Exhibit 10.7
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
Dated as of September 30, 2003
among
PHOENIX COLOR CORP.
PCC EXPRESS, INC.
TECHNIGRAPHIX, INC.
PHOENIX (MD.) REALTY, LLC
PHOENIX COLOR FULFILLMENT, INC.
as Borrowers
Each of the financial institutions
now or hereafter a party hereto
as Lenders,
and
WACHOVIA BANK,
NATIONAL ASSOCIATION
as Agent
TABLE OF CONTENTS
Page
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ARTICLE I : DEFINITIONS..........................................1
1.1. General Definitions:..........................................1
1.2. Accounting Terms and Determinations:.........................20
1.3. Other Definitional Terms:....................................20
ARTICLE II : LOANS...............................................21
2.1. Loans:.......................................................21
2.2. Existing Indebtedness........................................25
2.3. Optional and Mandatory Prepayments; Early Termination Fee:...26
2.4. Payments and Computations:...................................27
2.5. Maintenance of Account:......................................28
2.6. Statement of Account:........................................28
2.7. Taxes:.......................................................28
2.8. Extensions and Conversions:..................................30
2.9. Sharing of Payments:.........................................31
2.10. Pro Rata Treatment:..........................................31
2.11. Joint and Several Liability:.................................31
ARTICLE III : LETTERS OF CREDIT...................................32
3.1. Issuance:....................................................32
3.2. Notice and Reports:..........................................32
3.3. Participation:...............................................32
3.4. Reimbursement................................................33
3.5. Repayment with Loans:........................................34
3.6. Renewal, Extension:..........................................35
3.7. Uniform Customs and Practices:...............................35
3.8. Indemnification; Nature of Lender's Duties:..................35
3.9. Responsibility of Issuing Bank:..............................36
3.10. Conflict with Letter of Credit Documents:....................36
ARTICLE IV : INTEREST AND FEES...................................36
4.1. Interest on Loans and Adjustments:...........................36
4.2. Interest After Event of Default:.............................37
4.3. Unused Line Fee:.............................................38
4.4. Closing Fee:.................................................38
4.5. Letter of Credit Fees:.......................................38
4.6. Existing Amendment Fee:......................................39
4.7. Authorization to Charge Account:.............................39
4.8. Indemnification in Certain Events:...........................39
4.9. Inability To Determine Interest Rate:........................40
4.10. Illegality:..................................................40
4.11. Funding Indemnity:...........................................40
ARTICLE V : COLLATERAL.........................................41
5.1. Description:.................................................41
5.2. Lien Documents:..............................................42
5.3. Other Actions:...............................................42
5.4. Searches and Certificates:...................................43
5.5. Mortgage Modifications:......................................43
ARTICLE VI : CONDITIONS PRECEDENT................................43
6.1. Closing Conditions:..........................................44
6.2. Ongoing Borrowing Conditions:................................46
6.3. Notice of Borrowing, Borrowing Base Certificate:.............46
ARTICLE VII : REPRESENTATIONS AND WARRANTIES......................46
7.1. Organization and Qualification:..............................46
7.2. Liens:.......................................................46
7.3. No Conflict:.................................................47
7.4. Enforceability:..............................................47
7.5. Financial Data:..............................................47
7.6. Locations of Offices, Records and Inventory:.................48
7.7. Business Names:..............................................48
7.8. Affiliates and Subsidiaries:.................................48
7.9. Judgments or Litigation:.....................................48
7.10. Defaults:....................................................48
7.11. Compliance with Law:.........................................48
7.12. ERISA:.......................................................49
7.13. Compliance with Environmental Laws:..........................49
7.14. Intellectual Property:.......................................50
7.15. Licenses and Permits:........................................50
7.16. Title to Property:...........................................50
7.17. Labor Matters:...............................................51
7.18. Investment Company:..........................................51
7.19. Margin Security:.............................................51
7.20. Taxes and Tax Returns:.......................................52
7.21. Status of Accounts:..........................................52
7.22. Material Contracts:..........................................52
7.23. Corporate Structure:.........................................52
7.24. Accuracy and Completeness of Information:....................53
7.25. Solvency:....................................................53
7.26. Interrelatedness of Borrowers:...............................53
7.27. Commercial Tort Claims:......................................53
7.28. Letter of Credit Rights:.....................................53
7.29. Deposit Accounts:............................................54
7.30. Senior Debt:.................................................54
7.31. Survival of Representations:.................................54
ARTICLE VIII : AFFIRMATIVE COVENANTS...............................54
8.1. Financial Information:.......................................54
8.2. Corporate Existence:.........................................56
8.3. ERISA:.......................................................56
8.4. Environmental Matters:.......................................56
8.5. Books and Records:...........................................57
8.6. Collateral Records:..........................................57
8.7. Changes in Location:.........................................57
8.8. Insurance; Casualty Loss:....................................57
8.9. Taxes:.......................................................59
8.10. Compliance With Laws:........................................59
8.11. Use of Proceeds:.............................................59
8.12. Fiscal Year:.................................................59
8.13. Notification of Certain Events:..............................59
8.14. Collection of Accounts:......................................60
8.15. Acknowledgment Agreements:...................................61
8.16. Trademarks:..................................................61
8.17. Maintenance of Property:.....................................61
8.18. Commercial Tort Claims:......................................61
8.19. Letter of Credit Rights:.....................................61
8.20. Revisions or Updates to Schedules............................61
8.21. Book Publishers..............................................62
8.22. Fixed Asset Appraisals.......................................62
ARTICLE IX : FINANCIAL COVENANTS.................................62
9.1. Fixed Charge Coverage:.......................................62
9.2. Consolidated Capital Expenditures:...........................62
ARTICLE X : NEGATIVE COVENANTS.................................63
10.1. Liens:.......................................................63
10.2. Indebtedness:................................................63
10.3. Sale of Assets:..............................................63
10.4. Organizational Changes:......................................63
10.5. Guarantees:..................................................63
10.6. Restricted Payments:.........................................63
10.7. Investments:.................................................63
10.8. Affiliate Transactions:......................................64
10.9. Third Party Loans:...........................................64
10.10. Prohibited Transactions Under ERISA:.........................64
10.11. Bank Accounts:...............................................65
10.12. INTENTIONALLY OMITTED:.......................................65
10.13. Amendments of Material Contracts:............................65
10.14. Additional Negative Pledges:.................................65
10.15. Subordinated Debt:...........................................65
10.16. Licenses, Etc.:..............................................65
10.17. Phoenix Fulfillment..........................................66
10.18. Compensation.................................................66
ARTICLE XI : POWERS..............................................66
11.1. Appointment as Attorney-in-Fact:.............................66
ARTICLE XII : EVENTS OF DEFAULT AND REMEDIES......................67
12.1. Events of Default:...........................................67
12.2. Rights and Remedies upon a Default or an Event of Default:...68
12.3. Nature of Remedies:..........................................70
ARTICLE XIII : TERMINATION.........................................70
ARTICLE XIV : AGENT...............................................70
14.1. Appointment of Agent:........................................70
14.2. Nature of Duties of Agent:...................................71
14.3. Lack of Reliance on Agent:...................................71
14.4. Certain Rights of Agent:.....................................72
14.5. Reliance by Agent:...........................................72
14.6. Indemnification of Agent:....................................72
14.7. Agent in its Individual Capacity:............................72
14.8. Holders of Notes:............................................73
14.9. Successor Agent:.............................................73
14.10. Collateral Matters:..........................................73
14.11. Special Inter-Lending Provisions:............................74
14.12. Delivery of Information:.....................................75
14.13. Defaults:....................................................75
ARTICLE XV : MISCELLANEOUS.......................................76
15.1. Waivers:.....................................................76
15.2. JURY TRIAL:..................................................76
15.3. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE:............76
15.4. Arbitration:.................................................77
15.5. Notices:.....................................................78
15.6. Assignability:...............................................78
15.7. Payment of Expenses:.........................................80
15.8. Indemnification:.............................................81
15.9. Entire Agreement, Successors and Assigns:....................81
15.10. Amendments:..................................................81
15.11. Nonliability of Agent and Lender:............................82
15.12. Independent Nature of Lender's Rights:.......................82
15.13. Counterparts:................................................82
15.14. Effectiveness:...............................................83
15.15. Severability:................................................83
15.16. Headings Descriptive:........................................83
15.17. Maximum Rate:................................................83
15.18. Right of Setoff:.............................................84
15.19. Information:.................................................84
EXHIBITS AND SCHEDULES
EXHIBITS
Exhibit A Form of Assignment and Acceptance
Exhibit B Form of Notice of Borrowing
Exhibit C Form of Notice of Extension/Conversion
Exhibit D Form of Borrowing Base Certificate
Exhibit E Form of Compliance Certificate
Exhibit F Form of Publisher Agreement
SCHEDULES
Schedule 1.1(a) Lenders
Schedule 1.1(b) Indebtedness
Schedule 1.1(c) Investments
Schedule 1.1(e) Liens
Schedule 1.1(f) Subordinated Debt
Schedule 7.1 Jurisdictions of Organization and Qualification
Schedule 7.6 Places of Business/Collateral Locations
Schedule 7.7 Business Names
Schedule 7.8 Subsidiaries and Affiliates
Schedule 7.9 Litigation
Schedule 7.12 ERISA
Schedule 7.14 Intellectual Property
Schedule 7.16 Real Property Leases
Schedule 7.22 Material Contracts
Schedule 7.23 Corporate Structure
Schedule 7.27 Commercial Tort Claims
Schedule 7.28 Letter of Credit Rights
Schedule 7.29 Deposit Accounts
Schedule 10.9 Loans
Schedule 15.5 Addresses for Notices
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is entered into as
of September 30, 2003 among PHOENIX COLOR CORP., PCC EXPRESS, INC.,
TECHNIGRAPHIX, INC., PHOENIX (MD.) REALTY, LLC, and PHOENIX COLOR FULFILLMENT,
INC., (each is referred to individually as a "Borrower" and collectively, as the
"Borrowers"), each of the financial institutions identified as Lenders on
Schedule 1.1(a) attached hereto (together with each of their successors and
assigns, referred to individually as a "Lender" and collectively, as the
"Lenders), and WACHOVIA BANK, NATIONAL ASSOCIATION ("Wachovia"), acting as agent
(in such capacity, the "Agent").
BACKGROUND
WHEREAS, Borrowers, Agent and Lenders are parties to that certain Credit
Agreement dated as of September 15, 1998 (as has been amended or modified from
time to time, the "Existing Loan Agreement"), pursuant to which Agent and
Lenders established financing arrangements for the benefit of Borrowers.
Borrowers, Agent and Lenders are parties to certain other instruments, documents
and agreements related thereto (together with the Existing Loan Agreement, the
"Existing Loan Documents").
WHEREAS, Borrowers have requested that Agent and Lenders amend and restate
the Existing Loan Agreement in its entirety and in connection herewith
(including, without limitation, extending the Maturity Date, modifying financial
covenants and adjusting the interest rates applicable to the Obligations).
NOW, THEREFORE, Borrowers, Agent and Lenders, intending to be legally
bound hereby, agree as follows:
ARTICLE I : DEFINITIONS
1.1. General Definitions:
As used herein, the following terms shall have the meanings herein
specified:
"Accounts" shall mean all of Borrowers' "accounts" (as defined in the
Uniform Commercial Code), whether now existing or existing in the future,
including, without limitation, all accounts receivable (whether or not
specifically set forth on schedules furnished to Agent), including, without
limitation, all accounts created by or arising from all sales of goods or
rendition of services made under any Borrower's corporate name or any Borrower's
trade names or styles or through any Borrower's divisions.
"Acknowledgment and Waiver Agreements" shall mean the landlord waiver
agreements or warehousemen waiver agreements, in form and substance acceptable
to Agent, executed and delivered to Agent by landlords, warehousemen or other
Persons in possession of any Collateral or at whose premises any Collateral is
located, in each case acknowledging and agreeing, among other things, that (A)
such Persons do not have any Liens on any Collateral or any such Lien is
subordinated to the Lien of Agent and (B) Agent shall have access to the
premises of such Person to
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exercise remedies with respect to the Collateral.
"Adjustment Period" shall mean the period commencing on an Interest
Adjustment Date and ending on the next Interest Adjustment Date.
"Affiliate" shall mean any Person which directly or indirectly controls,
is controlled by, or is under common control with, a Borrower. For purposes of
this definition, "control" shall mean the possession, directly or indirectly, of
the power to (i) vote 20% or more of the securities having ordinary voting power
for the election of directors of such Person, or (ii) direct or cause the
direction of management and policies of a business, whether through the
ownership of voting securities, by contract or otherwise and either alone or in
conjunction with others or any group.
"Agent" shall mean Wachovia or any successor to Wachovia.
"Asset Disposition" shall mean any sale, lease, assignment or other
disposition (other than a disposition of Inventory in the ordinary course of any
Borrower's business) of any existing or future Property of any Borrower.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by an assigning Lender, accepted by Agent, in accordance with
Section 15.6 in the form attached hereto as Exhibit A.
"Authorized Person" shall mean the President, any Vice President appointed
by the Board of Directors of Borrower Agent, Controller, or Chief Financial
Officer of Borrower Agent.
"Availability Reserve" shall mean an amount equal to $1,000,000.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which any
Borrower, or any ERISA Affiliate, are or within the immediately preceding six
(6) years were, an "employer" as defined in Section 3(5) of ERISA.
"Blocked Account Agreement" shall mean an agreement, in form and substance
satisfactory to Agent, between each Depository Institution and Agent pursuant to
which such Depository Institution agrees, inter alia, to transfer all funds of
Borrowers maintained in any deposit account with that Depository Institution to
the Cash Collateral Account.
"Bond Reserve" shall mean a reserve against the Borrowing Base in the
following amount and the following manner: an amount reserved (on a cumulative
basis), on the first day of each calendar month that is equal to one-twelfth of
the annual payment obligation of Phoenix on the Subordinated Notes; provided, at
the time Phoenix makes a payment on account of Phoenix's obligations under the
Subordinated Notes, the accumulated reserve shall be reduced by an amount equal
to the payment made; provided further that such periodic reduction shall not
obviate the continuing imposition of the monthly reserve amount.
"Book Technology Park Facility" shall mean Realty's real estate and
improvements located at Hagerstown, Washington County, Maryland, as more fully
described in the Master Mortgage covering the Book Technology Park Facility.
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"Borrower Agent" shall mean Phoenix.
"Borrowers" shall have the meaning given to such term in the preamble of
this Credit Agreement.
"Borrowing Base" shall have the meaning given to such term in Section
2.1(b)(i).
"Borrowing Base Certificate" shall have the meaning given to such term in
Section 8.1(c).
"Business Day" shall mean any day other than a Saturday, a Sunday, a legal
holiday or a day on which banking institutions are authorized or required by law
or other governmental action to close in Philadelphia, Pennsylvania or New York,
New York; provided that in the case of Eurodollar Loans, such day is also a day
on which dealings between banks are carried on in U.S. dollar deposits in the
London interbank market.
"Capital Expenditures" shall mean, as applied to any Person for any
period, the aggregate of all capital expenditures (including that portion
attributable to Capital Lease Obligations incurred during that period), made by
that Person during such period in respect of the purchase, construction or other
acquisition of fixed or capital assets, determined in accordance with GAAP.
"Capitalized Lease Obligations" shall mean any Indebtedness under any
lease of any property (whether real, personal or mixed) which, in accordance
with GAAP, is or should be accounted for as a capital lease on the balance sheet
of that Person.
"Capital Stock" shall mean (i) in the case of a corporation, capital
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock, (iii) in the case of a partnership, partnership
interests (whether general or limited), (iv) in the case of a limited liability
company, membership interests and (v) any other equity interest or participation
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
"Cash Collateral Account" shall have the meaning given to such term in
Section 2.4(b).
"Casualty Loss" shall have the meaning given to such term in Section 8.8.
"Change of Control" shall mean (i) with respect to any Borrower, the
result caused by any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Permitted Holders, becoming the beneficial
owner (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that
for purposes of this clause (i) such person shall be deemed to have "beneficiary
ownership" of all shares that any such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than thirty-three and one-third percent (33
1/3%) of the total voting power of the Capital Stock of such Borrower entitled
to vote; or (ii) during any period of two consecutive years, individuals who at
the beginning of such period constituted such Borrower's board of directors
(together with any new directors whose election by such board of directors or
whose nomination for election by the shareholders of such Borrower was approved
by a vote of sixty-six and two-thirds percent (66 2/3%) of the directors of such
Borrower at the time of such approval who were either directors at
3
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority of the
board of directors then in office.
"Closing" shall mean the consummation of the making of the initial loan or
advance by Lenders to Borrowers under this Credit Agreement.
"Closing Date" shall mean the date on which the Closing occurs.
"Closing Fee" shall have the meaning given to such term in Section 4.4.
"Code" shall have the meaning given to such term in Section 1.3.
"Collateral" shall mean any and all rights and interests in or to personal
Property (including leasehold improvements) of any Borrower, whether now owned
or hereafter acquired, pledged from time to time as security for the Obligations
pursuant to this Credit Agreement or any of the other Credit Documents.
"Commitment" shall mean, for each Lender, the commitment of such Lender to
make its portion of the Loans in a principal amount up to such Lender's
Commitment Percentage of the Committed Amount.
"Commitment Percentage" shall mean, for any Lender, as applicable, the
percentage identified as its Commitment Percentage of the Loans on Schedule
1.1(a), as such percentage may be modified in connection with any assignment
made in accordance with the provisions of Section 15.6.
"Committed Amount" shall mean $20,000,000, but not exceeding the maximum
committed amount for such Lender set forth on Schedule 1.1(a).
"Compliance Certificate" shall have the meaning given to such term in
Section 8.1(d).
"Consolidated Amortization Expense" shall mean for any period, the
aggregate consolidated amount of amortization expenses of Borrowers, as
determined in accordance with GAAP.
"Consolidated Capital Expenditures" shall mean for any period, the
aggregate of all capital expenditures (including that portion of Capitalized
Lease Obligations incurred during that period) made by Borrowers and their
Subsidiaries during such period in respect of the purchase, construction or
other acquisition of fixed or capital assets determined in accordance with GAAP.
"Consolidated Capital Expenditures" shall also include the purchase price
(determined as of the effective date of the applicable operating lease) of all
equipment of Borrowers and their Subsidiaries subject to operating leases during
such period; provided further that, Consolidated Capital Expenditures shall not
include capital expenditures made by Borrowers in respect of the purchase of the
▇▇▇▇▇▇ American binding line and ▇▇▇▇▇▇ printing press. For the purposes hereof,
any deposits made by any Borrower or its Subsidiaries for the purposes of
acquiring or leasing fixed or capital assets shall be deemed Consolidated
Capital Expenditures.
"Consolidated Depreciation Expense" shall mean, for any period, the
aggregate, consolidated amount of depreciation expenses of Borrowers, as
determined in accordance with
4
GAAP.
"Consolidated EBITDA" shall mean for any period, Borrowers' Consolidated
Net Income (or deficit) plus (a) Consolidated Interest Expense, (b) Consolidated
Tax Expense, (c) Consolidated Depreciation Expense, (d) Consolidated
Amortization Expense minus (e) extraordinary gains and plus (f) extraordinary
non-cash losses, all as determined in accordance with GAAP. In addition to the
foregoing, for the measurement period in which an acquisition or merger by any
Borrower occurs which is permitted by written consent of Lenders (it being
understood that such consent may be withheld by Lenders in their sole and
absolute discretion), and for the next succeeding three (3) measurement periods,
Consolidated EBITDA shall be calculated by giving effect to such acquisition or
merger as if it has occurred on the first day of the applicable measurement
period.
"Consolidated Interest Expense" shall mean for any period, the aggregate,
consolidated amount of interest expense required to be paid or accrued during
such period on all Indebtedness of Borrowers outstanding during all or any part
of such period, as determined in accordance with GAAP.
"Consolidated Net Income" shall mean the consolidated net income after
taxes of Borrowers as such would appear on Borrowers' consolidated statement of
income, prepared in accordance with GAAP.
"Consolidated Tax Expense" for any period, the aggregate, consolidated
amount of income tax expense of Borrowers, as determined in accordance with
GAAP.
"Contractual Obligations" shall mean, with respect to any Person, any term
or provision of any securities issued by such Person, or any indenture,
mortgage, deed of trust, contract, undertaking, document, instrument or other
agreement to which such Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject.
"Conversion Date" shall mean each anniversary date of this Credit
Agreement.
"Credit Agreement" shall mean this Amended and Restated Loan and Security
Agreement, as the same may be modified, amended, extended, restated or
supplemented from time to time.
"Credit Documents" shall mean, collectively, this Credit Agreement, the
Notes, the Letters of Credit, the Letter of Credit Documents, the Security
Documents, the Subordination Agreements and all other documents, agreements,
instruments, opinions and certificates executed and delivered in connection
herewith or therewith, as the same may be modified, amended, extended, restated
or supplemented from time to time.
"Customer Rebate Reserve" shall mean a reserve against the Borrowing Base
in an amount equal to the accrued customer rebates as reflected on the most
recent financial statement of Borrower provide to Agent pursuant to this
Agreement.
"Default" shall mean an event, condition or default which, with the giving
of notice, the passage of time or both would be an Event of Default.
"Defaulting Lender" shall have the meaning given to such term in Section
2.1(d)(iv).
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"Depository Institution shall mean each depository institution where any
Borrower maintains a bank account and which institutions are set forth on
Schedule 7.29 as of the Closing Date, along with the numbers and title of each
account maintained by such Borrower at such institution.
"Dilution Rate" shall mean the ratio, expressed as a percentage, of (x)
the aggregate dollar amounts, without duplication, of all returns, allowances,
chargebacks, write-offs and other miscellaneous non-cash credits arising in
connection with the Accounts of Borrowers to (y) Borrowers' gross sales, each
measured on a rolling twelve (12) month basis and tested in connection with each
of Agent's field examinations.
"Documentary Letter of Credit" shall mean a Letter of Credit issued by
Issuing Bank for the account of any Borrower pursuant to this Agreement to
enable such Borrower to acquire merchandise, and all amendments, renewals,
extensions or replacements thereof.
"Documentary Letter of Credit Obligations" shall mean, at any time, the
sum of (a) the aggregate undrawn amount of all Documentary Letters of Credit
outstanding at such time, plus (b) the aggregate amount of all drawings under
Documentary Letters of Credit for which Issuing Bank has not at such time been
reimbursed, plus (c) without duplication, the aggregate amount of all payments
made by each Lender to Issuing Bank with respect to such Lender's participation
in Documentary Letters of Credit as provided in Section 3.3 for which Borrowers
have not at such time reimbursed Lenders, whether by way of a Loan or otherwise.
"DOL" shall mean the U.S. Department of Labor and any successor department
or agency.
"Dollars" and "$" shall mean dollars in lawful currency of the United
States of America.
"Early Termination" shall have the meaning given to such term in Section
2.3(c).
"Early Termination Fee" shall have the meaning given to such term in
Section 2.3(c).
"Eligible Accounts Receivable" shall mean all Accounts of any Borrower
(other than Phoenix Fulfillment) meeting all of the following specifications:
(i) the Account is lawfully and exclusively owned by such Borrower and subject
to no Lien (other than Permitted Liens, if applicable, and Liens granted under
the Security Documents) and such Borrower has the right of assignment thereof
and the power to grant a security interest therein; (ii) the Account is valid
and enforceable representing the undisputed indebtedness of an account debtor
for the purchase of Inventory not more than ninety (90) days past the invoice
date and does not represent a rebilling or pre-billing; (iii) not more than 50%
of the aggregate balance of all Accounts owing from an account debtor obligated
on the Account are outstanding more than ninety (90) days past their invoice
date; (iv) the Account is not subject to any defense, set-off, or counterclaim,
deduction, discount, credit, chargeback, freight claim, allowance or adjustment
of any kind; (v) the Account is net of any portion thereof attributable to the
sale of goods that have been returned, rejected, lost or damaged; (vi) if the
Account arises from the sale of goods by a Borrower, such sale was an absolute
sale and not on consignment or on approval or on a sale-or-return basis nor
subject to any other repurchase or return agreement, and such goods have been
shipped to the account debtor or its designee; (vii) if the Account arises from
the performance of services, such services have actually been performed;
6
(viii) the Account arose in the ordinary course of such Borrower's business;
(ix) no notice of the bankruptcy, receivership, reorganization, liquidation,
dissolution, or insolvency of the account debtor has been received by Agent, any
Lender or any Borrower; (x) the account debtor is not a Subsidiary or Affiliate
of any Borrower; (xi) the Account is not an Account of an account debtor having
its principal place of business or executive office outside the United States,
unless the payment of such Account is guaranteed by an irrevocable letter of
credit satisfactory to Agent; (xii) the Account does not represent a sale to the
government of the United States or any subdivision or agency thereof unless
Borrowers have complied, for the benefit of Agent, with the Federal Assignment
of Claims Act; (xiii) the Account is not an Account on which the account debtor
is obligated to any Borrower under any instrument; (xiv) the transaction which
gave rise to the Account complies in all respects with all applicable laws,
rules and regulations of any Governmental Authority; and (xv) the Account meets
such other reasonable specifications and requirements which may from time to
time be established by Agent. Eligible Accounts shall not include that portion
of an Account representing interest charges for past due balances or debit
memos. Notwithstanding the foregoing, no Accounts of Phoenix Fulfillment shall
be considered Eligible Accounts Receivable.
"Eligible Canadian Accounts Receivable" shall mean an Account of a
Borrower which otherwise meets the definition of an Eligible Account Receivable
except that the sale is to an account debtor located in Canada (other than
Quebec).
"Eligible Inventory" shall mean any and all raw material Inventory
(including raw paper, raw laminating film and unused printing plates) of any
Borrower located at such Borrower's places of business shown on Schedule 7.6
attached hereto and made a part hereof (and for which location Agent has
received an Acknowledgement and Waiver Agreement, which (i) is not subject to
any Lien (other than Liens granted under the Security Documents and Permitted
Liens, if applicable); (ii) is not slow moving, obsolete or unmerchantable;
(iii) meets all standards, if any, imposed by any Governmental Authority; and
(iv) meets such other reasonable specifications and requirements which may from
time to time be established by Agent. Eligible Inventory does not include
work-in-process, used printing plates, finished goods, packaging materials,
supplies and other similar items or any unused printing plates in excess of
$250,000 or Inventory of Phoenix Fulfillment.
"Equipment Availability" shall mean, the sum of $4,100,000. The aggregate
amount of Equipment Availability shall permanently and automatically reduce by
(x) Two Hundred Fifty Thousand Dollars ($250,000) on the first day of each
calendar month commencing January 1, 2004, (y) if all or any portion of a
security deposit financed by Lenders shall be returned to Borrowers, an amount
equal to the returned portion of such security deposit and (z) by an amount
equal to fifty percent (50%) of the amount of the ▇▇▇▇▇▇ Settlement paid to
Agent with such amount under this clause (z) being applied in the inverse order
of reductions.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute.
"ERISA Affiliate" shall mean any (i) corporation which is or was at any
time a member of the same controlled group of corporations (within the meaning
of Section 414(b) of the Internal Revenue Code) as any Borrower; (ii)
partnership or other trade or business (whether or not incorporated) at any time
under common control (within the meaning of Section 414(c) of the
7
Internal Revenue Code) with any Borrower; and (iii) member of the same
affiliated service group (within the meaning of Section 414(m) of the Internal
Revenue Code) as any Borrower, any corporation described in clause (i) above, or
any partnership or trade or business described in clause (ii) above.
"Eurodollar Loan" shall mean a Loan bearing interest based on a rate
determined by reference to the Eurodollar Rate.
"Eurodollar Rate" shall mean, for the Interest Period for each Eurodollar
Loan comprising part of the same borrowing (including conversions, extensions
and renewals), a per annum interest rate determined pursuant to the following
formula:
London Interbank Offered Rate
Eurodollar Rate = ---------------------------------
1 - Eurodollar Reserve Percentage
"Eurodollar Reserve Percentage" shall mean for any day, that percentage
(expressed as a decimal) which is in effect from time to time under Regulation D
of the Board of Governors of the Federal Reserve System (or any successor), as
such regulation may be amended from time to time or any successor regulation, as
the maximum reserve requirement (including, without limitation, any basic,
supplemental, emergency, special, or marginal reserves) applicable with respect
to Eurocurrency liabilities as that term is defined in Regulation D (or against
any other category of liabilities that includes deposits by reference to which
the interest rate of Eurodollar Loans is determined), whether or not any Lender
has any Eurocurrency liabilities subject to such reserve requirement at that
time. Eurodollar Loans shall be deemed to constitute Eurocurrency liabilities
and as such shall be deemed subject to reserve requirements without benefits of
credits for proration, exceptions or offsets that may be available from time to
time to a Lender. The Eurodollar Rate shall be adjusted automatically on and as
of the effective date of any change in the Eurodollar Reserve Percentage.
"Event(s) of Default" shall have the meaning provided for in Article XII.
"Excess Borrowing Availability" shall mean as of any date of
determination, an amount equal to the difference of (a) the Borrowing Base,
minus (b) the amount of the Obligations and extensions of credit requested to be
made as of such date, minus (c) all sums owing to trade creditors which remain
outstanding beyond normal trade terms.
"Exchange Act" shall mean The Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Excluded Equipment" shall mean any Equipment owned by any Borrower that
is subject to a purchase money Lien or a Capital Lease Obligation if the
contract or other agreement in which such Lien is granted (or in the
documentation providing for such Capital Lease Obligation) prohibits or requires
the consent of any Person other than a Borrower as a condition to the creation
of any other Lien on such Equipment.
"Existing Amendment Fee" shall mean the fee payable to Agent in an amount
equal to $72,000, which was fully earned under the Existing Loan Documents.
8
"Expenses" shall have the meaning given to such term in Section 15.7.
"Excluded Taxes" shall have the meaning given to such term in Section
2.7(a).
"Federal Funds Rate" shall mean, for any period, a fluctuating interest
rate per annum equal, for each day during such period, to the weighted average
of the rates on overnight Federal Funds transactions with members of the Federal
Reserve System arranged by Federal Funds brokers, as published for such day (or,
if such day is not a Business Day, for the next preceding Business Day) by the
Federal Reserve Bank of New York, or, if such rate is not so published for any
day that is a Business Day, the average of the quotations for such day on such
transactions received by Agent from three Federal Funds brokers of recognized
standing selected by it.
"Fees" shall mean, collectively, the Existing Amendment Fee, the Closing
Fee, the Unused Line Fee, the Letter of Credit Fee and any other fees at any
time payable hereunder or under any other written agreement among Borrowers and
Agent.
"Financials" shall have the meaning given to such term in Section 7.5.
"Financial Statements" shall mean the Financial Statements Borrowers are
obligated to deliver pursuant to Section 8.1 of this Agreement.
"Fixed Charge Coverage Ratio" for any measurement period, the ratio
obtained by dividing (a) an amount equal to (i) Consolidated EBITDA, minus (ii)
non-financed Consolidated Capital Expenditures (which shall in all events
exclude Consolidated Capital Expenditures for which Loans are made against
Equipment Availability), minus (iii) Distributions to shareholders of Phoenix,
minus (iv) loans and advances made to, or capital contributions and investments
made in, any Person other than a Borrower by a Borrower, minus (v) purchases
made of intangibles assets by (b) Fixed Charges, all as determined on a
consolidated basis for Borrowers in accordance with GAAP.
"Fixed Charges" for any measurement period, the sum of (a) Consolidated
Interest Expense, plus (b) scheduled payments of principal of all Indebtedness
of Borrowers during the next succeeding 12 month period (including, without
limitation, that portion of any Capitalized Lease Obligations attributable to
principal amortization in accordance with GAAP), plus, (c) tax payments of
Borrowers for such period (reduced, however, by any cash tax refunds received by
Borrowers during such period).
"Foreign Lender" shall have the meaning given to such term in Section
2.7(a).
"Funding Bank" shall have the meaning given to such term in Section 4.8.
"GAAP" shall mean generally accepted accounting principles in the United
States of America, as in effect on the date hereof and applied in a manner
consistent with the Financials.
"Governmental Authority" shall mean any federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Hagerstown Facility" shall mean Phoenix's real estate and improvements
located at Hagerstown, Washington County, Maryland as more fully described in
the Master Mortgage
9
covering the Hagerstown Facility.
"Hedging Agreements" shall mean any Interest Rate Protection Agreement or
other interest rate protection agreement, foreign currency exchange agreement,
commodity purchase or option agreement or other interest rate hedging device or
swap agreement (as defined in U.S.C. ss. 1.01 et. seq.) or exchange rate or
commodity price hedging agreements.
"Highest Lawful Rate" shall mean, at any given time during which any
Obligations shall be outstanding hereunder, the maximum nonusurious interest
rate, if any, that at any time or from time to time may be contracted for,
taken, reserved, charged or received on the indebtedness under this Credit
Agreement, under the laws of the Commonwealth of Pennsylvania (or the law of any
other jurisdiction whose laws may, by order of court, be mandatorily applicable
notwithstanding other provisions of this Credit Agreement and the other Credit
Documents), in any case after taking into account, to the extent permitted by
applicable law, any and all relevant payments or charges under this Credit
Agreement and any other Credit Documents executed in connection herewith, and
any available exemptions, exceptions and exclusions.
"Indebtedness" shall mean, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b) all
obligations of such Person evidenced by bonds, debentures, notes or similar
instruments, or upon which interest payments are customarily made, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers entered into
in the ordinary course of business), (d) all obligations of such Person issued
or assumed as the deferred purchase price of property or services purchased by
such Person (other than trade debt incurred in the ordinary course of business
and payable in accordance with customary practices) which would appear as
liabilities on a balance sheet of such Person, (e) all obligations of such
Person under take-or-pay or similar arrangements or under commodities
agreements, (f) all Indebtedness of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on, or payable out of the proceeds of production from,
property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all guaranties of such Person with
respect to Indebtedness of the type referred in this definition of another
Person, (h) the principal portion of all Capitalized Lease Obligations of such
Person, (i) all obligations of such Person under Hedging Agreements, (j) the
face amount (less any amount thereof that shall have been drawn and reimbursed)
of all standby or commercial letters of credit issued or bankers' acceptances
facilities created for the account of such Person and, without duplication, all
drafts drawn thereunder (to the extent unreimbursed), (k) all preferred Capital
Stock issued by such Person and required by the terms thereof to be redeemed, or
for which mandatory sinking fund payments are due, by a fixed date, (l) the
principal portion of all obligations of such Person under off-balance sheet
financing arrangements and (m) the Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner or a
joint venturer.
"Independent Accountant" shall mean a firm of independent public
accountants of nationally recognized standing selected by the Board of Directors
of Borrowers, which is "independent" as that term is defined in Rule 2-01 of
Regulation S-X promulgated by the Securities and Exchange Commission, or a firm
of independent public accountants otherwise reasonably acceptable to Agent.
10
"Intellectual Property Agreement" shall mean that certain Patents,
Trademarks, Copyrights, and Licenses Security Agreement dated as of even date
herewith from Phoenix in favor of Agent, for the benefit of Lenders, as may be
amended, modified, replaced or restated from time to time.
"Interest Adjustment Date" shall mean for the purposes of Section 4.1(b)
and Section 4.3(b), that date which is five (5) Business Days after the later of
Agent's receipt of each of (i) Borrowers' monthly Financial Statements delivered
as of the end of each March, June and September and the annual Financial
Statements, each as delivered to Agent pursuant to Section 8.1 and (ii)
Borrowers' Compliance Certificate for each such fiscal quarter.
"Interest Period" shall mean, as to Eurodollar Loans, a period of one
month, two months, three months or six months, as selected by Borrowers,
commencing on the date of the borrowing (including continuations and conversions
thereof); provided, however, (i) if any Interest Period would end on a day which
is not a Business Day, such Interest Period shall be extended to the next
succeeding Business Day (except that where the next succeeding Business Day
falls in the next succeeding calendar month, then on the next preceding Business
Day), (ii) no Interest Period shall extend beyond the Maturity Date, and (iii)
any Interest Period with respect to a Eurodollar Loan that begins on the last
Business Day of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest Period)
shall end on the last Business Day of the relevant calendar month at the end of
such Interest Period.
"Interest Rate Protection Agreement" shall mean any interest rate
protection agreement, foreign currency exchange agreement, commodity purchase or
option agreement or other interest or exchange rate or commodity price hedging
agreements between a Borrower and any Lender, or any affiliate of a Lender.
"Internal Revenue" shall mean the Internal Revenue Service and any
successor agency.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute thereto and all rules and
regulations promulgated thereunder.
"Inventory" shall mean all of Borrowers' inventory, including without
limitation, (i) all raw materials, work in process, parts, components,
assemblies, supplies and materials used or consumed in any Borrower's business;
(ii) all goods, wares and merchandise, finished or unfinished, held for sale or
lease or leased or furnished or to be furnished under contracts of service; and
(iii) all goods returned to or repossessed by any Borrower.
"Inventory Sublimit" shall mean $3,000,000.
"Investment" in any Person shall mean (i) the acquisition (whether for
cash, property, services, assumption of Indebtedness, securities or otherwise,
but exclusive of the acquisition of inventory, supplies, equipment and other
property or assets used or consumed in the ordinary course of business of the
applicable Borrower and Capital Expenditures not otherwise prohibited hereunder)
of assets, shares of Capital Stock, bonds, notes, debentures, partnership, joint
ventures or other ownership interests or other securities of such Person, or
(ii) any other capital contribution to or investment in such Person. In
determining the aggregate amount of Investments outstanding at any particular
time, (a) there shall be deducted in respect of each such Investment any amount
11
received as a return of capital (but only by repurchase, redemption, retirement,
repayment, liquidating dividend or liquidating distribution); (b) there shall be
deducted in respect of any Investment any cash amounts received as earnings on
such Investment, whether as dividends, interest or otherwise; and (c) there
shall not be deducted from or included in, as applicable, the aggregate amount
of Investments any decrease or increase, respectively, in the market value
thereof.
"Issuing Bank" shall mean Wachovia Bank, National Association, or any
successor or assign which shall issue a Letter of Credit for the account of
Borrowers.
"▇▇▇▇▇▇ Settlement" shall mean, an amount equal to the proceeds received
by any Borrower (or any Subsidiary of Borrower) as a result of any award,
judgment, settlement or any other payment in connection with Phoenix's
litigation against ▇▇▇▇▇▇ Biagosch GmbH, ▇▇▇▇▇▇ America, Inc. or any other
entity related thereto, as such litigation is described in Phoenix's 10-K dated
August 14, 2003.
"Leases" shall have the meaning given to such term in Section 7.16.
"Lender Hedging Indebtedness" shall mean indebtedness of a Borrower to a
Lender or any affiliate of a Lender in respect of Interest Rate Protection
Agreements between such Lender and such Borrower.
"Lenders" shall have the meaning given to such term in the preamble of
this Credit Agreement.
"Letter of Credit Documents" shall mean, with respect to any Letter of
Credit, such Letter of Credit, any amendments thereto, any documents delivered
in connection therewith, any application therefor, and any agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to such Letter of Credit) governing or providing for (i) the
rights and obligations of the parties concerned or at risk or (ii) any
collateral security for such obligations which documents shall be in form and
substance reasonably satisfactory to the Issuing Bank.
"Letter of Credit Fees" shall mean the letter of credit fees referred to
in Section 4.5(a).
"Letter of Credit Obligations" shall mean, at any time, the sum of the
Documentary Letter of Credit Obligations plus the Stand-By Letter of Credit
Obligations.
"Letter of Credit Sublimit" shall mean $2,000,000.
"Letters of Credit" shall mean collectively all letters of credit (whether
a Documentary Letter of Credit or a Stand-By Letter of Credit) issued and
outstanding by Issuing Bank for the account of a Borrower pursuant to this
Credit Agreement, and all amendments, renewals, extensions or replacements
thereof.
"Lien(s)" shall mean any lien, charge, trust, pledge, security interest,
deed of trust, mortgage, assignment or other claim or encumbrance of any kind or
nature upon any interest in Property.
"Loan" or "Loans" shall have the meanings given to such terms in Section
2.1(b) and shall
12
include Prime Rate Loans and Eurodollar Loans.
"Lockbox" shall have the meaning given to such term in Section 2.4(b)(i).
"London Interbank Offered Rate" shall mean, with respect to any Eurodollar
Loan for the Interest Period applicable thereto, the rate of interest per annum
(rounded upwards, if necessary, to the nearest 1/100 of 1.0%) appearing on
Telerate Page 3750 (or any successor page) as the London interbank offered rate
for deposits in Dollars at approximately 11:00 A.M. (London time) 2 Business
Days prior to the first day of such Interest Period for a term comparable to
such Interest Period; provided, however, if more than one rate is specified on
Telerate Page 3750, the applicable rate shall be the arithmetic mean of all such
rates. If, for any reason, such rate is not available, the term "London
Interbank Offered Rate" shall mean, with respect to any Eurodollar Loan for the
Interest Period applicable thereto, the rate of interest per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1.0%) appearing on Reuters Screen
LIBO Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 A.M. (London time) 2 Business Days prior to the first day of
such Interest Period for a term comparable to such Interest Period; provided,
however, if more than one rate is specified on Reuters Screen LIBO Page, the
applicable rate shall be the arithmetic mean of all such rates.
"Master Mortgages" shall mean collectively (a) that certain Master Deed of
Trust, Security Agreement and Assignment of Leases and Rents dated September 15,
1998 by Phoenix in favor of Agent with respect to the Hagerstown Facility; and
(b) that certain Master Deed of Trust, Security Agreement and Assignment of
Leases and Rents dated September 15, 1998 by Realty in favor of Agent with
respect to the Book Technology Park Facility, as the same may be amended,
modified, restated or supplemented from time to time (including, without
limitation, pursuant to the Mortgage Modifications).
"Master Pledge Agreement" collectively, those certain Stock Pledge
Agreements executed by each of the holders of Capital Stock of Phoenix in favor
of Agent dated as of September 15, 1998, as amended, modified, restated or
supplemented from time to time.
"Material Adverse Change" shall mean a material adverse change in (a) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of a Borrower, (b) the Collateral, (c) a
Borrower's ability to perform its respective obligations under the Credit
Documents, or (d) the validity, enforceability or availability of rights and
remedies of Agent or Lender hereunder.
"Material Adverse Effect" shall mean a material adverse effect on (a) the
business, prospects, operations, results of operations, assets, liabilities or
condition (financial or otherwise) of a Borrower, (b) the Collateral, (c) a
Borrower's ability to perform its respective obligations under the Credit
Documents, or (d) the validity, enforceability or availability of rights and
remedies of Agent or Lender hereunder.
"Material Contract" shall mean any contract between a Borrower and a
publisher identified on Schedule 7.22 and any contract or other arrangement
(other than any of the Subordinated Credit Documents), whether written or oral,
to which a Borrower is a party as to which the breach, nonperformance,
cancellation or failure to renew by any party thereto could reasonably be
expected
13
to have a Material Adverse Effect.
"Matured Lender Hedging Indebtedness" shall mean any Lender Hedging
Indebtedness to a Lender that has matured and/or become fixed and due and
payable as a result of the expiration, termination, settlement or unwinding of
the Interest Rate Protection Agreement provided by such Lender.
"Maturity Date" shall mean August 31, 2006.
"Merchandise Returns" shall mean any of the goods or products sold by
Borrowers that are returned to Borrowers.
"Mortgage Modifications" shall have the meaning given to such term in
Section 5.5.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA and (i) which is, or within the immediately
preceding six (6) years was, contributed to by Borrowers, or any ERISA Affiliate
or (ii) with respect to which Borrowers may incur any liability.
"Net Cash Proceeds" shall mean the aggregate cash proceeds received by
Borrowers in respect of any Asset Disposition, net of (a) direct costs
(including, without limitation, legal, accounting and investment banking fees,
and sales commissions) and (b) taxes paid or payable as a result thereof; it
being understood that "Net Cash Proceeds" shall include, without limitation, any
cash received upon the sale or other disposition of any non-cash consideration
received by Borrowers in any Asset Disposition.
"Notice of Borrowing" shall have the meaning given to such term in Section
2.1(d)(i).
"Notice of Extension/Conversion" shall have the meaning given to such term
in Section 2.8.
"Notes" shall have the meaning given to such term in Section 2.1(c).
"Obligations" shall mean the Loans, any other loans and advances or
extensions of credit made or to be made at any time by any Lender (or by Agent
on behalf of any Lender) to Borrowers, or to any of them, or to others for
Borrowers' account in each case pursuant to the terms and provisions of this
Credit Agreement, or any other Credit Document, together with interest thereon
(including interest which may accrue as post-petition interest in connection
with any bankruptcy or similar proceeding) and, including, without limitation,
any reimbursement obligation or indemnity of Borrowers on account of Letters of
Credit and all other Letter of Credit Obligations, Fees and all other
indebtedness, fees (including the Fees), expenses (including the Expenses),
liabilities and obligations of every kind or nature which may at any time be
owing by Borrowers to Agent, Issuing Bank or any Lender in each case pursuant to
this Credit Agreement, or any other Credit Document, whether now in existence,
hereafter arising or incurred from time to time by Borrowers, and all expenses
incurred at any time by Agent, Issuing Bank or Lenders (including the Expenses),
as well as expenditures to protect, preserve or defend any Collateral and
Agent's rights hereunder or in the Collateral, all of the foregoing, whether
unsecured or secured, due or to become due, absolute or contingent, joint or
several, matured or unmatured, direct or indirect, related or unrelated and
14
whether Borrowers are liable to Agent or such Lender for such indebtedness as
principal, surety, endorser, guarantor or otherwise. Without limiting the
generality of the foregoing, Obligations shall also include any other
indebtedness owing to Agent or any Lender in connection with any lockbox, cash
management or other services provided at any time by Agent or any Lender to
Borrowers pursuant to or related to the Credit Documents, Borrowers' liability
to Agent, Issuing Bank and Lenders as maker or endorser of any promissory note
or other instrument for the payment of money, Borrowers' liability to Agent,
Issuing Bank and Lenders, arising under any guaranty, endorsement or undertaking
which Agent or a Lender may make or issue to others for Borrowers' account
pursuant to or related to the Credit Documents, including any accommodation
extended with respect to applications for Letters of Credit.
"Other Taxes" shall have the meaning given to such term in Section 2.7(c).
"Overadvance" shall mean the amount by which the outstanding Loans and
outstanding Letter of Credit Obligations exceed the Borrowing Base (or the
applicable portion thereof or sublimit thereunder).
"PBGC" shall mean the Pension Benefit Guaranty Corporation and any Person
succeeding to the functions thereof.
"Perfection Certificates" shall mean collectively, those certain
perfection certificates for each Borrower, each in form and substance acceptable
to Agent (in its reasonable discretion).
"Permitted Holders" shall mean any or all of ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ and Phoenix's Employees' Stock Bonus and Ownership Plan (so long as
▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ are the sole trustees of such Employees'
Stock Bonus and Ownership Plan).
"Permitted Indebtedness" shall mean:
(i) Indebtedness to Lenders with respect to the Loans, the Letters
of Credit, Interest Rate Protection Agreements, or otherwise, pursuant to the
Credit Documents;
(ii) Indebtedness (including Capitalized Lease Obligations)
hereafter incurred by Borrowers to finance fixed assets provided that (A) the
total of all such Indebtedness for all such Persons taken together shall not
exceed an aggregate principal amount of $5,000,000 at any one time outstanding;
(B) such Indebtedness when incurred shall not exceed the purchase price of the
asset(s) financed or the lesser of the purchase price or the value of the
asset(s) if subsequently financed; and (C) no such Indebtedness shall be
refinanced for a principal amount in excess of the principal balance outstanding
thereon at the time of such refinancing;
(iii) unsecured obligations of Borrowers in respect of Hedging
Agreements entered into in order to manage existing or anticipated interest rate
or exchange rate risks and not for speculative purposes;
(iv) Existing Indebtedness set forth on Schedule 1.1(b) attached
hereto and any refinancings of such Indebtedness; provided that the aggregate
principal amount of such Indebtedness is not increased, the scheduled maturity
dates of such Indebtedness are not shortened and such
15
refinancing is on terms and conditions no more restrictive than the terms and
conditions of the Indebtedness being refinanced; and
(v) Subordinated Debt.
"Permitted Investments" shall mean:
(i) interest-bearing demand or time deposits (including certificates
of deposit) which are insured by the Federal Deposit Insurance Corporation
("FDIC") or a similar federal insurance program; provided, however, that
Borrowers may, in the ordinary course of their business, maintain in their
disbursement account from time to time amounts in excess of then applicable FDIC
or other program insurance limits;
(ii) Investments existing on the Closing Date and set forth on
Schedule 1.1(c) attached hereto;
(iii) marketable, direct obligations of the United States of
America, its agencies and instrumentalities maturing within 365 days of the date
of purchase;
(iv) commercial paper issued by corporations, each of which shall
have a net worth of at least $100,000,000, and each of which conducts a
substantial part of its business in the United States of America, maturing
within 270 days from the date of the original issue thereof, and which at the
time of acquisition has the highest rating by ▇▇▇▇▇'▇ Investors Service, Inc. or
Standard and Poor's Corporation;
(v) bankers' acceptances, and certificates of deposit maturing
within 365 days of the date of purchase which are issued by, or time deposits
maintained with, an eligible institution having capital, surplus and undivided
profits totaling more than $100,000,000 and which have the highest rating by
▇▇▇▇▇'▇ Investors Service, Inc. or Standard and Poor's Corporation;
(vi) money market or similar funds that invest primarily in the
types of investments referred to in clauses (i), (iii), (iv) and (v) above; and
(vii) Investments permitted under Section 10.17.
"Permitted Liens" shall mean:
(i) Liens granted to Agent by Borrowers pursuant to any Credit
Document;
(ii) Existing Liens set forth on Schedule 1.1(e) attached hereto;
(iii) Liens on fixed assets securing Indebtedness (including
Capitalized Lease Obligations) to the extent such Indebtedness is Indebtedness
described in clause (ii) of the definition of Permitted Indebtedness, provided
that (A) any such Lien attaches only to the assets to be financed and (B) a
description of the assets so financed is furnished to Agent;
(iv) Liens of warehousemen, mechanics, materialmen, workers,
repairmen, fillers, packagers, processors, common carriers, landlords and other
similar Liens arising by operation of law
16
or otherwise, not waived in connection herewith, for amounts that are not yet
due and payable or which are being diligently contested in good faith by
Borrowers by appropriate proceedings, provided that in any such case an adequate
reserve is being maintained by Borrowers for the payment of same;
(v) Liens for taxes, assessments or other governmental charges not
yet due and payable or which are being diligently contested in good faith by
Borrowers by appropriate proceedings; and
(vi) deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment insurance.
"Permitted Third Party Loans" shall mean:
(i) loans and advances existing as of the Closing Date as set forth
on Schedule 10.9;
(ii) loans and advances to shareholders of Phoenix not exceeding
$500,000 in the aggregate for all such loans and advances; and
(iii) loans and advances permitted under Section 10.17.
"Person" shall mean any individual, sole proprietorship, partnership,
joint venture, limited liability entity, trust, unincorporated organization,
association, corporation, institution, entity, or government (including any
division, agency or department thereof), and, as applicable, the successors,
heirs and assigns of each.
"Phoenix" shall mean Phoenix Color Corp., a Delaware corporation.
"Phoenix Fulfillment" shall mean Phoenix Color Fulfillment, Inc., a
Delaware corporation.
"Phoenix Fulfillment Account" shall mean a certain demand deposit account
of Phoenix Fulfillment maintained with Agent.
"Plan" shall mean any employee benefit plan, program or arrangement,
whether oral or written, maintained or contributed to by Borrowers, or with
respect to which Borrowers may incur liability.
"Prime Rate" shall mean the greater of (a) the rate which Wachovia
announces from time to time as its prime lending rate, as in effect from time to
time or (b) the Federal Funds Rate plus 50 basis points. The Prime Rate is a
reference rate and does not necessarily represent the lowest or best rate
actually charged to any customer. Wachovia (and its affiliates) may make
commercial loans or other loans at rates of interest at, above or below the
Prime Rate.
"Prime Rate Loans" shall mean a Loan bearing interest based on a rate
determined by reference to the Prime Rate.
"Property" shall mean all personal and real property of every kind and
description (whether tangible or intangible) in which a Person has any right,
title or interest.
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"Proprietary Rights" shall have the meaning given to such term in Section
7.14.
"Real Property" shall mean all right, title and interest of any Borrower
or any of its Subsidiaries (including any leasehold estate) in and to any parcel
of real property owned or operated by any Borrower or any of its Subsidiaries,
(including, without limitation, the Hagerstown Facility, and Book Technology
Park Facility), together with, in each case, all improvements, and appurtenant
fixtures, equipment, easements and other property and rights incidental to the
ownership, lease or operation thereof.
"Realty" shall mean Phoenix (MD.) Realty, LLC., a Maryland limited
liability company.
"Rental Expense" shall mean, for any applicable period of computation, the
sum of all real property rental expense of Borrowers for such period, determined
in accordance with GAAP.
"Reportable Event" shall mean any of the events described in Section 4043
of ERISA and the regulations thereunder.
"Required Lenders" shall mean, at any time, Lenders which are then in
compliance with their obligations hereunder and holding in the aggregate at
least 51% of (i) the Commitments (and participation interests therein) or (ii)
if the Commitments have been terminated, the outstanding Loans and participation
interests (including the participation interests of Issuing Bank in any Letters
of Credit); provided that if there are only two (2) Lenders at any time party to
this Credit Agreement, then Required Lenders shall mean both such Lenders.
"Restricted Payment" shall mean (i) any cash dividend or other cash
distribution, direct or indirect, on account of any shares of any class of
Capital Stock of any Borrower, as the case may be, now or hereafter outstanding,
(ii) any redemption, retirement, sinking fund or similar payment, purchase or
other acquisition for value, direct or indirect, of any shares of any class of
Capital Stock of any Borrower now or hereafter outstanding by such Borrower, as
the case may be, (iii) any cash payment made to redeem, purchase, repurchase or
retire, or to obtain the surrender of, any outstanding warrants, options or
other rights to acquire any shares of any class of Capital Stock of any Borrower
now or hereafter outstanding, or (iv) any payment to any Affiliate of a Borrower
(other than payments to Phoenix's Employees' Stock Bonus and Ownership Plan made
in the ordinary course of Phoenix's business) except to the extent expressly
permitted in this Credit Agreement.
"Security Documents" shall mean any existing or future agreement or
document granting, creating or conferring any Lien in favor of Agent for the
benefit of Lenders securing all or any portion of the Obligations, including,
without limitation, the Intellectual Property Agreement, the Master Pledge
Agreement, the Subsidiary Pledge Agreement, the Master Mortgages and this Credit
Agreement.
"Settlement Period" shall have the meaning given to such term in Section
2.1(d)(iii).
"Stand-by Letter of Credit" shall mean all Letters of Credit, other than
Documentary Letters of Credit, issued by Issuing Bank for the account of any
Borrower pursuant to this Credit Agreement, and all amendments, renewals,
extensions and replacements thereof.
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"Stand-by Letter of Credit Obligations" shall mean at any time, the sum of
(a) the aggregate undrawn amount of all Stand-by Letters of Credit outstanding
at such time, plus (b) the aggregate amount of all drawings under Stand-by
Letters of Credit for which Issuing Bank has not at such time been reimbursed,
plus (c) without duplication, the aggregate amount of all payments made by each
Lender to Issuing Bank with respect to such Lender's participation in Stand-by
Letters of Credit as provided in Section 3.3 for which Borrowers have not at
such time reimbursed Lenders, whether by way of a Loan or otherwise.
"Structures" shall mean all plants, offices, manufacturing facilities and
warehouses.
"Subordinated Debt" shall mean existing Indebtedness set forth and
indicated as subordinated set forth on Schedule 1.1(f) hereto (including, the
Indebtedness evidenced by the Subordinated Notes) and unsecured Indebtedness
hereafter incurred by Borrowers, which, in each case, is expressly subordinated
and made junior to the payment and performance in full of the Obligations and
under a Subordination Agreement.
"Subordinated Notes" shall mean the subordinated notes issued by Phoenix
pursuant to the Subordinated Note Indenture dated February 2, 1999 by and
between Phoenix and Chase Manhattan Trust Company National Association in a
principal amount equal to $105,000,000, which Notes are eligible for resale
under Rule 144A of the Securities Act of 1933, as amended.
"Subordination Agreements" shall mean the agreements entered into from
time to time by and among Borrowers, Agent, on behalf of Lenders, and a third
party creditor of Borrowers providing for the subordination of such third party
creditor's claims to those of Lenders on terms and conditions satisfactory to
Agent.
"Subsidiary" shall mean, as to any Person, (a) any corporation more than
50% of whose Capital Stock of any class or classes having by the terms thereof
ordinary voting power to elect a majority of the directors of such corporation
(irrespective of whether or not at the time, any class or classes of such
corporation shall have or might have voting power by reason of the happening of
any contingency) is at the time owned by such Person directly or indirectly
through Subsidiaries, (b) any partnership, association, joint venture or other
entity in which such Person directly or indirectly through Subsidiaries has more
than a 50% interest in the total capital, total income and/or total ownership
interests of such entity at any time and (c) any partnership in which such
Person is a general partner.
"Subsidiary Pledge Agreement" that certain Subsidiary Pledge Agreement
executed and delivered by Phoenix in favor of Agent dated September 15, 1998, as
amended or modified from time to time.
"Taxes" shall mean any federal, state, local or foreign income, sales,
use, transfer, payroll, personal, property, occupancy, franchise or other tax,
levy, impost, fee, imposition, assessment or similar charge, together with any
interest or penalties thereon.
"Termination Event" shall mean (i) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan; (ii) the withdrawal of any Borrower, or any
ERISA Affiliate from a Benefit Plan during a plan year in which such entity was
a "substantial employer" as defined in Section 4001(a)(2)
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of ERISA; (iii) the providing of notice of intent to terminate a Benefit Plan
pursuant to Section 4041 of ERISA; (iv) the institution by the PBGC of
proceedings to terminate a Benefit Plan or Multiemployer Plan; (v) any event or
condition (a) which might constitute grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan
or Multiemployer Plan, or (b) that may result in termination of a Multiemployer
Plan pursuant to Section 4041A of ERISA; or (vi) the partial or complete
withdrawal within the meaning of Sections 4203 and 4205 of ERISA, of any
Borrower, or any ERISA Affiliate from a Multiemployer Plan.
"Third-Party Loan" shall mean any loan, advance, deposit or extension of
credit made or granted by Borrowers to any other Person.
"Unused Line Fee" shall mean a fee determined by multiplying (i) the
positive difference, if any, between (A) the Committed Amount in effect at such
time and (B) the average daily Loans of Borrowers and the Letter of Credit
Obligations outstanding during such calendar month by (ii) 0.50% per annum, as
may be adjusted pursuant to Section 4.3(b) hereof.
"Voting Stock" shall mean, with respect to any Person, Capital Stock
issued by such Person the holders of which are ordinarily, in the absence of
contingencies, entitled to vote for the election of directors (or persons
performing similar functions) of such Person, even though the right so to vote
has been suspended by the happening of such a contingency.
1.2. Accounting Terms and Determinations:
Unless otherwise defined or specified herein, all accounting terms
shall be construed herein and all accounting determinations for purposes of
determining compliance with Article IX hereof and otherwise to be made under
this Credit Agreement shall be made in accordance with GAAP. All Financial
Statements required to be delivered hereunder from and after the Closing Date
and all financial records shall be maintained in accordance with GAAP as in
effect as of the date of the Financials. If GAAP shall change from the basis
used in preparing the Financials, the certificates required to be delivered
pursuant to Section 8.1 demonstrating compliance with the covenants contained
herein shall include calculations setting forth the adjustments necessary to
demonstrate how Borrowers are in compliance with the financial covenants based
upon GAAP as in effect on the Closing Date. If Borrowers shall change their
method of inventory accounting, all calculations necessary to determine
compliance with the covenants contained herein shall be made as if such method
of inventory accounting had not been so changed.
1.3. Other Definitional Terms:
Terms not otherwise defined herein which are defined in the Uniform
Commercial Code as in effect in the Commonwealth of Pennsylvania (the "Code")
shall have the meanings given them in the Code. It is the specific intent of
Borrowers, Agent and Lenders that references to terms defined in the Code shall
mean the definitions set forth in the Code as the Code is in effect from time to
time. The term "on the date hereof" shall mean the date of this Credit
Agreement. The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Credit Agreement shall refer to the Credit Agreement as
a whole and not to any particular provision of this Credit Agreement, unless
otherwise specifically provided. References in this Agreement to "Articles",
20
"Sections", "Schedules" or "Exhibits" shall be to Articles, Sections, Schedules
or Exhibits of or to this Agreement unless otherwise specifically provided. Any
of the terms defined in Section 1.1 may, unless the context otherwise requires,
be used in the singular or plural depending on the reference. "Include",
"includes" and "including" shall be deemed to be followed by "without
limitation" whether or not they are in fact followed by such words or words of
like import. "Writing", "written" and comparable terms refer to printing,
typing, computer disk, e-mail and other means of reproducing words in a visible
form. References to any agreement or contract are to such agreement or contract
as amended, modified or supplemented from time to time in accordance with the
terms hereof and thereof. References to any Person include the successors and
permitted assigns of such Person. References "from" or "through" any date mean,
unless otherwise specified, "from and including" or "through and including",
respectively. References to any times herein shall refer to the applicable time
in Philadelphia, Pennsylvania.
ARTICLE II : LOANS
2.1. Loans:
a. Commitment. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties set forth herein, each Lender
severally agrees to lend to Borrowers at any time or from time to time on or
after the Closing Date and before the Maturity Date, such Lender's Commitment
Percentage of the Loans up to its Commitment as may be requested or (as provided
herein) deemed requested by Borrowers.
b. Determination of Borrowing Base.
(i) Lenders' loans and advances to or for the benefit of
Borrowers (each, a "Loan"; and collectively, the "Loans") together with the
outstanding Letter of Credit Obligations shall be made subject to the terms
hereof, on a revolving basis, but shall not in the aggregate exceed at any time
an amount (the "Borrowing Base") equal to the lesser of:
(A) the Committed Amount then in effect; or
(B) the aggregate of the following amounts:
(1) an amount equal to the sum of (a) 85% of
Eligible Accounts Receivable; plus (b) the lesser of (i) $250,000 and (ii) 85%
of Eligible Canadian Accounts Receivable; plus
(2) an amount equal to the lesser of (a) the
Inventory Sublimit, or (b) an amount equal to the sum of (i) 55% of Eligible
Inventory comprised of paper raw material, plus (ii) 50% of Eligible Inventory
comprised of ink raw material; plus (iii) 35% of Eligible Inventory comprised of
other raw material; plus
(3) the Equipment Availability; minus
(4) the Bond Reserve; minus
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(5) the Customer Rebate Reserve; minus
(6) the Availability Reserve.
(ii) Agent shall have the right, in its sole, but reasonable
discretion, to establish reserves (in addition to the establishment of Bond
Reserve and the Customer Rebate Reserve) from time to time against the Borrowing
Base with respect to such matters, events or contingencies and in such amounts
as Agent may determine. All references to the Borrowing Base in this Credit
Agreement shall mean the amount calculated under the definition of Borrowing
Base less any reserves then in existence.
(iii) The advance rate in clause (i)(B)(1) above shall be
reduced by 1.0% for each 1.0% by which the Dilution Rate for the Accounts
exceeds 5.0%. If Borrowers implement a perpetual inventory system that is
reasonably satisfactory to Agent (as indicated in writing by Agent to Borrower
Agent), then the percentage set forth in Section 2.1(b)(i)(B)(2)(b)(i) shall
increase to 60%.
(iv) No Lender shall be obligated at any time to make
available to Borrowers its Commitment Percentage of any requested Loan if such
amount plus its Commitment Percentage of all Loans and its Commitment Percentage
of all Letter of Credit Obligations then outstanding would exceed such Lender's
Commitment at such time. The aggregate balance of Loans and the aggregate amount
of all Letter of Credit Obligations outstanding shall not at any time exceed the
Borrowing Base. No Lender shall be obligated to make available, any Loans to
Borrowers to the extent such Loan, when added to the then outstanding Loans and
all Letter of Credit Obligations, would cause the aggregate outstanding Loans
and all Letter of Credit Obligations to exceed the Borrowing Base. Borrowers
shall repay to Agent on demand for the account of Lenders from time to time the
full amount of the excess, if any, of (A) the amount of all Loans and Letter of
Credit Obligations outstanding over (B) the Borrowing Base. Any excess of Loans
and Letter of Credit Obligations over the Borrowing Base shall constitute in any
event Obligations and shall be secured by the Collateral.
(v) Borrowers shall have the right at any time and from time
to time, upon ten (10) Business Days prior written notice to Agent to
permanently reduce, without premium or penalty (but subject to Section 2.3(c)
and Section 4.11 of this Agreement), the Committed Amount in the minimum amount
of $3,000,000 and integral multiples of $1,000,000 in excess thereof. Upon the
effectiveness of such notice, each Lender's Commitment shall be reduced in
accordance with each Lender's Commitment Percentage of the amount specified in
the notice. Agent shall promptly notify Lenders of its receipt of such notice.
Any notice to reduce the Committed Amount pursuant to this Section 2.1(b)(v)
shall be permanent and may not be revoked. In the event of any such reduction,
outstanding Obligations in an amount in excess of the Committed Amount, as so
reduced, shall be paid on the effective date together with interest accrued on
the amount so paid (subject to Section 4.11 of this Agreement) to the date of
reduction.
c. Revolving Notes. The obligations to repay the Loans and to pay
interest thereon shall be evidenced by separate amended and restated promissory
notes of Borrowers in favor of each Lender (collectively, the "Notes"), in form
and substance acceptable to Agent, one Note being payable to the order of each
Lender in a principal amount equal to such Lender's Commitment and
22
representing the joint and several unconditional obligations of Borrowers to pay
Lenders the Committed Amount, or, if less, the aggregate unpaid principal amount
of all Loans made by such Lender hereunder, plus interest accrued thereon, as
set forth herein. Borrowers irrevocably authorizes each Lender, at its option,
to make or cause to be made appropriate notations on its Note, or on a record
pertaining thereto, reflecting Loans and repayments thereof. The outstanding
amount of the Loans set forth on such Lender's Note or record or on the books
and records of Agent shall be prima facie evidence of the principal amount
thereof owing and unpaid to such Lender, but the failure to make such notation
or record, or any error in such notation or record shall not limit or otherwise
affect the obligations of Borrowers hereunder or under any Note to make payments
of principal of or interest on any Note when due.
d. Borrowings under the Notes.
(i) Each request for borrowings hereunder shall be made by a
notice in the form attached hereto as Exhibit B from Borrower Agent to Agent (a
"Notice of Borrowing"), given not later than 1:00 P.M. (A) on the Business Day
on which the proposed borrowing is requested to be made for Loans that will be
Prime Rate Loans, and (B) 3 Business Days prior to the date of the requested
borrowing of Loans that will be Eurodollar Loans. Each Notice of Borrowing shall
be given by either telephone or facsimile and, if requested by Agent, confirmed
in writing if by telephone, setting forth (1) the requested date of such
borrowing, (2) the aggregate amount of such requested borrowing, (3) whether
such Loans will be Prime Rate Loans or Eurodollar Loans, and if appropriate, the
applicable Interest Period, (4) certification by Borrowers that they have
complied in all respects with Section 6.2, all of which shall be specified in
such manner as is necessary to comply with all limitations on Loans outstanding
hereunder (including, without limitation, availability under the Borrowing Base)
and (5) the account at which such requested funds should be made available. Each
Notice of Borrowing shall be irrevocable by and binding on Borrowers. No more
than five (5) Eurodollar Loans shall be outstanding hereunder at any one time
and Eurodollar Loans shall be in a minimum principal amount of at least
$1,000,000 and integral multiples of $100,000 in excess thereof. Loans may be
repaid and reborrowed in accordance with the provisions hereof.
(ii) Unless Agent elects, in its sole discretion, to utilize
the provisions of Subsection (iii) below, Agent shall give to each Lender prompt
notice (but in no event later than 1:00 P.M. on the date of Agent's receipt of
notice from Borrowers) or each Notice of Borrowing by facsimile. No later than
2:00 P.M. on the date on which a borrowing is requested to be made pursuant to
the applicable Notice of Borrowing, each Lender will make available to Agent at
the address of Agent set forth on the signature pages hereto, in immediately
available funds, its Commitment Percentage of such borrowing requested to be
made. Unless Agent shall have been notified by any Lender prior to the date of
borrowing that such Lender does not intend to make available to Agent its
portion of the borrowing to be made on such date, Agent may assume that such
Lender will make such amount available to Agent as required above and Agent may,
in reliance upon such assumption, make available the amount of the borrowing to
be provided by such Lender. Upon fulfillment of the conditions set forth in
Article VI for such borrowing, and as soon as practicable after receipt of funds
from Lenders (but in any event not later than 2:00 P.M.) Agent will make such
funds as have been received from Lenders available to Borrowers at the account
specified by Borrowers in such Notice of Borrowing.
(iii) Because Borrowers anticipate requesting borrowings of
Loans on a
23
daily basis and repaying Loans on a daily basis through the collection of
Accounts and the proceeds of other Collateral, resulting in the amount of
outstanding Loans fluctuating from day to day, in order to administer the Loans
in an efficient manner and to minimize the transfer of funds between Agent and
Lenders, Lenders hereby instruct Agent, and Agent may (in its sole discretion,
without any obligation) (A) make available, on behalf of Lenders, the full
amount of all Loans requested by Borrowers or Loans to reimburse Issuing Bank
for drawings under Letters of Credit (whether or not requested by Borrowers),
not to exceed $2,000,000 in the aggregate at any one time outstanding, without
giving each Lender prior notice of the proposed borrowing, of such Lender's
Commitment Percentage thereof and the other matters covered by the Notice of
Borrowing and (B) if Agent has made any such amounts available as provided in
clause (A), upon repayment of Loans by Borrowers, first apply such amounts
repaid directly to the amounts made available by Agent in accordance with clause
(A) and not yet settled as described below. If Agent advances Loans on behalf of
Lenders, as provided in the immediately preceding sentence, the amount of
outstanding Loans and each Lender's Commitment Percentage thereof shall be
computed weekly (on such day as Agent may determine) rather than daily and shall
be adjusted upward or downward on the basis of the amount of outstanding Loans
as of 5:00 P.M. on the Business Day immediately preceding the date of each
computation; provided, however, that Agent retains the absolute right at any
time or from time to time to make the aforedescribed adjustments at intervals
more frequent than weekly. Agent shall deliver to each Lender after the end of
each weekly period, or such lesser period or periods as Agent shall determine, a
summary statement of the amount of outstanding Loans for such period (such week
or lesser period or periods being hereafter referred to as a "Settlement
Period"). If the summary statement is sent by Agent and received by Lenders
prior to 12:00 Noon on any Business Day each Lender or Agent, as applicable,
shall make the transfer described in the next succeeding sentence no later than
3:00 P.M. on the day such summary statement was sent; and if such summary
statement is sent by Agent and received by Lenders after 12:00 Noon on any
Business Day, each Lender or Agent, as applicable, shall make such transfers no
later than 3:00 P.M. on the next succeeding Business Day. If in any Settlement
Period, the amount of a Lender's Commitment Percentage of the Loans is in excess
of the amount of Loans actually funded by such Lender, such Lender shall
forthwith (but in no event later than the time set forth in the immediately
preceding sentence) transfer to Agent by wire transfer in immediately available
funds the amount of such excess; and, on the other hand, if the amount of a
Lender's Commitment Percentage of the Loans in any Settlement Period is less
than the amount of Loans actually funded by such Lender, Agent shall forthwith
transfer to such Lender by wire transfer in immediately available funds the
amount of such difference. For purposes thereof and to simplify the settlement
process, Agent may offset amounts owing to and from a Lender based on the status
of the Loans as to Borrowers in order to obtain an aggregate amount to be
remitted to or from each Lender on each such date. The obligation of each Lender
to transfer such funds shall be irrevocable and unconditional, without recourse
to or warranty by Agent and made without setoff or deduction of any kind. Each
of Agent and Lenders agree to ▇▇▇▇ their respective books and records at the end
of each Settlement Period to show at all times the dollar amount of their
respective Commitment Percentages of the outstanding Loans. Because Agent on
behalf of Lenders may be advancing and/or may be repaid Loans prior to the time
when any Lender will actually advance and/or be repaid Loans, interest with
respect to Loans shall be allocated by Agent to each Lender (including Agent) in
accordance with the amount of Loans actually advanced by and repaid to each
Lender (including Agent) during each Settlement Period and shall accrue from and
including the date such Loans are advanced by Agent to but excluding the date
such Loans are repaid by Borrowers in accordance with Section 2.3 or actually
24
settled by the applicable Lender as described in this Section 2.1(d)(iii).
(iv) If the amounts described in subsection (d)(i), (d)(ii) or
(d)(iii) of this Section 2.1 are not in fact made available to Agent by a Lender
(such Lender being hereinafter referred to as a "Defaulting Lender") and Agent
has made such amount available to Borrowers, Agent shall be entitled to recover
such corresponding amount on demand from such Defaulting Lender. If such
Defaulting Lender does not pay such corresponding amount forthwith upon Agent's
demand therefor, Agent shall promptly notify Borrowers and Borrowers shall
immediately but in no event later than 2 Business Days after such demand) pay
such corresponding amount to Agent. Agent shall also be entitled to recover from
such Defaulting Lender and Borrowers, (A) interest on such corresponding amount
in respect of each day from the date such corresponding amount was made
available by Agent to Borrowers to the date such corresponding amount is
recovered by Agent, at a rate per annum equal to either (1) if paid by such
Defaulting Lender, the overnight Federal Funds Rate or (2) if paid by Borrowers,
the then applicable rate of interest, calculated in accordance with Section 4.1,
plus (B) in each case, an amount equal to any costs (including reasonable legal
expenses) and losses incurred as a result of the failure of such Defaulting
Lender to provide such amount as provided in this Credit Agreement. Nothing
herein shall be deemed to relieve any Lender from its obligation to fulfill its
commitments hereunder.
(v) The failure of any Lender to make the Loan to be made by
it as part of any borrowing shall not relieve any other Lender of its
obligation, if any, hereunder to make its Loan on the date of such borrowing,
but no Lender shall be responsible for the failure of any other Lender to make
the Loan to be made by such other Lender on the date of any borrowing. The
amounts payable to each Lender shall be a separate and independent obligation.
(vi) Each Lender shall be entitled to earn interest at the
then applicable rate of interest, calculated in accordance with Article IV, on
outstanding Loans which it has funded to Agent from the date such Lender funded
such Loan to, but excluding, the date on which such Lender is repaid with
respect to such Loan.
(vii) Notwithstanding the obligation of Borrowers to send
written confirmation of a Notice of Borrowing made by telephone if and when
requested by Agent, in the event that Agent agrees to accept a Notice of
Borrowing made by telephone, such telephonic Notice of Borrowing shall be
binding on Borrowers whether or not written confirmation is sent by Borrowers or
requested by Agent. Agent may act prior to the receipt of any requested written
confirmation, without any liability whatsoever, based upon telephonic notice
believed by Agent in good faith to be from an authorized representative of
Borrowers. Agent's records of the terms of any telephonic Notices of Borrowing
shall be conclusive on Borrowers in the absence of gross negligence or willful
misconduct on the part of Agent in connection therewith.
2.2. Existing Indebtedness: Each Borrower acknowledges and confirms that
as of the Closing Date, it is indebted to Lenders, without defense, set-off or
counter-claim under the Existing Loan Documents in the principal amount,
including the face amount of outstanding Letters of Credit, of $7,863,910.74
("Existing Indebtedness"). This Loan Agreement amends and restates the Existing
Loan Agreement and the Existing Indebtedness shall be deemed to constitute a
Loan hereunder. The execution and delivery of this Loan Agreement and the other
Credit Documents, however, does not evidence or represent a refinancing,
repayment, accord and/or satisfaction or
25
novation of the Existing Indebtedness. All of Lenders' obligations to Borrowers
with respect to Loans to be made concurrently herewith or after the date hereof
are set forth in this Loan Documents. All liens and security interests
previously granted to Agent, pursuant to the Existing Loan Agreement are
acknowledged and reconfirmed and remain in full force and effect and are not
intended to be released, replaced or impaired.
2.3. Optional and Mandatory Prepayments; Early Termination Fee:
a. Voluntary Prepayments. Borrowers shall have the right to reduce
or terminate (subject to Section 2.3(c)) the Committed Amount and/or prepay
Loans in whole or in part from time to time, provided, however, that (i) Loans
that are Eurodollar Loans may only be prepaid on 3 Business Days prior written
notice to Agent specifying the applicable Loans to be prepaid; (ii) any
prepayment of Loans that are Eurodollar Loans will be subject to Section 4.11;
and (iii) except as provided in Section 2.4(b) and Section 2.1(d)(iii), each
such partial prepayment of Loans shall be in a minimum principal amount of
$500,000 and integral multiples of $100,000.
b. Mandatory Prepayments.
(i) Committed Amount. If at any time the sum of the aggregate
principal amount of outstanding Loans plus Letter of Credit Obligations
outstanding shall exceed the Borrowing Base, Borrowers shall prepay, on demand,
the Loans and (after all Loans have been repaid) cash collateralize the Letter
of Credit Obligations, in an amount sufficient to eliminate such excess.
(ii) Casualty Loss. To the extent of cash proceeds received in
connection with a Casualty Loss, Borrowers shall (immediately upon receipt of
any such proceeds) prepay the Loans in an amount equal to 100% of such cash
proceeds if Agent shall have elected, at its option, to apply the proceeds
realized from such Casualty Loss to the prepayment of the Loans (such prepayment
to be applied as set forth in clause (vi) below).
(iii) Asset Dispositions and Collections. Contemporaneously
with the occurrence of any Asset Disposition, Borrowers shall, at Agent's
option, prepay the Loans in an aggregate amount equal to the Net Cash Proceeds
of the related Asset Disposition (such prepayments to be applied as set forth in
clause (vi) below).
(iv) ▇▇▇▇▇▇ Settlement. Borrowers shall, upon receipt of any
proceeds of the ▇▇▇▇▇▇ Settlement, immediately pay the entire amount of such
proceeds to Agent for the application to the outstanding Obligations (such
prepayment to be applied as set forth in clause (vi) below).
(v) Security Equipment Deposit. On each date upon which any
lessor of Eligible Fixed Assets returns all or any portion of a security deposit
financed by Borrowers under the Equipment Availability, Borrowers shall make a
mandatory prepayment of the Loan Obligations in amount equal to 100% of returned
portion of such security deposit (such prepayment to be applied as set forth in
clause (vi) below).
(vi) Application of Mandatory Prepayments. All amounts
required to be
26
paid pursuant to this Section 2.3(b) shall be applied to the Obligations in such
order as Agent may determine provided, however, prior to the occurrence of an
Event of Default or Default, all payments made with respect to the Loans shall
be applied to repay Loans consisting of Prime Rate Loans first and then Loans
consisting of Eurodollar Loans (in direct order of Interest Period maturities).
After all Loans have been repaid, prepayments shall be applied as cash
collateral in respect of Letter of Credit Obligations. All prepayments of
Eurodollar Loans under this Section 2.3(b) shall be subject to Section 4.11.
c. Early Termination Fee. In the event that prior to the Maturity
Date, the Credit Agreement is terminated and the Loans are repaid by Borrowers
for any reason or by Agent after the occurrence of an Event of Default ("Early
Termination"), Borrowers shall unconditionally pay to Agent, for the ratable
benefit of Lenders, an early termination fee ("Early Termination Fee") equal to
0.50% of the Committed Amount of all Lenders if such early termination occurs on
or before August 31, 2005 and 0.25% of the Committed Amount is such Early
Termination occurs at any time thereafter. Notwithstanding the foregoing,
Borrowers shall not be responsible for the payment of the Early Termination Fee
if such early Termination is the result of a sale of the stock or assets of the
Borrower Agent or an equity or debt event, in each case for which Agent or any
of Agent's affiliates is the investment banker or underwriter.
2.4. Payments and Computations:
a. Borrowers shall make each payment hereunder and under the Notes
not later than 2:00 P.M. on the day when due. Any payment received after 2:00
P.M. (including any payment in full of the Obligation) shall be deemed received
on the immediately following Business Day. Payments made by Borrowers shall be
in Dollars to Agent at its address referred to in Section 15.5 hereof in
immediately available funds. All payments made with respect to the Loans shall
be applied to repay Loans consisting of Prime Rate Loans first and then Loans
consisting of Eurodollar Loans (in direct order of Interest Period maturities).
b. (i) Borrowers shall maintain a lockbox account(s) ("Lockbox")
with Agent (on terms and conditions satisfactory to Agent) and a depository
account(s) ("Cash Collateral Account") with Agent subject to the provisions of
this subparagraph. Borrowers have agreed with Agent that all collections of
Accounts will be paid directly from Account Debtors into the Lockbox. Borrowers
shall then cause (and Agent is also hereby irrevocably authorized to cause) the
transfer of such collections from the Lockbox to the Cash Collateral Account.
Deposits into the Cash Collateral Account shall be applied by Agent daily,
subject to Agent's standard clearing procedures and clearing periods for
deposited funds, to reduce the outstanding indebtedness under the Loans. All
collections of Accounts and proceeds of other Collateral to the extent received
by any Borrower shall be held in trust for the benefit of Lenders and remitted,
in specie, to Agent for deposit in the Cash Collateral Account immediately upon
receipt by any Borrower. Borrowers shall have no right of access to or
withdrawal from the Lockbox or the Cash Collateral Account; provided that if
there are no outstanding Loans and no Event of Default has occurred and is
continuing, then all collections of Accounts shall be, subject to Agent's
standard clearing procedures and clearing periods for deposited funds,
transferred to Phoenix's operating accounts with Agent.
(ii) Notwithstanding the foregoing, Phoenix Fulfillment shall
have established and shall maintain with Agent the Phoenix Fulfillment Account
into which all amounts
27
received by or for the account of Phoenix Fulfillment from (A) any account
debtor of Phoenix Fulfillment or (B) pursuant to any blocked account agreement
shall be deposited.
(iii) All funds deposited into the Cash Collateral Account
shall immediately become cash collateral in favor of the Agent.
c. Borrowers hereby authorize Agent and each Lender to charge from
time to time against any or all of Borrowers' deposit accounts with such Person
(including the Cash Collateral Account) any of the Obligations which are then
due and payable. Each Lender receiving any payment as a result of charging any
such account shall promptly notify Agent thereof and make such arrangements as
Agent shall request to share the benefit thereof in accordance with Section 2.9.
d. Except as otherwise provided herein with respect to Eurodollar
Loans, any payments falling due under this Credit Agreement on a day other than
a Business Day shall be due and payable on the next succeeding Business Day and
shall accrue interest at the applicable interest rate provided for in this
Credit Agreement to but excluding such Business Day. Except as otherwise
provided herein, computation of interest and fees hereunder shall be made on the
basis of actual number of days elapsed over a 360 day year.
2.5. Maintenance of Account:
Agent shall maintain an account on its books in the name of
Borrowers in which Borrowers will be charged with all loans and advances made by
Lenders to Borrowers or for Borrowers' account, including the Loans, the Letter
of Credit Obligations and any other Obligations. Borrowers will be credited in
accordance with Section 2.4(b)(iii) above, with all amounts received by Lenders
from Borrowers or from others for Borrowers' account, including, as above set
forth, all amounts received by Agent in payment of Accounts. Further, it is
understood that Agent shall have no obligation whatsoever to perform in any
respect any of Borrowers' contracts or obligations relating to the Accounts.
2.6. Statement of Account:
After the end of each month Agent shall use commercially reasonable
efforts to send Borrowers a statement showing the accounting for the charges,
loans, advances and other transactions occurring among Lenders and Borrowers
during that month. The monthly statements shall be deemed correct and binding
upon Borrowers and shall constitute an account stated among Borrowers and
Lenders unless Agent receives a written statement of Borrowers' exceptions
within 30 days after same is mailed to Borrowers.
2.7. Taxes:
a. Any and all payments by Borrowers hereunder or under the Notes to
or for the benefit of any Lender shall be made, in accordance with Section 2.4,
free and clear of and without deduction for any and all present or future Taxes,
deductions, charges or withholdings and all liabilities with respect thereto,
excluding, in the case of each such Lender and Agent, Taxes imposed on or
measured by Agent's or any Lender's net income or receipts and Taxes described
in the proviso in the following sentence (any such excluded Taxes, collectively,
"Excluded Taxes"). If
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Borrowers shall be required by law to deduct any Taxes (other than Excluded
Taxes) from or in respect of any sum payable hereunder or under any Note to or
for the benefit of Agent or any Lender, (i) the sum payable shall be increased
as may be necessary so that after making all required deductions of Taxes
(including deductions of Taxes applicable to additional sums payable under this
Section 2.7) Agent or such Lender, as the case may be, receives an amount equal
to the sum it would have received had no such deductions been made, (ii)
Borrowers shall make such deductions and (iii) Borrowers shall pay the full
amount so deducted to the relevant taxation authority or other authority in
accordance with applicable law; provided, however, that Borrowers shall be under
no obligation to increase the sum payable to any Lender not organized under the
laws of the United States or a state thereof (a "Foreign Lender") by an amount
equal to the amount of the U.S. Tax required to be withheld under United States
law from the sums paid to such Foreign Lender, if such withholding is caused by
the failure of such Foreign Lender to be engaged in the active conduct of a
trade or business in the United States, or all amounts of interest and fees to
be paid to such Foreign Lender hereunder are not effectively connected with such
trade or business within the meaning of U.S. Treasury Regulation 1.1441-4(a) or
such Foreign Lender fails to comply with Section 2.7(b). Solely for purposes of
determining whether a withholding is an Excluded tax, a Foreign Lender will be
considered to have failed to comply with Section 2.7(b) if it fails to make the
deliveries described in the second sentence of Section 2.7(b) even though such
failure is excused by an event described in the final clause of such sentence.
b. Each Foreign Lender agrees that it will deliver to Borrowers and
Agent Internal Revenue Service Form W-8ECI or any successor form thereto,
certifying that the payments received from the Borrower hereunder are
effectively connected with such Foreign Lender's conduct of a trade or business
in the United States; or (ii) Internal Revenue Service Form W-8BEN, or any
successor form thereto, certifying that such Foreign Lender is entitled to
benefits under an income tax treaty to which the United States is a party which
completely exempts payments received from the Borrower hereunder from
withholding tax; or (iii) Internal Revenue Service Form W-8BEN or any successor
form thereto, together with a certificate stating that (1) the Foreign Lender is
not a bank for purposes of Internal Revenue Code section 881(c)(3)(A), or the
obligation of the Borrower hereunder is not, with respect to such Foreign
Lender, pursuant to a loan agreement entered into in the ordinary course of its
trade or business, within the meaning of that section; (2) the Foreign Lender is
not a 10% shareholder of the Borrower within the meaning of Internal Revenue
Code section 871(h)(3) or 881(c)(3)(B); and (3) the Foreign Lender is not a
controlled foreign corporation that is related to the Borrower within the
meaning of Internal Revenue Code section 881(c)(3)(C). Each such Lender also
agrees to deliver to Borrowers and Agent two (2) further copies of the said Form
W-8BEN (together with the certificate described in clause (iii) of the preceding
sentence, if applicable) or W-8ECI, or successor applicable form(s) or other
manner of certification, as the case may be, on or before the date that any such
form expires or becomes obsolete or after the occurrence of any event requiring
a change in the most recent form previously delivered by it to Borrowers, and
such extensions or renewals thereof as may reasonably be requested by Borrowers
or Agent, unless in any such case an event (including, without limitation, any
change in treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advises Borrowers
and Agent. Such Lender shall certify in the case of a Form W-8BEN or W-8ECI,
that it is entitled to receive payments under this Credit Agreement without
deduction or withholding of any U.S.
29
federal income taxes and that it is entitled to an exemption from U.S. backup
withholding tax.
c. In addition, Borrowers agree to pay any present or future stamp,
documentary, privilege, intangible or similar Taxes or any other excise or
property Taxes, charges or similar levies that arise at any time or from time to
time (other than Excluded Taxes) (i) from any payment made under any and all
Credit Documents, (ii) from the transfer of the rights of Lender under any
Credit Documents to any other Lender or Lenders or (iii) from the execution or
delivery by Borrowers of, or from the filing or recording or maintenance of, or
otherwise with respect to, any and all Credit Documents (hereinafter referred to
as "Other Taxes").
d. Borrowers will indemnify Lenders for the full amount of Taxes
(including, without limitation and without duplication, any Taxes imposed by any
jurisdiction on amounts payable under this Section 2.7), subject to (i) the
exclusion set out in the first sentence of Section 2.7(a), (ii) the provisions
of Section 2.7(c), and (iii) the provisions of the proviso set forth in Section
2.7(a), and will indemnify Agent and each Lender, as the case may be, for the
full amount of Other Taxes (including, without limitation and without
duplication, any Taxes imposed by any jurisdiction on amounts payable under this
Section 2.7) paid by Agent (on its own behalf or on behalf of any Lender), or by
such Lender in respect of payments made or to be made hereunder, and any
liability (including penalties, interest and expenses (including the Expenses))
arising solely therefrom or with respect thereto, whether or not such Taxes or
Other Taxes were correctly or legally asserted. Payment of this indemnification
shall be made within 30 days from the date such Lender or Agent, as the case may
be, makes written demand therefor.
e. Within 30 days after Agent's request, Borrowers shall furnish to
Agent, at its address referred to in Section 15.5, the original or certified
copy of a receipt evidencing payment of any Taxes.
f. Without prejudice to the survival of any other agreement of
Borrowers hereunder, the agreements and obligations of Borrowers contained in
this Section 2.7 shall survive the payment in full of all Obligations hereunder
and under the Notes.
2.8. Extensions and Conversions:
Subject to the terms of Section 6.2, Borrowers shall have the
option, on any Business Day, to extend existing Eurodollar Loans into a
subsequent permissible Interest Period, to convert Prime Rate Loans into
Eurodollar Loans, or to convert Eurodollar Loans into Prime Rate Loans;
provided, however, that (i) except as provided in Section 4.10, Eurodollar Loans
may be converted into Prime Rate Loans only on the last day of the Interest
Period applicable thereto, (ii) Eurodollar Loans may be extended, and Prime Rate
Loans may be converted into Eurodollar Loans, only if no Default or Event of
Default is in existence on the date of extension or conversion, (iii) Loans
extended as, or converted into, Eurodollar Loans shall be subject to the terms
of the definition of "Interest Period" and shall (if applicable) be in any
minimum amounts as provided herein with respect to Loans, and (iv) no more than
five (5) separate Eurodollar Loans shall be outstanding hereunder at any time.
Each such extension or conversion shall be effected by Borrowers by giving a
written notice (to be used at Agent's option) in the form of Exhibit C hereto (a
"Notice of Extension/Conversion") (or telephone notice promptly confirmed in
writing) to Agent prior to 11:00 A.M. on the Business Day of, in the case of the
conversion of a Eurodollar Loan into a Prime Rate Loan, and on the third
Business Day prior
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to, in the case of the extension of a Eurodollar Loan as, or conversion of a
Prime Rate Loan into, a Eurodollar Loan, the date of the proposed extension or
conversion, specifying the date of the proposed extension or conversion, the
Loans to be so extended or converted, the types of Loans into which such Loans
are to be converted and, if appropriate, the applicable Interest Periods with
respect thereto. Each request for extension or conversion shall constitute a
representation and warranty by Borrowers of the matters specified in Section
6.2. In the event Borrowers fail to request extension or conversion of any
Eurodollar Loan in accordance with this Section, or any such conversion or
extension is not permitted or required by this Section, then such Loan shall be
automatically converted into a Prime Rate Loan at the end of the Interest Period
applicable thereto. Agent shall give each Lender notice as promptly as
practicable of any proposed extension or conversion affecting by any Loan.
2.9. Sharing of Payments:
If any Lender shall obtain any payment (whether voluntary,
involuntary, through the exercise of any right of setoff or otherwise) on
account of the Loans made by it or its participation in Letters of Credit in
excess of its pro rata share of such payment as provided for in this Credit
Agreement, such Lender shall forthwith purchase from the other Lenders such
participation in the applicable Loans made by them or in their participation in
Letters of Credit as shall be necessary to cause such purchasing Lender to share
the excess payment accruing to all Lenders in accordance with their respective
ratable shares as provided for in this Credit Agreement; provided, however, that
if all or any portion of such excess is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and each
such Lender shall repay to the purchasing Lender the purchase price to the
extent of such recovery together with an amount equal to such Lender's ratable
share (according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) or
any interest or other amount paid or payable by the purchasing Lender in respect
to the total amount so recovered. Borrowers agree that any Lender so purchasing
a participation from another Lender pursuant to this Section 2.9 may, to the
fullest extent permitted by law, exercise all of its rights of payment
(including the right of setoff) with respect to such participation as fully as
if such Lender were the direct creditor of Borrowers in the amount of such
participation.
2.10. Pro Rata Treatment:
Each Loan, each payment or prepayment of principal of any Loan or
reimbursement obligations arising from drawings under Letters of Credit, each
payment of interest on the Loans, each payment of the Unused Line Fee, each
payment of any Letter of Credit Fee, any payment of the Early Termination Fee,
each reduction of the Commitment and each conversion or extension of any Loan,
actually received by Agent shall be allocated pro rata among Lenders in
accordance with the respective principal amounts of their outstanding Loans and
their participation interests in the Letters of Credit; provided, however, that
the foregoing fees payable hereunder to Lenders shall be allocated to each
Lender based on such Lender's Commitment Percentage.
2.11. Joint and Several Liability:
a. Each Borrower shall be jointly and severally liable for all
Obligations regardless of, inter alia, which Borrower or Borrowers requested (or
received the proceeds of) a particular
31
Loan.
b. Each of the other Borrowers hereby irrevocably authorize Borrower
Agent to give notices, make requests, make payments, receive payments and
notices, give receipts and otherwise take action on behalf of such Borrower
under and with respect to any Credit Document.
c. Without limiting the effect of Section 15.15 hereof, to the
extent that mandatory and non-waivable provisions of applicable law (including
but not limited to any applicable business corporation laws) otherwise would
render the other Credit Documents invalid or unenforceable, such Borrower's
obligations hereunder and under the other Credit Documents shall be limited to
the maximum amount which does not result in such invalidity or unenforceability.
ARTICLE III : LETTERS OF CREDIT
3.1. Issuance:
Subject to the terms and conditions hereof and of the Letter of
Credit Documents, if any, and any other terms and conditions which Issuing Bank
may reasonably require, Lenders will participate in the issuance by Issuing Bank
from time to time of such Letters of Credit in Dollars from the Closing Date and
thereafter until the Maturity Date as Borrowers may request, in a form
reasonably acceptable to Issuing Bank; provided, however, that the Letter of
Credit Obligations outstanding shall (a) not at any time exceed the Letter of
Credit Sublimit, and (b) be subject to Article II above. No Letter of Credit
shall be issued if the amount thereof together with all outstanding Letter of
Credit Obligations and Loans would exceed the Borrowing Base. No Letter of
Credit shall (x) have an original expiry date more than one year from the date
of issuance (in the case of Standby Letters of Credit) or 90 days from the date
of issuance (in the case of Documentary Letters of Credit) or (y) as originally
issued or as extended, have an expiry date extending beyond 10 days prior to the
Maturity Date. Each Letter of Credit shall comply with the related Letter of
Credit Documents. The issuance and expiry date of each Letter of Credit shall
comply with the related Letter of Credit Documents. The issuance and expiry date
of each Letter of Credit shall be a Business Day.
3.2. Notice and Reports:
The request for the issuance of a Letter of Credit shall be
submitted by Borrowers to Agent at least 3 Business Days prior to the requested
date of issuance. Issuing Bank will, upon request, disseminate in accordance
with standard bank policy to each Lender a report of Letters of Credit which are
then issued and outstanding.
3.3. Participation:
Each Lender, upon issuance of a Letter of Credit, shall be deemed to
have purchased without recourse a risk participation from Issuing Bank in such
Letter of Credit and the obligations arising thereunder, in each case in an
amount equal to its Commitment Percentage of such Letter of Credit, and shall
absolutely, unconditionally and irrevocably assume, as primary obligor and not
as surety, and be obligated to pay to Issuing Bank therefor and discharge when
due, its Commitment Percentage of the obligations arising under such Letter of
Credit. Without limiting the scope and nature of each Lender's participation in
any Letter of Credit, to the extent that Issuing bank has not
32
been reimbursed as required hereunder or under any such Letter of Credit, each
such Lender shall pay to Issuing Bank its Commitment Percentage of such
unreimbursed drawing pursuant to the provisions of Section 3.4. The obligation
of each Lender to so reimburse Issuing Bank shall be absolute and unconditional,
shall be made without setoff or deduction of any kind, and shall not be affected
by the occurrence of a Default, an Event of Default or any other occurrence or
event. Any such reimbursement shall not relieve or otherwise impair the
obligation of Borrowers to reimburse Issuing Bank under any Letter of Credit,
together with interest as hereinafter provided. All amounts due to each Lender
for participating in any Letter of Credit shall be paid by Issuing Bank as soon
as practical after Issuing Bank receives payment from Borrowers, but in no event
later than one (1) Business Day after such payment has been received, subject to
Section 2.1(d)(iii), of funds relating to Letters of Credit funded by Lenders.
3.4. Reimbursement
In the event of any drawing under any Letter of Credit, Issuing Bank
will promptly notify Borrowers which shall have the right under standard bank
procedures to designate the Business Day (within 3 Business Days of presentation
of documents to Issuing Bank), but subject in any event to the terms of the
Letter of Credit, on which the draw is to be honored if the documents presented
strictly adhere to the terms of the Letter of Credit. Unless Borrowers shall
immediately notify Issuing Bank that Borrowers intend to otherwise reimburse
Issuing Bank for its honoring of a drawing, Borrowers shall be deemed to have
requested that Lenders make a Loan in the amount of the drawing as provided in
Section 3.5 on the related Letter of Credit, the proceeds of which will be used
to satisfy the related reimbursement obligations. If, for any reason, proceeds
of any such Loan are not received by Issuing Bank from any Lender on the date a
drawing under any Letter of Credit is honored in an amount equal to the amount
of such drawing, Borrowers shall reimburse Issuing Bank on the day of drawing
under any Letter of Credit (either with the proceeds of a Loan obtained
hereunder or otherwise) in same day funds in an amount equal to the excess of
the amount of such drawing over the amount of proceeds, if any, that are
received, plus accrued interest on such amount at the then applicable interest
rate for the Prime Rate Loans. If Borrowers shall fail to reimburse Issuing Bank
as provided hereinabove, the unreimbursed amount of such drawing shall bear
interest at a per annum rate equal to the rate then applicable to Prime Rate
Loans under the terms of this Credit Agreement. Borrowers' reimbursement
obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of any rights of setoff, counterclaim or defense to
payment Borrowers may claim or have against Issuing Bank, Agent, Lenders, the
beneficiary of the Letter of Credit drawn upon or any other Person, including
without limitation any defense based on any failure of Borrowers to receive
consideration or the legality, validity, regularity or unenforceability of the
Letter of Credit. Unless a Loan is made by Agent on Borrowers' behalf to Issuing
Bank under the terms hereof to reimburse such drawing, Issuing Bank will
promptly notify the other Lenders of the amount of any unreimbursed drawing and
each Lender shall promptly pay to Agent for the account of Issuing Bank in
Dollars and in immediately available funds, the amount of such Lender's
Commitment Percentage of such unreimbursed drawing. Such payment shall be made
on the Business Day such notice is received by such Lender from Issuing Bank if
such notice is received at or before 2:00 P.M. otherwise such payment shall be
made at or before 12:00 Noon on the Business Day next succeeding the day such
notice is received. If such Lender does not pay such amount to
33
Issuing Bank in full upon such request, such Lender shall, on demand, pay to
Agent for the account of Issuing Bank interest on the unpaid amount during the
period from the date of such drawing until such Lender pays such amount to
Issuing Bank in full at a rate per annum equal to, if paid within 2 Business
Days of the date that such Lender is required to make payments of such amount
pursuant to the preceding sentence, the Federal Funds Rate and thereafter at a
rate equal to the Prime Rate. Each Lender's obligation to make such payment to
Issuing Bank, and the right of Issuing Bank to receive the same, shall be
absolute and unconditional, shall be made without setoff or deduction of any
kind and shall not be affected by any circumstance whatsoever and without regard
to the termination of this Credit Agreement or the Commitments hereunder, the
existence of a Default or Event of Default or the acceleration of the
obligations of Borrowers hereunder. Simultaneously with the making of each such
payment by a Lender to Issuing Bank, such Lender shall, automatically and
without any further action on the part of Issuing Bank or such Lender, acquire a
participation in an amount equal to such payment (excluding the portion of such
payment constituting interest owing to Issuing Bank) in the related unreimbursed
drawing portion of the Letter of Credit Obligation and in the interest thereon
and in the related Letter of Credit Documents, and shall have a claim against
Borrowers with respect thereto.
3.5. Repayment with Loans:
On any day on which Borrowers shall have requested, or been deemed
to have requested, a Loan advance to reimburse a drawing under a Letter of
Credit, and unless Agent has exercised its rights under Section 2.1(d)(iii)
hereof, Agent shall give notice to Lenders that a Loan has been requested or
deemed requested by Borrowers to be made in connection with a drawing under a
Letter of Credit, in which case a Loan advance comprised of Prime Rate Loans (or
Eurodollar Loans to the extent Borrowers has complied with the procedures of
Section 2.1(d)(i) with respect thereto) shall be immediately made to Borrowers
by all Lenders (notwithstanding any termination of the Commitments pursuant to
Section 12.2) pro rata based on the respective Commitment Percentages of Lenders
(determined before giving effect to any termination of the Commitments pursuant
to Section 12.2) and the proceeds thereof shall be paid directly by Agent to
Issuing Bank for application to the respective Letter of Credit Obligations.
Each such Lender is liable for and hereby irrevocably agrees to make its
Commitment Percentage of each such Loan immediately upon any such request or
deemed request in the amount, in the manner and on the date specified in the
preceding sentence notwithstanding (i) the amount of such borrowing may not
comply with the minimum amount for advances of Loans otherwise required
hereunder, (ii) whether any conditions specified in Section 6.2 are then
satisfied, (iii) whether a Default or an Event of Default then exists, (iv)
failure for any such request or deemed request for Loan to be made by the time
otherwise required hereunder, (v) whether the date of such borrowing is a date
on which Loans are otherwise permitted to be made hereunder or (vi) any
termination of the Commitments relating thereto immediately prior to or
contemporaneously with such borrowing. In the event that any Loan cannot for any
reasons be made on the date otherwise required above (including, without
limitation, as a result of the commencement of a bankruptcy or insolvency
proceeding with respect to Borrowers), then each such Lender hereby agrees that
it shall forthwith purchase (as of the date such borrowing would otherwise have
occurred, but adjusted for any payments received from Borrowers on or after such
date and prior to such purchase) from Issuing Bank such participation in the
outstanding Letter of Credit Obligations as shall be necessary to cause each
such Lender to share in such Letter of Credit Obligations ratably (based upon
the respective Commitment Percentages of Lenders (determined before giving
effect to any termination of the Commitments pursuant to Section 12.2)),
provided that at the time any purchase of participation pursuant to this
sentence is actually made, the purchasing Lender shall be required to pay to
Issuing Bank, to the extent not paid to Issuing Bank by Borrowers in accordance
with the terms of
34
Section 3.4, interest on the principal amount of participation purchased for
each day from and including the day upon which such borrowing would otherwise
have occurred to but excluding the date of payment for such participation, at
the rate equal to, if paid within 2 Business Days of the date of the Loan
advance, the Federal Funds Rate, and thereafter at a rate equal to the Prime
Rate.
3.6. Renewal, Extension:
The renewal or extension of any Letter of Credit shall, for purposes
hereof, be treated in all respects the same as the issuance of a new Letter of
Credit hereunder, except that Issuing Bank, in its sole discretion, may extend
or renew any Letter of Credit without regard to the conditions set forth in
Section 6.2 below.
3.7. Uniform Customs and Practices:
Issuing Bank may provide that the Letters of Credit shall be subject
to The Uniform Customs and Practice for Documentary Credits, as published as of
the date of issue by the International Chamber of Commerce (the "UCP") or any
other guideline or practice as Issuing Bank may reasonably determine, in which
case the UCP or such other guideline or practice may be incorporated by
reference therein and deemed in all respects to be a part thereof.
3.8. Indemnification; Nature of Lender's Duties:
a. In addition to their other obligations under this Article III,
Borrowers agree to protect, indemnify, pay and save Issuing Bank harmless from
and against any and all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees) that Issuing Bank
may incur or be subject to as a consequence, direct or indirect, of (A) the
issuance of any Letter of Credit or (B) the failure of Issuing Bank to honor a
drawing under a Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de facto government or
Governmental Authority (all such acts or omissions, herein called "Government
Acts").
b. Borrowers shall assume all risks of the acts, omissions or misuse
of any Letter of Credit by the beneficiary thereof. Issuing Bank shall not be
responsible: (i) for the form, validity, sufficiency, accuracy, genuineness or
legal effect of any document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate, fraudulent
or forged; (ii) for the validity or sufficiency of any instrument transferring
or assigning or purporting to transfer or assign any Letter of Credit or the
rights or benefits thereunder or proceeds thereof, in whole or in part, that may
prove to be invalid or ineffective for any reason; (iii) for errors, omissions,
interruptions or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex or otherwise, whether or not they be in cipher; (iv) for
any loss or delay in the transmission or otherwise of any document required in
order to make a drawing under a Letter of Credit or of the proceeds thereof; and
(v) for any consequences arising from causes beyond the control of Issuing Bank,
including, without limitation, any Government Acts. None of the above shall
affect, impair, or prevent the vesting of Issuing Bank's rights or powers
hereunder.
c. In furtherance and extension and not in limitation of the
specific provisions
35
hereinabove set forth, any action taken or omitted by Issuing Bank, under or in
connection with any Letter of Credit or the related certificates, if taken or
omitted in good faith, shall not put Issuing Bank under any resulting liability
to Borrowers. It is the intention of the parties that this Credit Agreement
shall be construed and applied to protect and indemnify Issuing Bank against any
and all risks involved in the issuance of the Letters of Credit, all of which
risks are hereby assumed by Borrowers, including, without limitation, any and
all Government Acts. Issuing Bank shall not, in any way, be liable for any
failure by Issuing Bank or anyone else to pay any drawing under any Letter of
Credit as a result of any Government Acts or any other cause beyond the control
of Issuing Bank.
d. Nothing in this Section 3.8 is intended to limit the
reimbursement obligations of Borrowers contained in Section 3.4 above. The
obligations of Borrowers under this Section 3.8 shall survive the termination of
this Credit Agreement. No act or omission of any current or prior beneficiary of
a Letter of Credit shall in any way affect or impair the rights of Issuing Bank
to enforce any right, power or benefit under this Credit Agreement.
e. Notwithstanding anything to the contrary contained in this
Section 3.8, Borrowers shall have no obligation to indemnify Issuing Bank in
respect of any liability incurred by Issuing Bank (i) arising solely out of the
gross negligence or willful misconduct of Issuing Bank, as determined in an
final unappealable judgment by a court of competent jurisdiction, or (ii) caused
by Issuing Bank failure to pay under any Letter of Credit after presentation to
it of a request strictly complying with the terms and conditions of such Letter
of Credit, as determined by a court of competent jurisdiction, unless such
payment is prohibited by any law, regulation, court order or decree.
3.9. Responsibility of Issuing Bank:
It is expressly understood and agreed that the obligations of
Issuing Bank hereunder to Lenders are only those expressly set forth in this
Credit Agreement and that Issuing Bank shall be entitled to assume that the
conditions precedent set forth in Article III or VI have been satisfied unless
it shall have acquired actual knowledge that any such condition precedent has
not been satisfied; provided, however, that nothing set forth in this Article
III shall be deemed to prejudice the right of any Lender to recover from Issuing
Bank any amounts made available by such Lender to Issuing Bank pursuant to this
Article III in the event that it is determined by a court of competent
jurisdiction that the payment with respect to a Letter of Credit constituted
gross negligence or willful misconduct on the part of Issuing Bank.
3.10. Conflict with Letter of Credit Documents:
In the event of any conflict between this Credit Agreement and any
Letter of Credit Document (including any letter of credit application), this
Credit Agreement shall control.
ARTICLE IV : INTEREST AND FEES
4.1. Interest on Loans and Adjustments:
a. Subject to the provisions of Section 4.1(b) and Section 4.2,
interest on the Loans shall be payable as follows: (A) for Prime Rate Loans that
are Loans, monthly in arrears on the first
36
day of each calendar month and on the Maturity Date and the interest rate shall
be equal to the Prime Rate plus [25] basis points on the average daily principal
balance thereof at the close of business for each day during each calendar
month; and (B) for Eurodollar Loans on the earlier of (i) every three (3) months
or (ii) the last day of each Interest Period and the interest rate shall be
equal to the Eurodollar Rate plus [250] basis points. In the event of any change
in the Prime Rate, the rate hereunder shall change, effective as of the day the
Prime Rate changes. The interest rates and Fees under this Credit Agreement
shall be calculated based on a 360 day year for the actual number of days
elapsed.
b. On a quarterly basis, commencing five (5) Business Days following
Agent's receipt of the Compliance Certificate and Financial Statements of
Borrowers for the fiscal quarter ending September 30, 2003 (as Borrowers shall
provide to Agent pursuant to Section 8.1 herein), on and after the Interest
Adjustment Date the applicable interest rate on all Prime Rate Loans and all new
or extended Eurodollar Loans shall be determined in accordance with the
following matrix (no downward rate adjustment being permitted if on the Interest
Adjustment Date an Event of Default or Default is outstanding):
----------------------------------------------------------------------------
Fixed Charge
Coverage Ratio Eurodollar Loans Prime Rate Loans
----------------------------------------------------------------------------
Equal to or greater than Eurodollar Rate + 275 Prime Rate + 50 basis
0.75 to 1 but less than basis points points
1.50 to 1
----------------------------------------------------------------------------
Equal to or greater than Eurodollar Rate + 250 Prime Rate + 25 basis
1.50 to 1 but less than basis points points
2.0 to 1
----------------------------------------------------------------------------
Equal to or greater than Eurodollar Rate + 225 Prime Rate
2.0 to 1 but less than basis points
2.50 to 1
----------------------------------------------------------------------------
Greater than or equal to Eurodollar Rate + 200 Prime Rate
2.50 to 1 basis points
----------------------------------------------------------------------------
For purposes of the foregoing, (i) Fixed Charge Coverage Ratio will be
determined on a quarterly basis by reference to Borrowers' Compliance
Certificates delivered pursuant to Section 8.1 herein; and (ii) if Borrowers
fail to timely deliver the applicable Compliance Certificates and Financial
Statements to Agent in accordance with Section 8.1 herein for any period, then
at Agent's option, the rate of interest on each Loan will be increased to the
highest rate of interest for the type of Loan pursuant to the above matrix,
which rate of interest shall continue in effect until the Compliance
Certificates and Financial Statements are delivered.
4.2. Interest After Event of Default:
Interest on any amount of matured principal under the Loans, and
interest on the amount of principal under the Loans outstanding as of the date
an Event of Default occurs, and at all times thereafter until the earlier of the
date upon which (a) all Obligations have been paid and satisfied in full or (b)
such Event of Default shall have been cured or waived, shall be payable on
demand at a rate equal to the rate or rates at which the Loans are then bearing
interest pursuant to Section 4.1 above, plus 200 basis points. In the event of
any change in said applicable interest rate, the rate
37
hereunder shall change, effective as of the day the applicable interest rate
changes, so as to remain 200 basis points above the then applicable interest
rate. To the extent permitted by applicable law, interest shall accrue at the
applicable contract rate(s) provided for in this Credit Agreement
notwithstanding the occurrence of any Event of Default, acceleration of the
Obligations, the entry of any judgment, or the commencement of any bankruptcy,
reorganization, receivership or other proceedings.
4.3. Unused Line Fee:
a. On the last day of each calendar month and on the date of final
payment of all Obligations hereunder (whether by acceleration or otherwise),
Borrowers shall pay to Agent, for the ratable benefit of Lenders, the Unused
Line Fee due in respect of such calendar month (or applicable portion thereof).
b. On a quarterly basis, commencing five (5) Business Days following
Agent's receipt of the Compliance Certificate and Financial Statements of
Borrowers for the fiscal quarter ending September 30, 2003 (as Borrowers shall
provide to Agent pursuant to Section 8.1 herein), on and after the Interest
Adjustment Date, the rate of the Unused Line Fee shall be determined in
accordance with the following matrix (no downward rate adjustment being
permitted if on the Interest Adjustment Date an Event of Default or Default is
outstanding):
---------------------------------------------------
Fixed Charge Coverage Ratio Unused Line Fee
---------------------------------------------------
Equal to or greater than 50 basis points
0.75 to 1 but less than
2.50 to 1
---------------------------------------------------
Greater than or equal to 37.5 basis points
2.50 to 1
---------------------------------------------------
For purposes of the foregoing, (i) the Unused Line Fee will be determined on a
quarterly basis by reference to Borrowers' Compliance Certificates delivered
pursuant to Section 8.1 herein; and (ii) if Borrowers fail to timely deliver the
applicable Compliance Certificates and Financial Statements to Agent in
accordance with Section 8.1 herein for any period, then at Agent's option, the
rate of interest on the Loans will be increased to the highest rate of interest
pursuant to the above matrix, which rate of interest shall continue in effect
until the Compliance Certificates and Financial Statements are delivered.
4.4. Closing Fee:
Borrower shall unconditionally pay to Agent a closing fee in the
amount of $40,000 on or prior to the Closing Date ("Closing Fee").
4.5. Letter of Credit Fees:
In consideration of the issuance of Letters of Credit hereunder,
Borrowers shall pay to (i) Agent, for the ratable benefit of Lenders, annually
in advance on the date of issuance and renewal a fee equal to the applicable
margin then in effect for Eurodollar Loans multiplied by the average daily
38
maximum face amount of all outstanding Letters of Credit computed at a per annum
rate for each day of the term of such Letter of Credit; (ii) Agent, for the
benefit of Agent, monthly in arrears on the first day of each calendar month a
fee equal to 0.125% of the average daily maximum face amount of all outstanding
Letters of Credit (less any amount thereof that shall have been drawn) computed
at a per annum rate for each day outstanding and (iii) Agent, from time to time
on demand of Agent, all normal costs and expenses of Agent in connection with
the issuance, renewal, transfer, amendment or other administration with respect
to the Letters of Credit. All such fees are referred to herein collectively as
"Letter of Credit Fees".
4.6. Existing Amendment Fee:
Borrowers shall unconditionally pay to Agent the Existing Amendment
Fee on December 31, 2003; provided however, such Existing Amendment Fee shall be
automatically due and payable on the termination of this Credit Agreement, if
such termination occurs prior to such payment date.
4.7. Authorization to Charge Account:
Borrowers hereby authorize Agent to charge Borrowers' Loan accounts
with the amount of all payments on the Loans, Fees and Expenses hereunder to
Lenders, Agent and Issuing Bank as and when such Obligations become due.
Borrowers confirm that any charges which Agent may so make to Borrowers' Loan
account as herein provided will be made as an accommodation to Borrowers and
solely at Agent's discretion.
4.8. Indemnification in Certain Events:
If after the Closing Date, either (a) any change in or in the
interpretation of any law or regulation is introduced, including, without
limitation, with respect to reserve requirements, applicable to Wachovia or any
other banking or financial institution from whom any Lender borrows funds or
obtains credit (a "Funding Bank") or any Lender, or (b) a Funding Bank or any
Lender complies with any future guideline or request from any central bank or
other Governmental Authority, or (c) a Funding Bank or any Lender determines
that the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change therein, or any change in the interpretation or
administration thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof has or would
have the effect described below, then such Funding Bank or any Lender complies
with any request or directive regarding capital adequacy (whether or not having
the force of law) of any such authority, central bank or comparable agency, and
in the case of any event set forth in this clause (c), such adoption, change or
compliance has or would have the direct or indirect effect of reducing the rate
of return on any Lender's capital as a consequence of its obligations hereunder
to a level below that which such Lender could have achieved but for such
adoption, change or compliance (taking into consideration a Funding Bank's or
such Lender's policies with respect to capital adequacy) by an amount deemed by
such Person to be material, and the result of any of the foregoing events
described in clauses (a), (b) or (c) is or results in an increase in the cost to
any Lender of funding or maintaining the Committed Amount, the Loans, or the
Letters of Credit, then Borrowers shall from time to time upon demand by Agent,
pay to Agent additional amounts sufficient to indemnify such Lender or Lenders
against such increased cost. A certificate as to the amount of such increased
cost shall be submitted to Borrowers by Agent and shall
39
be conclusive and binding absent manifest error.
4.9. Inability To Determine Interest Rate:
If prior to the first day of any Interest Period, (a) Agent shall
have determined in good faith (which determination shall be conclusive and
binding upon Borrowers) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, or (b) Dollar deposits in the
principal amounts of the Eurodollar Loans to which such Interest Period is to be
applicable are not generally available in the London interbank market, Agent
shall give facsimile or telephonic notice thereof to Borrowers and Lenders as
soon as practicable thereafter, and will also give prompt written notice to
Borrowers when such conditions no longer exist. If such initial notice is given
(i) any Eurodollar Loans requested to be made on the first day of such Interest
Period shall be made as Prime Rate Loans, (ii) any Loans that were to have been
converted on the first day of such Interest Period to or continued as Eurodollar
Loans shall be converted to or continued as Prime Rate Loans and (iii) each
outstanding Eurodollar Loan shall be converted, on the last day of the
then-current Interest Period thereof, to Prime Rate Loans. Until such notice has
been withdrawn by Agent, no further Eurodollar Loans shall be made or continued
as such, nor shall Borrowers have the right to convert Prime Rate Loans to
Eurodollar Loans.
4.10. Illegality:
Notwithstanding any other provision herein, if the adoption of or
any change in any law, treaty, rule or regulation or final, non-appealable
determination of an arbitrator or a court or other Governmental Authority or in
the interpretation or application thereof occurring after the Closing Date shall
make it unlawful for any Lender to make or maintain Eurodollar Loans as
contemplated by this Credit Agreement, (a) such Lender shall promptly give
written notice of such circumstances to Borrowers and Agent (which notice shall
be withdrawn whenever such circumstances no longer exist), (b) the commitment of
such Lender hereunder to make Eurodollar Loans, continue Eurodollar Loans as
such and convert a Prime Rate Loan to Eurodollar Loans shall forthwith be
canceled and, until such time as it shall no longer be unlawful for Lender to
make or maintain Eurodollar Loans, such Lender shall then have a commitment only
to make a Prime Rate Loan when a Eurodollar Loan is requested and (c) such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to Prime Rate Loans on the respective last days of the then
current Interest Periods with respect to such Loans or within such earlier
period as required by law. If any such conversion of a Eurodollar Loan occurs on
a day which is not the last day of the then current Interest Period with respect
thereto, Borrowers shall pay to such Lender such amounts, if any, as may be
required pursuant to Section 4.11.
4.11. Funding Indemnity:
Borrowers shall indemnify each Lender and to hold each Lender
harmless from any loss, damages, liability or expense which such Lender may
sustain or incur (other than through such Lender's gross negligence or willful
misconduct) as a consequence of (a) default by Borrowers in making a borrowing
of, conversion into or extension of Eurodollar Loans after Borrowers have given
a notice requesting the same in accordance with the provisions of this Credit
Agreement, (b) default by Borrowers in making any prepayment of a Eurodollar
Loan after Borrowers have given a notice
40
thereof in accordance with the provisions of this Credit Agreement, and (c) the
making of a prepayment of Eurodollar Loans on a day which is not the last day of
an Interest Period with respect thereto. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest which would
have accrued (exclusive of any applicable margin) on the amount so prepaid, or
not so borrowed, converted or extended, for the period from the date of such
prepayment or of such failure to borrow, convert or extend to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or extend, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Loans provided for herein over (ii) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market. This covenant shall survive the
termination of this Credit Agreement and the payment of the Loans and all other
amounts payable hereunder.
ARTICLE V : COLLATERAL
5.1. Description:
As security for the payment of the Obligations, and satisfaction by
Borrowers of all covenants and undertakings contained in this Credit Agreement
and the other Credit Documents, each Borrower hereby assigns and grants to
Agent, for the pro rata benefit of Lenders, a continuing first (subject only to
any Permitted Liens, if any, which Agent agrees are to be senior in lien
priority) Lien on and security interest in, upon and to all of such Borrower's
personal property, (other than the Excluded Equipment) including, without
limitation, all of the following personal property.
a. Accounts - All of such Borrower's now owned and hereafter
acquired, created, or arising Accounts;
b. Inventory - All of such Borrower's now owned or hereafter
acquired Inventory of every nature and kind, wherever located;
c. General Intangibles - All of such Borrower's now owned and
hereafter acquired, created or arising General Intangibles of every kind and
description, including, without limitation, customer lists, choses in action,
claims, books, records, goodwill, patents and patent applications, copyrights,
trademarks, tradenames, service marks, tradestyles, trademark applications,
trade secrets, contracts, contract rights, royalties, licenses, franchises,
deposits, license, franchise and royalty agreements, formulae, tax and any other
types of refunds, returned and unearned insurance premiums, rights and claims
under insurance policies including without limitation, credit insurance and key
man life insurance policies, and computer information, software, records and
data;
d. Equipment - All of such Borrower's now owned and hereafter
acquired Equipment, including, without limitation, machinery, vehicles,
furniture and Fixtures, wherever located, and all replacements, parts,
accessories, substitutions and additions thereto;
e. Deposit Accounts - All of such Borrower's now existing and
hereafter acquired or arising Deposit Accounts, reserves and credit balances of
every nature, wherever located, and all documents and records associated
therewith;
41
f. Property in Agent's or any Lender's Possession - All personal
property of such Borrower, now or hereafter in the possession of Agent or any
Lender;
g. Investment Property - All of such Borrower's now owned or
hereafter acquired Investment Property of every kind (including, without
limitation, such Borrower's equity interest in any Subsidiary or Affiliate);
h. Letter of Credit Rights - All of such Borrower's now owned or
hereafter acquired Letter of Credit Rights;
i. Commercial Tort Claims - All of such Borrower's now owned or
hereafter acquired Commercial Tort Claims;
j. Other Property - All of such Borrower's now owned or hereafter
acquired or created Instruments and other notes receivable, Goods, Chattel
Paper, Documents (including bills of lading, warehouse receipts and other
documents of title), Payment Intangibles, guarantees, Supporting Obligations,
letters of credit, rights of rescission, stoppage in transit, replevin, and
reclamation, and returned, reclaimed and repossessed goods; and
k. Proceeds - The Proceeds (including, without limitation, insurance
proceeds), whether cash or non-cash, of all of the foregoing personal property
and interests in personal property.
5.2. Lien Documents:
At Closing, and thereafter from time to time as Agent deems necessary,
each Borrower shall execute and/or deliver to Agent the following (all in form
and substance satisfactory to Agent):
a. Financing Statements - Financing statements, which Agent may file
in any jurisdiction where any Collateral is or may be located and in any other
jurisdiction that Agent deems appropriate; and
b. Other Agreements - Any other agreements, documents, instruments
and writings, including, without limitation, trademark , patent and/or copyright
security agreements and amendments or supplements thereto, as may be required by
Agent to evidence, perfect or protect Agent's Liens and security interests in
the Collateral.
5.3. Other Actions:
Each Borrower will defend the Collateral against all Liens (other
than Permitted Liens), claims and demands of all Persons at any time claiming
the same or any interest therein. Each Borrower agrees to comply with the
requirements of all state and federal laws and requests of Agent in order for
Agent to have and maintain a valid and perfected first security interest
(subject only to Permitted Liens) in the Collateral including, without
limitation, executing such documents as Agent may require to obtain Control (as
defined in the Code) over all Letter of Credit Rights, Deposit Accounts and
Investment Property. Agent is hereby authorized by each Borrower to file any
financing statements covering the Collateral or an amendment that adds
collateral covered by a financing statement or an amendment that adds a debtor
to a financing statement, in each case
42
whether or not a Borrower's signature appears thereon. Each Borrower hereby
authorizes Agent to file all such financing statements and amendments to
financing statements describing the Collateral in any filing office as Agent, in
its reasonable discretion, may determine, including financing statements listing
"All Assets" in the collateral description therein, as well as language
indicating that the acquisition by a third party of any right, title or interest
in or to the Collateral without Agent's consent, shall be a violation of Agent's
rights. In addition to the foregoing, each Borrower shall perform all further
acts that may be lawfully and reasonably required by Agent to secure Agent and
effectuate the intentions and objects of this Credit Agreement, including, but
not limited to, the execution and delivery of continuation statements,
amendments to financing statements, security agreements, contracts and any other
documents required hereunder as well as obtain Acknowledgment and Waiver
Agreements. At Agent's request, each Borrower shall, immediately deliver (with
execution by such Borrower of all necessary documents or forms to reflect,
implement or enforce all Liens described herein thereon) to Agent all
certificates of title to note Agent's Lien thereon and all documents or items
for which Agent must receive possession to obtain and/or maintain perfected
security interests, including without limitation, all notes, letters of credit,
certificates and documents of title, chattel paper, warehouse receipts,
instruments, and any other similar Collateral.
5.4. Searches and Certificates:
Borrowers shall, prior to or at Closing, and thereafter as Agent may
reasonably determine from time to time, at Borrowers' expense, obtain (and Agent
may also do so, at its option, but at Borrowers' expense from time to time) the
following searches (the results of which are to be consistent with the
warranties made by Borrowers in this Credit Agreement in any other Loan
Document):
a. UCC searches with the Secretary of State of each Borrower's
jurisdiction of organization and the Secretary of State and local filing office
of each state or other jurisdiction where either Borrower maintains its
executive office, a place of business, or any Property;
b. Judgment, federal tax lien and state tax lien searches, in all
applicable filing offices of each jurisdiction searched under subparagraph (a)
above; and c. Searches of ownership and Lien status of intellectual property in
the appropriate governmental offices.
5.5. Mortgage Modifications:
On or before the Closing Date, Phoenix and Realty, as applicable, shall
each execute and deliver to Agent a mortgage modification with respect to the
Master Mortgages ("Mortgage Modifications").
ARTICLE VI : CONDITIONS PRECEDENT
The obligation of any Lenders to make any Loan or of Issuing Bank to issue
any Letter of Credit hereunder is subject to the satisfaction of, or waiver of,
immediately prior to or concurrently with the making of such Loan or issuance of
such Letter of Credit the following conditions
43
precedent:
6.1. Closing Conditions:
The obligation of each Lender to make Loans and/or of Issuing Bank
to issue Letters of Credit hereunder shall be subject to the satisfaction, on or
prior to the Closing Date, of the following conditions precedent (all agreements
and documents from Borrowers or any other Person to be in form and substance
acceptable to Agent, in its sole discretion):
a. Executed Credit Documents. Receipt by Agent of duly executed
copies of: this Credit Agreement; the Notes; the Security Documents; and all
other Credit Documents.
b. Corporate Documents. Receipt by Agent of the following:
(i) Charter Documents. Copies of the articles or certificates
of incorporation or other charter documents of each Borrower certified to be
true and complete as of a recent date by the appropriate Governmental Authority
of the state or other jurisdiction of its incorporation and certified by a
secretary or assistant secretary of such Borrower to be true and correct as of
the Closing Date.
(ii) Bylaws/Operating Agreement. A copy of the bylaws or
operating agreement, as applicable, of each Borrower certified by a secretary or
assistant secretary of such Borrower to be true and correct as of the Closing
Date.
(iii) Resolutions. Copies of resolutions or unanimous written
consent of the board of directors or members, as applicable, of each Borrower
approving and adopting the Credit Documents, the transactions contemplated
therein and authorizing execution and delivery thereof, certified by a secretary
or assistant secretary of such Borrower to be true and correct and in force and
effect as of the Closing Date.
(iv) Good Standing. Copies of (i) a certificate of good
standing, existence or its equivalent with respect to each Borrower certified as
of a recent date by the appropriate Governmental Authorities of the state or
other jurisdiction of incorporation and each other jurisdiction in which the
failure to so qualify and be in good standing could reasonably be expected to
have a Material Adverse Effect and (ii) to the extent available, a certificate
indicating payment of all corporate franchise taxes certified as of a recent
date by the appropriate taxing Governmental Authorities.
(v) Incumbency. An incumbency certificate of each Borrower
certified by a secretary or assistant secretary of such Borrower to be true and
correct as of the Closing Date.
c. Financial Statements. Receipt by Agent of Borrowers' audited
Financial Statements for the fiscal year ending December 31, 2002, or if such
audited Financial Statements are not yet available, Agent shall have had the
opportunity to review drafts of such Financial Statements and have discussions
with Borrowers' Independent Accountants, such review and discussions acceptable
to Agent in its reasonable discretion, and such other information relating to
Borrowers as Agent may reasonably require.
44
d. Opinions of Counsel. Receipt by Agent of an opinion, or opinions
(which shall cover, among other things, authority, legality, validity, binding
effect, enforceability, absence of conflict with laws, corporate documents,
material agreements and the Subordinated Notes and attachment and perfection of
liens), satisfactory to Agent, addressed to Agent and dated the Closing Date,
from legal counsel to Borrowers.
e. Personal Property Collateral. Agent shall have received duly
authorized or, if required executed, UCC financing statements and other lien
documents for filing, all as may be required by Agent.
f. Priority of Liens. Agent shall have received satisfactory
evidence that (i) Agent, on behalf of Lenders, holds a perfected, first priority
Lien on all Collateral subject only to Permitted Liens and (ii) none of the
Collateral is subject to any other Liens other than Permitted Liens.
g. Opening Borrowing Base Certificate. Receipt by Agent of a
Borrowing Base Certificate as of the Closing Date, substantially in the form of
Exhibit D and certified by the chief financial officer of Borrowers to be true
and correct as of the Closing Date and evidencing an Excess Borrowing
Availability of at least $1,000,000.
h. Consents. Receipt by Agent of evidence that all governmental,
shareholder, member and third party consents and approvals required in
connection with the transactions contemplated hereby and expiration of all
applicable waiting periods without any action being taken by any authority that
could restrain, prevent or impose any material adverse conditions on such
transactions or that could seek or threaten any of the foregoing, and no law or
regulation shall be applicable which in the judgment of Agent could have such
effect.
i. Officer's Certificates. Agent shall have received a certificate
or certificates executed by the president, chief executive officer or chief
financial officer of Borrowers as of the Closing Date covering such matters as
Agent may require, including without limitation the following: (i) all
conditions to Closing contained herein have been satisfied, (ii) all
representations and warranties contained herein and in the other Credit
Documents are true and correct in all material respects, and (iii) no Default or
Event of Default exists.
j. Fees and Expenses. Payment by Borrowers of all Fees and Expenses
owed by them to Agent.
k. Perfection Certificates. Receipt by Agent of a duly executed
Perfection Certificate for each Borrower.
l. No Material Adverse Change. No Material Adverse Change shall have
occurred since December 31, 2002.
m. Reaffirmation Agreements. Receipt by Agent of duly executed a
reaffirmation of the Master Pledge Agreement from the holders of the Capital
Stock of Phoenix and a reaffirmation of the Subsidiary Pledge Agreement from
Phoenix.
45
n. Other. Receipt by Agent of such other documents, instruments,
agreements or information as are required to be provided herein or under any
other Credit Documents or as may otherwise be or have been requested by Agent.
6.2. Ongoing Borrowing Conditions:
On the date of the making of any Loan or the issuance of any Letter
of Credit, or the date of any extension of, or conversion to, a Eurodollar Loan,
both before and after giving effect thereto and to the application of the
proceeds therefrom, the following statements shall be true (and each request for
a Loan, and a Letter of Credit, or the conversion or extension and the
acceptance by Borrowers thereof, shall constitute a representation and warranty
by Borrowers that on the date of such Loan or issuance of such Letter of Credit,
or conversion or extension, before and after giving effect thereto and to the
application of the proceeds therefrom, such statements are true):
a. the representations and warranties contained in this Credit
Agreement are true and correct in all material respects on and as of the date
thereof as though made on and as of such date, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and correct
in all material respects on and as of such earlier date);
b. no event has occurred and is continuing, or would result from
such Loan or issuance of such Letter of Credit, or conversion or extension, or
the application of the proceeds thereof, which would constitute a Default or an
Event of Default under this Credit Agreement.
6.3. Notice of Borrowing, Borrowing Base Certificate:
On the date of the making of any Loan, Agent shall have received a
Notice of Borrowing to the extent such Notice of Borrowing is required to be
given with respect to the making of such Loan and a Borrowing Base Certificate.
ARTICLE VII : REPRESENTATIONS AND WARRANTIES
In order to induce Agent, Issuing Bank and Lenders to enter into this
Credit Agreement and Issuing Bank to issue the Letters of Credit, and Lenders to
make available the credit facilities contemplated hereby, each Borrower hereby
represents and warrants to Agent, Issuing Bank and Lenders:
7.1. Organization and Qualification:
Each Borrower (i) is duly organized, validly existing and in good
standing under the laws of the state of its incorporation or organization, (ii)
has the power and authority to own its Property and assets and to transact the
businesses in which it is presently, or proposes to be, engaged, and (iii) is
duly qualified and is authorized to do business and is in good standing in every
jurisdiction in which the failure to be so qualified could reasonably be
expected to have a Material Adverse Effect. Schedule 7.1 contains a true,
correct and complete list of all jurisdictions in which Borrowers are qualified
to do business as a foreign corporation as of the Closing Date.
7.2. Liens:
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There are no Liens in favor of any Person with respect to any
Property of Borrowers other than Permitted Liens. Upon the proper filing of
financing statements and the proper recordation of other applicable documents
with the appropriate filing or recordation offices in each of the necessary
jurisdictions, the security interests granted pursuant to the Credit Documents
constitute and shall at all times constitute valid and enforceable first, prior
and perfected Liens on the Collateral (other than Permitted Liens).
7.3. No Conflict:
The execution and delivery by each Borrower of this Credit Agreement
and each of the other Credit Documents executed and delivered in connection
herewith and the performance of the obligations of each Borrower hereunder and
thereunder and the consummation by each Borrower of the transactions
contemplated hereby and thereby: (i) are within the powers of such Borrower;
(ii) are duly authorized by the board of directors of such Borrower and, if
necessary, its stockholders or members, as applicable; (iii) are not in
contravention of the terms of the articles or certificate of incorporation or
organization or bylaws or operating agreement of such Borrower or of any
indenture, contract, lease, agreement, instrument or other commitment to which
such Borrower is a party or by which such Borrower or any of its Property are
bound; (iv) do not require the consent, registration or approval of any
Governmental Authority or any other Person; (v) do not contravene any statute,
law, ordinance regulation, rule, order or other governmental restriction
applicable to or binding upon such Borrower; and (vi) will not, except as
contemplated herein for the benefit of Agent on behalf of Lenders, result in the
imposition of any Liens upon any Property of such Borrower under any existing
indenture, mortgage, deed of trust, loan or credit agreement or other material
agreement or instrument to which such Borrower is a party or by which it or any
of its Property may be bound or affected.
7.4. Enforceability:
The Credit Agreement and all of the other Credit Documents are the
legal, valid and binding obligations of Borrowers, and are enforceable against
Borrowers in accordance with their terms.
7.5. Financial Data:
Borrowers have furnished to Agent and Lenders the following
Financial Statements (the "Financials"): (i) the consolidated balance sheet of
Borrowers as of, and statements of income, retained earnings and changes in
financial position for the fiscal year ended December 31, 2001 audited by
independent certified public accountants, and (ii) the unaudited consolidated
and consolidating balance sheet of Borrowers as of, and statement of income,
retained earnings and changes in financial position for the period ending June
30, 2003 prepared by the chief financial officer of Borrowers. The Financials
are in accordance with the books and records of Borrowers and fairly present the
financial condition of Borrowers at the dates thereof and the results of
operations for the periods indicated (subject, in the case of unaudited
Financial Statements, to normal year end adjustments), and such Financial
Statements have been prepared in conformity with GAAP consistently applied
throughout the periods involved. Since December 31, 2002, there have been no
changes in the condition, financial or otherwise, of Borrowers as shown on the
respective balance sheets of Borrowers described above, except (a) as
contemplated herein and (b) for changes which individually or in the aggregate
do not constitute a Material Adverse Change.
47
7.6. Locations of Offices, Records and Inventory:
Each Borrower's chief executive office and all other places of
business are set forth in Schedule 7.6 hereto, and the books and records of each
Borrower and all chattel paper and all records of accounts are located at the
chief executive offices of such Borrower. There is no address in which a
Borrower has any Collateral (except for vehicles, in-transit Inventory and
computer equipment stored on a customer's premises for the purpose of utilizing
Phoenix's Color Net(R) System) other than the addresses as set forth on Schedule
7.6. Schedule 7.6 also contains a true, correct and complete list of the legal
names and addresses of each landlord, warehouseman, filler, processor and packer
at which Inventory is stored, or equipment is located. None of the receipts
received by a Borrower from any warehouseman, filler, processor or packer states
that the goods covered thereby are to be delivered to bearer or to the order of
a named person or to a named person and such named person's assigns.
7.7. Business Names:
No Borrower has used any corporate or fictitious name during the
five (5) years preceding the date hereof, other than the name shown on its
Articles or Certificate of Incorporation or Organization (as applicable), as it
may be amended to the date hereof, delivered to Agent and those names as set
forth on Schedule 7.7.
7.8. Affiliates and Subsidiaries:
There are no Affiliates or direct or indirect Subsidiaries of any
Borrower except as set forth on Schedule 7.8. No Borrower is a party to any
partnership or joint venture except as set forth on Schedule 7.8.
7.9. Judgments or Litigation:
Except as set forth on Schedule 7.9, there is no (a) judgment,
order, writ or decree outstanding against any Borrower or (b) pending or, to the
best of any Borrower's knowledge, threatened litigation, contested claim,
governmental, administrative or regulatory investigation, arbitration, or
governmental audit (for taxes or otherwise) or proceeding by or against any
Borrower. Except as specifically set forth and identified on Schedule 7.9, no
such matter (individually or in the aggregate) could reasonably be expected to
have a Material Adverse Effect.
7.10. Defaults:
No Borrower is in default under any term of any indenture, contract,
lease, agreement, instrument or other commitment to which it is a party or by
which it is bound.
7.11. Compliance with Law:
No Borrower has violated or failed to comply with (including without
limitation in the ownership and use of its Property and the conduct of its
business) any statute, law, ordinance, regulation, rule or order of any foreign,
federal, state or local government, or any other Governmental Authority or any
self regulatory organization, or any judgment, decree or order of any court,
applicable to its business or operations the violation of or failure to comply
with which could reasonably be expected to have a Material Adverse Effect. No
Borrower has received any notice to
48
the effect that, or otherwise been advised that, it is not in compliance with,
and no Borrower has reason to anticipate that any currently existing
circumstances are likely to result in the violation of any such statute, law,
ordinance, regulation, rule, judgment, decree or order which failure or
violation could reasonably be expected to have a Material Adverse Effect.
7.12. ERISA:
No Borrower, nor any ERISA Affiliate maintains or contributes to any
Benefit Plan other than those set forth on Schedule 7.12. Each Benefit Plan has
been and is being maintained and funded in accordance in all material respects
with its terms and in compliance in all material respects with all provisions of
ERISA and the Internal Revenue Code applicable thereto. Each Borrower, and each
ERISA Affiliate has fulfilled all obligations related to the minimum funding
standards of ERISA and the Internal Revenue Code for each Benefit Plan, is in
compliance in all material respects with the currently applicable provisions of
ERISA and of the Internal Revenue Code and has not incurred any liability (other
than routine liability for premiums) under Title IV of ERISA. No Termination
Event has occurred nor has any other event occurred that may result in such a
Termination Event. No event or events have occurred in connection with which any
Borrower, any ERISA Affiliate, any fiduciary of a Benefit Plan or any Benefit
Plan, directly or indirectly, would be subject to any material liability,
individually or in the aggregate, under ERISA, the Internal Revenue Code or any
other law, regulation or governmental order or under any agreement, instrument,
statute, rule of law or regulation pursuant to or under which any such entity
has agreed to indemnify or is required to indemnify any person against liability
incurred under, or for a violation or failure to satisfy the requirements of,
any such statute, regulation or order.
7.13. Compliance with Environmental Laws:
a. To the Borrowers' knowledge, (a) the operations of each Borrower
comply with all applicable federal, state or local environmental, health and
safety statutes, regulations, directions, ordinances, criteria or guidelines and
(b) none of the operations of Borrowers are the subject of any judicial or
administrative proceeding alleging the violation of any federal, state or local
environmental, health or safety statute, regulation, direction, ordinance,
criteria or guidelines. The Borrowers have not received notice that any of the
operations of Borrowers are the subject of any federal or state investigation
evaluating whether Borrowers disposed any hazardous or toxic waste, substance or
constituent or other substance at any site that may require remedial action, or
any federal or state investigation evaluating whether any remedial action is
needed to respond to a release of any hazardous or toxic waste, substance or
constituent, or other substance into the environment. No Borrower has filed or
received any notice under any federal or state law indicating past or present
treatment, storage or disposal of a hazardous waste or reporting a spill or
release of a hazardous or toxic waste, substance or constituent, or other
substance into the environment. No Borrower has contingent liability of which
Borrowers have knowledge in connection with any release of any hazardous or
toxic waste, substance or constituent, or other substance into the environment,
nor have Borrowers received any notice, letter or other indication of potential
liability arising from the disposal of any hazardous or toxic waste, substance
or constituent or other substance into the environment.
49
7.14. Intellectual Property:
Each Borrower possesses adequate licenses, patents, patent
applications, copyrights, service marks, trademarks and tradenames to continue
to conduct its business as heretofore conducted by it. Schedule 7.14 attached
hereto sets forth (a) all of the federal, state and foreign registrations of
trademarks, service marks and other marks, trade names or other trade rights of
Borrowers, and all pending applications for any such registrations, (b) all of
the patents and copyrights of Borrowers and all pending applications therefor
and (c) all other trademarks, service marks and other marks, trade names and
other trade rights used by Borrowers in connection with their business
(collectively, the "Proprietary Rights"). Borrowers own each of the Proprietary
Rights set forth on Schedule 7.14 as indicated on such schedule, and except as
set forth on Schedule 7.14, to Borrowers' knowledge no other Person has the
right to use any of such Proprietary Rights. The Proprietary Rights set forth on
Schedule 7.14 are all those used in the businesses of Borrowers. Except as set
forth on Schedule 7.14, no Person has a right to receive any royalty or similar
payment in respect of any Proprietary Rights pursuant to any contractual
arrangements entered into by Borrowers, and no Person otherwise has a right to
receive any royalty or similar payment in respect of any such Proprietary Rights
except as set forth on Schedule 7.14. No Borrower has granted any license or
sold or otherwise transferred any interest in any of the Proprietary Rights to
any other Person. The use of each of the Proprietary Rights by Borrowers is not
infringing upon or otherwise violating the rights of any third party in or to
such Proprietary Rights, and no proceeding has been instituted against or notice
received by Borrowers that are presently outstanding alleging that the use of
any of the Proprietary Rights infringes upon or otherwise violates the rights of
any third party in or to any of the Proprietary Rights. No Borrower has given
notice to any Person that it is infringing on any of the Proprietary Rights and
to the best of Borrowers' knowledge, no Person is infringing on any of the
Proprietary Rights. All of the Proprietary Rights of Borrowers are valid and
enforceable rights of Borrowers and will not cease to be valid and in full force
and effect by reason of the execution and delivery of this Credit Agreement or
the Credit Documents or the consummation of the transactions contemplated hereby
or thereby.
7.15. Licenses and Permits:
Each Borrower has obtained and holds in full force and effect all
material franchises, licenses, leases, permits, certificates, authorizations,
qualifications, easements, rights of way and other rights and approvals which
are necessary or appropriate for the operation of its business as presently
conducted and as proposed to be conducted, except to the extent that the failure
to obtain or hold any such franchises, licenses, leases, permits, certificates,
authorizations, qualifications, easements, rights of way or other rights or
approvals would not unreasonably be expected to have a Material Adverse Effect.
No Borrower is in violation of the terms of any such franchise, license, lease,
permit, certificate, authorization, qualification, easement, right of way, right
or approval in any such case which could not reasonably be expected to have a
Material Adverse Effect.
7.16. Title to Property:
Each Borrower has (i) valid leasehold interests in all of the real
property it occupies as a tenant, (all such real property is set forth on
Schedule 7.16) and (ii) good, marketable and exclusive title to all of the other
Property it purports to own (including without limitation, all real and personal
Property in each case as reflected in the Financial Statements delivered to
Agent hereunder), other than, with respect to Property described in clause (ii)
above, properties disposed of in the ordinary
50
course of business or in any manner otherwise permitted under this Credit
Agreement since the date of the most recent audited balance sheet of Borrowers
or as set forth on Schedule 7.16(b), and in each case of (i) and (ii) above,
subject to no claims, options, rights or interests of any other Person. Each
Borrower enjoys peaceful and undisturbed possession of all its real property,
and there is no pending or, to the best of its knowledge, threatened
condemnation proceeding relating to any such real property. The leases with
respect to the leased property, together with any leases of real property
entered into by each Borrower after the date hereof, are referred to
collectively as the "Leases". None of the Leases contains provisions which have
or could reasonably be expected to have a Material Adverse Effect. No material
default exists under any Lease. All of the Structures and other tangible assets
owned, leased or used by Borrowers in the conduct of their business are (a)
insured to the extent and in a manner customary in the industry in which
Borrowers are engaged, (b) structurally sound with no known defects which have
or could reasonably be expected to have a Material Adverse Effect, (c) in good
operating condition and repair, subject to ordinary wear and tear, (d) not in
need of maintenance or repair except for ordinary, routine maintenance and
repair the cost of which is immaterial, and (e) sufficient for the operation of
the businesses of Borrowers as currently conducted.
7.17. Labor Matters:
To the Borrowers' knowledge, no Borrower is engaged in any unfair
labor practice. To the Borrowers' knowledge, there is (a) no material unfair
labor practice complaint pending against any Borrower or threatened against a
Borrower, before the National Labor Relations Board, and no grievance or
arbitration proceeding with any employee, or group or committee representing any
employees, or arising out of or under collective bargaining agreements that has
or could reasonably be expected to have a Material Adverse Effect is so pending
against any Borrower or threatened against a Borrower, (b) no strike, labor
dispute, slowdown or stoppage pending or threatened against a Borrower, and (c)
no union representation questions with respect to the employees of any Borrower
and no union organizing activities.
7.18. Investment Company:
No Borrower is (a) an "investment company" or a company "controlled"
by an "investment company" within the meaning of the Investment Company Act of
1940, as amended, (b) a "holding company" or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended, or (c) subject to any other law which
purports to regulate or restrict its ability to borrow money or to consummate
the transactions contemplated by this Credit Agreement or the other Credit
Documents or to perform its obligations hereunder or thereunder.
7.19. Margin Security:
No Borrower owns any margin stock and no portion of the proceeds of
any Loans or Letters of Credit shall be used by Borrowers for the purpose of
purchasing or carrying any "margin stock" (as defined in Regulation U of the
Board of Governors of the Federal Reserve System) or for any other purpose which
violates the provisions or Regulation U, T, or X of said Board of Governors or
for any other purpose in violation of any applicable statute or regulation, or
of the terms and conditions of this Credit Agreement.
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7.20. Taxes and Tax Returns:
a. Each Borrower has timely filed (inclusive of any permitted
extensions) with the appropriate taxing authorities all returns (including,
without limitation, information returns and other material information) in
respect of Taxes required to be filed through the date hereof and will timely
file (inclusive of any permitted extensions) any such returns required to be
filed on and after the date hereof. The information filed is complete and
accurate in all material respects.
b. (i) All Taxes, in respect of periods beginning prior to the date
hereof, have been timely paid, or will be timely paid, or an adequate reserve
has been established therefor, as set forth in the Financial Statements, and
(ii) no Borrower has any material liability for such Taxes for such periods in
excess of the amounts so paid or reserves so established. No material
deficiencies for Taxes have been claimed, proposed or assessed by any taxing or
other Governmental Authority against a Borrower and no material tax Liens have
been filed.
7.21. Status of Accounts:
Each Account is based on an actual and bona fide sale and delivery
of goods or rendition of services to customers, made by each Borrower in the
ordinary course of its business; the goods and inventory being sold and the
Accounts created are such Borrower's exclusive property and are not and shall
not be subject to any Lien, consignment arrangement, encumbrance, security
interest or financing statement whatsoever, and such Borrower's customers have
accepted the goods or services, owe and are obligated to pay the full amounts
stated in the invoices according to their terms, without any material dispute,
offset, defense, counterclaim or contra. Each Borrower confirms to Agent that
any and all taxes or fees relating to its business, its sales, the Accounts or
the goods relating thereto, are its sole responsibility and that same will be
paid by Borrowers when due (unless duly contested and adequately reserved for)
and that none of said taxes or fees is or will become a lien on or claim against
the Accounts.
7.22. Material Contracts:
Schedule 7.22 sets forth a true, correct and complete list of all
the Material Contracts currently in effect on the date hereof. None of the
Material Contracts contains provisions which have or could reasonably be
expected to have a Material Adverse Effect. All of the Material Contracts are in
full force and effect, and to the knowledge of Borrowers, no material defaults
currently exist thereunder.
7.23. Corporate Structure:
The authorized and outstanding Capital Stock of each Borrower and
the owners thereof are as set forth on Schedule 7.23 attached hereto. All of the
Capital Stock of each Borrower has been duly and validly authorized and issued
and is fully paid and non-assessable and has been sold and delivered to the
holders thereof in compliance with, or under valid exemption from, all federal
and state laws and the rules and regulations of all regulatory bodies thereof
governing the sale and delivery of securities. Except for the rights and
obligations set forth on Schedule 7.23, there are no subscriptions, warrants,
options, calls, commitments, rights or agreements by which any Borrower or any
of the shareholders of any Borrower is bound relating to the issuance, transfer,
voting or
52
redemption of shares of its Capital Stock or any pre-emptive rights held by any
Person with respect to the shares of Capital Stock of any Borrower. Except as
set forth on Schedule 7.23, no Borrower has issued any securities convertible
into or exchangeable for shares of its capital stock or any options, warrants or
other rights to acquire such shares or securities convertible into or
exchangeable for such shares.
7.24. Accuracy and Completeness of Information:
All factual information heretofore, contemporaneously or hereafter
furnished by or on behalf of any Borrower in writing to Agent, and Lenders or
the Independent Accountant for purposes of or in connection with this Credit
Agreement or any Credit Documents, or any transaction contemplated hereby or
thereby is or will be true and accurate in all material respects on the date as
of which such information is dated or certified and not incomplete by omitting
to state any material fact necessary to make such information not misleading at
such time. There is no fact now known to any officer of any Borrower which has,
or would have, a Material Adverse Effect which fact has not been set forth
herein, in the Financials, or any certificate, opinion or other written
statement made or furnished by any Borrower to Agent or any Lender.
7.25. Solvency:
After giving effect to the transactions contemplated under this
Agreement, each Borrower is able to pay its respective debts as they become due,
and has capital sufficient to carry on its respective business and all
businesses in which it is about to engage, and now owns Property having a value
both at fair valuation and at present fair salable value greater than the amount
required to pay such Borrower's debts, no Borrower will be rendered insolvent by
the execution and delivery of this Agreement or any of the other Credit
Documents executed in connection with this Agreement or by the transactions
contemplated hereunder or thereunder.
7.26. Interrelatedness of Borrowers:
The business operations of each Borrower are interrelated and
complement one another, and Borrowers have a common business purpose, with
inter-company bookkeeping and accounting adjustments used to separate their
respective Properties, liabilities, and transactions. To permit their
uninterrupted and continuous operations, Borrowers now require and will from
time to time hereafter require funds for general business purposes. The proceeds
of the Loans will directly or indirectly benefit each Borrower hereunder
severally and jointly, regardless of which Borrower requests or receives part or
all of the proceeds of such advances.
7.27. Commercial Tort Claims:
No Borrower has Commercial Tort Claims except as set forth on
Schedule 7.27 attached hereto and made a part hereof.
7.28. Letter of Credit Rights:
No Borrower has Letter of Credit Rights except as set forth on
Schedule 7.28 attached hereto and made a part hereof.
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7.29. Deposit Accounts:
All Deposit Accounts of each Borrower and each Depository
Institution are set forth on Schedule 7.29 attached hereto and made a part
hereof.
7.30. Senior Debt:
The Obligations are, and at times will be, considered [senior
indebtedness] under the Subordinated Notes.
7.31. Survival of Representations:
All representations made by Borrowers in this Credit Agreement and
in any other Credit Document shall survive the execution and delivery hereof and
thereof.
ARTICLE VIII : AFFIRMATIVE COVENANTS
Until termination of this Credit Agreement and the Commitments hereunder
and payment and satisfaction of all Obligations, each Borrower covenants and
agrees as follows:
8.1. Financial Information:
Borrowers will furnish to Agent (and in the case of the statements
referred to subsection (a), (b) and (d), also to each Lender) the following
information within the following time periods:
a. within ninety (90) days after the end of each fiscal year of
Borrowers, the earnings and retained earnings statement of Borrowers for such
year, the balance sheet of Borrowers as at the end of such fiscal year and a
statement of cash flows for such fiscal year, all on a consolidated and
consolidating basis, setting forth in each case in comparative form the
corresponding figures as at the end of and for the previous fiscal year, all in
reasonable detail, including all supporting schedules, and audited and
unqualifiedly certified by a nationally recognized independent public accounting
firm acceptable to Agent, to have been prepared in accordance with GAAP, and
such independent public accountants shall also unqualifiedly certify that in
making the examinations necessary to their certification mentioned above they
have reviewed the terms of this Agreement and the accounts and conditions of the
Borrowers during the accounting period covered by the certificate and that such
review did not disclose the existence of any condition or event which
constitutes a Default or an Event of Default (or if such conditions or events
existed, describing them) together with copies of any management letters
provided by such accountants to management of any Borrower;
b. within thirty (30) days after the end of each calendar month in
each fiscal year of Borrowers, the earnings and retained earnings statement of
Borrowers for such month and for the expired portion of the fiscal year ending
with the end of such month, setting forth in comparative form the corresponding
figures for the corresponding periods of the previous fiscal year, and, for each
fiscal year, a comparison of Borrowers' actual earnings statement for such month
compared to the monthly earnings forecast required under Section 8.1(g), and the
consolidated and
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consolidating balance sheet of Borrowers as at the end of such month, setting
forth in comparative form the corresponding figures as at the end of the
corresponding period of the previous fiscal year, all in reasonable detail and
certified by the chief financial officer of Phoenix to have been prepared from
the books and records of each Borrower;
c. not later than 1:00 P.M. on each Business Day, a borrowing base
certificate (the "Borrowing Base Certificate") in substantially the form of
Exhibit D hereto, duly completed and certified by any Authorized Person,
detailing Borrowers' Eligible Accounts Receivable and Eligible Canadian
Receivables as of the prior Business Day and Eligible Inventory (with a separate
itemization for paper raw materials, ink raw materials and other raw materials)
as of the last Business Day of the immediately preceding calendar month. Agent
may, but shall not be required to, rely on each Borrowing Base Certificate
delivered hereunder as accurately setting forth the available Borrowing Base for
all purposes of this Credit Agreement until such time as a new Borrowing Base
Certificate is delivered to Agent in accordance herewith;
d. at the time of submission of the monthly Financial Statements
that are due with respect to each calendar month that is the fiscal quarter end
(for the first three fiscal quarters in any fiscal year) and the annual
Financial Statement of Borrowers, a certificate substantially in the form of
Exhibit E hereto, ("Compliance Certificate"), executed by an Authorized Person,
certifying that, following a review of the Credit Agreement, no Event of Default
is outstanding and demonstrating compliance with the financial covenants
contained in Article IX by calculation thereof as of the end of each such fiscal
period;
e. promptly upon receipt thereof, copies of all management letters
and other material reports which are submitted to Borrowers by their Independent
Accountant in connection with any annual or interim audit of the books of
Borrowers made by such accountants;
f. within fifteen (15) days of the end of each calendar month,
Borrowers' accounts receivable aging report together with detailed calculations
and information regarding Eligible Accounts and ineligible Accounts, accounts
payable aging report, inventory certificate together with detailed calculations
and information regarding Eligible Inventory and ineligible Inventory, account
status reports and such other reports as Agent reasonably deems necessary,
certified by Phoenix's chief financial officer as or to Agent (with a separate
itemization for Phoenix Fulfillment, provided if Phoenix Fulfillment's accounts
payable at any time are in excess of $150,000, then such reports shall be
delivered on a weekly basis);
g. within thirty (30) days prior to each fiscal year end,
consolidated and consolidating financial projections for the immediately
succeeding fiscal year of Borrowers which includes a projected balance sheet and
statement of income for such fiscal years and a projected statement of cash
flows and projected statement of borrowings formula availability for such fiscal
years (all prepared on a fiscal quarter to fiscal quarter basis);
h. not later than the 15th day of each month (or if such day is not
a Business Day, then on the next succeeding Business Day), a certificate that
Phoenix Fulfillment is in compliance with Section 8.22; provided if Phoenix
Fulfillment's accounts payable are at any time in excess of $150,000, then such
reports shall be delivered on a weekly basis; and
55
i. Such other reports, certificates, schedules, documents, data or
information concerning Borrowers' finances and Property as Agent may reasonably
request from time to time.
8.2. Corporate Existence:
Each Borrower (a) will maintain its corporate existence, (b) will
maintain in full force and effect all material licenses, bonds, franchise,
leases, trademarks and qualifications to do business, (c) will obtain or
maintain patents, contracts and other rights necessary or desirable to the
profitable conduct of their business, (d) will continue in, and limit its
operations to, the same general lines of business as that presently conducted by
it and (e) will comply with all applicable laws, rules and regulations of any
federal, state or local Governmental Authority, except in the case of (b), (c)
and (e) where noncompliance could not reasonably be expected to have a Material
Adverse Effect.
8.3. ERISA:
Each Borrower will establish, maintain and operate all Plans to
comply in all material respects with the provisions of ERISA, the Internal
Revenue Code, and all other applicable laws, and the regulations and
interpretations thereunder other than to the extent that such Borrower is in
good faith contesting by appropriate proceedings the validity or implication of
any such provision, law, rule, regulation or interpretation.
8.4. Environmental Matters:
Each Borrower will conduct its business so as to comply in all
material respects with all environmental laws, regulations, directions,
ordinances, criteria and guidelines in all jurisdictions in which any of them is
or may at any time be doing business including, without limitation,
environmental land use, occupational safety or health laws, regulations,
directions, ordinances, criteria, guidelines, requirements or permits in all
jurisdictions in which it is or may at any time be doing business, except to the
extent that such Borrower is contesting, in good faith by appropriate legal
proceedings, any such law, regulation, direction, ordinance, criteria,
guideline, or interpretation thereof or application thereof; provided, further,
that each Borrower will comply with the order of any court or other governmental
body of the applicable jurisdiction relating to such laws unless such Borrower
shall currently be prosecuting an appeal or proceedings for review and shall
have secured a stay of enforcement or execution or other arrangement postponing
enforcement or execution pending such appeal or proceedings for review. If a
Borrower shall (a) receive notice that any violation of any federal, state or
local environmental law, regulation, direction, ordinance, criteria or guideline
may have been committed or is about to be committed by any Borrower, (b) receive
notice that any administrative or judicial complaint or order has been filed or
is about to be filed against any Borrower alleging violations of any federal,
state or local environmental law, regulation, direction, ordinance, criteria or
guideline or requiring a Borrower to take any action in connection with the
release of toxic or hazardous substances into the environment or (c) receive any
notice from a federal, state, or local governmental agency or private party
alleging that any Borrower may be liable or responsible for costs associated
with a response to or cleanup of a release of a toxic or hazardous substance
into the environment or any damages caused thereby, Borrowers will provide Agent
with a copy of such notice within 10 days after the receipt thereof by a
Borrower.
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8.5. Books and Records:
Each Borrower will maintain books and records pertaining to the
Collateral in such detail, form and scope as is consistent with good business
practice. Each Borrower agrees that Agent or its agents may, upon reasonably
notice to the Borrowers, and during regular business hours, enter upon the
premises of Borrowers for the purpose of (a) enabling Agent's auditors to
conduct (at Borrowers' expense) field examinations, (b) inspecting and verifying
the Collateral, (c) inspecting and/or copying (at Borrowers' expense) any and
all records pertaining thereto, and (d) discussing the affairs, finances and
business of Borrowers or with any officers, employees and directors of Borrowers
with the Independent Accountant. Agent shall be entitled from time to time, in
its name, a fictitious name or Borrowers' name to verify accounts receivable.
Borrowers shall be liable for all of Agent's customary field examination fees as
well as out-of-pocket costs and expenses associated with the above actions. If
no Event of Default is outstanding, field examination fees for which Borrowers
shall be liable shall not, without prior notice to Borrowers, exceed $700 per
person per day from the Closing Date through and including December 31, 2003,
$725 per person per day from January 1, 2004 through and including December 31,
2004, and $750 per person per day from January 1, 2005 and thereafter, in each
case plus all reasonable costs and expenses.
8.6. Collateral Records:
Each Borrower will execute and deliver to Agent, from time to time,
solely for Agent's convenience in maintaining a record of the Collateral, such
written statements and schedules as Agent may reasonably require, including
without limitation those described in Section 8.1 of this Credit Agreement,
designating, identifying or describing the Collateral pledged to Agent
hereunder. Borrowers' failure, however, to promptly give Agent such statements
or schedules shall not affect, diminish, modify or otherwise limit Agent's
security interests in the Collateral. Each Borrower agrees to maintain such
books and records regarding Accounts and the other Collateral as Agent may
reasonably require, and agrees that such books and records will reflect Agent's
interest in the Accounts and such other Collateral.
8.7. Changes in Location:
Each Borrower agrees to afford Agent 30 days prior written notice of any
change in any Borrower's jurisdiction or organization or the location of any
Collateral (other than Inventory held for shipment by third Persons, Inventory
in transit, or Inventory held for processing by third Persons) or in the
location of its chief executive office or place of business from the locations
specified in Schedule 7.6, and to execute in advance of such change, cause to be
filed and/or delivered to Agent any financing statements or other documents
required by Agent, all in form and substance satisfactory to Agent.
8.8. Insurance; Casualty Loss:
Each Borrower will maintain public liability insurance, third party
property damage insurance and replacement value insurance on the Collateral
under such policies of insurance, with such insurance companies, in such amounts
and covering such risks as are at all times customary for businesses of this
type and satisfactory to Agent in its commercially reasonable judgment. All
policies covering the Collateral are to name Agent as an additional insured (as
to liability coverage)
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and lender's loss payee (as to casualty and property coverage, as its interests
may appear, and are to contain such other provisions as Agent may reasonably
require to fully protect Agent's interest in the Collateral and to any payments
to be made under such policies. True copies of all original insurance policies
or certificates of insurance evidencing such insurance covering the Collateral
are to be delivered to Agent on or prior to the Closing Date, premium prepaid,
with the lender's loss payable endorsement in Agent's favor, and shall provide
for not less than 30 days prior written notice to Agent, of the exercise of any
right of cancellation. In the event Borrowers fail to respond in a timely and
appropriate manner (as determined by Agent in its sole discretion) with respect
to collecting under any insurance policies required to be maintained under this
Section 8.8, Agent shall have the right, in the name of Agent or Borrowers, to
file claims under such insurance policies, to receive and give acquittance for
any payments that may be payable thereunder, and to execute any and all
endorsements, receipts, releases, assignments, reassignments or other documents
that may be reasonably necessary to effect the collection, compromise or
settlement of any claims under any such insurance policies. Each Borrower will
provide written notice to Agent of the occurrence of any of the following events
within 5 Business Days after the occurrence of such event: any Property owned or
used by a Borrower is (i) materially damaged or destroyed, or suffers any other
loss or (ii) is condemned, confiscated or otherwise taken, in whole or in part,
or the use thereof is otherwise diminished so as to render impracticable or
unreasonable the use of such asset or property for the purpose to which such
asset or property were used immediately prior to such condemnation, confiscation
or taking, by exercise of the powers of condemnation or eminent domain or
otherwise, and in either case the amount of the damage, destruction, loss or
diminution in value of the Collateral which is in excess of $100,000
(collectively, a "Casualty Loss"). Each Borrower will diligently file and
prosecute its claim or claims for any award or payment in connection with a
Casualty Loss. In the event of a Casualty Loss, Borrowers will pay to Agent,
promptly upon receipt thereof, any and all insurance proceeds and payments
received by Borrowers on account of damage, destruction or loss of all or any
portion of the Collateral. Agent may, at its election and in its sole
discretion, either (a) apply the proceeds realized from Casualty Losses to
payment of accrued and unpaid interest or outstanding principal of the Loans or
(b) pay such proceeds to Borrower to be used to repair, replace or rebuild the
Property or portion thereof that was the subject of the Casualty Loss. After the
occurrence and during the continuance of an Event of Default, (i) no settlement
on account of any such Casualty Loss shall be made without the consent of Agent
and (ii) Agent may participate in any such proceedings and Borrowers will
deliver to Agent such documents as may be requested by Agent to permit such
participation and will consult with Agent, its attorneys and agents in the
making and prosecution of such claim or claims. Each Borrower hereby irrevocably
authorizes and appoints Agent its attorney-in-fact, to collect and receive for
any such award or payment and to file and prosecute such claim or claims, which
power of attorney shall be irrevocable and shall be deemed to be coupled with an
interest, and each Borrower shall, upon demand of Agent, make, execute and
deliver any and all assignments and other instruments sufficient for the purpose
of assigning any such award or payment to Agent free and clear of any
encumbrances of any kind or nature whatsoever. Each Borrower shall insure all
in-transit Inventory at its full replacement cost and note all bills of lading
and shipping documents accordingly or pay such additional freight charges as may
be necessary to insure exemption from the package limitation provisions of the
Carriage of Goods By Sea Act 46 U.S.C.A. ss. 1300 et seq.
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8.9. Taxes:
Each Borrower will pay, when due and in any event prior to
delinquency, all Taxes lawfully levied or assessed against such Borrower or any
of the Collateral; provided, however, that unless such Taxes have become a
federal tax or ERISA Lien on any of the assets of such Borrower, no such Tax
need be paid if the same is being contested in good faith, by appropriate
proceedings promptly instituted and diligently conducted and if an adequate
reserve or other appropriate provision shall have been made therefor as required
in order to be in conformity with GAAP.
8.10. Compliance With Laws:
Each Borrower will comply with all acts, rules, regulations, orders,
directions and ordinances of any legislative, administrative or judicial body or
official applicable to the Collateral or any part thereof, and to the operation
of its business (including, without limitation, the provisions of 15 U.S.C.
ss. ss. 1051-1127, 17 U.S.C., ss. 101, et seq. and 35 U.S.C. ss. 101, et seq.)
except where the failure to so comply could not reasonably be expected to have a
Material Adverse Effect.
8.11. Use of Proceeds:
The proceeds of any Loans made hereunder shall be used by Borrowers
solely to refinance existing Indebtedness under the Revolving Credit Agreement
and for (a) general working capital and general corporate purposes, and (b) for
the issuance of Letters of Credit; provided, however, that in any event, no
portion of the proceeds of any such advances shall be used by Borrowers for the
purpose of purchasing or carrying any "margin stock" (as defined in Regulation U
of the Board of Governors of the Federal Reserve System) or for any other
purpose which violates the provisions or Regulation U or X of said Board of
Governors or for any other purpose in violation of any applicable statute or
regulation, or of the terms and conditions of this Credit Agreement.
8.12. Fiscal Year:
Each Borrower agrees that it will not change its fiscal year from a
year ending December 31 unless required by law, in which case such Borrower will
give Agent at least 30 days prior written notice thereof.
8.13. Notification of Certain Events:
Each Borrower agrees that it will promptly notify Agent in writing of the
occurrence of any of the following events (but in no event shall such notice
from such Borrower be received by Agent later than 5 Business Days after the
occurrence of any such event):
a. any Material Contract of a Borrower is terminated or amended in
any material respect or any new Material Contract is entered into (in which
event Borrowers shall provide Agent with a copy of such Material Contract);
b. the institution of any litigation, proceeding(s) or investigation
against a Borrower in any federal, state, local or foreign court or before any
commission or other regulatory
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body (federal, state, local or foreign) in which a claim of at least $150,000
(not covered by insurance) has been or is reasonably likely to be asserted
against such Borrower;
c. any notification of violation of any material law or regulation
shall have been received by a Borrower from any local, state, federal or foreign
Governmental Authority or agency accompanied by a copy of any such notice;
d. the occurrence of a Termination Event as to a Borrower or any
ERISA Affiliate, accompanied by a written statement of the chief financial
officer of such Borrower describing such Termination Event and the action, if
any, which such Borrower or other such entities have taken, is taking or propose
to take with respect thereto, and when known, any action taken or threatened by
the Internal Revenue Service, DOL or PBGC with respect thereto;
e. the occurrence of a prohibited transaction (as defined in Section
406 of ERISA and Section 4975 of the Internal Revenue Code) as to a Borrower or
any ERISA Affiliate, accompanied by a statement of the chief financial officer
of such Borrower describing such transaction and the action which such Borrower
or other such entities have taken, are taking or propose to take with respect
thereto;
f. receipt by a Borrower, or any ERISA Affiliate, of notice of the
PBGC's intention to terminate a Benefit Plan or to have a trustee appointed to
administer a Benefit Plan, accompanied by copies of each such notice;
g. receipt by a Borrower, or any ERISA Affiliate, of a notice
regarding the imposition of withdrawal liability, accompanied by copies of each
such notice; or
h. (i) termination of a Multi-employer Plan, (ii) notice from the
administrator or plan sponsor of a Multi-employer Plan that it intends to
terminate a Multi-employer Plan, or (iii) commencement of proceedings by the
PBGC under Section 4042 of ERISA to terminate a Multi-employer Plan, accompanied
by a written statement setting forth any such event or information; or
i. the occurrence of any Default or Event of Default.
8.14. Collection of Accounts:
Unless an Event of Default is outstanding, Borrowers may and will
(subject to their reasonable business discretion) enforce and collect all
amounts owing on the Accounts, for Lenders' benefit and on Lenders behalf but at
Borrowers' expense in accordance with the provisions of Section 2.4; such
privilege shall terminate at Agent's option, without notice to Borrowers, which
is hereby expressly waived by Borrower, upon the occurrence of any Event of
Default which has not otherwise been waived by Required Lenders. Any checks,
cash, notes or other instruments or property received by Borrowers with respect
to any Accounts shall be held by Borrowers in trust for the benefit of Lenders,
separate from Borrowers' own property and funds, and immediately turned over to
Agent with proper assignments or endorsements. No checks, drafts or other
instruments received by Agent shall constitute final payment unless and until
such instruments have actually been collected.
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8.15. Acknowledgment Agreements:
Each Borrower will assist Agent in obtaining executed Acknowledgment
Agreements from each of the warehousemen, processors, packers, fillers,
landlords and mortgagees with whom such Borrower conducts business from time to
time.
8.16. Trademarks:
Each Borrower will do and cause to be done all things necessary to
preserve and keep in full force and effect all registrations of trademarks,
service marks and other marks, trade names or other trade rights.
8.17. Maintenance of Property:
Each Borrower will keep all property useful and necessary to its
business in good working order and condition (ordinary wear and tear excepted)
in accordance with its past operating practices and not to commit or suffer any
waste with respect to any of its properties, except for properties which either
individually or in the aggregate are not material.
8.18. Commercial Tort Claims:
In the event that Borrowers shall acquire any Commercial Tort Claim,
Borrowers shall give Agent written notice thereof; provided that Borrowers shall
not be deemed to have acquired any Commercial Tort Claim until Borrower shall
have filed such claim in a court having jurisdiction over such claim. Such
notice shall contain a sufficient description of the Commercial Tort Claim
including the parties, the court in which the claim was commenced (if
applicable), and the docket number assigned to the case (if applicable) and a
detailed explanation of the events giving rise to such claim. Such Borrower
shall grant Agent a security interest in such Commercial Tort Claim to secure
payment of the Obligations. Such Borrower shall execute and deliver such
instruments, documents and agreements as Agent may reasonably require in order
to obtain and perfect such security interest including, without limitation, a
security agreement or amendment to this Agreement all in form and substance
satisfactory to Agent. Borrowers authorize Agent to file (without a Borrower's
signature), financing statements or amendments to existing financing statements
as Agent deems necessary to perfect the security interest.
8.19. Letter of Credit Rights:
Borrowers shall provide written notice to Agent of any Letters of
Credit for which a Borrower is the beneficiary. Such Borrower shall execute and
deliver such instruments, documents and agreements and take such actions as
Agent reasonably may require in order to obtain and perfect its security
interest in such Letter of Credit Rights.
8.20. Revisions or Updates to Schedules.
If any of the information or disclosures provided on any of the Schedules
originally attached hereto become outdated or incorrect in any respect,
Borrowers shall deliver to Agent and Lenders as part of the Compliance
Certificate required pursuant to Section 8.1(d) such revision or updates to
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such Schedule(s) as may be necessary or appropriate to update or correct such
Schedule(s), provided, that no such revisions or updates to any such
Schedules(s) shall be deemed to have amended, modified or superseded such
Schedules(s) as originally attached hereto, or to have cured any breach of
warranty or representation resulting from the inaccuracy or incompleteness of
any such Schedule(s), unless and until Required Lenders, in their sole and
absolute discretion, shall have accepted in writing such revisions or updates to
such Schedule(s).
8.21. Book Publishers.
Phoenix Fulfillment (a) shall maintain at all times cash balances in
excess of amounts payable to book publishers for the sale of publisher's books,
(b) agrees that any agreement between Phoenix Fulfillment and any publisher
relating to the provision of services by Phoenix Fulfillment shall be
substantially similar to the form agreement attached hereto as Exhibit F, and
(c) segregate deposit accounts and funds contained therein from the deposit
accounts of all other Borrowers.
8.22. Fixed Asset Appraisals.
Borrowers shall, upon the request of Agent, obtain, at Borrowers' cost and
expense, and deliver to Agent one or more written appraisals of Borrowers' real
estate and/or equipment prepared, in either event, by an appraisal firm
acceptable to Agent.
8.23 Executive Management.
The current executive management, or replacements reasonably acceptable to
Agent, shall at all times control and direct the executive management of each
Borrower.
ARTICLE IX : FINANCIAL COVENANTS
Until termination of this Credit Agreement and the Commitments hereunder
and payment and satisfaction of all Obligations due or to become due hereunder,
Borrowers further covenant and agree as follows:
9.1. Fixed Charge Coverage:
Borrowers shall maintain a Fixed Charge Coverage Ratio of not less
than 1.1 to 1 as of the fiscal quarter ending September 30, 2003, 1.15 to 1 as
of the fiscal quarter ending December 31, 2003 and 1.2 to 1 as of the end of
each fiscal quarter thereafter, each calculated on a rolling four (4) quarter
basis.
9.2. Consolidated Capital Expenditures:
Borrowers shall not make more than $5,000,000 less the Net Cash
Proceeds from the sale of any equipment during the applicable periods in
Consolidated Capital Expenditures, measured on the last day of each fiscal
quarter and calculated on a rolling four (4) quarter basis commencing with the
fiscal quarter ending December 31, 2003.
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ARTICLE X : NEGATIVE COVENANTS
Until termination of the Credit Agreement and the Commitments hereunder
and payment and satisfaction of all Obligations, each Borrower agrees that,
unless otherwise agreed in writing by Agent, it will not:
10.1. Liens:
Mortgage, assign, pledge, transfer or otherwise permit any Lien of
any kind to exist at any time on any of its Property, except for Permitted
Liens.
10.2. Indebtedness:
Incur, create or be liable for any Indebtedness other than Permitted
Indebtedness.
10.3. Sale of Assets:
Make any Asset Disposition other than (a) sales of Inventory in the
ordinary course of business, (b) sales or other dispositions in the ordinary
course of business of equipment that is replaced by equipment of comparable or
superior quality within 30 days of the sale, lease, license, transfer or other
disposition, and (c) sales in the ordinary course of business of Property used
in Borrowers' business that is worn out or in need of replacement and that is
replaced with Property of reasonably equivalent value or utility.
10.4. Organizational Changes:
a. Merge or consolidate with any Person other than another Borrower
or (b) alter or modify any Borrowers' Articles of Incorporation, Certificate of
Incorporation or Certificate of Organization or (c) enter into or engage in any
business, operation or activity materially different from that presently being
conducted by Borrowers.
10.5. Guarantees:
Except for Permitted Indebtedness, assume, guarantee, endorse, or
otherwise become liable upon the obligations of any other Person, except by the
endorsement of negotiable instruments in the ordinary course of business.
10.6. Restricted Payments:
Make a Restricted Payment other than dividends to Phoenix by a
Subsidiary of Phoenix.
10.7. Investments:
Make any Investment other than Permitted Investments.
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10.8. Affiliate Transactions:
Except as permitted by this Credit Agreement, enter into any
transaction with, including, without limitation, the purchase, sale or exchange
of property or the rendering of any service to and Affiliate of any Borrower
except in the ordinary course of and pursuant to the reasonable requirements of
such Borrower's business and upon fair and reasonable terms no less favorable to
such Borrower than could be obtained in a comparable arm's-length transaction
with an unaffiliated Person or for incidental administrative purposes.
10.9. Third Party Loans:
Make any Third Party Loan except Permitted Third Party Loans.
10.10. Prohibited Transactions Under ERISA:
a. Engage, or permit any ERISA Affiliate to engage, in any
prohibited transaction which could reasonably be expected to result in a civil
penalty or excise tax described in Section 406 of ERISA or Section 4975 of the
Internal Revenue Code having a Material Adverse Effect;
b. Permit to exist with respect to any Benefit Plan any accumulated
funding (as defined in Sections 302 of ERISA and 412 of the Internal Revenue
Code), whether or not waived;
c. Fail, or permit any ERISA Affiliate to fail, to pay timely
required contributions or annual installments due with respect to any waived
funding deficiency to any Benefit Plan;
d. Terminate, or permit any ERISA Affiliate to terminate, any
Benefit Plan where such event would result in any liability of any Borrower, or
any ERISA Affiliate under Title IV of ERISA;
e. Fail, or permit any ERISA Affiliate to fail to make any required
contribution or payment to any Multiemployer Plan;
f. Fail, or permit any ERISA Affiliate to fail, to pay any required
installment or any other payment required under Section 412 of the Internal
Revenue Code on or before the due date for such installment or other payment;
g. Amend, or permit any ERISA Affiliate to amend, a Benefit Plan
resulting in an increase in current liability for the plan year such that either
of any Borrower, or any ERISA Affiliate is required to provide security to such
Benefit Plan under Section 401(a)(29) of the Internal Revenue Code;
h. Withdraw, or permit any ERISA Affiliate to withdraw, from any
Multiemployer Plan where such withdrawal may result in any liability of any such
entity under Title IV of ERISA; or
i. Allow any representation made in Section 7.12 to be untrue at any
time
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during the term of this Agreement.
10.11. Bank Accounts:
Open, maintain or otherwise have its primary checking, savings or
other accounts for the deposit or maintenance of money at any bank or other
financial institution with any Person, other than with Agent or a Depository
Institution that has executed, with respect to such account, a Blocked Account
Agreement.
10.12. INTENTIONALLY OMITTED:
10.13. Amendments of Material Contracts:
Amend, modify, cancel or terminate or permit the amendment,
modification, cancellation or termination of any of the Material Contracts which
would have a Material Adverse Effect.
10.14. Additional Negative Pledges:
Except with respect to the existing Subordinated Debt, create or
otherwise cause or suffer to exist or become effective, directly or indirectly,
(i) any prohibition or restriction (including any agreement to provide equal and
ratable security to any other Person in the event a Lien is granted to or for
the benefit of Agent) on the creation or existence of any Lien upon the assets
of any Borrower, other than assets subject to Permitted Liens or (ii) any
Contractual Obligation which may restrict or inhibit Agent's rights or ability
to sell or otherwise dispose of the Collateral or any part thereof after the
occurrence of an Event of Default.
10.15. Subordinated Debt:
Effect or permit any change in or amendment to any document or
instrument pertaining to the subordination, terms of payment or other terms or
provisions of any Subordinated Debt, give any notice of optional redemption or
optional prepayment or offer to repurchase under any such document or
instrument, or, directly or indirectly, make any payment of principal of or
interest on or in redemption, retirement or repurchase of any Subordinated Debt,
except for the scheduled payments required by the terms of the documents and
instruments evidencing Subordinated Debt and permitted by the subordination
provisions of the documents and instruments evidencing Subordinated Debt or, if
applicable, Subordination Agreements which have been delivered to and approved
by Agent.
10.16. Licenses, Etc.:
Enter into licenses of, or otherwise restrict the use of, any
patents, trademarks or copyrights which would prevent Borrower from selling,
transferring, encumbering or otherwise disposing of any such patent, trademark
or copyright.
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10.17. Phoenix Fulfillment.
Make or permit to exist any Investment or any loan, advance, deposit
or extension of credit to Phoenix Fulfillment in excess of $25,000 in the
aggregate of all such Investment and loans.
10.18. Compensation.
During any fiscal year of Borrowers, increase current compensation to the
key employees (as identified in Phoenix's annual 10-K report) by an amount that
exceeds five percent (5.0%) of aggregate of such employees', or replacements',
compensation for the immediately preceding fiscal year (other than participation
in any stock option or non-cash incentive plans); with an allocable reduction in
such aggregate amount if any key employee position(s) is eliminated. For
purposes of this Section 10.18, compensation shall exclude amounts allocated
under Phoenix's Employees' Stock Bonus and Ownership Plan and fringe benefits
provided in the ordinary course of Borrowers' business.
ARTICLE XI : POWERS
11.1. Appointment as Attorney-in-Fact:
Each Borrower hereby irrevocably authorizes and appoints Agent, or
any Person as Agent may designate, as such Borrowers' attorney-in-fact, at
Borrowers' cost and expense, to exercise all of the following powers, which
being coupled with an interest, shall be irrevocable until all of the
Obligations to Agent have been paid and satisfied in full and all of the
Commitment have been terminated:
a. To receive, take, endorse, sign, assign and deliver, all in the
name of Agent, Lenders or any Borrower, as the case may be, any and all checks,
notes, drafts, and other documents or instruments relating to the Collateral;
b. To receive, open and dispose of all mail addressed to any
Borrower and to notify postal authorities to change the address for delivery
thereof to such address as Agent may designate;
c. To request at any time from customers indebted on Accounts, in
the name of any Borrower or a third party designee of Agent, information
concerning the Accounts and the amounts owing thereon;
d. To give customers indebted on Accounts notice of Agent's interest
therein, and/or to instruct such customers to make payment directly to Agent for
any Borrower's account;
e. To take or bring, in the name of Agent, Lenders or any Borrower,
all steps, actions, suits or proceedings deemed by Agent necessary or desirable
to enforce or effect collection of the Accounts; and
f. To file financing statements in any office deemed appropriate by
Agent for such purpose and execute, file, record and register any or all of
Agent's security interest in any
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intellectual property of Borrowers with the United States Patent and Trademark
Office; and
g. To do all other acts and things as Agent may deem reasonable to
protect or preserve Agent's interest under this Credit Agreement or to fulfill
Borrowers' obligations under this Credit Agreement.
ARTICLE XII : EVENTS OF DEFAULT AND REMEDIES
12.1. Events of Default:
The occurrence of any of the following events shall constitute an
"Event of Default" hereunder:
a. failure of Borrowers to pay (i) any interest or Fees when due
hereunder, in each case whether at stated maturity, by acceleration, or
otherwise, (ii) any principal of the Loans or the Letter of Credit Obligations
when due, whether at stated maturity, by acceleration or otherwise or (iii) any
Expenses hereunder within 5 days after receipt by Borrowers from Agent or any
applicable Lender of notice that such Expenses are payable;
b. any representation or warranty, contained in this Credit
Agreement, the other Credit Documents or any other agreement, document,
instrument or certificate between any Borrower and Agent or any Lender or
executed by any Borrower in favor of Agent or any Lender shall prove untrue in
any material respect on or as of the date it was made or was deemed to have been
made;
c. failure of any Borrower to perform, comply with or observe any
term, covenant or agreement applicable to it contained in Section 8.1, Section
8.11, Section 8.13, Article IX or Article X;
d. failure of any Borrower to comply with any other covenant
contained in this Credit Agreement, the other Credit Documents or any other
agreement, document, instrument or certificate among any Borrower and Agent or
any Lender or executed by any Borrower in favor of Agent or any Lender and, in
the event such breach or failure to comply is capable of cure, such breach or
failure to comply is not cured within 30 days after its occurrence;
e. dissolution, liquidation, winding up or cessation of the business
(or any material portion of the business) of any Borrower, or the failure of any
Borrower to meet its debts generally as they mature, or the calling of a meeting
of any Borrower's creditors for purposes of compromising such Borrower's debts;
f. the commencement by or against any Borrower of any bankruptcy,
insolvency, arrangement, reorganization, receivership or similar proceedings
with respect to it under any federal or state law and, in the event any such
proceeding is commenced against such Borrower, such proceeding is not dismissed
within 90 days;
g. the occurrence of a default or event of default (in each case
which shall continue beyond the expiration of any applicable grace periods)
under, or the occurrence of any event that results in or would permit the
acceleration of the maturity of any note, agreement or
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instrument evidencing (i) any Subordinated Debt (including, without limitation,
the Subordinated Notes), or (ii) any other Indebtedness of Borrowers and the
aggregate principal amount of all such Indebtedness with respect to which a
default or an event of default has occurred, or the maturity of which is
accelerated or permitted to be accelerated, exceeds $250,000;
h. any party (other than Agent or Lenders) to any Credit Document
shall deny or disaffirm its obligations under any of the Credit Documents, or
any Credit Document shall be canceled, terminated, revoked or rescinded without
the express prior written consent of Agent, or any action or proceeding shall
have been commenced by any Person (other than Agent or any Lender) seeking to
invalidate, declare unenforceable, cancel, revoke, rescind or disaffirm the
obligations of any party to any Credit Document;
i. (i) any holder of Subordinated Debt alleges (or any Governmental
Authority with applicable jurisdiction determines) that the Subordinated Debt is
not subordinated to any of the Obligations or (ii) the subordination provisions
in any agreement relating to Subordinated Debt shall, in whole or in part,
terminate, cease to be effective or cease to be legally valid, binding and
enforceable as to any holder of the Subordinated Debt;
j. one or more judgments or decrees shall be entered against
Borrowers involving a liability of $250,000 or more in the aggregate (to the
extent not paid or covered by insurance (i) provided by a carrier who has
acknowledged coverage and has the ability to perform or (ii) as determined by
Agent in its reasonable discretion) and any such judgments or decrees shall not
have been vacated, discharged or stayed or bonded pending appeal within 30 days
from the entry thereof;
k. any Termination Event with respect to a Benefit Plan shall have
occurred and be continuing 15 days after notice thereof shall have been given to
Borrowers by Agent and the then current value of such Benefit Plan's benefits
guaranteed under Title IV of ERISA exceeds the then current value of such
Benefit Plan's assets allocable to such benefits by more than $100,000 (or in
the case of a Termination Event involving the withdrawal of a substantial
employer, the withdrawing employer's proportionate share of such excess exceeds
such amount);
l. a Material Adverse Change occurs;
m. a Change of Control occurs;
n. the occurrence of any uninsured damage to, loss, theft or
destruction in excess of $250,000 with respect to any Collateral or portion
thereof; or
o. any Borrower is indicted or convicted of the commission of a
crime or any proceeding of any kind is pending or threatened which would
reasonably be likely to result in the forfeiture of any material portion of the
Property of such Borrower to any Governmental Authority.
12.2. Rights and Remedies upon a Default or an Event of Default:
a. Upon the occurrence of a Default or an Event of Default, Agent
may, or at the direction of Required Lenders, shall cease making Loans and/or
issuing Letters of Credit. Upon
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the occurrence of any Event of Default, Agent may or, at the discretion of
Required Lenders, shall take any or all of the following actions: (i) declare
all Obligations to be immediately due and payable (except with respect to any
Event of Default set forth in Section 12.1(f) in which case all Obligations
shall automatically become immediately due and payable without the necessity of
any action, decision, notice or demand) without presentment, demand, protest or
any other action or obligation of Agent or any Lender, and (ii) immediately
terminate this Credit Agreement and the Commitments hereunder.
b. Upon acceleration of the Obligations, Agent may, or at the
direction of Required Lenders, shall at any time, and from time to time, take
any and all such action as Agent may elect to enforce any and all rights and
interests created and existing under the Credit Documents, or arising under
applicable law, including without limitation, all rights and remedies existing
under the Security Documents, all rights of setoff and the following rights (the
enumeration of any such rights not intended to be exhaustive and the exercise of
any right shall not preclude the exercise of any other rights):
(i) The right to take possession of, send notices regarding
and collect directly the Collateral, with or without judicial process
(including, without limitation, the right to notify the United States postal
authorities to redirect mail addressed to Borrowers or to an address designated
by Agent); or
(ii) By its own means or with judicial assistance, enter any
or all of Borrowers' premises and take possession of the Collateral, or render
it unusable, or dispose of the Collateral on such premises, without any
liability for rent, storage, utilities or other sums, and Borrowers shall not
resist or interfere with such action; or
(iii) Require Borrowers at Borrowers' expense to assemble all
or any part of the Collateral and make it available to Agent at any place
designated by Agent; or
(iv) The right to modify the Borrowing Base or any portion
thereof (including without limitation changing the advance rates described
therein or taking additional reserves) or to modify the terms and conditions
upon which Agent may be willing to consider making further Loans; or
c. In addition, upon demand by Agent at any time following the
occurrence of any Event of Default, Borrowers shall deposit with Agent for the
benefit of Lenders with respect to each Letter of Credit then outstanding,
promptly upon such demand, cash in an amount equal to the greatest amount for
which all such Letters of Credit may be drawn. Such deposit shall be held by
Agent for the benefit of Issuing Bank and the other Lender as security for, and
to provide for the payment of, outstanding Letters of Credit.
d. Borrowers agree that a notice received by them at least 10 days
before the time of any intended public sale or of the time, after which any
private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable Inventory or other Collateral which threatens
to speedily decline in value or which is sold on a recognized market may be sold
immediately by Agent without prior notice to Borrowers. Borrowers covenant and
agree not to
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interfere with or impose any obstacle to Agent's exercise of its rights and
remedies hereunder with respect to the Collateral. Agent shall have no
obligation to clean up or prepare the Collateral for sale. If Agent sells any of
the Collateral upon credit, Borrowers will only be credited with payments
actually made by the purchaser that are received by Agent and applied to the
Obligations. Agent may in connection with any sale of the Collateral
specifically disclaim any warranties of title or the like.
12.3. Nature of Remedies:
All rights and remedies granted Agent and/or Lenders hereunder and
under the other Credit Documents, or otherwise available at law or in equity,
shall be deemed concurrent and cumulative, and not alternative remedies, and
Agent may proceed with any number of remedies at the same time or at different
times until all Obligations are satisfied in full. The exercise of any one right
or remedy shall not be deemed a waiver or release of any other right or remedy,
and Agent, upon or at any time after the occurrence of an Event of Default, may
proceed against Borrowers, any guarantor, or their Property at any time, under
any agreement, with any available remedy and in any order. Nothing contained in
this Credit Agreement or the other Credit Documents shall be deemed to compel
Agent or Lenders at any time to accept a cure of any Event of Default hereunder.
In no event shall prior recourse to any Collateral be a prerequisite to Agent's
right to demand payment of any Obligation from Borrowers or any guarantor upon
the occurrence and during the continuance of any Event of Default.
ARTICLE XIII : TERMINATION
Except as otherwise provided in Article XII of this Credit Agreement, the
Commitments made hereunder shall automatically terminate on the Maturity Date
and all then outstanding Loans shall be immediately due and payable in full and
all outstanding Letters of Credit shall immediately terminate. Unless sooner
demanded, all Obligations shall become due and payable as of any termination
hereunder or under Article XII and, pending a final accounting, Agent may
withhold any balances in Borrowers' Loan accounts, in an amount sufficient, in
Agent's discretion, to cover all of the Obligations, whether absolute or
contingent, unless supplied with a satisfactory indemnity to cover all of such
Obligations. All of Agent's and Lenders' rights, liens and security interests in
and to Borrowers' Property shall continue after any termination until (a) all
Obligations have been indefeasible paid and satisfied in full, (b) Agent shall
have received a written agreement (in form and substance acceptable to Agent in
its reasonable discretion) executed by Borrowers and by a Person whose loans or
advances to Borrowers are used in whole or in part to satisfy the Obligations,
indemnifying Agent and Lenders from any loss or damage, or (c) Agent shall have
retained such monetary reserves necessary to pay in full all Obligations for
such period of time, in its reasonable discretion.
ARTICLE XIV : AGENT
14.1. Appointment of Agent:
a. Each Lender hereby designates Wachovia as Agent to act as herein
specified. Each Lender hereby irrevocably authorizes, and each holder of any
Note or participation in any Letter of Credit by the acceptance of a Note or
participation shall be deemed irrevocably to
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authorize, Agent to take such action on its behalf under the provisions of this
Credit Agreement and the Notes and any other instruments and agreements referred
to herein and to exercise such powers and to perform such duties hereunder and
thereunder as are specifically delegated to or required of Agent by the terms
hereof and thereof and such other powers as are reasonably incidental thereto.
Agent shall hold all Collateral and all payments of principal, interest, Fees,
charges and Expenses received pursuant to this Credit Agreement or any other
Credit Document for the ratable benefit of Lenders. Agent may perform any of its
duties hereunder by or through its agents or employees.
b. The provisions of this Article XIV are solely for the benefit of
Agent and Lenders, and Borrowers shall not have any rights as a third party
beneficiary of any of the provisions hereof (other than Sections 14.9 and
14.10(b) ). In performing its functions and duties under this Credit Agreement,
Agent shall act solely as 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 Borrower.
14.2. Nature of Duties of Agent:
Agent shall have no duties or responsibilities except those
expressly set forth in this Credit Agreement. Neither Agent nor any of its
officers, directors, employees or agents shall be liable for any action taken or
omitted by it as such hereunder or in connection herewith, unless caused by its
or their gross negligence or willful misconduct. The duties of Agent shall be
mechanical and administrative in nature; Agent shall not have by reason of this
Credit Agreement a fiduciary relationship in respect of any Lender; and nothing
in this Credit Agreement, expressed or implied, is intended to or shall be so
construed as to impose upon Agent any obligations in respect of this Credit
Agreement except as expressly set forth herein.
14.3. Lack of Reliance on Agent:
a. Independently and without reliance upon Agent, each Lender, to
the extent it deems appropriate, has made and shall continue to make (i) its own
independent investigation of the financial or other condition and affairs of
Borrowers in connection with the taking or not taking of any action in
connection herewith and (ii) its own appraisal of the creditworthiness of
Borrowers, and, except as expressly provided in this Credit Agreement, Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto,
whether coming into its possession before the making of the Loans or at any time
or times thereafter.
b. Agent shall not be responsible to any Lender for any recitals,
statements, information, representations or warranties herein or in any
document, certificate or other writing delivered in connection herewith or for
the execution, effectiveness, genuineness, validity, enforceability,
collectibility, priority or sufficiency of this Credit Agreement or the Notes or
the financial or other condition of Borrowers. Agent shall not be required to
make any inquiry concerning either the performance or observance of any of the
terms, provisions or conditions of this Credit Agreement or the Notes, or the
financial condition of Borrowers, or the existence or possible existence of any
Default or Event of Default, unless specifically requested to do so in writing
by any Lender.
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14.4. Certain Rights of Agent:
Without limiting Agent's rights and discretion under any provision
hereof, Agent shall have the right to request instructions from the Required
Lenders or, as required, each of Lenders. If Agent shall request instructions
from the Required Lenders or each of Lenders, as the case may be, with respect
to any act or action (including the failure to act) in connection with this
Credit Agreement, Agent shall be entitled to refrain from such act or taking
such action unless and until Agent shall have received instructions from the
Required Lenders or each of Lenders, as the case may be, and Agent shall not
incur liability to any Person by reason of so refraining. 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 in accordance with
the instructions of the Required Lenders or each of Lenders, as the case may be.
14.5. Reliance by Agent:
Agent shall be entitled to rely, and shall be fully protected in
relying, upon any note, writing, resolution, notice, statement, certificate,
telex teletype or telecopier message, cablegram, radiogram, order or other
documentary, teletransmission or telephone message believed by it to be genuine
and correct and to have been signed, sent or made by the proper person. Agent
may consult with legal counsel (including counsel for Borrowers with respect to
matters concerning Borrowers), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
14.6. Indemnification of Agent:
To the extent Agent is not reimbursed and indemnified by Borrowers,
each Lender will reimburse and indemnify Agent, in proportion to its respective
Commitment, for and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, Expenses (including
reasonable counsel fees and disbursements) 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 Credit Agreement, provided 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.
14.7. Agent in its Individual Capacity:
With respect to its obligation to lend under this Credit Agreement,
the Loans made by it and the Notes issued to it, its participation in Letters of
Credit issued hereunder, and all of its rights and obligations as a Lender
hereunder and under the other Credit Documents, Agent shall have the same rights
and powers hereunder as any other Lender or holder of a Note or participation
interests and may exercise the same as though it was not performing the duties
specified herein; and the terms "Lenders", "Required Lenders", "Holders of
Notes", or any similar terms shall, unless the context clearly otherwise
indicates, include Agent in its individual capacity. Agent may accept deposits
from, lend money to, acquire equity interests in, and generally engage in any
kind of banking, trust, financial advisory or other business with Borrowers or
any Affiliate of Borrowers as if it were not performing the duties specified
herein, and may accept fees and other consideration from Borrowers for services
in
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connection with this Credit Agreement and otherwise without having to account
for the same with Lenders. Notwithstanding anything to the contrary herein,
Agent and Lenders agree that they will not set off against any amounts held in
the Cash Collateral Account for any indebtedness owed by Borrowers not created
under the Credit Agreement and any documents executed in connection therewith.
14.8. Holders of Notes:
Agent may deem and treat the payee of any Note as the owner thereof
for all purposes hereof unless and until a written notice of the assignment or
transfer thereof shall have been filed with Agent. Any request, authority or
consent of any Person who, at the time of making such request or giving such
authority or consent, is the holder of any Note, shall be conclusive and binding
on any subsequent holder, transferee or assignee of such Note or of any Note or
Notes issued in exchange therefor.
14.9. Successor Agent:
a. Agent may, upon 5 Business Days notice to Lenders and Borrowers,
resign at any time (effective upon the appointment of a successor Agent pursuant
to the provisions of this Section 14.9(a)) by giving written notice thereof to
Lenders and Borrowers. Upon any such resignation, the Required Lenders shall
have the right, upon 5 days notice, to appoint a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
of notice of resignation, then, upon 5 days notice, the retiring Agent may, on
behalf of Lenders, appoint a successor Agent, which shall be a bank or other
financial institution which maintains an office in the United States, or a
commercial bank organized under the laws of the United States of America or of
any State thereof, or any affiliate of such bank or trust Borrowers or other
financial institution which is engaged in the banking business, having a
combined capital and surplus of at least $500,000,000. Notwithstanding anything
herein to the contrary, so long as no Event of Default shall have occurred and
be continuing, any successor Agent (whether appointed by the Required Lenders or
Agent) shall have been approved in writing by Borrowers (such approval not to be
unreasonably withheld).
b. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations under
this Credit Agreement. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article XIV shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent under this Credit
Agreement. In the event Agent or its assets are taken over by any state or
federal agency having jurisdiction over Agent or its assets, a majority of
Lenders other than Agent may appoint a successor to Agent.
14.10. Collateral Matters:
a. Each Lender authorizes and directs Agent to enter into the
Security Documents and accept the other Credit Documents for the benefit of
Lenders. Agent is hereby authorized, on behalf of all Lenders, without the
necessity of any notice to or further consent from any Lender, from time to time
prior to an Event of Default, to take any action, in its sole discretion,
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with respect to any Collateral or Security Document which may be necessary or
appropriate to perfect and maintain perfected or enforce the Liens upon the
Collateral granted pursuant to the Security Documents.
b. Lenders hereby authorize Agent, at its option and in its
discretion, to release any Lien granted to or held by Agent upon any Collateral
(i) upon termination of the Commitments and payment in cash and satisfaction of
all of the Obligations (including the Letter of Credit Obligations and Lender
Hedging Indebtedness, unless the same are secured by a letter of credit in form
and substance and issued by a financial institution acceptable to the holder(s)
of such Obligations or the holder(s) of such Obligations otherwise agrees) at
any time arising under or in respect of this Credit Agreement or the Credit
Documents or the transactions contemplated hereby or thereby, (ii) constituting
Property being sold or disposed of if the sale or disposition is permitted under
this Credit Agreement or any other Credit Document or is made by Agent in the
enforcement of its rights hereunder following the occurrence of an Event of
Default or (iii) if approved, authorized or ratified in writing by the Required
Lenders, unless such release is required to be approved by all Lenders
hereunder. Upon request by Agent at any time, Lenders will confirm in writing
Agent's authority to release particular types or items of Collateral pursuant to
this Section 14.10(b).
c. Agent shall have no obligation whatsoever to Lenders or to any
other Person to assure that the Collateral exists or is owned by Borrowers or is
cared for, protected or insured or that the liens granted to Agent herein or
pursuant hereto have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise or to continue exercising at all or in any manner or under any duty
of care, disclosure or fidelity any of the rights, authorities and powers
granted or available to Agent in this Section 14.10 or in any of the Security
Documents, it being understood and agreed that in respect of the Collateral, or
any act, omission or event related thereto, Agent may act in any manner it may
deem appropriate, in its sole discretion, given Agent's own interest in the
Collateral as one of Lenders and that Agent shall have no duty or liability
whatsoever to Lenders, except for its gross negligence or willful misconduct.
d. Notwithstanding any other provision hereof, no Collateral or
collections or proceeds of Collateral shall be applied at any time against any
Lender Hedging Indebtedness unless all Obligations other than Lender Hedging
Indebtedness owing to all Lenders and Agent have been paid in full and this
Agreement has been terminated. Notwithstanding Article XII above, acceleration,
settlement or unwinding of Lender Hedging Indebtedness shall be based upon the
terms of the applicable Hedging Agreement.
14.11. Special Inter-Lending Provisions:
a. Notwithstanding any other provision of Articles II, XII or
otherwise, and without impairing Agent's rights, options and remedies hereunder
upon and after the occurrence of an Event of Default, and without conferring any
right, benefit or entitlement of any kind to or on behalf of upon Borrowers,
Agent shall, in its sole discretion, without further right of disapproval by
Lenders, be entitled to permit Borrowers to have Overadvances outstanding if (i)
Lenders agree to any request by Agent to permit Overadvances to be outstanding
or (ii) any Lender fails to object in writing, within twenty-four (24) hours, to
any request by Agent to permit Overadvances to be outstanding. If a Lender
objects to a request by Agent to permit Overadvances to be
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outstanding, Agent shall have the option exercisable in its sole discretion, to
purchase such Lender's Loans and Commitment share of the credit facility within
10 days of Agent's receipt of such objection for a purchase price equal to the
outstanding principal balance of Loans made by such Lender plus accrued interest
owing to such Lender. No fee of any kind shall be owing to such assigning Lender
who shall execute the Assignment and Acceptance in conjunction with the sale of
its interests hereunder.
b. Notwithstanding any other provision of Articles VI, XII or
otherwise, and without impairing Agent's rights, options or remedies hereunder
upon and after the occurrence of an Event of Default, and without conferring any
right, benefit or entitlement of any kind to or on behalf of Borrowers, those
Lenders (other than the Lender then acting as Agent) may elect to cease making
Loans to Borrowers (without affecting their obligations to reimburse Agent for
Loans then outstanding, in connection with Letters of Credit then outstanding or
for Expenses previously or thereafter incurred) following the occurrence of an
Event of Default only upon 10 days prior written notice to Agent subject to any
applicable option of the Required Lenders in Section 15.10 to waive any then
outstanding Event of Default or waive the borrowing condition under Section 6.2
impacted by such Event of Default.
14.12. Delivery of Information:
Agent shall not be required to deliver to any Lender originals or
copies of any documents, instruments, notices, communications or other
information received by Agent from Borrowers, the Required Lenders, any Lender
or any other Person under or in connection with this Credit Agreement or any
other Credit Document except (a) as specifically provided in this Credit
Agreement or any other Credit Document and (b) as specifically requested from
time to time in writing by any Lender with respect to a specific document
instrument, notice or other written communication received by and in the
possession of Agent at the time of receipt of such request and then only in
accordance with such specific request. If at any time Agent requests any Lender
(for the purpose of Section 14.10(d) or otherwise) to inform Agent of the amount
of Lender Hedging Indebtedness or Matured Lender Hedging Indebtedness then owed
to such Lender such Lender shall provide such information to Agent promptly but
in no event later than one (1) Business Day following receipt of such request.
14.13. Defaults:
Agent shall not be deemed to have knowledge of the occurrence of a
Default or Event of Default (other than the non-payment of principal of or
interest on the Loans to the extent the same is required to be paid to Agent for
the account of Lenders) unless Agent has actual knowledge thereof or has
received notice from a Lender or Borrowers specifying such Default or Event of
Default and stating that such notice is a "Notice of Default". In the event that
Agent has such knowledge of or receives such a notice of the occurrence of a
Default or Event of Default, Agent shall give prompt notice thereof (other than
breaches of affirmative covenants in Article VIII herein) to Lenders (and shall
give each Lender prompt notice of each such non-payment). Agent shall (subject
to Section 15.10) take such action with respect to such Default or Event of
Default or refrain from taking such action, with respect to such Default or
Event of Default as directed by Required Lenders, or absent direction as Agent
shall deem advisable in the best interest of Lenders and shall, without
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limiting Agent's rights or discretion under this Credit Agreement, use
reasonable efforts under the circumstances to consult with Lenders before taking
any material enforcement action; and provided further that Agent shall not be
required to take any such action which it determines to be contrary to law.
ARTICLE XV : MISCELLANEOUS
15.1. Waivers:
Borrowers hereby waive due diligence, demand, presentment and
protest and any notices thereof as well as notice of nonpayment. No delay or
omission of Agent or Lenders to exercise any right or remedy hereunder, whether
before or after the happening of any Event of Default, shall impair any such
right or shall operate as a waiver thereof or as a waiver of any such Event of
Default. No single or partial exercise by Agent or Lenders of any right or
remedy shall preclude any other or further exercise thereof, or preclude any
other right or remedy.
15.2. JURY TRIAL:
TO THE EXTENT ANY DISPUTE IS NOT SUBJECT TO ARBITRATION, AGENT,
ISSUING BANK AND LENDERS EACH HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING ARISING OUT OF THIS CREDIT AGREEMENT, THE CREDIT DOCUMENTS
OR ANY OTHER AGREEMENTS OR TRANSACTIONS RELATED HERETO OR THERETO.
15.3. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE:
a. THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED
BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH
OF PENNSYLVANIA. Any legal action or proceeding with respect to this Credit
Agreement or any other Credit Document shall be brought in the courts of the
Commonwealth of Pennsylvania in Philadelphia County or of the United States for
the Eastern District of Pennsylvania, and, by execution and delivery of this
Credit Agreement, Borrowers hereby irrevocably accept for themselves and in
respect of their property, generally and unconditionally, the nonexclusive
jurisdiction of such courts. Borrowers further irrevocably consent to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified mail,
postage prepaid, or by nationally recognized overnight courier to it at the
address set out for notices pursuant to Section 15.5, such service to become
effective 3 days (or 1 day if sent by such courier) after such mailing. Nothing
herein shall affect the right of Agent or any Lender to serve process in any
other manner permitted by law or to commence legal proceedings or to otherwise
proceed against Borrowers in any other jurisdiction.
b. Borrowers hereby irrevocably waive any objection which they may
now or hereafter have to the laying of venue of any of the aforesaid actions or
proceedings arising out of or in connection with this Credit Agreement or any
other Credit Document brought in the courts referred to in subsection (a) above
and hereby further irrevocably waives and agrees not to plead or
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claim in any such court that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
15.4. Arbitration:
a. Notwithstanding the provisions of Section 15.3 to the contrary,
and subject to subsections (b) and (c) hereof, upon demand of any party hereto,
whether made before or after institution of any judicial proceeding, any
dispute, claim or controversy arising out of, connected with or relating to this
Credit Agreement and other Credit Documents ("Disputes") between or among
parties to this Credit Agreement shall be resolved by binding arbitration as
provided herein. Institution of a judicial proceeding by a party does not waive
the right of that party to demand arbitration hereunder. Disputes may include,
without limitation, tort claims, counterclaims, disputes as to whether a matter
is subject to arbitration, claims brought as class actions, claims arising from
Credit Documents executed in the future, or claims arising out of or connected
with the transaction reflected by this Credit Agreement. Arbitration shall be
conducted under and governed by the Commercial Financial Disputes Arbitration
Rules (the "Arbitration Rules") of the American Arbitration Association (the
"AAA") and Title 9 of the U.S. Code. All arbitration hearings shall be conducted
in Philadelphia, Pennsylvania. A hearing shall begin within 90 days of demand
for arbitration and all hearings shall be concluded within 120 days of demand
for arbitration. These time limitations may not be extended unless a party shows
cause for extension and then no more than a total extension of 60 days. The
expedited procedures set forth in Rule 51 et seq. of the Arbitration Rules shall
be applicable to claims of less than $1,000,000. All applicable statutes of
limitation shall apply to any Dispute. The panel from which all arbitrators are
selected shall be comprised of licensed attorneys selected from the Commercial
Financial Dispute Arbitration Panel of the AAA. The single arbitrator selected
for expedited procedure shall be a retired judge from the highest court of
general jurisdiction, state or federal, of the state where the hearing will be
conducted or if such person is not available to serve, the single arbitrator may
be a licensed attorney. The parties hereto do not waive applicable Federal or
state substantive law except as provided herein. A judgment upon the award may
be entered in any court having jurisdiction. Notwithstanding the foregoing, this
arbitration provision does not apply to disputes under or related to Hedging
Agreements.
b. Notwithstanding the preceding binding arbitration provisions,
Agent, Lenders and Borrowers agree to preserve, without diminution, certain
remedies that Agent on behalf of Lenders may (without first obtaining
permission, approval or authority of any arbitrator or court) employ or exercise
freely, independently or in connection with an arbitration proceeding or after
an arbitration action is brought. Agent on behalf of Lenders shall have the
right to proceed in any court of proper jurisdiction or by self-help to exercise
or prosecute the following remedies, as applicable (i) all rights under the Code
or other applicable law to foreclose or otherwise enforce its and their liens or
other rights and remedies against any and all Collateral (whether real or
personal property) or other security, including without limitation by collection
of accounts receivable, public or private sale or other disposition of personal
property, exercising a power of sale granted under Credit Documents or under
applicable law or judicial foreclosure and sale, including a proceeding to
confirm the sale; (ii) all rights of self-help including peaceful occupation of
real property and collection of rents, setoff, and peaceful possession of
personal property; (iii) obtaining provisional or ancillary remedies including
injunctive relief, sequestration, garnishment, attachment, appointment
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of receiver and filing an involuntary bankruptcy proceeding or exercise of any
and all rights and remedies in any bankruptcy, reorganization, receivership or
similar proceeding; and (iv) when applicable, a judgment by confession of
judgment. Any claim or controversy with regard to Agent's entitlement on behalf
of Lenders to exercise such remedies is a Dispute. Preservation of these
remedies does not limit the power of an arbitrator to grant similar remedies
that may be requested by a party in a Dispute.
c. The parties hereto agree that they shall not have a remedy of
punitive or exemplary damages against the other in any Dispute and hereby waive
any right or claim to punitive or exemplary damages they have now or which may
arise in the future in connection with any Dispute whether the Dispute is
resolved by arbitration or judicially.
d. By execution and delivery of this Credit Agreement, each of the
parties hereto accepts, for itself and in connection with its properties,
generally and unconditionally, the non-exclusive jurisdiction relating to any
arbitration proceedings conducted under the Arbitration Rules in Philadelphia,
Pennsylvania and irrevocably agrees to be bound by any final judgment rendered
thereby in connection with this Credit Agreement from which no appeal has been
taken or is available.
15.5. Notices:
Except as otherwise provided herein, all notices and correspondences
hereunder shall be in writing and sent by certified or registered mail return
receipt requested, by overnight delivery service, with all charges prepaid, or
by facsimile, if to Agent, Lenders or Borrowers to the addresses or by facsimile
transmission set forth on Schedule 15.5 hereto. All such notices and
correspondence shall be deemed given (i) if sent by certified or registered
mail, 3 Business Days after being postmarked, (ii) if sent by overnight delivery
service, when received at the above stated addresses or when delivery is refused
and (iii) if sent by facsimile transmission, when receipt of such transmission
is acknowledged; provided that all notices shall not be effective until actually
received.
15.6. Assignability:
a. Borrowers shall not have the right to assign or delegate their
obligations and duties under this Credit Agreement or any other Credit Documents
or any interest therein except with the prior written consent of Agent and
Lenders.
b. Notwithstanding subsection (c) of this Section 15.6, nothing
herein shall restrict, prevent or prohibit any Lender from (i) pledging or
granting a security interest in its Loans hereunder to a Federal Reserve Bank in
support of borrowings made by such Lender from such Federal Reserve Bank or (ii)
granting assignments or participations in the Loans and/or Commitments hereunder
to its parent and/or to any Affiliate of such Lender or to any other existing
Lender or Affiliate. Any Lender may make, carry or transfer Loans at, to or for
the account of, any of its branch offices or the office of an Affiliate of such
Lender except to the extent such transfer would result in increased costs to
Borrowers.
c. Each Lender may, with the consent of Agent (such consent not to
be unreasonably withheld or delayed) and (if no Event of Default is outstanding)
with the consent of
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Borrowers (such consent not to be unreasonably withheld or delayed), but without
the consent of any other Lender, assign to one or more banks or other financial
institutions all or a portion of its rights and obligations under this Credit
Agreement and the Notes; provided that (i) for each such assignment, the parties
thereto shall execute and deliver to Agent, for its acceptance (if properly
completed and executed in accordance with the terms hereof) and recording in its
books and records, an Assignment and Acceptance, together with any Note or Notes
subject to such assignment and a processing and recordation fee of $3,500 to be
paid by the assignee, (ii) no such assignment shall be for less than a
Commitment share of $5,000,000 or, if less, the entire remaining Commitments of
such Lender of the Commitments, (iii) if such assignee is a Foreign Lender, all
of the requirements of Section 2.8(b) shall have been satisfied as a condition
to such assignment and (iv) each such assignment shall be of a uniform, and not
a varying, percentage of all rights and obligations under and in respect of both
the Commitment of such Lender and all Loans of such Lender. Upon such execution
and delivery of the Assignment and Acceptance to Agent, from and after the date
specified as the effective date in the Assignment and Acceptance (the
"Acceptance Date"), (x) the assignee thereunder shall be a party hereto, and, to
the extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, such assignee shall have the rights
and obligations of a Lender hereunder and (y) the assignor thereunder shall, to
the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights (other than
any rights it may have pursuant to Section 15.8 which will survive) and be
released from its obligations under this Credit Agreement (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Credit Agreement, such
Lender shall cease to be a party hereto).
d. Within 2 Business Days after demand by Agent, Borrowers shall
execute and deliver to Agent in exchange for any surrendered Note or Notes
(which the assigning Lender agrees to promptly deliver to Borrowers) a new Note
or Notes to the order of the assignee in an amount equal to the Commitment or
Commitments assumed by it pursuant to such Assignment and Acceptance and, if the
assigning Lender has retained a Commitment or Commitments hereunder, a new Note
or Notes to the order of the assigning Lender in an amount equal to the
Commitment or Commitments retained by it hereunder. Such new Note or Notes shall
re-evidence the indebtedness outstanding under the old Notes or Notes and shall
be in an aggregate principal amount equal to the aggregate principal amount of
such surrendered Note or Notes, shall be dated the Closing Date and shall
otherwise be in substantially the form of the Note or Notes subject to such
assignments.
e. Each Lender may sell participations (without the consent of
Agent, Borrowers or any other Lender) to one or more parties in or to all or a
portion of its rights and obligations under this Credit Agreement (including,
without limitation, all or a portion of its Commitments, the Loans owing to it
and the Note or Notes held by it); provided that (i) such Lender's obligations
under this Credit Agreement (including, without limitation, its Commitments to
Borrowers hereunder) shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Lender shall remain the holder of any such Note for all
purposes of this Credit Agreement, (iv) Borrowers, Agent, and the other Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Credit Agreement and (v) such
Lender shall not transfer, grant, assign or sell any participation under which
the participant shall have rights to approve any
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amendment or waiver of this Credit Agreement except to the extent such amendment
or waiver would (A) extend the final maturity date or the date for the payments
of any installment of fees or principal or interest of any Loans or Letter of
Credit reimbursement obligations in which such participant is participating, (B)
reduce the amount of any installment of principal of the Loans or Letter of
Credit reimbursement obligations in which such participant is participating, (C)
except as otherwise expressly provided in this Credit Agreement, reduce the
interest rate applicable to the Loans or Letter of Credit reimbursement
obligations in which such participant is participating, or (D) except as
otherwise expressly provided in this Credit Agreement, reduce any Fees payable
hereunder.
f. Each Lender agrees that, without the prior written consent of
Borrowers and Agent, it will not make any assignment or sell a participation
hereunder in any manner or under any circumstances that would require
registration or qualification of, or filings in respect of, any Loan, Note or
other Obligation under the securities laws of the United States of America or of
any jurisdiction.
g. In connection with the efforts of any Lender to assign its rights
or obligations or to participate interests, Agent or such Lender may disclose
any information in its possession regarding Borrowers, their finances and/or
Property.
15.7. Payment of Expenses:
Borrowers agree to pay on demand all reasonable out-of-pocket costs
and expenses (whether paid or incurred) of (i) Agent in connection with (A) the
negotiation, preparation, execution and delivery and administration of this
Credit Agreement and the other Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of counsel to Agent); (B) searches, title examinations,
filings and recordings (including, without limitation, all stamp or recording
taxes or charges), and all other actions pertaining to the Collateral (whether
pursuant to Article V hereof or otherwise); (C) any amendment, waiver or consent
relating hereto and thereto including, without limitation, any such amendments,
waivers or consents resulting from or related to any work-out, re-negotiation or
restructure relating to the performance by Borrowers under this Credit
Agreement; and (D) the defense of all claims, cross-claims or counterclaims
asserted at any time by Borrowers or any other Person in connection with the
rights, claims, liens and/or interests of Agent and/or Lenders under this Credit
Agreement or the other Credit Documents or the credit facilities described
herein and (ii) Agent and Lenders in connection with enforcement of the Credit
Documents and the documents and instruments referred to therein, including but
not limited to, any work-out, re-negotiation or restructure relating to the
performance by Borrowers under this Credit Agreement, including, without
limitation, the reasonable fees and disbursements of counsel for Agent and each
Lender. In addition, Borrowers shall, upon demand, pay to Agent, Issuing Bank
and Lenders all costs and expenses (including the reasonable fees and
disbursements of counsel and other professionals) paid or incurred by Agent and
Lenders in (A) enforcing, protecting, preserving or defending its rights under
or in respect of this Credit Agreement, the other Credit Documents or any other
document or instrument now or hereafter executed and delivered in connection
herewith; (B) in collecting the Loans; (C) in foreclosing or otherwise
collecting upon the Collateral or any part thereof; and (D) obtaining any legal,
accounting or other advice in connection with any of the foregoing. Borrowers'
obligations under this Section 15.7 shall survive any termination of this Credit
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Agreement and the other Credit Documents and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any other of
their Obligations set forth in this Credit Agreement. All such costs and
expenses described in this Section 15.7 are referred to collectively as
"Expenses."
15.8. Indemnification:
Borrowers shall indemnify, defend and hold harmless Agent, Issuing
Bank and each Lender and their respective directors, officers, agents, employees
and counsel from and against (a) any and all losses, claims, damages,
liabilities, deficiencies, judgments or expenses incurred by any of them (except
to the extent that it is finally judicially determined to have resulted from
their own gross negligence or willful misconduct) arising out of or by reason of
any litigation, investigation, claim or proceeding which arises out of or is in
any way related to (i) this Credit Agreement, the other Credit Documents, any
Letter of Credit, the Collateral or the transactions contemplated thereby, (ii)
any actual or proposed use by Borrowers of the proceeds of the Loans, (iii)
Agent, Issuing Bank and Lenders entering into, performing under or enforcing
this Credit Agreement, the other Credit Documents or any other agreements and
documents relating hereto, including, without limitation, amounts paid in
settlement, court costs and the fees and disbursements of counsel incurred in
connection with any such litigation, investigation, claim or proceeding or any
advice rendered in connection with any of the foregoing, or (iv) the breach by
Borrowers of any warranty, undertaking or covenant made at any time hereunder or
under any other Credit Document and (b) any such losses, claims, damages,
liabilities, deficiencies, judgments or expenses incurred in connection with any
remedial or other action taken by Borrowers, Agent or Lenders in connection with
compliance by Borrowers, or any of their respective properties, with any
federal, state or local environmental laws, acts, rules, regulations, orders,
directions, ordinances, criteria or guidelines. If and to the extent that the
obligations of Borrowers hereunder are unenforceable for any reason, Borrowers
hereby agree to make the maximum contribution to the payment and satisfaction of
such obligations which is permissible under applicable law. Borrowers'
obligations under this Section 15.8 shall survive any termination of this Credit
Agreement and the other Credit Documents and the payment in full of the
Obligations, and are in addition to, and not in substitution of, any other of
their Obligations set forth in this Credit Agreement.
15.9. Entire Agreement, Successors and Assigns:
This Credit Agreement along with the other Credit Documents
constitutes the entire agreement among Borrowers, Agent and Lenders regarding
the subject matter hereof, supersedes any prior agreements among them, and shall
bind and benefit Borrowers, Agent and Lenders and their respective successors
and permitted assigns. No rights are intended to be created hereunder or under
any other Credit Documents for the benefit of any Person not a signatory hereto
or thereto.
15.10. Amendments:
Neither the amendment or waiver of any provision of this Credit
Agreement or any other Credit Document (other than Letter of Credit Documents),
nor the consent to any departure by Borrowers therefrom, shall in any event be
effective unless the same shall be in writing and signed by Borrowers and
Required Lenders (or by Agent at the direction of Required Lenders), or if
Lenders shall not be parties thereto, by the parties thereto and consented to by
Required Lenders, and each such amendment, waiver or consent shall be effective
only in the specific instance and for the specific
81
purpose for which given; provided that no amendment, waiver or consent shall
unless in writing and signed by all Lenders, do any of the following: (a) modify
the Commitments of Lenders, (b) except as otherwise expressly provided in this
Credit Agreement, reduce the principal of, or interest on, any Note or any
Letter of Credit reimbursement obligations or any fees hereunder, (c) postpone
any date fixed for any payment in respect of principal of, or interest on, any
Note or any Letter of Credit reimbursement obligations or any fees hereunder,
(d) change the percentage of the Commitments, or any minimum requirement
necessary for Lenders or Required Lenders to take any action hereunder, (e)
amend or waive this Section 15.10, or change the definition of Required Lenders,
(f) except as otherwise expressly provided in this Credit Agreement, and other
than in connection with the financing, refinancing, sale or other disposition of
any Property of Borrowers permitted under this Credit Agreement, release any
Liens in favor of Lenders on any portion of the Collateral, (g) permit Borrowers
or any guarantor to delegate, transfer or assign any of its, his or her
obligations to any Lender, (h) extend the Maturity Date of this Credit
Agreement; or (i) release or compromise the obligations of Borrowers or any
guarantor to any Lender, and, provided, further, that no amendment, waiver or
consent affecting the rights or duties of Agent or Issuing Bank under any Credit
Document shall in any event be effective, unless in writing and signed by Agent
and/or Issuing Bank, as applicable, in addition to Lenders required hereinabove
to take such action. Notwithstanding any of the foregoing to the contrary, the
consent of Borrower shall not be required for any amendment, modification or
waiver of the provisions of Article XIV (other than the provisions of Sections
14.9 and 14.10(b)). In addition, Borrowers and Lenders hereby authorize Agent to
modify this Credit Agreement by unilaterally amending or supplementing Schedule
1.1(a) from time to time in the manner requested by Borrowers, Agent or any
Lender in order to reflect any assignments or transfers of the Loans as provided
for hereunder; provided, however, that Agent shall promptly deliver a copy of
any such modification to Borrowers and each Lender.
15.11. Nonliability of Agent and Lender:
The relationship among Borrowers on the one hand and Agent and
Lenders on the other hand shall be solely that of borrowers and lenders. Neither
Agent nor Lenders shall have any fiduciary responsibilities to Borrowers or be
deemed to have entered into any partnership or joint venture with Borrowers.
Neither Agent nor Lenders shall undertake any responsibility to Borrowers to
review, evaluate or inform Borrowers of any matter in connection with any phase
of Borrowers' business or operations.
15.12. Independent Nature of Lender's Rights:
The amounts payable at any time hereunder to each Lender under such
Lender's Note or Notes shall be a separate and independent debt.
15.13. Counterparts:
This Credit Agreement may be executed in any number of counterparts
and by the different parties hereto in separate counterparts, each of which when
so executed and delivered shall be an original, but all of which shall together
constitute one and the same instrument. Signature by facsimile shall bind the
parties hereto.
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15.14. Effectiveness:
This Credit Agreement shall become effective on the date on which
all of the conditions to effectiveness contained herein have been satisfied (as
determined by Agent in its sole and absolute discretion) and all of the parties
have signed a copy hereof (whether the same or different copies) and shall have
delivered the same to Agent pursuant to Section 15.5.
15.15. Severability:
In case any provision in or obligation under this Credit Agreement
or the Notes or the other Credit Documents shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality and enforceability of
the remaining provisions or obligations, or of such provision or obligation in
any other jurisdiction, shall not in any way be affected or impaired thereby.
15.16. Headings Descriptive:
The headings of the several sections and subsections of this Credit
Agreement, and the Table of Contents, are inserted for convenience only and
shall not in any way affect the meaning or construction of any provision of this
Credit Agreement.
15.17. Maximum Rate:
Notwithstanding anything to the contrary contained elsewhere in this
Credit Agreement or in any other Credit Document, Borrowers, Agent and Lenders
hereby agree that all agreements among them under this Credit Agreement and the
other Credit Documents, whether now existing or hereafter arising and whether
written or oral, are expressly limited so that in no contingency or event
whatsoever shall the amount paid, or agreed to be paid, to Agent or any Lender
for the use, forbearance, or detention of the money loaned to Borrowers and
evidenced hereby or thereby or for the performance or payment of any covenant or
obligation contained herein or therein, exceed the Highest Lawful Rate. If due
to any circumstance whatsoever, fulfillment of any provisions of this Credit
Agreement or any of the other Credit Documents at the time performance of such
provision shall be due shall exceed the Highest Lawful Rate, then,
automatically, the obligation to be fulfilled shall be modified or reduced to
the extent necessary to limit such interest to the Highest Lawful Rate, and if
from any such circumstance any Lender should ever receive anything of value
deemed interest by applicable law which would exceed the Highest Lawful Rate,
such excessive interest shall be applied (as determined by Agent) to the
reduction of the principal amount then outstanding hereunder or on account of
any other then outstanding Obligations and not to the payment of interest, or if
such excessive interest exceeds the principal unpaid balance then outstanding
hereunder and such other then outstanding Obligations, such excess shall be
refunded to Borrowers. All sums paid or agreed to be paid to Agent or any Lender
for the use, forbearance, or detention of the Obligations and other indebtedness
of Borrowers to Agent or any Lender shall, to the extent permitted by applicable
law, be amortized, prorated, allocated and spread throughout the full term of
such indebtedness until payment in full so that the actual rate of interest on
account of all such indebtedness does not exceed the Highest Lawful Rate
throughout the entire term of such indebtedness. The terms and provisions of
this Section shall control every other provision of this Credit Agreement and
all agreements among Borrowers, Agent and Lenders.
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15.18. Right of Setoff:
In addition to and not in limitation of all rights of offset that
Agent and Lender may have under applicable law, Agent and Lenders shall, if any
Event of Default has occurred and is continuing and whether or not Agent has
made any demand or the Obligations of Borrowers are matured, have the right to
appropriate and apply to the payment of the Obligations of Borrowers all
deposits (general or special, time or demand, provisional or final) then or
thereafter held by and other indebtedness or property then or thereafter owing
by Agent or such Lender, including, without limitation, any and all amounts in
the Cash Collateral Account. Any amount received as a result of the exercise of
such rights shall be reallocated among Lenders as set forth in Section 2.9.
15.19. Information:
Agent and each Lender (each, a "Lending Party") agree to keep
confidential any information furnished or made available to it by Borrowers
pursuant to this Credit Agreement that is marked confidential; provided that
nothing herein shall prevent any Lending Party from disclosing such information
(a) to any other Lending Party or any Affiliate of any Lending Party, or any
officer, director, employee, attorney, agent, or advisor of any Lending Party or
Affiliate of any Lending Party, (b) to any other Person if reasonably incidental
to the administration of the credit facility provided herein, (c) as required by
any law, rule, or regulation, (d) upon the order of any court or administrative
agency, provided if allowed under such order, Agent and each Lender shall
endeavor to give notice to the applicable Borrower prior to such disclosure, (e)
upon the request or demand of any regulatory agency or authority, provided if
allowed under such request or demand, Agent and each Lender shall endeavor to
give notice to the applicable Borrower prior to such disclosure, (f) that is or
becomes available to the public or that is or becomes available to any Lending
Party other than as a result of a disclosure by any Lending Party prohibited by
this Credit Agreement, (g) in connection with any litigation to which such
Lending Party or any of its Affiliates may be a party relating to this Credit
Agreement or the transactions contemplated hereunder, (h) to the extent
necessary in connection with the exercise of any remedy under this Credit
Agreement or any other Credit Document, (i) subject to provisions substantially
similar to those contained in this Section 15.19, to any actual or proposed
participant or assignee and (j) to Gold Sheets and other similar bank trade
publications without listing any Borrower's name; such information to consist of
deal terms and other information customarily found in such publications.
[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK]
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Dated the date and year first written above.
BORROWERS: PHOENIX COLOR CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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PCC EXPRESS, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Chief Financial Officer
TECHNIGRAPHIX, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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PHOENIX (MD.) REALTY, LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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PHOENIX COLOR FULFILLMENT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Title: Chief Financial Officer
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[SIGNATURE PAGE A&R LOAN AND SECURITY AGREEMENT]
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AGENT: WACHOVIA BANK, NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Vice President
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LENDER: WACHOVIA BANK, NATIONAL ASSOCIATION
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Vice President
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[SIGNATURE PAGE A&R LOAN AND SECURITY AGREEMENT]
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