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EXHIBIT 10.41
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LOAN AGREEMENT
BETWEEN
SKC INVESTMENTS, INC.
AND
CHANNEL 66 OF VALLEJO, CALIFORNIA, INC.
DATED
APRIL 26, 1996
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LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of this 26th day of April, 1996, is by and
between SKC INVESTMENTS, INC., a Delaware corporation having its principal
offices at 100 South Sangamon Street, Suite 300, Chicago, Illinois 60607 (the
"Lender"), and CHANNEL 66 OF VALLEJO, CALIFORNIA, INC., a Delaware corporation
having its principal offices at 12144 Classic Drive, Coral Springs, Florida
33071 (the "Borrower");
W I T N E S S E T H:
WHEREAS, the Borrower intends to purchase and operate Television Station
KPST-TV, Channel 66, Vallejo, California (the "Station"); and
WHEREAS, the Borrower desires to borrow funds from the Lender to finance
the purchase of the Station from Pan Pacific Television, Inc. and to make other
improvements in the operation of the Station;
NOW, THEREFORE, in consideration of the mutual promises and agreements
herein contained, the Lender and the Borrower agree as follows:
ARTICLE I. AMOUNT AND TERMS OF THE LOANS
SECTION 1.1 THE LOAN. The Lender agrees, upon the terms and
conditions hereinafter set forth, to make a loan or loans to the Borrower in an
aggregate principal amount not to exceed at any one time outstanding Eight
Million Nine Hundred Thousand Dollars ($8,900,000.00) (the "Loan").
SECTION 1.2 THE PROMISSORY NOTE. The outstanding principal amount
of the Loan shall be evidenced by and subject to the terms of a promissory
note, dated of even date herewith, substantially in the form set forth as
Exhibit 1 hereto (the "Note") payable to the order of the Lender and
representing the obligation of the Borrower to pay the Lender the amount of the
Loan, with interest thereon, as prescribed in Section 1.4. The Lender is
authorized to endorse the date and amount of the Loan and each repayment of
principal and/or interest with respect thereto on the Schedule A annexed to and
constituting a part of the Note, which endorsement shall constitute prima facie
evidence of the information endorsed.
SECTION 1.3 INTEREST. The Loan shall bear interest on the unpaid
principal amount thereof at a rate per annum at all times equal to eleven and
five-tenths percent (11.5%). Interest shall be calculated on the basis of a
year of three hundred sixty (360) days and actual number of days elapsed during
the period for which such interest is payable. Interest shall begin to accrue
on the outstanding principal amount of the Loan on the date of commencement of
broadcast operations by the Borrower of the Station pursuant to Federal
Communications
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Commission ("FCC") authorization and the first payment of interest to the
Lender shall be due sixty (60) days thereafter at which time all interest
accrued shall become due and payable; thereafter, accrued interest shall be
paid monthly, on the same date as the principal payments are due pursuant to
Section 1.4 hereof. If any installment of principal or interest is not paid
when due, that installment shall bear interest at a rate per annum equal to the
lower of the highest rate permitted by law or eighteen percent (18%) from the
due date thereof until paid in full.
SECTION 1.4 REPAYMENT OF THE LOAN. Ninety (90) days after the
commencement of broadcast operations of the Station by the Borrower pursuant to
FCC authority, the Borrower shall begin repayment to the Lender of the Loan in
eighty-four (84) consecutive equalthe principal and interest payments
commencing on the next payment date thereafter.
SECTION 1.5 USE OF PROCEEDS AND ADVANCEMENT OF FUNDS.
(a) The proceeds of the Loans are to be used by Borrower
exclusively for the purpose of financing the acquisition of the Station and any
necessary construction and operation of the Station as follows:
(1) Up to Seven Million Eight Hundred Thirteen
Thousand Nine Hundred Sixty and 86/100ths Dollars ($7,813,960.86) shall be used
to: (i) purchase the Station from Pan Pacific Television, Inc., pursuant to the
Asset Purchase Agreement dated February 27, 1989 (the "Purchase Agreement"); and
(ii) reimburse parties for legitimate and prudent expenses which opposed the
acquisition pursuant to a global settlement approved by the FCC;
(2) Two Hundred Thousand Dollars ($200,000) shall be
used for working capital and for purposes of operation of the Station;
(3) Construction and capital improvement costs
pertaining to the building of a new studio which, in the aggregate, shall not
exceed Eight Hundred Eighty-Six Thousand Thirty-Nine and 14/100ths Dollars
(866,039.14), shall be paid pursuant to an operating and construction draw
schedule to be prepared by Borrower following receipt of documentary evidence
reasonably acceptable to Lender of a binding commitment for such capital
improvement. Each such payment shall constitute an additional Loan to Borrower
which shall be amortized over the remaining term of existing loans pursuant to
Sections 1.5(a)(1) and (2) above upon the same terms as such existing loans with
the first additional Loan payment of interest to Lender payable on the next
payment date pursuant to the existing loans between thirty (30) and sixty (60)
days from disbursal of such additional loans, and the prinicipal and interest
payments commencing on the next payment date thereafter.
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(b) The Borrower agrees to furnish to the Lender such
information as the Lender may reasonably request in connection with the loans
including the submission of additional documentation involving invoices and
other requests for payment submitted to the Borrower.
SECTION 1.6 INFORMATION. The Borrower agrees to furnish to the
Lender such information as the Lender may reasonably request in connection with
the Loan or the Station.
SECTION 1.7 PREPAYMENT. The Borrower may prepay the Note in whole
at any time, or from time to time in part, with accrued interest to the date of
prepayment on the amount prepaid, without penalty, provided that each payment,
other than for the full amount of the outstanding balance, shall be in the
amount of Twenty Five Thousand Dollars ($25,000.00) or an integral multiple
thereof. Each prepayment on the Note shall be applied to installments of
principal payable on the Note in the inverse order of maturity.
SECTION 1.8 PAYMENT ON NON-BUSINESS DAYS. Whenever any payment to
be made hereunder or under the Note shall become due on a Saturday, Sunday or
public holiday, such payment may be made on the next succeeding business day,
and such extension of time in such case shall be included in the computation of
interest hereunder and under the Note.
SECTION 1.9 REDUCTION OR DEFERRAL OF PAYMENT. In the event that
the television station affiliation agreement between Borrower and Home Shopping
Club, Inc. ("HSC") dated as of April 26, 1996 is terminated by HSC or
Borrower, and at the time of such termination Borrower is not in material
default or material noncompliance with the affiliation agreement, then except
as provided for in the Excess Cash Flow Test in Section 1.10 below, payment on
the Note shall be deferred for a period of One (1) year from the date payments
under the affiliation agreement between HSC and Borrower are terminated. At
the expiration of the One (1) year period, the payments of interest and
principal shall resume as provided herein with the date for each payment being
extended by One (1) year; provided, however, that to the extent interest is not
paid during this One (1) year period, such unpaid interest shall be added to
the remaining principal balance of the Note.
SECTION 1.10 EXCESS CASH FLOW TEST PAYMENTS. In the event that the
television station affiliation agreement between Borrower and HSC is terminated
as described in Section 1.9 above, during the One (1) year deferral period
Borrower shall be required to make monthly payments of Total Excess Cash Flow,
as defined below, in lieu of interest and principal payments as otherwise
provided for in this Agreement with said Total Excess Cash Flow payments being
applied first to interest on a monthly basis:
Total Excess Cash Flow = Operating Profit/(Loss) + Depreciation/Amortization +
Payments to Owners or Affiliates (Other Than Salaries In Effect Prior to
Affiliation
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Agreement Termination) + Proceeds from the Sale/Disposition of Assets - Capital
Expenditures Subject to Reasonable Approval of Lender - Federal and State
Income Taxes Paid in Cash - Fifty Thousand Dollar ($50,000) Cash Contingency
Fund
Salaries of Owners and Affiliates in effect prior to termination of the
affiliation agreement shall be on terms similar to those that a third party
would receive; provided, however, that the salary of Eddie L. Whitehead for
serving as General Manager of the Station shall be no less than that provided
in the 1989 Memorandum of Understanding executed by Whitehead Communications,
Inc., Silver King Broadcasting of Northern California, Inc. and Home Shopping
Network, Inc.
ARTICLE II. CLOSING
SECTION 2.1 CLOSING DATE. Closing of this transaction shall occur on a
date set by Lender upon five (5) days written notice to Borrower, or such other
date agreed upon by the parties hereto (the "Closing Date").
ARTICLE III. SECURITY
SECTION 3.1 SECURITY INTEREST. As security for the Loan, the Borrower
shall execute and deliver to the Lender, on or before the Closing Date, a
security agreement in the form of Exhibit 2 hereto (the "Security Agreement").
SECTION 3.2 PLEDGE AGREEMENTS. As further security for the Loan, on or
before the Closing Date, the Borrower shall deliver to the Lender a pledge
agreement in the form of Exhibit 3, duly executed by Whitehead Media of
California, Inc. ("WMC") and Lender (the "Pledge Agreement"). WMC and Silver
King Capital Corporation, Inc., the shareholders of the Borrower, are
hereinafter referred to as the "Shareholders."
SECTION 3.3 MORTGAGES. The Borrower shall execute a first mortgage or
deed of trust in favor of the Lender covering the real estate, if any, acquired
by Borrower pursuant to the Purchase Agreement, in form and substance
reasonably satisfactory to the Lender. If requested by the Lender, the
Borrower shall also deliver to the Lender, at Lender's expense, an ALTA
mortgagee's policy of title insurance in customary form with respect to such
parcel.
ARTICLE IV. CONDITIONS OF LENDING
SECTION 4.1 CONDITIONS PRECEDENT TO LOAN FUNDS. The obligation of the
Lender to Loan the funds pursuant to Section 1.5(a)(1) and the initial One
Hundred Thousand Dollars ($100,000.00) pursuant to Section 1.5(a)(2) hereunder
is subject to the condition precedent that the Lender shall have received all
of the following, on or before the Closing Date, in form and substance
reasonably satisfactory to the Lender:
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(a) the Note, duly executed and delivered by the Borrower;
(b) the Security Agreement, together with appropriate UCC-1
forms, duly executed and delivered by the Borrower;
(c) the Pledge Agreement, duly executed and delivered by WMC;
(d) a certified copy of the resolutions of the Board of Directors
of the Borrower evidencing approval of the execution, delivery and performance
of this Agreement, the Note and the Security Agreement and other matters
contemplated hereby;
(e) Certificates of Good Standing for the Borrower as of a recent
date prior to the Closing Date from the States of Delaware and California;
(f) Copies of the certificates evidencing the insurance required
to be maintained by the Borrower pursuant to Section 6.1(e);
(g) A copy of an executed television station affiliation
agreement between the Borrower and HSC that provides for hourly compensation to
the Borrower sufficient to permit the Borrower to repay the Loan as determined
by the Lender in its sole discretion and a copy of an executed Escrow Agreement
by and among HSC, Borrower and Lender in the form of Exhibit 4;
(h) A copy of the executed Purchase Agreement;
(i) Such documentation, as required by Sections 1.5(a) and (b);
and
(j) The written approval of the FCC for Borrower to acquire the
Station, including the FCC-issued licenses, and such Order is final and no
longer subject to administrative or judicial review or reconsideration.
(k) The remaining One Hundred Thousand Dollars ($100,000.00)
pursuant to Section 1.5(a)(2) hereunder shall be made available to Borrower
upon the presentation of financial information reasonably acceptable to Lender
showing that Borrower has insufficient cash to cover expenses.
SECTION 4.2 CONDITIONS PRECEDENT TO ADDITIONAL LOANS. The obligation of
the Lender to make any additional loans pursuant to Section 1.5(a)(3) hereunder
shall be subject to the fulfillment of the following conditions precedent:
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(a) No Event of Default (as defined in Section 7.1) shall have
occurred and be continuing hereunder on the date of such advance and no such
Event of Default would result from the making of such advance.
(b) Neither the business nor assets, nor the condition, financial
or otherwise, of the Borrower shall have materially adversely changed since the
Closing Date, excluding, however, any changes occurring as a result of this
Agreement and related Agreements; provided, however, that this Section 4.2(a)
shall not apply to any changes resulting from termination of the affiliation
agreement between Borrower and HSC as described in Sections 1.9 and 1.10
hereof.
(c) The representations and warranties contained in Article V
hereof shall be true and correct in all material respects on and as of the date
of making such advance.
(d) At the time assets are acquired by Borrower, copies of the
certificates evidencing the insurance required to be maintained by the Borrower
pursuant to Section 6.1(e) shall have been received by Lender.
(e) Such documentation as required by Sections 1.5(a) and (b).
(f) Lender shall have received the working drawings and
specifications for the modification of the Station specifying the broadcast
equipment to be utilized by Borrower ("Plans and Specifications") in a form and
substance reasonably satisfactory to Lender.
Each borrowing by the Borrower hereunder shall constitute a
representation and warranty to the effect of the foregoing paragraphs (a), (b)
and (c).
SECTION 4.3 COMPLIANCE. All of the representations and warranties of the
Borrower in this Agreement shall be true and accurate in all material respects
on and as of the Closing Date and the date of any subsequent disbursement of
any portion of the Loan, as if made on and as of such date and time. The
Borrower shall be in compliance with all of the applicable terms and provisions
of this Agreement and no Event of Default or any event which with the lapse of
any applicable grace period or the giving of notice or both would constitute an
Event of Default shall have occurred and be continuing. The Borrower shall
have performed all obligations and taken all actions to be performed or taken
by it hereunder on or prior to such date. On the Closing Date, the Borrower
shall deliver to the Lender a certificate, dated as of such date and signed by
an executive officer of the Borrower, certifying compliance with the conditions
of this Section 4.3. Each disbursement of all or a portion of the Loan to the
Borrower shall in and of itself, constitute a representation and warranty that
the Borrower as of the date of such Loan, is in compliance with this Section
and if the Borrower is not in
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compliance with this Section, the Lender shall not be required to disburse such
Loan to the Borrower.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
SECTION 5.1 REPRESENTATIONS AND WARRANTIES OF THE BORROWER. In order to
induce the Lender to enter into this Agreement and make the Loan, the Borrower
represents and warrants as follows:
(a) Existence and Standing. The Borrower is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware and is qualified to do business and in good standing under the laws
of the State of California and any other jurisdiction in which it conducts its
business, and has all requisite power and authority, corporate or otherwise, to
conduct its business, to own its properties and to execute and deliver, and to
perform all of its obligations under this Agreement, the Note, the Security
Agreement and all other documents that have been or will be executed and
delivered by the Borrower pursuant to this Agreement.
(b) Authorizations, Compliance with Laws. The execution,
delivery and performance by the Borrower of this Agreement, the Note, the
Security Agreement and all other documents required to be executed and
delivered by the Borrower pursuant to this Agreement have been duly authorized
by all necessary corporate action and do not and will not (i) violate (A) any
provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to the
Borrower or (B) any provision of the charter or by-laws of the Borrower; or
(ii) result in a breach of or constitute a default under any agreement or
instrument to which the Borrower is a party or by which its properties may be
affected; or (iii) result in the creation of a lien, charge or encumbrance of
any nature upon the Borrower's properties or assets other than as contemplated
by this Agreement.
(c) No Consent. No authorization, consent, approval, license,
exemption of or filing or registration with any court or governmental
department or agency, except for filing with the FCC, is or will be necessary
to the valid execution, delivery and performance by the Borrower of this
Agreement, the Note, the Security Agreement or any other document required to
be executed and delivered by the Borrower pursuant to this Agreement.
(d) Binding Obligations. This Agreement, the Note, the Security
Agreement and all other documents required to be executed and delivered by the
Borrower pursuant to this Agreement have been or will be executed and delivered
by duly authorized officers of the Borrower and constitute or will constitute,
legal, valid and binding obligations of the Borrower enforceable in accordance
with their respective terms.
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(e) Litigation. There are no actions, suits or proceedings
pending, or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or its properties before any court or governmental department or
agency which materially adversely affects the transactions contemplated by this
Agreement or which would have a material adverse effect on the business,
properties, operation or condition of the Borrower.
(f) No Default. The Borrower is not in default in the
performance, observance or fulfillment of any of the obligations or conditions
contained in any material agreement or instrument to which it is a party, nor
with respect to any order, judgment, writ, injunction or decree of any court,
governmental authority or arbitration board.
(g) Compliance with Laws. The Borrower has complied with all
applicable federal, state and local laws. All necessary licenses and permits
related to the Station have either been obtained and are currently valid or
have been applied for and are now being diligently pursued.
(h) Taxes. The Borrower has filed all tax returns and reports
(federal, state and local) required to be filed by it, and has paid all taxes
shown thereon, including interest and penalties, and all assessments received
by it (except to the extent that the same are being contested in good faith by
appropriate proceedings diligently prosecuted and as to which adequate reserves
have been set aside on the books of the Borrower in conformity with generally
accepted accounting principles).
(i) Title to Properties. The Borrower has good and marketable
title to all of its property and assets and valid and enforceable leasehold
interests in the property which it holds under lease, all such property, assets
and leasehold interests being free and clear of any and all mortgages, deeds of
trust, assignments, liens, security interests, charges or encumbrances of any
nature whatsoever, except for those created hereby, and no mortgages, deeds of
trust, financing statements or other evidences of security interests covering
all or any of the aforesaid property are on file among the records of any
public office, except those evidencing a security interest in favor of the
Lender.
(j) Material Misstatement. No statement made herein or
information, exhibit or report furnished by the Borrower to the Lender in
connection with this Agreement or its negotiation, contains any material
misstatement of fact or omits to state a material fact or any fact necessary to
make the foregoing not misleading.
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ARTICLE VI. COVENANTS OF THE BORROWER
SECTION 6.1 AFFIRMATIVE COVENANTS. So long as the Note shall remain
unpaid, the Borrower hereby covenants and agrees that it will, unless the
Lender shall otherwise consent in writing:
(a) Payment of Obligations. Pay punctually and discharge when
due: (i) all indebtedness heretofore or hereafter incurred; (ii) all taxes,
assessments and governmental charges or levies imposed upon it or its income or
profits, or upon any properties belonging to it; (iii) claims or demands of
materialmen, mechanics, carriers, warehousemen, landlords and other like
persons which, if unpaid might become a lien or charge upon the property of the
Borrower; provided that this covenant shall not require the payment of any of
the matters set forth in (i), (ii) and (iii) above if the same shall be
contested in good faith and by proper proceedings diligently pursued and as to
which adequate reserves have been set aside on the books of the Borrower in
accordance with generally accepted accounting principles.
(b) Preservation of Corporate Existence. Preserve and maintain
its corporate existence, rights, franchises and privileges in the jurisdiction
of its incorporation.
(c) Maintenance of Properties. Maintain and preserve all of its
properties necessary or useful in the proper conduct of its business in good
working order and condition, ordinary wear and tear excepted.
(d) Compliance with Laws. Comply in all material respects with
the requirements of all applicable laws, rules, regulations and orders of any
governmental authority.
(e) Maintenance of Insurance. Maintain with responsible and
reputable insurance companies policies on all of its properties and covering
such risks, including public liability and workers' compensation, in such
amounts as are usually carried by companies engaged in similar businesses and
owning similar properties as the Borrower, and promptly upon execution thereof
provide to the Lender copies of all such policies and any riders or amendments
thereto. The policies of insurance required hereunder shall name the Lender as
an additional loss payee or additional insured, as applicable, and shall
provide that the Lender shall receive at least thirty (30) days' written notice
prior to the cancellation, termination or alteration of any such policy.
(f) Operations in Ordinary Course. Continue to operate its
business in the ordinary course.
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(g) Perfection of Liens. Do all things requested by the Lender
to preserve and perfect the liens and security interests of the Lender arising
pursuant to the Security Agreement, the Pledge Agreement or any other agreement
required hereunder as first liens and security interests.
(h) FCC Approval. If counsel to the Lender reasonably determines
that the consent of the FCC is required in connection with the execution,
delivery and performance of this Agreement, the Pledge Agreement, the Security
Agreement or any other document delivered to the Lender in connection herewith
or therewith or as a result of any action which may be taken pursuant hereto or
thereto, then the Borrower, at its sole cost and expense, agrees to use its
best efforts to secure such consent and to cooperate with the Lender in any
action commenced by the Lender to secure such consent.
SECTION 6.2 NEGATIVE COVENANTS. So long as the Note shall remain unpaid
and the Agreement shall not have been terminated, the Borrower hereby covenants
that it will not, without the Lender's prior written approval:
(a) Indebtedness/Contracts. Create or incur, assume or suffer to
exist any indebtedness, obligation or liability, whether matured or unmatured,
liquidated or unliquidated, direct or contingent, joint or several, whether by
contract or otherwise, except for: (i) indebtedness to Lender pursuant to this
Agreement; and (ii) indebtedness (other than for borrowed money) incurred in
the ordinary course of business not to exceed One Hundred Thousand Dollars
($100,000.00) in the aggregate at any one time; provided, however, that this
restriction shall not apply to indebtedness for salaries of Station's employees
or to indebtedness incurred in the ordinary course of business prior to or as
of the Closing Date and Lender's prior written approval shall not be
unreasonably withheld with respect to any other such indebtedness incurred in
the ordinary course of business in excess of One Hundred Thousand Dollars
($100,000.00) in the aggregate at any one time.
(b) Liens. Create, assume or suffer to exist, directly or
indirectly, any security interest, mortgage, deed of trust, pledge, lien,
charge or other encumbrance, of any nature whatsoever upon any of its
properties or assets, now owned or hereafter as acquired, excluding, however,
from the operation of this covenant:
(i) any security interest or lien created pursuant to this
Agreement;
(ii) liens for taxes or assessments either not delinquent
or the validity of which are being contested in good faith by appropriate legal
or administrative proceedings and as to which adequate reserves shall have been
set aside on its books, in conformity with generally accepted accounting
principles;
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(iii) materialmen's, mechanics', carriers', workmen's,
repairmen's, warehousemen's or other like liens arising in the ordinary course
of business and either not yet due and payable or being contested in good faith
by appropriate legal proceedings and as to which adequate reserves shall have
been set aside on its books, in conformity with generally accepted accounting
principles;
(iv) deposits or pledges to secure payment of workers'
compensation, unemployment insurance or other social security benefits or
obligations;
(v) any judgment lien, unless the judgment it secures
shall not, within thirty (30) days after the entry thereof, have been
discharged, vacated, reversed, or execution thereof stayed pending appeal, or
shall not have been discharged, vacated or reversed within thirty (30) days
after the expiration of any such stay; or
(vi) liens or other encumbrances arising out of
indebtedness incurred pursuant to Section 6.2(a) hereof.
(c) Disposition of Assets. Sell, transfer, lease or otherwise
dispose of all or any material part of its assets other than in the ordinary
course of business and in exchange for collateral of like value in which the
Lender shall have a security interest.
(d) Merger. Enter into any consolidation or merger with, or into
any acquisition of all or substantially all of the properties or assets of any
person or entity.
(e) Transfer or Issuance of Shares. Permit the issuance or
transfer of any shares of the capital stock of the Borrower, or any options,
warrants, convertible securities or other rights to purchase the Borrower's
stock . The preceding sentence shall not apply to (i) transfers to the Lender;
(ii) transfers resulting from the death of the Shareholders; and (iii)
transfers effected by the Shareholders of the Borrower with the prior written
consent of the Lender (which shall not be unreasonably withheld), solely for
estate planning purposes of such Shareholders.
(f) Change of Business. Change, in any material respect, the
nature or character of its business as intended, or engage in any activity not
reasonably related to such business, as set forth in the executed television
station affiliation agreement with HSC; provided, however, that this Section
6.2(f) shall not apply to a change in programming of Station resulting from
termination of the affiliation agreement between Borrower and HSC so long as
Borrower is not in material default or material noncompliance with the
affiliation agreement.
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(g) Remove Assets. Remove any of the assets procured with the
proceeds of the borrowings provided for herein, or any replacements for such
assets, to a county in which no financing statement on Form UCC-1 has been
filed by the Lender with respect to such assets.
(h) Distributions or Dividends. Declare or make, directly or
indirectly, any payment or distribution, or incur any liability for the
purchase, acquisition, redemption or retirement of any capital stock of the
Borrower or as a dividend, return of capital or other payment or distribution
of any kind to a shareholder of the Borrower or any affiliate of the Borrower
(other than any stock dividend or stock split or similar distribution payable
only in capital stock of the Borrower) in respect of the Borrower's capital
stock, except that the Borrower may declare one annual dividend per year on all
classes of its capital stock with the prior written consent of the Lender.
(i) Transactions with Affiliates. Enter into any transaction or
agreement with any affiliate of the Borrower (other than the Lender).
(j) Adverse Change. Suffer any material adverse change in the
business, assets, properties, prospects or condition (financial or otherwise)
of the Borrower or the Station, or any damage, destruction or loss affecting
any assets used or useful in the conduct of the business of the Borrower;
provided, however, that so long as Borrower is not in default under this
Agreement or the television station affiliation agreement between the Borrower
and HSC, the termination, amendment or waiver of any provision of said
affiliation agreement shall not constitute a material adverse change pursuant
to this Section 6.2(j).
(k) Employee Compensation. Suffer any material increase in
excess of the reasonable range in the broadcast industry in the same or similar
markets in compensation payable or to become payable to any employees, or any
bonus payment made or promised to any employee, or any material change in
personnel policies, insurance benefits or other compensation arrangements
affecting any employees, provided that nothing in this clause shall be
construed to limit or restrict the commission compensation of employees who may
be selling brokered time for the Borrower.
(l) Cancellation of Debts. Cancel any debts owed or claims held
by the Borrower.
(m) Write-Down. Suffer any significant write-down of the value
of any assets or any significant write-off as uncollectible of any accounts
receivable without the prior written consent of the Lender.
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(n) Rights. Transfer or grant any right under, or enter into any
settlement regarding the breach or infringement of, any license, patent,
copyright, trademark, service mark, trade name, franchise, or similar right, or
modify any existing right relating to the Borrower.
(o) Plans and Specifications. Make any material changes in or
departures from the Plans and Specifications or make any change in the
Station's transmission or antenna system as contained in the Plans and
Specifications.
SECTION 6.3 REPORTING REQUIREMENTS. So long as the Note shall remain
unpaid and the Agreement shall not have been terminated, the Borrower shall,
unless the Lender shall otherwise consent in writing, furnish to the Lender:
(a) Default Certificate. As soon as possible and in any event
within seven (7) business days after the occurrence of each Event of Default
(as defined in Section 7.1) of which the Borrower has knowledge, the statement
of the chief financial officer of the Borrower setting forth details of such
Event of Default and the action which the Borrower proposes to take with
respect thereto.
(b) Financial Statements. Beginning with the making of the
initial Loan disbursement, quarterly financial statements within thirty (30)
days after the end of each fiscal quarter; within ninety (90) days after the
end of each fiscal year of the Borrower, a copy of the audited financial
statements for such year for the Borrower, including therein a balance sheet of
the Borrower as of the end of such fiscal year, statements of income and
expense of the Borrower for such fiscal year, and a statement of cash flow of
the Borrower for such fiscal year, in each case prepared by an independent
public accountant of recognized standing acceptable to the Lender, except that
the Lender may waive the audit requirement and accept a review of the
Borrower's financial records.
(c) Notice of Litigation. Promptly give written notice of all
actions, suits and proceedings before any court or governmental agency,
domestic or foreign, which may be commenced or threatened against the Borrower
in which the claim involved is Five Thousand Dollars ($5,000.00) or more and of
any other matter of the type described in Section 5.1(e).
(d) Budget. An annual budget to the Lender within the first
thirty (30) days of each fiscal year of the Borrower. Such budget shall be
satisfactory in form to the Lender.
(e) Other Information. Such other information respecting the
business, properties, operations or the condition, financial or otherwise, of
the Borrower as the Lender may from time to time reasonably request.
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ARTICLE VII. EVENTS OF DEFAULT
SECTION 7.1 EVENTS OF DEFAULT. Under this Agreement, an Event of Default
shall be any of the following which have not been cured within thirty (30) days
of written notice to Borrower by Lender except where they have occurred due to
the breach by Lender (or any entity controlled by or under common control of
it) of any agreement between it and Borrower or due to breach by HSC of the
affiliation agreement between it and Borrower:
(a) The Borrower shall fail to pay any installment of principal
or interest on the Note, or any other obligation to the Lender when due whether
at the due date thereof or by acceleration or otherwise, and such default shall
remain unremedied for a period of five (5) days after the due date thereof; or
(b) The security interest or lien of the Lender in any material
portion of the collateral covered by the Security Agreement, Pledge Agreements
or any Leasehold Mortgage shall at any time not constitute a legal, valid and
enforceable security interest or lien; or
(c) Any representation or warranty made by the Borrower (or any
of its officers) herein, in the Security Agreement or in any certificate,
agreement, instrument or statement contemplated by or made or delivered
pursuant to or in connection with this Agreement, the Note or the Security
Agreement, or by WMC in the Pledge Agreement shall prove to have been incorrect
in any material respect when made; or
(d) The Borrower shall fail to perform or observe any other
material term, covenant or agreement contained in this Agreement, the Note, the
Security Agreement or the Escrow Agreement, or the Shareholders (other than a
Shareholder affiliated with Lender) shall fail to perform or observe any
material term, covenant or agreement contained in the Pledge Agreement; or
(e) The Borrower or its shareholders shall fail to pay any
indebtedness for borrowed money owing by the Borrower or its shareholders or
any interest or premium thereon, when due, whether such indebtedness shall
become due by scheduled maturity, by required prepayment, by acceleration, by
demand or otherwise, or the Borrower or its shareholders shall fail to perform
any term, covenant or agreement under any agreement or instrument evidencing or
securing or relating to any such indebtedness owing by the Borrower or its
shareholders if the effect of such failure is to accelerate, or to permit the
holder of such indebtedness to accelerate the maturity of such indebtedness; or
(f) The Borrower shall expend the proceeds of the Loan for any
purpose other than the purchase and operation of the Station without the prior
written consent of the Lender, which may be withheld in the Lender's sole
discretion; or
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(g) The Borrower shall (i) fail to pay its debts as they mature
in the ordinary course of business; (ii) file a petition commencing a voluntary
case concerning it under any Chapter of Title 11 of the United States Code
entitled "Bankruptcy"; or (iii) the Borrower shall apply for or consent to the
appointment of any receiver, trustee, custodian or similar officer for it or
for all or any substantial part of its property; or (iv) such receiver,
trustee, custodian or similar officer shall be appointed without the
application or consent of the Borrower; or (v) an involuntary case is commenced
against the Borrower under any Chapter of the aforementioned Title 11 and an
order for relief under such Title 11 is entered or the petition commencing the
case is controverted; or (vi) the Borrower shall institute (by petition,
application, answer, consent or otherwise) any bankruptcy, insolvency,
reorganization, dissolution, liquidation or similar proceeding relating to it
under the laws of any jurisdiction; or (vii) any such proceeding shall be
instituted against the Borrower; or (viii) the Borrower shall take any action
for the purpose of effectuating the foregoing; or
(h) Any court, government, or government agency shall condemn,
seize or otherwise appropriate or take custody or control of all or a
substantial portion of the property or assets of the Borrower; or
(i) There shall be an irrevocable and unappealable denial or
revocation of the broadcast license for the Station.
SECTION 7.2 EFFECT OF EVENT OF DEFAULT. Should any Event of Default
occur, the Lender may at its option by written notice to the Borrower declare
the entire unpaid principal amount of the Note, together with all unpaid
interest and all other amounts payable under this Agreement and every other
obligation of the Borrower to the Lender, immediately due and payable,
whereupon the Note and all such obligations shall become and be forthwith due
and payable, without presentment, demand, protest or other notice of any kind,
all of which are hereby expressly waived by the Borrower, anything contained
herein or in the Note or in such other note or evidence of indebtedness to the
contrary notwithstanding; provided, however, that in case of an Event of
Default under Section 7.1(g), all the obligations of the Borrower under this
Agreement and the Note shall become immediately due and payable as of the date
of any such Event of Default regardless of the cause of such Event of Default
and without any notice to the Borrower required from the Lender. The Lender
shall have, in addition to all other rights and remedies allowed by law, the
rights and remedies of a secured party under the Uniform Commercial Code as in
effect in the State of California and, without limiting the generality of the
foregoing, the rights and remedies provided for in the Security Agreement and
Pledge Agreement, which provisions are hereby incorporated by reference.
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ARTICLE VIII. MISCELLANEOUS
SECTION 8.1 NO WAIVER; CUMULATIVE REMEDIES. No failure or delay on the
part of the Lender in exercising any right, power or remedy hereunder shall
operate as a waiver, nor shall any single or partial exercise of any such
right, power or remedy hereunder. The remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 8.2 AMENDMENTS. No amendment, modification, termination or
waiver of any provision of this Agreement, the Note, the Security Agreement or
the Escrow Agreement, nor consent to any departure by the Borrower therefrom,
shall in any event be effective unless in writing, signed by the Lender and
then only in the specific instance and for the specific purpose for which
given. No notice to or demand on the Borrower in any case shall entitle it to
any other or further notice or demand in similar or other circumstances.
SECTION 8.3 CONFLICTS. In the event of any conflict or inconsistency
between any provision of this Agreement and a provision of the Note or the
Security Agreement, the provisions of this Agreement shall control.
SECTION 8.4 ADDRESS FOR NOTICES. All notices and other communications
under this Agreement shall be in writing and shall be deemed sufficiently given
if delivered personally or by nationally recognized overnight courier service
to the applicable party at the addresses indicated below:
If to the Borrower:
Eddie L. Whitehead, President
Channel 66 of Vallejo, California, Inc.
12144 Classic Drive
Coral Springs, Florida 33071
with a copy (which shall not constitute notice) to:
James J. Freeman
Reed Smith Shaw & McClay
1301 K Street
Suite 1100 - East Tower
Washington, DC 20005
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If to the Lender:
SKC Investments, Inc.
c/o Steven H. Grant
12425 28th Street North
Suite 300
St. Petersburg, FL 33716
with a copy (which shall not constitute notice) to:
Michael Drayer
General Counsel
12425 28th Street North
Suite 300
St. Petersburg, FL 33716
or at such other address as may be designated by either party in a written
notice to the other complying as to delivery with the terms of this Section.
All such notices and other communications shall be effective upon delivery.
SECTION 8.5 EXPENSES. The Borrower agrees to pay on demand all costs and
expenses incurred by the Lender directly in connection with the enforcement of
this Agreement, the Note, the Security Agreement, the Pledge Agreement and
other instruments and documents to be delivered hereunder, including, without
limitation, the reasonable fees and expenses of any attorney to whom the Note
is referred for collection (whether or not litigation is commenced) or for
representation in proceedings under any bankruptcy or insolvency law. In
addition, the Borrower shall pay any and all taxes and fees payable or
determined to be payable in connection with the execution, delivery and
recordation of any instruments and documents to be delivered hereunder.
SECTION 8.6 BINDING EFFECT; ASSIGNMENT. This Agreement shall become
effective when executed and thereafter shall be binding upon and inure to the
benefit of the Borrower, the Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign any rights
or obligations hereunder without the prior written consent of the Lender. The
Lender shall be permitted to assign any of its rights, interest and obligations
hereunder and as to all related agreements, whereupon the Lender shall be
released from performing all obligations so assigned which arise after the
effective date of such assignment.
SECTION 8.7 GOVERNING LAW. This Agreement, the Note, the Security
Agreement and related documents shall be governed by, and construed in
accordance with, the laws of the
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State of Illinois with the exception of its conflicts of laws provisions;
provided that the effect of any recordation shall be determined by the State
thereof. The Borrower and Lender hereby irrevocably submit to the jurisdiction
of the state and federal district courts for the district including Chicago,
Illinois for the purposes of any action or proceeding arising out of or
relating to this Agreement or the subject matter hereof or thereof; waive and
agree not to assert, by way of motion, as a defense or otherwise, in any such
action or proceeding, any claim that (A) they are not personally subject to the
jurisdiction of such courts, (B) the action or proceeding is brought in an
inconvenient forum or (C) the venue of the action or proceeding is improper;
and agree that, notwithstanding any right or privilege they may possess at any
time, the Borrower and Lender and their property are and shall be generally
subject to suit on account of the obligations they have assumed hereunder.
The Borrower and Lender agree that service in person or by certified or
registered U.S. mail to its address set forth in Section 8.4, or as
subsequently changed as provided therein, shall constitute valid in personam
service upon the Borrower and Lender and their successors and assigns in any
action or proceeding with respect to any matter as to which they have submitted
to jurisdiction hereunder.
Notwithstanding the foregoing, the Lender or Borrower may at their option
bring any action or other proceeding arising out of or relating to this
Agreement or the subject matter hereof or thereof against the other party or
any of its assets in the courts of any jurisdiction or place where such party
or such assets may be found or where the such party may be subject to personal
jurisdiction, and may effect service of process as provided under any
applicable Governmental Rule.
The obligations of the Borrower and Lender under this Section shall
survive any termination of this Agreement.
SECTION 8.8 SEVERABILITY OF PROVISIONS. Any provision of this Agreement,
the Note or the Security Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions or affecting the validity or enforceability of any provisions in any
other jurisdiction.
SECTION 8.9 HEADINGS. Article and Section headings in this Agreement are
including for convenience of reference only and shall not constitute a part of
this Agreement for any other purpose.
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SECTION 8.10 RIGHTS AFFECTED BY EXTENSIONS. The rights of the
Lender and its assigns shall not be impaired by any indulgence, release,
renewal, extension or modification which the Lender may grant with respect to
the indebtedness or any part thereof, or with respect to the collateral or with
respect to any endorser, guarantor, or surety without notice or consent of the
Borrower or any endorser, guarantee, or surety.
SECTION 8.11 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties made in this Agreement and in any documents or
certificates delivered pursuant hereto or thereto shall survive the execution
and delivery of this Agreement and the Note and the making of the Loan
hereunder and continue in full force and effect, as of the respective dates as
of which they were made, until all of the obligations of the Borrower to the
Lender hereunder have been paid in full.
SECTION 8.12 ATTORNEYS' FEES. If any litigation arises between the
parties in connection with the transactions contemplated by this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys' fees in
addition to all other damages and remedies.
SECTION 8.13 FURTHER ASSURANCES. From time to time, the Borrower
shall execute and deliver to the Lender such additional documents as the Lender
may reasonably require to carry out the purposes of this Agreement or any of
the documents entered into in connection herewith, or to preserve and protect
the rights of the Lender hereunder or thereunder.
SECTION 8.14 INDEMNIFICATION. The Borrower hereby indemnifies and
holds harmless the Lender and its directors, officers, shareholders, employees,
agents, counsel, subsidiaries and affiliates (the "Indemnified Persons") from
and against any and all losses, liabilities, obligations, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against any
Indemnified Person in any way relating to or arising out of this Agreement, the
documents entered into in connection herewith, or any of them or any of the
transactions contemplated hereby or thereby; provided, however, that the
Borrower shall not be liable to any Indemnified Person, if there is a judicial
determination that such losses, liabilities, obligations, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the gross negligence or willful misconduct of such Indemnified Person.
SECTION 8.15 COUNTERPARTS. This agreement may be executed in any
number of counterparts, and by each of the parties on separate counterparts,
each of which, when so executed, shall be deemed an original, but all of which
shall constitute but one and the same instrument.
SECTION 8.16 SEVERABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of
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such prohibition or unenforceability without invalidating the remaining
portions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.
SECTION 8.17 WAIVER OF JURY TRIAL. The parties hereby waive the
right to a trial by jury in any action or proceeding arising out of or relating
to this Agreement or the other Credit Documents or the subject matter hereof or
thereof and brought by the other party.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective duly authorized officers, as of the date
first above written.
WITNESS: CHANNEL 66 OF VALLEJO,
CALIFORNIA, INC.
By:
- ---------------------------- ---------------------------
Name:
-------------------------
Title:
------------------------
WITNESS: SKC INVESTMENTS, INC.
By:
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Name:
-------------------------
Title:
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