Exhibit 10.12
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WAIVER AND AMENDMENT AGREEMENT NO. 3
WAIVER AND AMENDMENT AGREEMENT NO. 3 (this "Agreement") dated as of
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January 12, 1999 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 Sales, Inc., a California corporation ("MSSI"),
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Hollywood Rental Company, LLC, a Delaware limited liability company ("HRCL"),
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Matthews Studio Electronics, Inc., a California corporation ("MSE"), Matthews
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Acceptance Corporation, a California corporation ("MAC"), Duke City Video, Inc.,
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a New Mexico corporation ("Duke"), HDI Holdings, Inc., a Kentucky corporation
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("HDI"), Four Star Lighting, Inc., a New York corporation ("Four Star", and
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collectively with Parent, MSSI, HRCL, MSE, MAC, Duke and HDI, each a "Borrower"
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and collectively, the "Borrowers"), the Guarantors named therein, the lenders
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named therein (collectively, the "Lenders"), and The Chase Manhattan Bank, as
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agent for the Lenders (in such capacity, the "Agent"). Capitalized terms used
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herein and not otherwise defined herein shall have the meanings ascribed to them
in the Credit Agreement.
WHEREAS, the Borrowers have requested that the Lenders agree to waive
and amend certain terms and provisions of the Credit Agreement;
WHEREAS, the Lenders have agreed to waive certain conditions of the
Credit Agreement as described herein; and
WHEREAS, the Lenders, Borrowers and Guarantors have agreed to amend
the Credit Agreement 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 7.01 of the Credit Agreement as
it applies to the ING Security Agreement, dated January 12, 1999 among ING and
the Borrowers and the Guarantors (the "ING Security Agreement") pursuant to
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which ING shall have a Lien (which Lien shall be junior to the lien of the Agent
in all respects) on all of the assets of the Borrowers and the Guarantors.
1.2 The Lenders hereby waive Section 7.03 of the Credit Agreement as
it applies to the incurrence by the Borrowers and the Guarantors of obligations
to ING under the Reimbursement Agreement, dated January 12, 1999 among ING and
the Borrowers and the Guarantors, and to the repayment obligation of the
Borrowers which shall arise in the event that the Agent draws on the ING Letter
of Credit.
1.3 The Lenders hereby waive the requirements of Section 7.09 of the
Credit Agreement as it applies to the Fiscal Year ended September 30, 1998.
1.4 The Lenders hereby waive the requirements of Section 7.20 of the
Credit Agreement as it applies to the ING Letter of Credit, the ING Security
Agreement and any other document executed in connection therewith.
1.5 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 Schedule 2.01(b) to the Credit Agreement is hereby deleted in its
entirety and Schedule 2.01(b) attached hereto is substituted therefor.
2.2 The amount "$80,000,000" as it appears in the preamble of the
Credit Agreement is hereby deleted and the amount "$77,000,000" is substituted
therefor.
2.3 The amount "$64,000,000" as it appears in the preamble of the
Credit Agreement is hereby deleted and the amount "$61,000,000" is substituted
therefor.
2.4 The definition of "Debt Service Coverage Ratio" as it appears in
Section 1.01 of the Credit Agreement is hereby deleted in its entirety and the
following is substituted therefor:
"Debt Service Coverage Ratio" shall mean, with respect to any
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person for any four quarter period, the ratio of (i) the sum of (x) Net
Income plus (y) depreciation and amortization minus (z) Capital
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Expenditures (including cash down payments or up-front payments, if any,
required by any Capital Leases entered into during the four fiscal quarter
period (but only including those Capital Leases entered into after
September 30, 1998), but excluding Capital Expenditures paid for with
proceeds of Revolving Credit Loans and
excluding amounts required pursuant to GAAP to be recognized as the costs
of assets acquired under Capital Leases) to (ii) the aggregate Debt Service
Expense of such person for the four most recent consecutive fiscal quarters
ending on or prior to the date of determination. Notwithstanding the
foregoing sentence, for the fiscal quarters ending 6/30/99 and 9/30/99 Debt
Service Coverage Ratio shall be calculated on a building 3 and 4 fiscal
quarter basis; after 9/30/99 Debt Service Coverage shall be calculated in
accordance with the immediately preceding sentence.
2.5 The definition of "EBITDA" as it appears in Section 1.01 of the
Credit Agreement is hereby deleted in its entirety and the following is
substituted therefor:
"EBITDA" shall mean, with respect to any person for any period,
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the sum of (i) Net Income, (ii) Interest Expense, (iii) depreciation and
amortization of intangible assets and (iv) federal, state and local income
taxes, in each case of such person for such period, computed and calculated
in accordance with GAAP. Notwithstanding the foregoing sentence and solely
for the purpose of calculating Leverage Ratio the Parent and its
subsidiaries shall be deemed to have had EBITDA of $2,656,000, $2,900,000
and $2,312,000 for the fiscal quarters ended 3/31/98, 6/30/98 and 9/30/98,
respectively.
2.6 The definition of "Interest Coverage Ratio" as it appears in
Section 1.01 of the Credit Agreement is hereby deleted in its entirety and the
following is substituted therefor:
"Interest Coverage Ratio" shall mean, with respect to any person
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for any four-quarter period, the ratio of (i) the sum of (x) EBITDA less
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(y) Capital Expenditures (including cash down payments or up-front
payments, if any, required by any Capital Leases entered into during the
four fiscal quarter period (but only including those Capital Leases entered
into after September 30, 1998), but excluding amounts required pursuant to
GAAP to be recognized as the costs of assets acquired under Capital Leases)
for the four most recent consecutive fiscal quarters ending on or prior to
the date of determination, to (ii) the Cash Interest Expense of such person
for such four-quarter period. Notwithstanding the foregoing sentence, for
the fiscal quarters ending 6/30/99 and 9/30/99, Interest Coverage Ratio
shall be calculated on a building 3 and 4 fiscal quarter basis; after
9/30/99 Interest Coverage Ratio shall be calculated in accordance with the
immediately preceding sentence.
2.7 The definition of "Leverage Ratio" as it appears in Section 1.01
of the Credit Agreement is hereby deleted in its entirety and the following is
substituted therefor:
"Leverage Ratio" with respect to any person at the end of any fiscal
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quarter shall mean the ratio of (i) total Funded Indebtedness of such
person as at the date of determination to (ii) EBITDA (adjusted to include
the trailing EBITDA of any person acquired by such person as a Permitted
Acquisition and to exclude the trailing EBITDA of MSEI, in each case on a
basis satisfactory to the Agent) of such person for the four most recent
consecutive fiscal quarters ending on or prior to the date of
determination.
2.8 The following definitions hereby added to Section 1.01 in their
proper alphabetical order:
"Disney Assets" shall mean those certain assets purchased by Parent
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pursuant to that certain Asset Purchase Agreement, dated March 26, 1998
between Parent and Disney Production Services, Inc.
"ING Letter of Credit" shall mean that certain letter of credit issued by
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ING (U.S.) Capital Corporation in the face amount of $3,000,000, naming the
Agent as the beneficiary and on terms and conditions satisfactory to the
Agent
2.9 The phrase ", plus, (vi) the maximum amount potentially drawable
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under the ING Letter of Credit at such time" is hereby added immediately before
the phrase "(this clause (1)(B) referred to herein as the "Borrowing Base")" as
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it appears in Section 2.01(b) of the Credit Agreement.
2.10 The phrase "provided, however, the inclusion of the Disney Assets
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in the Borrowing Base shall not increase the Borrowing Base more than
$1,700,000" is hereby added at the end of the penultimate sentence in the first
full paragraph of Section 2.01(b) of the Credit Agreement.
2.11 The grid contained in the definition of "Interest Margin" in
Section 1.01 of the Credit Agreement is hereby amended in its entirety to read
as follows:
Leverage Ratio Alternate Base Rate LIBO Rate
- -------------- Interest Margin Interest Margin
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0 - 2.00 to 1.00 0% 1.50%
2.01 - 2.50 to 1.00 0% 1.75%
2.51 - 3.00 to 1.00 0% 2.00%
3.01 - 3.50 to 1.00 0.25% 2.25%
3.51 - 4.00 to 1.00 0.50% 2.50%
4.01 - 5.00 to 1.00 0.75% 2.75%
5.01 or greater to 1.00 1.25% 3.25%
2.12 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
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amount 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 $10,600,000
Fiscal Year ending September 30, 1999 $ 7,000,000
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);
provided, further, that for the Fiscal Year ending September 30, 1999
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the Capital Expenditures for all Borrowers other than Four Star shall
not in the aggregate exceed $3,000,000.
2.13 Section 7.08 of the Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 7.08 Net Worth. Permit the Net Worth of the Parent and
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its Consolidated subsidiaries at any time to be less than the
respective amounts set forth below for the periods indicated:
Period Amount
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9/30/98 $2,300,000
10/1/1998 through and
including 12/31/98 $1,020,000
1/1/1999 through and
including 3/31/99 $ 380,000
4/1/1999 through and
including 6/30/99 $ 200,000
7/1/1999 through and
including 9/29/00 $ 10,000
9/30/00 through and The sum of (x) $10,000 plus
including 9/29/2001 (y) the greater of (i)
$1,000,000 or (ii) 85% of Net
Income of the Parent and its
Consolidated subsidiaries for
Fiscal Year ending 9/30/2000.
9/30/2001 through and The sum of (x) $10,000 plus
including the Final (y) the greater of (i)
Maturity Date $4,000,000 or (ii) 85% of Net
Income of the Parent and its
Consolidated subsidiaries for
the two Fiscal Year period
ending 9/30/2001.
2.14 Section 7.09 of the Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 7.09 Debt Service Coverage Ratio. Permit the Debt
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Service Coverage Ratio of the Parent and its Consolidated subsidiaries
at the end of the fiscal quarter ending June 30, 1999 to be less than
1.00:1.00, thereafter for the fiscal quarter ending September 30, 1999
to be less than 1.10:1.00, thereafter for the fiscal quarters ending
December 31, 1999 through March 31, 2000 to be less than 1.50:1.00 and
thereafter at the end of each fiscal quarter to be less than
1.75:1.00.
2.15 Section 7.11 of the Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 7.11 Interest Coverage Ratio. Permit the Interest
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Coverage Ratio of the Parent and its Consolidated subsidiaries at the
end of the fiscal quarters set forth below to be less than the
respective amounts set forth below:
Date Ratio
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6/30/99 1.15:1.00
9/30/99 1.25:1.00
12/31/99 through and
including 9/29/2000 1.75:1.00
9/30/2000 through and
including 9/29/2001 2.00:1.00
9/30/2001 through and
including the Final
Maturity Date 2.25:1.00
2.16 Section 7.12 of the Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 7.12 Leverage Ratio. Permit the Leverage Ratio of
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the Parent and its Consolidated subsidiaries at the end of the fiscal
quarters set forth below to be greater than the respective amounts set
forth below:
Date Leverage Ratio
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9/30/98 6.50:1.00
12/31/98 7.35:1.00
3/31/99 6.75:1.00
6/30/99 6.00:1.00
9/30/99 5.00:1.00
each fiscal quarter
ending thereafter 4.50:1.00
2.17 Section 7.13 of the Credit Agreement is hereby amended in its
entirety to read as follows:
SECTION 7.13. EBITDA. Permit EBITDA of the Parent and its
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Consolidated subsidiaries to be less than (i)$10,000,000 for the
period October 1, 1997 through September 30, 1998, (ii)$2,750,000 for
the period October 1, 1998 through December 31, 1998, (iii)$6,000,000
for the period October 1, 1998 through March 31, 1999, (iv)
$10,000,000 for the period October 1, 1998 through June 30, 1999 and
(v)$15,000,000 for the Fiscal Year ending 9/30/99.
2.18 The term "ING Documents" as it appears in paragraph (b) of
Section 7.19 is hereby deleted and the term "Subordinated Loan Documents" is
substituted therefor.
SECTION 3. CONFIRMATION OF LOAN DOCUMENTS
3.1 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.
SECTION 4. 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:
4.1 The Agent shall have received the original ING Letter of Credit,
a fully executed copy of the ING Security Agreement and any other document
executed in connection therewith, all in form and substance satisfactory to the
Agent.
4.2 The Borrowers shall have paid to the Agent (for the ratable
benefit of the Lenders) an amendment fee of $50,000.
4.3 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.
4.4 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.
4.5 All legal matters in connection with this Agreement shall be
satisfactory to the Agent, the Lenders and their respective counsel in their
sole discretion.
4.6 The Agent shall have received a certificate signed by a Financial
Officer of each Borrower and Guarantor that (i) both immediately prior to and
after giving effect to the transactions contemplated herein 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) after giving effect
to the transactions contemplated herein there exists no unwaived Default or
Event of Default and (iii) after giving effect to the transactions contemplated
herein since September 30, 1998, no event has occurred which would result in a
Material Adverse Effect.
4.7 The Agent shall have received a favorable opinion of counsel in
form and substance satisfactory to the Agent and its counsel.
4.8 The Agent shall have received such other documents as the Lenders
or the Agent or Agent's counsel shall reasonably deem necessary.
SECTION 5. MISCELLANEOUS
5.1 Each 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 after giving effect to the transactions
contemplated herein, 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, except to the extent that any such representations or warranties which are
not true or correct shall not in the aggregate result in a Material Adverse
Effect. 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.
5.2 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.
5.3 All references to the Credit Agreement contained in the Credit
Agreement and the other Loan Documents and the other documents and instruments
delivered pursuant to or in connection therewith shall mean the Credit
Agreement, as amended hereby and as may in the future be amended, restated,
supplemented or modified from time to time.
5.4 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.
5.5 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.
5.6 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.
5.7 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.
[Remainder of this page intentionally left blank.]
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/ Keith Labbate
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Name: Keith Labbate
Title: Executive Director
CIBC Oppenheimer Corp., as Agent
MELLON BANK, N.A., as Lender
By: /s/ Roger D. Attix
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Name: Roger D. Attix
Title: 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