Exhibit 10.11
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WAIVER AND AMENDMENT AGREEMENT NO. 2
WAIVER AND AMENDMENT AGREEMENT NO. 2 (this "Agreement") dated as of
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September 25, 1998 to the Amended and Restated Credit Agreement, dated as of
April 1, 1998 (as the same has been or may be amended, restated, modified or
supplemented from time to time in accordance with its terms, the "Credit
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Agreement"), among Matthews Studio Equipment Group, a California corporation
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("Parent"), Matthews Studio Equipment, Inc., a California corporation ("MSEI"),
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Hollywood Rental Co., Inc., a California corporation ("HRCI"), Matthews Studio
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Electronics, Inc., a California corporation ("MSE"), Matthews Acceptance
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Corporation, a California corporation ("MAC"), Duke City Video, Inc., a New
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Mexico corporation ("Duke"), HDI Holdings, Inc., a Kentucky corporation ("HDI"),
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Four Star Lighting, Inc., a New York corporation ("Four Star", and collectively
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with Parent, MSEI, HRCI, MSE, MAC, Duke and HDI, each a "Borrower" and
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collectively, the "Borrowers"), the Guarantors named therein, the lenders named
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therein (collectively, the "Lenders"), and THE CHASE MANHATTAN BANK, as agent
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for the Lenders (in such capacity, the "Agent"). Capitalized terms used herein
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and not otherwise defined herein shall have the meanings ascribed to them in the
Credit Agreement.
WHEREAS, the Borrowers have requested that the Lenders consent to the
formation of a wholly-owned subsidiary of Parent named Matthews Studio Sales,
Inc., a California corporation ("MSSI"); and
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WHEREAS, the Borrowers have requested that the Lenders consent to the
formation of a wholly-owned subsidiary of Parent named Hollywood Rental Company,
LLC, a Delaware limited liability company ("HRCL"); and
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WHEREAS, the Borrowers have requested that the Lenders consent to the
spinning-off of certain assets of MSEI, namely the Olesen Business and the ESS
Business (each as herein defined), into MSSI; and
WHEREAS, the Borrowers have requested that the Lenders consent to the
sale of MSEI (after giving effect to the spin-off of certain assets described in
the immediately preceding whereas clause) through an exchange of the stock of
MSEI for the stock of Parent pursuant to the Stock Exchange Agreement, made and
entered into as of September 28, 1998 (the "Stock Exchange Agreement") by and
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among MSEI, Edward Phillips III, an individual, Phillips Associates, LLC, a
Delaware limited liability company and Parent; and
WHEREAS, the Borrowers have requested that the Lenders consent to the
merger (the "HRC Merger") of HRCI with and into HRCL; and
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WHEREAS, the Borrowers and the Lenders have agreed that MSSI shall
become a Borrower and Guarantor under the Credit Agreement and become a party to
the Loan Documents; and
WHEREAS, Parent purchased certain assets (the "Disney Assets") from
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Disney Production Services, Inc. ("Disney") pursuant to that certain Asset
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Purchase Agreement, dated March 26, 1998 between Parent and Disney.
WHEREAS, the Lenders have agreed to waive certain conditions of the
Credit Agreement in connection with the transactions described above and in
connection with other events; and
WHEREAS, the Lenders and the Borrowers have agreed to amend the Credit
Agreement and the other Loan Documents as described herein;
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, and subject to the fulfillment of
the conditions set forth below, the parties hereto agree as follows:
SECTION 1. WAIVERS TO CREDIT AGREEMENT
1.1 The Lenders hereby waive Section 7.06 of the Credit Agreement as
it relates to the formation of each of MSSI and HRCL and the purchase of the
Disney Assets.
1.2 The Lenders hereby waive Section 7.05 of the Credit Agreement as
it relates to the HRC Merger.
1.3 The Lenders hereby waive Section 7.05 of the Credit Agreement as
it relates to the spinning-off of the assets principally used in the operation
of the businesses conducted under the trade names (i) "Olesen" (the "Olesen
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Business") and (ii) "ESS", "ESS International", "ESS/Miami" and "Media Lighting"
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(the businesses listed in this clause (ii) collectively, the "ESS Business").
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1.4 The Lenders hereby waive Sections 7.04, 7.05, 7.06, 7.14 and
subsection (m) of Article VIII of the Credit Agreement as they relate to the
sale of MSEI and the exchange of the stock of MSEI for the stock of Parent
pursuant to the Stock Exchange Agreement. All payments and proceeds received by
the Agent in connection with such sale and exchange shall be applied to the
outstanding Revolving Credit Loans and there shall be no reduction of the Total
Revolving Credit
Commitment as a result of such application; provided, however, that M&E
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Availability and Rental Equipment Availability will each be reduced accordingly.
1.5 Intentionally omitted.
1.6 Except for the specific waivers set forth in Sections 1.1, 1.2,
1.3 and 1.4 above, nothing herein shall be deemed to be a waiver of any covenant
or agreement contained in the Credit Agreement, and the Borrowers and Guarantors
hereby agree that all of the covenants and agreements contained in the Credit
Agreement are hereby ratified and confirmed in all respects.
SECTION 2. AMENDMENTS TO CREDIT AGREEMENT
2.1 By executing and delivering this Agreement, MSSI hereby becomes a
Borrower and Guarantor under the Credit Agreement and agrees to be bound by, and
to comply with the terms and provisions of the Credit Agreement in the same
manner as if it were an original signatory thereto as a Borrower and Guarantor.
2.2 Section 7.07 of the Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 7.07. Capital Expenditures. Permit the aggregate amount
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of payments made for Capital Expenditures, including Capitalized Lease
Obligations and Indebtedness secured by Liens permitted under Section
7.01(e) hereof, in each of the periods indicated below to exceed the
following amounts for the Parent and its Consolidated subsidiaries:
Period Maximum Amount
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Fiscal Year ending September 30, 1998 $11,100,000
Fiscal Year ending September 30, 1999 $ 6,250,000
Fiscal Year ending September 30, 2000 $11,500,000
Fiscal Year ending September 30, 2001 $11,500,000
Fiscal Year ending September 30, 2002 $11,500,000
provided, however, the maximum amount permitted in any Fiscal Year
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(other than the Fiscal Years ending September 30, 1998 and September
30, 1999) shall be increased by 25% of such amount if in the
immediately preceding Fiscal Year the ratio of total Funded
Indebtedness to EBITDA (adjusted to include EBITDA of Permitted
Acquisitions during such year) for the Parent and its Consolidated
subsidiaries was less than 3.50:1.00; and provided, further, that
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$2,000,000 of the amount permitted to be expended with respect to the
Fiscal Year ended September 30, 1999 or any Fiscal Year thereafter (as
set forth above) may be carried over and may be expended in the
immediately succeeding Fiscal Year (but not in any other Fiscal Year).
2.3 All references to HRCI and MSEI contained in the Credit Agreement
and the other Loan Documents (as each may have been or may be amended, restated,
modified or supplemented from time to time in accordance with its respective
terms) shall hereafter be deemed to mean HRCL and MSSI, respectively.
2.4 The Credit Agreement is hereby further amended by adding the
phrase "or other equity interests" immediately after the following phrases as
each appears in the Credit Agreement:
(i) "capital stock" in paragraph (e) of the "Change of Control"
definition;
(ii) "capital stock" both times it appears in the definition of "Net
Worth";
(iii) "assets or stock" in the second to last line of subsection
2.09(d);
(iv) "capital stock" in Section 6.12;
(v) "stock" in the second line of Section 7.01;
(vi) "capital stock" both times it appears in Section 7.04; and
(vii) "common or preferred stock" in subsection 7.19 (d).
2.5 The schedules to the Credit Agreement are hereby amended as set
forth on Exhibit A.
SECTION 3. AMENDMENTS TO THE PLEDGE AGREEMENT.
3.1 The Pledgors (as defined in the Pledge Agreement) and the Agent
hereby amend Schedule I to the Pledge Agreement by deleting such schedule in its
entirety and substituting therefor Schedule I attached hereto.
3.2 The Pledgors and the Agent hereby amend the Pledge Agreement by
adding the phrase "or other equity interests" immediately after the following
phrases as each appears in the Pledge Agreement:
(i) "capital stock" in clause (a) of Section 1;
(ii) "common stock of the issuers" in clause (a) of Section 1;
(iii) "capital stock" in clause (f) of Section 3;
(iv) "stock" in subsection 5(a)(iii)(b);
(v) "capital stock" in subsection 5(a)(iii)(c);
(vi) "other securities" in Section 6;
(vii) "other securities" in subsection 7(b); and
(viii) "capital stock" in subsection 7(b).
SECTION 4. AMENDMENTS TO SECURITY AGREEMENT - PATENTS AND TRADEMARKS.
SECTION 1.
4.1 By executing and delivering this Agreement, MSSI hereby becomes a
Grantor under Security Agreement - Patents and Trademarks and agrees to be bound
by, and to comply with the terms and provisions of the Security Agreement -
Patents and Trademarks in the same manner as if it were an original signatory
thereto as a Grantor.
4.2 Schedules A, B and C to the Security Agreement - Patents and
Trademarks are hereby amended by deleting such schedules in their entirety and
substituting therefor Schedules A, B, and C attached hereto.
SECTION 5. AMENDMENT TO SECURITY AGREEMENT;CONFIRMATION OF SECURITY
INTEREST.
5.1 By executing and delivering this Agreement, MSSI hereby becomes a
Grantor under the Security Agreement and agrees to be bound by, and to comply
with the terms and provisions of the Security Agreement in the same manner as if
it were an original signatory thereto as a Grantor. MSSI hereby confirms the
existing grant of a security interest in and lien on the Collateral pursuant to
the Security Agreement and further agrees that such security interest and lien
are continuing and shall, at all times, continue to be attached, perfected and
enforceable pursuant to the terms of the Security Agreement.
5.2 The Grantors and the Agent hereby amend Schedules I and II to the
Security Agreement by deleting such schedules in their entirety and substituting
therefor Schedules I and II to the Security Agreement attached hereto.
SECTION 6. FURTHER AMENDMENT.
6.1 The parties hereto agree to negotiate new levels with respect to
the covenants set forth in Sections 7.08, 7.09, 7.11, 7.12 and 7.13 of the
Credit Agreement. In the event the parties cannot unanimously agree on
amendments to all such provisions by October 20, 1998, the Borrowers and
Guarantors hereby agree that
each such provision with respect to which no agreement has been reached shall
remain unchanged.
SECTION 7. PURCHASE OF DISNEY ASSETS.
7.1 The Borrowers and the Lenders hereby agree that amounts paid for
the Disney Assets shall not be included in the calculation of Capital
Expenditures for the Fiscal Year ending September 30, 1998.
7.2 The Borrowers and the Lenders hereby agree that the Disney Assets
shall not be included in any calculation of Borrowing Base until Sections 7.08,
7.09, 7.11, 7.12 and 7.13 of the Credit Agreement are amended in a manner
satisfactory to the Agent and the Lenders.
SECTION 8. MODIFICATION OF REPRESENTATION AND WARRANTY.
8.1 The Lenders and the Borrowers agree that from the date hereof
until the earlier to occur of (i) the consummation of the amendments
contemplated in Section 6.1 or (ii) October 20, 1998, any representation or
warranty made by the Borrowers pursuant to Section 5.01 of the Credit Agreement
shall be made without regard to Sections 7.08, 7.09, 7,11, 7.12 and 7.13 of the
Credit Agreement.
SECTION 9. CONFIRMATION OF LOAN DOCUMENTS
9.1 Each Loan Party, by its execution and delivery of this Agreement,
irrevocably and unconditionally ratifies and confirms in favor of the Agent that
it consents to the terms and conditions of the Credit Agreement as it has been
amended by this Agreement and that notwithstanding this Agreement, each Loan
Document to which such Loan Party is a party shall continue in full force and
effect in accordance with its terms, as it has been amended by this Agreement,
and is and shall continue to be applicable to all of the Obligations.
9.2 HRCL hereby confirms that, pursuant to the HRC Merger, it is the
successor in interest to all of the assets, liabilities and obligations of HRCI,
including, without limitation, the Obligations.
SECTION 10. CONDITIONS PRECEDENT
This Agreement shall become effective upon the execution and delivery
of counterparts hereof by all parties hereto and the fulfillment of the
following conditions:
10.1 The Borrowers shall have made a prepayment of the Revolving
Credit Loan in the amount of $5,000,000.
10.2 The Borrowers shall have paid to the Agent (for the ratable
benefit of the Lenders) an amendment fee of $120,000.
10.3 The Agent shall have received a Borrowing Base Certificate dated
the date hereof which shall reflect the Borrowing Base after giving effect to
the transactions described herein (other than the purchase of the Disney
Assets).
10.4 Messrs. Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to
the Agent, shall have received payment in full for all legal fees charged, and
all costs and expenses incurred, by such counsel through the date hereof and all
legal fees charged, and all costs and expenses incurred, by such counsel in
connection with the transactions contemplated under this Agreement and the other
Loan Documents and instruments in connection herewith and therewith.
10.5 The Agent shall have received favorable written opinions of
Whitman Breed Abbott & Morgan LLP, counsel to the Borrowers, Guarantors and
Grantors, in form and substance satisfactory to the Agent and its counsel.
10.6 The Agent shall have received (i) the stock certificate
evidencing Parent's ownership of MSSI together with a stock power undated and
executed in blank and (ii) a certificate from an officer of MSSI that the stock
certificate delivered pursuant to clause (i) above represents 100% of the issued
and outstanding stock of MSSI.
10.7 The Agent shall have received (i) a certificate evidencing
Parent's ownership of HRCL together with a certificate of power of transfer
undated and executed in blank and (ii) a certificate from an officer of HRCL
that such certificate delivered pursuant to clause (i) above represents Parent's
100% ownership interest of HRCL.
10.8 The Lenders shall have received (i) a copy of the certificate or
articles of incorporation or organization or other constitutive or charter
documents, in each case as amended to date, of each of MSSI and HRCL, certified
as of a recent date by the Secretary of State or other appropriate official of
the state of its organization, and a certificate as to the good standing of each
from such Secretary of State or other official and from the Secretary of State
or other official in each other jurisdiction where such person is qualified to
do business, in each case dated as of a recent date; (ii) a certificate of the
Secretary of each of MSSI and HRCL, dated as of the date hereof and certifying
(A) that attached thereto is a true and complete copy of such person's By-laws
or limited liability company agreement, as applicable, as in
effect on the date of such certificate and at all times since a date prior to
the date of the resolution described in item (B) below, (B) that attached
thereto is a true and complete copy of a resolution adopted by such person's
Board of Directors or managers authorizing the execution, delivery and
performance of this Agreement, and that such resolution has not been modified,
rescinded or amended and is in full force and effect, (C) that such person's
certificate or articles of incorporation or constitutive documents has not been
amended since the date of the last amendment thereto shown on the certificate of
good standing furnished pursuant to (i) above, and (D) as to the incumbency and
specimen signature of each of such person's officers executing this Agreement;
and (iii) a certificate of another of such person's officers as to incumbency
and signature of its Secretary.
10.9 The Lenders shall have received amended and restated Notes.
10.10 Each document (including, without limitation, each Uniform
Commercial Code financing statement) required by law or requested by the Agent
to be filed, registered or recorded in order to create in favor of the Agent for
the benefit of the Lenders a first priority perfected security interest in the
Collateral shall have been properly filed, registered or recorded in each
jurisdiction in which the filing, registration or recordation thereof is so
required or requested. The Agent shall have received evidence satisfactory to
it and its counsel of each such filing, registration or recordation.
10.11 The Agent shall have received a certified copy of the articles
of merger filed in connection with the HRC Merger.
10.12 The Agent shall have received executed copies of the Stock
Exchange Agreement and the other documents delivered in connection therewith,
including, without limitation, copies of any opinions delivered in connection
therewith, and evidence that such agreement is in full force and effect and that
the transactions contemplated therein and therewith have been consummated.
10.13 All legal matters in connection with this Agreement shall be
satisfactory to the Agent, the Lenders and their respective counsel in their
sole discretion.
10.14 The Agent shall have received a certificate signed by a
Financial Officer of each Borrower and Guarantor that both immediately prior to
and after giving effect to the transactions contemplated herein (i) all
representations and warranties contained in this Agreement or otherwise made in
writing to the Agent in connection herewith shall be true and correct, (ii)
there exists no unwaived Default or Event of Default and (iii) since June 30,
1998, no event has occurred which would result in a Material Adverse Effect.
10.15 MSEI shall have transferred to Parent all of its right, title
and interest in and to the Copyrights, Patents and Trademarks described on
Schedules A, B and C to the Security Agreement - Patents and Trademarks, and
Parent shall have executed any document or certificate and make any filing
necessary to evidence such transfer.
10.16 The Agent shall have received such other documents as the
Lenders or the Agent or Agent's counsel shall reasonably deem necessary.
SECTION 11. MISCELLANEOUS
11.1 The Borrower and each Guarantor reaffirms and restates the
representations and warranties set forth in Article IV of the Credit Agreement,
as amended by this Agreement, and all such representations and warranties shall
be true and correct on the date hereof with the same force and effect as if made
on such date. Each Loan Party represents and warrants (which representations
and warranties shall survive the execution and delivery hereof) to the Agent
that:
(a) It has the corporate power and authority to execute, deliver
and carry out the terms and provisions of this Agreement and the
transactions contemplated hereby and has taken or caused to be taken all
necessary corporate action to authorize the execution, delivery and
performance of this Agreement and the transactions contemplated hereby;
(b) No consent of any other person (including, without limitation,
shareholders or creditors of any Loan Party), and no action of, or filing
with any governmental or public body or authority is required to authorize,
or is otherwise required in connection with the execution, delivery and
performance of this Agreement;
(c) This Agreement has been duly executed and delivered on behalf
of each Loan Party by a duly authorized officer, and constitutes a legal,
valid and binding obligation of each Loan Party enforceable in accordance
with its terms, subject to bankruptcy, reorganization, insolvency,
moratorium and other similar laws affecting the enforcement of creditors'
rights generally and the exercise of judicial discretion in accordance with
general principles of equity; and
(d) The execution, delivery and performance of this Agreement will
not violate any law, statute or regulation, or any order or decree of any
court or governmental instrumentality, or conflict with, or result in the
breach of, or constitute a default under any contractual obligation of any
Loan Party.
11.2 Except, as herein expressly amended, the Credit Agreement is
ratified and confirmed in all respects and shall remain in full force and effect
in accordance with its terms.
11.3 All references to the Credit Agreement, the Pledge Agreement,
the Security Agreement and the Security Agreement - Patents and Trademarks in
the Credit Agreement and the other Loan Documents and the other documents and
instruments delivered pursuant to or in connection therewith shall mean such
Credit Agreement, Pledge Agreement, Security Agreement and Security Agreement -
Patents and Trademarks, as amended hereby and as may in the future be amended,
restated, supplemented or modified from time to time.
11.4 This Agreement may be executed by the parties hereto
individually or in combination, in one or more counterparts, each of which shall
be an original and all of which shall constitute one and the same agreement.
11.5 Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
11.6 THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD
TO CHOICE OR CONFLICT OF LAW PRINCIPLES THEREOF.
11.7 The parties hereto shall, at any time and from time to time
following the execution of this Agreement, execute and deliver all such further
instruments and take all such further actions as may be reasonably necessary or
appropriate in order to carry out the provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Waiver and
Amendment Agreement as of the date first above written.
THE CHASE MANHATTAN BANK, as Agent
By: /s/ Donna M. DiForio
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Name: Donna M. DiForio
Title: Vice President
THE CHASE MANHATTAN BANK, as Lender
By: /s/ Donna M. DiForio
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Name: Donna M. DiForio
Title: Vice President
PNC BANK, NATIONAL ASSOCIATION, as Lender
By: /s/ Michael D. Shover
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Name: Michael D. Shover
Title: Bank Officer
WELLS FARGO BANK, N.A., as Lender
By: /s/ Kevin McKhann
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Name: Kevin McKhann
Title: Vice President
CIBC, INC., as Lender
By: /s/ Harold Birk
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Name: Harold Birk
Title: Executive Director
CIBC Oppenheimer Corp., as Agent
MELLON BANK, N.A., as Lender
By: /s/ George G. Cole, Jr.
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Name: George G. Cole, Jr.
Title: First Vice President
MATTHEWS STUDIO EQUIPMENT GROUP,
as a Borrower and as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: Chairman of the Board/Chief
Executive Officer
HOLLYWOOD RENTAL COMPANY, LLC., (as
successor by merger to Hollywood Rental Co.,
Inc.), as a Borrower and as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: Manager & Chief Financial Officer
MATTHEWS STUDIO ELECTRONICS, INC.,
as a Borrower and as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: Chief Executive Officer
MATTHEWS ACCEPTANCE CORPORATION,
as a Borrower and as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: President
DUKE CITY VIDEO, INC.,
as a Borrower and as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: President
HDI HOLDINGS, INC.,
as a Borrower and as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: Chairman of the Board
FOUR STAR LIGHTING, INC.,
as a Borrower and as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: Chief Executive Officer
MATTHEWS STUDIO SALES, INC.,
as a Borrower and Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: President
MATTHEWS STUDIO GROUP CENTERS, INC.
(f/k/a Matthews Medical Equipment, Inc.), as a
Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: President
KEYLITE HOLDINGS, INC., as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: Chief Financial Officer
REEL WHEELS, INC., as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: Chief Financial Officer
KEYLITE PRODUCTION SERVICES, INC., as
a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: Chief Financial Officer
DUKE CITY HOLDINGS, INC., as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: Chief Executive Officer
FOUR STAR HOLDING, INC., as a Guarantor
By: /s/ Carlos D. DeMattos
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Name: Carlos D. DeMattos
Title: President