EXHIBIT 10.56
REIMBURSEMENT AGREEMENT
BETWEEN
PRIORITY FULFILLMENT SERVICES, INC.
AND
COMERICA BANK
EXECUTION COPY
EXHIBIT 10.56
INDEX
SECTION 1. Reimbursement and Other Payments............................................. 1
SECTION 2. Issuance of Letter of Credit................................................. 3
SECTION 3. Conditions Precedent to the Issuance of the Letter of Credit................. 3
SECTION 4. Obligations Absolute......................................................... 5
SECTION 5. Representations and Warranties............................................... 6
SECTION 6. Affirmative Covenants........................................................ 8
SECTION 7. Negative Covenants of the Obligor............................................ 9
SECTION 8. Events of Default............................................................ 9
SECTION 9. Collateral Security.......................................................... 10
SECTION 10. Amendments, Waivers, Etc..................................................... 10
SECTION 11. Addresses for Notices........................................................ 11
SECTION 12. No Waiver; Remedies.......................................................... 11
SECTION 13. Indemnification.............................................................. 11
SECTION 14. Continuing Obligation........................................................ 12
SECTION 15. Transfer of Letter of Credit................................................. 12
SECTION 16. Liability of the Bank........................................................ 12
SECTION 17. Costs, Expenses and Taxes.................................................... 13
SECTION 18. Disbursements................................................................ 13
SECTION 19. Severability................................................................. 13
SECTION 20. Waiver of Jury Trial......................................................... 13
SECTION 21. Jurisdiction................................................................. 14
SECTION 22. Authorized Signers........................................................... 14
SECTION 23. Governing Law................................................................ 14
SECTION 24. Headings..................................................................... 14
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REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT (the "Agreement") dated as of November 1, 2004
(the "Execution Date") by and between PRIORITY FULFILLMENT SERVICES, INC., a
Delaware corporation, whose address is 500 N. Central Expressway, 5th Floor,
Plano, Texas 75074 (the "Obligor") and COMERICA BANK, a Michigan banking
corporation, with an office located at 800 E. Campbell Road, Suite 254,
Richardson, Texas 75081 (the "Bank").
WITNESSETH:
WHEREAS, the Obligor has requested the Mississippi Business Finance
Corporation (the "Issuer") to finance the cost of acquiring equipment and
machinery (and related assets) to be used at a distribution facility located at
8474 Marketplace, Southaven, Mississippi (the financing of the machinery and
equipment collectively referred to herein as the "Project") by the issuance and
sale, pursuant to a Trust Indenture dated as of November 1, 2004 (the
"Indenture"), naming U.S. Bank National Association, as trustee (the "Trustee"),
of $5,000,000 principal amount of the Issuer's Variable Rate Demand Limited
Obligation Revenue Bonds (Priority Fulfillment Services, Inc. Project), Series
2004 (the "Bonds") to the purchaser or purchasers (the "Bond Purchasers"); and
WHEREAS, in order to induce the Bond Purchasers to purchase the Bonds, the
Obligor has requested that the Bank issue an irrevocable letter of credit (such
letter of credit and any successor letter of credit as described in Section 2 of
this Agreement being herein called the "Letter of Credit") in an amount not to
exceed $5,061,643.84 (such amount being herein called the "Letter of Credit
Amount") to secure payment of the principal and purchase price of, and interest
on, the Bonds;
NOW, THEREFORE, in consideration of the premises, the Obligor and the Bank
hereby agree as follows:
SECTION 1. Reimbursement and Other Payments.
(a) The Obligor hereby agrees with the Bank as follows: (i) to pay the
Bank, following payment by the Bank of any drawing presented under a Letter of
Credit (other than a Purchase Drawing (as defined in the Letter of Credit)), and
on the same day on which such drawing is so paid, a sum (and interest on such
sum as provided in clause (ii) below) equal to the amount so paid under the
Letter of Credit; (ii) to pay the Bank, interest on any and all amounts
remaining unpaid by the Obligor hereunder, at any time from the date any such
amount becomes payable until payment in full, payable on demand, at a
fluctuating interest rate per annum (computed on the basis of a 360 day year for
the actual number of days elapsed) as shall be in effect from time to time,
which rate per annum shall be equal to three percent (3%) above its prime rate
established by the Bank from time to time, which prime rate may not necessarily
be the Bank's lowest rate for loans ("Prime Rate"), provided that such
fluctuating interest rate shall in no event be higher than the maximum rate
permitted by law and, in addition, upon demand by the Bank any and all
reasonable expenses including but not limited to legal expenses incurred by the
Bank in enforcing any rights under this Agreement.
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(b) The Obligor hereby agrees to pay to the Bank, following payment by the
Bank of any Purchase Drawing presented under the Letter of Credit, interest on
all amounts owed the Bank as the result of the Bank honoring the Drawing,
payable monthly, at a fluctuating interest rate per annum (computed on the basis
of a year of 360 days) equal to one percent (1%) above the Bank's Prime Rate.
The Bank shall notify the Obligor in writing of the amounts due pursuant to this
Subsection 1(b). The amount of each Purchase Drawing shall be due and payable
upon the earlier of (A) the expiration or earlier termination date of the Letter
of Credit, (B) upon the occurrence of an Event of Default, (C) immediately from
the proceeds of a remarketing of the Bonds to the extent of such remarketing
proceeds; or (D) sixty (60) days after the date of such Purchase Drawing.
(c) In addition, the Obligor hereby agrees to pay to the Bank a commission
with respect to the Letter of Credit, computed (on the basis of a year of 360
days for the actual number of days elapsed) at the rate of three quarters of one
percent (3/4%) per annum on the Letter of Credit Amount (or, in the event, and
effective the first date on which an annual payment of the Letter of Credit
commission is due following the date of any reduction in the maximum amount
available under the Letter of Credit in accordance with the terms thereof, on
such smaller amount to which the maximum amount available under the Letter of
Credit may have been so reduced from time to time) from and including the date
of issuance of the Letter of Credit to but excluding the last day a drawing is
available under the Letter of Credit (the "Expiration Date"), payable annually
in advance on the first day of December of each year until the Expiration Date;
provided, that the first installment shall be payable on the date of issuance of
the Letter of Credit for the period from and including such date of issuance
until November 30, 2005. If the Expiration Date occurs on a day prior to the
date to which a commission has been prepaid under this Section 1(b), the Bank
agrees to repay, promptly after the Expiration Date, such portion of such
commission as is allocable to the period from and including the Expiration Date
until the day to which such commission has been prepaid; provided, that the Bank
shall not be obligated to repay any portion of such commission if at the close
of the Bank's business on the Expiration Date an Event of Default shall have
occurred and is then continuing.
(d) If any change in any law or regulation or in the interpretation or
implementation thereof by any court or administrative or governmental authority
charged with the administration thereof (including, without limitation, a change
in a requirement that affects the manner in which the Bank allocates capital
resources to its commitments, including its obligations hereunder and under the
Letter of Credit) shall either (i) impose, modify or deem applicable any
reserve, special deposit, limitation or similar requirement against letters of
credit issued by, or assets held by, or deposits in or for the account of, the
Bank or (ii) impose upon, modify, require, make or deem applicable to the Bank
any increased capital requirement or similar requirement (including, without
limitation, a new requirement that affects the manner in which the Bank
allocates capital resources to its commitments including its obligations
hereunder or under the Letter of Credit) or (iii) impose on the Bank any other
condition regarding this Agreement or the Letter of Credit, and the result of
any event referred to in clause (i), (ii) or (iii) above shall be an increase in
the cost to the Bank of issuing or maintaining the Letter of Credit or reduce
the rate of return on capital, as a consequence of the issuing or maintaining
the Letter of Credit or performing the Bank's obligations hereunder, to a level
below that which the Bank would have achieved but for such events; (which
increase in cost or decreased benefit shall be determined by the Bank's
reasonable allocation of the aggregate of such cost increases or reduced
benefits resulting from
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such events), then, upon demand by the Bank, the Obligor, shall immediately pay
to the Bank, from time to time as specified by the Bank, additional amounts
which shall be sufficient to compensate the Bank for such increased cost or
decreased benefit, together with interest on each such amount commencing the
date such compensation is demanded until payment in full thereof at the rate
provided in subsection (a)(ii) above. A certificate as to such increased cost or
decreased benefit incurred by the Bank as a result of any event mentioned in
clause (i), (ii) or (iii) above, submitted by the Bank to the Obligor, shall be
rebuttably presumed correct as to the amount thereof absent fraud or
demonstrable mistake in calculation.
(e) In addition, in the event that a successor Trustee is appointed
pursuant to the Indenture, the Obligor agrees to pay the Bank a commission equal
to $1,500 for transferring the Letter of Credit to the successor Trustee, plus
any out-of-pocket expenses incurred by the Bank in connection with such
transfer. Both such commission and such expenses shall be paid at the time of
transfer of the Letter of Credit.
(f) In addition, the Obligor agrees to pay the Bank a Letter of Credit
draw processing fee equal to $250, plus wiring and mailing expenses for each
drawing under the Letter of Credit submitted by the Trustee to the Bank (if an
interest drawing and a principal drawing are submitted at the same time, they
shall be treated as one drawing for purposes of determining the draw processing
fee), said fee to be due and payable on the date a drawing is submitted by the
Trustee to the Bank.
(g) All payments by the Obligor to the Bank hereunder shall be made in
lawful money of the United States and in immediately available funds at the
Bank's office at 500 Woodward Avenue, Detroit, Michigan 48226, or such other
office of the Bank as may be designated from time to time by written notice to
the Obligor by the Bank. All such payments will be charged when due to Obligor's
account no. 1892024777 maintained with Bank (or any other deposit or other
accounts of Obligor with Bank); provided, however, this authorization shall not
affect Obligor's obligation to pay, when due, any indebtedness hereunder whether
or not account balances are sufficient to pay amounts due.
SECTION 2. Issuance of Letter of Credit. On or before December 29, 2004,
upon written notice from the Obligor to the Bank and subject to the satisfaction
of the conditions precedent specified in Section 3 below, the Bank will issue
the Letter of Credit in substantially the form of Exhibit "A" hereto, in favor
of the Trustee and expiring no later than December 16, 2006. The Obligor hereby
requests that the Bank issue the Letter of Credit in the form attached as
Exhibit "A".
SECTION 3. Conditions Precedent to the Issuance of the Letter of Credit.
The obligation of the Bank to issue the Letter of Credit is subject to the
satisfaction of the following conditions precedent:
(a) On or before the date of issuance of the Letter of Credit, the Obligor
shall have paid to the Bank the commission payable on such date of issuance
under Section 1(c) above.
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(b) On or before the date of issuance of the Letter of Credit, the Bank
shall have received the following, each dated contemporaneous with the date of
issuance of the Letter of Credit and in form and substance satisfactory to the
Bank:
(i) Certified copies of resolutions of the Board of Directors of the
Obligor approving this Agreement, the form and content of the Letter of
Credit and the other matters and documents contemplated hereby.
(ii) A Certificate of the Secretary or an Assistant Secretary of the
Obligor, certifying the names and true signatures and incumbency of the
officers of the Obligor, authorized to sign this Agreement, and the other
documents to be delivered by it hereunder.
(iii) Certified copies of the Articles of Incorporation of the
Obligor and certificates of good standing for the Obligor from each
jurisdiction in which its conduct or activities require it to be licensed
to do business.
(iv) A full set of the Obligor's Bylaws duly certified by the
Secretary or an Assistant Secretary of the Obligor.
(v) Favorable opinion of Wolff and Samson counsel for the Obligor
and the Guarantor (as defined herein), in form and substance satisfactory
to the Bank.
(vi) A favorable opinion of Watkins, Ludden, Winter & Stennis, P.A.,
as Bond Counsel, in form and substance satisfactory to the Bank.
(vii) A favorable opinion of Bodman LLP, as counsel for the Bank, in
form and substance satisfactory to the Bank.
(viii) An executed copy of the Indenture (or a copy thereof
certified as to authenticity by the Trustee)
(ix) An executed copy of that certain Loan Agreement dated as of the
Execution Date between the Issuer and the Obligor (the "Loan Agreement")
(or a copy thereof certified as to authenticity by Counsel for or an agent
of the Issuer).
(x) Counterpart originals of the guarantees, mortgages, security
agreements, subordination agreements and other documents constituting the
Collateral Documents (as defined in Section 9 of this Agreement) together
with evidence of such recordings, filings of financing statements or of
other actions necessary or desirable to establish the priority of lien in
the Security (as defined in Section 9 of this Agreement) as the Bank may
require.
(xi) A copy of the Private Placement Memorandum (together with the
documents incorporated therein by reference, herein called the "Private
Placement Memorandum") of the Issuer relating to the Bonds.
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(xii) An executed original of that certain Pledge and Security
Agreement dated as of the Execution Date between the Obligor, the Bank and
the Trustee.
(xiii) A redemption notice to the Trustee duly executed by Obligor
with respect to the redemptions required under Section 6(d) of this
Agreement.
(xiv) Such other documents, instruments, approvals (and, if
requested by the Bank, certified duplicates of executed copies thereof) or
opinions as the Bank may reasonably request.
(c) The following statements shall be true and correct on and as of the
date of issuance of the Letter of Credit, and the Bank shall have received a
certificate signed by a duly authorized officer of the Obligor, dated the date
of such issuance, stating that:
(i) the representations and warranties contained in Section 5 of
this Agreement are correct on and as of the date of such issuance as
though made on and as of such date; and
(ii) no event has occurred which constitutes an Event of Default or
which would constitute an Event of Default but for the requirement that
notice be given or time elapse or both, nor will the issuance of the
Letter of Credit give rise to the occurrence of an Event of Default.
(d) On or before the day of the issuance of the Letter of Credit:
(i) the Issuer and the Trustee shall have duly authorized and
executed the Indenture and the Indenture shall continue to be in full
force and effect;
(ii) the Obligor and the Issuer shall have duly authorized and
executed the Loan Agreement and the Loan Agreement shall continue to be in
full force and effect;
(iii) the Obligor shall have duly authorized and executed the
Collateral Documents and the Collateral Documents shall continue to be in
full force and effect;
(iv) the Bonds, the Indenture, the Loan Agreement, the Collateral
Documents, the Pledge and Security Agreement and any other agreement or
instrument relating to any of the foregoing (the "Operative Documents")
shall be in form and substance satisfactory to the Bank.
SECTION 4. Obligations Absolute. The payment obligations of the Obligor
under this Agreement shall be absolute, unconditional and irrevocable, and shall
be paid strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including, without limitation, the following
circumstances, either alleged or established:
(a) any lack of validity or enforceability of the Operative
Documents;
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(b) any amendment or waiver of or any consent to departure from or in
connection with the Operative Documents, including any substitution, exchange or
release of collateral with respect to any of the Operative Documents;
(c) the existence of any claim, set-off, defense or other right which the
Obligor may have at any time against the Trustee, any beneficiary or any
transferee of the Letter of Credit (or any persons or entities for whom the
Trustee, any such beneficiary or any such transferee may be acting), the Bank or
any other person or entity, whether in connection with this Agreement, the
Operative Documents, the transactions contemplated herein or therein or any
unrelated transaction;
(d) any statement or any other document presented under the Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect whatsoever;
(e) payment in good faith by the Bank under the Letter of Credit against
presentation of a drawing or certificate which does not comply with the terms of
the Letter of Credit;
(f) any failure, omission, delay or lack on the part of the Bank or any
party to any of the Operative Documents to enforce, assert or exercise any
right, power or remedy conferred upon the Bank or any such party under this
Agreement or any of the Operative Documents, or any other acts or omissions on
the part of the Bank or any such party;
(g) the voluntary or involuntary liquidation, dissolution, sale or other
disposition of all or substantially all the assets of the Obligor or the Issuer;
the receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition with creditors or
readjustment or other similar proceedings affecting the Obligor or the Issuer or
any of the assets of either of them, or any allegation or contest of the
validity of this Agreement or any of the Operative Documents, in any such
proceedings;
(h) any other circumstance or happening whatsoever, whether or not similar
to any of the foregoing, and any other event or action that would, in the
absence of this clause, result in the release or discharge by operation of law
of the Obligor from the performance or observance of any obligation, covenant or
agreement contained in this Agreement.
No setoff, counterclaim, reduction or diminution of any obligation, or any
defense of any kind or nature which the Obligor has or may have against the
Issuer or the Trustee shall be available hereunder to the Obligor against the
Bank.
SECTION 5. Representations and Warranties. The Obligor represents and
warrants as of the Execution Date, as follows:
(a) The Obligor is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware.
(b) The execution, delivery and performance by the Obligor of this
Agreement, the Loan Agreement, the Pledge and Security Agreement and the
Collateral Documents, as the case may be, are within the Obligor's corporate
powers, have been duly authorized by all necessary
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corporate action, do not contravene or violate (i) the Articles of Incorporation
or Bylaws of the Obligor, (ii) any law, order, rule or regulation applicable to
the Obligor, (iii) any material contract or agreement to which the Obligor is a
party or by which it is bound and does not result in or require the creation of
any lien, security interest or other charge or encumbrance (other than pursuant
to the Collateral Documents, this Agreement, the Indenture, the Pledge and
Security Agreement or the Loan Agreement) upon or with respect to any of its
properties.
(c) All registration with, authorizations by, or approvals of any
governmental body required to be obtained by the Obligor for its execution,
delivery and performance of this Agreement, the Loan Agreement, the Pledge and
Security Agreement and the Collateral Documents have been obtained and remain in
full force and effect.
(d) This Agreement, the Loan Agreement, the Pledge and Security Agreement
and the Collateral Documents are legal, valid and binding obligations of the
Obligor, enforceable against it in accordance with their respective terms,
except as enforceability may be subject, to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar law affecting
creditors' rights generally.
(e) There is not pending or, to the knowledge of the Obligor, threatened
any action or proceeding before any court, governmental agency or arbitrator
against or affecting the Obligor which, if determined adversely to the Obligor,
would materially and adversely affect the financial condition or operations of
the Obligor.
(f) The Obligor has not incurred any material accumulated funding
deficiency within the meaning of the Employment Retirement Income Security Act
of 1974 ("ERISA") and has not incurred any material liability to the Pension
Benefit Guaranty Corporation ("PBGC") in connection with any employee benefit
plan established or maintained by the Obligor or any Guarantor.
(g) The Obligor is not in default in the payment of any indebtedness for
borrowed money in an amount in excess of Fifty Thousand Dollars ($50,000) or
under the terms and provisions of any agreement or instrument evidencing any
such indebtedness.
(h) No representation or warranty of the Obligor contained in this
Agreement or in any of the Collateral Documents, and no statement contained in
any certificate, schedule, list, financial statement or other instrument
furnished to the Bank by or on behalf of the Obligor contains, or will contain,
any untrue statement of a material fact, or omits, or will omit, to state a
material fact necessary to make the statements contained herein or therein not
misleading in any material respect when made.
(i) The Obligor has obtained or will obtain at the appropriate times all
licenses, permits, authorizations, consents or approvals from each governmental
authority necessary for the operation of the Project; and all such licenses,
permits, authorizations, consents or approvals previously obtained, if any, are
in full force and effect.
(j) No Event of Default has occurred under the Loan and Security Agreement
dated March 28, 2003 between the Obligor, Priority Fulfillment Services of
Canada, Inc. and Bank, as the same may be amended from time to time ("Credit
Agreement") or event which with the
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giving of notice or passage of time or both would constitute an Event of Default
under the Credit Agreement shall have occurred and be continuing.
All of the Obligor's representations and warranties set forth in the
Credit Agreement, which relate to the Obligor, including, without limitation,
the representations and warranties in Section 5 of the Credit Agreement, are
hereby incorporated herein by reference as if set forth fully herein as
continuing representations and warranties of the Obligor, and shall remain
continuing representations and warranties hereunder, notwithstanding any
termination of the Credit Agreement after the date hereof.
SECTION 6. Affirmative Covenants. So long as a drawing is available under
the Letter of Credit, and thereafter until Obligor's liabilities and obligations
under this Agreement have been satisfied in full, the Obligor shall:
(a) Preservation of Corporate Existence. Etc. Preserve and maintain its
corporate existence and such of its rights (charter and statutory) and
privileges as are material to its business and operations; and qualify and
remain qualified as a foreign corporation in each jurisdiction in which such
qualification is material to its business and operations or the ownership of its
properties.
(b) Inspection Rights. At any reasonable time during normal business hours
and upon reasonable notice and from time to time, permit the Bank or any agents
or representatives thereof to examine and make copies of and abstracts from the
records and books of account of, and visit the properties of the Obligor and the
Project, and to discuss the affairs, finances and accounts of the Obligor with
any of its officers and directors.
(c) Reporting Requirements. Furnish to the Bank the following:
(i) as soon as possible after becoming aware of the occurrence of
each Event of Default or each event which, with the giving of notice or
lapse of time, or both, would constitute an Event of Default, a written
statement from the chief financial officer (or in his absence, a
responsible senior officer) of the Obligor setting forth details of such
Event of Default or event and the action which the Obligor has taken or
proposes to take with respect thereto; and
(ii) such other information respecting the business, properties, or
the financial condition or operations of the Obligor as the Bank may from
time to time reasonably request.
(d) Optional Redemption of Bonds. The Obligor shall cause the Bonds to be
optionally redeemed at the times and in the amounts set forth in Exhibit "B"
attached hereto. On the date hereof, Obligor shall deliver an instruction to the
Trustee in the form of Exhibit "C" to redeem the Bonds in accordance with the
schedule set forth on Exhibit "B". On the first business day of each month of
each year, commencing January 3, 2005, the Obligor shall pay to the Bank for
deposit to an interest bearing cash collateral account one twelfth (1/12th) of
the annual redemption payment next coming due, which moneys shall be used to
reimburse the Bank for payments by the Bank of drafts submitted by the Trustee
under the Letter of Credit.
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(e) Comply with Covenants. Comply with all affirmative, negative and
financial covenants contained in the Credit Agreement (as the same may be
amended, waived or modified from time to time), as if explicitly set forth
herein in their entirety ("Credit Agreement Covenants"). So long as this
Agreement remains in full force and effect, the Credit Agreement Covenants, as
incorporated herein by reference in accordance with the foregoing, shall remain
in full force and effect hereunder notwithstanding any termination of the Credit
Agreement after the date hereof.
SECTION 7. Negative Covenants of the Obligor. So long as a drawing is
available under the Letter of Credit and thereafter so long as any indebtedness
remains outstanding hereunder, the Obligor agrees that it will not, without the
prior written consent of the Bank:
(a) Amendment of Indenture or Loan Agreement. Enter into or agree to any
amendment, change or modification of, or any waiver of any provision of, the
Indenture or the Loan Agreement.
(b) Misrepresentation. Furnish the Bank with any certificate or other
document that contains any untrue statement of a material fact or omits to state
a material fact necessary to make such certificate or document not misleading in
light of the circumstances under which it was furnished.
(c) Use of Proceeds. Use or permit the use of the proceeds of the Bonds
for a purpose other than permitted under the Loan Agreement.
SECTION 8. Events of Default.
(a) The occurrence of any of the following events shall be an "Event of
Default" hereunder unless waived by the Bank pursuant to Section 10 hereof:
(i) Any representation or warranty made by the Obligor pursuant to
Section 5 hereof shall prove to have been untrue in any material respect
when made; or
(ii) The Obligor shall fail to pay when due any amount specified in
Section 1 hereof; or
(iii) The Obligor shall fail to perform or observe any of its
obligations or covenants under, or shall fail to comply with any of the
provisions of Section 6 or Section 7; or
(iv) The Obligor shall fail to perform or observe any of its
obligations or covenants under Section 6 or 7 of the Credit Agreement
which gives rise to an Event of Default under the Credit Agreement, taking
into account applicable periods of notice and cure under Section 8 of the
Credit Agreement; or
(v) The Obligor shall fail to perform or observe any other term,
covenant or agreement herein contained and continuance thereof for thirty
(30) days, or the Obligor or any guarantor of the Obligor's obligations to
the Bank ("Guarantor") shall fail to perform or observe any term, covenant
or agreement in any other agreement with the Bank to
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which it may be a party and such failure shall continue unremedied beyond
any applicable period of cure; or
(vi) Any material provision of the Agreement or any of the
Collateral Documents shall at any time for any reason cease to be valid
and binding on the Obligor, or shall be declared to be null or void, or
the validity or enforceability of any material provision of this Agreement
shall at any time for any reason be contested by the Obligor, or the
Obligor, shall deny that it has any or further liability or obligation
under this Agreement; or
(vii) An Event of Default under and as defined in the Loan
Agreement, the Credit Agreement, the Indenture and/or the Collateral
Documents shall have occurred and be continuing without the same being
cured or waived pursuant to the terms thereof (it being the intent of the
parties that so long as this Agreement remains in full force and effect
the Events of Default set forth in the Credit Agreement shall be Events of
Default hereunder regardless of whether the Credit Agreement shall be
terminated after the date hereof but before termination of this
Agreement).
(b) If any of the Events of Default specified in subsection (a) above
shall have occurred and be continuing, in addition to the Bank's other remedies
available under the Loan Agreement, the Indenture, the Pledge and Security
Agreement, the Collateral Documents, or such other documents executed in
connection herewith, or any other remedy available at law or in equity, then the
Bank may, at any time and in its sole discretion, but shall not be obligated to,
accelerate any indebtedness of Obligor to Bank under Section 1(b), or terminate
its commitment to issue the Letter of Credit or, if the Letter of Credit shall
have been issued, may elect to give notice to the Trustee pursuant to the
Indenture thereby requiring the Trustee to declare the principal of all Bonds
then outstanding and the interest accrued thereon and any premium thereon and
thereby owing to be immediately due and payable and/or require the Obligor to
deliver cash collateral to the Bank in the amount equal to the maximum amount
that may be available to be drawn at any time under the Letter of Credit.
SECTION 9. Collateral Security. To secure full and timely performance of
the Obligor's covenants set out in this Agreement and to secure the repayment of
all other moneys owing by the Obligor to the Bank whensoever arising and whether
associated with this Agreement or otherwise (i) the Obligor has granted to the
Bank first perfected security interests in all the Obligor's accounts
receivable, inventory, machinery and equipment and other tangible and intangible
personal property pursuant to certain previously executed loan documents and
(ii) the Obligor has caused to be delivered to the Bank the guaranty described
in attached Exhibit "D". The security agreements creating such liens in favor of
the Bank and the various guaranties agreements shall be granted pursuant to
documentation satisfactory in form and substance to the Bank and are herein
collectively called the "Collateral Documents".
SECTION 10. Amendments, Waivers, Etc. No amendments or waiver of any
provision of this Agreement nor consent to any departure by the Obligor
therefrom shall in any event be effective unless the same shall be in writing
and signed by the Bank and the Obligor, and then such amendment, waiver or
consent shall be effective only in the specific instance and for the
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specific purpose for which given. No amendment, waiver or consent with respect
to any provision of this Agreement shall affect any other provision of this
Agreement.
SECTION 11. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing and mailed or delivered as follows:
if to the Obligor:
Priority Fulfillment Services, Inc.
500 N. Central Expressway
5th Floor
Plano, Texas 75074
Attn: Thomas Madden
if to the Bank:
Comerica Bank
801 East Campbell
Suite 142
Richardson, Texas 75081
Attention: William Stuart Bell
or as to any party, at such other address as shall be designated by such party
in a written notice to the other party. All such notices and other
communications shall, when mailed, be effective three days after the date of
deposit in the mails, addressed as aforesaid.
SECTION 12. No Waiver; Remedies. No failure on the part of the Bank to
exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and exclusive of any remedies
provided by law.
SECTION 13. Indemnification. The Obligor hereby indemnifies and holds the
Bank harmless from and against any and all claims, damages, losses, liabilities,
costs or expenses whatsoever which the Bank may incur (or which may be claimed
against the Bank by any person or entity whatsoever) :
(i) by reason of any untrue statement or alleged untrue statement of
fact contained in the Private Placement Memorandum or any amendment or
supplement thereto, in the Sections entitled "The Obligor and the Use of
Proceeds," "The Letter of Credit," "The Loan Agreement" and "The
Reimbursement Agreement" insofar as the aforesaid Sections provide summary
descriptions of the matters contained therein in the Private Placement
Memorandum or any amendment or supplement thereto, or the omission or
alleged omission to state therein facts necessary to make such statements,
in the light of the circumstances under which they were made, not
misleading; provided, however, that, the Obligor shall not be required to
indemnify the Bank with respect to information concerning the Bank in the
Appendix to the Private Placement Memorandum
11
(the "Bank Information") which is finally determined to contain an untrue
statement of a material fact or omit to state a material fact necessary to
make the statements in the Bank Information, in the light of the
circumstances under which they were made, not misleading; or
(ii) by reason of or in connection with the execution and delivery
or transfer of, or payment or failure to pay under, the Letter of Credit;
provided, however, that the Obligor shall not be required to indemnify the
Bank pursuant to this clause (ii) for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the extent,
caused by (a) the willful misconduct or gross negligence of the Bank or
(b) the Bank's willful or grossly negligent failure to pay under the
Letter of Credit after the presentation to it by the Trustee of a drawing
and certificates strictly complying with the terms and conditions of the
Letter of Credit.
Nothing in this Section 13 is intended, nor shall be deemed, to limit the
Obligor's reimbursement obligation contained in Section 1 hereof.
SECTION 14. Continuing Obligation. This Agreement is a continuing
obligation and shall (i) be binding upon the Obligor, its successors and
assigns, and (ii) inure to the benefit of and be binding upon and be enforceable
by the Bank and its successors, transferees and assigns; provided, however, that
the Obligor may not assign all or any part of this Agreement without the prior
written consent of the Bank. The Obligor's warranties and representations made
in Section 5 of this Agreement shall survive the delivery and performance of all
documents and agreements contemplated by this Agreement.
SECTION 15. Transfer of Letter of Credit. The Letter of Credit first
issued by the Bank pursuant to Section 2 hereof may be transferred and each
successor Letter of Credit may be successively transferred, all in accordance
with the terms of such first Letter of Credit.
SECTION 16. Liability of the Bank. The Obligor assumes all risks of the
acts or omissions of the Trustee and any beneficiary or transferee of the Letter
of Credit with respect to its use of the Letter of Credit. Neither the Bank nor
any of its officers or directors shall be liable or responsible for: (a) the use
which may be made of the Letter of Credit or for any acts or omissions of the
Trustee and any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement(s)
thereof, even if such documents should in fact prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Bank in
good faith made against presentation of documents which do not comply fully with
the terms of the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under the Letter of Credit, except only that
the Obligor shall have a claim against the Bank, and the Bank shall be liable to
the Obligor, to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Obligor which the Obligor proves were
caused by (i) the Bank's willful misconduct or gross negligence, (ii) the Bank's
willful, grossly negligent or bad faith failure to pay under the Letter of
Credit after the presentation to it by the Trustee or a successor trustee under
the Indenture of a sight draft and certificate strictly complying with the terms
and conditions of the Letter of Credit or (iii) the Bank's bad faith payment
under the Letter of Credit after presentation to it by the Trustee or a
successor trustee under the Indenture of a sight draft and certificate which do
not
12
comply fully with the terms and conditions of the Letter of Credit. In
furtherance and not in limitation of the foregoing, the Bank may accept
documents that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the contrary.
SECTION 17. Costs, Expenses and Taxes. The Obligor agrees to pay on demand
all reasonable costs and expenses in connection with the preparation, execution,
delivery, filing, recording, and administration of this Agreement and the
monitoring of the construction of the Project, any other documents which may be
delivered in connection with this Agreement and any transfer of the Letter of
Credit including, without limitation, the reasonable fees and out-of-pocket
expenses of counsel for the Bank, with respect thereto and with respect to
advising the Bank as to its rights and responsibilities under this Agreement and
all costs and expenses, if any, in connection with the enforcement of this
Agreement and such other documents which may be delivered in connection with
this Agreement, including, but not limited to the Collateral Documents. In
addition, the Obligor shall pay any and all stamp and other taxes and fees
payable or determined to be payable in connection with the execution, delivery,
filing and recording of this Agreement and such other documents and agrees to
save the Bank harmless from and against any and all liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes and fees.
SECTION 18. Disbursements. The Trustee shall be authorized to disburse the
proceeds of the Bonds pursuant to the terms of the Indenture upon presentation
by the Obligor of a requisition certificate conforming to the requirements
therefor set forth in the Loan Agreement and herein, including endorsement of
each requisition certificate by the Bank. The Obligor acknowledges and agrees
that the Bank shall only be required to execute requisition certificates and
thereby authorize disbursements to the Obligor (a) provided that no Event of
Default has occurred under this Agreement, the Pledge and Security Agreement or
the Collateral Documents and no event which with notice and/or the passage of
time would become an Event of Default under this Agreement, the Pledge and
Security Agreement or the Collateral Documents has occurred, and (b) the request
for draw is in compliance with the Bank's usual requirements for equipment
lending, including but not limited to (i) approval of disbursements by Bank;
(ii) receipt by the Bank of copies of all invoices and proof of delivery with
respect to all machinery and equipment for which payment is being sought and
(iii) disbursement of no more than one hundred percent (100%) of the costs of
machinery and equipment (including, without limitation, soft costs). All such
calculations shall be performed by the Bank or its agent using a methodology
satisfactory to the Bank in its sole discretion.
SECTION 19. Severability. Any provision of this Agreement which is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction.
SECTION 20. Waiver of Jury Trial. The Obligor and the Bank hereby
irrevocably waive the right to trial by jury with respect to any and all actions
or proceedings at any time in which Obligor and the Bank are parties arising out
of this Agreement or the other documents contemplated hereby.
13
SECTION 21. Jurisdiction. Obligor hereby irrevocably submits to the
non-exclusive jurisdiction of any United States Federal or Michigan state court
sitting in any action or proceeding arising out of or relating to this Agreement
or the Letter of Credit and the Obligor hereby irrevocably agrees that all
claims in respect of such action or proceeding may be heard and determined in
any such United States Federal or Michigan state court. The Obligor irrevocably
consents to the service of any and all process in any such action or proceeding
brought in any court in or of the State of Michigan by the delivery of copies of
such process to the Obligor at its address specified in Section 10 hereof or by
certified mail directed to such address.
SECTION 22. Authorized Signers. The following officers of the Obligor are
authorized on behalf of the Obligor to execute and deliver to the Bank all
documents and instruments related to any amendments to the Letter of Credit:
Name Title Signature
Mark C. Layton Chief Executive Officer _______________________
Thomas J. Madden Chief Financial Officer _______________________
SECTION 23. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Michigan.
SECTION 24. Headings. Section headings in this Agreement are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
In the Presence of: PRIORITY FULFILLMENT
SERVICES, INC.
_______________________________ By:________________________
Its:_______________________
COMERICA BANK
_______________________________ By:________________________
William Stuart Bell
Its:_______________________
15
EXHIBIT "B"
Obligor shall optionally redeem Bonds in the following amounts on the
first business day of January of each year, commencing January 3, 2006.
YEAR AMOUNT OF REDEMPTION
2006 $500,000
2007 $500,000
2008* $800,000
2009 $800,000
2010 $800,000
2011 $800,000
2012 $800,000
*These dates are for informational purposes only and will apply only if the Bank
extends the expiration date of the Letter of Credit. There is no commitment or
obligation on the part of the Bank to extend the expiration date of the Letter
of Credit.
EXHIBIT "C"
REDEMPTION NOTICE
To: U.S. Bank National Association, as trustee
Re: $5,000,000 principal amount of the Issuer's Variable Rate Demand Limited
Obligation Revenue Bonds (Priority Fulfillment Services, Inc. Project),
Series 2004 (the "Bonds")
Date: December 29, 2004
The undersigned, the Obligor (as defined in the Trust Indenture, dated as
of November 1, 2004, pursuant to which the Bonds were issued (the "Indenture"))
hereby gives notice of redemption to you as Trustee with respect to the Bonds
pursuant to Section 401(a) of the Indenture. You are hereby directed to redeem
the Bonds in the following amounts on the first business day of January of each
year, commencing January 1, 2006, as follows in accordance with the provisions
of the Indenture:
YEARS AMOUNTS
2006 $ 500,000
2007 $ 500,000
2008 $ 800,000
2009 $ 800,000
2010 $ 800,000
2011 $ 800,000
2012 $ 800,000
This notice may only be revoked at the written direction of the
undersigned, with the written concurrence of Comerica Bank and shall be of no
further force and effect on and after the Conversion Date (as defined in the
Indenture).
PRIORITY FULFILLMENT
SERVICES, INC.
By:_______________________________
Its:______________________________
The foregoing notice is hereby accepted:
U.S. Bank National Association, as trustee
By:__________________________________________
Its:_________________________________________