AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
by and among
MULTIGRAPHICS, INC.,
formerly known as
AM INTERNATIONAL, INC.,
PUBLISHING SOLUTIONS INC.
and
FOOTHILL CAPITAL CORPORATION
DATED AS OF FEBRUARY ___, 1998
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION.................................4
1.1. Definitions...........................................4
1.2. Accounting Terms................................. 17
1.3. Code.................................................17
1.4. Construction.........................................17
1.5. Schedules and Exhibits...............................17
1.6. Amendment and Restatement............................17
2. LOAN AND TERMS OF PAYMENT................................. 18
2.1. Revolving Advances................................. 18
2.2. Letters of Credit................................. 19
2.3. Intentionally Omitted................................22
2.4. Intentionally Omitted................................22
2.5. Overadvances.........................................22
2.6. Interest and Letter of Credit Fees: Rates, Payments,
and Calculations.....................................22
2.7. Collection of Accounts...............................23
2.8. Crediting Payments; Application of Collections. 24
2.9. Designated Account................................. 25
2.10. Maintenance of Loan Account; Statements of
Obligations..........................................25
2.11. Fees................................................25
3. CONDITIONS; TERM OF AGREEMENT...............................26
3.1. Conditions Precedent to the Initial Advance and Letter
of Credit............................................26
3.2. Conditions Precedent to all Advances and all Letters
of Credit............................................27
3.3. Intentionally Omitted................................27
3.4. Term.................................................27
3.5. Effect of Termination................................27
3.6. Early Termination by Borrower........................28
3.7. Termination Upon Event of Default....................28
4. CREATION OF SECURITY INTEREST...............................28
4.1. Grant of Security Interest...........................28
4.2. Negotiable Collateral................................29
4.3. Collection of Accounts, General Intangibles, and
Negotiable Collateral................................29
4.4. Delivery of Additional Documentation Required........29
4.5. Power of Attorney................................. 29
4.6. Right to Inspect................................. 30
5. REPRESENTATIONS AND WARRANTIES..............................30
5.1. No Encumbrances......................................30
5.2. Eligible Accounts....................................30
5.3. Eligible Inventory...................................30
5.4. Equipment............................................30
5.5. Location of Inventory and Equipment..................31
5.6. Inventory Records....................................31
5.7. Location of Chief Executive Office; FEIN.............31
5.8. Due Organization and Qualification; Subsidiaries.....31
5.9. Due Authorization; No Conflict.......................31
5.10. Litigation..........................................32
5.11. No Material Adverse Change..........................32
5.12. Solvency............................................32
5.13. Employee Benefits...................................32
5.14. Environmental Condition.............................33
5.15. Subsidiary Activities...............................33
5.16. Patents and Trademarks..............................33
6. AFFIRMATIVE COVENANTS.......................................33
6.1. Accounting System....................................33
6.2. Collateral Reporting.................................34
6.3. Financial Statements, Reports, Certificates..........34
6.4. Tax Returns..........................................36
6.5. Guarantor Reports....................................36
6.6. Returns..............................................36
6.7. Intentionally Omitted................................36
6.8. Maintenance of Equipment.............................36
6.9. Taxes................................................36
6.10. Insurance...........................................37
6.11. No Setoffs or Counterclaims.........................38
6.12. Location of Inventory and Equipment.................38
6.13. Compliance with Laws................................38
6.14. Employee Benefits...................................38
6.15. Leases..............................................39
6.16. Intentionally Omitted...............................39
6.17. Change Name.........................................39
7. NEGATIVE COVENANTS..........................................40
7.1. Indebtedness.........................................40
7.2. Liens................................................40
7.3. Restrictions on Fundamental Changes..................40
7.4. Disposal of Assets...................................40
7.5. Change Corporate Structure...........................41
7.6. Guarantee............................................41
7.7. Nature of Business...................................41
7.8. Prepayments and Amendments...........................41
7.9. Change of Control....................................41
7.10. Consignments........................................41
7.11. Distributions.......................................41
7.12. Accounting Methods..................................41
7.13. Investments.........................................42
7.14. Transactions with Affiliates........................42
7.15. Suspension..........................................42
7.16. Intentionally Omitted...............................42
7.17. Use of Proceeds.....................................42
7.18. Change in Location of Chief Executive Office........42
10. TAXES AND EXPENSES.........................................48
11. WAIVERS; INDEMNIFICATION...................................48
11.1. Demand; Protest; etc................................48
11.2. Foothill's Liability for Collateral.................49
11.3. Indemnification.....................................49
12. NOTICES....................................................49
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.................50
14. DESTRUCTION OF BORROWER'S DOCUMENTS........................51
15. GENERAL PROVISIONS.........................................51
15.1. Effectiveness.......................................51
15.2. Successors and Assigns..............................51
15.3. Section Headings....................................51
15.4. Interpretation......................................51
15.5. Severability of Provisions..........................52
15.6. Amendments in Writing...............................52
15.7. Counterparts; Telefacsimile Execution...............52
15.8. Revival and Reinstatement of Obligations............52
15.9. Integration.........................................52
15.10. Confidentiality....................................52
15.11. Guaranty...........................................53
SCHEDULES AND EXHIBITS
Schedule E-1 Eligible Inventory Locations
Schedule P-1 Permitted Liens
Schedule 2.6 Business Plan
Schedule 5.8 Subsidiaries
Schedule 5.13 ERISA Benefit Plans
Schedule 5.14 Environmental Matters
Schedule 6.12 Location of Inventory and Equipment
Schedule 7.1 Indebtedness
Schedule 7.14 Transactions with Affiliates
Schedule 7.17 Existing Letters of Credit
Exhibit C-1 Form of Compliance Certificate
AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this
"Agreement"), is entered into as of February ___, 1998, among
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"),
with a place of business located at 00000 Xxxxx Xxxxxx Xxxxxxxxx,
Xxxxx 0000, Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000, MULTIGRAPHICS, INC.,
formerly known as AM INTERNATIONAL, INC., a Delaware corporation
("Multigraphics"), with its chief executive office located at 000
Xxxxxxxx Xxxxx, Xxxxx Xxxxxxxx, Xxxxxxxx 00000 and PUBLISHING
SOLUTIONS INC., an Ohio corporation ("PSI"), with its chief executive
office located at 00 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxx, Xxxx 00000
(Multigraphics and PSI are each individually a "Borrower", and
collectively "Borrowers"). The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1. Definitions.
As used in this Agreement, the following terms shall have
the following definitions:
"Account Debtor" means any Person who is or who may become
obligated under, with respect to, or on account of, an Account.
"Accounts" means, with respect to a Borrower, all currently
existing and hereafter arising accounts, contract rights, and all
other forms of obligations owing to such Borrower arising out of the
sale or lease of goods or the rendition of services by such Borrower,
irrespective of whether earned by performance, and any and all credit
insurance, guaranties, or security therefor.
"Advances" has the meaning set forth in Section 2.1(a).
"Affiliate" means, as applied to any Person, any other
Person who directly or indirectly controls, is controlled by, is
under common control with or is a director or officer of such Person.
For purposes of this definition, "control" means the possession,
directly or indirectly, of the power to vote 10% or more of the
securities having ordinary voting power for the election of directors
or the direct or indirect power to direct the management and policies
of a Person.
"Agreement" has the meaning set forth in the preamble
hereto.
"Authorized Person" means any officer or other employee of
a Borrower.
"Average Unused Portion of Maximum Revolving Amount" means,
as of any date of determination, (a) the Maximum Revolving Amount,
less (b) the sum of (i) the average Daily Balance of Advances that
were outstanding during the immediately preceding month, plus (ii)
the average Daily Balance of the undrawn Letters of Credit that were
outstanding during the immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code
(11 U.S.C. S 101 et seq.), as amended, and any successor statute.
"Benefit Plan" means a "defined benefit plan" (as defined
in Section 3(35) of ERISA) for which either Borrower, any Subsidiary
of either Borrower, or any ERISA Affiliate has been an "employer" (as
defined in Section 3(5) of ERISA) within the past six years.
"Borrower" has the meaning set forth in the preamble to
this Agreement.
"Borrower's Books" means, with respect to a Borrower, all
of such Borrower's books and records including: ledgers; records
indicating, summarizing, or evidencing such Borrower's properties or
assets (including the Collateral) or liabilities; all information
relating to such Borrower's business operations or financial
condition; and all computer programs, disk or tape files, printouts,
runs, or other computer prepared information.
"Borrowing Base" has the meaning set forth in Section
2.1(a). "Business Day" means any day that is not a Saturday,
Sunday, or other day on which national banks are authorized or
required to close.
"Change of Control" shall be deemed to have occurred at
such time as (i) a "person" or "group" (within the meaning of
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934),
other than any of Apollo Advisors, L.P.; Lion Advisors, L.P.; AIF II,
L.P.; or any of its Affiliates; BEA Associates; State of Wisconsin
Investment Board; Fidelity Bankers Life Insurance Company; Hellmold
Associates, Inc.; Trust Company of the West; and Bellgrave N.V. or
any of the Affiliates of any of the foregoing, becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Securities
Exchange Act of 1934), directly or indirectly, of more than 20% of
the total voting power of all classes of stock then outstanding of
Multigraphics entitled to vote in the election of directors or (ii)
Multigraphics fails to own 100% of all classes of stock then
outstanding of PSI.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means, with respect to a Borrower, each of the
following:
(a) such Borrower's Accounts,
(b) such Borrower's Books,
(c) such Borrower's Equipment, other than such Borrower's
leased Equipment to the extent that the applicable lease prohibits
Liens on such property,
(d) such Borrower's General Intangibles,
(e) such Borrower's Inventory,
(f) such Borrower's Negotiable Collateral,
(g) such Borrower's Real Property Collateral,
(h) any money, or other assets of such Borrower that now
or hereafter come into the possession, custody, or control of
Foothill, and
(i) the proceeds and products, whether tangible or
intangible, of any of the foregoing, including proceeds of insurance
covering any or all of the Collateral of such Borrower, and any and
all Accounts, Borrower's Books, Equipment, General Intangibles,
Inventory, Negotiable Collateral, money, deposit accounts, or other
tangible or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Collateral Access Agreement" means a landlord waiver,
mortgagee waiver, bailee letter, or acknowledgment agreement of any
warehouseman, processor, lessor, consignee, or other Person in
possession of, having a Lien upon, or having rights or interests in
the Equipment or Inventory, in each case, in form and substance
reasonably satisfactory to Foothill.
"Collections" means all cash, checks, notes, instruments,
and other items of payment (including, insurance proceeds, proceeds
of cash sales, rental proceeds, and tax refunds).
"Compliance Certificate" means a certificate substantially
in the form of Exhibit C-1 and delivered by the chief accounting
officer of Multigraphics to Foothill.
"Consolidated Current Assets" means, as of any date of
determination, the aggregate amount of all current assets of
Borrowers on a consolidated basis that would, in accordance with
GAAP, be classified on a balance sheet as current assets.
"Consolidated Current Liabilities" means, as of any date of
determination, the aggregate amount of all current liabilities of
Borrowers on a consolidated basis that would, in accordance with
GAAP, be classified on a balance sheet as current liabilities. For
purposes of this definition, all Advances outstanding under this
Agreement shall be deemed to be current liabilities without regard to
whether they would be deemed to be so under GAAP.
"Daily Balance" means the amount of an Obligation owed at
the end of a given day.
"deems itself insecure" means that the Person deems itself
insecure in accordance with the provisions of Section 1208 of the
Code.
"Default" means an event, condition, or default that, with
the giving of notice, the passage of time, or both, would be an Event
of Default.
"Depository Account" has the meaning set forth in Section
3.7.
"Depository Agreements" means those certain agreements
establishing the Depository Accounts, in form and substance
satisfactory to Foothill, each of which is among PSI, Foothill, and
one of the Depository Banks.
"Depository Banks" means Bank One N.A. and any other bank
from time to time party to a Depository Agreement.
"Dilution" means, with respect to a Borrower, in each case
based upon the experience of the immediately prior 3 months, the
result of dividing the Dollar amount of (a) the debt write-downs,
discounts, advertising allowances, returns, promotions, credits, or
other dilution with respect to the Accounts of such Borrower, by (b)
such Borrower's Collections (excluding extraordinary items) plus the
Dollar amount of clause (a).
"Dilution Reserve" means, with respect to a Borrower, as of
any date of determination, an amount sufficient to reduce Foothill's
advance rate against Eligible Accounts of such Borrower by one
percentage point for each percentage point by which Dilution is in
excess of 5%.
"Dollars or $" means United States dollars.
"Early Termination Premium" has the meaning set forth in
Section 3.6.
"Eligible Accounts" means the Eligible Service Accounts and
the Eligible Trade Accounts.
"Eligible Inventory" means Inventory consisting of first
quality finished goods held for sale in the ordinary course of a
Borrower's business, raw materials for such finished goods and
demonstration units, that strictly comply with each and all of the
representations and warranties respecting Inventory made by such
Borrower to Foothill in the Loan Documents, and that are and at all
times continue to be acceptable to Foothill in all respects in its
reasonable credit judgment, consistent with Foothill's standard
credit policies; provided, however, that standards of eligibility may
be fixed and revised from time to time by Foothill in Foothill's
reasonable credit judgment, consistent with Foothill's standard
credit policies. In determining the amount to be so included,
Inventory of a Borrower shall be valued at the lower of cost or
market on a basis consistent with such Borrower's current and
historical accounting practices. An item of Inventory shall not be
included in Eligible Inventory of a Borrower if:
(a) it is not owned solely by such Borrower or such
Borrower does not have good, valid, and marketable title thereto;
(b) it is not located at one of the locations set forth on
Schedule E-1 or another location of which Foothill has been notified
in accordance with Section 6.12;
(c) it is not located on property owned or leased by such
Borrower or in a contract warehouse, in each case, subject to a
Collateral Access Agreement executed by the mortgagee, lessor, the
warehouseman, or other third party, as the case may be, and
segregated or otherwise separately identifiable from goods of others,
if any, stored on the premises;
(d) it is not subject to a valid and perfected first
priority security interest in favor of Foothill, and, if it is
located outside of the State of Illinois, as evidenced by post-filing
UCC searches;
(e) it consists of goods returned or rejected by such
Borrower's customers that are not otherwise in compliance with the
other provisions of the definition of "Eligible Inventory" or it
consists of goods in transit;
(f) it is slow-moving (as determined on a manner
consistent with such Borrower's historical practices), obsolete, a
restrictive or custom item, work-in-process, packaging or shipping
materials, trunk kit Inventory, Inventory held for return, Inventory
subject to a Lien in favor of any third Person, Inventory located
with the vendor thereof unless Foothill has received documentation
satisfactory to Foothill with respect thereto, xxxx and hold goods,
defective or unsaleable goods, "seconds" or used Inventory, or
Inventory acquired on consignment;
(g) it was purchased from DS America (doing business as
SCREEN) or any of its Affiliates, Subsidiaries or successors and
subject to a security interest in favor of such entity; and
(h) if it is located on property leased by such Borrower,
Foothill has not received a copy of the lease relating thereto.
"Eligible Service Accounts" means those Accounts that do
not qualify as Eligible Trade Accounts solely because they arise out
of the rendition of services by a Borrower pursuant to a service
contract (other than a service contract that provides for invoicing
on a time and materials basis), but such Accounts arise pursuant to a
service contract that is currently in existence, under which no
breach or default exists, that is not prepaid more than a year in
advance, and, with respect to annual renewal xxxxxxxx, the Account
Debtor thereunder has executed a confirmation of renewal.
"Eligible Trade Accounts" means those Accounts created by a
Borrower in the ordinary course of business, that arise out of such
Borrower's sale of goods or rendition of services, that strictly
comply with each and all of the representations and warranties
respecting Accounts made by such Borrower to Foothill in the Loan
Documents, and that are and at all times continue to be acceptable in
all material respects to Foothill in its reasonable credit judgment,
consistent with Foothill's standard credit policies; provided,
however, that standards of eligibility may be fixed and revised from
time to time by Foothill in Foothill's reasonable credit judgment,
consistent with Foothill's standard credit policies. Eligible Trade
Accounts of a Borrower shall not include the following:
(a) Accounts of such Borrower that the Account Debtor has
failed to pay within 90 days of invoice date or Accounts with selling
terms of more than 60 days;
(b) Accounts of such Borrower owed by an Account Debtor or
its Affiliates where 50% or more of all Accounts owed by that Account
Debtor (or its Affiliates) to Borrowers are deemed ineligible under
clause (a) above;
(c) Accounts of such Borrower with respect to which the
Account Debtor is an employee or Affiliate of a Borrower;
(d) Accounts of such Borrower with respect to which goods
are placed on consignment, guaranteed sale, sale or return, sale on
approval, xxxx and hold, or other terms by reason of which the
payment by the Account Debtor may be conditional;
(e) Accounts of such Borrower that are not payable in
Dollars or with respect to which the Account Debtor: (i) does not
maintain its chief executive office in the United States or Canada,
or (ii) is not organized under the laws of the United States or
Canada or any State or Province thereof, respectively, or (iii) is
the government of any foreign country or sovereign state (other than
Canada), or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof, unless (y) the Account
is supported by an irrevocable letter of credit reasonably
satisfactory to Foothill (as to form, substance, and issuer or
domestic confirming bank) that has been delivered to Foothill and is
directly drawable by Foothill, or (z) the Account is covered by
credit insurance in form and amount, and by an insurer, reasonably
satisfactory to Foothill;
(f) Accounts of such Borrower with respect to which the
Account Debtor is either (i) the United States or any department,
agency, or instrumentality of the United States (exclusive, however,
of Accounts with respect to which such Borrower has complied, to the
reasonable satisfaction of Foothill, with the Assignment of Claims
Act, 31 U.S.C. S 3727), or (ii) any State of the United States
(exclusive, however, of Accounts (y) owed by any State that does not
have a statutory counterpart to the Assignment of Claims Act) or (z)
with respect to which such Borrower has complied, to the reasonable
satisfaction of Foothill, with an applicable statutory counterpart to
the Assignment of Claims Act);
(g) Accounts of such Borrower with respect to which the
Account Debtor is a creditor of such Borrower, has or has asserted a
right of setoff, has disputed its liability, or has made any claim
with respect to the Account, in each case to the extent of the
applicable offset, dispute or claim; Accounts of such Borrower
subject to a contra to the extent of such contra; and Accounts of
such Borrower subject to offset because the Account Debtor has
prepaid all or any portion of its obligations under a service
contract with such Borrower (which payments are classified by such
Borrower as "deferred revenues"), to the extent of such offset;
(h) Accounts of such Borrower with respect to an Account Debtor
whose total obligations owing to Borrowers exceed 10% of all
Eligible Accounts, to the extent of the obligations owing by such
Account Debtor in excess of such percentage;
(i) Accounts with respect to which the Account Debtor is
subject to any Insolvency Proceeding, or becomes insolvent, or goes
out of business;
(j) Accounts the collection of which Foothill, in its
reasonable credit judgment, believes to be doubtful by reason of the
Account Debtor's financial condition;
(k) Accounts of such Borrower with respect to which the
goods giving rise to such Account have not been shipped and billed to
the Account Debtor, the services giving rise to such Account have not
been performed and accepted by the Account Debtor, or the Account
otherwise does not represent a final sale;
(l) Accounts of such Borrower with respect to which the
Account Debtor is located in the states of New Jersey, Minnesota or
West Virginia (or any other state that requires a creditor to file a
Business Activity Report or similar document in order to bring suit
or otherwise enforce its remedies against such Account Debtor in the
courts or through any judicial process of such state), unless such
Borrower has qualified to do business in New Jersey, Minnesota, West
Virginia, or such other states, or has filed a Notice of Business
Activities Report with the applicable division of taxation, the
department of revenue, or with such other state offices, as
appropriate, for the then-current year, or is exempt from such filing
requirement;
(m) Accounts of such Borrower that represent progress
payments or other advance xxxxxxxx that are due prior to the
completion of performance by such Borrower of the subject contract
for goods or services;
(n) Accounts of such Borrower payable to such Borrower on
a COD basis; and
(o) Accounts of such Borrower that arise out of the
rendition of services by such Borrower pursuant to a service contract
(other than a service contract that provides for invoicing on a time
and materials basis), or the lease of goods by such Borrower.
"Equipment" means, with respect to a Borrower, all of such
Borrower's present and hereafter acquired machinery, machine tools,
motors, equipment, furniture, furnishings, fixtures, vehicles
(including motor vehicles and trailers), tools, parts, goods (other
than consumer goods, farm products, or Inventory), wherever located,
including, (a) any interest of such Borrower in any of the foregoing,
and (b) all attachments, accessories, accessions, replacements,
substitutions, additions, and improvements to any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act
of 1974, 29 U.S.C. SS 1000 et seq., amendments thereto, successor
statutes, and regulations or guidance promulgated thereunder.
"ERISA Affiliate" means (a) any corporation subject to
ERISA whose employees are treated as employed by the same employer as
the employees of either Borrower under IRC Section 414(b), (b) any
trade or business subject to ERISA whose employees are treated as
employed by the same employer as the employees of either Borrower
under IRC Section 414(c), (c) solely for purposes of Section 302 of
ERISA and Section 412 of the IRC, any organization subject to ERISA
that is a member of an affiliated service group of which either
Borrower is a member under IRC Section 414(m), or (d) solely for
purposes of Section 302 of ERISA and Section 412 of the IRC, any
party subject to ERISA that is a party to an arrangement with either
Borrower and whose employees are aggregated with the employees of
either Borrower under IRC Section 414(o).
"ERISA Event" means (a) a Reportable Event with respect to
any Benefit Plan or Multiemployer Plan, (b) the withdrawal of either
Borrower, any of its Subsidiaries or ERISA Affiliates from a Benefit
Plan during a plan year in which it was a "substantial employer" (as
defined in Section 4001(a)(2) of ERISA), (c) the providing of notice
of intent to terminate a Benefit Plan in a distress termination (as
described in Section 4041(c) of ERISA), (d) the institution by the
PBGC of proceedings to terminate a Benefit Plan or Multiemployer
Plan, (e) any event or condition (i) that provides a basis under
Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or
the appointment of a trustee to administer, any Benefit Plan or
Multiemployer Plan, or (ii) that may result in termination of a
Multiemployer Plan pursuant to Section 4041A of ERISA, (f) the
partial or complete withdrawal within the meaning of Sections 4203
and 4205 of ERISA, of either Borrower, any of its Subsidiaries or
ERISA Affiliates from a Multiemployer Plan, or (g) providing any
security to any Plan under Section 401(a)(29) of the IRC by either
Borrower or its Subsidiaries or any of their ERISA Affiliates.
"Event of Default" has the meaning set forth in Section 8.
"FEIN" means Federal Employer Identification Number.
"Foothill" has the meaning set forth in the preamble to
this Agreement.
"Foothill Account" has the meaning set forth in Section
2.7.
"Foothill Expenses" means all: costs or expenses
(including taxes, and insurance premiums) required to be paid by
either Borrower under any of the Loan Documents that are reasonably
paid or incurred by Foothill; fees or charges reasonably paid or
incurred by Foothill in connection with Foothill's transactions with
either Borrower, including fees or charges for photocopying,
notarization, couriers and messengers, telecommunication, public
record searches (including tax lien, litigation, and UCC searches and
including searches with the patent and trademark office, the
copyright office, or the department of motor vehicles), filing,
recording, publication, appraisal (including periodic Personal
Property Collateral or Real Property Collateral appraisals), real
estate surveys, real estate title policies and endorsements, and,
after the occurrence and during the continuance of an Event of
Default, or if Foothill at any time has a Lien on any Real Property
Collateral of either Borrower, environmental audits; costs and
expenses incurred by Foothill in the disbursement of funds to either
Borrower (by wire transfer or otherwise); charges paid or incurred by
Foothill resulting from the dishonor of checks; costs and expenses
paid or incurred by Foothill to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Personal Property
Collateral or the Real Property Collateral, or any portion thereof,
irrespective of whether a sale is consummated; costs and expenses
reasonably paid or incurred by Foothill in examining either
Borrower's Books; costs and expenses of third party claims or any
other suit reasonably paid or incurred by Foothill in enforcing or
defending the Loan Documents or in connection with the transactions
contemplated by the Loan Documents or Foothill's relationship with
either Borrower or any guarantor; and Foothill's reasonable attorneys
fees and expenses incurred in advising, structuring, drafting,
reviewing, administering, amending, terminating, enforcing (including
attorneys fees and expenses incurred in connection with a "workout,"
a "restructuring," or an Insolvency Proceeding concerning either
Borrower or any guarantor of the Obligations), defending, or
concerning the Loan Documents, irrespective of whether suit is
brought.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States, consistently applied
by Borrower.
"General Intangibles" means, with respect to a Borrower,
all of such Borrower's present and future general intangibles and
other personal property (including contract rights, rights arising
under common law, statutes, or regulations, choses or things in
action, goodwill, patents, trade names, trademarks, servicemarks,
copyrights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights to
payment and other rights under any royalty or licensing agreements,
infringement claims, computer programs, information contained on
computer disks or tapes, literature, reports, catalogs, deposit
accounts, insurance premium rebates, tax refunds, and tax refund
claims), other than goods, Accounts, and Negotiable Collateral.
"Governing Documents" means the certificate or articles of
incorporation, by-laws, or other organizational or governing
documents of any Person.
"Hazardous Materials" means (a) substances that are defined
or listed in, or otherwise classified pursuant to, any applicable
laws or regulations as "hazardous substances," "hazardous materials,"
"hazardous wastes," "toxic substances," or any other formulation
intended to define, list, or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, or "EP toxicity", (b) oil,
petroleum, or petroleum derived substances, natural gas, natural gas
liquids, synthetic gas, drilling fluids, produced waters, and other
wastes associated with the exploration, development, or production of
crude oil, natural gas, or geothermal resources, (c) any flammable
substances or explosives or any radioactive materials, and (d)
asbestos in any form or electrical equipment that contains any oil or
dielectric fluid containing levels of polychlorinated biphenyls in
excess of 50 parts per million.
"Indebtedness" means: (a) all obligations of a Borrower for
borrowed money, (b) all obligations of a Borrower evidenced by bonds,
debentures, notes, or other similar instruments and all reimbursement
or other obligations of a Borrower in respect of letters of credit,
bankers acceptances, interest rate swaps, or other financial
products, (c) all obligations of a Borrower under capital leases, (d)
all obligations or liabilities of others secured by a Lien on any
property or asset of a Borrower, irrespective of whether such
obligation or liability is assumed, and (e) any obligation of a
Borrower guaranteeing or intended to guarantee (whether guaranteed,
endorsed, co-made, discounted, or sold with recourse to such
Borrower) any indebtedness, lease, dividend, letter of credit, or
other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by
or against any Person under any provision of the Bankruptcy Code or
under any other bankruptcy or insolvency law, assignments for the
benefit of creditors, or proceedings seeking reorganization,
arrangement, or other similar relief. "Inventory" means, with respect
to a Borrower, all present and future inventory in which such
Borrower has any interest,including goods held for sale or lease
or to be furnished under a contract of service and all of such
Borrower's present and future raw materials, work in process, finished
goods, and packing and shipping materials, wherever located.
"Inventory Letter of Credit" means, with respect to a
Borrower, a documentary Letter of Credit issued to support the
purchase by such Borrower of Inventory prior to transit of such
Inventory to a location set forth on Schedule E-1 or another location
of which Foothill has been notified pursuant to Section 6.12 and with
respect to which Foothill has filed all financing statements,
amendments to financing statements and fixture filings reasonably
required by Foothill, that provides that all draws thereunder must
require presentation of customary documentation (including, if
applicable, commercial invoices, packing list, certificate of origin,
xxxx of lading or airway xxxx, customs clearance documents, quota
statement, inspection certificate, beneficiaries statement, and xxxx
of exchange, bills of lading, dock warrants, dock receipts, warehouse
receipts, or other documents of title) in form and substance
satisfactory to Foothill and reflecting the passage to such Borrower
of title to first quality Inventory conforming to such Borrower's
contract with the seller thereof. Any such Letter of Credit shall
cease to be an "Inventory Letter of Credit" at such time, if any, as
the goods purchased thereunder become Eligible Inventory.
"Inventory Reserves" means reserves (determined from time
to time by Foothill in its reasonable discretion) for (a) the
estimated costs relating to unpaid freight charges, warehousing or
storage charges, taxes, duties, and other similar unpaid costs
associated with the acquisition of Inventory by a Borrower pursuant
to an Inventory Letter of Credit, plus (b) the estimated amount of
outstanding reclamation claims of unpaid sellers of Inventory sold to
such Borrower.
"IRC" means the Internal Revenue Code of 1986, as amended,
and the regulations thereunder.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section 2.2(a).
"Letter of Credit" means an L/C or an L/C Guaranty, as the
context requires.
"Lien" means any interest in property securing an
obligation owed to, or a claim by, any Person other than the owner of
the property, whether such interest shall be based on the common law,
statute, or contract, whether such interest shall be recorded or
perfected, and whether such interest shall be contingent upon the
occurrence of some future event or events or the existence of some
future circumstance or circumstances, including the lien or security
interest arising from a mortgage, deed of trust, encumbrance, pledge,
hypothecation, assignment, deposit arrangement, security agreement,
adverse claim or charge, conditional sale or trust receipt, or from a
lease, consignment, or bailment for security purposes and also
including reservations, exceptions, encroachments, easements, rights-
of-way, covenants, conditions, restrictions, leases, and other title
exceptions and encumbrances affecting Real Property.
"Loan Account" has the meaning set forth in Section 2.10.
"Loan Documents" means this Agreement, the Letters of
Credit, the Lockbox Agreements, the Depository Agreements, the
Mortgages, any note or notes executed by either Borrower and payable
to Foothill, and any other agreement entered into, now or in the
future, in connection with this Agreement.
"Lockbox Account" shall mean a depository account
established pursuant to one of the Lockbox Agreements.
"Lockbox Agreements" means those certain agreements
establishing the Lockboxes, in form and substance satisfactory to
Foothill, each of which is among Multigraphics, Foothill, and one of
the Lockbox Banks.
"Lockbox Banks" means LaSalle National Bank, PNC Bank,
N.A., Bankers Trust Company and any other bank from time to time
party to a Lockbox Agreement.
"Lockboxes" has the meaning set forth in Section 2.7.
"Material Adverse Change" means (a) a material adverse
change in the business, prospects, operations, results of operations,
assets, liabilities or condition (financial or otherwise) of
Borrowers on a consolidated basis, (b) the material impairment of the
ability of Borrowers to perform their obligations under the Loan
Documents to which either or both Borrowers are a party or of
Foothill to enforce the Obligations or realize upon the Collateral,
(c) a material adverse effect on the value of the Collateral or the
amount that Foothill would be likely to receive (after giving
consideration to delays in payment and costs of enforcement) in the
liquidation of such Collateral, or (d) a material impairment of the
priority of Foothill's Liens with respect to the Collateral.
"Maximum Revolving Amount" means $10,000,000.
"Mortgages" means one or more mortgages, deeds of trust, or
deeds to secure debt, executed by a Borrower in favor of Foothill
after the date hereof, the format and substance of which shall be
satisfactory to Foothill, that encumber the Real Property Collateral
and the related improvements thereto.
"Multiemployer Plan" means, with respect to a Borrower, a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to
which such Borrower, any of its Subsidiaries, or any ERISA Affiliate
has contributed, or was obligated to contribute, within the past six
years.
"Multigraphics Designated Account" means, account number
00000000 of Multigraphics maintained with Multigraphics' Designated
Account Bank, or such other deposit account of Multigraphics (located
within the United States) which has been designated, in writing and
from time to time, by Multigraphics to Foothill.
"Multigraphics Designated Account Bank" means Bankers Trust
Company, whose office is located at Xxx Xxxxxxx Xxxxx Xxxxx, Xxx
Xxxx, Xxx Xxxx 00000, and whose ABA number is 000000000.
"Negotiable Collateral" means, with respect to a Borrower,
all of such Borrower's present and future letters of credit, notes,
drafts, instruments, investment property, security entitlements,
securities (including the shares of stock of Subsidiaries of such
Borrower), documents, personal property leases (wherein such Borrower
is the lessor), chattel paper, and such Borrower's Books relating to
any of the foregoing.
"Net Worth" means, as of any date of determination,
Borrower's consolidated total shareholders' equity as determined in
accordance with GAAP. "Obligations" means all loans, Advances, debts,
principal, interest (including any interest that, but for the provisions
of the Bankruptcy Code, would have accrued), contingent reimbursement
obligations under any outstanding Letters of Credit, premiums
(including Early Termination Premiums), liabilities (including all
amounts charged to a Borrower's Loan Account pursuant hereto),
obligations, fees, charges, costs, or Foothill Expenses (including
any fees or expenses that, but for the provisions of the Bankruptcy
Code, would have accrued), lease payments, guaranties, covenants, and
duties owing by each Borrower to Foothill of any kind and description
(whether pursuant to or evidenced by the Loan Documents or pursuant
to any other agreement between Foothill and such Borrower, and
irrespective of whether for the payment of money), whether direct or
indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, and including any debt, liability, or
obligation owing from each Borrower to others that Foothill may have
obtained by assignment or otherwise, and further including all
interest not paid when due and all Foothill Expenses that each
Borrower is required to pay or reimburse by the Loan Documents, by
law, or otherwise.
"Other Borrower's Obligations" means, with respect to each
Borrower, as of any date of determination, the outstanding
Obligations of the other Borrower as of such date.
"Overadvance" has the meaning set forth in Section 2.5.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Investment" means:
(a) investments in short-term obligations backed by the
full faith and credit of the United States Government;
(b) investments in certificates of deposit, time deposits,
money market funds or bankers acceptances issued by any prime
commercial bank or investment bank (which commercial bank or
investment bank shall have capital and surplus of at least
$500,000,000 in the aggregate at all times, and a short term debt
rating of at least A-1 from Standard & Poor's Corporation and at
least P-1 from Xxxxx'x Investors Services, Inc. at all times), with a
remaining maturity not in excess of one year, payable to the order of
either Borrower or to bearer, and repurchase agreements secured by
investments of the type described in clause (a) above and this clause
(b); and
(c) investments in commercial paper having a rating of at
least A-1 from Standard & Poor's Corporation and at least P-1 from
Xxxxx'x Investors Services, Inc. at all times.
"Permitted Liens" means (a) Liens held by Foothill,
(b) Liens for unpaid taxes that either (i) are not yet due and
payable or (ii) are the subject of Permitted Protests, (c) Liens set
forth on Schedule P-1 or securing capital leases and purchase money
financing set forth on Schedule 7.1, (d) the interests of lessors
under operating leases and purchase money Liens of lessors or lenders
under capital leases or installment purchase contracts relating to
Equipment to the extent that the acquisition or lease of the
underlying asset is permitted under Section 7.21 and so long as the
Lien only attaches to the asset purchased or acquired and only
secures the purchase price of, or lease cost with respect to, the
asset, interest with respect thereto and all related fees and
charges, (e) Liens arising by operation of law in favor of
warehousemen, landlords, carriers, mechanics, materialmen, laborers,
or suppliers, incurred in the ordinary course of business of a
Borrower and not in connection with the borrowing of money, and which
Liens either (i) are for sums not yet due and payable, or (ii) are
the subject of Permitted Protests, (f) Liens arising from deposits
made in connection with obtaining worker's compensation or other
unemployment insurance, (g) Liens or deposits to secure performance
of bids, tenders, or leases (to the extent permitted under this
Agreement), incurred in the ordinary course of business of a Borrower
and not in connection with the borrowing of money, (h) Liens arising
by reason of security for surety or appeal bonds in the ordinary
course of business of a Borrower, (i) Liens of or resulting from any
judgment or award that would not cause a Material Adverse Change and
as to which the time for the appeal or petition for rehearing of
which has not yet expired, or in respect of which a Borrower is in
good faith prosecuting an appeal or proceeding for a review, and in
respect of which a stay of execution pending such appeal or
proceeding for review has been secured, (j) Liens with respect to the
Real Property Collateral that are exceptions to the commitments for
title insurance issued in connection with the Mortgages, as accepted
by Foothill and (k) with respect to any Real Property that is not
part of the Real Property Collateral, easements, rights of way,
zoning and similar covenants and restrictions, and similar
encumbrances that customarily exist on properties of Persons engaged
in similar activities and similarly situated and that in any event do
not materially interfere with or impair the use or operation of the
Collateral by a Borrower or the value of Foothill's Lien thereon or
therein, or materially interfere with the ordinary conduct of the
business of a Borrower.
"Permitted Protest" means the right of a Borrower to
protest any Lien (other than any such Lien that secures the
Obligations), tax (other than payroll taxes), or rental payment,
provided that (a) a reserve with respect to such obligation is
established on the books of such Borrower in an amount that is
reasonably satisfactory to Foothill, (b) any such protest is
instituted and diligently prosecuted by such Borrower in good faith,
and (c) Foothill is satisfied that, while any such protest is
pending, there will be no impairment of the enforceability, validity,
or priority (except in a case where Foothill has established a
reserve in respect of such Lien) of any of the Liens of Foothill in
and to the Collateral.
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, general
partnerships, limited liability partnerships, joint ventures, trusts,
land trusts, business trusts, or other organizations, irrespective of
whether they are legal entities, and governments and agencies and
political subdivisions thereof.
"Personal Property Collateral" means all Collateral other
than the Real Property Collateral.
"Plan" means any employee benefit plan, program, or
arrangement maintained or contributed to by either Borrower or with
respect to which it may incur liability.
"PSI Designated Account" means account number 100144646 of
PSI maintained with PSI's Designated Account Bank, or such other
deposit account of PSI (located within the United States) which has
been designated, in writing and from time to time, by PSI to
Foothill.
"PSI Designated Account Bank" means Bank One whose office
is located at 00 Xxxxx Xxxx Xxxxxx, Xxxxx, Xxxx 00000, and whose ABA
number is 000000000. "Real Property" means, with respect to a
Borrower, any estates or interests in real property now owned or
hereafter acquired by such Borrower.
"Real Property Collateral" means any Real Property
hereafter acquired by a Borrower (other than Real Property in which
such Borrower has a leasehold interest).
"Reference Rate" means the variable rate of interest, per
annum, most recently announced by Norwest Bank Minnesota, National
Association, or any successor thereto, as its "base rate,"
irrespective of whether such announced rate is the best rate
available from such financial institution.
"Reportable Event" means any of the events described in
Section 4043(c) of ERISA or the regulations thereunder other than a
Reportable Event as to which the provision of 30 days notice to the
PBGC is waived under applicable regulations.
"Retiree Health Plan" means an "employee welfare benefit
plan" within the meaning of Section 3(1) of ERISA that provides
benefits to individuals after termination of their employment, other
than as required by Section 601 of ERISA.
"Solvent" means, with respect to any Person on a particular
date, that on such date (a) at fair valuations, all of the properties
and assets of such Person are greater than the sum of the debts,
including contingent liabilities, of such Person, (b) the present
fair salable value of the properties and assets of such Person is not
less than the amount that will be required to pay the probable
liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and
assets and pay its debts and other liabilities, contingent
obligations and other commitments as they mature in the normal course
of business, (d) such Person does not intend to, and does not believe
that it will, incur debts beyond such Person's ability to pay as such
debts mature, and (e) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction,
for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the
prevailing practices in the industry in which such Person is engaged.
In computing the amount of contingent liabilities at any time, it is
intended that such liabilities will be computed at the amount that,
in light of all the facts and circumstances existing at such time,
represents the amount that reasonably can be expected to become an
actual or matured liability.
"Subsidiary" of a Person means a corporation, partnership,
limited liability company, or other entity in which that Person
directly or indirectly owns or controls the shares of stock or other
ownership interests having ordinary voting power to elect a majority
of the board of directors (or appoint other comparable managers) of
such corporation, partnership, limited liability company, or other
entity.
"Termination Date" has the meaning set forth in Section
3.4.
"Voidable Transfer" has the meaning set forth in Section
15.8.
"Working Capital" means, as of any date of determination,
Consolidated Current Assets minus Consolidated Current Liabilities.
1.2. Accounting Terms.
All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. When used herein, the term
"financial statements" shall include the notes and schedules thereto.
Whenever the term "Borrower" is used in respect of a financial
covenant or a related definition, it shall be understood to mean
Borrowers on a consolidated basis unless the context clearly requires
otherwise.
1.3. Code.
Any terms used in this Agreement that are defined in the
Code shall be construed and defined as set forth in the Code unless
otherwise defined herein.
1.4. Construction.
Unless the context of this Agreement clearly requires
otherwise, references to the plural include the singular, references
to the singular include the plural, the term "including" is not
limiting, and the term "or" has, except where otherwise indicated,
the inclusive meaning represented by the phrase "and/or." The words
"hereof," "herein," "hereby," "hereunder," and similar terms in this
Agreement refer to this Agreement as a whole and not to any
particular provision of this Agreement. An Event of Default shall
"continue" or be "continuing" until such Event of Default has been
waived in writing by Foothill. Section, subsection, clause,
schedule, and exhibit references are to this Agreement unless
otherwise specified. Any reference in this Agreement or in the Loan
Documents to this Agreement or any of the Loan Documents shall
include all alterations, amendments, changes, extensions,
modifications, renewals, replacements, substitutions, and
supplements, thereto and thereof, as applicable.
1.5. Schedules and Exhibits.
All of the schedules and exhibits attached to this
Agreement shall be deemed incorporated herein by reference.
1.6. Amendment and Restatement.
This Agreement amends and restates in its entirety that
certain (i) Loan and Security Agreement dated as of May 30, 1997
between Multigraphics and Foothill and that certain First Amendment
to Loan and Security Agreement ("First Amendment") dated December 31,
1997 between Multigraphics and Foothill; provided, that the
obligation to repay the loans and other credit accommodations owing
under such Loan and Security Agreement and First Amendment and the
liens and the security interests securing payment thereof shall be
continuing, but shall now be governed by the terms of this Agreement
and the other Loan Documents, (ii) Security Agreement dated as of
December 18, 1997 between PSI and Foothill and (iii) Guaranty dated
as of December 18, 1997 executed by PSI in favor of Foothill;
provided, that the obligations owing under such Guaranty and the
liens and the security interests securing payment thereof shall be
continuing, but shall now be governed by the terms of this Agreement
and the other Loan Documents
2. LOAN AND TERMS OF PAYMENT.
2.1. Revolving Advances.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to make advances ("Advances") to each Borrower in an
amount outstanding not to exceed in the aggregate at any one time the
lesser of (i) the Maximum Revolving Amount less the outstanding
balance of all undrawn or unreimbursed Letters of Credit issued for
the account of such Borrower less the Other Borrower's Obligations,
or (ii) such Borrower's Borrowing Base less (A) the aggregate amount
of all undrawn or unreimbursed Letters of Credit (other than
Inventory Letters of Credit) issued for the account of such Borrower,
less (B) 50% of the aggregate amount of all undrawn or unreimbursed
Inventory Letters of Credit issued for the account of such Borrower
in connection with the purchase of finished goods or supplies less
(C) 70% of the aggregate amount of all undrawn or unreimbursed
Inventory Letters of Credit issued for the account of such Borrower
in connection with the purchase of parts less (D) 70% of the
aggregate amount of all undrawn or unreimbursed Inventory Letters of
Credit issued for the account of such Borrower in connection with the
purchase of demonstration units less (E) the aggregate amount of the
Inventory Reserves relating to such Borrower. For purposes of this
Agreement, "Borrowing Base", as of any date of determination, shall
mean, with respect to Multigraphics, the result of:
(x) the lesser of (i) the sum of (A) up to 85%
of Eligible Trade Accounts of Multigraphics, less the
amount, if any, of the Dilution Reserve relating to
Multigraphics, plus (B) up to 50% of Eligible Service
Accounts of Multigraphics, and (ii) an amount equal to
Multigraphics' Collections with respect to Accounts
for the immediately preceding 90 day period, plus
(y) the least of (i) $5,000,000 less the
outstanding Advances to PSI against the value of
Eligible Inventory of PSI, (ii) the sum of (A) up to
50% of the value of Eligible Inventory of
Multigraphics consisting of finished goods and
supplies, (B) up to 30% of the value of Eligible
Inventory of Multigraphics consisting of parts and (C)
the lesser of (I) up to 30% of the value of Eligible
Inventory of Multigraphics consisting of demonstration
units and (II) $500,000 less 30% of the aggregate
amount of all undrawn or unreimbursed Inventory
Letters of Credit issued for the account of
Multigraphics in connection with the purchase of
demonstration units less the outstanding Advances to
PSI against the value of Eligible Inventory of PSI
consisting of demonstration units, and (iii) 175% of
the amount of credit availability created by clause
(x) above, minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Section 2.1(b) with
respect to Multigraphics.
For purposes of this Agreement, "Borrowing Base", as
of any date of determination, shall mean, with respect to PSI, the
result of:
(x) the lesser of (i) the sum of (A) up to 85%
of Eligible Trade Accounts of PSI, less the amount, if
any, of the Dilution Reserve relating to PSI, plus (B)
up to 50% of Eligible Service Accounts of PSI, and
(ii) an amount equal to PSI's Collections with respect
to Accounts for the immediately preceding 90 day
period, plus
(y) the least of (i) $5,000,000 less the
outstanding Advances to Multigraphics against the
value of Eligible Inventory of Multigraphics, (ii) the
sum of (A) up to 31% of the value of Eligible
Inventory of PSI consisting of finished goods, parts
and supplies and (B) the lesser of (I) up to 16% of
the value of Eligible Inventory of PSI consisting of
demonstration units and (II) $500,000 less 16% of the
aggregate amount of all undrawn or unreimbursed
Inventory Letters of Credit issued for the account of
PSI in connection with the purchase of demonstration
units less the outstanding Advances to Multigraphics
against the value of Eligible Inventory of
Multigraphics consisting of demonstration units, and
(iii) 175% of the amount of credit availability
created by clause (x) above, minus
(z) the aggregate amount of reserves, if any,
established by Foothill under Section 2.1(b) with
respect to PSI.
(b) Anything to the contrary in Section 2.1(a) above
notwithstanding, Foothill, in its reasonable judgment, may create
reserves against either Borrower's Borrowing Base or reduce its
advance rates based upon Eligible Accounts or Eligible Inventory of
either Borrower without declaring an Event of Default (i) for amounts
owing by such Borrower to landlords, warehouseman, processors and
similar Persons that could assert a statutory or common law Lien in
any of the Collateral that is senior to Foothill's Lien on such
Collateral, (ii) for any amount subject to a Permitted Protest, (iii)
for such matters as are determined by Lender in its reasonable credit
judgment in accordance with its standard credit policies or (iv) if
it determines that there has occurred a Material Adverse Change.
Without limiting Lender's ability to create reserves after the
Closing Date pursuant to this Section 2.1(b), as of the Closing Date,
Lender has established reserves for potential warranty claims,
Inventory shrinkage, Inventory obsolescence and average Inventory
variance.
(c) Foothill shall have no obligation to make Advances
hereunder to the extent they would cause the outstanding Obligations
to exceed the Maximum Revolving Amount.
(d) Amounts borrowed pursuant to this Section 2.1 may be
repaid and, subject to the terms and conditions of this Agreement,
reborrowed at any time during the term of this Agreement.
2.2. Letters of Credit.
(a) Subject to the terms and conditions of this Agreement,
Foothill agrees to issue letters of credit for the account of a
Borrower (each, an "L/C") or to issue guarantees of payment (each
such guaranty, an "L/C Guaranty") with respect to letters of credit
issued by an issuing bank for the account of a Borrower. Foothill
shall have no obligation to issue a Letter of Credit for the account
of a Borrower if any of the following would result:
(i) the sum of 50% of the aggregate amount of
all undrawn and unreimbursed Inventory Letters of
Credit issued for the account of such Borrower in
connection with the purchase of finished goods or
supplies plus 70% of the aggregate amount of all
undrawn and unreimbursed Inventory Letters of Credit
issued for the account or such Borrower in connection
with the purchase of parts or demonstration units,
plus 100% of the aggregate amount of all other types
of undrawn and unreimbursed Letters of Credit issued
for the account of such Borrower, would exceed such
Borrower's Borrowing Base less the amount of
outstanding Advances to such Borrower less the
aggregate amount of Inventory Reserves relating to
such Borrower; or
(ii) the aggregate amount of all undrawn or
unreimbursed Letters of Credit (including Inventory
Letters of Credit) would exceed the lower of: (x) the
Maximum Revolving Amount less the aggregate amount of
outstanding Advances; or (y) $5,000,000; or
(iii) the outstanding Obligations would exceed the
Maximum Revolving Amount; or
(iv) 30% of the aggregate amount of all undrawn
or unreimbursed Inventory Letters of Credit issued for
the account of such Borrower in connection with the
purchase of demonstration units would exceed $500,000
less the aggregate amount of Advances to such Borrower
then outstanding against the value of Eligible
Inventory consisting of demonstration units less the
aggregate amount of Advances to the other Borrower
then outstanding against the value of Eligible
Inventory of such Borrower consisting of demonstration
units.
Each Borrower expressly understands and agrees that Foothill shall
have no obligation to arrange for the issuance by issuing banks of
the letters of credit that are to be the subject of L/C Guarantees.
Each Letter of Credit shall have an expiry date no later than 30 days
prior to the date on which this Agreement is scheduled to terminate
under Section 3.4 (without regard to any potential renewal term) and
all such Letters of Credit shall be in form and substance acceptable
to Foothill in its sole discretion. If Foothill is obligated to
advance funds under a Letter of Credit, the applicable Borrower
immediately shall reimburse such amount to Foothill and, in the
absence of such reimbursement, the amount so advanced immediately and
automatically shall be deemed to be an Advance hereunder and,
thereafter, shall bear interest at the rate then applicable to
Advances under Section 2.6.
(b) Each Borrower hereby agrees to indemnify, save,
defend, and hold Foothill harmless from any loss, cost, expense, or
liability, including payments made by Foothill, expenses, and
reasonable attorneys fees incurred by Foothill arising out of or in
connection with any Letter of Credit issued for the account of such
Borrower. Each Borrower agrees to be bound by the issuing bank's
regulations and interpretations of any Letters of Credit guarantied
by Foothill and opened to or for a Borrower's account or by
Foothill's interpretations of any L/C issued by Foothill to or for a
Borrower's account, even though this reasonable interpretation may be
different from such Borrower's own, and each Borrower understands and
agrees that Foothill shall not be liable for any error, negligence,
or mistake, whether of omission or commission, in following either
Borrower's instructions or those contained in the Letter of Credit or
any modifications, amendments, or supplements thereto. Each Borrower
understands that the L/C Guarantees may require Foothill to indemnify
the issuing bank for certain costs or liabilities arising out of
claims by such Borrower against such issuing bank. Each Borrower
hereby agrees to indemnify, save, defend, and hold Foothill harmless
with respect to any loss, cost, expense (including reasonable
attorneys fees), or liability incurred by Foothill under any L/C
Guaranty issued for the account of such Borrower as a result of
Foothill's indemnification of any such issuing bank, other than any
such loss, cost, expense or liability incurred because of Foothill's
gross negligence or willful misconduct.
(c) Each Borrower hereby authorizes and directs any bank
that issues a letter of credit guaranteed by Foothill to deliver to
Foothill all instruments, documents, and other writings and property
received by the issuing bank pursuant to such letter of credit, and
to accept and rely upon Foothill's instructions and agreements with
respect to all matters arising in connection with such letter of
credit and the related application. Such Borrower may or may not be
the "applicant" or "account party" with respect to such letter of
credit.
(d) Any and all charges, commissions, fees, and costs
incurred by Foothill relating to the letters of credit guaranteed by
Foothill shall be considered Foothill Expenses for purposes of this
Agreement and immediately shall be reimbursable by the applicable
Borrower to Foothill.
(e) Immediately upon the termination of this Agreement,
each Borrower agrees to either (i) provide cash collateral to be held
by Foothill in an amount equal to 102% of the maximum amount of
Foothill's obligations under Letters of Credit issued for the account
of such Borrower, (ii) cause to be delivered to Foothill releases of
all of Foothill's obligations under outstanding Letters of Credit
issued for the account of Borrower or (iii) cause to be delivered to
Foothill one or more back-to-back letters of credit, in form and
substance, and issued by an issuer, reasonably acceptable to
Foothill, in an aggregate amount equal to 102% of the maximum amount
of Foothill's obligations under outstanding Letters of Credit issued
for the account of Borrower. At Foothill's discretion, any proceeds
of Collateral of a Borrower received by Foothill after the occurrence
and during the continuation of an Event of Default may be held as the
cash collateral required by this Section 2.2(e).
(f) If by reason of (i) any change in any applicable law,
treaty, rule, or regulation or any change in the interpretation or
application by any governmental authority of any such applicable law,
treaty, rule, or regulation, or (ii) compliance by the issuing bank
or Foothill with any direction, request, or requirement (irrespective
of whether having the force of law) of any governmental authority or
monetary authority including, without limitation, Regulation D of the
Board of Governors of the Federal Reserve System as from time to time
in effect (and any successor thereto):
(A) any reserve, deposit, or similar
requirement is or shall be imposed or modified in
respect of any Letters of Credit issued
hereunder, or
(B) there shall be imposed on the issuing
bank or Foothill any other condition regarding
any letter of credit, or Letter of Credit, as
applicable, issued pursuant hereto;
and the result of the foregoing is to increase, directly or
indirectly, the cost to the issuing bank or Foothill of issuing,
making, guaranteeing, or maintaining any letter of credit, or Letter
of Credit, as applicable, or to reduce the amount receivable in
respect thereof by such issuing bank or Foothill, then, and in any
such case, Foothill may, at any time within a reasonable period after
the additional cost is incurred or the amount received is reduced,
notify the applicable Borrower, and such Borrower shall pay on demand
such amounts as the issuing bank or Foothill may specify to be
necessary to compensate the issuing bank or Foothill for such
additional cost or reduced receipt, together with interest on such
amount from the date of such demand until payment in full thereof at
the rate set forth in Section 2.6(a)(i) or (c)(i), as applicable.
The determination by the issuing bank or Foothill, as the case may
be, of any amount due pursuant to this Section 2.2(f), as set forth
in a certificate setting forth the calculation thereof in reasonable
detail, shall, in the absence of manifest or demonstrable error, be
final and conclusive and binding on all of the parties hereto.
2.3. Intentionally Omitted.
2.4. Intentionally Omitted.
2.5. Overadvances.
If, at any time or for any reason, the amount of
Obligations owed by either Borrower to Foothill pursuant to Sections
2.1 or 2.2 is greater than either the applicable Dollar or percentage
limitations set forth in Sections 2.1 or 2.2 (an "Overadvance"), such
Borrower immediately shall pay to Foothill, in cash, the amount of
such excess to be used by Foothill first, to repay Advances for such
Borrower outstanding under Section 2.1 and, thereafter, to be held by
Foothill as cash collateral to secure such Borrower's obligation to
repay Foothill for all amounts paid pursuant to Letters of Credit
issued for the account of such Borrower.
2.6. Interest and Letter of Credit Fees: Rates, Payments, and
Calculations.
(a) Interest Rate. Except as provided in clause (b)
below, all Obligations (except for undrawn Letters of Credit) shall
bear interest commencing on the Closing Date at a per annum rate of
1.00 percentage point above the Reference Rate, which rate shall be
prospectively reduced by one-half percentage point one day after
receipt by Lender of Borrowers' unqualified annual audited financial
statements for the 1998 fiscal year delivered pursuant to Section
6.3(b) and one-half percentage point one day after receipt by Lender
of Borrowers' unqualified annual audited financial statements for the
1999 fiscal year delivered pursuant to Section 6.3(b), respectively,
if Borrowers on a consolidated basis, (i) have net income for such
fiscal year, determined in accordance with GAAP, of at least $1 and
(ii) have met or exceeded the projected levels for each of gross
margin dollars; net income; operating income; stockholders equity;
and working capital (defined as current assets less current
liabilities), set forth in Borrowers' business plan for, or as of the
last day of, such fiscal year, as applicable, a copy of which
business plan is attached hereto as Schedule 2.6. If the interest
rate is so reduced with respect to Borrowers' financial performance
for the 1998 fiscal year and Borrowers fail to satisfy either of the
foregoing criteria for the 1999 fiscal year, the interest rate shall
be prospectively increased by one-half percentage point one day after
receipt of Borrowers' financial statements for its 1999 fiscal year.
Except as provided in Section 2.6(c) below, in no event shall the
applicable interest rate be less than the Reference Rate or greater
than 1.00 percentage point above the Reference Rate.
(b) Letter of Credit Fee. Each Borrower shall pay
Foothill a fee (in addition to the charges, commissions, fees, and
costs set forth in Section 2.2(d)) equal to 1.50% per annum times the
aggregate undrawn amount of all outstanding Letters of Credit issued
for the account of such Borrower.
(c) Default Rate. Upon the occurrence and during the
continuation of an Event of Default, and commencing immediately
following notice thereof by Foothill to Borrowers, (i) all
Obligations (except for undrawn Letters of Credit) shall
prospectively bear interest at a per annum rate equal to 4.00
percentage points above the otherwise applicable interest rate
provided in Section 2.6(a), and (ii) the Letter of Credit fee
provided in Section 2.6(b) shall be prospectively increased to 3.50%
per annum times the amount of the undrawn Letters of Credit.
(d) Minimum Interest. In no event shall the rate of
interest chargeable hereunder for any day be less than 7.00% per
annum. To the extent that interest accrued hereunder at the rate set
forth herein would be less than the foregoing minimum daily rate, the
interest rate chargeable hereunder for such day automatically shall
be deemed increased to the minimum rate.
(e) Payments. Interest and Letter of Credit fees payable
hereunder shall be due and payable, in arrears, on the first day of
each month during the term hereof. Each Borrower hereby authorizes
Foothill, at its option, without prior notice to either Borrower, to
charge such interest and Letter of Credit fees, all Foothill Expenses
(as and when incurred), for which such Borrower is obligated, the
charges, commissions, fees, and costs provided for in Section 2.2(d)
(as and when accrued or incurred) for which such Borrower is
obligated, the fees and charges provided for in Section 2.11 (as and
when accrued or incurred) for which such Borrower is obligated, and
all installments or other payments due under any Loan Document for
which such Borrower is obligated, to either Borrower's Loan Account,
which amounts thereafter shall accrue interest at the rate then
applicable to Advances hereunder. Any interest not paid when due
shall be compounded and shall thereafter accrue interest at the rate
then applicable to Advances hereunder.
(f) Computation. The Reference Rate as of the date of
this Agreement is 8.50% per annum. In the event the Reference Rate
is changed from time to time hereafter, the applicable rate of
interest hereunder automatically and immediately shall be increased
or decreased by an amount equal to such change in the Reference Rate.
All interest and fees chargeable under the Loan Documents shall be
computed on the basis of a 360 day year for the actual number of days
elapsed.
(g) Intent to Limit Charges to Maximum Lawful Rate. In no
event shall the interest rate or rates payable under this Agreement,
plus any other amounts paid in connection herewith, exceed the
highest rate permissible under any law that a court of competent
jurisdiction shall, in a final determination, deem applicable. Each
Borrower and Foothill, in executing and delivering this Agreement,
intend legally to agree upon the rate or rates of interest and manner
of payment stated within it; provided, however, that, anything
contained herein to the contrary notwithstanding, if said rate or
rates of interest or manner of payment exceeds the maximum allowable
under applicable law, then, ipso facto as of the date of this
Agreement, each Borrower is and shall be liable only for the payment
of such maximum as allowed by law, and payment received from such
Borrower in excess of such legal maximum, whenever received, shall be
applied to reduce the principal balance of the Obligations owing by
such Borrower to the extent of such excess.
2.7. Collection of Accounts.
(a) Multigraphics shall at all times maintain lockboxes
(the "Lockboxes") and, immediately after the Closing Date, shall
instruct all Account Debtors with respect to the Accounts, General
Intangibles, and Negotiable Collateral of Multigraphics to remit all
Collections in respect thereof to such Lockboxes. Multigraphics,
Foothill, and the Lockbox Banks shall enter into the Lockbox
Agreements, which among other things shall provide for the opening of
a Lockbox Account for the deposit of Collections at a Lockbox Bank.
Multigraphics agrees that all Collections and other amounts received
by Multigraphics from any Account Debtor or any other source
immediately upon receipt shall be deposited into a Lockbox Account.
No Lockbox Agreement or arrangement contemplated thereby shall be
modified by Multigraphics without the prior written consent of
Foothill. Upon the terms and subject to the conditions set forth in
the Lockbox Agreements, all amounts received in each Lockbox Account
shall be transferred by federal funds transfer or ACH transfer each
Business Day into an account (the "Foothill Account") maintained by
Foothill at a depository selected by Foothill.
(b) PSI shall at all times maintain depository accounts
(the "Depository Accounts") and, immediately after the Closing Date,
shall deposit all Collections in respect of the Accounts, General
Intangibles and Negotiable Collateral of PSI to such Depository
Accounts by 2:00 p.m. Eastern Standard Time on the Business Day
immediately following the day such collections are received by PSI.
PSI, Foothill, and the Depository Banks shall enter into the
Depository Agreements, which among other things shall provide for the
opening of a Depository Account for the deposit of Collections at a
Depository Bank. No Depository Agreement or arrangement contemplated
thereby shall be modified by PSI without the prior written consent of
Foothill. Upon the terms and subject to the conditions set forth in
the Depository Agreements, all amounts received in each Depository
Account shall be transferred by federal funds transfer or ACH
transfer each Business Day into an account (the "PSI Account")
maintained by PSI at a depository selected by PSI and shall be
available to PSI at PSI's instruction; provided, that if (a) an Event
of Default has occurred and is continuing or (b) Foothill reasonably
deems itself insecure, Foothill shall have the right, in its
discretion, to direct each Depository Bank to wire all amounts
received in the applicable Depository Account each Business Day into
the Foothill Account.
2.8. Crediting Payments; Application of Collections.
The receipt of any Collections by Foothill (whether from
transfers to Foothill by the Lockbox Banks and Depository Banks
pursuant to the Lockbox Agreements, Depository Agreements or
otherwise) immediately shall be applied provisionally to reduce the
Obligations outstanding under Section 2.1, but shall not be
considered a payment on account unless such Collection item is a wire
transfer of immediately available federal funds and is made to the
Foothill Account or unless and until such Collection item is honored
when presented for payment. From and after the Closing Date,
Foothill shall be entitled to charge each Borrower for 1 Business Day
of `clearance' or `float' at the rate set forth in Section 2.6(a)(i)
or Section 2.6(c)(i), as applicable, on all Collections (regardless
of whether forwarded by the Lockbox Banks to Foothill, whether
provisionally applied to reduce the Obligations under Section 2.1, or
otherwise). This across-the-board 1 Business Day clearance or float
charge on all Collections is acknowledged by the parties to
constitute an integral aspect of the pricing of Foothill's financing
of Borrowers, and shall apply irrespective of the characterization of
whether receipts are owned by a Borrower or Foothill, and whether or
not there are any outstanding Advances, the effect of such clearance
or float charge being the equivalent of charging 1 Business Day of
interest on such Collections. Should any Collection item not be
honored when presented for payment, then the applicable Borrower
shall be deemed not to have made such payment, and interest shall be
recalculated accordingly. Anything to the contrary contained herein
notwithstanding, any Collection item shall be deemed received by
Foothill only if it is received into the Foothill Account on a
Business Day on or before 11:00 a.m. California time. If any
Collection item is received into the Foothill Account on a non-
Business Day or after 11:00 a.m. California time on a Business Day,
it shall be deemed to have been received by Foothill as of the
opening of business on the immediately following Business Day.
2.9. Designated Account.
Foothill is authorized to make the Advances and the Letters
of Credit under this Agreement based upon telephonic or other
instructions received from anyone purporting to be an Authorized
Person, or without instructions if pursuant to Section 2.6(e).
Multigraphics agrees to establish and maintain the Multigraphics
Designated Account with the Multigraphics Designated Account Bank and
PSI agrees to establish and maintain the PSI Designated Account with
the PSI Designated Account Bank, each for the purpose of receiving
the proceeds of the Advances requested by such Borrower and made by
Foothill hereunder. Unless otherwise agreed by Foothill and
Borrowers, any Advance requested by Multigraphics and made by
Foothill hereunder shall be made to the Multigraphics Designated
Account, and any Advance requested by PSI and made by Foothill
hereunder shall be made to the PSI Designated Account.
2.10. Maintenance of Loan Account; Statements of Obligations.
Foothill shall maintain an account on its books in the name
of each Borrower (each, a "Loan Account") on which such Borrower will
be charged with all Advances made by Foothill to such Borrower or for
such Borrower's account, including without limitation, accrued
interest, Foothill Expenses, and any other payment Obligations of
such Borrower. In accordance with Section 2.8, the Loan Account of a
Borrower will be credited with all payments received by Foothill from
such Borrower or for such Borrower's account, including all amounts
received in the Foothill Account from any Lockbox Bank or Depository
Bank, as applicable. Foothill shall render statements regarding each
Borrower's Loan Account to such Borrower, including principal,
interest, fees, and including an itemization of all charges and
expenses constituting Foothill Expenses owing by such Borrower, and
such statements shall be conclusively presumed to be correct and
accurate and constitute an account stated between such Borrower and
Foothill unless, within 30 days after receipt thereof by such
Borrower, such Borrower shall deliver to Foothill written objection
thereto describing the error or errors contained in any such
statements.
2.11. Fees.
On or about May 30, 1997, Multigraphics paid to Foothill a
closing fee of $75,000. In addition, Borrowers shall jointly and
severally pay to Foothill the following fees:
(a) Intentionally Omitted;
(b) Unused Line Fee. On the first day of each month
during the term of this Agreement, commencing on the Closing Date, an
unused line fee in an amount equal to 0.25% per annum times the
Average Unused Portion of the Maximum Revolving Amount;
(c) Intentionally Omitted;
(d) Financial Examination, Documentation, and Appraisal
Fees. Foothill's customary fee of $650 per day per examiner, plus
out-of-pocket expenses for each financial analysis and examination
(i.e., audits) of each Borrower performed by personnel employed by
Foothill, payable as incurred; Foothill's customary appraisal fee of
$1,500 per day per appraiser, plus out-of-pocket expenses for each
appraisal of the Collateral performed by personnel employed by
Foothill, payable as incurred; the actual charges paid or incurred by
Foothill if it elects to employ the services of one or more third
Persons to perform such financial analyses and examinations (i.e.,
audits) of each Borrower, to appraise the Collateral or to verify
Accounts or other Collateral, payable as incurred; and, on each
anniversary of May 30, 1997 prior to the Termination Date, Foothill's
customary fee of $1,000 per year for its loan documentation review;
and
(e) Servicing Fee. On the first day of each month (for
the prior month) during the term of this Agreement, and thereafter so
long as any Obligations are outstanding, a servicing fee in an amount
equal to $1,500.
3. CONDITIONS; TERM OF AGREEMENT.
3.1. Conditions Precedent to the Initial Advance and Letter of
Credit.
The obligation of Foothill to make the initial Advance or
to issue the initial Letter of Credit on or after the Closing Date is
subject to the fulfillment, to the satisfaction of Foothill and its
counsel, of each of the following conditions:
(a) Foothill shall have received evidence satisfactory to
Foothill of the filing of all financing statements and fixture
filings required by Foothill to be filed;
(b) Foothill shall have received each of the following
documents, duly executed, and each such document shall be in full
force and effect:
(i) UCC termination statements and other
documentation evidencing the termination of all
existing Liens in and to the properties and assets of
each Borrower other than Permitted Liens;
(ii) a side agreement relating to the Trademark
and License Mortgage dated May 30, 1997, in form and
substance satisfactory to Foothill, executed by
Multigraphics; and
(iii) a solvency certificate, in form and
substance satisfactory to Foothill, executed by PSI's
chief financial officer;
(c) Foothill shall have received a certificate from the
Secretary of each Borrower attesting to the resolutions of such
Borrower's Board of Directors authorizing its execution, delivery,
and performance of this Agreement and the other Loan Documents
executed contemporaneously with this Agreement and to which such
Borrower is a party and authorizing specific officers of such
Borrower to execute the same;
(d) Foothill shall have received copies of each Borrower's
Governing Documents, as amended, modified, or supplemented to the
Closing Date, certified by the Secretary of such Borrower;
(e) Foothill shall have received a certificate of status
with respect to each Borrower, dated within 10 days of the Closing
Date, such certificate to be issued by the appropriate officer of the
jurisdiction of organization of such Borrower, which certificate
shall indicate that such Borrower is in good standing in such
jurisdiction;
(f) Foothill shall have received certificates of status
with respect to each Borrower, each dated within 15 days of the
Closing Date, such certificates to be issued by the appropriate
officer of the jurisdictions in which its failure to be duly
qualified or licensed would constitute a Material Adverse Change,
which certificates shall indicate that each Borrower is in good
standing in such jurisdictions;
(g) Foothill shall have received a Collateral Access
Agreement from the lessor of PSI's Akron, Ohio facility;
(h) Foothill shall have received an opinion of Borrowers'
counsel in form and substance satisfactory to Foothill in its sole
discretion;
(i) no material adverse change shall have occurred with
respect to the financial condition, business, operations,
performance, properties or assets of either Borrower or the value of
the Collateral after the date hereto; and
(j) no Event of Default shall be in existence.
3.2. Conditions Precedent to all Advances and all Letters of
Credit.
The following shall be conditions precedent to all Advances
and all Letters of Credit hereunder:
(a) the representations and warranties contained in this
Agreement and the other Loan Documents shall be true and correct in
all material respects on and as of the date of such extension of
credit, as though made on and as of such date (except to the extent
that such representations and warranties relate solely to an earlier
date);
(b) no Default or Event of Default shall have occurred and
be continuing on the date of such extension of credit, nor shall
either result from the making thereof; and
(c) no injunction, writ, restraining order, or other order
of any nature prohibiting, directly or indirectly, the extending of
such credit shall have been issued and remain in force by any
governmental authority against either Borrower, Foothill, or any of
their Affiliates.
3.3. Intentionally Omitted.
3.4. Term.
This Agreement shall become effective upon the execution
and delivery hereof by each Borrower and Foothill and shall continue
in full force and effect for a term ending on May 30, 2000 (the
"Termination Date"), unless sooner terminated pursuant to the terms
hereof. The foregoing notwithstanding, Foothill shall have the right
to terminate its obligations under this Agreement immediately and
without notice upon the occurrence and during the continuation of an
Event of Default.
3.5. Effect of Termination.
On the date of termination of this Agreement, all
Obligations (including contingent reimbursement obligations of each
Borrower with respect to any outstanding Letters of Credit)
immediately shall become due and payable without notice or demand;
provided, that any such contingent reimbursement obligations with
respect to Letters of Credit shall be satisfied in the manner set
forth in Section 2.2(e). No termination of this Agreement, however,
shall relieve or discharge either Borrower of such Borrower's duties,
Obligations, or covenants hereunder, and Foothill's continuing Liens
in the Collateral shall remain in effect until all Obligations have
been fully and finally discharged and Foothill's obligation to
provide additional credit hereunder is terminated.
3.6. Early Termination by Borrower.
The provisions of Section 3.4 that allow termination of
this Agreement by Borrowers only on the Termination Date and certain
anniversaries thereof notwithstanding, Borrowers have the option, at
any time upon 30 days prior written notice to Foothill, to terminate
this Agreement by paying to Foothill, in cash, the Obligations, in
full (provided, that any contingent reimbursement obligations of
either Borrower with respect to outstanding Letters of Credit shall
be satisfied in the manner set forth in Section 2.2(e)), together
with a premium (the "Early Termination Premium") equal to (a) 3% of
the Maximum Revolving Amount if such termination occurs on or before
May 30, 1998, (b) 2% of the Maximum Revolving Amount if such
termination occurs after May 30, 1998 but on or before May 30, 1999
and (c) 1% of the Maximum Revolving Amount if such termination occurs
after May 30, 1999 but before May 30, 2000; provided, that if
Borrowers terminate this Agreement due to Foothill's refusal to
consent to a proposed acquisition that would violate Section 7.13(a)
or (c) below, the applicable Termination Prepayment shall be reduced
by one-half of the Early Termination Premium otherwise payable
hereunder.
3.7. Termination Upon Event of Default.
If Foothill terminates this Agreement upon the occurrence
of an Event of Default caused by a breach of this Agreement that
either Borrower has intentionally committed or intentionally
permitted to occur, in view of the impracticability and extreme
difficulty of ascertaining actual damages and by mutual agreement of
the parties as to a reasonable calculation of Foothill's lost profits
as a result thereof, Borrowers shall jointly and severally pay to
Foothill upon the effective date of such termination, a premium in an
amount equal to the Early Termination Premium. The Early Termination
Premium shall be presumed to be the amount of damages sustained by
Foothill as the result of such an early termination and each Borrower
agrees that it is reasonable under the circumstances currently
existing. The Early Termination Premium provided for in this Section
3.7 shall be deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1. Grant of Security Interest.
Each Borrower hereby grants to Foothill a continuing
security interest in all currently existing and hereafter acquired or
arising Personal Property Collateral of such Borrower in order to
secure prompt repayment of any and all Obligations and in order to
secure prompt performance by each Borrower of each of its covenants
and duties under the Loan Documents. Foothill's security interests
in the Personal Property Collateral shall attach to all Personal
Property Collateral without further act on the part of Foothill or
either Borrower. Anything contained in this Agreement or any other
Loan Document to the contrary notwithstanding, except for the sale of
Inventory to buyers in the ordinary course of business and other
sales of Personal Property Collateral permitted under Section 7.4,
neither Borrower has any authority, express or implied, to dispose of
any item or portion of the Personal Property Collateral or the Real
Property Collateral.
4.2. Negotiable Collateral.
In the event that any Collateral, including proceeds, is
evidenced by or consists of Negotiable Collateral, the applicable
Borrower, immediately upon the request of Foothill, shall endorse and
deliver physical possession of such Negotiable Collateral to
Foothill.
4.3. Collection of Accounts, General Intangibles, and Negotiable
Collateral.
At any time after the occurrence and during the continuance
of an Event of Default, Foothill or Foothill's designee may (a)
notify customers or Account Debtors of a Borrower that the Accounts,
General Intangibles, or Negotiable Collateral have been assigned to
Foothill or that Foothill has a security interest therein, and (b)
collect the Accounts, General Intangibles, and Negotiable Collateral
directly and charge the collection costs and expenses to the Loan
Account. Each Borrower agrees that at any time that Foothill (i) has
notified customers or Account Debtors under clause (a) above, (ii) is
directly collecting Accounts, General Intangibles and Negotiable
Collateral under clause (b) above or (iii) has directed any Lockbox
Bank or Depository Bank to wire funds into the Foothill Account
pursuant to Section 2.7, it will hold in trust for Foothill, as
Foothill's trustee, any Collections that it receives and immediately
will deliver said Collections to Foothill in their original form as
received by such Borrower.
4.4. Delivery of Additional Documentation Required.
At any time upon the request of Foothill, each Borrower
shall execute and deliver to Foothill all financing statements,
continuation financing statements, fixture filings, security
agreements, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other documents
that Foothill reasonably may request, in form satisfactory to
Foothill, to perfect and continue perfected Foothill's security
interests in the Collateral, and in order to fully consummate all of
the transactions contemplated hereby and under the other the Loan
Documents.
4.5. Power of Attorney.
Each Borrower hereby irrevocably makes, constitutes, and
appoints Foothill (and any of Foothill's officers, employees, or
agents designated by Foothill) as such Borrower's true and lawful
attorney, with power to (a) if such Borrower refuses to, or fails
timely to execute and deliver any of the documents described in
Section 4.4, sign the name of such Borrower on any of the documents
described in Section 4.4, (b) at any time that an Event of Default
has occurred and is continuing or Foothill deems itself insecure,
sign such Borrower's name on any invoice or xxxx of lading relating
to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to
Account Debtors, (c) send requests for verification of Accounts, (d)
endorse such Borrower's name on any Collection item that may come
into Foothill's possession, (e) at any time that an Event of Default
has occurred and is continuing or Foothill deems itself insecure,
notify the post office authorities to change the address for delivery
of such Borrower's mail to an address designated by Foothill, to
receive and open all mail addressed to such Borrower, and to retain
all mail relating to the Collateral and forward all other mail to
such Borrower, (f) at any time that an Event of Default has occurred
and is continuing or Foothill deems itself insecure, make, settle,
and adjust all claims under such Borrower's policies of insurance and
make all determinations and decisions with respect to such policies
of insurance, and (g) at any time that an Event of Default has
occurred and is continuing or Foothill deems itself insecure, settle
and adjust disputes and claims respecting the Accounts directly with
Account Debtors, for amounts and upon terms that Foothill determines
to be reasonable, and Foothill may cause to be executed and delivered
any documents and releases that Foothill determines to be necessary.
The appointment of Foothill as each Borrower's attorney, and each and
every one of Foothill's rights and powers, being coupled with an
interest, is irrevocable until all of the Obligations have been fully
and finally repaid and performed and Foothill's obligation to extend
credit hereunder is terminated.
4.6. Right to Inspect.
Foothill (through any of its officers, employees, or
agents) shall have the right, from time to time hereafter to inspect
each Borrower's Books and to check, test, and appraise the Collateral
in order to verify each Borrower's financial condition or the amount,
quality, value, condition of, or any other matter relating to, the
Collateral; provided, that unless an Event of Default has occurred
and is continuing, (a) all of such inspections shall take place
during normal business hours and (b) Foothill will conduct such
inspections no more than once per calendar quarter.
5. REPRESENTATIONS AND WARRANTIES.
In order to induce Foothill to enter into this Agreement,
each Borrower makes the following representations and warranties
which shall be true, correct, and complete in all material respects
as of the Closing Date and at and as of the date of the making of
each Advance or Letter of Credit, as though made on and as of the
date of such Advance or Letter of Credit (except to the extent that
such representations and warranties relate solely to an earlier date)
and such representations and warranties shall survive the execution
and delivery of this Agreement:
5.1. No Encumbrances.
Each Borrower has good and indefeasible title to the
Collateral, free and clear of Liens except for Permitted Liens.
5.2. Eligible Accounts.
The Eligible Accounts of each Borrower are bona fide
existing obligations created by the sale and delivery of Inventory or
the rendition of services to Account Debtors in the ordinary course
of such Borrower's business, unconditionally owed to such Borrower
without defenses, disputes, offsets, counterclaims, or rights of
return or cancellation. The property giving rise to such Eligible
Trade Account has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional
acceptance by the Account Debtor. Neither Borrower has received
notice of actual or imminent bankruptcy, insolvency, or material
impairment of the financial condition of any Account Debtor regarding
any Eligible Account.
5.3. Eligible Inventory.
All Eligible Inventory of each Borrower is of good and
merchantable quality, free from defects.
5.4. Equipment.
All of the Equipment of each Borrower is used or held for
use in such Borrower's business and is fit for such purposes.
5.5. Location of Inventory and Equipment.
The Inventory and Equipment are located only at the
locations identified on Schedule 6.12 or otherwise permitted by
Section 6.12.
5.6. Inventory Records.
Each Borrower keeps records that are correct and accurate
in all material respects, itemizing and describing the kind, type,
quality, and quantity of the Inventory, and such Borrower's cost
therefor.
5.7. Location of Chief Executive Office; FEIN.
The chief executive office of Multigraphics is located at
the address indicated in the preamble to this Agreement and
Multigraphics' FEIN is 00-0000000. The chief executive office of PSI
is located at the address indicated in the preamble to this Agreement
and PSI's FEIN is 00-0000000.
5.8. Due Organization and Qualification; Subsidiaries.
(a) Each Borrower is duly organized and existing and in
good standing under the laws of the jurisdiction of its incorporation
and qualified and licensed to do business in, and in good standing
in, any state where the failure to be so licensed or qualified
reasonably could be expected to have a Material Adverse Change.
(b) Set forth on Schedule 5.8 is a complete and accurate
list of each Borrower's direct and indirect Subsidiaries, showing the
jurisdiction of their incorporation.
(c) Except as set forth on Schedule 5.8, no capital stock
(or any securities, instruments, warrants, options, purchase rights,
conversion or exchange rights, calls, commitments or claims of any
character convertible into or exercisable for capital stock) of any
direct or indirect Subsidiary of either Borrower is subject to the
issuance of any security, instrument, warrant, option, purchase
right, conversion or exchange right, call, commitment or claim of any
right, title, or interest therein or thereto.
5.9. Due Authorization; No Conflict.
(a) The execution, delivery, and performance by each
Borrower of this Agreement and the Loan Documents to which it is a
party have been duly authorized by all necessary corporate action.
(b) The execution, delivery, and performance by each
Borrower of this Agreement and the Loan Documents to which it is a
party do not and will not (i) violate any provision of federal,
state, or local law or regulation (including Regulations G, T, U, and
X of the Federal Reserve Board) applicable to such Borrower, the
Governing Documents of such Borrower, or any order, judgment, or
decree of any court or other governmental authority binding on such
Borrower, (ii) conflict with, result in a breach of, or constitute
(with due notice or lapse of time or both) a default under any
material contractual obligation or material lease of such Borrower,
(iii) result in or require the creation or imposition of any Lien of
any nature whatsoever upon any properties or assets of such Borrower,
other than Permitted Liens, or (iv) require any approval of
stockholders or any approval or consent of any Person under any
material contractual obligation of such Borrower.
(c) Other than the filing of appropriate financing
statements, fixture filings, and mortgages, the execution, delivery,
and performance by each Borrower of this Agreement and the Loan
Documents to which such Borrower is a party do not and will not
require any registration with, consent, or approval of, or notice to,
or other action with or by, any federal, state, foreign, or other
governmental authority or other Person.
(d) This Agreement and the Loan Documents to which each
Borrower is a party, and all other documents contemplated hereby and
thereby, when executed and delivered by such Borrower will be the
legally valid and binding obligations of such Borrower, enforceable
against such Borrower in accordance with their respective terms,
except as enforcement may be limited by equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws
relating to or limiting creditors' rights generally.
(e) The Liens granted by each Borrower to Foothill in and
to its properties and assets pursuant to this Agreement and the other
Loan Documents are validly created, perfected, and first priority
Liens, subject only to Permitted Liens.
5.10. Litigation.
There are no actions or proceedings pending by or against
either Borrower before any court or administrative agency and neither
Borrower has knowledge or belief of any pending, threatened, or
imminent litigation, governmental investigations, or claims,
complaints, actions, or prosecutions involving either Borrower or any
guarantor of the Obligations, except for: (a) ongoing collection
matters in which either Borrower is the plaintiff; (b) matters
existing on the date hereof that would not reasonably be expected to
cause a Material Adverse Change; and (c) matters arising after the
date hereof that would not reasonably be expected to cause a Material
Adverse Change.
5.11. No Material Adverse Change.
All financial statements relating to each Borrower or any
guarantor of the Obligations (other than projections) that have been
delivered by such Borrower to Foothill have been prepared in
accordance with GAAP (except, in the case of unaudited financial
statements, for the lack of footnotes and being subject to quarterly
adjustments and year-end audit adjustments) and fairly present such
Borrower's (or such guarantor's, as applicable) financial condition
as of the date thereof and such Borrower's results of operations for
the period then ended. There has not been a Material Adverse Change
with respect to the Borrowers (or such guarantor, as applicable)
since the date of the latest financial statements submitted to
Foothill on or before the Closing Date.
5.12. Solvency.
Each Borrower is Solvent. No transfer of property is being
made by either Borrower and no obligation is being incurred by either
Borrower in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder,
delay, or defraud either present or future creditors of either
Borrower.
5.13. Employee Benefits.
Neither Borrower, any of its Subsidiaries, nor any of their
ERISA Affiliates maintains or contributes to any Benefit Plan, other
than those listed on Schedule 5.13. Each Borrower, each of its
Subsidiaries and each ERISA Affiliate have satisfied the minimum
funding standards of ERISA and the IRC with respect to each Benefit
Plan to which it is obligated to contribute. No ERISA Event has
occurred nor has any other event occurred that may result in an ERISA
Event that reasonably could be expected to result in a Material
Adverse Change. Neither Borrower or its Subsidiaries, any ERISA
Affiliate, nor any fiduciary of any Plan is subject to any direct or
indirect material liability with respect to any Plan as a result of
any noncompliance with any applicable law, treaty, rule, regulation,
or agreement. Neither Borrower or its Subsidiaries nor any ERISA
Affiliate is required to provide security to any Plan under Section
401(a)(29) of the IRC.
5.14. Environmental Condition.
Except as set forth in Schedule 5.14, (a) neither
Borrower's properties or assets has ever been used by such Borrower
or, to the best of each Borrower's knowledge, by previous owners or
operators in the disposal of, or to produce, store, handle, treat,
release, or transport, any Hazardous Materials; (b) neither
Borrower's properties or assets has ever been designated or
identified in any manner pursuant to any environmental protection
statute as a Hazardous Materials disposal site, or a candidate for
closure pursuant to any environmental protection statute; (c) no Lien
arising under any environmental protection statute has attached to
any revenues or to any real or personal property owned or operated by
either Borrower; and (d) neither Borrower has received a summons,
citation, notice, or directive from the Environmental Protection
Agency or any other federal or state governmental agency concerning
any action or omission by either Borrower resulting in the releasing
or disposing of Hazardous Materials into the environment, except for
any of the foregoing which would not reasonably be expected to cause
a Material Adverse Change.
5.15. Subsidiary Activities.
Neither Borrower's Subsidiaries has any material assets or
conducts any material business operations, except as set forth on
Schedule 5.15.
5.16. Patents and Trademarks.
The loss by either Borrower or any of its Subsidiaries of
all of its respective rights with respect to (a) all U.S. patents and
patent applications owned by such Borrower or such Subsidiary and (b)
all U.S. trademarks, trademark registrations, trademark applications,
trade names and tradestyles, service marks, service xxxx
registrations, service xxxx applications and brand names owned by
such Borrower or such Subsidiary, other than any of the foregoing
listed on Exhibit A to the trademark and license mortgage described
in Section 3.1(b)(iii), would not be reasonably expected to cause a
Material Adverse Change.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until full and final payment
of the Obligations, and unless Foothill shall otherwise consent in
writing, such Borrower shall do all of the following:
6.1. Accounting System.
Maintain a standard and modern system of accounting that
enables such Borrower to produce financial statements in accordance
with GAAP, and maintain records pertaining to the Collateral that
contain information as from time to time may be reasonably requested
by Foothill. Each Borrower also shall keep a modern inventory
reporting system that shows all additions, sales, claims, returns,
and allowances with respect to the Inventory.
6.2. Collateral Reporting.
Provide Foothill with the following documents at the
following times in form satisfactory to Foothill: (a) unless Foothill
otherwise requests, on a monthly basis, and, in any event, by no
later than the 16th day of each month during the term of this
Agreement, a sales journal, collection journal, and credit register
since the last such schedule and a calculation of the Borrowing Base
of such Borrower as of such date, (b) unless Foothill otherwise
requests, on a monthly basis and, in any event, by no later than the
16th day of each month during the term of this Agreement, (i) a
detailed calculation of the Borrowing Base of such Borrower, and (ii)
a detailed aging, by total, of the Accounts of such Borrower,
together with a reconciliation to the detailed calculation of the
Borrowing Base of such Borrower previously provided to Foothill,
including separate agings for Accounts arising from the provision of
services by such Borrower and for all other Accounts, (c) unless
Foothill otherwise requests, on a monthly basis and, in any event, by
no later than the 16th day of each month during the term of this
Agreement, a summary aging, by vendor, of such Borrower's accounts
payable and any book overdraft, (d) unless Foothill otherwise
requests, on a monthly basis, and, in any event, by no later than the
16th day of each month during the term of this Agreement, Inventory
reports specifying such Borrower's cost and the market value of its
Inventory by category, with additional detail showing additions to
and deletions from the Inventory, (e) unless Foothill otherwise
requests, on a monthly basis, and, in any event, by no later than the
16th day of each month during the term of this Agreement, notice of
all returns, disputes, or claims of such Borrower, (f) upon request,
copies of invoices in connection with the Accounts of such Borrower,
customer statements, credit memos, remittance advices and reports,
deposit slips, shipping and delivery documents in connection with the
Accounts of such Borrower and for Inventory and Equipment acquired by
such Borrower, purchase orders and invoices, (g) on a quarterly
basis, a detailed list of such Borrower's customers, (h) unless
Foothill otherwise requests, on a monthly basis, and, in any event,
by no later than the 16th day of each month during the term of this
Agreement, a calculation of the Dilution of such Borrower for the
prior month; and (i) such other reports as to the Collateral or the
financial condition of such Borrower as Foothill may reasonably
request from time to time. Original sales invoices evidencing daily
sales shall be mailed by each Borrower to each Account Debtor and,
after the occurrence and during the continuance of an Event of
Default, at Foothill's direction, the invoices shall indicate on
their face that the Account has been assigned to Foothill and that
all payments are to be made directly to Foothill. With respect to
any of the foregoing documents to be delivered no later than the 16th
day of a month, if in any month the 16th falls on a day that is not a
Business Day, than such documents shall be delivered no later than
the next Business Day after the 16th of such month.
6.3. Financial Statements, Reports, Certificates.
Deliver to Foothill: (a) as soon as available, but in any
event within 90 days after the end of the last month of each fiscal
year, within 45 days after the end of the last month of each of
fiscal quarter (other than the last quarter in any fiscal year) and
within 30 days after the end of each month during each fiscal year
(other than the last month of any fiscal quarter), a company prepared
balance sheet, income statement, and statement of cash flow covering
each Borrower's operations during such period; and (b) as soon as
available, but in any event within 90 days after the end of each
fiscal year, financial statements of each Borrower for each such
fiscal year, audited by independent certified public accountants
reasonably acceptable to Foothill and certified, without any
qualifications, by such accountants to have been prepared in
accordance with GAAP, together with a certificate of such accountants
addressed to Foothill stating that such accountants do not have
knowledge of the existence of any Default or Event of Default. Such
audited financial statements shall include a balance sheet, profit
and loss statement, and statement of cash flow and, if prepared, such
accountants' letter to management. If a Borrower is a parent company
of one or more Subsidiaries, or Affiliates, or is a Subsidiary or
Affiliate of another company, then, in addition to the financial
statements referred to above, such Borrower agrees to deliver
financial statements prepared on a consolidating basis so as to
present such Borrower and each such related entity separately, and on
a consolidated basis; provided however, that such consolidating
financial statements are not required to be audited by independent
certified public accountants.
Together with the above, each Borrower also shall deliver
to Foothill such Borrower's Form 10-Q Quarterly Reports, Form 10-K
Annual Reports, and Form 8-K Current Reports, and any other filings
made by such Borrower with the Securities and Exchange Commission, if
any, promptly following the filing thereof, or any other information
that is provided by such Borrower to its shareholders, and any other
report previously prepared by such Borrower and reasonably requested
by Foothill relating to the financial condition of such Borrower.
Each month, together with the financial statements provided
pursuant to Section 6.3(a), Multigraphics shall deliver to Foothill a
certificate signed by its chief financial officer to the effect that:
(i) all financial statements delivered or caused to be delivered to
Foothill hereunder have been prepared in accordance with GAAP
(except, in the case of unaudited financial statements, for the lack
of footnotes and being subject to quarterly adjustments and year-end
audit adjustments) and fairly present the financial condition of each
Borrower, (ii) the representations and warranties of each Borrower
contained in this Agreement and the other Loan Documents are true and
correct in all material respects on and as of the date of such
certificate, as though made on and as of such date (except to the
extent that such representations and warranties relate solely to an
earlier date), (iii) for each month that also contains the date on
which a financial covenant in Section 7.20 is to be tested, a
Compliance Certificate demonstrating in reasonable detail compliance
at the end of such period with the applicable financial covenants
contained in Section 7.20, and (iv) on the date of delivery of such
certificate to Foothill there does not exist any condition or event
that constitutes a Default or Event of Default (or, in the case of
clauses (i), (ii), or (iii), to the extent of any non-compliance,
describing such non-compliance as to which he or she may have
knowledge and what action the applicable Borrower has taken, is
taking, or proposes to take with respect thereto).
Multigraphics shall have issued written instructions to its
independent certified public accountants authorizing them to
communicate with Foothill and to release to Foothill whatever
financial information concerning such Borrower that Foothill may
request. Each Borrower hereby irrevocably authorizes and directs all
auditors or accountants, to deliver to Foothill, at such Borrower's
expense, copies of such Borrower's financial statements, papers
related thereto, and other accounting records of any nature in their
possession, and to disclose to Foothill any information they may have
regarding such Borrower's business affairs and financial conditions.
Foothill shall concurrently notify such Borrower of any such request
for information made to such Borrower's accountants.
6.4. Tax Returns.
Deliver to Foothill copies of such Borrower's future
federal income tax returns, and any amendments thereto, within 30
days of the filing thereof with the Internal Revenue Service.
6.5. Guarantor Reports.
Cause any guarantor of any of the Obligations to deliver
its annual financial statements at the time when Borrowers provide
their audited financial statements to Foothill and copies of all
federal income tax returns as soon as the same are available and in
any event no later than 30 days after the same are required to be
filed by law.
6.6. Returns.
Cause returns and allowances, if any, as between such
Borrower and its Account Debtors to be on the same basis and in
accordance with the usual customary practices of such Borrower, as
they exist at the time of the execution and delivery of this
Agreement. If, at a time when no Event of Default has occurred and
is continuing, any Account Debtor returns any Inventory to a
Borrower, such Borrower promptly shall determine the reason for such
return and, if such Borrower accepts such return, issue a credit
memorandum (with a copy to be sent to Foothill upon Foothill's
request) in the appropriate amount to such Account Debtor. If, at a
time when an Event of Default has occurred and is continuing, any
Account Debtor returns any Inventory to a Borrower, such Borrower
promptly shall determine the reason for such return and, if Foothill
consents (which consent shall not be unreasonably withheld), issue a
credit memorandum (with a copy to be sent to Foothill) in the
appropriate amount to such Account Debtor.
6.7. Intentionally Omitted.
6.8. Maintenance of Equipment.
Maintain the Equipment in good operating condition and
repair (ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. Other than
those items of Equipment that constitute fixtures on the Closing
Date, each Borrower shall use its best efforts not to permit any item
of Equipment to become a fixture to real estate or an accession to
other property.
6.9. Taxes.
Cause all assessments and taxes, whether real, personal, or
otherwise, due or payable by, or imposed, levied, or assessed against
such Borrower or any of its property to be paid in full, before
delinquency or before the expiration of any extension period, except
to the extent that the validity of such assessment or tax shall be
the subject of a Permitted Protest. Each Borrower shall make due and
timely payment or deposit of all such federal, state, and local
taxes, assessments, or contributions required of it by law, except to
the extent that the validity of such assessment or tax shall be the
subject of a Permitted Protest, and will execute and deliver to
Foothill, on demand, appropriate certificates attesting to the
payment thereof or deposit with respect thereto. Each Borrower will
make timely payment or deposit of all tax payments and withholding
taxes required of it by applicable laws, including those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state,
and federal income taxes, except to the extent that the validity of
such assessment or tax shall be the subject of a Permitted Protest,
and will, upon request, furnish Foothill with proof satisfactory to
Foothill indicating that such Borrower has made such payments or
deposits.
6.10. Insurance.
(a) At its expense, keep the Personal Property Collateral
insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as are
ordinarily insured against by other owners in similar businesses.
Each Borrower also shall maintain business interruption, public
liability, product liability, and property damage insurance relating
to such Borrower's ownership and use of the Personal Property
Collateral, as well as insurance against larceny, embezzlement, and
criminal misappropriation.
(b) At its expense, obtain and maintain (i) insurance of
the type necessary to insure Collateral for the full replacement cost
thereof, against any loss by fire, lightning, windstorm, hail,
explosion, aircraft, smoke damage, vehicle damage, earthquakes,
elevator collision, and other risks from time to time included under
"extended coverage" policies, in such amounts as Foothill may
reasonably require, but in any event in amounts sufficient to prevent
such Borrower from becoming a co-insurer under such policies (except
to the extent of deductibles and self-insurance retentions standard
for companies operating in the same line of business as such
Borrower) and (ii) insurance for such other risks as Foothill may
reasonably require. Replacement costs, at Foothill's option, may be
redetermined by an insurance appraiser, reasonably satisfactory to
Foothill, not more frequently than once every 12 months at such
Borrower's cost.
(c) Intentionally Omitted.
(d) All such policies of insurance shall be in such form,
with such companies, and in such amounts as may be reasonably
satisfactory to Foothill. All insurance required herein shall be
written by companies which are authorized to do insurance business in
the State of California. All hazard insurance and such other
insurance as Foothill shall specify, shall contain a California Form
438BFU (NS) mortgagee endorsement, or an equivalent endorsement
satisfactory to Foothill, showing Foothill as sole loss payee
thereof, and shall contain a waiver of warranties. Every policy of
insurance referred to in this Section 6.10 shall contain an agreement
by the insurer that it will not cancel such policy except after 30
days prior written notice to Foothill and that any loss payable
thereunder shall be payable notwithstanding any act or negligence of
either Borrower or Foothill which might, absent such agreement,
result in a forfeiture of all or a part of such insurance payment and
notwithstanding (i) occupancy or use of any real property for
purposes more hazardous than permitted by the terms of such policy,
(ii) any foreclosure or other action or proceeding taken by Foothill
pursuant to the Mortgages upon the happening of an Event of Default,
or (iii) any change in title or ownership of any real property. Each
Borrower shall deliver to Foothill certified copies of such policies
of insurance and evidence of the payment of all premiums therefor.
(e) Original policies or certificates thereof satisfactory
to Foothill evidencing such insurance shall be delivered to Foothill
at least 30 days prior to the expiration of the existing or preceding
policies. Each Borrower shall give Foothill prompt notice of any
loss covered by such insurance, and after the occurrence and during
the continuance of an Event of Default, Foothill shall have the
exclusive right (subject to the rights of holders of Permitted Liens)
to adjust any loss, without any liability to either Borrower
whatsoever in respect of such adjustments. Any monies received as
payment for any loss under any insurance policy including the
insurance policies mentioned above, shall be paid over to Foothill
(subject to the rights of holders of Permitted Liens) to be applied
at the option of Foothill either to the prepayment of the Obligations
without premium, in such order or manner as Foothill may elect, or
shall be disbursed to the applicable Borrower under stage payment
terms satisfactory to Foothill for application to the cost of
repairs, replacements, or restorations. All repairs, replacements,
or restorations shall be effected with reasonable promptness and
shall be of a value at least equal to the value of the items or
property destroyed prior to such damage or destruction. Upon the
occurrence and during the continuance of an Event of Default,
Foothill shall have the right to apply all prepaid premiums to the
payment of the Obligations in such order or form as Foothill shall
determine.
(f) Neither Borrower shall take out separate insurance
concurrent in form or contributing in the event of loss with that
required to be maintained under this Section 6.10, unless Foothill is
included thereon as named insured with the loss payable to Foothill
under a standard California 438BFU (NS) Mortgagee endorsement, or its
local equivalent. Each Borrower immediately shall notify Foothill
whenever such separate insurance is taken out, specifying the insurer
thereunder and full particulars as to the policies evidencing the
same, and originals of such policies immediately shall be provided to
Foothill.
6.11. No Setoffs or Counterclaims.
Make payments hereunder and under the other Loan Documents
by or on behalf of such Borrower without setoff or counterclaim and
free and clear of, and without deduction or withholding for or on
account of, any federal, state, or local taxes.
6.12. Location of Inventory and Equipment.
Keep the Inventory and Equipment only at the locations
identified on Schedule 6.12; provided, however, that each Borrower
may amend Schedule 6.12 to add a new location of each Borrower so
long as such amendment occurs by written notice to Foothill prior to
the date on which the Inventory or Equipment is moved to such new
location, so long as such new location is within the continental
United States, and so long as, at the time of such written
notification, Borrowers provide any financing statements or fixture
filings necessary to perfect and continue perfected Foothill's
security interests in such assets, and provided further, that PSI
shall be permitted to ship Inventory to customer locations not
identified on Schedule 6.12 which will remain at such customer
locations awaiting installation and/or acceptance so long as such
Inventory is not included in Eligible Inventory.
6.13. Compliance with Laws.
Comply with the requirements of all applicable laws, rules,
regulations, and orders of any governmental authority, including the
Fair Labor Standards Act and the Americans With Disabilities Act,
other than laws, rules, regulations, and orders the non-compliance
with which, individually or in the aggregate, would not have and
could not reasonably be expected to have a Material Adverse Change.
6.14. Employee Benefits.
(a) Promptly, and in any event within 10 Business Days
after such Borrower or any of its Subsidiaries knows or has reason to
know that an ERISA Event has occurred that reasonably could be
expected to result in a Material Adverse Change, a written statement
of the chief financial officer of such Borrower describing such ERISA
Event and any action that is being taking with respect thereto by
such Borrower, any such Subsidiary or ERISA Affiliate, and any action
taken or threatened by the IRS, Department of Labor, or PBGC. Such
Borrower or such Subsidiary, as applicable, shall be deemed to know
all facts known by the administrator of any Benefit Plan of which it
is the plan sponsor, (ii) promptly, and in any event within 3
Business Days after the filing thereof with the IRS, a copy of each
funding waiver request filed with respect to any Benefit Plan and all
communications received by such Borrower, any of its Subsidiaries or,
to the knowledge of such Borrower, any ERISA Affiliate with respect
to such request, and (iii) promptly, and in any event within 3
Business Days after receipt by such Borrower, any of its Subsidiaries
or, to the knowledge of such Borrower, any ERISA Affiliate, of the
PBGC's intention to terminate a Benefit Plan or to have a trustee
appointed to administer a Benefit Plan, copies of each such notice.
(b) Cause to be delivered to Foothill, upon Foothill's
request, each of the following: (i) a copy of each Plan (or, where
any such plan is not in writing, complete description thereof) (and
if applicable, related trust agreements or other funding instruments)
and all amendments thereto, all written interpretations thereof and
written descriptions thereof that have been distributed to employees
or former employees of such Borrower or its Subsidiaries; (ii) the
most recent determination letter issued by the IRS with respect to
each Benefit Plan; (iii) for the three most recent plan years, annual
reports on Form 5500 Series required to be filed with any
governmental agency for each Benefit Plan; (iv) all actuarial reports
prepared for the last three plan years for each Benefit Plan; (v) a
listing of all Multiemployer Plans, with the aggregate amount of the
most recent annual contributions required to be made by either
Borrower or any ERISA Affiliate to each such plan and copies of the
collective bargaining agreements requiring such contributions;
(vi) any information that has been provided to either Borrower or any
ERISA Affiliate regarding withdrawal liability under any
Multiemployer Plan; and (vii) the aggregate amount of the most recent
annual payments made to former employees of either Borrower or its
Subsidiaries under any Retiree Health Plan.
6.15. Leases.
Pay when due all rents and other amounts payable under any
leases to which such Borrower is a party or by which such Borrower's
properties and assets are bound, unless such payments are the subject
of a Permitted Protest. To the extent that either Borrower fails
timely to make payment of such rents and other amounts payable when
due under its leases, Foothill shall be entitled, in its discretion,
to reserve an amount equal to such unpaid amounts against the
Borrowing Base of such Borrower.
6.16. Intentionally Omitted.
6.17. Change Name.
Provide Foothill with 15 days prior written notice of any
change to such Borrower's name, FEIN, identity, or the addition by
such Borrower of any new fictitious name; and provide Foothill, as
soon as available thereafter, with (a) written evidence of the
effectiveness of the same, including without limitation, in the case
of a name change, evidence that such Borrower has amended each of its
qualifications to do business as a foreign corporation to reflect
such name change, all in form and substance satisfactory to Foothill,
except where the failure to so amend would not be reasonably likely
to cause a Material Adverse Change and (b) any financing statements
or amendments to financing statements necessary to perfect and
continue perfect Foothill's security interests in the Collateral.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until full and final payment
of the Obligations, neither Borrower will do any of the following
without Foothill's prior written consent:
7.1. Indebtedness.
Create, incur, assume, permit, guarantee, or otherwise
become or remain, directly or indirectly, liable with respect to any
Indebtedness, except:
(a) Indebtedness evidenced by this Agreement, together
with Indebtedness to issuers of letters of credit that are the
subject of L/C Guarantees;
(b) Indebtedness set forth on Schedule 7.1;
(c) Indebtedness secured by Permitted Liens;
(d) Indebtedness permitted under Section 7.13; and
(e) refinancings, renewals, or extensions of Indebtedness
permitted under clauses (b) and (c) of this Section 7.1 (and
continuance or renewal of any Permitted Liens associated therewith)
so long as: (i) the terms and conditions of such refinancings,
renewals, or extensions do not materially impair the prospects of
repayment of the Obligations by either Borrower, (ii) the net cash
proceeds of such refinancings, renewals, or extensions do not result
in an increase in the aggregate principal amount of the Indebtedness
so refinanced, renewed, or extended, (iii) such refinancings,
renewals, refundings, or extensions do not result in a shortening of
the average weighted maturity of the Indebtedness so refinanced,
renewed, or extended, and (iv) to the extent that Indebtedness that
is refinanced was subordinated in right of payment to the
Obligations, then the subordination terms and conditions of the
refinancing Indebtedness must be at least as favorable to Foothill as
those applicable to the refinanced Indebtedness.
7.2. Liens.
Create, incur, assume, or permit to exist, directly or
indirectly, any Lien on or with respect to any of its property or
assets, of any kind, whether now owned or hereafter acquired, or any
income or profits therefrom, except for Permitted Liens (including
Liens that are replacements of Permitted Liens to the extent that the
original Indebtedness is refinanced under Section 7.1(d) and so long
as the replacement Liens only encumber those assets or property that
secured the original Indebtedness).
7.3. Restrictions on Fundamental Changes.
Except for transactions to which Foothill has consented
under Section 7.13, enter into any merger, consolidation,
reorganization, or recapitalization, or reclassify its capital stock,
or liquidate, wind up, or dissolve itself (or suffer any liquidation
or dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of transactions,
all or any substantial part of its property or assets.
7.4. Disposal of Assets.
Sell, lease, assign, transfer, or otherwise dispose of any
of such Borrower's properties or assets other than (a) sales of
Inventory to buyers in the ordinary course of such Borrower's
businesses as currently conducted, (b) sales or other dispositions of
obsolete or unuseful Equipment and (c) sales or other dispositions of
other Equipment with an aggregate book value for both Borrowers not
in excess of $50,000 in any fiscal year.
7.5. Change Corporate Structure.
Change such Borrower's corporate structure (within the
meaning of Section 9402(7) of the Code), except in connection with a
transaction to which Foothill has consented under Section 7.13.
7.6. Guarantee.
Guarantee or otherwise become in any way liable with
respect to the obligations of any third Person except by endorsement
of instruments or items of payment for deposit to the account of such
Borrower or which are transmitted or turned over to Foothill.
7.7. Nature of Business.
Make any change in the principal nature of such Borrower's
business.
7.8. Prepayments and Amendments.
(a) Except in connection with a refinancing permitted by
Section 7.1(d), prepay, redeem, retire, defease, purchase, or
otherwise acquire any Indebtedness owing to any third Person, other
than the Obligations in accordance with this Agreement, and
(b) Directly or indirectly, amend, modify, alter,
increase, or change any of the terms or conditions of any agreement,
instrument, document, indenture, or other writing evidencing or
concerning Indebtedness permitted under Sections 7.1(b), (c), or (d).
7.9. Change of Control.
Cause, permit, or suffer, directly or indirectly, any
Change of Control.
7.10. Consignments.
Consign any Inventory of Multigraphics or PSI in excess of
aggregate amounts equal to $1,300,000 and $300,000, respectively, at
any time or sell any Inventory on xxxx and hold, sale or return, sale
on approval, or other conditional terms of sale.
7.11. Distributions.
Make any distribution or declare or pay any dividends (in
cash or other property, other than capital stock) on, or purchase,
acquire, redeem, or retire any of such Borrower's capital stock, of
any class, whether now or hereafter outstanding, except that PSI
shall be permitted to declare and pay dividends in respect of its
capital stock to Multigraphics, so long as and to the extent that (a)
no Event of Default is then in existence or would be caused thereby
and (b) such dividend would be permitted to be declared and paid
under applicable law.
7.12. Accounting Methods.
Modify or change its method of accounting or enter into,
modify, or terminate any agreement currently existing, or at any time
hereafter entered into with any third party accounting firm or
service bureau for the preparation or storage of such Borrower's
accounting records without said accounting firm or service bureau
agreeing to provide Foothill information regarding the Collateral or
such Borrower's financial condition. Each Borrower waives the right
to assert a confidential relationship, if any, it may have with any
accounting firm or service bureau in connection with any information
requested by Foothill pursuant to or in accordance with this
Agreement, and agrees that Foothill may contact directly any such
accounting firm or service bureau in order to obtain such
information.
7.13. Investments.
Directly or indirectly make, acquire, or incur any
liabilities (including contingent obligations) for or in connection
with (a) the acquisition of the securities (whether debt or equity)
of, or other interests in, a Person, (b) except in connection with a
transaction to which Foothill has consented under clause (a) or (c)
of this Section 7.13, loans, advances, capital contributions, or
transfers of property to a Person; provided however, that
Multigraphics shall be permitted to make capital contributions and/or
loans to PSI so long as no Event of Default is then in existence or
would be caused thereby, and provided further, that PSI shall be
permitted to make loans to Multigraphics so long as (i) no Event of
Default is then in existence or would be caused thereby and (ii) such
loan could have been characterized as a dividend which would have
been permitted to be declared and paid under applicable law if PSI
had chosen to do so (c) the acquisition of all or substantially all
of the properties or assets of a Person or (d) Permitted Investments.
Foothill shall not unreasonably withhold its consent to a request by
either Borrower to take any action prohibited under clause (a) or (c)
above.
7.14. Transactions with Affiliates.
Except as described on Schedule 7.14 or permitted under
Sections 7.11 or 7.13, directly or indirectly enter into or permit to
exist any material transaction with any Affiliate of either Borrower
except for transactions that are in the ordinary course of such
Borrower's business, upon fair and reasonable terms, that are fully
disclosed to Foothill, and that are no less favorable to such
Borrower than would be obtained in an arm's length transaction with a
non-Affiliate.
7.15. Suspension.
Suspend or go out of a substantial portion of its business.
7.16. Intentionally Omitted.
7.17. Use of Proceeds.
Use the proceeds of the Advances and Letters of Credit
issued made hereunder for any purpose other than, consistent with the
terms and conditions hereof, its lawful and permitted corporate
purposes, including without limitation to provide for ongoing working
capital and letter of credit needs of such Borrower and to finance
acquisitions to which Foothill has consented under Section 7.13.
7.18. Change in Location of Chief Executive Office.
Relocate its chief executive office to a new location
without providing 30 days prior written notification thereof to
Foothill and so long as, at the time of such written notification,
Borrowers provide any financing statements or fixture filings
necessary to perfect and continue perfected Foothill's security
interests.
7.19. No Prohibited Transactions Under ERISA.
Directly or indirectly:
(a) engage, or permit any Subsidiary of either Borrower to
engage, in any prohibited transaction which is reasonably likely to
result in a civil penalty or excise tax described in Sections 406 of
ERISA or 4975 of the IRC for which a statutory or class exemption is
not available or a private exemption has not been previously obtained
from the Department of Labor;
(b) permit to exist with respect to any Benefit Plan any
accumulated funding deficiency (as defined in Sections 302 of ERISA
412 of the IRC), whether or not waived; and
(c) fail, or permit any Subsidiary of either Borrower 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 Subsidiary of either Borrower
to terminate, any Benefit Plan where such event would result in any
liability of such Borrower, any of its Subsidiaries or any ERISA
Affiliate under Title IV of ERISA;
(e) fail, or permit any Subsidiary of either Borrower to
fail, to make any required contribution or payment to any
Multiemployer Plan;
(f) fail, or permit any Subsidiary of either Borrower to
fail, to pay any required installment or any other payment required
under Section 412 of the IRC on or before the due date for such
installment or other payment;
(g) amend, or permit any Subsidiary of either Borrower to
amend, a Plan resulting in an increase in current liability for the
plan year such that either Borrower, any Subsidiary of either
Borrower or any ERISA Affiliate is required to provide security to
such Plan under Section 401(a)(29) of the IRC; or
(h) withdraw, or permit any Subsidiary of either Borrower
to withdraw, from any Multiemployer Plan where such withdrawal is
reasonably likely to result in any liability of any such entity under
Title IV of ERISA;
which, individually or in the aggregate, results in or reasonably
would be expected to result in a claim against or liability of each
Borrower, any of its Subsidiaries or any ERISA Affiliate in excess of
$300,000.
7.20. Financial Covenants.
Fail to maintain:
(a) Net Worth. Net Worth of at least the applicable
amount set forth below as of each date set forth below:
Date Net Worth
The last day of the second (-$13,500,000)
quarter of the 1998 fiscal
year
The last day of the third (-$13,200,000)
quarter of the 1998 fiscal
year
The last day of the fourth (-$12,500,000)
quarter of the 1998 fiscal
year
The last day of the first (-$12,000,000)
quarter of the 1999 fiscal
year
The last day of the second (-$11,500,000)
quarter of the 1999 fiscal
year
The last day of the third (-$11,000,000)
quarter of the 1999 fiscal
year
The last day of the fourth (-$10,000,000)
quarter of the 1999 fiscal
year and the last day of
each fiscal quarter
thereafter
(b) Working Capital. Working Capital of at least (i)
(-$12,500,000), measured the last day of the second fiscal quarter of
the 1998 fiscal year, (ii) (-$12,000,000), measured on the last day
of the third fiscal quarter of the 1998 fiscal year, the last day of
the fourth fiscal quarter of the 1998 fiscal year and the last day of
the first fiscal quarter of the 1999 fiscal year, (iii)
(-$11,500,000), measured on the last day of the second fiscal quarter
of the 1999 fiscal year, (iv) (-$11,000,000), measured on the last
day of the third fiscal quarter of the 1999 fiscal year and (v)
$10,500,000), measured on the last day of the fourth fiscal quarter
of the 1999 fiscal year and the last day of each fiscal quarter
thereafter.
7.21. Capital Expenditures.
Make capital expenditures in any fiscal year in excess of
$600,000 in the aggregate for both Borrowers.
7.22. Subsidiary Activities.
Except for the activities, assets and liabilities of PSI as
a subsidiary of Multigraphics, permit any of such Borrower's
Subsidiaries to conduct any material business operations, own any
material assets or have any material liabilities.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute an
event of default (each, an "Event of Default") under this Agreement:
8.1. If either Borrower fails to pay when due and payable or
when declared due and payable, any portion of the Obligations other
than principal (including any interest which, but for the provisions
of the Bankruptcy Code, would have accrued on such amounts), and such
failure continues for 3 days thereafter; or if either Borrower fails
to pay when due and payable, or when declared due and payable, any
portion of the Obligations consisting of principal;
8.2. If either Borrower fails to perform, keep, or observe any
term, provision, condition, covenant, or agreement contained in (a)
Section 6.2 of this Agreement and such failure continues for 5 days
thereafter, (b) any of Section 6.4, 6.5, 6.9, 6.12, 6.13, 6.14 or
6.15 of this Agreement and such failure continues for 15 days
thereafter or (c) any other section of this Agreement, of any of the
Loan Documents, or of any other present or future agreement between
either Borrower and Foothill;
8.3. If there is a Material Adverse Change;
8.4. If any material portion of either Borrower's properties or
assets is attached, seized, subjected to a writ or distress warrant,
or is levied upon, or comes into the possession of any third Person;
8.5. If an Insolvency Proceeding is commenced by either
Borrower;
8.6. If an Insolvency Proceeding is commenced against either
Borrower and any of the following events occur: (a) such Borrower
consents to the institution of the Insolvency Proceeding against it;
(b) the petition commencing the Insolvency Proceeding is not timely
controverted; (c) the petition commencing the Insolvency Proceeding
is not dismissed within 45 calendar days of the date of the filing
thereof; provided, however, that, during the pendency of such period,
Foothill shall be relieved of its obligation to extend credit
hereunder; (d) an interim trustee is appointed to take possession of
all or a substantial portion of the properties or assets of, or to
operate all or any substantial portion of the business of, such
Borrower; or (e) an order for relief shall have been issued or
entered therein;
8.7. If either Borrower is enjoined, restrained, or in any way
prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.8. If a notice of Lien, levy, or assessment in an amount in
excess of $100,000 or in respect of payroll taxes is filed of record
with respect to any of either Borrower's properties or assets by the
United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or
governmental agency, or if any taxes or debts owing at any time in an
amount in excess of $100,000 in the aggregate or in respect of
payroll taxes hereafter to any one or more of such entities becomes a
Lien, whether xxxxxx or otherwise, upon any of either Borrower's
properties or assets and the same is not paid on the payment date
thereof, in each case, whether or not the same is (a) subject to a
Permitted Protest, (b) constitutes a Permitted Lien or (c) is the
subject of a reserve under Section 2.1(b).
8.9. If a judgment or other claim in an amount in excess of
$1,000,000 becomes a Lien or encumbrance upon any portion of either
Borrower's properties or assets, other than any such judgment or
claim that has been vacated, stayed, discharged or fully bonded
pending appeal or is insured (and Foothill is satisfied that the
insurer will not challenge its liability with respect thereto), so
long as the uninsured portion thereof does not exceed $1,000,000, in
each case whether or not the same is (a) subject to a Permitted
Protest, (b) constitutes a Permitted Lien or (c) is the subject of a
reserve under Section 2.1(b).
8.10. If there is a default in any material agreement to which
either Borrower is a party with one or more third Persons and that
evidences or secures Indebtedness in excess of $1,000,000, and such
default (a) occurs at the final maturity of the obligations
thereunder, or (b) results in a right by such third Person(s),
irrespective of whether exercised, to accelerate the maturity of
either Borrower's obligations thereunder;
8.11. If either Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent such
payment is permitted by the terms of the subordination provisions
applicable to such Indebtedness;
8.12. If any material misstatement or misrepresentation exists
now or hereafter in any warranty, representation, statement, or
report made to Foothill by either Borrower or any officer, employee,
agent, or director of either Borrower, or if any such material
warranty or representation is withdrawn; or
8.13. If the obligation of any guarantor under its guaranty or
other Loan Document is limited or terminated by operation of law or
by the guarantor thereunder or any such guarantor becomes the subject
of an Insolvency Proceeding.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1. Rights and Remedies.
Upon the occurrence, and during the continuation, of an
Event of Default Foothill may, at its election, without notice of its
election and without demand, do any one or more of the following, all
of which are authorized by each Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable;
(b) Cease advancing money or extending credit to or for
the benefit of each Borrower under this Agreement, under any of the
Loan Documents, or under any other agreement between such Borrower
and Foothill;
(c) Terminate this Agreement and any of the other Loan
Documents as to any future liability or obligation of Foothill, but
without affecting Foothill's rights and security interests in the
Personal Property Collateral or the Real Property Collateral and
without affecting the Obligations;
(d) Settle or adjust disputes and claims directly with
Account Debtors for amounts and upon terms which Foothill considers
advisable, and in such cases, Foothill will credit the applicable
Borrower's Loan Account with only the net amounts received by
Foothill in payment of such disputed Accounts of such Borrower after
deducting all Foothill Expenses incurred or expended in connection
therewith;
(e) Cause each Borrower to hold all returned Inventory in
trust for Foothill, segregate all returned Inventory from all other
property of such Borrower or in such Borrower's possession and
conspicuously label said returned Inventory as the property of
Foothill;
(f) Without notice to or demand upon either Borrower or
any guarantor, make such payments and do such acts as Foothill
considers necessary or reasonable to protect its security interests
in the Personal Property Collateral. Each Borrower agrees to
assemble the Personal Property Collateral if Foothill so requires,
and to make the Personal Property Collateral available to Foothill as
Foothill may designate. Each Borrower authorizes Foothill to enter
the premises where the Personal Property Collateral is located, to
take and maintain possession of the Personal Property Collateral, or
any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or Lien that in Foothill's determination appears
to conflict with its security interests and to pay all expenses
incurred in connection therewith. With respect to any of each
Borrower's owned or leased premises, each Borrower hereby grants
Foothill a license to enter into possession of such premises and to
occupy the same, without charge, in order to exercise any of
Foothill's rights or remedies provided herein, at law, in equity, or
otherwise, but only to the extent not prohibited by any applicable
lease or Collateral Access Agreement;
(g) Without notice to either Borrower (such notice being
expressly waived), and without constituting a retention of any
collateral in satisfaction of an obligation (within the meaning of
Section 9505 of the Code), set off and apply to the Obligations any
and all (i) balances and deposits of each Borrower held by Foothill
(including any amounts received in the Lockbox Accounts), or (ii)
indebtedness at any time owing to or for the credit or the account of
such Borrower's held by Foothill;
(h) Hold, as cash collateral, any and all balances and
deposits of each Borrower held by Foothill, and any amounts received
in the Lockbox Accounts, to secure the full and final repayment of
all of the Obligations;
(i) Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell (in the manner
provided for herein) the Personal Property Collateral. Foothill is
hereby granted a license or other right to use, without charge, each
Borrower's labels, patents, copyrights, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it
pertains to the Personal Property Collateral, in completing
production of, advertising for sale, and selling any Personal
Property Collateral and each Borrower's rights under all licenses and
all franchise agreements shall inure to Foothill's benefit;
(j) Sell the Personal Property Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including each Borrower's premises) as Foothill determines is
commercially reasonable. It is not necessary that the Personal
Property Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition of the
Personal Property Collateral as follows:
(i) Foothill shall give Borrowers and each
holder of a security interest in the Personal Property
Collateral who has filed with Foothill a written
request for notice, a notice in writing of the time
and place of public sale, or, if the sale is a private
sale or some other disposition other than a public
sale is to be made of the Personal Property
Collateral, then the time on or after which the
private sale or other disposition is to be made;
(ii) The notice shall be personally delivered or
mailed, postage prepaid, to Borrowers as provided in
Section 12, at least 5 days before the date fixed for
the sale, or at least 5 days before the date on or
after which the private sale or other disposition is
to be made; no notice needs to be given prior to the
disposition of any portion of the Personal Property
Collateral that is perishable or threatens to decline
speedily in value or that is of a type customarily
sold on a recognized market. Notice to Persons other
than Borrowers claiming an interest in the Personal
Property Collateral shall be sent to such addresses as
they have furnished to Foothill;
(iii) If the sale is to be a public sale, Foothill
also shall give notice of the time and place by
publishing a notice one time at least 5 days before
the date of the sale in a newspaper of general
circulation in the county in which the sale is to be
held, or as is otherwise required by the Code;
(l) Foothill may credit bid and purchase at any public
sale; and
(m) Any deficiency that exists after disposition of the
Personal Property Collateral as provided above will be paid
immediately by the applicable Borrower. Any excess will be returned,
without interest and subject to the rights of third Persons, by
Foothill to the applicable Borrower.
9.2. Remedies Cumulative.
Foothill's rights and remedies under this Agreement, the
Loan Documents, and all other agreements shall be cumulative.
Foothill shall have all other rights and remedies not inconsistent
herewith as provided under the Code, by law, or in equity. No
exercise by Foothill of one right or remedy shall be deemed an
election, and no waiver by Foothill of any Event of Default shall be
deemed a continuing waiver. No delay by Foothill shall constitute a
waiver, election, or acquiescence by it.
10. TAXES AND EXPENSES.
If either Borrower fails to pay any monies (whether taxes,
assessments, insurance premiums, or, in the case of leased properties
or assets, rents or other amounts payable under such leases) due to
third Persons, or fails to make any deposits or furnish any required
proof of payment or deposit, all as required under the terms of this
Agreement, then, to the extent that Foothill reasonably determines
that such failure by such Borrower could result in a Material Adverse
Change, in its discretion and without prior notice to either
Borrower, Foothill may do any or all of the following: (a) make
payment of the same or any part thereof; (b) set up such reserves
under Section 2.1(b) as Foothill deems necessary to protect Foothill
from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type described in Section 6.10, and take
any action with respect to such policies as Foothill deems prudent.
Any such amounts paid by Foothill shall constitute Foothill Expenses.
Foothill agrees to provide Borrowers with prompt notice of any such
action taken by Foothill. Any such payments made by Foothill shall
not constitute an agreement by Foothill to make similar payments in
the future or a waiver by Foothill of any Event of Default under this
Agreement. Foothill need not inquire as to, or contest the validity
of, any such expense, tax, or Lien and the receipt of the usual
official notice for the payment thereof shall be conclusive evidence
that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1. Demand; Protest; etc.
Each Borrower waives demand, protest, notice of protest,
notice of default or dishonor, notice of payment and nonpayment,
nonpayment at maturity, release, compromise, settlement, extension,
or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Foothill on which such Borrower may in
any way be liable.
11.2. Foothill's Liability for Collateral.
So long as Foothill complies with its obligations, if any,
under Section 9207 of the Code, Foothill shall not in any way or
manner be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage thereto occurring or arising in
any manner or fashion from any cause; (c) any diminution in the value
thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other Person. All risk of loss,
damage, or destruction of the Collateral shall be borne by Borrowers.
11.3. Indemnification.
Borrowers shall jointly and severally pay, indemnify,
defend, and hold Foothill and its officers, directors, employees,
counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and
against any and all claims, demands, suits, actions, investigations,
proceedings, and damages, and all reasonable attorneys fees and
disbursements and other costs and expenses actually incurred in
connection therewith (as and when they are incurred and irrespective
of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of
or related to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Loan Documents or the
transactions contemplated herein, and with respect to any
investigation, litigation, or proceeding related to this Agreement,
any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is
a party thereto), or any act, omission, event or circumstance in any
manner related thereto (all the foregoing, collectively, the
"Indemnified Liabilities"). Neither Borrower shall have any
obligation to any Indemnified Person under this Section 11.3 with
respect to any Indemnified Liability that a court of competent
jurisdiction finally determines to have resulted from the gross
negligence or willful misconduct of such Indemnified Person. This
provision shall survive the termination of this Agreement and the
repayment of the Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices or
demands by any party relating to this Agreement or any other Loan
Document shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail,
postage prepaid) shall be personally delivered or sent by registered
or certified mail (postage prepaid, return receipt requested),
overnight courier, or telefacsimile to a Borrower or to Foothill, as
the case may be, at its address set forth below:
If to Multigraphics: MULTIGRAPHICS, INC.
000 Xxxxxxxx Xxxxx
Xxxxx Xxxxxxxx, Xxxxxxxx
60056Attn: Chief Financial
Officer
Fax No. (000) 000-0000
with copies to: SIDLEY & AUSTIN
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
If to PSI: PUBLISHING SOLUTIONS, INC.
00 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxx, Xxxx 00000
Attn: Chief Financial Officer
Fax No. (000) 000-0000
with copies to: SIDLEY & AUSTIN
Xxx Xxxxx Xxxxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx Xxxxxxxx, Esq.
Fax No.: (000) 000-0000
If to Foothill: FOOTHILL CAPITAL CORPORATION
00000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxx 0000
Xxx Xxxxxxx, Xxxxxxxxxx 90025-
3333
Attn: Business Finance Division
Manager
Fax No.: (000) 000-0000
with copies to: GOLDBERG, KOHN, BELL, BLACK,
XXXXXXXXXX & XXXXXX, LTD.
00 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Fax No.: (000) 000-0000
The parties hereto may change the address at which they are
to receive notices hereunder, by notice in writing in the foregoing
manner given to the other. All notices or demands sent in accordance
with this Section 12, other than notices by Foothill in connection
with Sections 9504 or 9505 of the Code, shall be deemed received on
the earlier of the date of actual receipt or 3 days after the deposit
thereof in the mail. Each Borrower acknowledges and agrees that
notices sent by Foothill in connection with Sections 9504 or 9505 of
the Code shall be deemed sent when deposited in the mail or
personally delivered, or, where permitted by law, transmitted
telefacsimile or other similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(UNLESS EXPRESSLY PROVIDED TO THE CONTRARY IN AN ANOTHER LOAN
DOCUMENT), THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF
AND THEREOF, AND THE RIGHTS OF THE PARTIES HERETO AND THERETO WITH
RESPECT TO ALL MATTERS ARISING HEREUNDER OR THEREUNDER OR RELATED
HERETO OR THERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED IN
THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR, AT THE SOLE OPTION
OF FOOTHILL, IN ANY OTHER COURT IN WHICH FOOTHILL SHALL INITIATE
LEGAL OR EQUITABLE PROCEEDINGS AND WHICH HAS SUBJECT MATTER
JURISDICTION OVER THE MATTER IN CONTROVERSY. EACH OF EACH BORROWER
AND FOOTHILL WAIVES, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
ANY RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON
CONVENIENS OR TO OBJECT TO VENUE TO THE EXTENT ANY PROCEEDING IS
BROUGHT IN ACCORDANCE WITH THIS SECTION 13. EACH BORROWER AND
FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH OF EACH BORROWER AND FOOTHILL
REPRESENTS THAT IT HAS REVIEWED THIS WAIVER AND EACH KNOWINGLY AND
VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF THIS AGREEMENT
MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWER'S DOCUMENTS.
All documents, schedules, invoices, agings, or other papers
delivered to Foothill may be destroyed or otherwise disposed of by
Foothill 4 months after they are delivered to or received by
Foothill, unless a Borrower requests, in writing, the return of said
documents, schedules, or other papers and makes arrangements, at such
Borrower's expense, for their return.
15. GENERAL PROVISIONS.
15.1. Effectiveness.
This Agreement shall be binding and deemed effective when
executed by each Borrower and Foothill.
15.2. Successors and Assigns.
This Agreement shall bind and inure to the benefit of the
respective successors and assigns of each of the parties; provided,
however, that neither Borrower may assign this Agreement or any
rights or duties hereunder without Foothill's prior written consent
and any prohibited assignment shall be absolutely void. Foothill (a)
may assign this Agreement and its rights and duties hereunder and no
consent or approval by either Borrower is required in connection with
any such assignment and (b) reserves the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of,
or any interest in Foothill's rights and benefits hereunder; provided
that without either Borrower's prior consent (which will not be
unreasonably withheld) (i) Foothill will retain at least $5,000,000
of the commitments evidenced by this Agreement and (ii) no more than
3 Persons (including Foothill) will hold interests (either by way of
assignment or participation), in this Agreement and the Obligations.
In connection with any such assignment or participation, Foothill may
disclose all documents and information which Foothill now or
hereafter may have relating to either Borrower or either Borrower's
business. To the extent that Foothill assigns its rights and
obligations hereunder to a third Person as provided in this Section
15.2, Foothill thereafter shall be released from such assigned
obligations to each Borrower and such assignment shall effect a
novation between Borrowers and such third Person.
15.3. Section Headings.
Headings and numbers have been set forth herein for
convenience only. Unless the contrary is compelled by the context,
everything contained in each section applies equally to this entire
Agreement.
15.4. Interpretation.
Neither this Agreement nor any uncertainty or ambiguity
herein shall be construed or resolved against Foothill or either
Borrower, whether under any rule of construction or otherwise. On
the contrary, this Agreement has been reviewed by all parties and
shall be construed and interpreted according to the ordinary meaning
of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto.
15.5. Severability of Provisions.
Each provision of this Agreement shall be severable from
every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
15.6. Amendments in Writing.
This Agreement can only be amended by a writing signed by
both Foothill and each Borrower.
15.7. Counterparts; Telefacsimile Execution.
This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each
of which, when executed and delivered, shall be deemed to be an
original, and all of which, when taken together, shall constitute but
one and the same Agreement. Delivery of an executed counterpart of
this Agreement by telefacsimile shall be equally as effective as
delivery of an original executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by
telefacsimile also shall deliver an original executed counterpart of
this Agreement but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
15.8. Revival and Reinstatement of Obligations.
If the incurrence or payment of the Obligations by either
Borrower or any guarantor of the Obligations or the transfer by
either or both of such parties to Foothill of any property of either
or both of such parties should for any reason subsequently be
declared to be void or voidable under any state or federal law
relating to creditors' rights, including provisions of the Bankruptcy
Code relating to fraudulent conveyances, preferences, and other
voidable or recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Foothill is required to
repay or restore, in whole or in part, any such Voidable Transfer, or
elects to do so upon the reasonable advice of its counsel, then, as
to any such Voidable Transfer, or the amount thereof that Foothill is
required or elects to repay or restore, and as to all reasonable
costs, expenses, and attorneys fees of Foothill related thereto, the
liability of such Borrower or such guarantor automatically shall be
revived, reinstated, and restored and shall exist as though such
Voidable Transfer had never been made.
15.9. Integration.
This Agreement, together with the other Loan Documents,
reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or
qualified by any other agreement, oral or written, before the date
hereof.
15.10. Confidentiality.
Foothill agrees that it will not disclose without the prior
consent of each Borrower (other than to its employees, auditors,
counsel or other professional advisors or to its Affiliates) any
information with respect to either Borrower which is furnished
pursuant to this Agreement; provided, that Foothill may disclose any
such information (a) as has become generally available to the public,
(b) as may be required in any report, statement or testimony
submitted to any municipal, state or Federal regulatory body having
or claiming to have jurisdiction over Foothill or to the Federal
Reserve Board or the Federal Deposit Insurance Corporation or similar
organizations (whether in the United States or elsewhere) or their
successors, (c) as may be required in response to any summons or
subpoena or in connection with any litigation, to the extent
permitted or deemed advisable by counsel, (d) in order to comply with
any law, order, regulation or ruling applicable to Foothill and (e)
to any prospective permitted transferee in connection with any
contemplated transfer by Foothill of all or a portion of the
commitments evidenced by this Agreement (provided, that such
prospective permitted transferee executes an agreement with Foothill
containing provisions substantially identical to those contained in
this Section 15.10).
15.11. Guaranty.
(a) Borrowers acknowledge that they are jointly and
severally liable for all of the Obligations, and as a result each
Borrower hereby unconditionally guaranties the full and prompt
payment when due, whether at maturity or earlier, by reason of
acceleration or otherwise, and at all times thereafter, of all
indebtedness, liabilities and obligations of every kind and nature of
the other Borrower to Foothill, howsoever created, arising or
evidenced, whether direct or indirect, absolute or contingent, joint
or several, now or hereafter existing, or due or to become due, and
howsoever owned, held or acquired by Foothill.
(b) The liability of each Borrower hereunder and under the
Loan Documents shall be absolute, unconditional and irrevocable
irrespective of:
(i) any lack of validity, legality or
enforceability of this Agreement, or any other Loan
Document as to either Borrower;
(ii) the failure of Foothill
(A) to enforce any right or remedy against
either Borrower or any other Person (including
any guarantor or either Borrower) under the
provisions of this Agreement, any other Loan
Documents or otherwise, or
(B) to exercise any right or remedy against
any other guarantor of, or collateral security
any Obligations;
(iii) any change in the time, manner or place of
payment of, or in any other term of, all or any of the
Obligations, or other extension, compromise or renewal
of any Obligations;
(iv) any reduction, limitation, impairment or
termination of any Obligations with respect to either
Borrower for any reason including any claim of waiver,
release, surrender, alteration or compromise, and
shall not be subject to (and each Borrower hereby
waives any right to or claim of) any defense or
setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality,
nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence
affecting, any Obligations with respect to either
Borrower;
(v) any addition, exchange, release, surrender
or nonperfection of any Collateral, or any amendment
to or waiver or release or addition of, or consent to
departure from any guaranty, held by any Foothill
securing any of the Obligations; or
(vi) any other circumstance which might otherwise
constitute a defense available to, or a legal or
equitable discharge of, either Borrower, any surety or
any guarantor.
Each Borrower agrees if such Borrower's guaranty hereunder,
or if any liens securing such guaranty, would, but for the
application of this sentence, be unenforceable under applicable law,
such guaranty and each such lien shall be valid and enforceable to
the maximum extent that would not cause such guaranty or such lien to
be enforceable under applicable law, and such guaranty and such lien
shall be deemed to have been automatically amended accordingly at all
relevant times.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed.
MULTIGRAPHICS, INC., formerly known
as AM INTERNATIONAL, INC.,
a Delaware corporation
By ________________________________
Title _____________________________
PUBLISHING SOLUTIONS INC.,
an Ohio corporation
By ________________________________
Title _____________________________
FOOTHILL CAPITAL CORPORATION,
a California corporation
By ________________________________
Title _____________________________
