MASTER SECURITY AGREEMENT
This Master Security Agreement ("Agreement") dated this 15th day of
September, 1998, is made by Phoenix Color Corp., a Delaware corporation
("Phoenix"), PCC Express, Inc., a Delaware corporation ("PCC") and Phoenix (MD.)
Realty LLC, a Maryland limited liability company ("Realty") (Phoenix, PCC and
Realty are sometimes referred to herein individually as "Debtor" or collectively
as "Debtors") in favor of First Union National Bank, a national banking
association, as collateral agent (in such capacity "Collateral Agent") for (i)
First Union National Bank, as agent (in such capacity "Bank Agent"), for the
lenders ("Lenders") and issuer ("Issuer") parties to the Credit Agreement, dated
as of the date hereof (as amended, modified, restated or supplemented from time
to time, "Credit Agreement"), among the borrowers ("Borrowers"), Bank Agent,
Issuer and Lenders and (ii) First Union Investors, Inc. ("Purchaser") as
purchaser of, and any other holder of the Bridge Notes or Exchange Notes as
defined in, and issued under, the Bridge Securities Purchase Agreement (as
amended, modified, restated or supplemented from time to time, "Purchase
Agreement"), among Phoenix, PCC, Realty and Purchaser.
BACKGROUND
A. Borrowers, Issuer, Lenders and Bank Agent have entered into the Credit
Agreement which, as set forth in the Background thereto (which Background is
incorporated by reference as if fully set forth herein), inter alia, confirms
and preserves the continued effect and operation of liens and security interests
granted under the Existing Loan Agreement (as defined in the Credit Agreement).
B. Phoenix and Purchaser have entered into the Purchase Agreement pursuant
to which Phoenix may issue, from time to time the Bridge Notes and Exchange
Notes (as defined in the Purchase Agreement) and PCC and Realty have guaranteed,
in accordance with the terms of the Purchaser Agreement, the payment and
performance of Phoenix's obligations under the Purchase Agreement.
C. It is a condition precedent to the effectiveness of the Credit
Agreement that each Debtor pledge the Collateral as provided herein in order to
secure the Loan Obligations under, and as defined in, the Credit Agreement.
D. It is a condition precedent to the effectiveness of the Purchase
Agreement that each Debtor pledge the Collateral as herein provided in order to
secure the Bridge Note Obligations and Exchange Note Obligations, each as
defined in the Credit Agreement.
E. It is the intention of the parties that the legal operation and effect
of the Existing Loan Agreement be confirmed, as modified, amended, supplemented
and restated by the Credit
Agreement and this Agreement and that, in the event of any inconsistency between
the terms of the Existing Credit Agreement, on one hand, and the terms and
conditions of the Credit Agreement and this Agreement, on the other, the terms
of the Credit Agreement and this Agreement shall govern.
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
SECTION 1. DEFINED TERMS
1.1 Definitions. (a) Unless otherwise defined herein, terms defined in the
Credit Agreement and used herein shall have the meanings given to them in the
Credit Agreement or by reference therein.
(b) The following terms shall have the following meanings:
Bridge Note Majority Holders - The holders of more than fifty
percent (50%) of the outstanding principal amount of the Bridge Notes.
Collateral - As defined in Section 2.
Default - Any Default under and as defined in the Credit Agreement
or any Default under and as defined in the Purchase Agreement.
Event of Default - Any Event of Default under and as defined in the
Credit Agreement or any Event of Default under and as defined in the
Purchase Agreement.
Exchange Note Holders - Any holders of the Exchange Notes.
Obligations - The collective reference to (i) the Loan Obligations,
(ii) the Bridge Note Obligations and (iii) the Exchange Note Obligations,
in each case whether on account of principal, interest, fees, indemnities,
costs, expenses or otherwise.
Secured Parties - Collectively, Bank Agent, Lenders, Issuer,
Purchaser, Trustee, holders of the Bridge Notes and Exchange Note Holders,
and any successors or assigns thereto.
Trustee - The trustee under the Exchange Indenture.
(c) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
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SECTION 2. SECURITY INTEREST
2.1 Description. As security for the prompt and complete payment and
performance (whether at the stated maturity, by acceleration or otherwise) of
all Obligations, each Debtor hereby assigns and grants to Collateral Agent (for
the benefit of Secured Parties), a continuing Lien on and security interest in,
upon and to the following property (the "Collateral"):
(a) Accounts, Contract Rights, Etc. - All of such Debtor's now owned
and hereafter acquired, created, or arising Accounts, accounts receivable, notes
receivable, contract rights, Chattel Paper, Documents (including documents of
title), Instruments, letters of credit and Goods;
(b) Inventory - All of such Debtor's now owned or hereafter acquired
Inventory of every nature and kind, wherever located;
(c) General Intangibles - All of such Debtor's now owned and
hereafter acquired, created or arising General Intangibles of every kind and
description, including, without limitation, all existing and future rights to
commissions, customer lists, choses in action, claims, books, records, patents
and patent applications, copyrights, copyright applications, servicemarks,
trademarks, tradenames, tradestyles, trademark applications, blueprints,
drawings, designs and plans, trade secrets, contracts, contract rights, license
agreements, formulae, tax and any other types of refunds, returned and unearned
insurance premiums, rights and claims under insurance policies including,
without limitation, credit insurance and key man life insurance policies, and
computer information, software, records and data;
(d) Equipment - All of such Debtor's now owned and hereafter
acquired Equipment, including, without limitation, machinery, vehicles,
furniture and Fixtures, wherever located, and all replacements, parts,
accessories, substitutions and additions thereto;
(e) Deposit Accounts - All of such Debtor's now existing and
hereafter acquired or arising deposit accounts of every nature, including,
without limitation, the Cash Collateral Account, wherever located, and all
documents and records associated therewith;
(f) Property in Lender's Possession - All Property of such Debtor,
now or hereafter in any Secured Party's possession;
(g) Investment Property- All of such Debtor's now owned or hereafter
acquired Investment Property whether registered or unregistered; and
(h) Proceeds - The Proceeds (including, without limitation,
insurance proceeds), whether cash or non-cash, of all of the foregoing.
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2.2 Lien Documents. As Collateral Agent deems necessary, each Debtor shall
execute and deliver to Collateral Agent, for the benefit of Secured Parties, or
have executed and delivered (all in form and substance satisfactory to
Collateral Agent):
(a) Financing Statements. Financing statements pursuant to the UCC,
which Collateral Agent may file in any jurisdiction where any Collateral is or
may be located and in any other jurisdiction that Collateral Agent deems
appropriate; and
(b) Other Agreements. Any other agreements, documents, instruments
and writings, including, without limitation, intellectual property security
agreements required to evidence, perfect or protect Collateral Agent's Lien and
security interest in the Collateral required hereunder or as Collateral Agent
may request from time to time.
2.3 Other Actions. In addition to the foregoing, each Debtor shall do
anything further that may be lawfully and reasonably required by Collateral
Agent to secure Collateral Agent (for the benefit of Secured Parties), and
effectuate the intentions and objects of this Agreement, including, without
limitation, the execution and delivery of continuation statements, amendments to
financing statements, and any other documents required hereunder. At Collateral
Agent's request, each Debtor shall also immediately deliver to Collateral Agent
all items constituting Collateral for which Collateral Agent must receive
possession to obtain a perfected security interest, including, without
limitation, all notes, certificates and documents of title, Chattel Paper,
Instruments, and any other similar instruments constituting Collateral.
2.4 Filing Security Agreement. A carbon, photographic or other
reproduction or other copy of this Agreement or of a financing statement is
sufficient as and may be filed in lieu of a financing statement.
2.5 Landlord/Warehouseman Waiver. Each Debtor will use its best efforts to
cause each owner of any premises occupied by such Debtor or to be occupied by
such Debtor and each warehouseman of any warehouse, where, in either event,
Collateral is held, to execute and deliver to Collateral Agent an instrument, in
form and substance reasonably satisfactory to Collateral Agent, under which such
owner(s) or warehouseman subordinates its/his/their interests in and waives
its/his/their right to distrain on or foreclose against the Collateral and
agrees to allow Collateral Agent to remain on such premises to dispose of or
deal with any Collateral located thereon.
2.6 Power of Attorney. Each of the officers of Collateral Agent or its
representative is hereby irrevocably made, constituted and appointed the true
and lawful attorney for each Debtor (without requiring it to act as such) with
full power of substitution to do the following: (a) endorse, in favor of
Collateral Agent, the name of Debtor upon any and all checks, drafts, money
orders and other instruments for the payment of monies that are payable to such
Debtor and constitute collections on such Debtor's Accounts or other Collateral;
(b) execute in the name of each Debtor any financing statements in favor of
Collateral Agent; (c) execute in the name of
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each Debtor, schedules, assignments, instruments, documents and statements that
such Debtor is obligated to give Collateral Agent hereunder or is necessary to
perfect (or continue to evidence the perfection of) such security interest or
Lien; and (d) do such other and further acts and deeds in the name of each
Debtor that Collateral Agent may reasonably deem necessary or desirable to
enforce any Account or other Collateral or protect Collateral Agent's security
interest or Lien in the Collateral. The power of attorney set forth herein is
coupled with an interest.
2.7 Particular Releases of Security Interests. If it is determined that
the security interest granted in any Debtor's Equipment under Section 2.1(d)
constitutes a violation of any Permitted Lien that is a lease, conditional sale
contract or purchase money security agreement with respect to any particular
item of such Equipment, then upon Phoenix's written request to Collateral Agent,
which request shall be accompanied by such documentation as Collateral Agent may
reasonably require to verify such violation and to specifically identify such
Equipment, Collateral Agent shall execute a UCC-3 partial release statement for
such specified Equipment.
SECTION 3. REPRESENTATIONS AND WARRANTIES
3.1 Each Debtor represents and warrants that:
(a) Ratification. Each representation and warranty made by any
Debtor in (or referred to in) the Credit Agreement or the Purchase Agreement
relating to such Debtor is hereby ratified and confirmed and incorporated by
reference as if set forth herein in full.
(b) Perfection. This Agreement is effective to create in favor of
Collateral Agent, for the benefit of Secured Parties, legal, valid and
enforceable Liens and security interests in all right, title and interest of
each Debtor in the Collateral, and when financing statements have been filed in
the offices of the jurisdictions shown on Schedule "3.1(b)" attached hereto and
made a part hereof under such Debtor's name, Collateral Agent, for the benefit
of Secured Parties, will have perfected Liens and security interests in the
Collateral, superior in right to any and all other Liens, existing or future
other than Permitted Liens.
(c) Chief Executive Office. Each Debtor's chief executive office is
located at 000 Xxxxxxx Xxxxxxxx Xxxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000.
(d) Inventory and Equipment Location. Each Debtor keeps its
Inventory and Equipment at the locations set forth on Schedule 4.2 to the Credit
Agreement.
SECTION 4. COVENANTS
4.1 Each Debtor covenants and agrees with Collateral Agent and each
Secured Party that, from and after the date of this Agreement, until the
Obligations shall have been paid and satisfied in full and the Revolving Credit
has been terminated:
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(a) Ratification. Each covenant made by any Debtor in (or referred
to in) the Credit Agreement or the Purchase Agreement relating to such Debtor is
hereby ratified and confirmed and incorporated by reference as if set forth
herein in full.
(b) Change of Location. Each Debtor shall give thirty (30) days
prior written notice to Collateral Agent of any change in the location of any
Collateral from that set forth in Schedule 4.2 to the Credit Agreement or of any
change of its chief executive office.
(c) Insurance. Each Debtor shall maintain casualty, public
liability, product liability and business interruption insurance as set forth in
the Credit Agreement. The policies of all such casualty insurance shall contain
standard Mortgagee and Lender's Loss Payable Clauses (and, with respect to
liability and interruption insurance, additional insured clauses) issued in
favor of Collateral Agent under which all losses thereunder shall be paid to
Collateral Agent (for application in accordance with the terms of the Collateral
Agency Agreement) as Collateral Agent's interest may appear. Such policies shall
expressly provide that the requisite insurance cannot be altered or canceled
without thirty (30) days prior written notice to Collateral Agent and shall
insure Collateral Agent notwithstanding the act or neglect of any Debtor. Each
Debtor hereby irrevocably appoints Collateral Agent as such Debtor's
attorney-in-fact (which power is coupled with an interest), exercisable at
Collateral Agent's option to endorse any check (but only a check in excess of
$100,000 if no Event of Default has occurred) which may be payable to any Debtor
in order to collect the proceeds of such insurance and any amount or amounts
collected by Collateral Agent pursuant to the provisions of this paragraph may
be applied by Collateral Agent, in its sole discretion, in the manner set forth
in the Collateral Agency Agreement or to repair, reconstruct or replace the loss
of or damage to Collateral as Collateral Agent in its reasonable judgment may
from time to time determine.
SECTION 5. REMEDIES
5.1 Rights and Remedies on Default. Collateral Agent may, at any time
after an acceleration of Loan Obligations, Bridge Note Obligations or Exchange
Note Obligations, following the occurrence of an Event of Default, exercise
rights and remedies of a secured party granted to it under the UCC and may
exercise all rights and remedies under any other applicable law, including,
without limitation, the following rights and remedies:
(i) the right to take possession of, send notices, and collect
directly the Collateral, with or without judicial process (including, without
limitation the right to notify the United States postal authority to redirect
all mail addressed to a Debtor to an address designated by Collateral Agent);
(ii) by its own means or with judicial assistance, enter any
Debtor's premises and take possession of the Collateral, or render it unusable,
or dispose of the Collateral on such premises without any liability for rent,
storage, utilities or other sums, and no Debtor shall resist or interfere with
such action;
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(iii) require each Debtor at such Debtor's expense to assemble all
or any part of the Collateral and make it available to Collateral Agent at any
place designated by Collateral Agent; and
(iv) in its discretion, collect and dispose of all Proceeds arising
from all Accounts and General Intangibles. Collateral Agent may (A) notify
Account Debtors and other obligors of the grant to and creation in favor of
Collateral Agent of the security interest in the Accounts, General Intangibles
and the Proceeds thereof under this Agreement, (B) direct such Account Debtors
or other obligors to make any payments from time to time due in respect of any
such Accounts and General Intangibles directly to Collateral Agent at such
places as it directs and (C) assume entire control over all of the Proceeds of
such Accounts and General Intangibles. Each Debtor shall promptly remit all such
Proceeds then or subsequently in its possession, and any collections and
receipts with respect to such Proceeds shall be held in trust by such Debtor for
the benefit of Collateral Agent.
Each Debtor hereby agrees that a notice received by it at least ten (10) days
before the time of any intended public sale or of the time after which any
private sale or other disposition of the Collateral is to be made, shall be
deemed to be reasonable notice of such sale or other disposition. If permitted
by applicable law, any perishable Inventory or Collateral which threatens to
speedily decline in value or which is sold on a recognized market may be sold
immediately by Collateral Agent without prior notice to such Debtor. Collateral
Agent, Bank Agent, Lenders, Issuer, Purchaser, Trustee, and any holder of the
Bridge Notes or Exchange Notes shall have the right upon any such public sale or
sales and, to the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of the Collateral so sold free of any equity
or right of redemption which each Debtor hereby waives. Each Debtor covenants
and agrees not to interfere with or impose any obstacle to Collateral Agent's
exercise of its rights and remedies with respect to the Collateral, after the
occurrence of an Event of Default hereunder
5.2 License of General Intangibles. For purpose of enabling Collateral
Agent to exercise its rights and remedies hereunder, each Debtor hereby grants
to Collateral Agent an irrevocable, nonexclusive license (exercisable without
payment of any royalty or other compensation to any Debtor) to use assign,
license or sublicense any Debtor's General Intangibles, wherever the same may be
located, including in such license reasonable access to all media in which any
General Intangibles may be recorded or stored and to all computer programs used
for the compilation or printout thereof; provided that Collateral Agent shall
comply with all reasonable quality control standards and trademark use
requirements of such Debtor. No agreements hereafter acquired or agreed to or
entered into by any Debtor shall prohibit, restrict or impair the rights granted
to Collateral Agent hereunder. Notwithstanding the foregoing, neither Collateral
Agent nor any Secured Party shall have any obligations or liabilities regarding
any Debtor's General Intangibles by reason of, or arising out of, this
Agreement.
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5.3 Nature of Remedies. Collateral Agent shall have the right to proceed
against all or any portion of the Collateral in any order and may apply such
Collateral to the Obligations in accordance with the terms of the Collateral
Agency Agreement. All rights and remedies granted Collateral Agent hereunder and
under any agreement referred to herein, or otherwise available at law or in
equity, shall be deemed concurrent and cumulative, and not alternative remedies,
and Collateral Agent may proceed with any number of remedies at the same time
until all existing and future Obligations are satisfied in full and the
Revolving Credit has been terminated. The exercise of any one right or remedy
shall not be deemed a waiver or release of any other right or remedy, and
Collateral Agent, upon the occurrence of an Event of Default, may proceed
against any Debtor, and/or the Collateral, at any time, under any agreement,
with any available remedy and in any order.
SECTION 6. COLLATERAL AGENT
6.1 Performance by Collateral Agent of Debtors' Obligations. If any Debtor
fails to perform or comply with any of its agreements contained herein,
Collateral Agent, at its option, but without any obligation so to do, may
perform or comply, or otherwise cause performance or compliance, with such
agreement.
6.2 Duty of Collateral Agent; Release of Collateral. (a) Collateral
Agent's sole duty to any Person with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9207 of
the UCC or otherwise, shall be to deal with it in the same manner as Collateral
Agent deals with similar property for its own account. Neither Collateral Agent
nor any other Secured Party nor any of their respective officers, directors,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
any Debtor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The powers conferred on Collateral
Agent and the other Secured Parties hereunder are solely to protect such
parties' interests in the Collateral and shall not impose any duty upon any of
such parties to exercise any such powers. Such parties shall be accountable only
for amounts that they actually receive as a result of the exercise of such
powers, and neither they nor any of their officers, directors, employees or
agents shall be responsible to any Debtor for any act or failure to act
hereunder, except for their own gross negligence or willful misconduct.
(b) Except as otherwise provided in Section 2.7 hereof, Collateral
Agent shall release the Liens on the Collateral granted hereunder only upon
receipt of notice from Bank Agent, Bridge Note Majority Holders and Trustee
which notices, taken together, confirm the satisfaction in full of all of the
Obligations and termination of the Revolving Credit.
6.3 Authority of Collateral Agent. Each Debtor acknowledges that the
rights and responsibilities of Collateral Agent under this Agreement with
respect to any action taken by
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Collateral Agent or the exercise or non-exercise by the Collateral Agent of any
option, voting right request, judgment or other right or remedy provided for
herein or resulting or arising out of this Agreement shall, as between Bank
Agent (for the benefit of Lenders) on the one hand and the holders of the Bridge
Notes and holders of the Exchange Notes on the other hand be governed by the
Collateral Agency Agreement and by such other agreements with respect thereto as
may exist from time to time among them; and as between Bank Agent and Lenders,
be governed by the Credit Agreement and by such other agreements with respect
thereto as may exist from time to time among them; and as among the Bridge Note
Holders be governed by the Purchase Agreement and such other agreements with
respect thereto as may exist from time to time among them; and as among the
Exchange Note Holders be governed by the Exchange Indenture and such other
agreements with respect thereto as may exist from time to time among them; but,
as between Collateral Agent and Debtors, Collateral Agent shall be conclusively
presumed to be acting as agent for Secured Parties, in accordance with the
Collateral Agency Agreement, with full and valid authority so to act or refrain
from acting and no Debtor shall be under any obligation, or entitlement, to make
any inquiry respecting such authority.
SECTION 7. MISCELLANEOUS
7.1 GOVERNING LAW. THIS AGREEMENT, SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE SUBSTANTIVE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA WITHOUT
REGARD TO ITS OTHERWISE APPLICABLE PRINCIPLES OF CONFLICT OF LAWS. THE
PROVISIONS OF THIS AGREEMENT AND ALL OTHER AGREEMENTS AND DOCUMENTS REFERRED TO
HEREIN ARE TO BE DEEMED SEVERABLE, AND THE INVALIDITY OR UNENFORCEABILITY OF ANY
PROVISION SHALL NOT AFFECT OR IMPAIR THE REMAINING PROVISIONS WHICH SHALL
CONTINUE IN FULL FORCE AND EFFECT.
7.2 Waiver. No omission or delay by Collateral Agent in exercising any
right or power under this Agreement or any related agreements and documents will
impair such right or power or be construed to be a waiver of any Default, or
Event of Default or an acquiescence therein, and any single or partial exercise
of any such right or power will not preclude other or further exercise thereof
or the exercise of any other right, and as to Debtors no waiver will be valid
unless in writing and signed by Collateral Agent and then only to the extent
specified.
7.3 Notices. Any notices or consents required or permitted by this
Agreement shall be in writing and shall be deemed given to Debtors if effected
in the manner set forth in Section 9.8 of the Credit Agreement and to Collateral
Agent if effected in the manner set forth in the Collateral Agency Agreement.
7.4 Headings. The headings of any paragraph or Section of this Agreement
are for convenience only and shall not be used to interpret any provision of
this Agreement.
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7.5 Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties. No Debtor
may transfer, assign or delegate any of its duties or obligations hereunder.
7.6 Duplicate Originals. Two or more duplicate originals of this Agreement
may be signed by the parties, each of which shall be an original but all of
which together shall constitute one and the same instrument. This Agreement may
be executed in counterpart, all of which counterparts taken together shall
constitute one fully completed fully executed document.
7.7 Modification. No modification hereof or any agreement referred to
herein shall be binding or enforceable unless in writing and signed by Debtors,
Collateral Agent, Bank Agent, Majority Bridge Note Holders and, if appointed,
Trustee.
7.8 Signatories. Each individual signatory hereto represents and warrants
that he is duly authorized to execute this Agreement on behalf of his principal
and that he executes the Agreement in such capacity and not as a party.
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
the day and year first above written.
PHOENIX (MD.) REALTY, LLC PHOENIX COLOR CORP.
By: /s/ Xxxxxx Xxxxxxxxx By: /s/ Xxxxxx Xxxxxxxxx
------------------------------ ------------------------------
Title: Treasurer Title: Exec. VP
PCC EXPRESS, INC.
By: /s/ Xxxxxx Xxxxxxxxx
------------------------------
Title: Exec. VP
Accepted:
FIRST UNION NATIONAL BANK,
as Collateral Agent
By: /s/ Xxxxxxxx X. Xxxxx
------------------------------
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