THIRD AMENDMENT TO CREDIT
AGREEMENT,
WAIVER, CONSENT AND FORBEARANCE AGREEMENT
THIS THIRD
AMENDMENT TO CREDIT AGREEMENT, WAIVER, CONSENT AND FORBEARANCE
AGREEMENT (this “ Amendment ”), dated as of
June 20, 2006, is entered into by and among the Lenders
signatory hereto, WELLS FARGO FOOTHILL, INC., a California
corporation, in its capacity as agent for the Lenders and Bank
Product Providers (in such capacity “Agent”). PCA
LLC, a Delaware limited liability company (“PCA”).
each of PCA’s Subsidiaries identified on the signature pages
hereof (such Subsidiaries, together with PCA, are referred to
hereinafter each individually as a “ Borrower ”,
and individually and collectively, jointly and severally, as the
“ Borrowers ”). Terms used herein without
definition shall have the meanings ascribed to them in the Credit
Agreement defined below.
A. The
Lenders signatory thereto, Agent, Borrowers and Parent Guarantor
have previously entered into that certain Credit Agreement dated
July 15, 2005, as amended by that certain First Amendment to
Credit Agreement, dated August 11, 2005, by and among the
Agent, the Borrowers and the Lenders signatory thereto and that
certain Second Amendment to Credit Agreement, dated December 5,
2005 , by and among the Agent, the Borrowers and the Lenders
signatory thereto (as amended, modified and supplemented from time
to time, the “ Credit Agreement ”), pursuant to
which the Lenders have made certain loans and financial
accommodations available to Borrowers and Parent Guarantor, among
others, has guaranteed such obligations.
B. Borrowers
have failed to deliver to Agent consolidated and consolidating
financial statements of Parent Guarantor and its Subsidiaries for
their fiscal year ended January 29, 2006 as set forth in
Schedule 5.3(c) of the Credit Agreement (the “
Reporting Event of Default ”) and have advised Agent
that such financial statements will be delivered with a
“going concern” qualification (the “
Anticipated Qualification Event of Default ” and
together with the Reporting Event of Default, the “
Financial Statement Defaults ”). Borrowers have
requested that Agent and the Lenders waive the Financial Statement
Defaults.
C. Borrowers
have failed, after the expiration of a thirty-day grace period, to
make an interest payment (the “ Goldman Payment
”) due June 14, 2006 (the “ Goldman Event of
Default ”) to GS Mezzanine Partners II, L.P. and GS
Mezzanine Partners II Offshore, L.P. (collectively, “
Goldman ”) in respect of the 13
3 / 4 %
Senior Subordinated Notes Due 2010 issued by PCA and guaranteed by
certain of the Credit Parties pursuant to that certain Purchase
Agreement, dated as of June 27, 2002 among PCA, Parent
Guarantor (as successor in interest to PCA International Inc., a
North Carolina corporation), the Credit Parties named therein,
Goldman, and the purchasers named therein (as amended, modified and
supplemented from time to time, the “ Goldman Purchase
Agreement ”). Borrowers have requested that Agent and the
Lenders forbear from exercising any remedies under the Loan
Documents with respect to the Goldman Event of Default in order to
allow Borrowers to obtain from Goldman a postponement of the
Goldman Payment and waiver of all events of default arising under
the Goldman Purchase Agreement as a result of the failure to timely
make the Goldman Payment (any document effecting such a
postponement and waiver being the “Goldman
Amendment”).
D. Pursuant
to the terms of the Agfa Contract, Agfa has agreed to forbear (the
“ Agfa Forbearance ”) from exercising its rights
and remedies with respect to outstanding amounts owed to Agfa (the
“ Agfa Indebtedness ”) by the Borrowers until
June 15, 2006 pending the implementation of a new sales
contract between Agfa and the Borrowers. Borrowers have not and do
not anticipate implementing such a contract and have not made
payment on the Agfa Indebtedness which event gives Agfa the right
to institute action against the Credit Parties to the extent not
prohibited by the Agfa Subordination Agreement. Borrowers have
informed Agent that they intend to make arrangements with Agfa to
reinstate the Agfa Forbearance.
E. Borrowers
have requested that Agent and the Lenders amend the definition of
Consolidated EBITDA in the Credit Agreement on the terms and
conditions set forth herein.
F. Borrowers
are entering into this Amendment with the understanding and
agreement that, except as specifically provided herein, none of the
Lender Group’s rights or remedies as set forth in the Credit
Agreement or any other Loan Document is being waived or modified by
the terms of this Amendment.
NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants herein
contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:
1.
Amendments to Credit Agreement .
(a) Clause
(ii)(E) of the definition of “Consolidated EBITDA” in
Schedule 1.1 of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
“(E) during
periods prior to July 30, 2006, Consolidated Non-Cash Charges
of up to $2,320,000 in the aggregate at any time reported during
such periods, minus (or plus),”
(b) Section 11
of the Credit Agreement is hereby amended by replacing the notice
party Morrison & Foerster LLP appearing therein with the
following notice party:
BINGHAM
MCCUTCHEN LLP
355 South Grand Avenue, Suite 4400
Los Angeles, California 90071
Attn: Sandra L. Montgomery, Esq.
Fax No. (213) 680-6499
2. Waiver
of Financial Statement Defaults . Subject to the terms of
Section 8 hereof, Agent and the Lenders hereby waive
enforcement of the Lender Group’s rights against Borrowers
arising from the Financial Statement Defaults; provided ,
however , nothing herein shall be deemed a waiver with
respect to any other or future failure of Borrowers to comply fully
with Section 5.3 and Schedule 5.3(c) of the Credit
Agreement (as amended or modified by this Amendment). This waiver
shall be effective only for the specific defaults comprising the
Financial Statement Defaults, and in no event shall this waiver be
deemed to be a waiver of enforcement of any of the Lender
Group’s rights with respect to any other Defaults or Events
of Default now existing or hereafter arising. Nothing contained in
this Amendment nor any communications between Borrowers and any
member of the Lender Group shall be a waiver of any rights or
remedies the Lender Group has or may have against Borrowers, except
as specifically provided herein. Except as specifically provided
herein, each member of the Lender Group hereby reserves and
preserves all of its rights and remedies against Borrowers under
the Credit Agreement and the other Loan Documents.
3. Agreement to
Forbear .
(a) For
the Forbearance Term (as defined below), neither Agent nor any
Lender shall take any action or commence any proceedings with
respect to the enforcement of any of its rights or remedies under
the Loan Documents as a result of the Goldman Event of Default. The
parties agree that neither the foregoing agreement by Agent and the
Lenders nor the acceptance by Agent or any Lender of any of the
payments provided for in the Credit Agreement or any other Loan
Document, nor any payment prior to the date hereof shall, however,
(i) excuse any party from any of its obligations under the
Loan Documents, or (ii) toll the running of any time periods
applicable to any such rights and remedies, including, without
limitation, any time periods within which any Borrower may cure
Defaults under the Credit Agreement or any other Loan Document or
otherwise. Each Borrower agrees that it will not assert laches,
waiver or any other defense to the enforcement of any of the Loan
Documents based upon the foregoing agreement by Agent and the
Lenders to
forbear or the
acceptance by Agent or any Lender of any of the payments provided
for in the Financing Agreements or any payment prior to the date
hereof.
(b) As
used herein, “ Forbearance Term ” shall mean the
period commencing upon the effectiveness of this Amendment and
continuing until the earliest to occur of: (i) the institution
of any actions or exercising of any remedies by Goldman or Agfa
with respect to any Credit Party or any of their respective assets
or properties or issuance of any notice by Goldman or Agfa of its
intention to do so, (ii) if Goldman shall refuse to enter into
the Goldman Amendment or require that the applicable Credit Parties
enter into an amendment to the Goldman Purchase Agreement that is
not on terms satisfactory to Agent, or (iii) any other Default
or Event of Default under any of the Loan Documents, and
(iv) July 31, 2006.
4.
Termination of Agreement to Forbear . Each Borrower
acknowledges and agrees that upon the termination of Lender’s
agreement to forbear as provided in Section 3 hereof, Agent
and the Lenders shall be entitled to exercise any or all of their
remedies under the Loan Documents including, without limitation,
the appointment of a receiver, the acceleration of the Obligations
and the enforcement of Agent’s Liens, as a result of the
Goldman Event of Default, and at any time Agent and the Lenders
shall be entitled to exercise any or all of their remedies under
the Loan Documents as a result of any other Default or Event of
Default.
5.
Release: Covenant Not to Sue .
(a) Each
Borrower hereby absolutely and unconditionally releases and forever
discharges the Lender Group, and any and all of their respective
participants, parent corporations, subsidiary corporations,
affiliated corporations, insurers, indemnitors, successors and
assigns thereof, together with all of the present and former
directors, officers, agents and employees of any of the foregoing
(each a “ Released Party ”), from any and all
claims, demands or causes of action of any kind, nature or
description, whether arising in law or equity or upon contract or
tort or under any state or federal law or otherwise, which such
Borrower has had, now has or has made claim to have against any
such person for or by reason of any act, omission, matter, cause or
thing whatsoever arising from the beginning of time to and
including the date of this Amendment, whether such claims, demands
and causes of action are matured or unmatured or known or unknown.
It is the intention of Borrowers in providing this release that the
same shall be effective as a bar to each and every claim, demand
and cause of action specified, and in furtherance of this intention
it waives and relinquishes all rights and benefits under
Section 1542 of the Civil Code of the State of California (or
any comparable provision of any other applicable law), which
provides:
“A
general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing
the release, which if known by him might have materially affected
his settlement with the debtor.”
Each Borrower
acknowledges that
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