expected to occur; (iii) there are no pending, or to the Knowledge of
Borrower, threatened claims, actions or lawsuits (other than claims for benefits
in the normal course), asserted or instituted against (x) any Plan or its
assets, (y) any fiduciary with respect to any Plan or (z) any Loan Party or any
ERISA Affiliate with respect to any Plan; (iv) no Loan Party or any ERISA
Affiliate has incurred or reasonably expects to incur any Withdrawal Liability
(and no event has occurred which, with the giving of notice under Section 4219
of ERISA, would result in such liability) under Section 4201 of ERISA as a
result of a complete or partial withdrawal from a Multiemployer Plan; (v) within
the last five years no Loan Party or other ERISA Affiliate has engaged in a
transaction which resulted in a Title IV Plan with Unfunded Pension Liabilities
being transferred outside of the "controlled group" (within the meaning of
Section 4001(a)(14) of ERISA) of any such entity; (vi) no Plan which is a
Retiree Welfare Plan provides for continuing benefits or coverage for any
participant or any beneficiary of a participant after such participant's
termination of employment (except as may be required by Section 4980B of the IRC
and at the sole expense of the participant or the beneficiary of the
participant); (vii) each Loan Party or other ERISA Affiliate have complied with
the notice and continuation coverage requirements of Section 4980B of the IRC
and the proposed or final regulations thereunder; and (viii) no liability under
any Plan has been funded, nor has such obligation been satisfied with, the
purchase of a contract from an insurance company that is not rated AAA by
Standard & Poor's Corporation and the equivalent by each other nationally
recognized rating agency.
3.14 No Litigation. Except as set forth on Schedule 3.14, no action, claim
------------- -------------
or proceeding is now pending or, to the Knowledge of Borrower, threatened
against any Loan Party, at law, in equity or otherwise, before any court, board,
commission, agency or instrumentality of any federal, state, or local government
or of any agency or subdivision thereof, or before any arbitrator or panel of
arbitrators, (i) which challenges any such Person's right, power, or competence
to enter into or perform any of its obligations under the Loan Documents, or the
validity or enforceability of any Loan Document or any action taken thereunder
or (ii) which if determined adversely, could have or result in a Material
Adverse Effect. To the Knowledge of Borrower, there does not exist a state of
facts which is reasonably likely to give rise to such proceedings.
3.15 Brokers. Except as set forth on Schedule 3.15, no broker or finder
------- -------------
acting on behalf of any Loan Party brought about the obtaining, making or
closing of the credit extended pursuant to this Agreement or the transactions
contemplated by the Loan Documents and no
23
Loan Party has any obligation to any Person in respect of any finder's or
brokerage fees in connection therewith.
3.16 Patents, Trademarks, Copyrights and Licenses. Except as otherwise set
--------------------------------------------
forth on Schedule 3.16, each Loan Party owns all licenses, patents, patent
-------------
applications, copyrights, service marks, trademarks, trademark applications and
trade names which are necessary to continue to conduct its business as
heretofore conducted by it, now conducted by it and proposed to be conducted by
it, each of which is listed, together with Patent and Trademark Office
application or registration numbers, where applicable, on Schedule 3.16. Each
-------------
Loan Party conducts business without infringement or claim of infringement of
any license, patent, copyright, service ▇▇▇▇, trademark, trade name, trade
secret or other intellectual property right of others, except where such
infringement or claim of infringement could not have or result in a Material
Adverse Effect. Except as set forth on Schedule 3.16, to Borrower's Knowledge,
-------------
there is no infringement or claim of infringement by others of any material
license, patent, copyright, service ▇▇▇▇, trademark, trade name, trade secret or
other intellectual property right of any Loan Party.
3.17 Full Disclosure. No information contained in this Agreement, the
---------------
other Loan Documents, the Financials or any written statement furnished by or on
behalf of any Loan Party or any Affiliate thereof pursuant to the terms of this
Agreement or any other Loan Document, which has previously been delivered to
Agent or any Lender, contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading in light of the circumstances under which they were made.
With respect to all business plans and other forecasts and projections
(including, without limitation, the Projections) furnished by or on behalf of
Borrower and made available to Agent or any Lender relating to the financial
condition, operations, business, properties or prospects of Borrower or any
Subsidiary thereof (i) all facts stated as such therein are true and complete in
all material respects, (ii) all facts upon which the forecasts or projections
therein contained are based are true and complete in all material respects and
no material fact was omitted therefrom, (iii) all assumptions made on that basis
are reasonable under the circumstances and are disclosed therein, and (iv) the
forecasts or projections are reasonably based on those facts and assumptions.
With respect to any such forecasts or projections made available to Agent or any
Lender after the Closing Date, the foregoing clauses (i) through (iv) shall be
true and correct in all respects as of the date of such projections or
forecasts.
3.18 Hazardous Materials. Except as set forth on Schedule 3.18 or routine
------------------- -------------
operations in the ordinary course of business in compliance with applicable
permits issued by a Governmental Authority, the Subject Property is free of any
Hazardous Material. In addition, Schedule 3.18 discloses existing or potential
-------------
environmental liabilities of each Loan Party of which Borrower, after due
inquiry, has Knowledge, which could constitute or result in a Material Adverse
Effect or Environmental Liabilities and Costs. Except as set forth on Schedule
--------
3.18, no Loan Party has caused or suffered to occur any Release at, under, above
----
or within any Subject Property. No Loan Party is involved in operations which
could lead to the imposition of any liability or Lien on it, or any owner of any
premises which it occupies, under the Environmental Laws, and no Loan Party has
permitted any tenant or occupant of such premises to engage in any such
activity.
24
3.19 Insurance Policies. Schedule 3.19 lists all insurance of any nature
------------------ -------------
maintained for current occurrences by each Loan Party, as well as a summary of
the terms of such insurance. Borrower covenants that such insurance complies
with and shall at all times comply with the standards set forth on Annex D.
-------
3.20 Deposit and Disbursement Accounts. Schedule 3.20 lists all banks and
--------------------------------- -------------
other financial institutions at which Borrower or any Subsidiary thereof
maintains deposits and/or other accounts and/or post office lock boxes, and such
Schedule correctly identifies the name, address and telephone number of each
depository, the name in which the account is held, a description of the purpose
of the account, and the complete account number.
3.21 Subordinated Notes. None of the Subordinated Notes has been
------------------
amended or modified in any respect and no provision therein has been waived, and
no default or event of default under the Subordinated Notes has occurred and is
continuing.
3.22 Representations and Warranties Regarding the Collateral.
-------------------------------------------------------
(a) Borrower is the sole owner of each item of the Collateral in which
it purports to grant a security interest hereunder, having good and marketable
title thereto free and clear of any and all Liens except (i) the security
interest granted to Agent, for itself and Lenders under this Agreement and (ii)
Permitted Encumbrances. Borrower will warrant and defend the Collateral against
all claims and demands of all persons at any time claiming the same or any
interest thereon.
(b) No effective security agreement, financing statement, equivalent
security or Lien instrument or continuation statement covering all or any part
of the Collateral is on file or of record in any public office, except (i) such
as have been filed in favor of Agent, for itself and for Lenders, pursuant to
this Agreement or (ii) such as relate to Permitted Encumbrances.
(c) As a result of the filing of appropriate financing statements in
the jurisdictions listed on Schedule 3.22(c) hereto, this Agreement is effective
----------------
to create a valid and continuing Lien on and perfected security interest in
favor of Agent, for itself and for Lenders, in the Collateral with respect to
which a security interest may be perfected by filing pursuant to the Code, which
Lien and security interest is prior to all other Liens except those Liens
specifically designated on Schedule 6.7 as being prior to the Lien of this
------------
Agreement as a matter of law, and is enforceable as such as against creditors of
and purchasers from Borrower (other than purchasers of Inventory in the ordinary
course of business). All action (including, without limitation, all filings,
registrations and recordings) necessary or desirable to create, protect and
perfect the security interest granted to Agent, for itself and for Lenders,
hereby in respect of each item of the Collateral has been duly accomplished.
(d) Schedule 3.22(d) hereto lists all Instruments of Borrower. All
----------------
action necessary or desirable to protect and perfect the security interest of
Agent, for itself and for Lenders, granted hereby in each item set forth on
Schedule 3.22(d), including the delivery of all
----------------
25
originals thereof to Agent, for itself and for Lenders, has been duly taken
(except as otherwise required by Revolving Lender in accordance with the terms
of the Subordination Agreement between Agent and Revolving Lender). The security
interest of Agent, for itself and for Lenders, in the Collateral listed on
Schedule 3.22(d) hereto is prior to all other Liens (except as otherwise
----------------
required by Revolving Lender in accordance with the terms of the Subordination
Agreement between Agent and Revolving Lender) and is enforceable as such against
creditors of and (except as provided by the Code) purchasers from Borrower.
(e) Borrower's chief executive office, principal place of business,
corporate offices, all warehouses and premises within which Collateral is stored
or located, and the locations of all of its records concerning the Collateral
are set forth on Schedule 3.22(c). Such Schedule 3.22(c) correctly identifies
---------------- ----------------
any of such facilities or locations that are not owned by Borrower and sets
forth the names of the owners and lessors or collateral of, and the holders of
any mortgages on, such facilities and locations. Borrower shall not change its
chief executive office, principal place of business, corporate offices, or
warehouses or Collateral premises, or the location of its records concerning the
Collateral without giving thirty (30) days prior written notice thereof to Agent
and taking all actions deemed by Agent necessary or appropriate to protect and
perfect Agent's interest in the Collateral.
(f) (i) Each Account represents a bona fide sale of Inventory to
---- ----
customers in the ordinary course of Borrower's business completed in accordance
with the terms and provisions contained in the documents available to Agent with
respect thereto and is not evidenced by either a Document, Instrument or Chattel
Paper; (ii) the amounts shown on any aged receivable trial balance delivered by
Borrower to Revolving Lender pursuant to documents governing the Revolving
Credit Facility and on Borrower's books and records and all invoices and
statements which may be delivered to Revolving Lender with respect thereto are
actually and absolutely owing to Borrower and are not in any way contingent;
(iii) there are no setoffs, claims or disputes existing or asserted with respect
to any Account and Borrower has not made any agreement with any Account Debtor
for any deduction therefrom except a discount or allowance allowed by Borrower
in the ordinary course of its business for prompt payment; (iv) to the best of
Borrower's Knowledge, there are no facts, events or occurrences which in any way
impair the validity or enforcement of any Account or tend to reduce the amount
payable thereunder as shown on the respective aged receivable trial balances,
Borrower's books and records and all invoices and statements delivered to
Revolving Lender with respect thereto; (v) to the best of Borrower's Knowledge,
all Account Debtors have the capacity to contract; (vi) Borrower has received no
notice of proceedings or actions which are threatened or pending against any
Account Debtor which might result in any material adverse change in such Account
Debtor's financial condition; and (vii) Borrower has no Knowledge that any
Account Debtor is unable generally to pay its debts as they become due.
(g) With respect to any Inventory, (i) such property is located at one
of the locations set forth on Schedule 3.22(c), (ii) Borrower has good,
----------------
indefeasible and marketable title to such property and such property is not
subject to any Lien whatsoever, except for Permitted Encumbrances, (iii) such
property is of good and merchantable quality, free from any defects, (iv) except
as noted on Schedule 3.16, such property is not subject to any licensing,
-------------
patent, royalty,
26
trademark, tradename or copyright agreements with any third parties, and (v) the
completion of manufacture, sale or other disposition of such property by Agent
following a Default shall not require the consent of any person (except, so long
as the Revolving Credit Facility is in effect, Revolving Lender) and shall not
constitute a breach or default under any contract or agreement to which Borrower
is a party or to which such property is subject (other than the documents
governing the Revolving Credit Facility).
3.23 Solvency. Both before and after giving effect to (a) the Loans to be
--------
made or extended on the Closing Date or such other date as Loans requested
hereunder are made or extended, (b) the disbursement of the proceeds of such
Loans pursuant to the instructions of Borrower, (c) any Acquisition and the
consummation of the other transactions contemplated hereby and (d) the payment
and accrual of all transaction costs in connection with the foregoing, each Loan
Party is Solvent.
4. FINANCIAL STATEMENTS AND INFORMATION
4.1 Reports and Notices. Borrower covenants and agrees that from and
-------------------
after the Closing Date and until the Termination Date, it shall deliver to the
Agent and/or Lenders, as required, the Financial Statements, Projections and
notices at the times and in the manner set forth on Annex C. Upon the request
-------
of any Lender, Agent shall forward such Financial Statements, Projections and
notices to such Lender.
4.2 Communication with Accountants. Borrower (for itself and each
------------------------------
Subsidiary thereof) authorizes to Agent and, so long as a Default or Event of
Default shall have occurred and be continuing, each Lender to communicate
directly with its and its Subsidiaries' independent certified public accountants
and tax advisors and authorizes those accountants to disclose to Agent and each
Lender any and all financial statements and other supporting financial documents
and schedules including copies of any management letter with respect to the
business, financial condition and other affairs of Borrower and each Subsidiary
thereof. At or before the Closing Date, Borrower shall deliver a letter
addressed to such accountants and tax advisors instructing them to comply with
the provisions of this Section 4.
---------
5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees (for itself and its Subsidiaries) that,
unless Agent shall otherwise consent in writing, from and after the date hereof
and until the Termination Date:
5.1 Maintenance of Existence and Conduct of Business. Borrower shall (and
------------------------------------------------
shall cause each of its Subsidiaries to) (a) do or cause to be done all things
necessary to preserve and keep in full force and effect its corporate existence
and its rights and franchises; (b) continue to conduct its business
substantially as now conducted or as otherwise permitted hereunder; (c) at all
times maintain, preserve and protect all of its Intellectual Property, and
preserve all the remainder of its property, in use or useful in the conduct of
its business and keep the same in good repair, working order and condition
(taking into consideration ordinary wear and tear) and from time to time make,
or cause to be made, all necessary or appropriate repairs, replacements
27
and improvements thereto consistent with industry practices, so that the
business carried on in connection therewith may be properly and advantageously
conducted at all times; and (d) transact business only under the names set forth
on Schedule 3.2.
------------
5.2 Payment of Charges and Claims. Borrower shall pay and discharge, or
-----------------------------
cause to be paid and discharged in accordance with the terms thereof, (A) all
Charges imposed upon it or any Subsidiary or its or their income and profits, or
any of its property (real, personal or mixed), and (B) lawful claims for labor,
materials, supplies and services or otherwise, which if unpaid might by law
become a Lien on its property; provided, that Borrower or any Subsidiary shall
--------
not be required to pay any such Charge or claim which is being contested in good
faith by proper legal actions or proceedings, so long as at the time of
commencement of any such action or proceeding and during the pendency thereof
(i) no Default shall have occurred and be continuing, (ii) adequate reserves
with respect thereto are established and are maintained in accordance with GAAP,
(iii) such contest operates to suspend collection of the contested Charges or
claims and is maintained and prosecuted continuously with diligence, (iv) none
of the Collateral would be subject to forfeiture or loss or any Lien by reason
of the institution or prosecution of such contest, (v) no Lien shall exist, be
imposed or be attempted to be imposed for such Charges or claims during such
action or proceeding unless the full amount of such Charge or claim is covered
by insurance satisfactory in all respects to Agent, and (vi) Borrower shall
promptly pay or discharge such contested Charges and all additional charges,
interest penalties and expenses, if any, and shall deliver to Agent evidence
acceptable to Agent of such compliance, payment or discharge, if such contest is
terminated or discontinued adversely to Borrower.
5.3 Books and Records. Borrower shall (and shall cause each Subsidiary
-----------------
to) keep adequate records and books of account with respect to its business
activities, in which proper entries, reflecting all of its consolidated and
consolidating financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financials referred to in paragraph I of Schedule 3.4.
------------
5.4 Litigation. Borrower shall notify Agent in writing, promptly upon
----------
learning thereof, of any litigation, Claim or other action commenced or
threatened against Borrower or any Subsidiary, and of the institution against
any such Person of any suit or administrative proceeding which (i) may involve
an amount in excess of $250,000.00 individually or in the aggregate or (ii)
could have or result in a Material Adverse Effect if adversely determined.
5.5 Insurance.
---------
(a) Borrower shall, at its (or its Subsidiary's) sole cost and expense
maintain or cause to be maintained, the policies of insurance in such amounts
and as otherwise described in Annex D and Section 2.1(d). Borrower shall notify
------- --------------
Agent promptly of any occurrence causing a material loss or decline in value of
any real or personal property and the estimated (or actual, if available) amount
of such loss or decline, except as specified otherwise on Annex D. Subject to
-------
the rights of Revolving Lender (so long as any amounts are outstanding under the
Revolving Credit Facility or Revolving Lender has any commitment to advance
funds thereunder) with respect to proceeds of losses or declines relating to
Inventory, Borrower hereby directs all present
28
and future insurers under its "All Risk" policies of insurance to pay all
proceeds payable thereunder directly to Agent for the benefit of Lenders
(provided, however, that if the amount of the proceeds of any such loss or
-------- -------
decline are less than $500,000, then upon Borrower's request, Agent shall
deliver such proceeds to Borrower to be used solely to repair or replace the
affected property). Borrower irrevocably makes, constitutes and appoints Agent
(and all officers, employees or agents designated by Agent) as Borrower's true
and lawful agent and attorney in-fact for the purpose of making, settling and
adjusting claims under the "All Risk" policies of insurance, endorsing the name
of Borrower on any check, draft, instrument or other item of payment for the
proceeds of such "All Risk" policies of insurance, and for making all
determinations and decisions with respect to such "All Risk" policies of
insurance. In the event Borrower at any time or times hereafter shall fail to
obtain or maintain (or fail to cause to be obtained or maintained) any of the
policies of insurance required above or to pay any premium in whole or in part
relating thereto, Agent, without waiving or releasing any Obligations or Default
hereunder, may at any time or times thereafter (but shall not be obligated to)
obtain and maintain such policies of insurance and pay such premium and take any
other action with respect thereto which Agent deems advisable. All sums so
disbursed, including attorneys' fees, court costs and other charges related
thereto, shall be payable, on demand, by Borrower to Agent and shall be
additional Obligations hereunder secured by the Collateral.
(b) Agent reserves the right at any time, upon review of Borrower's
risk profile, to require additional forms and limits of insurance to, in the
Lender's sole opinion, adequately protect interests of Agent and the Lenders.
Borrower shall, if so requested by Agent, deliver to Agent, as often as Agent
may request, a report of a reputable insurance broker satisfactory to Agent with
respect to its insurance policies.
(c) Borrower shall deliver to Agent endorsements to all of its and its
Subsidiaries' (i) "All Risk" and business interruption insurance naming Agent,
on behalf of itself and the Lenders, as loss payee, and (ii) general liability
and other liability policies naming Agent, on behalf of itself and the Lenders,
as additional insureds.
5.6 Compliance with Laws. Borrower shall (and shall cause each of its
--------------------
Subsidiaries to) comply in all material respects with all federal, state and
local laws, permits and regulations applicable to it, including, without
limitation, those relating to licensing, environmental, ERISA and labor matters.
5.7 Agreements. Borrower shall (and shall cause each of its Subsidiaries
----------
to) perform, within all required time periods (after giving effect to any
applicable grace periods), all of its obligations and enforce all of its rights
under each agreement, contract, instrument or other document to which it is a
party, including, without limitation, any leases and customer contracts to which
it is a party where the failure to so perform and enforce could have or result
in a Material Adverse Effect. Borrower shall not (and shall not permit any of
its Subsidiaries to) terminate or modify any provision of any agreement,
contract, instrument or other document to which it is a party which termination
or modification could have or result in a Material Adverse Effect. Borrower
shall (and shall cause each of its Subsidiaries to) perform and comply with all
obligations in respect of Accounts, Chattel Paper, Contracts, Licenses,
Instruments, Documents
29
and all other agreements constituting or giving rise to Collateral. Borrower
shall not, without Agent's prior written consent, with respect to any of the
Accounts, Chattel Paper, Instruments or amounts due under any Contract (i) grant
any extension of the time of payment of any thereof, other than those granted in
the ordinary course of business; (ii) compromise or settle the same for less
than the full amount thereof (other than the compromise or settlement, for
adequate consideration, of Accounts in the ordinary course of business
consistent with past practices the aggregate amount of which Accounts does not
exceed $100,000.00 in any Fiscal Year); (iii) release, in whole or in part, any
Person liable for the payment thereof; or (iv) allow any credit or discount
whatsoever thereon other than trade discounts granted in the ordinary course of
business of Borrower.
5.8 Supplemental Disclosure. At the request of Agent (in the event that
-----------------------
such information is not otherwise delivered by Borrower to Agent pursuant to
this Agreement) but not more frequently than every three months, Borrower will
supplement (or cause to be supplemented) each Schedule hereto, or representation
herein or in any other Loan Document with respect to any matter hereafter
arising which, if existing or occurring at the date of this Agreement, would
have been required to be set forth or described in such Schedule or as an
exception to such representation or which is necessary to correct any
information in such Schedule or representation which has been rendered
inaccurate thereby; provided however, that such supplement to such Schedule or
-------- -------
representation shall not be deemed an amendment thereof unless expressly
consented to in writing by Agent, and no such amendments, except as the same may
be consented to in a writing which expressly includes a waiver, shall be or be
deemed a waiver by Agent of any Default disclosed therein. Borrower shall, if
so requested by Agent, furnish to Agent as often as it reasonably requests,
statements and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as Agent may reasonably
request, all in reasonable detail, and, Borrower shall advise Agent promptly, in
reasonable detail, of (i) any Lien, other than as permitted pursuant to Section
-------
6.7, attaching to or asserted against any of the Collateral, (ii) any material
---
change in the composition of the Collateral and (iii) the occurrence of any
other event which would have a Material Adverse Effect upon the Collateral
and/or the Lien of the Agent, for the benefit of itself and Lenders, thereon.
5.9 Environmental Matters. Borrower shall
---------------------
(i) comply with the Environmental Laws and permits applicable to it,
(ii) notify Agent promptly after Borrower becomes aware of any Release
upon any Subject Property, and
(iii) promptly forward to Agent a copy of any order, notice,
permit, application, or any communication or report received by any Loan Party
in connection with any such Release or any other matter relating to the
Environmental Laws that may affect any Subject Property or any Loan Party. The
provisions of this Section 5.9 shall apply whether or not the Environmental
-----------
Protection Agency, any other federal agency or any state or local environmental
agency has taken
30
or threatened any action in connection with any Release or the presence of any
Hazardous Materials.
5.10 Landlord's and Mortgagee's Agreements. Borrower shall obtain a
-------------------------------------
landlord's agreement in form and substance acceptable to Agent from the lessor
of any present or future leased premises of Borrower and mortgagee's agreement
in form and substance acceptable to Agent from each mortgagee of a Loan Party,
agreeing (among other things) to waive any lien any of said entities may have
upon the Collateral.
5.11 Certain Obligations Respecting Subsidiaries. Borrower will, and will
-------------------------------------------
cause each of its Subsidiaries to, take such action from time to time as shall
be necessary to ensure that each of its Subsidiaries is a wholly owned
Subsidiary. Borrower will not permit any of its Subsidiaries to enter into,
after the date of this Agreement, any indenture, agreement, instrument or other
arrangement that, directly or indirectly, prohibits or restrains, or has the
effect of prohibiting or restraining, or imposes materially adverse conditions
upon, the incurrence or payment of Indebtedness, the granting of Liens, the
declaration or payment of dividends or other Restricted Payments, the making of
loans, advances or Investments or the sale, assignment, transfer or other
disposition of any property or assets.
5.12 Application of Proceeds. Borrower shall use the proceeds of (i) the
-----------------------
Term Loan as provided in Section 1.1(d); and (ii) the Acquisition Line Advances
--------------
as provided in Section 1.2(a).
--------------
5.13 Fiscal Year. Borrower shall, and shall cause each Subsidiary to,
-----------
maintain as its Fiscal Year the twelve month period ending on December 31 of
each year.
5.14 Casualty and Condemnation.
-------------------------
(a) Borrower shall promptly notify Agent of any loss, damage, or
destruction to any Collateral or any real property owned by Borrower whether or
not constituting Collateral (collectively, "Property") or arising from its use,
--------
whether or not covered by insurance. Agent is hereby authorized to adjust losses
and collect all insurance proceeds (related to the Collateral) directly. If,
notwithstanding the provisions hereof which require that Agent, on behalf of
itself and the Lenders, be the sole loss payee, a check or other instrument from
an insurer is made payable to Borrower or Borrower and Agent jointly, Agent may
endorse Borrower's name thereon and take such other action as Agent may elect to
obtain the proceeds thereof. After deducting from such proceeds the expenses,
if any, incurred by Agent in the collection or handling thereof, Agent may apply
such proceeds to the reduction of the Obligations in the manner set forth in
Section 1.7 or, at Agent's option in its sole discretion, may permit or require
-----------
Borrower to use such proceeds, or any part thereof, to replace, repair or
restore such Collateral as provided in paragraph (c) below.
(b) Borrower shall promptly upon learning of the institution of any
proceeding for the condemnation or other taking of any of its Property, notify
Agent of the pendency of such proceeding, and agrees that Agent may participate
in any such proceeding and Borrower from time to time will deliver to Agent all
instruments reasonably requested by Agent to permit such
31
participation. Agent shall (and is hereby authorized to) collect any and all
awards, payments or other proceeds of any such condemnation or taking and apply
such proceeds to the reduction of the Obligations in the manner set forth in
Section 1.7 or, at Agent's option in its sole discretion, may permit or require
-----------
Borrower to use such proceeds, or any part thereof, to replace, repair or
restore such Collateral as provided in paragraph (c) below.
(c) Any Collateral which is to be replaced, repaired or restored
pursuant to paragraph (a) or (b) above shall be replaced, repaired or restored
pursuant to such terms and conditions as Agent may require and with materials
and workmanship of substantially as good a quality as existed before such loss
or taking, and Borrower shall commence such replacement, repair or restoration
as soon as practicable and proceed diligently with it until completion to
Agent's satisfaction. Borrower shall provide to Agent written progress reports,
other information and evidence of its compliance with the foregoing.
5.15 Covenants Regarding the Collateral.
----------------------------------
(a) Further Assurances; Pledge of Instruments. At any time and from
-----------------------------------------
time to time, upon the written request of Agent and at the sole expense of
Borrower, Borrower shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Agent may
reasonably deem desirable to obtain the full benefits of this Agreement and of
the rights and powers herein granted, including (i) using its best efforts to
secure all consents and approvals necessary or appropriate for the assignment to
or for the benefit of Agent of any License (including, but not limited to
software licenses) or Contract held by Borrower or in which Borrower has any
rights not heretofore assigned, (ii) filing any financing or continuation
statements under the Code with respect to the liens and security interests
granted hereunder or under any other Loan Document, (iii) transferring
Collateral to Agent's possession (if such Collateral consists of Documents,
Instruments or Chattel Paper or if a security interest in such Collateral can be
perfected only by possession, or if requested by Agent) (except as otherwise
required by Revolving Lender in accordance with the terms of the Subordination
Agreement between Agent and Revolving Lender) and (iv) using its best efforts to
obtain waivers of liens from landlords and mortgagees (it being understood that
Agent in its discretion may establish a reasonable reserve against availability
under this Agreement until the same have been obtained). Borrower also hereby
authorizes Agent to file any such financing or continuation statement without
the signature of Borrower to the extent permitted by applicable law. If any
amount payable under or in connection with any of the Collateral is or shall
become evidenced by any Instrument, such Instrument, other than checks and notes
received in the ordinary course of business, shall be duly endorsed in a manner
satisfactory to Agent immediately upon Borrower's receipt thereof.
(b) Maintenance of Records. Borrower shall keep and maintain, at its
----------------------
own cost and expense, satisfactory and complete records of the Collateral,
including a record of any and all payments received and any and all credits
granted with respect to the Collateral and all other dealings with the
Collateral. Borrower shall ▇▇▇▇ its books and records pertaining to the
Collateral to evidence this Agreement and the security interests granted hereby.
All Chattel Paper shall be marked with the following legend (except as otherwise
required by Revolving
32
Lender in accordance with the terms of the Subordination Agreement between Agent
and Revolving Lender): "This writing and the obligations evidenced or secured
hereby are subject to the security interest of General Electric Capital
Corporation, for itself and as agent for itself and certain other Lenders." As
further security, Borrower agrees that Agent shall have a special property right
and security interest in all of Borrower's books and records pertaining to the
Collateral and, upon the occurrence and during the continuation of a Default,
Borrower shall deliver and turn over any such books and records to Agent or to
its representatives at any time on demand of Agent. Prior to the occurrence of a
Default and upon reasonable notice from Agent or the Lenders, Borrower shall
permit any representative of Agent to inspect such books and records and shall
provide photocopies thereof to Agent as more specifically set forth in Section
-------
1.10 of this Agreement.
----
(c) Continuous Perfection. Borrower shall not change its name,
---------------------
identity or corporate structure in any manner which might make any financing or
continuation statement filed in connection herewith seriously misleading within
the meaning of Section 9-402(7) of the Code or any other then applicable
provision of the Code unless Borrower shall have given Agent at least thirty
(30) days' prior written notice thereof and shall have taken all action (or made
arrangements to take such action substantially simultaneously with such change
if it is impossible to take such action in advance) necessary or reasonably
requested by Agent to amend such financing statement or continuation statement
so that it is not seriously misleading.
(d) Provisions Regarding Accounts.
-----------------------------
(i) Borrower shall not re-date any invoice or sale or make sales on
extended dating beyond that customary in Borrower's business or extend or modify
any Account (other than corrections of errors in the ordinary course of
business). If Borrower becomes aware of any matter materially affecting any
Account, including information regarding the Account Debtor's creditworthiness,
and such Account could have a Material Adverse Effect, Borrower will promptly so
advise Agent.
(ii) Borrower shall not release, in whole or in part, the obligations
of any Person liable for payment in respect of any Account nor shall Borrower,
without Agent's written consent, accept any note or other Instrument (except a
check or other Instrument for the immediate payment of money) for an amount in
excess of $75,000.00, individually or in the aggregate, with respect to any
Accounts of one Account Debtor. Any such Instrument shall be considered as
evidence of the Account or Accounts and not payment thereof and (after
termination of the Revolving Credit Facility and payment in full of all
indebtedness thereunder) Borrower will promptly deliver such Instrument to Agent
appropriately endorsed in favor of Agent, for the benefit of itself and the
Lenders. Regardless of the form of presentment, demand, notice of dishonor,
protest, and notice of protest with respect thereto, the maker thereof will
remain liable thereon until such Instrument is paid in full.
(iii) Borrower shall not, without Agent's prior written consent,
compromise, settle or adjust any Account for less than the full amount thereof
if the reduction in
33
the amounts payable under any Accounts as a result of any such compromise,
settlement or adjustment would exceed $75,000.00 in the aggregate in any Fiscal
Year.
(e) Provisions Regarding Inventory. Borrower agrees that all
------------------------------
Inventory manufactured or processed by Borrower will be manufactured and
processed in accordance with the Federal Fair Labor Standards Act of 1938, as
amended, and all rules, regulations, and orders thereunder. Borrower will not,
without Agent's written consent, sell any Inventory on a guaranteed sale, sale
and return, sale on approval, consignment, or other repurchase or return basis.
(f) Provisions Regarding Equipment. Borrower represents and warrants
------------------------------
to and agrees with Agent that all of the Equipment is and will be used or held
for use in Borrower's business. Borrower shall keep and maintain the Equipment
in good operating condition and repair (ordinary wear and tear excepted) and
shall make all necessary replacements thereof. Borrower shall promptly inform
Agent of any material additions to or deletions from the Equipment. Borrower
shall not permit any Equipment to become a fixture to real property or an
accession to other personal property, unless Agent has a valid, perfected, and
first priority Lien in such real or personal property. Borrower will not,
without Agent's prior written consent, alter or remove any identifying symbol or
number on the Equipment. Except as otherwise permitted pursuant to Section 6.8,
-----------
Borrower shall not, without the prior written consent of Agent, sell, lease as a
lessor, or otherwise dispose of any of the Equipment.
(g) Provisions Regarding Trademark Collateral.
-----------------------------------------
(i) Borrower shall notify Agent immediately if it knows or has reason
to know that any application or registration relating to any Trademark that is
material to the conduct of Borrower's business may become abandoned or
dedicated, or of any adverse determination or development (including, without
limitation, the institution of, or any such determination or development in, any
proceeding in the United States Patent and Trademark Office or any court)
regarding Borrower's ownership of any Trademark which is material to the conduct
of Borrower's business, its right to register the same, or to keep and maintain
the same.
(ii) In no event shall Borrower, either itself or through any agent,
employee, licensee or designee, file an application for the registration of any
Trademark with the United States Patent or Trademark Office or any similar
office or agency in any other country or any political subdivision thereof
without giving Agent prior written notice thereof, and, upon request of Agent,
Borrower shall execute and deliver any and all agreements, instruments,
documents and papers as Agent may request to evidence Agent's security interest
in such Trademark and the General Intangibles, including the goodwill, of
Borrower relating thereto or represented thereby.
(iii) Borrower shall take all necessary actions to maintain and
pursue each application, to obtain the relevant registration, and to maintain
the registration of each of the Trademarks which is material to the conduct of
Borrower's business, including the filing of
34
applications for renewal, affidavits of use, affidavits of noncontestability and
opposition and interference and cancellation proceedings.
(iv) In the event that any of the Collateral that is composed of
Trademarks ("Trademark Collateral") is infringed upon, or misappropriated or
--------------------
diluted by a third party, Borrower shall notify Agent promptly after Borrower
learns thereof and shall, unless Borrower shall reasonably determine that such
Trademark Collateral is not material to the conduct of Borrower's business,
promptly ▇▇▇ for infringement, misappropriation or dilution and to recover any
and all damages for such infringement, misappropriation or dilution, and shall
take such other actions as Borrower shall reasonably deem appropriate under the
circumstances to protect such Trademark Collateral.
(h) Provisions Regarding Patents and Copyrights.
-------------------------------------------
(i) Borrower agrees not to divest its rights under a Patent or
Copyright, without the prior written approval of Agent, and will take all action
necessary or advisable to maintain each Patent or Copyright that directly
contributes to five percent (5%) of Borrower's revenues.
(ii) Borrower agrees, promptly upon learning of the same, to furnish
Agent in writing with all pertinent information available to Borrower with
respect to any infringement or other violation of Borrower's rights in any
material Patent or Copyright, or with respect to any claim that practice of any
material Patent or Copyright violates any property right of that party.
Borrower further agrees, absent direction of Agent to the contrary, to prosecute
any person infringing any significant Patent or Copyright.
5.16 Agent's Appointment as Attorney-in-Fact.
---------------------------------------
(a) Borrower hereby irrevocably constitutes and appoints Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Borrower and in the name of Borrower or in its own name, from time
to time in Agent's discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute and deliver any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby grants to Agent the power and right, on behalf of
Borrower, without notice to or assent by Borrower, and at any time, to do the
following:
(i) in the name of Borrower, in its own name or otherwise, take
possession of, endorse and receive payment of any checks, drafts, notes,
acceptances, or other Instruments for the payment of monies due under any
Collateral;
(ii) continue any insurance existing pursuant to the terms of the Loan
Documents, and pay all or any part of the premiums therefor and the costs
thereof; and
35
(iii) receive payment of any and all monies, claims, and other amounts
due or to become due at any time arising out of or in respect of any Collateral.
(b) Borrower hereby irrevocably constitutes and appoints Agent and any
officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of Borrower and in the name of Borrower or in its own name, from time
to time in Agent's discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute and deliver any
and all documents and instruments which may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the generality
of the foregoing, hereby grants to Agent the power and right, on behalf of
Borrower, without notice to or assent by Borrower, upon the occurrence and
during the continuation of an Event of Default, to do the following:
(i) ask, demand, collect, receive and give acquittances and receipts
for any and all money due or to become due under any Collateral;
(ii) pay or discharge taxes, liens, security interest, or other
encumbrances levied or placed on or threatened against the Collateral;
(iii) effect any repairs or obtain any insurance called for by the
terms of this Agreement and pay all or any part of the premiums therefor and
costs thereof;
(iv) direct any party liable for any payment under or in respect of
any of the Collateral to make payment of any and all monies due or to become due
thereunder, directly to Agent or as Agent shall direct;
(v) sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors, assignments,
verifications, and notices in connection with accounts and other documents
constituting or related to the Collateral;
(vi) settle, compromise or adjust any suit, action, or proceeding
described above and, in connection therewith, give such discharges or releases
as Agent may deem appropriate;
(vii) file any claim or take or commence any other action or
proceeding in any court of law or equity or otherwise deemed appropriate by
Agent for the purpose of collecting any and all such monies due under any
Collateral whenever payable;
(viii) commence and prosecute any suits, actions or proceedings of law
or equity in any court of competent jurisdiction to collect the Collateral or
any part thereof and to enforce any other right in respect of any Collateral;
(ix) defend any suit, action or proceeding brought against Borrower
with respect to any Collateral if Borrower does not defend such suit, action or
proceeding or if
36
Agent believes that Borrower is not pursuing such defense in a manner that will
maximize the recovery with respect to such Collateral;
(x) license or, to the extent permitted by an applicable license,
sublicense whether general, specific or otherwise, and whether on an exclusive
or non-exclusive basis, any Patent or Trademark throughout the world for such or
terms on such conditions and in such manner as Agent shall, in its sole
discretion, determine; and
(xi) sell, transfer, pledge, make any agreement with respect to, or
otherwise deal with any of the Collateral as fully and completely as though
Agent were the absolute owner thereof for all purposes, and to do, at Agent's
option and Borrower's expense, at any time, or from time to time, all acts and
things which Agent reasonably deems necessary to perfect, preserve, or realize
upon the Collateral and Lenders' Lien therein in order to effect the intent of
this Agreement, all as fully and effectively as Borrower might do.
(c) Borrower hereby ratifies, to the extent permitted by law, all that
said attorneys shall lawfully do or cause to be done by virtue hereof. The
power of attorney granted pursuant to this Section 5.16 is a power coupled with
------------
an interest and shall be irrevocable until the Termination Date.
(d) The powers conferred on Agent hereunder are solely to protect the
Lenders' security interests in the Collateral and shall not impose any duty upon
it to exercise any such powers. Agent shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers and none of its
officers, directors, employees, agents or representatives shall be responsible
to Borrower for any act or failure to act, except for their own gross negligence
or willful misconduct as determined by a final judgment of a court of competent
jurisdiction.
(e) Borrower also authorizes Agent, at any time and from time to time,
to (i) communicate in its own name with any party to any Contract with regard to
the assignment of the right, title and interest of Borrower in and under the
Contracts and other matters relating thereto and (ii) execute, in connection
with the sale provided for in Section 8.2 hereof, any endorsements, assignments
-----------
or other instruments of conveyance or transfer with respect to the Collateral.
5.17 Maintenance Covenant. Borrower shall duly pay and discharge in
---------------------
accordance with Borrower's customary business practices in respect thereto, all
current debts, obligations and accounts payable as they become due, except for
such debts, obligations and accounts payable the validity of which are being
contested in good faith by appropriate proceedings, diligently pursued and
available to Borrower, with respect to which adequate reserves have been set
aside on its books.
37
5.18 Year 2000 Problems.
------------------
On or prior to October 31, 1998, each Loan Party shall complete and
deliver to Agent a Year 2000 Assessment, and on or prior to January 31, 1999,
each Loan Party shall complete and deliver to Agent a Year 2000 Corrective Plan.
On or prior to April 1, 1999, each Loan Party shall implement Year 2000
Corrective Actions. On or before May 31, 1999, each Loan Party shall complete
Year 2000 Corrective Actions and Year 2000 Implementation Testing. On or before
August 31, 1999, each Loan Party shall eliminate all Year 2000 Problems, except
where the failure to correct the same could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate.
5.19 Interest Rate Protection.
------------------------
Within one hundred twenty (120) days from the Closing Date, Borrower
shall enter into an interest rate cap or other interest rate protection
agreement covering at least 50% of the aggregate principal amount of Term Loan
A, plus Term Loan B, plus Term Loan C then outstanding and having effective
---- ----
rates, maturity and other terms and conditions satisfactory to Agent.
6. NEGATIVE COVENANTS
Borrower covenants and agrees (for itself and each Subsidiary) that,
without the prior written consent of Agent and the Requisite Lenders, from and
after the date hereof and until the Termination Date:
6.1 Mergers, Subsidiaries, Etc. Borrower shall not (and shall not permit
---------------------------
any of its Subsidiaries to), directly or indirectly, by operation of law or
otherwise, merge with, consolidate with, acquire all or substantially all of the
assets or capital stock of, or otherwise combine with, any Person or form or
acquire any Subsidiary, provided, however, that the foregoing shall not prohibit
--------
a merger of a Person with and into Borrower consummated pursuant to an Eligible
Acquisition on the date of an Acquisition Line Advance. Prior to forming any
Subsidiary, Borrower shall (a) provide not less than thirty (30) days prior
written notice to Agent, (b) take all actions requested by Agent to protect and
preserve the Collateral, and (c) receive the prior written consent of Agent.
6.2 Investments. Borrower shall not (and shall not permit any of its
-----------
Subsidiaries to), directly or indirectly, make or maintain any Investment except
(i) as otherwise permitted by Section 6.3 or 6.4; (ii) Investments outstanding
------------------
on the date hereof and listed on Schedule 6.2; and (iii) advances constituting
------------
trade credit representing the purchase price of Inventory or supplies sold to
any Person (other than a Subsidiary or Affiliate of Borrower) in the ordinary
course of business and payable on terms not exceeding one hundred twenty (120)
days.
6.3 Indebtedness. Borrower shall not (and shall not permit any of its
------------
Subsidiaries to) create, incur, assume or permit to exist any Indebtedness,
except (i) the Obligations; (ii) Deferred Taxes; (iii) the Subordinated Notes;
(iv) Capital Lease Obligations permitted under clause (iv) of
38
Section 6.7 and Indebtedness secured by purchase money Liens permitted under
-----------
clause (iv) of Section 6.7 in a maximum aggregate amount outstanding not to
-----------
exceed $1,000,000; (v) Indebtedness under the Revolving Credit Facility, (vi)
the ▇▇▇▇▇▇▇▇ Note, (vii) Indebtedness owing to any of its Affiliates in an
aggregate amount not to exceed $500,000; and (viii) other Indebtedness set forth
on Schedule 6.3.
------------
6.4 Affiliate and Employee Loans and Transactions; Employment Agreements.
--------------------------------------------------------------------
Except as otherwise expressly permitted hereunder, Borrower shall not (and shall
not permit any of its Subsidiaries to) enter into any management agreements,
service agreements, lending, borrowing or other commercial transaction with any
of its Subsidiaries, Affiliates, officers, directors or employees, including,
without limitation, payment of any management, consulting, advisory or similar
fee; provided, however, Borrower may (i) on the date of any Acquisition Line
-------- -------
Advance, extend a loan to Holdings to enable Holdings to pay a portion of the
amount due to the applicable Sellers, such loan to be evidenced by a promissory
note executed by Holdings and payable to Borrower, (ii) extend loans to its
officers, directors and employees in a maximum aggregate principal amount
outstanding at any time for all officers, directors and employees of
$250,000.00, except as stated on Schedule 6.4, (iii) incur Indebtedness owing to
------------
any of its Affiliates as described in clause (vii) of Section 6.3; and (iv)
------------ -----------
extend loans to Harperprints in a maximum aggregate amount outstanding not to
exceed $150,000, such loans to be evidenced by a promissory note executed by
Harperprints and payable to Borrower. Set forth on Schedule 6.4 is a list of
------------
all such management agreements, service agreements, lending, borrowing or other
commercial transactions existing or outstanding as of the Closing Date.
6.5 Capital Structure and Business. Except as permitted under Section
------------------------------ -------
5.1, Borrower shall not (and shall not permit any of its Subsidiaries to) (i)
make any changes in its business objectives, purposes, or operations which could
in any way adversely affect the repayment of the Obligations or have or result
in a Material Adverse Effect, (ii) make any change in its capital structure as
described on Schedule 3.9 and Schedule 6.3 (including, without limitation, the
------------ ------------
issuance or recapitalization of any shares of Stock or other securities
convertible into Stock or any revision of the terms of its outstanding Stock),
(iii) amend its articles or certificate of incorporation, charter, by-laws or
other organizational documents, or (iv) engage in any business other than the
business currently engaged in by such Person.
6.6 Guaranteed Indebtedness. Borrower shall not (and shall not permit any
-----------------------
of its Subsidiaries to) incur any Guaranteed Indebtedness except (i) by
endorsement of instruments or items of payment for deposit to the general
account of such Person or (ii) for Guaranteed Indebtedness incurred for the
benefit of Borrower if the primary obligation is permitted by this Agreement for
Borrower to incur (and such Guaranteed Indebtedness shall be treated as a
primary obligation for all purposes hereof).
6.7 Liens. Borrower shall not (and shall not permit any of its
-----
Subsidiaries to) create or permit to exist any Lien on any of its properties or
assets except for (i) presently existing or hereafter created Liens in favor of
Agent, for the benefit of itself and the Lenders, to secure the Obligations;
(ii) Liens set forth on Schedule 6.7 existing on the Closing Date; (iii)
------------
Permitted Encumbrances; (iv) purchase money liens or purchase money security
interests upon or in
39
Equipment acquired by Borrower or any of its Subsidiaries in the ordinary course
of business to secure the purchase price of such Equipment or to secure
Indebtedness or Capital Lease Obligations permitted under Section 6.3 incurred
-----------
solely for the purpose of financing the acquisition of such Equipment, so long
as such Equipment is not a component, part or accessory installed on, or an
accession, addition or attachment to, any other Equipment or other property of
Borrower or any Subsidiary thereof (except other Equipment on which a security
interest exists under this clause); and (v) extensions, renewals and
replacements of Liens referred to in clauses (ii) and (iv) above, provided that
------- ---- ----
any such extension, renewal or replacement Lien is limited to the property or
assets covered by the Lien extended, renewed or replaced and does not secure
Indebtedness in an amount greater than the amount of the outstanding
Indebtedness secured thereby immediately prior to such extension, renewal or
replacement; provided that Borrower shall not create or permit any Lien to exist
--------
on any of the Stock of Borrower's Subsidiaries or any of Borrower's Accounts
(other than Liens described in clause (i) above).
----------
6.8 Sale of Assets. Borrower shall not (and shall not permit any of its
--------------
Subsidiaries to) sell, transfer, convey, assign or otherwise dispose of any of
its assets or properties, including, without limitation, any Collateral;
provided, however, that the foregoing shall not prohibit (i) the sale of
-------- -------
Inventory in the ordinary course of business; (ii) the sale or disposition of
any assets which have become obsolete or surplus to the business of Borrower or
any of its Subsidiaries which either (x) give rise to Net Proceeds which do not
exceed $250,000 per year, in the aggregate, or (y) have a depreciated value
according to Agent's internal analysis which does not exceed $250,000 in the
aggregate; or (iii) the sale or disposition of assets which either (x) give rise
to Net Proceeds which do not exceed (A) $10,000 individually, or (B) $250,000
per year, in the aggregate, or (y) have a depreciated value according to Agent's
internal analysis which does not exceed (A) $10,000 individually, or (B)
$250,000 per year, in the aggregate.
6.9 Material Contracts. Borrower shall not (and shall not permit any of
------------------
its Subsidiaries to) cancel or terminate any Material Contract or amend or
otherwise modify any Material Contract, or waive any default or breach any
Material Contract, or take any other action in connection with any Material
Contract that would have a Material Adverse Effect.
6.10 ERISA. Neither Borrower nor any ERISA Affiliate shall acquire any new
-----
ERISA Affiliate that maintains or has an obligation to contribute to a Pension
Plan that has either an "accumulated funding deficiency," as defined in Section
302 of ERISA, or any "unfunded vested benefits," as defined in Section
4006(a)(3)(E)(iii) of ERISA in the case of any Pension Plan other than a
Multiemployer Plan and in Section 4211 of ERISA in the case of a Multiemployer
Plan. Additionally, neither Borrower nor any ERISA Affiliate shall permit or
suffer any condition set forth on Schedule 3.13 to cease to be met and satisfied
-------------
at any time; terminate any Pension Plan that is subject to Title IV of ERISA
where such termination could reasonably be anticipated to result in liability to
Borrower; (b) permit any accumulated funding deficiency, as defined in Section
302(a)(2) of ERISA, to be incurred with respect to any Pension Plan; fail to
make any contributions or fail to pay any amounts due and owing as required by
the terms of any Plan before such contributions or amounts become delinquent;
make a complete or partial withdrawal (within the meaning of Section 4201 of
ERISA) from any Multiemployer Plan; at any time fail to
40
provide the Agent with copies of any Plan documents or governmental reports or
filings, if reasonably requested by Agent.
6.11 Financial Covenants. Borrower shall not breach or fail to comply
-------------------
with any of the following financial covenants, each of which shall be calculated
in accordance with GAAP consistently applied (and based upon the financial
statements delivered hereunder):
(a) Interest Coverage Ratio. Holdings shall maintain an Interest
-----------------------
Coverage Ratio of not less than the ratio set forth below corresponding to the
applicable Fiscal Quarter set forth below:
Fiscal Minimum Interest
Quarter Coverage
Ending Ratio
---------- ----------------
31-Dec-98 1.90:1.0
31-Mar-99 1.90:1.0
30-June-99 1.90:1.0
30-Sep-99 2.25:1.0
31-Dec-99 2.25:1.0
31-Mar-00 2.25:1.0
30-June-00 2.25:1.0
30-Sep-00 2.25:1.0
31-Dec-00 2.50:1.0
31-Mar-01 2.50:1.0
30-June-01 2.50:1.0
30-Sep-01 2.50:1.0
31-Dec-01 3.00:1.0
31-Mar-02 3.00:1.0
30-June-02 3.00:1.0
30-Sep-02 3.00:1.0
31-Dec-02 3.25:1.0
(b) Capital Expenditures. Holdings shall not make aggregate non-
--------------------
financed Capital Expenditures (excluding any Capital Expenditures made by
Borrower pursuant to Section 5.14 to replace, repair or restore any Property
------------
subject to any loss or taking described therein) in any Fiscal Year in excess of
the amount set forth below for such Fiscal Year, determined on a consolidated
basis in accordance with GAAP:
Fiscal Year Maximum Amount of
Ending Capital Expenditures
1998 $3,000,000
1999 $4,000,000
2000 $5,000,000
2001 $6,000,000
2002 $6,000,000
41
(c) Net Worth. Holdings shall maintain, on a consolidated and
---------
consolidating basis, at all times, a Net Worth of not less than the sum of (i)
$31,750,000, plus (ii) 85% of the cumulative Net Income, if positive for any
----
Fiscal Quarter, i.e. exclusive of negative Net Income for any Fiscal Quarter,
plus (iii) all net proceeds from any equity issuance.
----
6.12 Hazardous Materials. Except as set forth in Schedule 3.18, Borrower
------------------- -------------
shall not and shall not permit any of its Subsidiaries or any other Person
within the control of Borrower to (a) cause or permit a Release of Hazardous
Material on, under in or about any Subject Property; (b) use, store, generate,
treat or dispose of Hazardous Materials, except in compliance with Environmental
Laws; or (c) transport any Hazardous Materials to or from any Subject Property,
except in compliance with Environmental Laws.
6.13 Sale-Leasebacks. Borrower shall not (and shall not permit any of its
---------------
Subsidiaries to) engage in any sale-leaseback or similar transaction involving
any of its property or assets.
6.14 Cancellation of Indebtedness. Borrower shall not (and shall not
----------------------------
permit any of its Subsidiaries to) cancel any claim or Indebtedness owing to it,
except for reasonable consideration and in the ordinary course of its business,
or voluntarily prepay any Indebtedness (other than the Obligations).
6.15 Restricted Payments. Borrower shall not make any Restricted Payment
-------------------
to any Person and Borrower shall not permit any Subsidiary to make any
Restricted Payment other than to Borrower, provided, however, that Borrower may
-------- -------
pay dividends or payment of fees to Holdings made solely to enable Holdings to
pay (i) officers' salaries pursuant to applicable Employment Agreements and
operating expenses (including without limitation rental payments on leased real
property), (ii) interest on the Subordinated Indebtedness payable to the Sellers
(other than the McQuiddy Sellers) in accordance with the terms of the
Subordination Agreements, or (iii) principal and interest on the ▇▇▇▇▇▇▇▇ Note
when due pursuant to the terms thereof.
6.16 Real Property Leases. Borrower shall not (and shall not permit any of
--------------------
its Subsidiaries to) enter into or renew (by amendment, modification or
otherwise) any Lease other than renewals of existing Leases upon substantially
the same terms as are in effect on the Closing Date.
6.17 Bank Accounts. Borrower shall not (and shall not permit any of
-------------
its Subsidiaries to) maintain any deposit, operating or other bank accounts
except for those accounts identified on Schedule 3.20.
-------------
6.18 Subordinated Notes. Neither Borrower nor any of its Subsidiaries
------------------
shall purchase, redeem, retire or otherwise acquire for value, or set apart any
money for a sinking, defeasance or other analogous fund for, the purchase,
redemption, retirement or other acquisition of, or make any payment (scheduled,
voluntary or other) of principal of or interest on, or any other amount owing in
respect of, any Subordinated Notes, except that, so long as no Default shall
have occurred and be continuing (or would occur as a result of any such
payment), Borrower may, on
42
regularly scheduled interest payment dates (which shall be no more frequent than
quarterly, unless Agent otherwise consents), make payments of interest on the
Subordinated Notes at the interest rate listed on each Subordinated Note
respectively, subject to satisfaction of the following conditions: (i) no
Default shall have occurred and be continuing (or would occur as a result of
such payment) on the date of such payment; (ii) Borrower shall have provided
Agent evidence reasonably satisfactory in the judgment of Agent that the
condition set forth in the foregoing clause (i) will be satisfied on and as of
the date of such payment; and (iii) upon Agent's request, Borrower shall have
given Agent at least five (5) Business Days prior written notice of its
intention to make any such payment. Borrower will not consent to any amendment,
modification, supplement or waiver of any of the provisions of the Subordinated
Notes or the ▇▇▇▇▇▇▇▇ Note.
6.19 No Speculative Transactions. Borrower shall not (and shall not permit
---------------------------
any of its Subsidiaries to) engage in any speculative transaction or any
transaction involving commodity options or futures contracts (other than in the
ordinary course of business consistent with past practice).
6.20 Margin Regulations. Borrower shall not use the proceeds of any Loan
------------------
to purchase or carry any Margin Stock or any equity security of a class which is
registered pursuant to Section 12 of the Securities Exchange Act of 1934.
6.21 Limitation on Negative Pledge Clauses. Borrower shall not (and shall
-------------------------------------
not permit any of its Subsidiaries to), directly or indirectly, enter into any
agreement with any Person, other than Agent and the Lenders pursuant to a Loan
Document or the Revolving Lender pursuant to a document governing the Revolving
Credit Facility, which prohibits or limits the ability of Borrower or any of its
Subsidiaries to create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired.
6.22 Accounting Changes. Borrower shall not (and shall not permit any of
------------------
its Subsidiaries to) make, any significant change in accounting treatment and
reporting practices except for changes concurred in by Borrower's independent
public accountants and approved by Agent.
6.23 EBITDA. Borrower shall not permit the EBITDA of Holdings,
------
determined on a consolidated basis in accordance with GAAP, at the end of each
Fiscal Quarter set forth below to be less than the corresponding amount set
forth below:
Date Amount
------------ -----------
31-Mar-98 $ 3,000,000
30-June-98 $ 8,200,000
30-Sep-98 $12,400,000
31-Dec-98 $16,000,000
43
6.24 Fixed Charge Coverage Ratio. Borrower shall not permit the Fixed
---------------------------
Charge Coverage Ratio of Holdings, determined on a consolidated basis in
accordance with GAAP, at the end of each Fiscal Quarter set forth below to be
less than the corresponding ratio set forth below:
Fiscal Quarter Ending Ratio
----------------------- --------
31-Dec-98 1.10:1.0
31-Mar-99 1.10:1.0
30-June-99 1.10:1.0
30-Sep-99 1.10:1.0
31-Dec-99 1.10:1.0
31-Mar-00 1.10:1.0
30-June-00 1.10:1.0
30-Sep-00 1.10:1.0
31-Dec-00 1.15:1.0
31-Mar-01 1.15:1.0
30-June-01 1.15:1.0
30-Sep-01 1.15:1.0
31-Dec-01 1.20:1.0
31-Mar-02 1.20:1.0
30-June-02 1.20:1.0
30-Sep-02 1.20:1.0
31-Dec-02 1.20:1.0
6.25 Leverage Ratio. Borrower shall not permit the Leverage Ratio at the
--------------
end of each Fiscal Quarter set forth below to be more than the corresponding
ratio set forth below:
Fiscal Quarter Ending Ratio
----------------------- --------
30-June-98 5.00:1.0
30-Sep-98 5.00:1.0
31-Dec-98 4.75:1.0
31-Mar-99 4.75:1.0
30-June-99 4.75:1.0
30-Sep-99 4.75:1.0
31-Dec-99 4.25:1.0
31-Mar-00 4.25:1.0
30-June-00 4.25:1.0
30-Sep-00 4.25:1.0
31-Dec-00 3.75:1.0
31-Mar-01 3.75:1.0
30-June-01 3.75:1.0
30-Sep-01 3.75:1.0
31-Dec-01 3.50:1.0
31-Mar-02 3.50:1.0
44
30-June-02 3.50:1.0
30-Sep-02 3.50:1.0
31-Dec-02 3.50:1.0
7. TERM
7.1 Duration. The financing arrangement contemplated hereby shall be in
--------
effect until the Termination Date. On the Termination Date, the Acquisition Line
Commitment shall terminate and the Term Loan, Acquisition Line Advances and all
other Obligations shall immediately become due and payable in full, in cash.
7.2 Survival of Obligations. Except as otherwise expressly provided for
-----------------------
in the Loan Documents, no termination or cancellation (regardless of cause or
procedure) of any financing arrangement under this Agreement shall in any way
affect or impair the Obligations, duties, indemnities, and liabilities of any
Loan Party, or the rights of Agent and Lenders relating to any Obligations, due
or not due, liquidated, contingent or unliquidated or any transaction or event
occurring prior to such termination, or any transaction or event, the
performance of which is not required until after the Termination Date. Except
as otherwise expressly provided herein or in any other Loan Document, all
undertakings, agreements, covenants, warranties and representations of or
binding upon any Loan Party, and all rights of Agent and each Lender, all as
contained in the Loan Documents shall not terminate or expire, but rather shall
survive such termination or cancellation and shall continue in full force and
effect until such time as all of the Obligations have been indefeasibly paid in
full in accordance with the terms of the agreements creating such Obligations.
8. EVENTS OF DEFAULT; RIGHTS AND REMEDIES
8.1 Events of Default. The occurrence of any one or more of the following
-----------------
events (regardless of the reason therefor) shall constitute an "Event of
--------
Default" hereunder:
(a) Borrower shall fail to make any payment in respect of any
Obligations hereunder or under any of the other Loan Documents when due and
payable or declared due and payable, including, without limitation, any payment
of principal of, or interest on, the Term Loan or Acquisition Line Advances, and
the same shall remain unpaid for a period ending three (3) days after the date
such payment was due and payable or declared due and payable.
(b) Borrower shall fail or neglect to perform, keep or observe any of
the provisions of Section 6, Section 5.9, Section 5.5 or Section 5.1, or any of
--------- ----------- ----------- -----------
the provisions set forth on Annex C.
-------
(c) Any Loan Party shall fail or neglect to perform, keep or observe
any term or provision of this Agreement (other than any such term or provision
referred to in paragraph (a) or (b) above) or of any of the other Loan
Documents, and the same shall remain unremedied for a period ending on the first
to occur of ten (10) days after Borrower shall receive written
45
notice of any such failure from Agent or thirty (30) days after any Loan Party
shall become aware thereof.
(d) A default shall occur under any other agreement, document or
instrument to which any Loan Party is a party or by which any such Person or its
property is bound, and such default (i) involves the failure to make any payment
(whether of principal, interest or otherwise, and after giving effect to any
applicable grace or cure period) due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) in respect of any Indebtedness of
such Person in an aggregate amount exceeding $250,000.00 or (ii) causes (or
permits any holder of such Indebtedness or a trustee to cause) such
Indebtedness, or a portion thereof in an aggregate amount exceeding $250,000.00,
to become due prior to its stated maturity or prior to its regularly scheduled
dates of payment.
(e) Any representation or warranty herein or in any Loan Document or
in any written statement pursuant thereto or hereto, any report, financial
statement or certificate made or delivered to Agent or any Lender by any Loan
Party shall be untrue or incorrect in any material respect as of the date when
made or deemed made (including those made or deemed made pursuant to Section 2.2
-----------
and Section 4).
---------
(f) Any of the assets of any Loan Party shall be attached, seized,
levied upon or subjected to a writ or distress warrant, or come within the
possession of any receiver, trustee, custodian or assignee for the benefit of
creditors of such Loan Party and shall remain unstayed or undismissed for sixty
(60) consecutive days; or any Person other than a Loan Party shall apply for the
appointment of a receiver, trustee or custodian for any Loan Party's assets and
shall remain unstayed or undismissed for sixty (60) consecutive days; or any
Loan Party shall have concealed, removed or permitted to be concealed or
removed, any part of its property, with intent to hinder, delay or defraud its
creditors or any of them or made or suffered a transfer of any of its property
or the incurring of an obligation which may be fraudulent under any bankruptcy,
fraudulent conveyance or other similar law.
(g) A case or proceeding shall have been commenced against any Loan
Party in a court having competent jurisdiction seeking a decree or order (i)
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other applicable federal, state or foreign bankruptcy or other
similar law, (ii) appointing a custodian, receiver, liquidator, assignee,
trustee or sequestrator (or similar official) of any Loan Party or of any
substantial part of its properties, or (iii) ordering the winding up or
liquidation of the affairs of any Loan Party and such case or proceeding shall
remain undismissed or unstayed for sixty (60) consecutive days or such court
shall enter a decree or order granting the relief sought in such case or
proceeding.
(h) Any Loan Party shall (i) file a petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other applicable federal, state or foreign bankruptcy or other similar law,
(ii) consent to the institution of proceedings thereunder or to the filing of
any such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee or sequestrator (or similar official)
of any Loan
46
Party or of any substantial part of any Loan Party's properties, (iii) fail
generally to pay its debts as such debts become due, or (iv) take any corporate
action in furtherance of any such action.
(i) Final judgment or judgments (after the expiration of all times to
appeal therefrom) for the payment of money in excess of $250,000.00 in the
aggregate shall be rendered against any Loan Party, unless the same shall be (i)
fully covered by insurance in accordance with Section 5.5, or (ii) vacated,
-----------
stayed, bonded, paid or discharged within a period of fifteen (15) days from the
date of such judgment.
(j) There shall occur any Material Adverse Effect since the Closing
Date which shall not have been cured (or waived by the Lender) within ten days
of notice thereof from Agent to Borrower.
(k) Any provision of any Loan Document shall for any reason cease to
be valid, binding and enforceable in accordance with its terms; or any Lien
created under any Collateral Document shall cease to be a valid and perfected
Lien having the first priority (except to the extent provided in the
Subordination Agreement between Borrower and Revolving Lender) in any of the
Collateral purported to be covered thereby.
(l) ▇▇▇▇ ▇. ▇▇▇▇▇▇ ceases for any reason whatsoever (other than as a
result of his death) to be actively engaged in the management of Borrower.
(m) ▇▇▇ ▇▇▇▇▇▇▇▇ ceases for any reason whatsoever (other than as a
result of his death) to be actively engaged in the management of the division of
the Borrower acquired from B & M Printing, Inc. and not replaced by an
individual acceptable to Agent within a reasonable period of time.
(n) Either ▇▇ ▇▇▇ or ▇▇▇▇ ▇▇▇▇▇▇ ceases for any reason whatsoever
(other than as a result of his death) to be actively engaged in the management
of the division of the Borrower acquired from Lithograph Printing of Memphis,
Inc. and not replaced by an individual acceptable to Agent within a reasonable
period of time.
(o) ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ceases for any reason whatsoever (other than as a
result of his death) to be actively engaged in the management of the division of
the Borrower acquired from Phoenix Communications, Inc. and King Mailing
Services, Inc. and not replaced by an individual acceptable to Agent within a
reasonable period of time.
(p) Holdings ceases for any reason whatsoever to employ individuals
acceptable to Agent in each of the following positions and any such position is
not filled by an individual satisfactory to Agent within sixty (60) days
thereafter: Chief Financial Officer, Senior Vice President-Marketing and Chief
Operating Officer.
(q) There shall occur a Change of Control.
47
(r) There shall occur any "Event of Default" under and as defined in
the Subordinated Notes.
(s) An event or condition specified in Section 6.10 hereof shall occur
------------
or exist with respect to any Plan or Multiemployer Plan and, as a result of such
event or condition, together with all other such events or conditions, Borrower,
any Subsidiary thereof or any ERISA Affiliate shall incur or in the opinion of
the Agent shall be reasonably likely to incur a liability to a Plan, a
Multiemployer Plan or PBGC (or any combination of the foregoing) in excess of
$100,000.00 in the aggregate.
(t) The occurrence of a default under the provisions of any of the
other Loan Documents and expiration of any cure or grace period applicable
thereto.
(u) The liquidation, termination or dissolution of the Borrower or
Holdings without the prior written consent of the Lender.
(v) The repudiation of any guaranty of the Obligations by any
Guarantor.
(w) Either ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
ceases for any reason whatsoever (other than as a result of his death) to be
actively engaged in the management of the division of the Borrower acquired from
The Argus Press, Inc. and not replaced by an individual acceptable to Agent
within a reasonable period of time.
(x) Either H. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇. or ▇▇▇▇▇ ▇▇▇▇▇▇▇ ceases for any
reason whatsoever (other than as a result of his death) to be actively engaged
in the management of the division of the Borrower acquired from ▇▇▇▇▇▇▇▇
Brothers, Inc. and not replaced by an individual acceptable to Agent within a
reasonable period of time.
(y) Either Web ▇▇▇▇▇▇▇▇ or ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III ceases for any
reason whatsoever (other than as a result of his death) to be actively engaged
in the management of the ▇▇▇▇▇▇▇▇ Division and not replaced by an individual
acceptable to Agent within a reasonable period of time.
(z) Harperprints shall not have merged with and into Borrower on terms
and pursuant to documents in form and substance satisfactory to Agent on or
before the earlier of (i) the expiration or termination of the repurchase option
granted to the Harperprints Sellers pursuant to that certain Stock Purchase
Agreement dated as of March 31, 1998, among Holdings and the Harperprints
Sellers, and (ii) July 1, 1999.
8.2 Remedies.
--------
(a) If any Event of Default shall have occurred and be continuing,
Agent may (and at the request of Requisite Lenders shall) without notice except
as expressly provided herein, increase the rate of interest applicable to the
Loans and the other Obligations, effective as of the date of the occurrence of
the Default giving rise to such Event of Default, to the Default
48
Rate as provided in Section 1.4(d). If any Event of Default shall have
--------------
occurred and be continuing Agent may (and at the request of Requisite Lenders
shall), without notice, take any one or more of the following actions:
(a) terminate the Acquisition Line Commitment whereupon Lenders' obligation to
make further Acquisition Line Advances shall terminate; or (b) declare all or
any portion of the Obligations to be forthwith due and payable whereupon such
Obligations shall become and be due and payable; or (c) exercise any rights and
remedies provided to Agent under the Loan Documents and/or at law or equity,
including all remedies provided under the Code; provided, however, that upon the
-------- -------
occurrence of an Event of Default specified in Section 8.1 (f), (g) or (h), the
---------------------------
rate of interest applicable to all Obligations shall be increased automatically
to the Default Rate as provided in Section 1.4(d), and Acquisition Line
--------------
Commitment shall immediately terminate and the Obligations shall become
immediately due and payable, in each case, without declaration, notice or demand
by any Person.
Without limiting the generality of the foregoing, Borrower expressly
agrees that in any such event Agent without demand of performance or other
demand, advertisement or notice of any kind (except the notice specified below
of time and place of public or private sale) to or upon Borrower or any other
Person (all and each of which demands, advertisements and notices are hereby
expressly waived to the maximum extent permitted by the Code and other
applicable law), may forthwith enter upon the premises of Borrower where any
Collateral is located through self-help, without judicial process, without first
obtaining a final judgment or giving Borrower notice and opportunity for a
hearing on Lender's claim or action, and without paying rent to Borrower, and
collect, receive, assemble, process, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, assign, give an
option or options to purchase, or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. Agent shall have the right upon any such public sale or sales,
and, to the extent permitted by law, upon any such private sale or sales, to
purchase for its benefit and the benefit of Lenders the whole or any part of
said Collateral so sold, free of any right or equity of redemption, which equity
of redemption Borrower hereby releases. Such sales may be adjourned or continued
from time to time with or without notice. Agent shall have the right to conduct
such sales on Borrower's premises or elsewhere and shall have the right to use
Borrower's premises without charge for such sales for such time or times as
Agent deems necessary or advisable.
Borrower further agrees, at Agent's request, to assemble the
Collateral and make it available to Agent at places which Agent shall reasonably
select, whether at Borrower's premises or elsewhere. Until Agent is able to
effect a sale, lease, or other disposition of the Collateral, Agent shall have
the right to use or operate the Collateral on behalf of Lenders, or any part
thereof, to the extent that it deems appropriate for the purpose of preserving
the Collateral or its value or for any other purpose deemed appropriate by
Agent. Agent shall have no obligation to Borrower to maintain or preserve the
rights of Borrower as against third parties with respect to the Collateral while
the Collateral is in the possession of Agent. Agent may, if it so elects, seek
the appointment of a receiver or keeper to take possession of the Collateral and
to enforce any of Agent's remedies with respect to such appointment without
prior notice or hearing. Agent shall
49
apply the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, as provided in paragraph (d) below, Borrower remaining
liable for any deficiency remaining unpaid after such application, and only
after so paying over such net proceeds and after the payment by Agent of any
other amount required by any provision of law, including section 9-504(1)(c) of
the Code (but only after Agent has received what Agent considers reasonable
proof of a subordinate party's security interest), need Agent account for the
surplus, if any, to Borrower. To the maximum extent permitted by applicable law,
Borrower waives all claims, damages, and demands against Agent arising out of
the repossession, retention or sale of the Collateral except such which may
arise out of the gross negligence or willful misconduct of such party. Borrower
agrees that five (5) days' prior notice by Agent of the time and place of any
public sale or of the time after which a private sale may take place is
reasonable notification of such matters. Borrower shall remain liable for any
deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which Agent, for itself and Lenders is
entitled, Borrower also being liable for any attorneys' fees incurred by Agent
to collect such deficiency.
(b) Borrower agrees to pay any and all costs of Agent, including,
without limitation, reasonable attorneys' fees, incurred in connection with the
enforcement of any of its rights and remedies hereunder.
(c) Except as otherwise specifically provided herein, Borrower hereby
waives presentment, demand, protest or any notice (to the maximum extent
permitted by applicable law) of any kind in connection with this Agreement or
any Collateral.
(d) The Proceeds of any sale, disposition or other realization upon
all or any part of the Collateral shall be distributed by Agent upon receipt, in
the following order of priorities:
First, the payment in full of reasonable expenses of Agent in
-----
connection with such sale, disposition or other realization, including all
expenses, liabilities and advances incurred or made by Agent in connection
therewith, including reasonable attorney's fees;
Second, to the ratable payment of accrued but unpaid interest on the
------
Obligations;
Third, to the ratable payment of unpaid principal of the Obligations;
-----
Fourth, to the ratable payment of all other Obligations until all
------
other Obligations shall have been paid in full; and
Finally, to payment to Borrower, or its successors or assigns, or as a
-------
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.
8.3 Grant of License to Use Patent and Trademark Collateral. For the
-------------------------------------------------------
purpose of enabling Agent to exercise rights and remedies under Section 8.2
-----------
hereof (including, without limiting the terms of Section 8.2 hereof, in order to
-----------
take possession of, hold, preserve, process,
50
assemble, prepare for sale, market for sale, sell or otherwise dispose of
Collateral) at such time as Agent shall be lawfully entitled to exercise such
rights and remedies, Borrower hereby grants to Agent, for the benefit of itself
and Lenders, an irrevocable, non-exclusive license (exercisable without payment
of royalty or other compensation to Borrower) to use, transfer, license or
sublicense any Patent, Trademark, Copyrights or trade secret now owned or
hereafter acquired by Borrower, and wherever the same may be located, and
including in such license reasonable access to all media in which any of the
licensed items may be recorded or stored and to all computer and automatic
machinery software and programs used for the compilation or printout thereof.
8.4 Waivers by Borrower. Except as otherwise provided for in this
-------------------
Agreement and applicable law to the full extent permitted by applicable law,
Borrower waives (i) presentment, demand and protest and notice of presentment,
dishonor, notice of intent to accelerate, notice of acceleration, protest,
default, nonpayment, maturity, release, compromise, settlement, extension or
renewal of any or all Loan Documents, notes, commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Agent or Lenders on which Borrower may in any way be liable, and
Borrower hereby ratifies and confirms whatever Agent or Lenders may do in this
regard, (ii) all rights to notice and a hearing prior to Agent's taking
possession or control of, or to Agent's replevin, attachment or levy upon, the
Collateral or any bond or security which might be required by any court prior to
allowing Agent to exercise any of its remedies, and (iii) the benefit of any
right of redemption and all valuation, appraisal and exemption laws. Borrower
acknowledges that it has been advised by counsel of its choice with respect to
this Agreement, the other Loan Documents and the transactions contemplated by
this Agreement and the other Loan Documents.
9. SUCCESSORS AND ASSIGNS
9.1 Successors and Assigns. This Agreement and the other Loan Documents
----------------------
shall be binding on and shall inure to the benefit of Borrower, Agent, Lenders
and their respective successors and assigns, except as otherwise provided herein
or therein. Borrower may not assign, delegate, transfer, hypothecate or
otherwise convey its rights, benefits, obligations or duties hereunder or under
any of the Loan Documents without the prior express written consent of Agent and
Lenders. Any such purported assignment, transfer, hypothecation or other
conveyance by Borrower without such prior express written consent shall be void.
The terms and provisions of this Agreement and the other Loan Documents are for
the purpose of defining the relative rights and obligations of Borrower, Agent
and the Lenders with respect to the transactions contemplated hereby and there
shall be no third party beneficiaries of any of the terms and provisions of this
Agreement or any of the other Loan Documents.
10. ASSIGNMENT AND PARTICIPATIONS; APPOINTMENT OF AGENT
10.1 Assignment and Participations
-----------------------------
(a) The Loan Parties signatory hereto consent to any Lender's assignment
of, and/or sale of participations in, at any time or times, the Loan Documents,
Loans and any Commitment
51
or of any portion thereof or interest therein, including any Lender's rights,
title, interests, remedies, powers or duties thereunder, whether evidenced by a
writing or not. Any assignment by a Lender shall (i) require the consent of
Agent (which shall not be unreasonably withheld or delayed) and the execution of
an assignment agreement (an "Assignment Agreement") substantially in the form
--------------------
attached hereto as Exhibit B and otherwise in form and substance satisfactory
---------
to, and acknowledged by, Agent; (ii) be conditioned on such assignee Lender
representing to the assigning Lender and Agent that (x) it is purchasing the
applicable Loans to be assigned to it for its own account, for investment
purposes and not with a view to the distribution thereof, and (y) that it, or
its parent, has assets in excess of $100,000,000; (iii) if a partial assignment
to a Person other than a Lender, be in an amount at least equal to $5,000,000
and, after giving effect to any such partial assignment, the assigning Lender
shall have retained Commitments in an amount at least equal to $5,000,000; and
(iv) include a payment to Agent of an assignment fee of $3,500. In the case of
an assignment by a Lender under this Section 10.1, the assignee shall have, to
------------
the extent of such assignment, the same rights, benefits and obligations as it
would if it were a Lender hereunder. The assigning Lender shall be relieved of
its obligations hereunder with respect to its Commitments or assigned portion
thereof from and after the date of such assignment. Borrower hereby acknowledges
and agrees that any assignment will give rise to a direct obligation of Borrower
to the assignee and that the assignee shall be considered to be a "Lender". In
all instances, each Lender's liability to make Loans hereunder shall be several
and not joint and shall be limited to such Lender's Pro Rata Share of the
applicable Commitment. In the event Agent or any Lender assigns or otherwise
transfers all or any part of the Obligations, Agent or any such Lender shall so
notify Borrower and Borrower shall, upon the request of Agent or such Lender,
execute new Notes in exchange for the Notes, if any, being assigned.
Notwithstanding the foregoing provisions of this Section 10.1(a), any Lender may
---------------
at any time pledge the Obligations held by it and such Lender's rights under
this Agreement and the other Loan Documents to a Federal Reserve Bank, and any
Lender that is an investment fund may assign the Obligations held by it and such
Lender's rights under this Agreement and the other Loan Documents to another
investment fund managed by the same investment advisor; provided, however, that
-------- -------
no such pledge to a Federal Reserve Bank shall release such Lender from such
Lender's obligations hereunder or under any other Loan Document.
(b) Any participation by a Lender of all or any part of its Commitments
shall be made with the understanding that all amounts payable by Borrower
hereunder shall be determined as if that Lender had not sold such participation,
and that the holder of any such participation shall not be entitled to require
such Lender to take or omit to take any action hereunder except actions directly
affecting (i) any reduction in the principal amount of, or interest rate or Fees
payable with respect to, any Loan in which such holder participates, (ii) any
extension of the scheduled amortization of the principal amount of any Loan in
which such holder participates or the final maturity date thereof, and (iii) any
release of all or substantially all of the Collateral (other than in accordance
with the terms of this Agreement, the Collateral Documents or the other Loan
Documents). Solely for purposes of Sections 1.9, 1.10, 1.11 and 10.7, Borrower
------------ ---- ---- ----
acknowledges and agrees that a participation shall give rise to a direct
obligation of Borrower to the participant and the participant shall be
considered to be a "Lender". Except as set forth in the preceding sentence
neither Borrower nor any Loan Party shall have any obligation or duty to any
52
participant. Neither Agent nor any Lender (other than the Lender selling a
participation) shall have any duty to any participant and may continue to deal
solely with the Lender selling a participation as if no such sale had occurred.
(c) Except as expressly provided in this Section 10.1, no Lender shall, as
------------
between Borrower and that Lender, or Agent and that Lender, be relieved of any
of its obligations hereunder as a result of any sale, assignment, transfer or
negotiation of, or granting of participation in, all or any part of the Loans,
the Notes or other Obligations owed to such Lender.
(d) Each Loan Party executing this Agreement shall assist any Lender
permitted to sell assignments or participations under this Section 10.1 as
------------
reasonably required to enable the assigning or selling Lender to effect any such
assignment or participation, including the execution and delivery of any and all
agreements, notes and other documents and instruments as shall be requested
(provided, however, that no such document, agreement, note or instrument shall
--------- -------
modify the economic terms of the Loans to the detriment of Borrower or increase
any Loan Party's obligations under any Loan Document) and, if requested by
Agent, the preparation of informational materials for, and the participation of
management in meetings with, potential assignees or participants. Each Loan
Party executing this Agreement shall certify the correctness, completeness and
accuracy of all descriptions of the Loan Parties and their affairs contained in
any selling materials provided by them and all other information provided by
them and included in such materials, except that any Projections delivered by
Borrower shall only be certified by Borrower as having been prepared by Borrower
in compliance with the representations contained in Section 3.4.
-----------
(e) A Lender may furnish any information concerning Loan Parties in the
possession of such Lender from time to time to assignees and participants
(including prospective assignees and participants).
(f) So long as no Event of Default shall have occurred and be continuing,
no Lender shall assign or sell participations in any portion of its Loans or
Commitments to a potential Lender or participant, if, as of the date of the
proposed assignment or sale, the assignee Lender or participant would be subject
to capital adequacy or similar requirements under Section 1.12(a), increased
---------------
costs under Section 1.12(b), an inability to fund LIBOR Loans under Section
--------------- -------
1.12(c), or withholding taxes in accordance with Section 1.11(a).
------- ---------------
10.2. Appointment of Agent. GE Capital is hereby appointed
--------------------
to act on behalf of all Lenders as Agent under this Agreement and the other Loan
Documents. The provisions of this Section 10.2 are solely for the benefit of
------------
Agent and Lenders and no Loan Party nor any other Person shall have any rights
as a third party beneficiary of any of the provisions hereof. In performing its
functions and duties under this Agreement and the other Loan Documents, Agent
shall act solely as an agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for any Loan Party or any other Person. Agent shall have no duties or
responsibilities except for those expressly set forth in this Agreement and the
other Loan Documents. The duties of Agent shall be mechanical and administrative
in nature and Agent shall not have, or be deemed to have, by reason of this
53
Agreement, any other Loan Document or otherwise a fiduciary relationship in
respect of any Lender. Neither Agent nor any of its Affiliates nor any of their
respective officers, directors, employees, agents or representatives shall be
liable to any Lender for any action taken or omitted to be taken by it hereunder
or under any other Loan Document, or in connection herewith or therewith, except
for damages caused by its or their own gross negligence or willful
misconduct.
If Agent shall request instructions from Requisite Lenders or all
affected Lenders with respect to any act or action (including failure to act) in
connection with this Agreement or any other Loan Document, then Agent shall be
entitled to refrain from such act or taking such action unless and until Agent
shall have received instructions from Requisite Lenders, Requisite Acquisition
Line Lenders or all affected Lenders, as the case may be, and Agent shall not
incur liability to any Person by reason of so refraining. Agent shall be fully
justified in failing or refusing to take any action hereunder or under any other
Loan Document (a) if such action would, in the opinion of Agent, be contrary to
law or the terms of this Agreement or any other Loan Document, (b) if such
action would, in the opinion of Agent, expose Agent to Environmental Liabilities
and Costs or (c) if Agent shall not first be indemnified to its reasonable
satisfaction against any and all liability and expense which may be incurred by
it by reason of taking or continuing to take any such action. Without limiting
the foregoing, no Lender shall have any right of action whatsoever against
Agent as a result of Agent acting or refraining from acting hereunder or under
any other Loan Document in accordance with the instructions of Requisite
Lenders, Requisite Acquisition Line Lenders or all affected Lenders, as
applicable.
10.3 Agent's Reliance, Etc. Neither Agent nor any of its Affiliates nor
---------------------
any of their respective directors, officers, agents or employees shall be liable
for any action taken or omitted to be taken by it or them under or in connection
with this Agreement or the other Loan Documents, except for damages caused by
its or their own gross negligence or willful misconduct. Without limitation of
the generality of the foregoing, Agent: (a) may treat the payee of any Note as
the holder thereof until Agent receives written notice of the assignment or
transfer thereof signed by such payee and in form satisfactory to Agent; (b) may
consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts; (c) makes no warranty or representation to any Lender
and shall not be responsible to any Lender for any statements, warranties or
representations made in or in connection with this Agreement or the other Loan
Documents; (d) shall not have any duty to ascertain or to inquire as to the
performance or observance of any of the terms, covenants or conditions of this
Agreement or the other Loan Documents on the part of any Loan Party or to
inspect the Collateral (including the books and records) of any Loan Party; (e)
shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Loan Documents or any other instrument or document furnished pursuant
hereto or thereto; and (f) shall incur no liability under or in respect of this
Agreement or the other Loan Documents by acting upon any notice, consent,
certificate or other instrument or writing (which may be by telecopy, telegram,
cable or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
54
10.4 GE Capital and Affiliates. With respect to its Commitments
-------------------------
hereunder, GE Capital shall have the same rights and powers under this Agreement
and the other Loan Documents as any other Lender and may exercise the same as
though it were not Agent; and the term "Lender" or "Lenders" shall, unless
otherwise expressly indicated, include GE Capital in its individual capacity. GE
Capital and its Affiliates may lend money to, invest in, and generally engage in
any kind of business with, any Loan Party, any of their Affiliates and any
Person who may do business with or own securities of any Loan Party or any such
Affiliate, all as if GE Capital were not Agent and without any duty to account
therefor to Lenders. GE Capital and its Affiliates may accept fees and other
consideration from any Loan Party for services in connection with this Agreement
or otherwise without having to account for the same to Lenders. GE Capital has
also purchased certain equity interests in Holdings and received a warrant from
Holdings, which is a corporation which currently owns one hundred percent (100%)
of the outstanding Stock of Borrower. Each Lender acknowledges the potential
conflict of interest between GE Capital as a Lender holding disproportionate
interests in the Loans, GE Capital as a stockholder, and/or warrant holder of
Holdings, and GE Capital as Agent.
10.5 Indemnification. Lenders agree to indemnify Agent (to the extent not
---------------
reimbursed by Loan Parties and without limiting the obligations of Borrower
hereunder), ratably according to their respective Pro Rata Shares, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any other Loan
Document or any action taken or omitted by Agent in connection therewith;
provided, however, that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from Agent's gross negligence or
willful misconduct. Without limiting the foregoing, each Lender agrees to
reimburse Agent promptly upon demand for its ratable share of any reasonable
out-of-pocket expenses (including counsel fees) incurred by Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Agreement and each other Loan Document, to the extent that Agent is not
reimbursed for such expenses by Loan Parties.
10.6 Successor Agent. Agent may resign at any time by giving not less
---------------
than thirty (30) days' prior written notice thereof to Lenders and Borrower.
Upon any such resignation, the Requisite Lenders shall have the right to appoint
a successor Agent. If no successor Agent shall have been so appointed by the
Requisite Lenders and shall have accepted such appointment within 30 days after
the resigning Agent's giving notice of resignation, then the resigning Agent
may, on behalf of Lenders, appoint a successor Agent, which shall be a Lender,
if a Lender is willing to accept such appointment, or otherwise shall be a
commercial bank or financial institution or a subsidiary of a commercial bank or
financial institution if such commercial bank or financial institution is
organized under the laws of the United States of America or of any State thereof
and has a combined capital and surplus of at least $300,000,000. If no successor
Agent has been appointed pursuant to the foregoing, by the 30th day after the
date such notice of resignation was given by the resigning Agent, such
resignation shall become effective and the
55
Requisite Lenders shall thereafter perform all the duties of Agent hereunder
until such time, if any, as the Requisite Lenders appoint a successor Agent as
provided above. Any successor Agent appointed by Requisite Lenders hereunder
shall be subject to the approval of Borrower, such approval not to be
unreasonably withheld or delayed; provided that such approval shall not be
required if a Default or an Event of Default shall have occurred and be
continuing. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall succeed to and become vested with
all the rights, powers, privileges and duties of the resigning Agent. Upon the
earlier of the acceptance of any appointment as Agent hereunder by a successor
Agent or the effective date of the resigning Agent's resignation, the resigning
Agent shall be discharged from its duties and obligations under this Agreement
and the other Loan Documents, except that any indemnity rights or other rights
in favor of such resigning Agent shall continue. After any resigning Agent's
resignation hereunder, the provisions of this Section 10 shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents.
10.7 Setoff and Sharing of Payments. In addition to any rights now or
------------------------------
hereafter granted under applicable law and not by way of limitation of any such
rights, upon the occurrence and during the continuance of any Event of Default,
each Lender and each holder of any Note is hereby authorized at any time or from
time to time, without notice to any Loan Party or to any other Person, any such
notice being hereby expressly waived, to set off and to appropriate and to apply
any and all balances held by it at any of its offices for the account of
Borrower or any Guarantor (regardless of whether such balances are then due to
Borrower or such Guarantor) and any other properties or assets any time held or
owing by that Lender or that holder to or for the credit or for the account of
Borrower or any Guarantor against and on account of any of the Obligations which
are not paid when due. Any Lender or holder of any Note exercising a right to
set off or otherwise receiving any payment on account of the Obligations in
excess of its Pro Rata Share thereof shall purchase for cash (and the other
Lenders or holders shall sell) such participations in each such other Lender's
or holder's Pro Rata Share of the Obligations as would be necessary to cause
such Lender to share the amount so set off or otherwise received with each other
Lender or holder in accordance with their respective Pro Rata Shares. Borrower
and each Loan Party that is a Guarantor agrees, to the fullest extent permitted
by law, that (a) any Lender or holder may exercise its right to set off with
respect to amounts in excess of its Pro Rata Share of the Obligations and may
sell participations in such amount so set off to other Lenders and holders and
(b) any Lender or holders so purchasing a participation in the Loans made or
other Obligations held by other Lenders or holders may exercise all rights of
set-off, bankers' lien, counterclaim or similar rights with respect to such
participation as fully as if such Lender or holder were a direct holder of the
Loans and the other Obligations in the amount of such participation.
Notwithstanding the foregoing, if all or any portion of the set-off amount or
payment otherwise received is thereafter recovered from the Lender that has
exercised the right of set-off, the purchase of participations by that Lender
shall be rescinded and the purchase price restored without
interest.
56
10.8 Advances; Payments; Non-Funding Lenders; Information; Actions in
----------------------------------------------------------------
Concert.
-------
(a) Advances; Payments. (i) Agent shall notify Acquisition Line
------------------
Lenders, promptly after receipt of a notice of Acquisition Line Advance by
telecopy, telephone or other similar form of transmission. Each Acquisition Line
Lender shall make the amount of such Lender's Pro Rata Share of such Acquisition
Line Advance available to Agent in same day funds by wire transfer to Agent's
account as set forth in Annex E not later than 11:00 a.m. (New York time) on the
-------
requested funding date. After receipt of such wire transfers (or, in the Agent's
sole discretion, before receipt of such wire transfers), subject to the terms
hereof, Agent shall make the requested Acquisition Line Advance to the Borrower
in the notice of Acquisition Line Advance. All payments by each Acquisition Line
Lender shall be made without setoff, counterclaim or deduction of any kind.
(ii) On the second (2nd) Business Day of each calendar week or more
frequently as aggregate cumulative payments in excess of $2,000,000 are received
with respect to the Loans (each, a "Settlement Date"), Agent will advise each
---------------
Lender by telephone, or telecopy of the amount of such Lender's Pro Rata Share
of principal, interest and Fees paid for the benefit of Lenders with respect to
each applicable Loan. Provided that such Lender has funded all payments or
Advances required to be made by it and has purchased all participations required
to be purchased by it under this Agreement and the other Loan Documents as of
such Settlement Date, Agent will pay to each Lender such Lender's Pro Rata Share
of principal, interest and Fees paid by Borrowers since the previous Settlement
Date for the benefit of that Lender on the Loans held by it. To the extent that
any Lender (a "Non-Funding Lender") has failed to fund all such payments and
------------------
Advances or failed to fund the purchase of all such participations, Agent shall
be entitled to set off the funding short-fall against that Non-Funding Lender's
Pro Rata Share of all payments received from Borrower. Such payments shall be
made by wire transfer to such Lender's account (as specified by such Lender in
Annex E or the applicable Assignment Agreement) not later than 2:00 p.m. (New
-------
York time) on the next Business Day following each Settlement Date.
(b) Availability of Lender's Pro Rata Share. Agent may assume that
---------------------------------------
each Acquisition Line Lender will make its Pro Rata Share of each Acquisition
Line Advance available to Agent on each funding date. If such Pro Rata Share is
not, in fact, paid to Agent by such Acquisition Line Lender when due, Agent will
be entitled to recover such amount on demand from such Acquisition Line Lender
without set-off, counterclaim or deduction of any kind. If any Acquisition Line
Lender fails to pay the amount of its Pro Rata Share forthwith upon Agent's
demand, Agent shall promptly notify Borrower and Borrower shall immediately
repay such amount to Agent. Nothing in this Section 10.8(b) or elsewhere in
---------------
this Agreement or the other Loan Documents shall be deemed to require Agent to
advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
Borrower may have against any Lender as a result of any default by such Lender
hereunder. To the extent that Agent advances funds to Borrower on behalf of any
Acquisition Line Lender and is not reimbursed therefor on the same Business Day
as such Advance is made, Agent shall be entitled to retain for its account all
interest accrued on such Advance until reimbursed by the applicable Acquisition
Line Lender.
57
(c) Return of Payments. (i) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by Agent from Borrower and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender on
demand without set-off, counterclaim or deduction of any kind.
(ii) If Agent determines at any time that any amount received by Agent
under this Agreement must be returned to Borrower or paid to any other Person
pursuant to any insolvency law or otherwise, then, notwithstanding any other
term or condition of this Agreement or any other Loan Document, Agent will not
be required to distribute any portion thereof to any Lender. In addition, each
Lender will repay to Agent on demand any portion of such amount that Agent has
distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
(d) Non-Funding Lenders. The failure of any Non-Funding Lender to make any
-------------------
Acquisition Line Advance or any payment required by it hereunder on the date
specified therefor shall not relieve any other Acquisition Line Lender (each
such other Acquisition Line Lender, an "Other Lender") of its obligations to
------------
make such Advance on such date, but neither any Other Lender nor Agent shall be
responsible for the failure of any Non-Funding Lender to make an Advance or to
purchase a participation required hereunder. Notwithstanding anything set forth
herein to the contrary, a Non-Funding Lender shall not have any voting or
consent rights under or with respect to any Loan Document or constitute a
"Lender" or an "Acquisition Line Lender" (or be included in the calculation of
"Requisite Lenders" or, "Requisite Acquisition Line Lenders" hereunder) for any
voting or consent rights under or with respect to any Loan Document.
(e) Dissemination of Information. Agent will use reasonable efforts to
----------------------------
provide Lenders with any notice of Default or Event of Default received by Agent
from, or delivered by Agent to, any Loan Party, with notice of any Event of
Default of which Agent has actually taken by Agent following any Event of
Default; provided, however, that Agent shall not be liable to any Lender for any
failure to do so, except to the extent that such failure is attributable to
Agent's gross negligence or willful misconduct. Lenders acknowledge that
Borrower is required to provide Financial Statements and collateral reports to
Agent in accordance with Annex D and Section 5.8 hereto and agree that Agent
------- -----------
shall have no duty to provide the same to Lenders.
(f) Actions in Concert. Anything in this Agreement to the contrary
------------------
notwithstanding, each Lender hereby agrees with each other Lender that no Lender
shall take any action to protect or enforce its rights arising out of this
Agreement or the Notes (including exercising any rights of set-off) without
first obtaining the prior written consent of Agent and Requisite Lenders, it
being the intent of Lenders that any such action to protect or enforce rights
under this Agreement and the Notes shall be taken in concert and at the
direction or with the consent of Agent.
11. MISCELLANEOUS
58
11.1 Complete Agreement; Modification of Agreement. The Loan Documents
---------------------------------------------
constitute the complete agreement between the parties with respect to the
subject matter thereof and may not be modified, altered or amended except as set
forth in Section 11.2 below. Any letter of interest, commitment letter, and/or
------------
fee letter (other than the Fee Letter) between any Loan Party on one hand and
Agent or any Lender or any of their respective affiliates on the other hand,
predating this Agreement and relating to a financing of substantially similar
form, purpose or effect shall be superseded by this
Agreement.
11.2 Amendments and Waivers. (a) Except for actions expressly permitted
----------------------
to be taken by Agent, no amendment, modification, termination or waiver of any
provision of this Agreement or any of the Notes, or any consent to any departure
by any Loan Party therefrom, shall in any event be effective unless the same
shall be in writing and signed by Agent and Borrower, and by Requisite Lenders,
Requisite Acquisition Line Lenders or all affected Lenders, as applicable.
Except as set forth in clauses (b) and (c) below, all such amendments,
----------- ---
modifications, terminations or waivers requiring the consent of any Lenders
shall require the written consent of Requisite Lenders.
(b) No amendment, modification, termination or waiver of or consent with
respect to any provision of this Agreement which waives compliance with the
conditions precedent set forth in Section 2.2 to the making of any Loan shall be
-----------
effective unless the same shall be in writing and signed by Agent, Requisite
Acquisition Line Lenders and Borrower. Notwithstanding anything contained in
this Agreement to the contrary, no waiver or consent with respect to any Default
(if in connection therewith Agent or Requisite Acquisition Line Lenders, as the
case may be, have exercised its or their right to suspend the making or
incurrence of further Advances pursuant to Section 8.2(a)) or any Event of
---------------
Default shall be effective for purposes of the conditions precedent to the
making of Loans set forth in Section 2.2 unless the same shall be in writing and
-----------
signed by Agent, Requisite Acquisition Line Lenders and Borrowers.
(c) No amendment, modification, termination or waiver shall, unless in
writing and signed by Agent and each Lender directly affected thereby, do any of
the following: (i) increase the principal amount of any Lender's Commitment
(which action shall be deemed to directly affect all Lenders); (ii) reduce the
amount due on any schedule payment date or reduce the principal of, rate of
interest on or Fees payable with respect to any Loan of any affected Lender;
(iii) extend any scheduled payment date or final maturity date of the principal
amount of any Loan of any affected Lender; (iv) waive, forgive, defer, extend or
postpone any payment of interest or Fees as to any affected Lender; (v) release
any Guaranty or, except as otherwise permitted herein or in the other Loan
Documents, release, or permit any Loan Party to sell or otherwise dispose of,
any Collateral with a value exceeding $2,500,000 in the aggregate (which action
shall be deemed to directly affect all Lenders) provided, however, that Agent
-------- -------
shall be authorized to release that certain web press currently located at ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ and previously sold to ▇▇▇▇ ▇. ▇▇▇▇▇, without
the consent of any Lender; (vi) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Loans which shall be required for
Lenders or any of them to take any action hereunder; and (vii) amend
59
or waive this Section 11.2 or the definitions of the terms "Requisite Lenders"
------------
or "Requisite Acquisition Line Lenders" insofar as such definitions affect the
substance of this Section 11.2. Furthermore, no amendment, modification,
------------
termination or waiver affecting the rights or duties of Agent under this
Agreement or any other Loan Document shall be effective unless in writing and
signed by Agent, in addition to Lenders required hereinabove to take such
action. Each amendment, modification, termination or waiver shall be effective
only in the specific instance and for the specific purpose for which it was
given. No amendment, modification, termination or waiver shall be required for
Agent to take additional Collateral pursuant to any Loan Document. No amendment,
modification, termination or waiver of any provision of any Note shall be
effective without the written concurrence of the holder of that Note. No notice
to or demand on any Loan Party in any case shall entitle such Loan Party or any
other Loan Party to any other or further notice or demand in similar or other
circumstances. Any amendment, modification, termination, waiver or consent
effected in accordance with this Section 11.2 shall be binding upon each holder
------------
of the Notes at the time outstanding and each future holder of the Notes.
(d) If, in connection with any proposed amendment, modification,
waiver or termination (a "Proposed Change"):
---------------
(i) requiring the consent of all affected Lenders, the consent of
Requisite Lenders is obtained, but the consent of other Lenders whose consent is
required is not obtained (any such Lender whose consent is not obtained as
described this clause (i) and in clauses (ii) and (iii) below being referred to
---------- ------------ -----
as a "Non-Consenting Lender"), or
---------------------
(ii) requiring the consent of Requisite Acquisition Line Lenders, the
consent of Acquisition Line Lenders holding 51% or more of the aggregate
Acquisition Line Commitments is obtained, but the consent of Requisite
Acquisition Line Lenders is not obtained, or
(iii) requiring the consent of Requisite Lenders, the consent of
Lenders holding 51% or more of the aggregate Commitments is obtained, but the
consent of Requisite Lenders is not obtained,
then, so long as Agent is not a Non-Consenting Lender, at Borrower's request,
Agent or a Person acceptable to Agent shall have the right with Agent's consent
and in Agent's sole discretion (but shall have no obligation) to purchase from
such Non-Consenting Lenders, and such Non-Consenting Lenders agree that they
shall, upon Agent's request, sell and assign to Agent or such Person, all of the
Commitments of such Non-Consenting Lender for an amount equal to the principal
balance of all Loans held by the Non-Consenting Lender and all accrued interest
and Fees with respect thereto through the date of sale, such purchase and sale
to be consummated pursuant to an executed Assignment Agreement.
(e) Upon indefeasible payment in full in cash and performance of all
of the Obligations (other than indemnification Obligations under Section 1.9),
-----------
termination of the Commitments and a release of all claims against Agent and
Lenders, and so long as no suits, actions, proceedings, or claims are pending or
threatened against any Indemnified Person
60
asserting any damages, losses or liabilities that are Indemnified Liabilities,
Agent shall deliver to Borrower termination statements, mortgage releases and
other documents necessary or appropriate to evidence the termination of the
Liens securing payment of the Obligations.
11.3 Fees and Expenses.
-----------------
(a) Borrower shall pay on demand all reasonable costs and expenses
(including, without limitation, reasonable fees of counsel) of Agent in
connection with the preparation, negotiation, approval, execution, delivery,
administration, modification, amendment, waiver and enforcement (whether through
negotiations, legal proceedings or otherwise) of the Loan Documents, and
commitments relating thereto, and the other documents to be delivered hereunder
or thereunder and the transactions contemplated hereby and thereby and the
fulfillment or attempted fulfillment of conditions precedent hereunder,
excluding costs and expenses incurred in connection with any sale or assignment
of any of the Loans prior to acceleration of the Obligations, other than sales
or assignments made by GE Capital of Loans in an aggregate principal amount not
to exceed $28,000,000; and including, without limitation: (i) wire transfer fees
and other costs of forwarding to Borrower or any other Person on behalf of
Borrower by Agent and the Lenders of the proceeds of the Term Loan or
Acquisition Line Advances; (ii) any amendment, modification or waiver of, or
consent with respect to, any of the Loan Documents or advice in connection with
the administration of the advances made pursuant hereto or its rights hereunder
or thereunder; (iii) any litigation, contest, dispute, suit, proceeding or
action (whether instituted by Agent, the Lenders, Borrower or any other Person)
in any way relating to the Collateral, any of the Loan Documents or any other
agreements to be executed or delivered in connection therewith or herewith,
whether as party, witness, or otherwise, including any litigation, contest,
dispute, suit, case, proceeding or action, and any appeal or review thereof, in
connection with a case commenced by or against Borrower or any other Person that
may be obligated to Agent by virtue of the Loan Documents; (iv) any attempt to
enforce any rights of Agent against Borrower or any other Person that may be
obligated to Agent or the Lenders by virtue of any of the Loan Documents; or (v)
after the occurrence and during the continuance of any Default, any effort to
(A) evaluate, observe, assess Borrower or its affairs, or (B) verify, protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the
Collateral.
(b) Borrower shall pay on demand all reasonable costs and expenses
(including, without limitation, reasonable counsels' fees) of Agent and the
Lenders in connection with any Default and any enforcement or collection
proceedings resulting therefrom or any amendment, modification or waiver of, or
consent with respect to, any of the Loan Documents in connection with any
Default.
(c) Without limiting the generality of clauses (a) and (b) above,
Borrower's obligation to reimburse Agent and/or the Lenders for costs and
expenses shall include the reasonable fees and expenses of counsel (and local,
foreign or special counsel, advisors, consultants and auditors retained by such
counsel), accountants, environmental advisors, appraisers, investment bankers,
management and other consultants and paralegals; court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram charges;
secretarial overtime
61
charges; expenses for travel, lodging and food; and all other out-of-pocket
costs and expenses of every type and nature paid or incurred in connection with
the performance of such legal or other advisory services.
11.4 No Waiver. No failure on the part of Agent or the Lenders, at
---------
any time or times, to require strict performance by any Loan Party, of any
provision of this Agreement and any of the other Loan Documents shall waive,
affect or diminish any right of Agent or such Lender thereafter to demand strict
compliance and performance therewith. Any suspension or waiver of a Default
shall not suspend, waive or affect any other Default whether the same is prior
or subsequent thereto and whether of the same or of a different type. None of
the undertakings, agreements, warranties, covenants and representations of any
Loan Party contained in this Agreement or any of the other Loan Documents and no
Default by any Loan Party shall be deemed to have been suspended or waived by
Agent or any Lender, unless such waiver or suspension is by an instrument in
writing signed by an officer of or other authorized employee of Agent and the
applicable required Lender if required hereunder and directed to Borrower
specifying such suspension or waiver.
11.5 Remedies. The rights and remedies of Agent and the Lenders under
--------
this Agreement shall be cumulative and nonexclusive of any other rights and
remedies which Agent or the Lenders may have under any other agreement,
including, without limitation, the Loan Documents, by operation of law or
otherwise. Recourse to the Collateral shall not be required.
11.6 Severability. 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 or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
11.7 Conflict of Terms. Except as otherwise provided in this Agreement or
-----------------
any of the other Loan Documents by specific reference to the applicable
provisions of this Agreement, if any provision contained in this Agreement is in
conflict with, or inconsistent with, any provision in any of the other Loan
Documents, the provisions contained in this Agreement shall govern and control.
11.8 Right of Set-off. Subject to Section 1.3(a), upon the occurrence and
---------------- --------------
during the continuance of any Event of Default, Agent is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply in accordance with Section 1.7 any and all deposits (general or
-----------
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Agent and/or the Lenders to or for the credit
or the account of Borrower against any and all of the Obligations now or
hereafter existing irrespective of whether or not Agent or such Lender shall
have made any demand under this Agreement or any other Loan Document and
although such Obligations may be unmatured. Agent agrees promptly to notify the
Lenders and Borrower after any such set-off and application made by Agent;
provided, however, that the failure to give such notice shall not affect the
-------- -------
validity of such set-off and application. The rights of Agent and the Lenders
under this Section are in addition to
62
the other rights and remedies (including, without limitation, other rights of
set-off) which Agent and the Lenders may have.
11.9 Authorized Signature. Until Agent shall be notified by Borrower to
--------------------
the contrary, to the signature upon any document or instrument delivered
pursuant hereto and believed by Agent or any of Agent 's officers, the Lenders,
or employees to be that of an officer or duly authorized representative of
Borrower listed on Schedule 11.9 shall bind Borrower and be deemed to be the act
-------------
of Borrower affixed pursuant to and in accordance with resolutions duly adopted
by Borrower's Board of Directors, and Agent and the Lenders shall be entitled to
assume the authority of each signature and authority of the person whose
signature it is or appears to be unless the person acting in reliance of such
signature shall have actual knowledge of the fact that such signature is false
or the person whose signature or purported signature is presented is without
authority.
11.10 GOVERNING LAW. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN ANY OF
-------------
THE LOAN DOCUMENTS, IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION,
VALIDITY AND PERFORMANCE, THIS AGREEMENT AND THE OBLIGATIONS ARISING HEREUNDER
SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK, APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE,
AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA. BORROWER, AGENT AND
LENDERS HEREBY CONSENT AND AGREE THAT THE STATE OR FEDERAL COURTS LOCATED IN NEW
YORK CITY, NEW YORK, OR CHICAGO, ILLINOIS SHALL HAVE EXCLUSIVE JURISDICTION TO
HEAR AND DETERMINE ANY CLAIMS OR DISPUTES PERTAINING TO THIS AGREEMENT OR ANY OF
THE OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS, PROVIDED, THAT AGENT, LENDERS AND
BORROWER ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY
A COURT LOCATED OUTSIDE OF NEW YORK CITY OR CHICAGO, AS THE CASE MAY BE, AND,
PROVIDED, FURTHER, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO
PRECLUDE AGENT FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER
JURISDICTION TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF AGENT.
BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY
ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND BORROWER HEREBY WAIVES ANY
OBJECTION WHICH BORROWER MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS AND HEREBY CONSENTS TO THE GRANTING OF
----- --- ----------
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. BORROWER
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS
ISSUED IN ANY SUCH ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS,
COMPLAINTS AND OTHER PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL
ADDRESSED TO BORROWER AT THE ADDRESS SET FORTH ON
63
SCHEDULE 11.11 OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED
--------------
COMPLETED UPON THE EARLIER OF BORROWER'S ACTUAL RECEIPT THEREOF OR THREE (3)
DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
11.11 Notices. Except as otherwise provided herein, whenever it is
-------
provided herein that any notice, demand, request, consent, approval, declaration
or other communication shall or may be given to or served upon either of the
parties by the other party, or whenever either of the parties desires to give or
serve upon the other party any communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (i) upon the earlier of actual receipt and three (3)
days after deposit in the United States Mail, registered or certified mail,
return receipt requested, with proper postage prepaid, (ii) upon transmission,
when sent by telecopy or other similar facsimile transmission (with such
telecopy or facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this Section 11.11,
-------------
(iii) one (1) Business Day after deposit with a reputable overnight courier with
all charges prepaid or (iv) when delivered, if hand-delivered by messenger, all
of which shall be addressed to the party to be notified and sent to the address
or facsimile number indicated below or to such other address (or facsimile
number) as may be substituted by notice given as herein provided. The giving of
any notice required hereunder may be waived in writing by the party entitled to
receive such notice. Failure or delay in delivering copies of any notice,
demand, request, consent, approval, declaration or other communication to any
Person (other than Borrower, the Lender or the Lender) designated below to
receive copies shall in no way adversely affect the effectiveness of such
notice, demand, request, consent, approval, declaration or other communication.
If to Agent or
GE Capital, at: General Electric Capital Corporation
Capital Funding, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇. ▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Risk Manager
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
General Electric Capital Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Counsel-Capital Funding, inc.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
64
General Electric Capital Corporation
Capital Funding, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Mr. ▇▇▇▇ ▇▇▇▇▇▇
▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇ ▇▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
If to Borrower, at: Premier Graphics, Inc.
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
11.12 Section Titles. The Section titles and Table of Contents
--------------
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of this Agreement.
11.13 Counterparts. This Agreement may be executed in any number of
------------
separate counterparts, each of which shall, collectively and separately,
constitute one agreement.
11.14 Time of the Essence. Time is of the essence of this Agreement
-------------------
and each of the other Loan Documents.
11.15 WAIVER OF JURY TRIAL. BECAUSE DISPUTES ARISING IN CONNECTION
--------------------
WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED
BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND
FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT
THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE,
TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER IN CONTRACT, TORT,
OR OTHERWISE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
65
11.16 NO ORAL AGREEMENTS. THIS WRITTEN LOAN AGREEMENT REPRESENTS THE
------------------
FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF
PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE
NO UNWRITTEN AGREEMENTS BETWEEN THE PARTIES.
11.17 RELEASE. BORROWER ACKNOWLEDGES AND AGREES THAT (A) IT HAS NO
-------
CLAIMS, COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES OF ANY KIND OR NATURE
WHATSOEVER TO THE ORIGINAL AGREEMENT, THE RESTATED AGREEMENT AND THE OTHER LOAN
DOCUMENTS (AS SUCH TERM IS DEFINED IN EACH OF THE ORIGINAL AGREEMENT AND THE
RESTATED AGREEMENT) AND THE PERFORMANCE OF ITS OBLIGATIONS THEREUNDER, OR (B) IF
IT HAS ANY SUCH CLAIMS, COUNTERCLAIMS, OFFSETS, CREDITS OR DEFENSES TO THE LOAN
DOCUMENTS (AS SUCH TERM IS DEFINED IN EACH OF THE ORIGINAL AGREEMENT AND THE
RESTATED AGREEMENT) AND/OR ANY TRANSACTION RELATED TO THE LOAN DOCUMENTS (AS
SUCH TERM IS DEFINED IN EACH OF THE ORIGINAL AGREEMENT AND THE RESTATED
AGREEMENT), SAME ARE HEREBY WAIVED, RELINQUISHED AND RELEASED IN CONSIDERATION
OF EACH LENDER'S EXECUTION AND DELIVERY OF THIS AGREEMENT.
11.18 Amendment and Restatement. This Agreement and the Notes are
-------------------------
given in amendment, restatement, renewal and extension (but not in novation,
extinguishment or satisfaction) of the (i) Restated Loan Agreement and the
promissory notes executed in connection therewith, which Restated Loan Agreement
and such promissory notes were given in amendment, restatement, renewal and
extension (but not in novation, extinguishment or satisfaction) of the Original
Agreement and the promissory notes issued in connection therewith, and (ii) the
▇▇▇▇▇▇▇▇ Loan Agreement. All liens and security interests securing payment of
the obligations under the Original Agreement, the Restated Loan Agreement, the
▇▇▇▇▇▇▇▇ Loan Agreement and such promissory notes are hereby collectively
renewed, extended, rearranged, ratified and brought forward as security for the
payment and performance of the Obligations. With respect to matters relating to
the period prior to the date hereof, all of the provisions of the Original
Agreement, the Restated Loan Agreement, the ▇▇▇▇▇▇▇▇ Loan Agreement and the
promissory notes, security agreements and other documents, instruments or
agreements executed in connection therewith are hereby ratified and confirmed
and shall remain in force and effect.
11.19 References. Each of the Loan Documents, and any and all other
----------
Loan Documents, documents or instruments now or hereafter executed and delivered
pursuant to the terms hereof are hereby amended so that (i) any reference in
such other Loan Documents to the Original Agreement, the Restated Loan Agreement
or the ▇▇▇▇▇▇▇▇ Agreements (including as any thereof may have been amended)
shall mean a reference to this Agreement, and (ii) any reference in such other
Loan Documents to Original Lender shall mean a reference to Agent or Agent and
Lenders, as context may require.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
66
IN WITNESS WHEREOF, this Agreement has been duly executed as of the
date first written above.
Borrower:
PREMIER GRAPHICS, INC.
By:
----------------------------
▇▇▇▇▇ ▇. Fair
Secretary
Agent, for the benefit of the Lenders:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Credit Analyst
Lenders:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
----------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
Senior Credit Analyst
67
INDEX OF ANNEXES, SCHEDULES AND EXHIBITS
Annex A Definitions
Annex B Schedule of Closing Documents
Annex C Financial Statements, Projections and Notices
Annex D Insurance Requirements
Annex E Agent's and Lender's Acquisition Line Advance
Account Information
Annex F Acquisition Line and Term Loan Commitments
Schedule 3.2 - Executive Offices; Trade Names
Schedule 3.4 - Financial Statements and Projections
Schedule 3.5 - Dividends
Schedule 3.6 - Real Estate and Leases
Schedule 3.7 - Material Contracts
Schedule 3.8 - Labor Matters
Schedule 3.9 - Ventures, Subsidiaries and Affiliates;
Outstanding Stock
Schedule 3.12 - Tax Matters
Schedule 3.13 - ERISA Plans
Schedule 3.14 - Litigation
Schedule 3.15 - Brokers
Schedule 3.16 - Patents, Trademarks, Copyrights and Licenses
Schedule 3.18 - Hazardous Materials
Schedule 3.19 - Insurance Policies
Schedule 3.20 - Disbursement and Deposit Accounts
Schedule 3.22(c) - Schedule of Offices, Locations of Collateral and
Record Concerning Collateral
Schedule 3.22(d) - Schedule of Instruments
Schedule 6.2 - Investments
Schedule 6.3 - Indebtedness
Schedule 6.4 - Loans to and Transactions with Employees
Schedule 6.7 - Liens
Schedule 11.9 - Authorized Signatures
Exhibit A-1 - Form of Note A
Exhibit A-2 - Form of Note B
Exhibit A-3 - Form of Note C
Exhibit A-4 - Form of Acquisition Line Note
Exhibit B - Form of Assignment Agreement
Exhibit C - Form of Borrower Pledge Agreement
Exhibit D - Form of Parent Guaranty
Exhibit E - Form of Parent Pledge Agreement
Exhibit F - Form of Affiliate Guaranty
Exhibit G - Form of Affiliate Security Agreement