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PURCHASE AGREEMENT
DATED: As of September __, 2000
BETWEEN: (1) TEAM COMMUNICATIONS GROUP, INC.
11818 Wilshire Boulevard, Second Floor
Los Angeles, California 90025
(hereinafter called the "Seller" which expression shall where the
context so permits include its successors in title and assigns)
(2) CALL OF THE WILD DISTRIBUTION LLC
3957 Maplewood Drive
Seaford, New York 11783
(hereinafter called "Purchaser" which expression shall where
the context so permits include its successors in title and
assigns)
WHEREAS:
(A) The Seller owns all rights of whatsoever nature in and to the Series in
the Territory (subject to the Discovery License) and Related Receivables
(as such terms are defined below).
(B) Purchaser wishes to acquire all of Seller's rights in and to the Series
and Related Receivables and the Seller has agreed to assign and transfer
the same to Purchaser upon the terms and subject to the conditions
hereinafter set forth.
NOW IT IS HEREBY AGREED as follows:
1. CONDITION PRECEDENT
The parties' rights and obligations under this Agreement are conditioned
upon closing of Purchaser's financing agreement ("Heller Agreement")
with Heller EMX, Inc. ("Heller") and the funding of the loan
contemplated thereunder.
2. THE SERIES AND RELATED RECEIVABLES
(a) The "Series" means the first thirteen (13) one-hour episodes of
the television series entitled "Jack London's Call of the Wild"
and comprises a connected and continuous series of scenes
telling or presenting a complete story and is suitable for
public exhibition in any and all media including by means of
videograms and television exhibition. The Series is produced by
Call of the Wild Productions, Inc. ("Producer"). The Series
includes , without limitation, the cinematographic film
photoplay and sound records thereof, as well as trailers and
clips thereof, produced by means of any photographic,
electronic, mechanical or other processes or devises now or
hereafter known, invented, used or contemplated, by which
photographs, films, drawings, images or other visual
reproductions or representations are or may be printed,
imprinted, recorded or otherwise preserved on film, tape or any
other material of any description (whether translucent or not)
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for later projection, exhibition or transmission by any means or
media now known or hereafter devised, in such manner that the
same are or appear to be in motion or in sequence on a screen,
mirror, tube or other medium or device, whether or not
accompanied by sound record.
(b) The "Related Receivables" means the right (as assignee of
Producer) to receive all CAVCO, GST or other similar grants,
subsidies and reimbursements related to the Series whether
received prior to, on or after the date of this Agreement.
3. CREDITS
As one of the requirements of Delivery (as hereinafter defined) of the
Series, the Seller shall deliver to Purchaser a written statement of all
of the paid advertising credits Seller is obliged to give to any person,
firm or company in connection with the Series, and Purchaser shall
appropriately insert or cause to be inserted such credits in all
advertising issued by it or under its control and shall impose a similar
obligation on all distributors of the Series.
4. DELIVERY OF THE SERIES
The Seller agrees and undertakes to deliver the Series to Purchaser on
the date the Purchase Price (as defined below) is paid to Seller.
"Delivery" of the Series shall be deemed to mean delivery to Purchaser
of (i) a laboratory account transfer letter in the form of Schedule 1
attached hereto ("the Lab Account Transfer Letter"), (ii) a written
statement of all paid advertising credit obligations relating to the
Series, (iii) certificates naming Purchaser, Heller and their respective
designees as additional insureds on an errors and omissions insurance
policy for the Series, from an underwriter and upon terms in all
respects satisfactory to Purchaser and Heller, and (iv) a signed
short-form assignment in the form of Schedule 2 attached hereto.
5. GRANT OF RIGHTS
(a) For the consideration set forth in sub-clause (b) of this Clause
and subject to payment of the Purchase Price (as therein
defined) the Seller hereby assigns, sells, transfers, grants and
licenses to Purchaser all of Seller's right, title and interest
in and to the Series and the Related Receivables (the "Rights"),
including without limitation, (i) the sole and exclusive right
to sell, distribute, lease, market, license, exhibit, broadcast,
reproduce, publicize and otherwise exploit the Series or any
elements thereof throughout the universe excluding Canada ("the
Territory") in all media now known or hereafter invented in
perpetuity, excluding therefrom the two (2) year exclusivity
period under Producer's pre-existing three (3) year license
agreement with Discovery Communications, Inc. (the "Discovery
License") (collectively, "Exploitation"), (ii) the sole and
exclusive right to receive and collect all proceeds of
Exploitation (including, without limitation, the Pre-Closing
Proceeds (as defined in Section 6(k) below), but excluding any
license fee payable under the Discovery License) and the Related
Receivables, (iii) all rights described on Exhibit A hereto, and
(iv) all of Seller's right, title and
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interest in, to and under Seller's pre-existing license and sale
agreements for the Series ("Pre-Closing Agreements") copies of
which are attached hereto as Schedule 3.
(b) In consideration of the assignment and grant of the Rights
herein contained, Purchaser hereby agrees to pay the Seller the
sum of US$8,139,428 (the "Purchase Price"), less all Financing
Costs (as defined in the Sales Agency Agreement) which are due
and payable upon closing of this Agreement. The Purchase Price
(net of the aforesaid deduction) shall be payable to Seller upon
(i) Delivery of the Series to Purchaser, and (ii) satisfaction
of the condition precedent specified in Clause 1 above.
Concurrently with the payment of the Purchase Price, Seller
shall pay to Heller on Purchaser's behalf all Pre-Closing
Proceeds (as that term is deferred in Section 6(k) below) by
wire transfer to such account as Heller may designate in writing
to Purchaser for application under that certain Sales Agency and
Minimum Guarantee Agreement ("Sales Agency Agreement") dated
September ___, 2000 between Purchaser and Seller.
(c) Upon closing of this transaction, all Pre-Closing Agreements
shall be modified to reflect Seller's assignment thereof to
Purchaser, and expressly require the distributors to remit any
and all monies payable thereunder directly to the Collection
Account (as that term is defined in the Sales Agency Agreement),
and all such distributors shall be expressly directed by Seller
in writing to make all payments directly to the Collection
Account, without any right of offset relating to other
transactions between Seller and the applicable distributor. Any
monies received by or credited to Seller relating to the Series
following the closing of this transaction shall be segregated
from Seller's other property, held in trust for Purchaser and
Heller, and promptly remitted by Seller to the Collection
Account.
6. SELLER'S WARRANTIES
The Seller hereby represents and warrants as follows:
(a) It has the right and authority to enter into this Agreement and
that it has obtained all necessary clearances and owns or
controls all rights in and to the Series, all proceeds of
Exploitation thereof, the Related Receivables, the Pre-Closing
Agreements, the Pre-Closing Proceeds, the literary material upon
which the Series was based and all music and performances
contained in the Series as are necessary to enable it to assign
the Rights to Purchaser hereunder;
(b) The Series will not contain any material which is defamatory or
which will violate or infringe any common law or other right
(including without limitation any copyright, right of privacy or
trademark) of any person, firm or corporation;
(c) The credits as appearing in the original negatives of the Series
will comply with all agreements and undertakings entered into or
given in connection with the production of the Series;
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(d) That (i) Seller has good and sufficient licenses from the owners
of all literary, dramatic and musical material contained in the
Series, or upon which the Series is based, to the extent
required to enable Purchaser to exploit the rights granted
hereunder and to enter into any and all subdistribution
agreements including, without limitation, the Sales Agency and
Minimum Guarantee Agreement; and (ii) all amounts and
obligations to all third parties with respect to production and
delivery of the Series (including, without limitation, all
production costs, deferments, profit participations, royalty
payments, music synchronization or other music costs, license
fees and any residual, supplemental market or other payments to
any guild or union) shall have been fully paid and satisfied by
Seller and, if any such amounts and/or obligations arise after
the delivery of the Series, Seller shall be solely responsible
for the payment and/or satisfaction thereof;
(e) That Seller owns the exclusive right under copyright to
distribute the Series as herein described and that Seller has
obtained (or caused to be obtained) copyright registration of
said Series in the name of the copyright owner in the United
States Copyright Office, and shall obtain (or cause to be
obtained) any and all renewals thereof, and will prior to
closing hereunder furnish Purchaser with copies of the
applicable copyright registration certificates;
(f) That no claims or litigation are pending or threatened, and
Seller knows of no dispute which may result in a claim or
litigation, which might adversely affect any of the rights
granted to Purchaser hereunder;
(g) That the Pre-Closing Agreements constitute all of the agreements
for the license, sale or exploitation of the Series entered into
prior to the date hereof;
(h) That Seller will not negotiate or enter into distribution or
subdistribution agreements for the Series in the Territory, and
Seller will direct all inquiries therefor to Purchaser or
Purchaser's nominee;
(i) That the Series and Related Receivables are free and clear of
any liens, claims or encumbrances whatsoever, except for liens
in favor of Heller;
(j) That the Series and all of the delivery materials relating
thereto are of first-class technical quality suitable for all
forms of worldwide distribution and exhibition, and that the
items delivered to Purchaser pursuant to Section 4 above
constitute all materials relating to the Series in Seller's
possession or control;
(k) All sums derived from the Related Receivables and/or the
distribution, exhibition or other exploitation of the Series by
Seller prior to the effective date of this Agreement (other than
the Discovery License) are set forth on Schedule 4 hereto by
payor, territory, amount and date (collectively, the
"Pre-Closing Proceeds");
(l) That Producer owns the copyright in the Series and that Seller
will cause Producer to provide to Heller a mortgage of copyright
and security agreement from Producer in form and substance
satisfactory to Heller; and
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(m) That no governmental or other third-party consent or approval is
required for Seller to assign the Related Receivables to
Purchaser (or to Heller pursuant to the Heller Agreement); that
the Related Receivables are not subject to any right of offset
or defense on the part of the obligors thereof; that Seller has
no reason to believe the Related Receivables will not be payable
within 10 months after the date hereof; and that to the best of
Seller's knowledge the amount of the Related Receivables shall
be not less than US$2.7 million.
7. CREDITS
(a) Purchaser shall adhere to the credit schedule supplied by the
Seller (or in the absence of a written credit schedule, to the
credits contained in the version of the Series delivered
hereunder) in the main and/or end titles of the Series and in
all advertising with respect thereto.
(b) On a prospective basis following the date hereof, and solely to
the extent Purchaser's sales agent is able to do so in the
exercise of its reasonable efforts, Purchaser shall have the
right (but not the obligation) to include (or authorize others
to include) in the main and end titles of the Series and in all
advertising and publicity material for the Series, in a manner
which is not inconsistent with other credits for the Series, the
words "Distributed by [Purchaser's nominee]," or a similar
indication of Purchaser's (or its nominee's) function.
8. SECURITY INTEREST
(a) To secure the performance of Seller's obligations to effectuate
due and timely Delivery of the Series, and to secure Seller's
grant of rights in the Series to Purchaser pursuant to this
Agreement, Seller hereby grants to Purchaser a security interest
("Security Interest") in all rights in the Series, the proceeds
of Exploitation thereof, and the Related Receivables granted by
Seller to Purchaser pursuant to this Agreement.
(b) With respect to said Security Interest, Purchaser and its
successors and assigns shall have all of the rights, powers and
privileges of a secured party under the Uniform Commercial Code,
the United States Copyright Act, and all other applicable laws,
in force from time to time.
(c) Seller agrees to execute and deliver to Purchaser when requested
from time to time, laboratory access letters, UCC Financing
Statements and Mortgages of Copyright in form satisfactory to
Purchaser for recording purposes, confirming and evidencing
Purchaser's Security Interest in and to the Series.
9. BREACH
In the event of any breach by Purchaser, the Seller shall have no right
to terminate this Agreement or any of the Rights herein granted, or to
enjoin the distribution or exploitation of the Series, Seller's sole
remedy for breach being limited to an action at law for damages.
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10. INDEMNITY
Each of Purchaser and the Seller hereby indemnifies the other, its
respective officers, directors, agents, employees, parents,
subsidiaries, affiliates, successors, and assigns (collectively, the
"Indemnified Parties") and hold it and each of them harmless from and
against any claim, loss, damage or expense (including reasonable
attorneys' fees and expenses) (collectively, "Claims") arising out of or
in connection with any breach by Purchaser or the Seller (as the case
may be) of any covenant, agreement, representation or warranty made in
this Agreement or any agreement, act or omission of Purchaser or the
Seller (as the case may be), or its subsidiaries, affiliates, successors
or assigns, or the officers, directors, agents or employees of the
foregoing. In addition, Seller hereby indemnifies Purchaser and its
Indemnified Parties and holds it and each of them harmless from and
against any Claims arising from development, production, distribution
and/or exploitation of the Series.
11. ASSIGNMENT
It is specifically agreed that Purchaser may assign the rights and the
benefit of this Agreement to a third party distributor. Purchaser may
also assign the rights and the benefit of this Agreement to any bank or
financing entity. Seller may not assign or delegate of its rights,
duties and/or obligations under this Agreement without Purchaser's and
Heller's prior written consent.
12. NO JOINT VENTURE
Nothing in this Agreement shall be construed to create or evidence a
partnership or agency relationship between the parties hereto. Neither
party shall hold itself out contrary to the terms of this Clause and
neither party shall become liable because of any representations, acts
or omissions of the other. Other than with respect to Heller, this
Agreement is not for the benefit of any third party and shall not be
deemed to create or evidence any right or remedy of any such third
party, whether referred to herein or not.
13. NO WAIVER
No waiver by either party hereto of any breach of any provision of this
Agreement shall be deemed to be a waiver of (i) any preceding or
succeeding breach of the same provision or (ii) any breach of any other
provision of this Agreement, and no waiver shall be effective unless
made in writing and then only to the extent specifically set forth. The
exercise of any rights granted to either party hereunder shall not
operate as a waiver of any default or breach on the part of the other
party hereto. Each and all of the several rights and remedies of the
parties hereunder shall be construed as cumulative and no one of them
shall be construed as exclusive of the others or of any right at law.
14. SEVERABILITY
Nothing in this Agreement shall be construed so as to require the
commission of any act contrary to law, and wherever there is any
conflict between any provisions of this Agreement and any statute, law
or ordinance, contrary to which the parties shall have no
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legal right to contract the latter shall prevail, but in such event the
provision of this Agreement affected shall be curtailed and limited only
to the extent necessary to bring it within the legal requirements.
15. HEADINGS
The headings to the Clauses of this Agreement are for convenience only
and shall not be considered for any purpose in interpreting or
construing this Agreement.
16. GOVERNING LAW
Seller agrees that any matter arising under this Agreement may be
finally adjudged or determined in any court or courts of the State of
New York or of the United States of America having jurisdiction in the
State of New York, and Seller hereby submits generally and
unconditionally to the jurisdiction of such courts and of any of them in
respect of any such matter. Seller hereby irrevocably appoints the
Secretary of State of the State of New York as its agent for service of
process in the State of New York. If and to the extent permitted by law,
service of all writs, processes and summonses in any action, suit or
proceeding instituted by Purchaser in any of the courts of the State of
New York or of the United States of America may be made upon Seller by
the mailing of copies of the same to such party, enclosed in registered
or certified mail cover, at the address designated hereinbelow, or to
the Secretary of State of the State of New York.
17. MODIFICATION
This Agreement, including all Schedules and any other exhibit or
attachments made a part hereof, is complete and constitutes the entire
agreement between the parties regarding the subject matter hereof, all
prior understandings (oral or written) if any having been superseded
hereby. No officer, employee or representative of either party has any
authority to make any representation or promise in connection with this
Agreement or the subject matter hereof which is not contained herein and
each party acknowledges that it has not executed this Agreement in
reliance upon any such representation or promise. No purported
modification or amendment to this Agreement shall be effective unless in
writing (which for this purpose shall include an exchange of telexes)
signed by the parties hereto and consented to in writing by Heller.
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18. INCONSISTENCY
In the event of inconsistency or variation between the provisions of
this Agreement and any Schedules, exhibits, or attachments made a part
hereof, the Agreement shall prevail.
19. NOTICES
All notices given hereunder shall be in writing (unless otherwise
specified) and shall be sent by personal delivery or prepaid telegram,
cable or facsimile or prepaid air mail. The parties' respective
addresses for notices shall be as set forth above. Either party may
change its address for notices by so advising the other party in
writing. All notices given by post shall be deemed given when received
but in any event not later than five (5) days from the date of deposit
in the mail. All notices sent by facsimile shall be deemed given when
received but in any event not later than the day after the date of
transmission of such facsimile. All notices given by personal delivery
shall be deemed given when received.
IN WITNESS WHEREOF the Seller and Purchaser have executed this
Agreement the day and year first above written.
TEAM COMMUNICATIONS GROUP, INC.
("Seller")
By:
-----------------------------------
Its:
----------------------------------
CALL OF THE WILD DISTRIBUTION, LLC
("Purchaser")
By:
-----------------------------------
Its:
----------------------------------
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SCHEDULE 1-A
LABORATORY ACCOUNT TRANSFER LETTER
DATE: As of September __, 2000
International Image Services Corp.
__________________________________
__________________________________
Attention:________________________
Re: "Call of the Wild" - Episodes 1-13 (the "Series")
Ladies and Gentlemen:
This letter will confirm that all materials held by you relating
to the Series, including but not limited to those listed on Schedule A attached
hereto (the "Materials"), are currently in your possession. You are hereby
advised that the Materials have been irrevocably assigned and transferred by the
undersigned Team Communications Group, Inc. ("Producer") to, and are now the
sole and exclusive property of, Call of the Wild Distribution, LLC ("Owner"),
and should be vaulted in the name of the Owner. You hereby acknowledge that the
Materials on Schedule A are currently in your possession at the above address,
and are in commercially acceptable technical quality. You are hereby instructed
to honor all directions of the Owner with regard to the Materials, subject to
the restrictions set forth in this letter. The Materials are not to be cut,
altered or edited in any way, nor are any of the Materials to be removed from
your facility at any time, without the express prior written consent of the
Owner.
You agree that you will fill all orders from the Owner or its
designees as the case may be, in accordance with the authority granted herein
without regard to any liability or obligation of any third party. Further, you
agree that you shall not hold Owner liable nor assert or enforce any claim or
lien against the Series or any of the Materials, in connection with any unpaid
balances of any other parties. You acknowledge that there are currently no
unpaid and outstanding charges against the Series account.
The instructions, authorizations and directions herein contained
in favor of Owner are being relied on by Owner and are coupled with an interest
and may not be revoked, rescinded or in any way modified without the written
consent of Owner.
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By signing in the spaces provided below, the signatories agree to
all of the terms and conditions herein set forth.
ACKNOWLEDGED AND AGREED TO:
INTERNATIONAL IMAGE SERVICES CORP.
("Laboratory")
By:___________________________________
Its:__________________________________
TEAM COMMUNICATIONS GROUP, INC.
("Producer")
By:___________________________________
Its:__________________________________
CALL OF THE WILD DISTRIBUTION LLC
("Owner")
By:___________________________________
Its:__________________________________
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SCHEDULE 1-B
LABORATORY ACCOUNT TRANSFER LETTER
DATE: As of September __, 2000
Broadcast Standards, Inc.
__________________________________
__________________________________
Attention:________________________
Re: "Call of the Wild" - Episodes 1-13 (the "Series")
Ladies and Gentlemen:
This letter will confirm that all materials held by you relating
to the Series, including but not limited to those listed on Schedule A attached
hereto (the "Materials"), are currently in your possession. You are hereby
advised that the Materials have been irrevocably assigned and transferred by the
undersigned Team Communications Group, Inc. ("Producer") to, and are now the
sole and exclusive property of, Call of the Wild Distribution, LLC ("Owner"),
and should be vaulted in the name of the Owner. You hereby acknowledge that the
Materials on Schedule A are currently in your possession at the above address,
and are in commercially acceptable technical quality. You are hereby instructed
to honor all directions of the Owner with regard to the Materials, subject to
the restrictions set forth in this letter. The Materials are not to be cut,
altered or edited in any way, nor are any of the Materials to be removed from
your facility at any time, without the express prior written consent of the
Owner.
You agree that you will fill all orders from the Owner or its
designees as the case may be, in accordance with the authority granted herein
without regard to any liability or obligation of any third party. Further, you
agree that you shall not hold Owner liable nor assert or enforce any claim or
lien against the Series or any of the Materials, in connection with any unpaid
balances of any other parties. You acknowledge that there are currently no
unpaid and outstanding charges against the Series account.
The instructions, authorizations and directions herein contained
in favor of Owner are being relied on by Owner and are coupled with an interest
and may not be revoked, rescinded or in any way modified without the written
consent of Owner.
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By signing in the spaces provided below, the signatories agree to
all of the terms and conditions herein set forth.
ACKNOWLEDGED AND AGREED TO:
BROADCAST STANDARDS, INC.
("Laboratory")
By:___________________________________
Its:__________________________________
TEAM COMMUNICATIONS GROUP, INC.
("Producer")
By:___________________________________
Its:__________________________________
CALL OF THE WILD DISTRIBUTION LLC
("Owner")
By:___________________________________
Its:__________________________________
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SCHEDULE A
TO
LABORATORY ACCOUNT TRANSFER LETTER
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SCHEDULE 2
SHORT-FORM ASSIGNMENT
For good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the undersigned, TEAM COMMUNICATIONS GROUP,
INC. ("Seller") hereby sells and assigns to CALL OF THE WILD DISTRIBUTION LLC
("Purchaser") under copyright and otherwise, all right, title and interest
(including, without limitation, all of Seller's rights under copyrights and any
renewals and extensions thereof), whether now in existence or hereafter
acquired, in and to the television series hereinafter designated "Series" and
the proceeds thereof (including, without limitation, the Related Receivables, as
that term is defined in the Purchase Agreement described hereinbelow), and the
literary and musical material upon which, in whole or in part, the Series is or
may be based, including, without limitation, the rights to distribute, license
and otherwise exploit the Series in the "Territory" for the "Term" and for the
"Media," all as hereinafter specified.
a. "Series": The first thirteen (13) one-hour episodes of the
television series entitled "Jack London's Call of the Wild".
b. "Territory": The universe excluding (i) Canada and (ii) the
United States during the two (2) year exclusivity period under the license
agreement between Call of the Wild Productions, Inc. and Discovery
Communications, Inc.
c. "Term": Perpetuity.
d. "Media": All media (whether now known or hereafter devised).
This assignment is executed in accordance with, and is subject to
the terms and conditions of, that certain Purchase Agreement ("Purchase
Agreement") dated as of September __, 2000, between Seller and Purchaser. All
capitalized terms used but not defined herein shall have the same meanings as
those set forth in the Purchase Agreement.
Seller hereby appoints Purchaser, its successors and assigns, as
its irrevocable attorney-in-fact with the right (but not the obligation),
subject to the terms of the Purchase Agreement, (i) to enforce and protect all
rights, licenses and privileges granted and assigned herein or pursuant to the
Purchase Agreement and granted under any and all copyrights (and renewals and
extensions thereof), and (ii) to prevent any infringement of said copyright and
to litigate, collect and receive all damages arising from such infringement of
such rights, licenses and privileges, using the names of Seller and joining
Seller as party plaintiff or defendant in any suit or proceeding (in the
discretion of Purchaser). Seller agrees to cooperate with Purchaser in any suit
or action instituted by Purchaser hereunder.
Seller agrees to execute and deliver and cause to be executed and
delivered to Purchaser any and all documents and instruments necessary to effect
and complete the transfer by Seller of all rights granted and assigned to
Purchaser pursuant to the Purchase Agreement. In the event Seller fails to
execute and deliver such other documents and instruments after demand
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thereof by Purchaser, Purchaser is hereby authorized and appointed
attorney-in-fact of and for Seller to make, execute and deliver any and all such
documents and instruments.
It is understood that Purchaser's aforementioned powers as
attorney-in-fact of Seller are powers coupled with an interest and irrevocable.
This Assignment and the provisions hereof shall be binding upon
Seller, its successors and permitted assigns.
IN WITNESS WHEREOF, the undersigned have executed this short-form
assignment by their respective duly authorized officers as of the ___ day of
September, 2000.
Date of Execution: September __, 2000.
TEAM COMMUNICATIONS GROUP, INC.
("Seller")
By ___________________________________
Its __________________________________
STATE OF CALIFORNIA )
)ss.
COUNTY OF LOS ANGELES )
On ____________________ before me, ______________________, a Notary Public,
personally appeared ________________________, personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity(ies) upon behalf of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
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SCHEDULE 3
COPIES OF PRE-CLOSING AGREEMENTS
(to be attached)
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SCHEDULE 4
DESCRIPTION OF SUMS RECEIVED IN RESPECT OF SERIES PRIOR TO CLOSING
I. RECEIPTS FROM SALES
NAME OF PAYOR AMOUNT TERRITORY TERM NO. OF EPISODES
- ----------------- ---------------- ---------------- --------------- -------------------
- ----------------- ---------------- ---------------- --------------- -------------------
II. RECEIPTS FROM GST REFUNDS
-------------------------
III. RECEIPTS FROM CAVCO
-------------------
IV. OTHER RECEIPTS
--------------
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EXHIBIT "A"
RIGHTS
The Rights shall include all of Seller's right, title, and interest in and to
the Series (excluding only the two (2) year exclusivity period under Producer's
pre-existing three (3) year license agreement with Discovery Communications,
Inc. (the "Discovery License"), and further including but not limited to related
goods, accounts, contract rights, general intangibles, equipment, copyrights,
trademarks, and any proceeds thereof or income therefrom (excluding any license
fee payable under the Discovery License). Subject to such exclusion, the Rights
shall include, to the extent they are owned by Seller (it being understood that
this definition does not constitute a representation that each and all the
various rights listed are owned by Seller), without limitation, the scenario,
screenplay or script upon which the Series is based, all of the properties
thereof, tangible and intangible, whether now in existence or hereafter to be
made or produced and whether or not in possession of Seller, and any rights
therein and thereto, of every kind and character, including, without limiting
the foregoing language, each and all of the following particular rights and
properties:
(i) all scenarios, screenplays and/or scripts at every stage of the development
of the Series;
(ii) all common law and statutory copyright and other rights in all literary and
other properties with respect to the Series ("Literary Properties") that form
the basis of the Series or which are or will be incorporated into the Series,
all component parts of the same Series consisting of the Literary Properties and
other properties, all motion picture rights in and to the story, all treatments
of said story and other literary material, together with all preliminary and
final screenplays (including the screenplay (the "Screenplay"), and all drafts
prior thereto) used and to be used in connection with the Series, and all other
literary material upon which the Series is based or from which it is adapted;
(iii) all motion picture rights in and to all music and musical compositions
connected with the Series, including, without limitation, all rights to record,
re-record, produce, reproduce, or synchronize all of said music and musical
compositions in and in connection with motion pictures;
(iv) all exposed and/or delivered negative film, sound tracks, positive prints,
cutouts and trims connected with the Series, whether or not in completed form or
in some state of completion;
(v) all collateral, allied, subsidiary and merchandising rights appurtenant or
related to the Series now or hereafter owned or controlled by Seller, including,
without limitation, the following rights: Literary Properties, or the text or
any part of the Literary Properties; all rights throughout the world to
broadcast, transmit and/or reproduce by means of television (including, without
limitation, free, commercially sponsored, sustaining, subscription, cable and
pay television) or by any process analogous thereto, now known or hereafter
devised, the Series; all rights to produce primarily for television or similar
use, by use of film or any other medium now known or hereafter devised, a motion
picture or series of motion pictures based upon the Series, the Literary
Properties, or any part thereof, including, without limitation, any script,
scenario or the like used in the Series; all merchandising rights including,
without limitation, all rights to
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use, exploit, and license others to use and exploit any commercial tie-ups of
any kind arising out of or connected with the Literary Properties, the Series,
the title or titles of the Series, the characters of the Series or the Literary
Properties, or the names or characteristics of such characters and including
further, without limitation, any commercial exploitation in connection with or
related to the Series or the Literary Properties;
(vi) all statutory copyrights, domestic and foreign, obtained or to be obtained
on the Series, together with any and all copyrights obtained or to be obtained
in connection with the Series or any underlying or component elements of the
Series, including, without limitation, all copyrights on the property described
in subparagraphs (i) through (v) of this definition, together with the right to
register for copyright, and all rights to renew or extend such registration and
the right to sue in the name of Seller or in Purchaser's name for past, present,
or future infringements of copyrights;
(vii) all insurance policies connected with the Series and all proceeds which
may be derived therefrom;
(viii) all rights to distribute, sell, rent, license the exhibition of, and
otherwise exploit and turn to account the Series, the negatives, sound tracks,
prints, and motion picture rights in and to the Literary Properties, other
literary material upon which the Series is based or from which it is adapted,
and such music and musical compositions used or to be used in the Series;
(ix) any and all sums, proceeds, money, products, profits, or increases and any
other money profits or increases (as those terms are used in the Uniform
Commercial Code or otherwise) or other property obtained or to be obtained from
the distribution, exhibition, sale, or other uses or dispositions of the Series
or any part of the Series in the Territory, including, without limitation, all
proceeds, profits, products, and increases, whether in money or otherwise, from
the sale, rental, or licensing of the Series and/or any of the elements of the
Series, whether pursuant to the any agreements for sale, rental, licensing or
other distribution of the Series ("Distribution Agreements") or otherwise, in
any and all media, including collateral, allied, subsidiary, and merchandising
rights, and amounts recovered as damages by reason of unfair competition,
copyright infringement, breach of any contract or infringement of any rights, or
derived therefrom in any manner whatsoever;
(x) the dramatic, non-dramatic, stage, television, radio, and publishing rights,
title and interests in and to the Series, to the extent owned by Seller, and the
rights to register for copyrights and renewals of same therein, and the right to
sue in Seller's name or in the Purchaser's name for past, present, and future
infringements of copyright;
(xi) the title of the Series and all rights of Seller to the use thereof,
including, without limitation, rights protected pursuant to any trademark,
service mark, or unfair competition law, and/or the rules and principles of law
related to any other applicable statute, common law decision, or other rule or
principle of law;
(xii) all contract rights and general intangibles which grant to any person any
right to acquire, produce, develop, reacquire, finance, release, sell,
distribute, lease, sublease, market, license,
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sublicense, exhibit, broadcast, transmit, reproduce, publicize or otherwise
exploit the Series or any rights in the Series, including any and all
Distribution Agreements;
(xiii) with respect to the Series, all accounts and/or other rights to payment
which Seller presently owns or which may arise in favor of Seller in the future,
including, without limitation, any refund under a completion guarantee, all
accounts and/or rights to payment due from exhibitors in connection with the
distribution of the Series (including all Distribution Agreements), and all
accounts and/or rights to payment arising from exploitation of any and all of
the collateral, allied, subsidiary, merchandising, and other rights in
connection with the Series;
(xiv) any and all "general intangibles" (as that term is defined in the Uniform
Commercial Code) in connection with the Series not elsewhere included in this
definition, including, without limitation, any and all general intangibles
consisting of any right to payment which may arise in the distribution or
exploitation of any of the rights set out herein, and any and all general
intangible rights in favor of Seller or Purchaser in connection with the Series
for services or other performances by any third parties, including actors,
writers, directors, individual producers, and/or any and all other performing or
non-performing parties or artists in any way connected with the Series, any and
all general intangible rights in favor of Seller or Purchaser relating to
licenses of sound or other equipment in connection with the Series, and licenses
for photographic or other processes, and any and all general intangibles related
to the exhibition, distribution or exploitation of the Series including general
intangibles related to or which grow out of the exhibition of the Series and the
exploitation of any and all other rights in the Series set out in this
definition;
(xv) any and all goods including inventory (as that term is defined in the
Uniform Commercial Code) which may arise in connection with the creation,
production, or delivery of the Series and which goods, pursuant to any
production or distribution agreement or otherwise, are owned by Seller;
(xvi) each and all of the rights, regardless of denomination, which arise in
connection with the creation, production, completion of production, delivery,
distribution, or other exploitation of the Series, including, without
limitation, any and all rights in favor of Seller and/or Purchaser, the
ownership or control of which are or may become necessary or desirable, in the
opinion of Purchaser, in order to complete production of the Series in the event
that Purchaser exercises any rights it may have to take over and complete
production of the Series;
(xvii) any and all documents issued by any pledgeholder or bailee with respect
to the Series or with respect to any negatives, sound tracks or prints (whether
or not in completed form) connected therewith;
(xviii) any and all rights of Seller under contracts relating to the production
of the Series, which have been delivered to Purchaser pursuant to this
Agreement; and
(xix) all of Seller's right, title and interest in and to all Distribution
Agreements including, without limitation, the proceeds thereof.
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21
SALES AGENCY AND MINIMUM GUARANTEE AGREEMENT
DATED: September __, 2000
BETWEEN: (1) TEAM COMMUNICATIONS GROUP, INC.
11818 Wilshire Boulevard, Second Floor
Los Angeles, California 90025
(hereinafter called "Sales Agent" which expression
shall where the context so permits include its
successors in title and assigns)
(2) CALL OF THE WILD DISTRIBUTION LLC 3957 Maplewood Drive
Seaford, New York 11783
(hereinafter called "Distributor" which expression
shall where the context so admits include its
successors in title and assigns)
WHEREAS:
(A) Sales Agent and Distributor's affiliate, Abracadabra Entertainment, LLC
("Financier") have entered into (i) that certain Multiple Purchase
Agreement/Trade Credit Facility (the "Financing Agreement") dated June
3, 2000, pursuant to which Sales Agent agreed to acquire various
television programs, motion pictures, sales agency rights and/or
distribution rights from Financier, and (ii) that certain Sale and
Purchase Agreement (the "Series Agreement") dated June 23, 2000,
relating to the Series.
(B) Distributor wishes to engage Sales Agent to service all of Distributor's
rights of distribution and exploitation (excluding only Canada and the
pre-existing three (3) year license ("Discovery License") to Discovery
Communications, Inc.) in and to thirteen (13) one-hour episodes of the
television series entitled "Jack London's Call of the Wild" (the
"Series").
(C) Distributor has agreed to pay for the acquisition of the Series and to
deliver the same and appoint Sales Agent as its exclusive agent to
service all of Distributor's rights of distribution and exploitation
therein on Distributor's behalf upon the terms and subject to the
conditions hereinafter set forth.
(D) Distributor has obtained acquisition financing for the Series from
Heller EMX, Inc. ("Heller") pursuant to a Credit Agreement dated on or
about the date hereof (as amended from time to time, the "Heller Credit
Agreement") and certain related Loan Documents (as defined in the Heller
Credit Agreement) and has assigned all of its rights and interests under
this Agreement to Heller as additional security for all Obligations (as
defined in the Heller Credit Agreement) owing to Heller.
(E) To induce Heller to enter into the Heller Credit Agreement and provide
the financing contemplated thereunder, Sales Agent has become a party to
certain agreements in favor of Heller, including, without limitation, a
certain Inter-Party Agreement dated on or about
22
the date hereof (the "Inter-Party Agreement") pursuant to which, inter
alia, Sales Agent has agreed to pay to Heller 5% of all Gross Receipts
(as defined herein) for a period ("Heller Share Payment Term") of
twenty-five (25) years from the closing date under the Heller Credit
Agreement.
NOW IT IS HEREBY AGREED as follows:
1. THE SERIES
Sales Agent acknowledges that it has viewed all episodes of the Series
and has approved same.
2. CREDITS
Upon Delivery (as hereinafter defined) of the Series, Sales Agent shall
continue to comply with such paid advertising credits as Distributor is
obliged (pursuant to Distributor's obligations under that certain
Purchase Agreement dated September __, 2000 between Distributor and
Sales Agent) to give to any person, firm or company in connection with
the Series and Sales Agent shall appropriately insert or cause to be
inserted such credits in all advertising issued by it or under its
control and shall impose a similar obligation on all broadcasters and
subdistributors of the Series.
3. DELIVERY OF THE SERIES
(a) "Delivery" of the Series shall be deemed to mean delivery to
Sales Agent of a laboratory access letter in the form of
Schedule 1 attached hereto ("the Lab Access Letter"), receipt of
which is hereby acknowledged.
(b) Sales Agent hereby agrees and acknowledges that delivery to it
of the Lab Access Letter shall constitute full performance by
Distributor of its obligation hereunder and Sales Agent shall
have no right to refuse delivery of the Series, to reject the
Series or withhold payment of the Minimum Guarantee (as defined
below) or any other amounts owing by Sales Agent for any reason
whatsoever.
(c) Sales Agent hereby acknowledges that it has reviewed and
approved all relevant underlying documentation relating to the
Series and is satisfied that Distributor has all rights
necessary to appoint Sales Agent to service the rights granted
hereunder and hereby waives any right to reject Delivery of the
Series or terminate this Agreement or make any claim against
Distributor by reason of any defect in such rights.
4. SALES AGENCY/GRANT OF RIGHTS
(a) Subject to due and timely payment of each installment of the
Minimum Guarantee (as defined below) and continued compliance
with all covenants and other obligations set forth herein and in
the Financing Agreement and the Series Agreement, Distributor
hereby (i) appoints Sales Agent as its exclusive sales agent to
service the distribution of the Series; and (ii) upon (and
subject to) due
1A-2
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and timely indefeasible payment in full of the Minimum
Guarantee, grants and assigns to Sales Agent all of
Distributor's right, title and interest in the Series ("the
Rights"); it being understood and agreed that the Rights shall
not vest in Sales Agent (and shall remain vested in Distributor)
until such indefeasible payment in full of the Minimum Guarantee
to Distributor. Notwithstanding such reassignment of the Rights,
each of the terms of and all of Sales Agent's obligations
arising under Sections 5, 6, 7(a)-(c), 8, 9(a), 13(b), and 14
through 23 of this Agreement shall continue to remain in effect
with respect to Sales Agent and Heller and shall be fully
enforceable by Heller as a third party beneficiary of this
Agreement as more fully provided in the Inter-Party Agreement.
(b) Sales Agent hereby agrees to pay Distributor the sum of
US$8,139,428 plus the Financing Costs (as defined below)
(collectively, the "Minimum Guarantee"), which amount shall, to
the extent Gross Receipts have not already been received in the
Collection Account (as set out in Section 5(b) hereof) become
due and payable as specified on Schedule 2 attached hereto or on
such earlier date the entire Minimum Guarantee shall become due
upon termination of this Agreement; provided, that in
determining whether the Minimum Payment (as defined in Section
5(b)(iii) below) has been met for any monthly period, all
Additional Amortization Payments (as defined in Section 5(c)
below) not previously applied to a prior month's Minimum Payment
shall be deducted from the amount which Sales Agent is required
to fund to the Collection Account.
(c) For purposes hereof, the "Financing Costs" shall mean the
aggregate of the following: (i) interest on the principal sum of
US$8,139,428 at the rate provided in the Heller Credit Agreement
which shall generally be equal to the one-month LIBOR plus 462.5
basis points (provided that during the pendency of any event of
default, the foregoing interest rate shall be increased by 3%);
(ii) the closing fee charged by Heller in the amount of two
percent (2%) of the amount financed in connection with this
Agreement, which is hereby agreed to equal $162,788.56 payable
to Heller immediately upon execution of this Agreement and all
payments, if any, required pursuant to Section 1.8 {Yield
Protection} and/or 1.9 {taxes} and/or any other provisions of
the Heller Credit Agreement; (iii) a fee (the "Placement Fee")
charged by Distributor in the amount of four percent (4%) of the
amount financed in connection with this Agreement, which is
hereby agreed to equal $325,577.12, to be deducted and paid to
Distributor from the first loan proceeds advanced under the
Heller Credit Agreement; (iv) all out-of-pocket fees, costs and
expenses (including those of attorneys and consultants) incurred
by Distributor's lender in connection with this transaction or
under Section 1.3 of the Heller Credit Agreement, including,
without limitation, all such amounts incurred after the date
hereof in connection with the administration, amendment,
restatement, waiver, consent, workout and/or enforcement of any
of Distributor's agreements with Heller, this Agreement or any
other agreement related to or executed in connection with any of
the foregoing; (v) legal fees and costs charged and incurred by
Distributor's counsel related to this transaction, including,
without limitation, all such amounts incurred after the date
hereof in connection with the administration, amendment,
restatement, waiver, consent, workout and/or
1A-3
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enforcement of this Agreement and/or any other agreement related
to or executed in connection with this Agreement; it being
agreed that upon closing of this transaction and funding under
the Heller Credit Agreement the sum of $30,000.00 advanced by
Sales Agent towards Distributor's legal fees shall be reimbursed
to Sales Agent by means of a $30,000.00 reduction in the
Placement Fee payable to Distributor; (vi) the appraisal by
Arthur Kananack & Associates Inc. which cost $5,000.00; and
(vii) any costs and expenses related to enforcing this Agreement
or terminating this Agreement.
5. EXPLOITATION REVENUES
(a) For the purposes of this Agreement, "the Gross Receipts" shall
mean all sums derived from the distribution, exhibition or other
exploitation of the Series by Sales Agent (excluding the
revenues received under the Discovery License), after the
deduction therefrom only of fees, commissions and expenses
payable to any and all third-party sub-distributors to whom
Sales Agent shall license or grant any rights in the Series.
(b) The Gross Receipts shall be paid directly to the Collection
Account (as defined below) and applied each month by the
Collection Agent (as defined below) as follows:
(i) First, sixty-five percent (65%) of such Gross Receipts
(excluding any Excluded Revenues, as defined below),
shall be applied toward payment of the Minimum Guarantee
until indefeasibly paid in full;
(ii) Second, for the duration of the Heller Share Payment
Term, five percent (5%) of Gross Receipts (excluding any
Excluded Revenues, as defined below) shall be applied
toward payment of the "Heller Share" owing to Heller
under the Inter-Party Agreement;
(iii) Third, thirty percent (30%) of the Gross Receipts
(excluding any Excluded Revenues, as defined below)
shall be applied toward payment of a sales agency fee
owing to Sales Agent (the "Sales Agency Fee"); provided,
however, that until the full amount of all installments
of the Minimum Guarantee (including, without limitation,
all outstanding Financing Costs) which are then due and
owing at such time in accordance with Schedule 2 hereto
(each such scheduled monthly payment, a "Minimum
Payment") have been paid in full, the Gross Receipts
payable to the Sales Agent hereunder shall be applied
toward payment of the applicable Minimum Payment until
paid in full. Moreover, the Sales Agent shall not be
entitled to receive its portion of the Gross Receipts at
any time (i) any "Event of Default" shall have occurred
and be continuing under the Heller Credit Agreement,
(ii) a "Sales Agent Default" shall have occurred under
the Inter-Party Agreement, or (iii) Sales Agent is in
material breach of its obligations, covenants and
warranties hereunder, under the Financing Agreement, or
under the Series Agreement, during which time Heller, in
1A-4
25
its sole discretion, may elect to apply such amounts
toward payment of the Minimum Guarantee in such manner
as Heller may deem appropriate; and
(iv) Last, after indefeasible payment in full of the Minimum
Guarantee, the balance of Gross Receipts (net of the
Heller Share for the duration of the Heller Share
Payment Term) shall be remitted to Sales Agent.
(c) In the event that during any month, the proceeds distributed
toward payment of the Minimum Guarantee under Section 5(b)(i)
above exceed the applicable Minimum Payment, the excess amount
shall be deemed to be an "Additional Amortization Payment"
hereunder and shall be deemed applied to reduce the next
applicable Minimum Payment(s).
(d) For purposes hereof, the "Excluded Revenues" shall mean CAVCO,
GST or other similar government grants, subsidies and
reimbursements related to the Series whether received prior to,
on or after the date of this Agreement.
(e) Notwithstanding anything to the contrary contained herein, all
Excluded Revenues and Sale Proceeds (as defined below) shall be
applied to payment of the Minimum Guarantee by ratably prepaying
each of the remaining Minimum Payments of the Minimum Guarantee
on Schedule 2; provided, that such ratable reduction in the
Minimum Payment(s) due to the receipt of Excluded Revenues shall
become effective only on and after the date US$2,700,000 of
collections from the Excluded Revenues have been received in the
Collection Account (the "Excluded Revenue Collection Date").
Until the Excluded Revenue Collection Date, Excluded Revenues
will be provisionally applied to the Minimum Payments in inverse
order of maturity. Thereafter, the first US$2,700,000 in
Excluded Revenues shall be applied as aforesaid to ratably
prepay each remaining Minimum Payment, and any Excluded Revenues
in excess of US$2,700,000 shall be applied to the remaining
Minimum Payments in inverse order of maturity. As used herein,
"Sale Proceeds" shall mean any and all proceeds of any sale or
assignment of all or substantially all of Sale Agent's rights
hereunder in any single or group of related transactions. In
computing such ratable reduction, the following procedure shall
be used: (1) subtract from the principal balance of the Minimum
Guarantee the amount of $2,700,000 (the difference being the
"Subtotal"); (2) divide the Subtotal by the number of remaining
monthly Minimum Payments due to be paid on the Minimum Guarantee
at such time; and (3) the quotient of (2) shall be the new
monthly Minimum Payment. Because the recomputation of the
Minimum Payment on the Excluded Revenue Collection Date reflects
all Additional Amortization Payments and/or other prior
prepayments of principal on the Minimum Guarantee, only
Additional Amortization Payments and/or prepayments of the
principal of the Minimum Guarantee occurring after the Excluded
Revenue Collection Date shall be counted toward reducing any
Minimum Payment after the Excluded Revenue Collection Date.
1A-5
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6. COLLECTION ACCOUNT
All Gross Receipts shall be remitted directly by the distributors to the
following collection account ("Collection Account") to be administered
by Heller ("Collection Agent") in accordance with this agreement:
-------------------------------
-------------------------------
Attention:
---------------------
Tel:
---------------------------
Account Name:
------------------
Account Number:
----------------
ABA Number:
--------------------
All deal memos and long-form agreements previously entered into by Sales
Agent related to the Series will be modified to expressly require the
distributors to remit any and all monies directly to the Collection
Account, and all such distributors shall be expressly directed by Sales
Agent in writing to make all payments directly to the Collection
Account, without any right of offset relating to other transactions
between Sales Agent and the applicable distributor. In the future, all
deal memos and long-form agreements prepared by Sales Agent for the
Series shall expressly require the distributors to remit any and all
monies directly to the Collection Account, without any right of offset
relating to other transactions between Sales Agent and the applicable
distributor. Concurrently with execution hereof, Sales Agent and
Distributor shall enter into the Inter-Party Agreement with Heller which
shall provide for the deposit and payment of all monies in the
Collection Account. Any monies received by or credited to Sales Agent
relating to the Series shall be segregated from Sales Agent's other
property, held in trust for Distributor and Heller and promptly remitted
by Sales Agent to the Collection Account for administration as provided
above.
7. SALES AGENT'S WARRANTIES
Sales Agent hereby warrants and undertakes:
(a) to distribute and exploit the Series on the best terms
reasonably available consistent with good business judgment and
professional standards with a view to obtaining the maximum
revenues therefrom;
(b) to deliver to Distributor and Heller copies of all signed
agreements with third parties for the distribution or other
exploitation of the Series within seven days of receipt thereof
by Sales Agent;
(c) to use its best efforts to procure prompt and accurate
accountings and payments from all sub-distributors of the Series
and to send to Distributor and Heller copies of all such
accountings within seven days of receipt thereof by Sales Agent;
and
1A-6
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(d) that all of the agreements, representations and warranties made
by Sales Agent in the Financing Agreement and the Series
Agreement are hereby reaffirmed, which agreements,
representations and warranties shall be deemed to apply, as
appropriate, to the Series and to this Agreement; it being
expressly understood and agreed that this Agreement and all
documents, instruments and agreements executed and/or delivered
by Sales Agent hereunder shall be deemed to be documents,
instruments and agreements executed and/or delivered by Sales
Agent under, pursuant to and in connection with the Financing
Agreement and the Series Agreement, and that the transaction
contemplated herein shall be deemed to be a transaction
contemplated in the Financing Agreement and the Series
Agreement. In the event of any direct conflict between the terms
of this Agreement and any of the Financing Agreement or Series
Agreement, this Agreement shall be deemed to govern.
8. ACCOUNTINGS AND AUDITS
(a) Sales Agent shall furnish to Distributor and Heller within
thirty days after the close of each Accounting Period (as
hereinafter defined) detailed itemized statements of all Gross
Receipts collected during such Accounting Period identifying
name of payor, the amount received from such payor, the
territory in which the payor has been licensed rights in the
Series, the term of the relevant license and the episodes
covered by such payment, together with copies of all licenses
and sale agreements for the Series entered into during such
Accounting Period. For the purposes of this Agreement
"Accounting Period" shall mean (i) each calendar month for a
period of three years commencing with the month in which this
Agreement becomes effective and (ii) thereafter each period of
three calendar months. All such statements shall set forth
details of all payments due in accordance with Clause 5 hereof.
(b) Sales Agent shall keep detailed and proper books and records of
account in connection with its activities hereunder and the
collection of Gross Receipts separate from accounts of any other
programs whatsoever and in customary and convenient form and in
accordance with proper book-keeping and accounting practice and
standards. Distributor and/or Heller shall be entitled prior to
the payment in full of the Minimum Guarantee (at Sales Agent's
sole cost and expense) and at all reasonable times thereafter
(at Distributor's and/or Heller's sole cost and expense) to
audit Sales Agent's books and records in relation to the Series
and to make copies thereof during normal business hours and upon
reasonable notice and Sales Agent agrees to provide reasonable
facilities for such purposes and to generally assist and provide
such information as may reasonably be requested in connection
therewith. In the event that such audit discloses an
underpayment to Distributor in excess of ten percent (10%) or
$10,000 (whichever is the lesser) in the Accounting Period under
inspection Sales Agent shall pay the reasonable and proper costs
of the inspection in addition to the understated sums due
together with interest on such underpayments at the rate (the
"Default Rate") of 4% over the then applicable prime or base
rate utilized by
1A-7
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Heller or any successor or assign thereof from time to time in
effect from the date such sums were due to the date of actual
payment.
9. COLLECTION OF GROSS RECEIPTS; OWNERSHIP
(a) If by virtue of any legal or exchange control restriction any
remittance and/or collection of Gross Receipts into the
Collection Account shall not be possible, Sales Agent shall so
inform Distributor and Heller and supply Distributor and Heller
with details of such restriction and shall use its best efforts
to procure that any sums due to Distributor or Heller so
restricted are maintained in a bank account in the country so
restricted with a bank acceptable to Distributor and Heller in
the name of Distributor or Heller, as Heller may direct.
(b) Until indefeasible payment in full of the Minimum Guarantee to
Distributor, the Series and all rights therein (including the
rights represented by Sales Agent), together with all proceeds
derived therefrom, shall at all times be the sole and exclusive
property of Distributor, it being understood and agreed that
Sales Agent shall have no ownership interest whatsoever in the
foregoing and Sales Agent's entitlements hereunder shall be
solely contractual in nature.
(c) All contracts for the Series entered into by Sales Agent shall
be in Distributor's name.
10. CREDITS
(a) Sales Agent shall strictly adhere to the credit schedule
supplied by Distributor (or in the absence of a written credit
schedule to the credits contained in the version of the Series
delivered hereunder) in the main and/or end titles of the Series
and in all advertising and publicity with respect thereto.
(b) Sales Agent shall have the right (but not the obligation) to
include in the main and end titles of the Series and in all
advertising and publicity material for the Series, in a manner
which is not inconsistent with other credits for the Series,
the-words "Distributed by Team Communication Group, Inc." or a
similar indication of Sales Agent's function.
(c) Sales Agent will use its best efforts, on a prospective basis,
to provide screen credit to Distributor as follows: "Financing
arranged in part by Abracadabra Entertainment, LLC and O'Dea &
Company."
11. FINANCIAL COVENANTS
Sales Agent understands and agrees that it is of the essence of this
Agreement that Sales Agent maintain the minimum financial conditions
specified in the Financing Agreement and the Series Agreement (as
applicable) at all times hereunder.
1A-8
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12. BREACH
(a) In the event Distributor has not received the Minimum Guarantee
in full upon the due dates as set out in sub-clause 4 (b) (time
being of the essence), Distributor shall be entitled at any time
thereafter to terminate this Agreement by notice in writing to
Sales Agent effective immediately but without prejudice to any
other rights remedies available to Distributor.
(b) Any of the following occurrences shall constitute a material
breach of this Agreement by Sales Agent (a "Material Breach")
and at any time after the occurrence thereof Distributor shall
have the right to terminate this Agreement, effective
immediately (unless otherwise specified below), without
prejudice to any other rights or remedies available to
Distributor:
(i) any failure to account to or pay any sum due to
Distributor and/or its designee as and when required
hereunder, which failure is not cured within three (3)
days following written notification thereof to Sales
Agent, it being agreed that time is of the essence with
regard to all accounting and payments save insofar as
any failure is due to the default of the Collection
Agent;
(ii) Sales Agent's failure to maintain each and every of the
financial covenants specified in the Financing Agreement
and the Series Agreement (as applicable), which failure
is not cured within thirty (30) days following written
notification thereof to Sales Agent;
(iii) the obtaining by any party of any final judgment against
Sales Agent in excess of $100,000, which judgment is not
paid or discharged within sixty (60) days;
(iv) the filing of any voluntary or involuntary petition in
bankruptcy or institution of any other insolvency
proceeding by or against Sales Agent;
(v) the appointment of a trustee, receiver or similar
official for a substantial portion of Sales Agent's
assets or the rejection of this Agreement by any such
person;
(vi) Sales Agent's making of a general assignment for the
benefit of creditors;
(vii) the sale or merger of Sales Agent, except for a
Permitted Transaction (as defined in the Inter-Party
Agreement);
(viii) any breach or default under any other financing
agreement or guaranty to which Sales Agent is a party,
which breach or default has a claim value in excess of
$100,000 and results in acceleration of payments owing
under such agreement;
1A-9
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(ix) failure to furnish Distributor with financial statements
and covenant calculations as and when required under the
Financing Agreement and the Series Agreement, which
failure is not cured within seven (7) days following
written notification thereof to Sales Agent;
(x) Sales Agent ceasing to engage in the business of Series
distribution;
(xi) Sales Agent's failure to remedy completely any other
breach of any of the provisions of this Agreement, the
Financing Agreement or the Series Agreement, which
failure is not cured within thirty (30) days following
written notification thereof to Sales Agent; and/or
(xii) the occurrence of a "Sales Agent Default" under the
Inter-Party Agreement which is not cured within any
applicable grace period.
13. TERMINATION
(a) Upon the termination of this Agreement by Distributor following
a Material Breach, the following shall apply:
(i) The appointment of Sales Agent hereunder shall terminate
and any and all rights and materials held by Sales Agent
relating to the Series shall revert to Distributor
absolutely. Distributor shall be free to deal with the
Series as it sees fit in its sole discretion.
(ii) Any amount of the Minimum Guarantee then unpaid shall
immediately become due and payable and Distributor shall
render an invoice to Sales Agent for such amount. For
the avoidance of doubt, the Minimum Guarantee shall be
payable in full in such event notwithstanding the
termination of this Agreement and termination of Sales
Agent's engagement hereunder, and notwithstanding any
re-licensing of the Series to others by Distributor (or
by its successors or assigns).
(iii) Distributor (or its designee) shall have the right to
collect and retain for its own account all monies due or
to become due to Sales Agent under any license or
agreement theretofore made by Sales Agent with respect
to the exhibition, distribution or other exploitation of
the Series, all such licenses and agreements, and all
monies thereunder, being automatically assigned to
Distributor in such event (if not already in
Distributor's name). Sales Agent shall execute and
deliver to Distributor any and all further assignments
and instruments deemed by Distributor necessary or
desirable to evidence or effectuate such assignment and,
if Sales Agent fails or refuses to execute to deliver to
Distributor any such assignment or instrument upon ten
(10) days' written notice, then Sales Agent hereby
irrevocably appoints Distributor Sales Agent's agent
(and where appropriate attorney-in-fact) for the purpose
of execution and delivery of all such assignments and
instruments in Sales Agent's name or otherwise, such
appointment being coupled with an interest.
1A-10
31
(iv) Distributor shall continue to be entitled,
notwithstanding termination of this Agreement, to incur
and to recover from Sales Agent reasonable attorneys'
fees and expenses in order to enforce the provisions of
this Agreement.
(v) Distributor shall be entitled to exercise any of the
rights herein provided in addition to and without
prejudice to any other rights or remedies Distributor
may have against Sales Agent under this Agreement or at
law or in equity.
(b) Sales Agent shall have no right of termination of this Agreement
and/or any rights in the nature of injunction and the like
against Distributor or the Series or any right to withhold or
retain monies payable to Distributor hereunder and in the event
of a breach hereof by Distributor, Sales Agent's sole right
shall be an action at law for damages.
14. CONFIDENTIALITY
Sales Agent, its owners, affiliates, employees and counsel recognize
that the identity of Distributor's lender and collateral sources and the
nature of Distributor's finance methods are confidential, proprietary to
Distributor, have competitive value, and are not intended to be divulged
by Sales Agent to any third party. Accordingly, Sales Agent, its owners,
affiliates, employees and counsel agree not to divulge any information
related to the identity of Distributor's lender and collateral sources
or the nature of its financing methods which may come into their
possession without Distributor's prior written permission or unless
required by law.
15. INDEMNITY
Sales Agent hereby indemnifies and agrees to keep indemnified each of
Distributor and Heller together with their respective officers,
directors, agents, employees, parents, subsidiaries, affiliates,
successors, and assigns, (collectively, "Indemnified Parties") and hold
each of them harmless from and against any claim, loss, damage or
expense (including reasonable attorneys' fees and expenses)
(collectively, "Claims") arising out of or in connection with any breach
by Sales Agent of any covenant, agreement, representation or warranty
made in this Agreement or any agreement, act or omission of Sales Agent
or its respective subsidiaries, affiliates, successors or assigns, or
the officers, directors, agents or employees of the foregoing. In
addition, Sales Agent hereby indemnifies Distributor, Heller and the
Indemnified Parties and holds each of them harmless from and against any
Claims arising from the development, production, distribution and/or
exploitation of the Series.
16. ASSIGNMENT
Neither this Agreement nor any rights granted hereunder may be assigned
or otherwise disposed of by Sales Agent either voluntarily or by
operation of law, without the written consent of Distributor, but this
shall not prevent Sales Agent from engaging sub-distributors, or
sub-licensees for the purpose of exploiting the Rights. Distributor
shall be
1A-11
32
entitled to freely assign license or otherwise deal with the benefit of
this Agreement. The parties hereto acknowledge and agree that
Distributor has assigned all of its rights and interests in this
Agreement to Heller as security for its obligations under the Heller
Credit Agreement. In addition, Distributor and Sales Agent acknowledge
that pursuant to the Inter-Party Agreement, Heller has an interest in a
portion of the Gross Receipts during the Heller Share Payment Term,
which interest shall survive the repayment of the Minimum Guarantee and
all obligations owing under the Heller Credit Agreement. As a result,
Distributor and Sales Agent each acknowledge and agree that Heller is a
third party beneficiary under this Agreement and may enforce the terms
of this Agreement as though it were a party hereto.
17. NO JOINT VENTURE
Nothing in this Agreement shall be construed to create or evidence a
partnership or agency relationship between the parties hereto. Neither
party shall hold itself out contrary to the items of this Clause and
neither party shall become liable because of any representations, act or
omissions of the other. This Agreement is not for the benefit of any
third party and shall not be deemed to create or evidence any right or
remedy of such third party, whether referred to herein or not.
18. NO WAIVER
No waiver by either party hereto of any breach of any provision of this
Agreement shall be deemed to be a waiver of (i) any preceding or
succeeding breach of the same provision or (ii) any breach of any other
provision of this Agreement, and no waiver shall be effective unless
made in writing and then only to the extent specifically set forth.
Moreover, no waiver of any obligations, duties or other noncompliance of
Sales Agent under this Agreement shall be effective unless approved in
writing by Heller. The exercise of any rights granted to either party
hereunder shall not operate as a waiver of any default or breach on the
part of the other part hereto. Each and all of the several rights and
remedies of the parties hereunder shall be construed as cumulative and
no one of them as exclusive of the others or of any right or priority
allowed by law.
19. SEVERABILITY
Nothing in this Agreement shall be construed so as to require the
commission of any act contrary to law, and wherever there is any
conflict between any provisions of this Agreement and any statute, law
or ordinance, contrary to which the parties shall have no legal right to
contract the latter shall prevail, but in such event the provision of
this Agreement affected shall be curtailed and limited only to the
extent necessary to bring it within the legal requirements.
20. HEADINGS
The headings to the Clauses of this Agreement are for convenience only
and shall not be considered for any purpose in interpreting or
construing this Agreement.
1A-12
33
21. GOVERNING LAW
Sales Agent agrees that any matter arising under this Agreement may be
finally adjudged or determined in any court or courts of the State of
New York or of the United States of America having jurisdiction in the
State of New York, and Sales Agent hereby submits generally and
unconditionally to the jurisdiction of such courts and of any of them in
respect of any such matter. Sales Agent hereby irrevocably appoints the
Secretary of State of the State of New York as its agent for service of
process in the State of New York. If and to the extent permitted by law,
service of all writs, processes and summonses in any action, suit or
proceeding instituted by Distributor in any of the courts of the State
of New York or of the United States of America may be made upon Sales
Agent by the mailing of copies of the same to such party, enclosed in
registered or certified mail cover, at the address designated
hereinabove, or to the Secretary of State of the State of New York.
22. MODIFICATION
This Agreement, including all Schedules and any other exhibits or
attachments made a part hereof, together with the Inter-Party Agreement,
the Purchase Agreement, the Financing Agreement and the Series Agreement
referenced in Recital (A) hereto, are complete and constitute the entire
agreement between the parties regarding the subject matter hereof, all
prior understandings (oral or written) if any having been superseded
hereby. No officer, employee or representative of either party has any
authority to make any representation or promise in connection with this
Agreement or the subject matter hereof which is not contained herein or
in the Inter-Party Agreement, the Purchase Agreement, the Financing
Agreement or in the Series Agreement and each party acknowledges that it
has not executed this Agreement in reliance upon any such representation
or promise. No purported modification or amendment to this Agreement or
the Financing Agreement or the Series Agreement shall be effective
unless in writing (which for this purpose shall include an exchange of
telexes) signed by the parties hereto and approved in writing by Heller.
23. INCONSISTENCY
In the event of inconsistency or variation between the provisions of
this Agreement and any Schedules, exhibits, or attachments made a part
hereof, this Agreement shall prevail.
24. NOTICES
All notices given hereunder shall be in writing (unless otherwise
specified) and shall be sent by personal delivery or facsimile or
prepaid air mail. Distributor's and Sales Agent's respective addresses
for notices shall be as set forth above. Either party may change its
address for notices by so advising the other party in writing. All
notices given by post shall be deemed given when received but in any
event not later than five (5) days from the date of deposit in the mail.
All notices sent by facsimile shall be deemed given when received but in
any event not later than one (1) day from the date of transmission of
1A-13
34
such facsimile. All notices given by personal delivery shall be deemed
given when received.
[Signature Page Follows]
1A-14
35
IN WITNESS WHEREOF Distributor and Sales Agent have executed this Agreement the
day and year first above written.
CALL OF THE WILD DISTRIBUTION, LLC
("Distributor")
By:
-------------------------------
Its:
------------------------------
TEAM COMMUNICATIONS GROUP, INC.
("Sales Agent")
By:
-------------------------------
Its:
------------------------------
[Signature Page to Sales Agency and Minimum Guarantee Agreement]
15
36
SCHEDULE 1-A
LABORATORY ACCESS LETTER
DATE: September __, 2000
TO: International Image Services, Inc. ("Laboratory")
FROM: Call of the Wild Distribution LLC
RE: Episode 1-13 of the one-hour television series entitled "Jack
London's Call of the Wild (the "Series")
Call of the Wild Distribution LLC ("Owner") has on deposit with you certain
materials specified in the attached Schedule A and related to the Series
identified above. In accordance with the agreement ("Agreement") between Owner
and Team Communications Group, Inc. ("Sales Agent"), for the licensing of
certain rights in the Series to be serviced by Sales Agent on Owner's behalf,
you are directed as follows:
1. You are hereby authorized by Owner and irrevocably directed to honor any
and all laboratory services ordered by Sales Agent or its assignees
during the term of the Agreement.
2. The delivery of materials requested by Sales Agent will be at the sole
cost and expense of Sales Agent without regard to any liability or
obligation of Owner or third parties to any laboratory and you agree
that Owner shall not be held responsible nor shall any lien be asserted
against Owner based on any obligations of Sales Agent or its assignees
for any work, labor or services performed at the request of Sales Agent
or its assignees.
3. You also agree not to look to Sales Agent or assert any lien against
Sales Agent for any obligation owed to you for any work, labor or
services performed at the request of Owner or any other party.
4. The materials identified in the attached schedule will not be removed
from your possession absent written approval by Owner, unless the party
that will in the future possess the materials is a laboratory approved
by Owner which provides Owner with a laboratory access letter granting
the same rights identified in this letter.
5. The acknowledgments, agreements and authorizations contained in this
letter shall be irrevocable, and Laboratory is hereby authorized to act
on same.
1A-1
37
6. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
Please confirm your agreement to the foregoing by signing below:
CALL OF THE WILD DISTRIBUTION LLC
("Owner")
By:
-------------------------------
Its:
------------------------------
TEAM COMMUNICATIONS GROUP, INC.
("Sales Agent")
By:
-------------------------------
Its:
------------------------------
AGREED:
INTERNATIONAL IMAGE SERVICES, INC.
("Laboratory")
By:
-------------------------------
Its:
------------------------------
1A-2
38
SCHEDULE 1-B
LABORATORY ACCESS LETTER
DATE: September __, 2000
TO: Broadcast Systems, Inc. ("Laboratory")
FROM: Call of the Wild Distribution LLC
RE: Episode 1-13 of the one-hour television series entitled "Jack
London's Call of the Wild (the "Series")
Call of the Wild Distribution LLC ("Owner") has on deposit with you certain
materials specified in the attached Schedule A and related to the Series
identified above. In accordance with the agreement ("Agreement") between Owner
and Team Communications Group, Inc. ("Sales Agent"), for the licensing of
certain rights in the Series to be serviced by Sales Agent on Owner's behalf,
you are directed as follows:
6. You are hereby authorized by Owner and irrevocably directed to honor any
and all laboratory services ordered by Sales Agent or its assignees
during the term of the Agreement.
7. The delivery of materials requested by Sales Agent will be at the sole
cost and expense of Sales Agent without regard to any liability or
obligation of Owner or third parties to any laboratory and you agree
that Owner shall not be held responsible nor shall any lien be asserted
against Owner based on any obligations of Sales Agent or its assignees
for any work, labor or services performed at the request of Sales Agent
or its assignees.
8. You also agree not to look to Sales Agent or assert any lien against
Sales Agent for any obligation owed to you for any work, labor or
services performed at the request of Owner or any other party.
9. The materials identified in the attached schedule will not be removed
from your possession absent written approval by Owner, unless the party
that will in the future possess the materials is a laboratory approved
by Owner which provides Owner with a laboratory access letter granting
the same rights identified in this letter.
10. The acknowledgments, agreements and authorizations contained in this
letter shall be irrevocable, and Laboratory is hereby authorized to act
on same.
1B-1
39
6. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of the parties hereto.
Please confirm your agreement to the foregoing by signing below:
CALL OF THE WILD DISTRIBUTION LLC
("Owner")
By:
-------------------------------
Its:
------------------------------
TEAM COMMUNICATIONS GROUP, INC.
("Sales Agent")
By:
-------------------------------
Its:
------------------------------
AGREED:
BROADCAST SYSTEMS, INC.
("Laboratory")
By:
-------------------------------
Its:
------------------------------
1B-2
40
SCHEDULE A
TO LABORATORY ACCESS LETTER
The following described materials are in possession of Laboratory, are of first
class technical quality or can be manufactured with materials which are of first
class technical quality, currently in possession of Laboratory:
A-1
41
SCHEDULE 2
MINIMUM PAYMENT SCHEDULE
The Minimum Payment for each month shall be equal to $339,143 plus all accrued
and unpaid Financing Costs; provided that from and after the Excluded Revenue
Collection Date, the amount of the Minimum Payment for each month shall be (i) a
reduced principal amount determined in accordance with Section 5(e) of the
Agreement, plus (ii) all accrued and unpaid Financing Costs. The first Minimum
Payment shall be due one month from the date of the closing and funding under
the Heller Credit Agreement and each successive Minimum Payment shall be due on
each successive one month period occurring thereafter until the entire amount of
the Guaranteed Minimum has been paid in full.
2-1
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INTER-PARTY AGREEMENT
This INTER-PARTY AGREEMENT, dated as of October _______, 2000, by
and among CALL OF THE WILD DISTRIBUTION, LLC ("Borrower"), HELLER EMX, INC.,
individually as a Lender and as Agent for the Lenders ("Heller") and TEAM
COMMUNICATIONS GROUP, INC. ("Sales Agent").
RECITALS
WHEREAS, pursuant to that certain Purchase Agreement dated on or
about the date hereof between Borrower and Sales Agent (the "Purchase
Agreement"), Sales Agent has agreed to assign and transfer all of its right,
title and interest in and to the Series and the Related Receivables (as such
terms are defined in the Purchase Agreement) to Borrower;
WHEREAS, pursuant to that certain Sales Agency and Minimum
Guarantee Agreement (the "Sales Agent Agreement") dated on or about the date
hereof between Borrower and Sales Agent, Sales Agent has been exclusively
engaged to service the distribution of the Series throughout the Territory and
all media;
WHEREAS, Borrower and Heller are parties to a certain Credit
Agreement dated on or about the date hereof (as amended, restated or otherwise
modified from time to time, the "Credit Agreement") and certain Loan Documents
(as defined in the Credit Agreement) related thereto pursuant to which Heller
has agreed to make a loan (the "Loan") to Borrower to enable Borrower to acquire
the Series and Related Receivables under the Purchase Agreement from Sales Agent
while appointing Sales Agent as its exclusive agent for exploiting the
distribution rights in the Series pursuant to the Sales Agent Agreement;
WHEREAS, pursuant to the Sales Agent Agreement, once the Minimum
Guarantee (as defined in the Sales Agent Agreement) has been indefeasibly paid
in full, all of Borrower's rights in and to the Series shall revest in Sales
Agent;
WHEREAS, to induce Heller to enter into the Credit Agreement and
provide the financing contemplated thereunder, Borrower and Sales Agent have
agreed to enter into this Agreement which shall survive the payment in full of
the Minimum Guarantee and the Obligations (as defined in the Credit Agreement).
NOW, THEREFORE, in consideration of the premises set forth herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Definitions.
1.1 Capitalized terms used herein without definition shall
have the meanings ascribed to such terms in the Credit Agreement. The
following capitalized terms shall have the meanings set forth below:
43
"Additional Amortization Payments" shall have the meaning
ascribed to such term in the Sales Agent Agreement.
"Cash Equivalents" means: (i) marketable securities (A)
issued or directly and unconditionally guaranteed as to interest and principal
by the United States government or (B) issued by any agency of the United States
government the obligations of which are backed by the full faith and credit of
the United States, in each case maturing within one year after acquisition
thereof; (ii) marketable direct obligations issued by any state of the United
States of America or any political subdivision of any such state or any public
instrumentality thereof, in each case maturing within one year after acquisition
thereof and having, at the time of acquisition, a rating of at least A-1 from
Standard & Poor's Ratings Group ("S&P") or at least P-1 from Moody's Investors
Service, Inc. ("Moody's"); (iii) commercial paper maturing no more than one year
from the date of acquisition and, at the time of acquisition, having a rating of
at least A-1 from S&P or at least P-1 from Moody's; (iv) certificates of deposit
or bankers' acceptances issued or accepted by any Heller or by any commercial
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia that is at least (A) "adequately
capitalized" (as defined in the regulations of its primary Federal banking
regulator) and (B) has Tier 1 capital (as defined in such regulations) of not
less than $250,000,000, in each case maturing within one year after issuance or
acceptance thereof; and (v) shares of any money market mutual or similar funds
that (A) has substantially all of its assets invested continuously in the types
of investments referred to in clauses (i) through (iv) above, (B) has net assets
of not less than $500,000,000 and (C) has the highest rating obtainable from
either S&P or Moody's.
"CIBC Transaction" shall mean the creation and funding of
Team TV Fund, LLP (the "Fund") (or such other name as may be agreed by Sales
Agent), which funding shall consist of $7.5 million of equity and $67,500,000 of
debt, which debt is non-recourse to the Sales Agent. In connection with the CIBC
Transaction, Sales Agent is expressly permitted to (i) invest up to $5,000,000
in the equity of the Fund, (ii) defer distribution fees for Product (as defined
in the definition of "Ordinary Course of Business") acquired from the Fund,
(iii) repurchase any Product from the Fund, (iv) transfer rights to any Product
owned or controlled by Sales Agent to the Fund, and (v) make any production
advances and guarantees which it deems appropriate to acquire Product from the
Fund.
"Collection Account" shall have the meaning ascribed to
such term in the Sales Agent Agreement.
"Contingent Obligation," as applied to any Person, means
any direct or indirect liability of that Person: (i) with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
purpose or intent of the Person incurring such liability, or the effect thereof,
is to provide assurance to the obligee of such liability that such liability
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto; (ii) with respect to any letter
of credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings; (iii) under any foreign exchange
contract, currency swap agreement, interest rate swap agreement or other similar
agreement or
2
44
arrangement designed to alter the risks of that Person arising from fluctuations
in currency values or interest rates; (iv) to make take-or-pay or similar
payments if required regardless of nonperformance by any other party or parties
to an agreement, or (v) pursuant to any agreement to purchase, repurchase or
otherwise acquire any obligation or any property constituting security therefor,
to provide funds for the payment or discharge of such obligation or to maintain
the solvency, financial condition or any balance sheet item or level of income
of another. The amount of any Contingent Obligation shall be equal to the amount
of the obligation so guaranteed or otherwise supported or, if not a fixed and
determined amount, the maximum amount so guaranteed.
"Contractual Obligations," as applied to any Person, means
any indenture, mortgage, deed of trust, contract, undertaking, agreement or
other instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject
including, without limitation, the Sales Agent Documents.
"Discovery License" shall have the meaning ascribed to such
term in the Sales Agent Agreement.
"Gross Receipts" shall have the meaning ascribed to such
term in the Sales Agent Agreement.
"Guaranteed Obligations" shall have the meaning set forth
in Section 6 hereof.
"Heller Share" shall have the meaning set forth in Section
5 hereof.
"Heller Share Term" shall mean a period of 25 years from
and after the Closing Date (as defined in the Credit Agreement) unless earlier
terminated in accordance with Section 5.3 hereof.
"Investment" means (i) any direct or indirect purchase or
other acquisition by Sales Agent or any of its Subsidiaries of any beneficial
interest in, including stock, partnership interest or other equity securities
of, or ownership interest in, any other Person; and (ii) any direct or indirect
loan, advance or capital contribution by Sales Agent or any of its Subsidiaries
to any other Person, including all indebtedness and accounts receivable from
that other Person that are not current assets or did not arise from sales to
that other Person in the Ordinary Course of Business.
"Loan Repayment Date" shall have the meaning set forth in
Section 5 hereof.
"Material Adverse Effect" means (a) a material adverse
effect upon the business, operations, properties, assets or condition (financial
or otherwise) of Sales Agent or (b) the impairment of the ability of Sales Agent
to perform its obligations under this Agreement, any Sales Agent Document or
Loan Document to which it is a party or of Heller to enforce any Loan Document
or collect any of the Minimum Guarantee or the Guaranteed Obligations. In
determining whether any individual event would result in a Material Adverse
Effect, notwithstanding that such event does not of itself have such effect, a
Material Adverse Effect
3
45
shall be deemed to have occurred if the cumulative effect of such event and all
other then existing events would result in a Material Adverse Effect. "Minimum
Guarantee" shall have the meaning ascribed to such term in the Sales Agent
Agreement.
"Minimum Payment" shall have the meaning ascribed to such
term in the Sales Agent Agreement.
"Ordinary Course of Business" shall mean the operation of
the Sales Agent in the filmed entertainment business as conducted, at any time,
in Los Angeles California and New York, including, but not limited to, the
business of developing, producing, acquiring, marketing and otherwise exploiting
filmed entertainment product, including television programming, feature films,
made for television movies (including satellite, pay cable, free cable, and
network and non-network broadcast and exhibition), direct to video programming,
documentaries, digital programming, including exhibition over the internet or
such means of exploitation existing now or hereinafter devised or any other
content generally considered to be filmed entertainment (collectively,
"Product"). In connection with the Ordinary Course of Business, the Sales Agent
is expressly permitted to (i) acquire and develop Product, (ii) provide
production advances or other loans in respect of the acquisition of Product, as
well as issuing or making financial and production guarantees, including (A)
financial guarantees to third party lenders providing financing for Product, (B)
shortfall guarantees to financiers or other distributors or licensee's of the
Sales Agent's Product, and (C) guarantees or "pay or play" offers to any
creative elements associated with any Product, (iii) provide marketing and
promotional expenses for Product, including "print and advertising" expenses (as
such term is commonly understood in the entertainment community in Los Angeles),
(iv) subject to compliance with all of Sales Agent's financial covenants in
Section 11 hereof prior to and immediately after giving effect to any such
proposed borrowing, any borrowing of funds from third parties for the production
of Product, (v) acquiring film libraries, (vi) entering into joint ventures with
respect to the production or acquisition of Product, (vii) establishing and
funding any Subsidiary or affiliate which intends to engage in any or all of the
activities provided for herein, (viii) entering into indemnitee arrangements in
furtherance of any of the foregoing activities or any Asset Dispositions, (ix)
entering into any off balance sheet transaction (including, but not limited to,
CIBC Transaction, as defined above), tax advantage transaction, sale-leaseback
transaction or government incentive program or transaction in furtherance of any
of the foregoing activities, (x) deferring production or distribution fees or
expenses, and (xi) subject to continued compliance with all of Sales Agent's
financial covenants in Section 11 hereof, any other activities which are pursued
by companies in the filmed entertainment business; provided, that Ordinary
Course of Business shall not include any of the forgoing activities with respect
to the Series, the Related Receivables and/or the other personal property of the
Sales Agent described as "Collateral" in the Security Agreement between Heller
and Sales Agent dated on or about the date hereof except for the Related
Transactions contemplated by the Related Transactions Documents (as such terms
are defined in the Credit Agreement).
"Related Receivables" shall have the meaning ascribed to
such term in the Purchase Agreement.
"Restricted Junior Payment" means: (i) any dividend or
other distribution, direct or indirect, on account of any shares of any class of
stock or other equity security of, or
4
46
ownership interest in, Sales Agent or any of its Subsidiaries now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
to the holders of that class; (ii) any redemption, conversion, exchange,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock or other equity
security of, or ownership interest in, Sales Agent or any of its Subsidiaries
now or hereafter outstanding; (iii) any payment or prepayment of interest on,
principal of, premium, if any, redemption, conversion, exchange, purchase,
retirement, defeasance, sinking fund or similar payment with respect to, any
Indebtedness subordinated to the Guaranteed Obligations; and (iv) any payment
made to retire, or to obtain the surrender of, any outstanding warrants, options
or other rights to acquire shares of any class of stock or other equity security
of, or ownership interest in, Sales Agent or any of its Subsidiaries now or
hereafter outstanding.
"Sales Agency Fee" shall have the meaning ascribed to such
term in the Sales Agent Agreement.
"Sales Agent's Account" shall mean Account No. 001 161 938
(ABA No. 1 222 39 050) held by Sales Agent at Mercantile National Bank (1840
Century Park East, Los Angeles, CA 90067-2103) or such other account designated
in writing by Sales Agent to Heller.
"Sales Agent Documents" shall have the meaning set forth in
Section 2.1.
"Series" shall have the meaning ascribed to such term in
the Purchase Agreement;
"Total Sale Event" shall mean the sale of all or
substantially all of the assets of Sales Agent to a third party which third
party assumes all of Sales Agent's obligations under this Agreement, the Sales
Agent Documents and any Loan Document to which Sales Agent is a party which is
then in effect.
1.2 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP and, except
where otherwise specified, all financial data submitted in connection
with this Agreement shall be prepared in accordance with GAAP.
SECTION 2. Assignment of Sales Agent Documents.
2.1 Borrower hereby collaterally assigns and grants to
Heller, as additional security for the payment and performance in full of
all Obligations (as such term is defined in the Credit Agreement) a
security interest in all of Borrower's rights and remedies with respect
to any and all representations, warranties, covenants and indemnities
arising under or in connection with any of the Sales Agent Agreement, the
Purchase Agreement and each of the other documents executed by Sales
Agent with or in favor of Borrower in connection therewith (collectively,
the "Sales Agent Documents"). Without limiting the generality of the
foregoing, Borrower hereby specifically transfers and assigns to Heller
all rights of Borrower to payment of money under the Sales Agent
Documents, including, without limitation, all payments of the Minimum
Guarantee, but specifically excluding payment of Borrower's Placement Fee
(as defined in the Sales Agent Agreement).
5
47
2.2 Borrower hereby irrevocably authorizes and empowers
Heller as its agent (a) at any time to receive and collect any and all
payments, proceeds, awards or other amounts due to Borrower (other than
the Placement Fee) under any or all of the Sales Agent Documents and
apply all such amounts on account of the Obligations in accordance with
the Credit Agreement and the Heller Share in accordance with this
Agreement, and (b) at any time from and after the occurrence and during
the continuance of an Event of Default to directly or on behalf of
Borrower, assert any and all claims and demands and enforce any rights
and remedies as Borrower may have, from time to time, against Sales Agent
with respect to the Sales Agent Documents, as Heller may deem proper.
Borrower hereby irrevocably makes, constitutes and appoints Heller (and
all officers, employees and agents designated by Heller) as Borrower's
true and lawful attorney (and agent-in-fact) for the purpose of enabling
Heller or its agent to (i) at any time collect such payments, proceeds,
awards and/or other amounts (other than the Placement Fee) and apply such
monies to the Obligations in accordance with the Credit Agreement and to
the Heller Share in accordance with this Agreement and (ii) at any time
after the occurrence and during the continuation of an Event of Default,
assert any claims and demands or enforce any rights and remedies in
respect to the Sales Agent Documents.
2.3 Borrower hereby agrees to keep Heller reasonably
informed of all circumstances bearing upon the exercise of its rights and
remedies under the Sales Agent Documents. In no event shall Borrower have
the authority to waive, amend, alter or modify any of the terms of or any
of its rights and remedies under, the Sales Agent Documents without the
prior written consent of Heller.
2.4 Sales Agent hereby acknowledges and consents to the
foregoing assignment of Borrower's rights and remedies under the Sales
Agent Documents to Heller and agrees as follows: (a) to pay or cause to
be paid all amounts owing under the Sales Agent Documents to Borrower
and/or Heller to be paid to Heller at the Collection Account (or such
other account as Heller may hereafter direct in writing) and cause all
parties obligated to fund any Gross Receipts to fund such payments
directly to such Collection Account; (b) to send to Heller duplicates of
all notices, certificates, reports and/or other statements furnished by
Sales Agent to Borrower under the Sales Agent Documents and to permit
Heller or its representatives to audit, examine and take excerpts from
all books and records of Sales Agent pertaining to the Series and Related
Receivables at all reasonable times upon reasonable notice in accordance
with the terms of the Sales Agent Agreement; (c) to notify Heller
promptly of any conflicting notice received by Sales Agent of any claim
by any third party that such third party is entitled to receive all or
any portion of any amounts owing to Borrower and/or Heller or to be
funded to the Collection Account, and Sales Agent shall continue to make
and cause to be made payment of all such amounts to the Collection
Account notwithstanding its receipt of any such conflicting claim or
notice.
2.5 Sales Agent hereby acknowledges and agrees that Sales
Agent's rights in the Series and Related Receivables are, until
indefeasible payment in full of the Minimum Guarantee to Heller in
accordance with this Agreement and the Sales Agent Agreement, subject and
subordinate in all respects to the rights of Heller therein.
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2.6 Sales Agent hereby acknowledges and agrees that the
Minimum Guarantee and the Heller Share are unconditionally due and
payable and all conditions precedent thereto (other than the passage of
time with respect to the Minimum Guarantee and the receipt of Gross
Receipts with respect to the Heller Share) have been satisfied and all
consideration therefore has been received by Sales Agent. Sales Agent
hereby agrees that once Heller has been paid all or any portion of the
Minimum Guarantee and/or the Heller Share, the same shall not be subject
to refund or return to Sales Agent by Heller for any reason whatsoever.
Sales Agent hereby waives and releases all rights of offset,
counterclaim, recoupment, right of cross-collateralization, defenses or
right to set up reserves, which it may now or hereafter have under the
Sales Agent Agreement or otherwise, which could or would effect or
diminish the payment of the Minimum Guarantee or the Heller Share to
Heller. Sales Agent hereby also acknowledges that it has approved all
"chain of title" documentation relating to the Series and acknowledges
that it may not refuse to perform any of its obligations or duties under
the Sales Agent Documents or fail to pay Heller the Minimum Guarantee and
the Heller Share or refuse to accept delivery of the Series under the
Sales Agent Agreement by reason of any deficiency with respect thereto or
any claim, proceeding or judgment arising out of such actual claimed
deficiency. Sales Agent represents and warrants that no default or breach
exists under any of the Sales Agent Documents and that the Sales Agent
Documents are in full force and effect and that the Minimum Guarantee and
Heller Share shall be payable to Heller on the dates and in the manner
set forth in the Sales Agent Agreement.
SECTION 3. Sales Agent Documents.
3.1 Borrower and Sales Agent each represent and warrant
that no breach or default exists under the Sales Agent Documents and that
each Sales Agent Document remains in full force and effect and that the
Minimum Guarantee and Heller Share shall be payable to Heller on the
dates and in the manner set forth in the Sales Agent Agreement and this
Agreement.
3.2 Borrower and Sales Agent agree that they shall not,
without the prior written consent of Heller, amend, modify, alter,
terminate or waive any provision of any Sales Agent Document without the
prior written consent of Heller.
3.3 It is expressly agreed by each of the parties hereto
that anything to the contrary notwithstanding, Borrower shall remain
solely responsible for the performance of all obligations under the Sales
Agent Documents applicable to Borrower. Heller shall have no obligation
under the Sales Agent Documents by any reason of or arising out of this
Agreement or any action taken by Heller pursuant hereto, nor shall Heller
be required or obligated in any manner to perform any obligations of
Borrower or to present or file any claim or take any other action as a
condition to collecting or enforcing any of the payment obligations of
Sales Agent under the Sales Agent Documents.
SECTION 4. Application of Gross Receipts.
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4.1 Upon receipt of any Gross Receipts, Heller shall be
entitled to retain and apply all such Gross Receipts which, pursuant to
Section 5 of the Sales Agent Agreement, Heller is entitled to apply
toward payment of the Minimum Guarantee and/or the Heller Share. Heller
agrees to apply all such Gross Receipts applicable to payment of the
Minimum Guarantee to payment of Borrower's Obligations to Heller under
the Credit Agreement. Heller is also entitled to retain all Gross
Receipts which pursuant to Section 5 of the Sales Agent Agreement are
applicable to payment of the Heller Share. As and when permitted under
Section 5 of the Sales Agent Agreement, Heller agrees to disburse to
Sales Agent's Account all Gross Receipts which are entitled to be applied
to the Sales Agency Fee. All such payments of the Sales Agency Fee shall
be made on or before the fifth Business Day following the scheduled date
for monthly payment of principal and interest under the Credit Agreement
(each a "Scheduled Payment Date"). In addition, Heller shall provide
written notice following the end of each monthly period, following the
Scheduled Payment Date specifying (i) the amount of Gross Receipts
received during such month, (ii) the Minimum Payment, Heller Share and
other Obligations due for such month, (iii) the amount, if any, still due
and owing in respect of the Minimum Payment and other Obligations owing
for such month, (iv) the amount, if any, to be applied as Additional
Amortization Payment for such month and (v) the amount, if any, to be
applied in respect of the Sales Agency Fee for such month.
4.2 Upon the payment in full of all Obligations (other than
payment of the Heller Share), Heller shall (i) promptly notify Sales
Agent thereof in writing, and thereupon execute and deliver to Borrower
and/or Sales Agent, as applicable, all termination statements and release
documents provided to Heller which are reasonably necessary to terminate
all Liens granted to Heller under the Loan Documents. Notwithstanding the
repayment of the Obligations and the termination of Heller's Liens, each
of the terms of, and all of Sales Agent's duties and obligations arising
under, Sections 5, 6, 7(a)-(c), 8, 9(a), 13(b), and 15 through 24 of the
Sales Agent Agreement shall continue to remain in full force and effect
with respect to Sales Agent and Heller and shall be fully enforceable by
Heller as though set forth fully herein with each reference to Borrower
set forth therein being deemed to be a reference to Heller. Without
limiting the foregoing, Sales Agent hereby agrees that all Gross Receipts
shall continue to be remitted directly to the Collection Account in
accordance with Section 6 of the Sales Agent Agreement which Gross
Receipts shall, at the end of each monthly period (ending on the
Scheduled Payment Date for such period), be applied to satisfy the Heller
Share with the balance of such Gross Receipts being remitted to Sales
Agent's Account. Sales Agent further acknowledges and agrees that all
accounting and audit rights of Heller in Section 8 of the Sales Agent
Agreement shall continue to remain in full force after the Loan Repayment
Date. Except with respect to Sales Agent's obligation to fund the Minimum
Guarantee and to guaranty all Obligations under the Credit Agreement, the
repayment of the Obligations and termination of all Liens of Heller
related thereto shall not operate to terminate or release any of the
rights and obligations of Sales Agent and Heller described in this
Agreement and/or the Sales Agent Agreement.
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SECTION 5. Heller Share.
5.1 To induce Heller to provide the financing contemplated
by the Credit Agreement, each of Sales Agent and Borrower hereby jointly
and severally agree to pay Heller five percent (5%) of all Gross Receipts
(other than the Related Receivables) which heretofore or hereafter may be
collected in respect of the Series for the Heller Share Term (the "Heller
Share"). The parties hereto also acknowledge and agree that the Heller
Share shall be applicable to all Gross Receipts (other than the Related
Receivables) which may have been received prior to the Closing Date (as
defined in the Credit Agreement) notwithstanding that the Heller Share
Term commences on the Closing Date. The parties hereto also acknowledge
that once all Obligations owing under the Credit Agreement have been paid
in full and all Liens of Heller have been released (the "Loan Repayment
Date"), the Heller Share shall survive such Loan Repayment Date and
continue until the expiration of the Heller Share Term; provided, that
after the Loan Repayment Date, Borrower shall cease to have any further
obligation to fund any portion of the Heller Share, and Sales Agent shall
be solely liable and responsible for payment of the Heller Share.
5.2 Sales Agent shall not cause or permit to exist any
restriction of any kind on the obligations of Sales Agent to Heller under
this Agreement and the Sales Agent Documents with respect to the Series
and the Related Receivables, including, without limitation, its
obligation to remit, and cause to be remitted, all Gross Receipts to the
Collection Account for application to the Heller Share with the balance
of such funds being remitted directly to the Sales Agent's Account (any
such restriction, a "Prohibited Restriction").
5.3 If Sales Agent shall ever (i) cause or permit to exist
a Prohibited Restriction or (ii) except for a Total Sale Event (as
defined under Section 1.1 hereof) sell or assign substantially all of
Sales Agent's rights in the Series in any single transaction or group of
related transactions (a "Sale Event"), Heller, in its sole discretion,
may elect, in lieu of the exercise of any other rights or remedies
available to Heller, to receive a cash payment equal to five percent (5%)
of the Fair Market Value of the Series effective upon the date the
consummation of such Prohibited Restriction or Sale Event together with
interest thereon at the Default Rate (as defined in Section 8 of the
Sales Agent Agreement) until paid in full (the "Final Heller Payment").
Upon Heller's receipt of the Final Heller Payment and payment of all
amounts owing in respect of the Heller Share prior to the occurrence of
any such Prohibited Restriction or Sale Event, the Heller Share shall be
deemed satisfied in full and this Agreement and the Sales Agent Documents
shall automatically terminate and be of no further force and effect.
Sales Agent shall provide Heller with not less than 15 days prior written
notice of any Prohibited Restriction and/or Sale Event together with a
description of the terms and conditions of the same. In no event shall
the occurrence of any such Prohibited Restriction or Sale Event be deemed
permitted under this Agreement without the prior written consent of
Heller, nor shall such occurrence of a Prohibited Restriction or Sale
Event require that Heller select as its remedy, its right to receive the
Final Heller Payment. As used herein, the "Fair Market Value" of the
Series shall be determined in a reasonably prompt manner as follows: If
Sales Agent and Heller cannot agree on a mutually acceptable amount, the
Sales Agent
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and Heller shall select a mutually acceptable independent, experienced
appraiser who is a member of a recognized professional association of
business appraisers (a "Qualified Appraiser") who shall determine the
value of the Series, assuming that the sale would be between a willing
buyer and a willing seller, and neither of whom is under any compulsion
to sell or to buy and that the Series is free of all liens, claims or
other encumbrances. The determination of such Qualified Appraiser shall
be deemed final and binding on all parties. If Sales Agent and Heller
cannot agree on a mutually acceptable Qualified Appraiser, each shall
appoint a Qualified Appraiser. The two Qualified Appraisers shall
determine the value of a the Series, assuming that the sale would be
between a willing buyer and a willing seller, and neither of whom is
under any compulsion to sell or to buy. If the higher of the two
appraisals is not more than 10% higher than the lower of the appraisals,
the Fair Market Value shall be the average of the two appraisals. If the
higher of the two appraisals is 10% or more higher than the lower of the
two appraisals, then a third Qualified Appraiser shall be appointed by
the two Qualified Appraisers, and if they cannot agree on a third
appraiser, the American Arbitration Association shall appoint the third
Qualified Appraiser. The Fair Market Value after the appointment of the
third Qualified Appraiser shall be the average of the three appraisals.
The decision of the Qualified Appraisers shall be final and binding on
all parties. The fees and expenses of the appraisers shall be paid
one-half by Sales Agent and one-half by Heller.
SECTION 6. Guarantee.
6.1 Agreement of Payment and Performance. Sales Agent
hereby unconditionally and irrevocably guarantees to Heller the punctual
payment and performance when due, whether at stated maturity, by
acceleration or otherwise, of the Obligations. Without limitation of the
foregoing, the Obligations shall include (a) all costs and expenses
(including reasonable attorneys' fees and expenses) incurred by Heller in
collecting any amount due Heller under this Agreement or in prosecuting
any action against Borrower or Sales Agent with respect to all or any
part of the Obligations (collectively, the "Enforcement Costs"), and (b)
all interest, fees, costs and expenses due Heller after the filing of a
bankruptcy petition by or against Sales Agent or Borrower regardless of
whether such amounts can be collected during the pendency of the
bankruptcy proceedings. Sales Agent agrees that this Agreement is a
present and continuing guaranty of payment and not of collectibility, and
that Heller shall not be required to prosecute collection, enforcement or
other remedies against Borrower, any other guarantor of the Obligations
or any other Person, or to enforce or resort to any of the Collateral or
other rights or remedies pertaining thereto, before calling on Sales
Agent for payment. Sales Agent agrees that if, for any reason, Borrower
or any other guarantor of the Obligations shall fail or be unable to pay,
punctually and fully, any of the Obligations, Sales Agent shall pay such
obligations to Heller in full immediately upon demand. Sales Agent agrees
that one or more successive actions may be brought against Sales Agent,
as often as Heller deems advisable, until all of the Obligations are paid
and performed in full. The Sales Agent's obligations under this Section
6.1 are collectively referenced as the "Guaranteed Obligations".
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6.2 Continuing Agreement. Sales Agent agrees that the
Guaranteed Obligations and any other obligations under this Agreement or
any of the Loan Documents to which Sales Agent is a party shall be
primary obligations, shall not be subject to any counterclaim, set-off,
abatement, deferment or defense based upon any claim that Sales Agent may
have against Heller, Borrower, any other guarantor of the Obligations or
any other Person, and shall remain in full force and effect without
regard to, and shall not be released, discharged or affected in any way
by any circumstance or condition (whether or not Sales Agent shall have
any knowledge thereof), including without limitation:
(a) any lack of validity or enforceability of any of
the Loan Documents;
(b) any termination, amendment, modification or
other change in any of the Loan Documents;
(c) any furnishing, exchange, substitution or
release of any Collateral, or any failure to perfect any Lien in
any of the Collateral;
(d) any failure, omission or delay on the part of
Borrower, Sales Agent or Heller to conform or comply with any term
of any of the Loan Documents or any failure of Heller to give
notice of any Event of Default or of any disposition or intended
disposition of any collateral securing the Obligations;
(e) any waiver, compromise, release, settlement or
extension of time of payment or performance or observance of any
of the obligations or agreements contained in any of the Loan
Documents;
(f) any action or inaction by Heller under or in
respect of any of the Loan Documents, any failure, lack of
diligence, omission or delay on the part of Heller to enforce,
assert or exercise any right, power or remedy conferred on them in
any of the Loan Documents, or any other action or inaction on the
part of Heller;
(g) any dissolution of Borrower or Sales Agent or
any voluntary or involuntary bankruptcy, insolvency,
reorganization, arrangement, readjustment, assignment for the
benefit of creditors, composition, receivership, liquidation,
marshaling of assets and liabilities or similar events or
proceedings with respect to Borrower or Sales Agent, or any of
their respective property or creditors, or any action taken by any
trustee or receiver or by any court in any such proceeding
including, without limitation, any proceeding under Title 11 of
the United States Code (11 U.S.C. Section 101 et seq.), as amended
(the "Bankruptcy Code");
(h) any merger or consolidation of Borrower or Sales
Agent into or with any Person, or any sale, lease or transfer of
any of the assets of Borrower or Sales Agent to any other Person;
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(i) any change in the ownership of the of Sales
Agent or Borrower or any change in the relationship between
Borrower or Sales Agent, or any termination of any such
relationship, including without limitation, any termination of any
of the Sales Agent Documents;
(j) any release or discharge by operation of law of
Borrower, Sales Agent or any other guarantor of the Obligations
from any obligation or agreement contained in any of the Loan
Documents;
(k) Heller's election, in any proceeding instituted
under the Bankruptcy Code, of the application of Section
1111(b)(2) of the Bankruptcy Code;
(l) any borrowing or grant of a security interest by
Borrower as debtor-in-possession under Section 364 of the
Bankruptcy Code;
(m) the inability of Heller to enforce the
Obligations of Borrower as a result of the automatic stay
provisions of Section 362 of the Bankruptcy Code;
(n) the disallowance, under Section 502 of the
Bankruptcy Code, of all or any portion of Heller's claim or claims
for repayment of the Obligations; or
(o) any other occurrence, circumstance, happening or
event, whether similar or dissimilar to the foregoing and whether
foreseen or unforeseen, which otherwise might constitute a legal
or equitable defense or discharge of the liabilities of Sales
Agent or any surety or which otherwise might limit recourse
against Borrower or Sales Agent.
6.3 Waivers. Sales Agent unconditionally waives, to the
extent permitted by law, (i) notice of any of the matters referred to in
Section 6.2 above, (ii) all notices which may be required by statute,
rule of law or otherwise, now or hereafter in effect, to preserve intact
any rights against Sales Agent, including, without limitation, any
demand, presentment and protest, proof of notice of non-payment under any
of the Loan Documents and notice of any Default or any Event of Default
or any failure on the part of Borrower, Sales Agent or any other
guarantor of the Obligations to perform or comply with any covenant,
agreement, term or condition of any of the Loan Documents, (iii) any
right to the enforcement, assertion or exercise against Borrower, Sales
Agent or any other guarantor of the Obligations of any right or remedy
conferred under any of the Loan Documents, (iv) any requirement of
diligence on the part of any Person, (v) any requirement to exhaust any
remedies or to mitigate the damages resulting from any default under any
of the Loan Documents, and (vi) any notice of any sale, transfer or other
disposition of any right, title or interest of Heller under any of the
Loan Documents.
6.4 Limitation. Notwithstanding any provision contained
herein to the contrary, unless the Obligations have been declared due and
owing in full as a result of an Event of Default, Sales Agent's
obligations under this Section 6 will be enforceable only
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to the extent necessary to fund the Minimum Payment for any monthly
period which has not been paid in full as required under the Sales Agent
Agreement.
SECTION 7. Representations and Warranties. To induce Heller to
enter into the Loan Documents and to make the loan, Sales Agent represents,
warrants and covenants to Heller that the following statements are and will
remain true, correct and complete until payment in full of all Obligations:
7.1 Disclosure. No representation or warranty of Sales
Agent contained in this Agreement, the financial statements referred to
in subsection 8.2, the Sales Agent Documents or any Loan Document to
which Sales Agent is a party or any other document, certificate or
written statement furnished to Heller by or on behalf of Sales Agent for
use in connection with the Loan Documents or the Sales Agent Documents
contains any untrue statement of a material fact or omitted, omits or
will omit to state a material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made.
7.2 No Material Adverse Effect. Since December 31, 1999,
there have been no events or changes in facts or circumstances affecting
Sales Agent which individually or in the aggregate have had or could
reasonably be expected to have a Material Adverse Effect and that have
not been disclosed herein or in the attached Schedules.
7.3 No Conflict. The consummation of the Related
Transactions does not and will not violate or conflict with any laws,
rules, regulations or orders of any governmental authority or violate,
conflict with, result in a breach of, or constitute a default (with due
notice or lapse of time or both) under any Contractual Obligation of
Sales Agent except if such violations, conflicts, breaches or defaults
have either been waived on or before the Closing Date or could not
reasonably be expected to have, either individually or in the aggregate,
a Material Adverse Effect.
7.4 Organization, Powers, Capitalization and Good Standing.
(a) Organization and Powers. Sales Agent is duly
organized, validly existing and in good standing under the laws of
its jurisdiction of organization and qualified to do business in
all states where such qualification is required except where
failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect. The jurisdiction of organization
and all jurisdictions in which Sales Agent is qualified to do
business are set forth on Schedule 7.4(a). Sales Agent has all
requisite organizational power and authority to own and operate
its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into each Related Transactions
Document (as defined in the Credit Agreement) to which it is a
party and to incur the Guaranteed Obligations, grant liens and
security interests in the Series Collateral and carry out the
Related Transactions (as defined in the Credit Agreement).
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(b) Binding Obligation. This Agreement is, and the
other Related Transactions Documents to which Sales Agent is a
party when executed and delivered will be, the legally valid and
binding obligations of the Sales Agent, enforceable against Sales
Agent, in accordance with their respective terms.
7.5 Financial Statements. All financial statements
concerning Sales Agent and its Subsidiaries which have been or will
hereafter be furnished to Heller pursuant to this Agreement, including
those listed below, have been or will be prepared in accordance with GAAP
consistently applied (except as disclosed therein) and do or will present
fairly the financial condition of the entities covered thereby as at the
dates thereof and the results of their operations for the periods then
ended.
7.6 Intellectual Property. Sales Agent and each of its
Subsidiaries owns, is licensed to use or otherwise has the right to use,
all patents, trademarks, trade names, copyrights, technology, know-how
and processes used in or necessary for the conduct of its business as
currently conducted that are material to the condition (financial or
other), business or operations of Sales Agent or its Subsidiaries
(collectively called "Intellectual Property") and all such Intellectual
Property is fully protected and/or duly and properly registered, filed or
issued in the appropriate office and jurisdictions for such
registrations, filings or issuances. Except as disclosed in Schedule 7.6,
the use of such Intellectual Property by Sales Agent and its Subsidiaries
does not and has not been alleged by any Person to infringe on the rights
of any Person.
7.7 Investigations, Audits, Etc. Except as set forth on
Schedule 7.7, none of Sales Agent or any of its Subsidiaries, is the
subject of any review or audit by the Internal Revenue Service or any
governmental investigation concerning the violation or possible violation
of any law.
7.8 Solvency. Sales Agent and each of its Subsidiaries: (a)
owns and will own assets the fair saleable value of which are (i) greater
than the total amount of its liabilities (including contingent
liabilities) and (ii) greater than the amount that will be required to
pay the probable liabilities of its then existing debts as they become
absolute and matured considering all financing alternatives and potential
asset sales reasonably available to it; (b) has capital that is not
unreasonably small in relation to its business as presently conducted or
after giving effect to any contemplated transaction; and (c) does not
intend to incur and does not believe that it will incur debts beyond its
ability to pay such debts as they become due.
7.9 Series Production Costs. The total production cost of
the Series is equal to $10,869,428 and the aggregate amount of
consideration received under the Discovery License is equal to
$2,730,000.
7.10 Sales Agent Documents. Each representation or warranty
of Sales Agent contained in each of the Sales Agent Documents is true and
correct in all material respects.
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7.11 Litigation. Except as set forth on Schedule 7.11,
there are no actions, suits or proceedings pending or, to the knowledge
of Sales Agent, threatened against or affecting the Sales Agent or before
any court or governmental agency, arbitrator or instrumentality, domestic
or foreign, which if determined adversely to the Sales Agent would have a
material adverse effect on the Collateral or the financial condition,
other properties or operations of the Sales Agent, or which would
materially adversely affect the rights and Lien of Heller granted to the
Sales Agent under any of the Loan Documents.
SECTION 8. Reporting Covenants. Sales Agent covenants and agrees
that Sales Agent shall perform and comply with all covenants in this Section
until the termination of this Agreement in accordance with Section 5 hereof;
provided, that from and after the payment in full of all Obligations, the terms
of Section 8.2 and 8.3 hereof shall no longer be applicable to Sales Agent.
8.1 Reporting of Covenants. Sales Agent shall furnish to
Heller within 30 days of the close of each Accounting Period (as
hereinafter defined) detailed itemized statements of all Gross Receipts
collected during such Accounting Period. For purposes of this Agreement,
"Accounting Period" shall mean (i) each calendar month for a period of
three years commencing with the month in which the effectiveness of this
Agreement shall have occurred and (ii) thereafter, each period of three
calendar months. All such statements of Gross Receipts shall set forth
the name of the payor, the amount received from such payor, the territory
in which the payor has been licensed rights in the Series, the term of
the relevant license and the number of episodes covered by such payment.
Sales Agent shall also, upon request of Heller, furnish such additional
information concerning the Gross Receipts as Heller may reasonably
request. In addition to the monthly statements of Gross Receipts Sales
Agent shall furnish to Heller a Compliance Certificate in the form of
Exhibit A hereto at the same time quarterly financials are due under
Section 8.2(b) hereof and annual financials are due under Section 8.2(c)
hereof, provided that upon payment in full of all Obligations, such
Compliance Certificate requirement shall no longer be applicable to Sales
Agent.
8.2 Financial Statements. Sales Agent will maintain, and
cause each of its subsidiaries to maintain, a system established and
administered in accordance with sound business practices to permit the
preparation of financial statement in conformity with GAAP (it being
understood that quarterly financial statements are not required to have
footnoted disclosures). Sales Agent will deliver the financial statements
and other reports below to Heller.
(a) Monthly Reports. As soon as available but in any
event within 15 days after the end of each month (including the
last month of Sales Agent's fiscal year), Sales Agent will deliver
a copy of various monthly reports normally prepared by Sales Agent
in the Ordinary Course of Business in
connection with the operation of Sales Agent and its Subsidiaries
during such month, that reflect at a minimum, inter alia, the cash
balances, the aged
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receivables and the updated sales information of Sales Agent and
its Subsidiaries for such month.
(b) Quarterly Financials. As soon as available and
in any event within 45 days after the end of each fiscal quarter
(including the last fiscal quarter in Sales Agent's fiscal year),
Sales Agent will deliver a copy of its 10Q and, if not already
included in such 10Q, a copy of the consolidated balance sheets of
Sales Agent and its Subsidiaries as of the end of such quarter and
the related consolidated statements of income, stockholders'
equity and cash flow for such quarter and for the period from the
beginning of the then current fiscal year of Sales Agent to the
end of such quarter.
(c) Year-End Financials. As soon as available and in
any event within 90 days after the end of each fiscal year of
Sales Agent, Sales Agent will deliver a copy of its 10K and, if
not already included in such 10K, a copy of the consolidated and
consolidating balance sheets of Sales Agent and its Subsidiaries
as of the end of such year and the related consolidated and
consolidating statements of income, stockholders' equity and cash
flow for such fiscal year, together with a report with respect to
the consolidated financial statements from a firm of certified
public accountants selected by Sales Agent and reasonably
acceptable to Heller, which reports shall be prepared in
accordance with Statements of Auditing Standards No. 58 (the
"Statement") entitled "Reports on Audited Financial Statements"
and such reports shall be "Unqualified" (as such term is defined
in such Statement).
(d) Accountants' Reports. Promptly upon receipt
thereof, Sales Agent will deliver copies of all significant
reports submitted by Sales Agent's firm of certified public
accountants in connection with each annual, interim or special
audit or review of any type of the financial statements or related
internal control systems of Sales Agent and/or its Subsidiaries
made by such accountants, including any comment letter submitted
by such accountants to management in connection with their
services.
(e) Material Breaches. Promptly upon any officer of
Sales Agent obtaining knowledge of any of the following events or
conditions, Sales Agent shall promptly provide written notice to
Heller specifying the nature and period of the existence of any
such event or condition and what action Sales Agent has taken, is
taking and proposes to take with respect thereto (i) any condition
or event that constitutes or which could reasonably be expected to
result in the occurrence of any material breach or default under
Sales Agent Document and/or Loan Document to which Sales Agent is
a party; (ii) any default by any party owing Gross Receipts to
timely fund such Gross Receipts to the Collection Account; or
(iii) any default or event of default with respect to any
Indebtedness for borrowed money of Sales Agent or any of its
Subsidiaries.
(f) Litigation. Promptly upon any officer of Sales
Agent obtaining knowledge of (i) the institution of any action,
suit, proceeding,
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governmental investigation or arbitration against or affecting
Sales Agent or any property of Sales Agent (including any and all
rights in and to the Series or the Related Receivables) not
previously disclosed by Sales Agent to Heller or (ii) any material
development in any action, suit, proceeding, governmental
investigation or arbitration at any time pending against or
affecting Sales Agent or any property of Sales Agent (including,
without limitation, any rights in the Series and/or Related
Receivables) which, in each case, could reasonably be expected to
have a Material Adverse Effect, Sales Agent will promptly give
notice thereof to Heller and provide such other information as may
reasonably be available to them to enable Heller and its counsel
to evaluate such matter.
(g) SEC Filings and Press Releases. Promptly upon
their becoming available, copies of: (i) all reports, notices and
proxy statements made publicly available by Sales Agent to its
security holders; (ii) all regular and periodic reports and all
registration statements and prospectuses, if any, filed by Sales
Agent with any securities exchange or with the Securities and
Exchange Commission or any governmental or private regulatory
authority; and (iii) all press releases and other statements made
available by Sales Agent to the public concerning material changes
or developments in the business of Sales Agent;
(h) Other Information. With reasonable promptness,
Sales Agent will deliver such other information and data with
respect to Sales Agent, the Series and/or the Related Receivables
as from time to time may be reasonably requested by Heller.
8.3 Accounting Terms; Utilization of GAAP for Purposes of
Calculations Under Agreement. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings
assigned to such terms in conformity with GAAP. Financial statements and
other information furnished to Heller pursuant to subsection 8.2 shall be
prepared in accordance with GAAP as in effect at the time of such
preparation. No "Accounting Changes" (as defined below) shall affect
financial covenants, standards or terms in this Agreement; provided that
Borrower shall prepare footnotes to the financial statements required to
be delivered hereunder that show the differences between the financial
statements delivered (which reflect such Accounting Changes) and the
basis for calculating financial covenant compliance (without reflecting
such Accounting Changes). "Accounting Changes" means: (a) changes in
accounting principles required by GAAP and implemented by Sales Agent;
(b) changes in accounting principles recommended by Sales Agent's
certified public accountants and implemented by Sales Agent; and (c)
changes in carrying value of Sales Agent's or any of its Subsidiaries'
assets, liabilities or equity accounts resulting from the application of
purchase accounting principles (A.P.B. 16 and/or 17 and EITF 88-16 and
FASB 109). All such adjustments described in clause (c) above resulting
from expenditures made subsequent to the effective date of this Agreement
shall be treated as expenses in the period the expenditures are made.
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SECTION 9. Affirmative Covenants. Sales Agent covenants and agrees
that until payment in full of all Obligations, Sales Agent shall perform and
comply with all covenants in this Section:
9.1 Compliance With Laws and Contractual Obligations. Sales
Agent will (a) comply with and cause each of its Subsidiaries to comply
with (i) the requirements of all applicable laws, rules, regulations and
orders of any governmental authority (including, without limitation,
laws, rules, regulations and orders relating to taxes, employer and
employee contributions, securities, employee retirement and welfare
benefits, environmental protection matters and employee health and
safety) as now in effect and which may be imposed in the future in all
jurisdictions in which Sales Agent or its Subsidiaries are now doing
business or may hereafter be doing business and (ii) the obligations,
covenants and conditions contained in all Contractual Obligations of
Sales Agent or such Subsidiary, as applicable other than those laws,
rules, regulations, orders and provisions of such Contractual Obligations
the noncompliance with which could not be reasonably expected to have,
either individually or in the aggregate, a Material Adverse Effect, and
(b) maintain or obtain and will cause each of its Subsidiaries to
maintain or obtain, all licenses, qualifications and permits now held or
hereafter required to be held by Sales Agent and its Subsidiaries, for
which the loss, suspension, revocation or failure to obtain or renew,
could reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect. This subsection shall not preclude
the Sales Agent or any Subsidiary from contesting any taxes or other
payments, if they are being diligently contested in good faith in a
manner which stays enforcement thereof and if appropriate expense
provisions have been recorded in conformity with GAAP. Sales Agent
represents and warrants that, it (i) is in compliance and each of its
Subsidiaries is in compliance with the requirements of all applicable
laws, rules, regulations and orders of any governmental authority as now
in effect other than those laws, rules, regulations, orders and
provisions of such Contractual Obligations the noncompliance with which
could not be reasonably expected to have, either individually or in the
aggregate, a Material Adverse Effect and (ii) maintains and each of its
Subsidiaries maintains all licenses, qualifications and permits referred
to above.
9.2 Organizational Existence. Sales Agent will, and will
cause each of its Subsidiaries to, at all times preserve and keep in full
force and effect its organizational existence and all rights and
franchises material to its business.
9.3 Further Assurances. Sales Agent shall, from time to
time, execute such financing statements, documents, security agreements
and reports as Heller at any time may reasonably request to evidence,
perfect or otherwise implement the security for repayment of the
Obligations contemplated by the Loan Documents to which Sales Agent is a
party.
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SECTION 10. Negative Covenants. Sales Agent covenants and agrees
that until payment in full of all Obligations, Sales Agent shall perform and
comply with all covenants in this Section:
(a) Indebtedness. Sales Agent will not and will not
permit any of its Subsidiaries directly or indirectly to create,
incur, assume, or otherwise become or remain directly or
indirectly liable with respect to any Indebtedness (other than
pursuant to a Contingent Obligation) except for Indebtedness, the
incurrence of which shall not, on a pro-forma basis for the most
recently ended month for which information is available, cause
Sales Agent to fail to comply with any of the financial covenants
set forth in Section 11 of this Agreement.
10.2 Liens and Related Matters.
(a) No Liens. Sales Agent will not and will not
permit any of its Subsidiaries directly or indirectly to create,
incur, assume or permit to exist any Lien on or with respect to
the Series, the Related Receivables or Sales Agent's rights under
the Sales Agent Agreement, whether now owned or hereafter
acquired, or any income or profits therefrom, except Permitted
Encumbrances.
"Permitted Encumbrances" means, (a) the rights and Liens in favor
of Heller, (b) the rights granted to the Borrower under the
Purchase Agreement and the rights granted to licensees,
sub-licensees, lessees, sub-lessees, or other transferees in
connections with the exploitation of the Series, all of which
shall be subject and subordinate to the Liens and rights of Heller
under this Agreement and the other Loan Documents, (c) any Lien of
the laboratory which maintains the original Physical Properties of
the Series provided for under the Laboratory Pledgeholder
Agreement, provided such Liens (i) occur in the ordinary course of
distributing the Series, (ii) are for an aggregate amount which
does not at any time exceed the sum of Twenty-Five Thousand
Dollars ($25,000) and (iii) are security for amounts that, at the
time the Lien is granted, are not yet due and payable or are being
contested in good faith; and (d) the Discovery License.
(b) No Negative Pledges. Sales Agent will not and
will not permit any of its Subsidiaries directly or indirectly to
enter into or assume any agreement (other than the Loan Documents)
prohibiting the creation or assumption of any Lien on or with
respect to the Series, Related Receivables or Sales Agent's rights
under the Sales Agent Agreement, whether now owned or hereafter
acquired.
(c) No Restrictions on Subsidiary Sales Agents to
Sales Agent. Except as provided herein and other than in the
Ordinary Course of Business, Sales Agent will not and will not
permit any of its Subsidiaries directly or indirectly to create or
otherwise cause or suffer to exist or become effective any
consensual encumbrance or restriction of any kind on the ability
of any such
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Subsidiary to: (1) pay dividends or make any other distribution on
any of such Subsidiary's capital stock owned by Sales Agent or any
other Subsidiary; (2) pay any Indebtedness owed to Sales Agent or
any other Subsidiary; (3) make loans or advances to Sales Agent or
any other Subsidiary; or (4) transfer any of its property or
assets to Sales Agent or any other Subsidiary, if and only if,
such transfer or restriction would directly impede the payment or
performance of Sales Agent's obligations under the Sales Agent
Agreement or this Agreement.
10.3 Investments. Sales Agent will not and will not permit
any of its Subsidiaries directly or indirectly to make or own any
Investment in any Person except:
(a) Sales Agent and its Subsidiaries may make and
own Investments in Cash Equivalents; provided that such Cash
Equivalents are not subject to setoff rights;
(b) Sales Agent may make intercompany loans to its
Subsidiaries;
(c) Sales Agent and its Subsidiaries may make loans
and advances to employees for moving, entertainment, travel and
other similar expenses in the Ordinary Course of Business;
(d) Sales Agent and its Subsidiaries may make
capital contributions to their wholly-owned domestic or foreign
Subsidiaries, or in respect of any joint venture or affiliate
formed or created in the Ordinary Course of Business; and
(e) Sales Agent may acquire rights in films,
recordings and other Literary Properties (and related Physical
Properties) in the Ordinary Course of Business.
10.4 Contingent Obligations. Other than in the Ordinary
Course of Business, Sales Agent will not and will not permit any of its
Subsidiaries directly or indirectly to create or become or be liable with
respect to any Contingent Obligation.
10.5 Restricted Junior Payments. Sales Agent will not and
will not permit any of its Subsidiaries directly or indirectly to
declare, order, pay, make or set apart any sum for any Restricted Junior
Payment, except that Subsidiaries and affiliates of Sales Agent may make
ratable Restricted Junior Payments to Sales Agent and any other holder of
equity interests in such Subsidiary or affiliate.
10.6 Restriction on Fundamental Changes. Sales Agent will
not and will not permit any of its Subsidiaries directly or indirectly
to: (a) liquidate, wind-up or dissolve itself (or suffer any liquidation
or dissolution); or (b) enter into any transaction of merger or
consolidation or acquire by purchase or otherwise all or any substantial
part of the business or assets of any other Person except, upon not less
than five (5) Business Days prior written notice to Heller, accompanied
by a Permitted Transaction Certificate, Sales Agent or any Subsidiary of
Sales Agent may engage in a Permitted Transaction. As
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used herein, "Permitted Transaction Certificate" shall mean a certificate
of the chief executive officer of Sales Agent describing the proposed
transaction and certifying that no Sales Agent Default exists or will be
caused by such transaction, and that the transaction constitutes a
Permitted Transaction which certificate shall have attached thereto pro
forma financial statements of the Sales Agent after giving effect to such
transaction and computations of compliance, on a pro forma basis for the
most recently ended month for which information is available, with each
of the financial covenants set forth in Section 11 of this Agreement. As
used herein, a "Permitted Transaction" shall mean (a) with respect to any
acquisition by Sales Agent or any of its Subsidiaries of all or
substantially all of the assets or business of any Person (an "Asset
Acquisition"), any Asset Acquisition in the Ordinary Course of Business
if before and immediately giving effect to such acquisition the Sales
Agent shall be in compliance with all financial covenants set forth in
Section 11 of this Agreement on a pro forma basis (consolidating all
financial attributes of such Asset Acquisition and related liabilities
onto Sales Agent's financial statements) for the most recently ended
month for which information is available and no Sales Agent Default shall
then exist or result from such Asset Acquisition and (b) with respect to
any merger or consolidation of Sales Agent or any Subsidiary of Sales
Agent with any Person (a "Merger"), any Merger with any Person engaged in
the business of purchasing, financing and/or distributing films,
recordings and other Literary Properties (and related Physical
Properties) in the Ordinary Course of Business if after giving effect to
such Merger (x) Sales Agent is the surviving entity and (y) Sales Agent
shall be in compliance with all financial covenants set forth in this
Agreement on a pro forma basis (consolidating all financial attributes of
such Merger onto Sales Agent's financial statements) for the most
recently ended month for which information is available and no Sales
Agent Default shall then exist or result from such Merger.
10.7 Disposal of Assets or Subsidiary Stock. Sales Agent
will not and will not permit any of its Subsidiaries directly or
indirectly to convey, sell, lease, sublease, transfer or otherwise
dispose of, or grant any Person an option to acquire, in one transaction
or a series of related transactions, any of its property, business or
assets, or the capital stock of or other equity interests in any of its
Subsidiaries, whether now owned or hereafter acquired, except for (a)
bona fide sales of inventory to customers in the Ordinary Course of
Business and dispositions of obsolete equipment not used or useful in the
business.
10.8 Transactions with Affiliates. Sales Agent will not and
will not permit any of its Subsidiaries directly or indirectly to enter
into or permit to exist any transaction (including the purchase, sale,
lease or exchange of any property or the rendering of any management,
consulting, investment banking, advisory or other similar services) with
any Affiliate or with any director, officer or employee of Sales Agent or
any of its Subsidiaries, except (a) in the Ordinary Course of Business,
and (b) payment of reasonable compensation to officers, directors and
employees for services actually rendered to Sales Agent or such
Subsidiary.
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SECTION 11. Financial Covenants. Sales Agent covenants and agrees
that until payment in full of all Obligations, Sales Agent shall perform and
comply with all covenants in this Section 11:
11.1 Maximum Leverage Ratio. Sales Agent shall maintain at
all times, to be tested at the end of each calendar quarter, a Leverage
Ratio of not greater than 2 to 1. For the purpose of this Agreement,
"Leverage Ratio" shall mean the total GAAP liabilities divided by GAAP
net worth.
11.2 Maximum Adjusted Leverage Ratio. Sales Agent shall
maintain at all times, to be tested at the end of each calendar quarter,
an Adjusted Leverage Ratio of not greater than 3 to 1. For the purposes
of this Agreement, "Adjusted Leverage Ratio" shall mean the total GAAP
liabilities and GAAP contingent liabilities divided by GAAP net worth.
11.3 Minimum Cash Requirement. Sales Agent shall maintain
at all times, to be tested at the end of each calendar quarter, a minimum
of cash and cash equivalents of at least $2,500,000.
11.4 Minimum Net Worth. Sales Agent shall maintain a net
worth of not less than $50,000,000, as of the end of each calendar
quarter. For the purpose of this Agreement, the term "net worth" shall
have the meaning assigned to it by GAAP.
11.5 Minimum Quick Ratio. Sales Agent shall maintain, as of
the end of each calendar quarter, a ratio of (i) cash or cash equivalents
and current receivables to (ii) current liabilities, of not less than
seven tenths to one (0.7 to 1). For the purposes of this Agreement, the
terms "cash equivalents", "current receivables" and "current liabilities"
shall have the respective meanings assigned to them by GAAP.
11.6 Minimum Current Ratio. Sales Agent shall maintain, as
of the end of each calendar quarter, a ratio of (i) current assets to
(ii) current liabilities, of not less than 1.25 to 1. For the purposes of
this Agreement, the terms "current assets" and "current liabilities"
shall have the respective meanings assigned to them by GAAP.
11.7 Minimum Debt Service Coverage. Sales Agent shall
maintain a ratio of (i) EBITDA for the quarter to (ii) required principal
and interest payments paid for on-balance sheet debt and off-balance
sheet contingent liabilities during the quarter, to be tested at the end
of each calendar quarter, of not less than 1.5 to 1. For the purposes of
this Agreement, "EBITDA" shall have the meaning of earnings before
interest, tax, depreciation, and amortization, all of which individual
terms shall have the respective meanings assigned to them by GAAP.
11.8 Minimum Debt Service and Overhead Coverage. Sales
Agent shall maintain the ratio of (i) EBITDA for the quarter to (ii)
required principal and interest payments paid for on-balance sheet debt
and off-balance sheet contingent liabilities during the quarter, plus all
expenses set forth on the line item general and administrative expenses
on Sales Agent's income statement for the quarter, to be tested at the
end of each calendar quarter, of not less than 1 to 1.
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SECTION 12. Defaults, Rights and Remedies.
12.1 Sales Agent Default. "Sales Agent Default" shall mean
the occurrence or existence of any one or more of the following:
(a) Payment. (1) Failure to pay any Minimum Payment
or the Minimum Guarantee within three (3) days of receipt of
written notice from Heller specifying the amount so due and owing,
or (2) failure to pay, within five (5) days of receipt of written
notice from Heller, any other amount due under this Agreement, any
Sales Agent Document or any of the other Loan Documents to which
Sales Agent is a Party; or
(b) Default in Other Agreements. (1) Failure of
Sales Agent or any of its Subsidiaries to pay when due or within
any applicable grace period any principal or interest on
Indebtedness (other than the Minimum Guarantee) or any Contingent
Obligations (other than the Guaranteed Obligation) or (2) breach
or default of Sales Agent or any of its Subsidiaries, or the
occurrence of any condition or event, with respect to any
Indebtedness (other than the Minimum Guarantee) or any Contingent
Obligations (other than the Guaranteed Obligation), if the effect
of such failure to pay, breach, default or occurrence is to cause
the holder or holders then to cause, Indebtedness and/or
Contingent Obligations having an individual principal amount in
excess of $100,000 or having an aggregate principal amount in
excess of $100,000 to become or be declared due prior to their
stated maturity; or
(c) Other Defaults Under Loan Documents. Sales Agent
breaches any representation or warranty or defaults in the
performance of or compliance with any term contained in this
Agreement, any Sales Agent Document or any Loan Document to which
Sales Agent is a party (other than occurrences described in other
provisions of this subsection 12.1 for which a different grace or
cure period is specified or which constitute immediate Sales Agent
Default) and such default is not remedied or waived within thirty
(30) days after the earlier of (1) receipt by Sales Agent of
notice from Heller of such default or (2) actual knowledge of
Sales Agent of such default; or
(d) Involuntary Bankruptcy; Appointment of Receiver,
Etc. (1) A court enters a decree or order for relief with respect
to Sales Agent or any of its Subsidiaries in an involuntary case
under the Bankruptcy Code, which decree or order is not stayed or
other similar relief is not granted under any applicable federal
or state law; or (2) the continuance of any of the following
events for forty-five (45) days unless dismissed, bonded or
discharged: (a) an involuntary case is commenced against Sales
Agent or any of its Subsidiaries, under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect; or (b)
a decree or order of a court for the appointment of a receiver,
liquidator, sequestrator, trustee, custodian or other officer
having similar powers over Sales Agent or any of its Subsidiaries,
or over all or a substantial part of its property, is entered; or
(c) an interim receiver, trustee or other custodian is appointed
without
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the consent of Sales Agent or any of its Subsidiaries, for all or
a substantial part of the property of Sales Agent or any such
Subsidiary; or
(e) Voluntary Bankruptcy; Appointment of Receiver,
Etc. (1) Sales Agent or any of its Subsidiaries commences a
voluntary case under the Bankruptcy Code, or consents to the entry
of an order for relief in an involuntary case or to the conversion
of an involuntary case to a voluntary case under any such law or
consents to the appointment of or taking possession by a receiver,
trustee or other custodian for all or a substantial part of its
property; or (2) Sales Agent or any of its Subsidiaries makes any
assignment for the benefit of creditors; or (3) the Board of
Directors of Sales Agent or any of its Subsidiaries adopts any
resolution or otherwise authorizes action to approve any of the
actions referred to in this subsection; or
(f) Judgment and Attachments. Any money judgment,
writ or warrant of attachment, or similar process (other than
those described elsewhere in this subsection 12.1) involving (1)
an amount in any individual case in excess of $100,000 or (2) an
amount in the aggregate at any time in excess of $100,000 (in
either case to the extent not adequately covered by insurance as
to which the insurance company has acknowledged coverage) is
entered or filed against Sales Agent or any of its Subsidiaries or
any of their respective assets and remains undischarged or
unvacated, or remains unbonded or unstayed pending appeal for a
period of sixty (60) days or in any event later than five (5)
Business Days prior to the date of any proposed sale thereunder;
or
(g) Dissolution. Any order, judgment or decree is
entered against Sales Agent or any of its Subsidiaries decreeing
the dissolution or split up of Sales Agent or that Subsidiary and
such order remains undischarged or unstayed for a period in excess
of fifteen (15) days; or
(h) Solvency. Sales Agent or any of its Subsidiaries
ceases to be solvent (as represented in subsection [7.8]
{Solvency} or admits in writing its present or prospective
inability to pay its debts as they become due; or
(i) Injunction. Sales Agent or any of its
Subsidiaries is enjoined, restrained or in any way prevented by
the order of any court or any administrative or regulatory agency
from conducting all or any material part of its business for more
than fifteen (15) days; or
(j) ERISA; Pension Plans. (1) Sales Agent or any of
its Affiliates fails to make full payment when due of all amounts
which, under the provisions of any employee benefit plans or any
applicable provisions of the IRC, any such Person is required to
pay as contributions thereto and such failure results in or is
likely to result in a Material Adverse Effect; or (2) an
accumulated funding deficiency in excess of $100,000 occurs or
exists, whether or not waived, with respect to any such employee
benefit plans; or (3) any employee benefit plan
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loses its status as a qualified plan under the IRC which results
in or could reasonably be expected to result in a Material Adverse
Effect; or
(k) Invalidity of Loan Documents or Sales Agent
Documents. This Agreement, any Sales Agent Document or any Loan
Document to which Sales Agent is a party, for any reason, other
than a partial or full release in accordance with the terms
thereof, ceases to be in full force and effect or is declared to
be null and void, or Sales Agent denies that it has any further
liability under any Sales Agent Document or Loan Document to which
it is party, or gives notice to such effect; or
(l) Licenses and Permits. The loss, suspension or
revocation of, or failure to renew, any license or permit now held
or hereafter acquired by Sales Agent or any of its Subsidiaries,
if such loss, suspension, revocation or failure to renew could
reasonably be expected to have a Material Adverse Effect; or
(m) Failure of Security. Heller does not have or
ceases to have a valid and perfected first priority security
interest in the Collateral (subject to Permitted Encumbrances) or
any substantial portion thereof, in each case, for any reason
other than the failure of Heller to take any action within its
control;
(n) Change in Control.
(1) any Person or group of Persons (within
the meaning of the Securities Exchange Act of 1934) other
than Drew Levin shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the
Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 40% or more of the issued and
outstanding shares of capital Stock of Sales Agent having
the right to vote for the election of directors of Sales
Agent under ordinary circumstances; or
(2) during any period of twelve consecutive
calendar months, individuals who at the beginning of such
period constituted the board of directors of Sales Agent
(together with any new directors whose election by the
board of directors of Sales Agent or whose nomination for
election by the Stockholders of Sales Agent was approved by
a vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of
such period or whose election or nomination for election
was previously so approved) cease for any reason other than
death or disability to constitute a majority of the
directors then in office;
(3) Drew Levin ceases to be the chief
executive officer of Sales Agent.
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(o) Any Event of Default shall have occurred under
the Credit Agreement and shall have resulted in the declaration of
the Obligations to become immediately due and owing.
12.2 Acceleration and other Remedies. Upon the occurrence
of any Sales Agent Default described in subsections 12.1(e) or 12.1(f),
the Guaranteed Obligations shall automatically become immediately due and
payable, without presentment, demand, protest, notice of intent to
accelerate, notice of acceleration or other requirements of any kind, all
of which are hereby expressly waived by Sales Agent. Upon the occurrence
and during the continuance of any other Sales Agent Default, Heller may
by written notice to Sales Agent (a) declare all or any portion of the
Guaranteed Obligations to be, and the same shall forthwith become,
immediately due and payable and (b) exercise any other remedies which may
be available under the Loan Documents, Sales Agent Documents or
applicable law, including, without limitation, the exercise of all rights
and remedies available under Section 13 {Termination} of the Sales Agent
the Agreement.
12.3 Termination of Sales Agent.
(a) At any time after the occurrence of a Sales
Agent Default of the type described in Sections 12.1(a), (e) or
(f) hereof or all of the Guaranteed Obligations have been declared
immediately due and payable under Section 12.2 hereof, Heller
shall have the right, at its option and upon notice to the
Borrower and Sales Agent, to terminate the Sales Agent Agreement
and all rights of the Sales Agent under the Sales Agent Agreement
or otherwise, and all rights of the Sales Agent to distribute or
otherwise market the Series shall also be terminated. As provided
in the Sales Agent Agreement, termination of the Sales Agent
and/or re-licensing of the Series with third parties shall not
release or discharge the obligations of the Sales Agent to satisfy
the Minimum Guarantee or the Guaranteed Obligations.
(b) In the event that Heller elects to terminate the
rights of the Sales Agent under the Sales Agent Agreement and/or
elects to terminate the Borrower's right to distribute or
otherwise market the Series, Heller shall be entitled, at any time
thereafter, to exercise all rights and remedies under hereunder,
and/or replace the Sales Agent with a Person selected by Heller or
market the Series itself or through its designees, including the
right to sell any and all rights in and to the Series which have
not been sold by the Borrower (or the Sales Agent on the
Borrower's behalf) on terms and conditions which Heller, in its
sole and absolute discretion, deems appropriate under the
circumstances. Each of Borrower and Sales Agent ratifies all acts
of Heller taken pursuant to the Power of Attorney. Heller shall
not be liable for any acts or omissions or for any error of
judgment or mistake of law with respect to any take or not taken
pursuant to the Power of Attorney. Heller's powers under the Power
of Attorney, being coupled with an interest, are irrevocable until
this Agreement has been terminated and the Obligations have been
fully paid in cash.
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(c) In the event that Heller elects to terminate the
rights of the Sales Agent with respect to the Series, then payment
of any and all fees, commissions, expense reimbursements,
marketing costs and any other sums payable to the Sales Agent with
respect to the Series, including all amounts payable to the Sales
Agent under the Sales Agent Agreement shall be deferred and shall
not be due and payable until all Obligations have been satisfied
in full.
12.4 Attorney-in-Fact. Upon the occurrence of a Sales Agent
Default of the type described in Sections 12.1(a), (e) or (f) hereof or
the declaration of all Guaranteed Obligations have been declared
immediately due and payable under Section 12.2 hereof, which occurrence
is continuing, each of Borrower and Sales Agent hereby constitutes and
appoints Heller as its true and lawful attorney-in-fact, in its place and
stead and with full power of substitution, either in the Heller's own
name or in the name of Borrower and/or Sales Agent, as applicable, to do
the following (the "Power of Attorney"):
(a) Renegotiate the Sales Agent Agreement, the
Distribution Agreements, or such other agreements as Heller has a
Lien in pursuant to the terms of the Loan Documents as Heller in
its sole and exclusive discretion deems proper;
(b) Require, demand, collect, receive, settle,
adjust, compromise and to give acquittances and receipts for the
payment of any and all money payable pursuant to any agreements
included in the Collateral and such licenses and agreements as
Heller may enter into as aforesaid; and
(c) Terminate the Sales Agent Agreement and/or
replace Sales Agent with a Person selected by Heller.
12.5 Performance by Heller. If Sales Agent shall fail to
perform any covenant, duty or agreement contained in any of the Loan
Documents, Heller may perform or attempt to perform such covenant, duty
or agreement on behalf of Sales Agent after the expiration of any cure or
grace periods set forth herein. In such event, Sales Agent shall, at the
request of Heller, promptly pay any amount reasonably expended by Heller
in such performance or attempted performance to Heller, together with
interest thereon at the highest rate of interest in effect upon the
occurrence of a Sales Agent Default as specified in subsection 1.2(E) of
the Credit Agreement from the date of such expenditure until paid.
Notwithstanding the foregoing, it is expressly agreed that Heller shall
not have any liability or responsibility for the performance of any
obligation of Sales Agent under this Agreement, any Sales Agent Document
or any other Loan Document.
12.6 Limitation After Payment of Obligations.
Notwithstanding anything to the contrary contained in this Agreement,
upon payment in full of the Obligations, each of the terms of Sections
2.1, 2.2, 2.3, 2.4, 2.5, 3, 6, 7, 8.2, 8.3, 9, 10, 11 and 12 of this
Agreement shall cease to be in effect and shall no longer be enforceable
by Heller; provided, that each of the terms of Sections 1, 2.6, 4, 5, 8.1
and 13 shall survive the payment in full of the Obligations and remain in
full force and effect until the end of
27
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the Heller Share Term and the payment in full of the Heller Share in
accordance with the terms of this Agreement.
SECTION 13. Miscellaneous.
13.1 Entire Agreement. This Agreement, together with the
Sales Agent Documents and other Loan Documents, constitutes the entire
agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements relating to the subject matter
hereof.
13.2 Headings. The headings in this Agreement are for
convenience of reference only and are not part of the substance of this
Agreement.
13.3 Severability. Whenever possible, each provision of
this Agreement shall be interpreted in such a manner to be effective and
valid under applicable law, but if any provision of this Agreement shall
be prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions
of this Agreement.
13.4 Notices. Whenever it is provided herein that any
notice, demand, request, consent, approval, declaration or other
communication shall or may be given to or served upon any of the parties
by any other party, or whenever any of the parties desires to give or
serve upon another any such communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or
other communication shall be in writing and shall be addressed to the
party to be notified as follows:
(a) If to Heller, at:
Heller EMX, Inc.
150 East 42nd Street
New York, New York 10017
Attention: Ralph Willis
Telecopy Number: (212) 880-7003
with copies to:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022-4802
Attention: Hendrik de Jong
Telecopy Number: (212) 751-4864
(b) If to Borrower, at the address of Borrower and its
counsel specified in the Credit Agreement.
(c) If to Sales Agent, at:
28
70
Team Communications Group, Inc.
11818 Wilshire Blvd., 2nd Floor
Los Angeles, CA 90025
Attention: Drew Levin
Telecopy Number: (310) 312-4401
with copies to:
Kelly Lytton Mintz & Vann LLP
1900 Avenue of the Stars
Los Angeles, CA 90067
Attention: Bruce Vann
Telecopy Number: (310) 277-5953
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice,
demand, request, consent, approval, declaration or other communication
hereunder shall be deemed to have been validly served, given or delivered
(i) upon the earlier of actual receipt and five (5) Business Days after
the same shall have been deposited with the United States mail,
registered or certified mail, return receipt requested, with proper
postage prepaid, (ii) upon transmission, when sent by telecopy or other
similar facsimile transmission (with such telecopy or facsimile promptly
confirmed by delivery of a copy by personal delivery or United States
mail as otherwise provided in this Section 13.4), (iii) one (1) Business
Day after deposit with a reputable overnight carrier with all charges
prepaid, or (iv) when delivered, if hand-delivered by messenger.
13.5 Successors and Assigns. This Agreement and all
obligations of each of Sales Agent and Borrower hereunder shall be
binding upon the successors and assigns of Sales Agent and Borrower, as
applicable, (including a debtor-in-possession on behalf of Sales Agent
and/or Borrower, as applicable) and shall, together with the rights and
remedies of Heller hereunder, inure to the benefit of Heller and its
respective successors and assigns. No sales of participations, other
sales, assignments, transfers or other dispositions of any agreement
governing or instrument evidencing the Obligations or the Guarantee
Obligations or any portion thereof shall in any manner affect the rights
of Heller hereunder. Neither Sales Agent nor Borrower may assign, sell,
hypothecate or otherwise transfer any interest in or obligation under
this Agreement.
13.6 No Waiver; Cumulative Remedies; Amendments. Heller
shall not by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies hereunder, and no waiver shall be
valid unless in writing, signed by Heller and then only to the extent
therein set forth. A waiver by Heller of any right or remedy hereunder on
any one occasion shall not be construed as a bar to any right or remedy
which Heller would otherwise have had on any future occasion. No failure
to exercise nor any delay in exercising on the part of Heller any right,
power or privilege hereunder, shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege
hereunder preclude any other or future exercise thereof or the exercise
29
71
of any other right, power or privilege. The rights and remedies hereunder
provided are cumulative and may be exercised singly or concurrently, and
are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Agreement may be waived, altered, modified,
supplemented or amended except by an instrument in writing, duly executed
by Heller, Borrower and Sales Agent; provided that no such written
approval of Borrower shall be required hereunder after the Loan Repayment
Date.
13.7 Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall collectively and separately
constitute one and the same agreement.
13.8 Expenses and Attorneys Fees. At all times prior to
payment in full of the Obligations, Sales Agent agrees to promptly pay
all fees, costs and expenses (including without limitation reasonable
attorneys' fees and expenses, appraisal fees, reasonable out of pocket
expenses) incurred by Heller in connection with any matters contemplated
by or arising out of this Agreement, any Sales Agent Document or Loan
Document to which Sales Agent is a party, in connection with the
examination, review, due diligence investigation, documentation,
negotiation and closing of the transactions contemplated herein and in
connection with the continued administration and/or enforcement of this
Agreement, any Sales Agent Document or Loan Document to which Sales Agent
is a party, including any amendments, modifications, consents and
waivers. At all times after payment in full of the Obligations, Sales
Agent agrees to promptly pay all fees, costs and expenses (including
attorneys' fees and expenses) incurred by Heller in connection with any
action to enforce this Agreement or the Sales Agency Agreement, or to
collect any payments of the Heller Share due from Sales Agent.
13.9 Indemnities. Sales Agent agrees to indemnify, pay, and
hold Heller, each other Lender party to the Credit Agreement from time to
time and their respective officers, directors, employees, agents, and
attorneys (the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs and expenses (including all reasonable fees and
expenses of counsel to such Indemnitees) of any kind or nature whatsoever
that may be imposed on, incurred by, or asserted against the Indemnitee
as a result of such Indemnitees being a party to this Agreement or the
transactions consummated pursuant to this Agreement or otherwise relating
to any of the Related Transactions; provided that Sales Agent shall have
no obligation to an Indemnitee hereunder with respect to liabilities to
the extent resulting from the gross negligence or willful misconduct of
that Indemnitee as determined by a court of competent jurisdiction. If
and to the extent that the foregoing undertaking may be unenforceable for
any reason, Sales Agent agrees to make the maximum contribution to the
payment and satisfaction thereof which is permissible under applicable
law. This Section shall survive the termination of this Agreement.
13.10 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
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72
13.11 No Fiduciary Relationship; Limited Liability. No
provision in the this Agreement, any Sales Agent Document or any Loan
Documents and no course of dealing between the parties shall be deemed to
create any fiduciary duty owing to Sales Agent or Borrower by Heller.
Each of Sales Agent and Borrower agrees that Heller shall have no
liability to Sales Agent or Borrower (whether sounding in tort, contract
or otherwise) for losses suffered by Sales Agent or Borrower in
connection with, arising out of, or in any way related to the
transactions contemplated and the relationship established by the this
Agreement, any Sales Agent Document or Loan Document, or any act,
omission or event occurring in connection therewith, unless and to the
extent that it is determined that such losses resulted from the gross
negligence or willful misconduct of the party from which recovery is
sought as determined by a court of competent jurisdiction. Heller shall
not have any liability with respect to, and each of Sales Agent and
Borrower hereby waives, releases and agrees not to sue for, any special,
indirect or consequential damages suffered by Sales Agent or Borrower in
connection with, arising out of, or in any way related to this Agreement,
any Sales Agent Document or Loan Document or the transactions
contemplated thereby.
13.12 Construction. Heller, Sales Agent and Borrower
acknowledge that each of them has had the benefit of legal counsel of its
own choice and has been afforded an opportunity to review this Agreement,
the Sales Agent Documents and the Loan Documents with its legal counsel
and that such agreements and documents shall be construed as if jointly
drafted by Heller, Sales Agent and Borrower.
13.13 CONSENT TO JURISDICTION. EACH OF SALES AGENT AND
BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL
COURT LOCATED WITHIN THE CITY OF NEW YORK, STATE OF NEW YORK AND
IRREVOCABLY AGREES THAT, SUBJECT TO HELLER'S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE SALES AGENT
DOCUMENTS OR THE OTHER LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS.
EACH OF SALES AGENT AND BORROWER EXPRESSLY SUBMITS AND CONSENTS TO THE
JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON
CONVENIENS. EACH OF SALES AGENT AND BORROWER HEREBY WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE UPON SALES AGENT AND/OR BORROWER BY CERTIFIED OR
REGISTERED MAIL, RETURN RECEIPT REQUESTED, ADDRESSED TO SALES AGENT
AND/OR BORROWER, AS APPLICABLE, AT THE ADDRESS SET FORTH IN THIS
AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE
SAME HAS BEEN POSTED. IN ANY LITIGATION, TRIAL, ARBITRATION OR OTHER
DISPUTE RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT, ANY SALES AGENT
DOCUMENT OR ANY OTHER LOAN DOCUMENT, ALL DIRECTORS, OFFICERS, EMPLOYEES
AND AGENTS OF SALES AGENT, BORROWER OR OF THEIR RESPECTIVE AFFILIATES
SHALL BE DEEMED TO BE EMPLOYEES OR MANAGING AGENTS OF SALES AGENT AND/OR
BORROWER, AS APPLICABLE, FOR PURPOSES OF ALL APPLICABLE LAW OR COURT
RULES REGARDING THE PRODUCTION
31
73
OF WITNESSES BY NOTICE FOR TESTIMONY (WHETHER IN A DEPOSITION, AT TRIAL
OR OTHERWISE). EACH OF SALES AGENT AND BORROWER AGREES THAT HELLER'S
COUNSEL IN ANY SUCH DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY OF
THESE INDIVIDUALS AS IF UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY
DEPOSITION OF ANY OF THEM MAY BE USED IN THAT PROCEEDING AS IF IT WERE AN
EVIDENCE DEPOSITION. EACH OF SALES AGENT AND BORROWER IN ANY EVENT WILL
USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH DISPUTE
RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY HELLER,
ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER FORM) OR
OTHER THINGS UNDER ITS CONTROL AND RELATING TO THE DISPUTE.
13.14 WAIVER OF JURY TRIAL. SALES AGENT, BORROWER AND
HELLER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE SALES
AGENT DOCUMENTS AND THE OTHER LOAN DOCUMENTS. SALES AGENT, BORROWER AND
HELLER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER
INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE WAIVER IN
ENTERING INTO THIS AGREEMENT, THE SALES AGENT DOCUMENTS AND THE OTHER
LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS. SALES AGENT, BORROWER AND HELLER WARRANT AND
REPRESENT THAT EACH HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER
WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS
JURY TRIAL RIGHTS.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have executed this
agreement as of the day and year first above written.
CALL OF THE WILD DISTRIBUTION, LLC
By:
------------------------------------------
Its:
-----------------------------------------
HELLER EMX, INC., individually and as agent
By:
------------------------------------------
Its:
------------------------------------------
TEAM COMMUNICATIONS GROUP, INC.
By:
------------------------------------------
Its:
------------------------------------------
[SIGNATURE PAGE TO INTER-PARTY AGREEMENT]
75
Exhibit A
COMPLIANCE CERTIFICATE
For Quarterly Period Ending _________________
This certificate is given by TEAM COMMUNICATIONS GROUP, INC., a California
corporation ("Sales Agent"), pursuant to subsection 8.1 of that certain
Inter-Party Agreement dated as of October _____________, 2000 between Sales
Agent, CALL OF THE WILD DISTRIBUTION, LLC and HELLER EMX, INC. ("Heller"), as
such agreement may hereafter be amended, restated, supplemented or otherwise
modified from time to time (the "Inter-Party Agreement"). Capitalized terms used
herein without definition shall have the meanings set forth in the Inter-Party
Agreement.
The officer executing this certificate is the Chief Financial Officer [Chief
Executive Officer] of Sales Agent and as such is duly authorized to execute and
deliver this certificate on behalf of Sales Agent. By executing this certificate
such officer hereby certifies to Heller that:
(a) The financial statements delivered with this certificate in accordance with
subsections 8.2 (b) and/or (c) of the Inter-Party Agreement fairly present in
all material respects the results of operations and financial condition of Sales
Agent and its Subsidiaries as of the dates of such financial statements;
(b) I have reviewed the terms of the Inter-Party Agreement and have made, or
caused to be made under my supervision, a review in reasonable detail of the
transactions and conditions of Sales Agent and its Subsidiaries during the
accounting period covered by such financial statements;
(c) Such review has not disclosed the existence during or at the end of such
accounting period, and I have no knowledge of the existence as of the date
hereof, of any condition or event that constitutes a Sales Agent Default, except
as set forth in Exhibit A hereto which includes a description of the nature and
period of existence of such Sales Agent Default and what action Sales Agent has
taken, is undertaking and proposed to take with respect thereto; and
(d) Sales Agent is in compliance with the covenants contained in Section 11 of
the Inter-Party Agreement, as demonstrated below, except as set forth below or
described in Exhibit A.
IN WITNESS WHEREOF, Sales Agent has caused this Certificate to be executed by
its Chief Financial Officer [Chief Executive Officer] this ____ day of ________,
_____.
By:
-----------------------------------
Chief Financial Officer
[Chief Executive Officer]
Exhibit A-1
76
COMPLIANCE CERTIFICATE
FOR QUARTERLY PERIOD ENDING _________________
COVENANT 11.1 MAXIMUM LEVERAGE RATIO
Total Liabilities $
----------
Divided by:
Net Worth $
----------
Leverage Ratio ===========
Permitted Maximum Leverage Ratio 2 : 1
In Compliance Yes/No
COVENANT 11.2 MAXIMUM ADJUSTED LEVERAGE RATIO
Total Liabilities $
----------
Plus:
Contingent Liabilities $
----------
$
----------
Divided by:
Net Worth $
----------
Adjusted Leverage Ratio
===========
Permitted Maximum Adjusted Leverage Ratio 3 : 1
In Compliance Yes/No
Exhibit A-2
77
COMPLIANCE CERTIFICATE
FOR QUARTERLY PERIOD ENDING _________________
COVENANT 11.3 MINIMUM CASH REQUIREMENT
Cash $
----------
Plus:
Cash Equivalents $
----------
$
==========
Required Minimum Cash $ 2,500,000
In Compliance Yes/No
COVENANT 11.4 MINIMUM NET WORTH
Net Worth $
==========
Required Minimum Net Worth $50,000,000
In Compliance Yes/No
COVENANT 11.5 MINIMUM QUICK RATIO
Cash, Cash Equivalents and Current Receivables $
----------
Divided by:
Current Liabilities $
----------
Quick Ratio
===========
Required Minimum Quick Ratio 0.7 : 1
In Compliance Yes/No
Exhibit A-3
78
COMPLIANCE CERTIFICATE
FOR QUARTERLY PERIOD ENDING _________________
COVENANT 11.6 MINIMUM CURRENT RATIO
Current Assets $
----------
Divided by:
Current Liabilities $
----------
Current Ratio
===========
Required Minimum Current Ratio 1.25 : 1
In Compliance Yes/No
COVENANT 11.7 MINIMUM DEBT SERVICE COVERAGE
EBITDA (for the quarter) $
----------
Divided by:
Required principal and interest payments paid for on-balance
sheet debt and off-balance sheet contingent liabilities
(for the quarter) $
----------
Debt Service Coverage
===========
Required Minimum Debt Service Coverage 1.5 : 1
In Compliance Yes/No
Exhibit A-4
79
COMPLIANCE CERTIFICATE
FOR QUARTERLY PERIOD ENDING _________________
COVENANT 11.8 MINIMUM DEBT SERVICE AND OVERHEAD COVERAGE
EBITDA (for the quarter) $
----------
Divided by:
Required principal and interest payments paid for on-balance
sheet debt and off-balance sheet contingent liabilities
(for the quarter) $
Plus: ----------
All expenses set forth on the line item general and
administrative expenses on Sales Agent's income statement
(for the quarter) $
----------
Debt Service and Overhead Coverage $
==========
Required Minimum Debt Service and Overhead Coverage 1 : 1
In Compliance Yes/No
Exhibit A-5
80
EXHIBIT A TO COMPLIANCE CERTIFICATE
DESCRIPTION OF SALES AGENT DEFAULT
Exhibit A-6
81
Schedule 7.4(a)
Organization and Powers
Jurisdiction of Organization: California
Jurisdiction of Due Qualification: California
82
Schedule 7.6
Intellectual Property
83
Schedule 7.7
Investigations, Audits, Etc.
None.
84
Schedule 7.11
Litigation
85
================================================================================
CREDIT AGREEMENT
DATED AS OF October ___, 2000
by and among
CALL OF THE WILD DISTRIBUTION, LLC
as Borrower
and
HELLER EMX, INC.
as Agent and a Lender
and
THE OTHER FINANCIAL INSTITUTIONS PARTY HERETO
as Lenders
================================================================================
86
TABLE OF CONTENTS
SECTION 1. AMOUNTS AND TERMS OF LOANS....................................................... 1
1.1 Term Loan Facility........................................................... 1
1.2 Interest and Related Fees.................................................... 2
1.3 Expenses and Attorneys Fees.................................................. 5
1.4 Payments..................................................................... 5
1.5 Prepayments.................................................................. 5
1.6 Maturity..................................................................... 6
1.7 Loan Accounts................................................................ 6
1.8 Yield Protection............................................................. 6
1.9 Taxes........................................................................ 7
1.10 Optional Prepayment/Replacement of Lenders................................... 8
SECTION 2. AFFIRMATIVE COVENANTS............................................................ 9
2.1 Compliance With Laws and Contractual Obligations............................. 9
2.2 Insurance.................................................................... 10
2.3 Inspection; Lender Meeting................................................... 10
2.4 Organizational Existence..................................................... 11
2.5 Collection of Gross Receipts................................................. 11
2.6 Performance and Amendment of Agreements, Etc................................. 11
2.7 Physical Properties and Rights............................................... 11
2.8 Further Assurances........................................................... 11
2.9 Other Covenants.............................................................. 12
SECTION 3. NEGATIVE COVENANTS............................................................... 12
3.1 Indebtedness................................................................. 12
3.2 Liens and Related Matters.................................................... 12
3.3 Investments.................................................................. 13
3.4 Contingent Obligations....................................................... 13
3.5 Restricted Junior Payments................................................... 13
3.6 Restriction on Fundamental Changes........................................... 14
3.7 Disposal of Assets........................................................... 14
3.8 Transactions with Affiliates................................................. 14
3.9 Fiscal Year.................................................................. 14
3.10 Press Release, Public Offering Materials..................................... 14
3.11 Subsidiaries................................................................. 14
3.12 Bank Accounts................................................................ 14
3.13 Original Physical Properties................................................. 14
3.14 Employees.................................................................... 14
SECTION 4. INFORMATION AND REPORTING........................................................ 15
4.1 Financial Statements and Other Reports....................................... 15
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87
4.2 Accounting Terms, Utilization of GAAP for Purposes of Calculations
Under Agreement.............................................................. 16
SECTION 5. REPRESENTATIONS AND WARRANTIES................................................... 17
5.1 Disclosure................................................................... 17
5.2 No Material Adverse Effect................................................... 17
5.3 No Conflict.................................................................. 17
5.4 Organization, Powers, Capitalization and Good Standing....................... 17
5.5 Financial Statements and Projections......................................... 18
5.6 Intellectual Property........................................................ 18
5.7 Investigations, Audits, Etc.................................................. 18
5.8 Employee Matters............................................................. 18
5.9 Solvency..................................................................... 18
5.10 Year 2000.................................................................... 18
5.11 Use of Proceeds, Margin Regulations.......................................... 18
5.12 Rights in the Series and Collateral.......................................... 19
5.13 Delivery..................................................................... 19
5.14 Assets....................................................................... 19
SECTION 6. DEFAULT, RIGHTS AND REMEDIES..................................................... 19
6.1 Event of Default............................................................. 19
6.2 Change in Control............................................................ 21
6.3 Acceleration and Other Remedies.............................................. 21
6.4 Termination of Sales Agent and Borrower's Sales.............................. 21
6.5 Attorney-in-Fact............................................................. 22
6.6 Performance by Agent......................................................... 22
SECTION 7. CONDITIONS TO LOANS.............................................................. 23
SECTION 8. ASSIGNMENT AND PARTICIPATION..................................................... 23
8.1 Assignments and Participations............................................... 23
8.2 Agent........................................................................ 25
8.3 Amendments, Consents and Waivers............................................. 29
8.4 Set Off and Sharing of Payments.............................................. 29
8.5 Disbursements of Advances; Return of Payment................................. 30
SECTION 9. MISCELLANEOUS.................................................................... 31
9.1 Indemnities.................................................................. 31
9.2 Amendments and Waivers....................................................... 32
9.3 Notices...................................................................... 32
9.4 Failure or Indulgence Not Waiver, Remedies Cumulative........................ 33
9.5 Marshaling, Payments Set Aside............................................... 33
9.6 Severability................................................................. 33
9.7 Lenders' Obligations Several, Independent Nature of Lenders' Rights.......... 33
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88
9.8 Headings..................................................................... 34
9.9 Applicable Law............................................................... 34
9.10 Successors and Assigns....................................................... 34
9.11 No Fiduciary Relationship, Limited Liability................................. 34
9.12 Construction................................................................. 34
9.13 Confidentiality.............................................................. 34
9.14 CONSENT TO JURISDICTION...................................................... 35
9.15 WAIVER OF JURY TRIAL......................................................... 35
9.16 Survival of Warranties and Certain Agreements................................ 36
9.17 Entire Agreement............................................................. 36
9.18 Counterparts; Effectiveness.................................................. 36
SECTION 10. DEFINITIONS..................................................................... 36
10.1 Certain Defined Terms........................................................ 36
10.2 Other Definitional Provisions................................................ 43
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89
\ INDEX OF DEFINED TERMS
Defined Term Defined in Section
- ------------ ------------------
Accounting Changes Section 4.2
Acquisition Agreement Section 10.1
Acquisition Documents Section 10.1
Acquisition Price Section 10.1
Affected Lender Section 1.10
Affiliate Section 10.1
Agent Section 10.1
Agreement Section 10.1
Asset Disposition Section 10.1
Assignment and Acceptance Agreement Section 10.1
Bankruptcy Code Section 10.1
Base Rate Section 1.2(B)
Base Rate Loans Section 10.1
Borrower Preamble & Section 10.1
Business Day Section 10.1
Cash Equivalents Section 10.1
Certificate of Exemption Section 1.9(C)
Closing Date Section 10.1
Closing Fee Section 1.2(C)
Collateral Section 10.1
Collection Account Section 1.4
Contingent Obligation Section 3.4
Contractual Obligations Section 2.1
Default Section 10.1
Defaulting Lender Section 8.5(C)(1)
Distribution Agreement Section 10.1
Distributor Section 10.1
Event of Default Section 6.1
Federal Funds Effective Date Section 10.1
Foreign Lender Section 1.9(C)
GAAP Section 10.1
Heller Preamble
Gross Receipts Section 10.1
Indebtedness Section 10.1
Indemnitee Section 9.1
Intellectual Property Section 5.6
Interest Period Section 1.2(A)
Interest Settlement Date Section 8.5(A)
Inter-Party Agreement Section 10.1
Investment Section 3.3
IRC Section 10.1
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90
Laboratory Section 10.1
Laboratory Pledgeholder Agreement Section 10.1
Lender(s) Section 10.1
Letter of Non-Exemption Section 1.9(C)
LIBOR Section 1.2(A)
LIBOR Loans Section 1.2(A)
Lien Section 10.1
Literary Property Section 10.1
Loan(s) Section 1.1(A)
Loan Amount Section 1.1(A)
Loan Documents Section 10.1
Loan Exposure Section 10.1
Loan Party Section 10.1
Material Adverse Effect Section 10.1
Minimum Guarantee Section 10.1
Net Proceeds Section 10.1
Note(s) Section 10.1
Obligations Section 10.1
Permitted Encumbrances Section 10.1
Person Section 10.1
Physical Properties Section 10.1
Placement Fee Section 3.5(A)
Power of Attorney Section 6.4
Pro Rata Share Section 10.1
Register Section 8.1(B)
Related Funds Section 8.1(E)
Related Transactions Section 10.1
Related Transactions Documents Section 10.1
Related Receivables Section 10.1
Related Receivables Collection Date Section 1.1(A) & Section 10.1
Related Receivables Excess Payment Section 10.1
Related Receivables Payment Section 10.1
Replacement Lender Section 1.10(A)
Requisite Lenders Section 10.1
Restricted Junior Payment Section 3.5
Sales Agent Section 10.1
Sales Agent Agreement Section 10.1
Sales Agent Documents Section 10.1
Scheduled Installments Section 1.1(A)
Security Documents Section 10.1
Series Section 10.1
Subsidiary Section 10.1
Subtotal Section 1.1
Termination Date Section 10.1
Sales Agent Section 10.1
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91
Territory Section 10.1
Year 2000 Compliant Section 5.10
vi
92
CREDIT AGREEMENT
This CREDIT AGREEMENT is dated as of October ___, 2000 and
entered into by and among CALL OF THE WILD DISTRIBUTION, LLC, a Delaware limited
liability company ("Borrower"), with its principal place of business at 3957
Maplewood Drive, Seaford, New York 11753, the financial institutions who are or
hereafter become parties to this Agreement as "Lenders" (as defined in
subsection 10.1 hereof), and HELLER EMX, INC., a Delaware corporation (in its
individual capacity "Heller"), with its principal place of business at 150 East
42nd Street, New York, New York 10017, as "Agent" (as such term is defined in
subsection 10.1 hereof).
R E C I T A L S:
WHEREAS, Borrower desires that Lenders extend a term credit
facility to Borrower to provide funds for financing the acquisition by Borrower
of the Series and Related Receivables (as such terms are hereinafter defined in
subsection 10.1).
WHEREAS, Borrower desires to secure all of its Obligations (as
hereinafter defined in subsection 10.1) under the Loan Documents (as hereinafter
defined in subsection 10.1) by granting to Agent, for the benefit of Agent and
Lenders, a security interest in and lien upon all of its assets; and
WHEREAS, Team Communications Group, Inc., a California
corporation ("Sales Agent") is willing to guaranty all of the Obligations of
Borrower to Lenders under the Loan Documents pursuant to the Inter-Party
Agreement (as hereinafter defined in subsection 10.1);
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, Borrower, Lenders and
Agent agree as follows:
SECTION 1.
AMOUNTS AND TERMS OF LOANS
1.1 Term Loan Facility.
(A) Subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties of Borrower contained herein
each Lender agrees, severally and not jointly, to lend to Borrower in one draw,
on the Closing Date (as defined in subsection 10.1 hereof), its Pro Rata Share
of the aggregate amount of $8,139,428 ("Loans", the aggregate amount of Loans:
"Loan Amount"). Borrower shall repay the Loans over a maximum of two (2) years
from the Closing Date through scheduled monthly minimum amortization payments
("Scheduled Installments") of $339,143 to be made by Borrower on the day each
monthly Interest Period ends commencing with the Interest Period ending in
October, 2000 and ending on the Termination Date; provided that the final
Scheduled Installment due in September, 2002 shall be equal to the unpaid
balance of the Loans then outstanding; provided, however that such Scheduled
Installment amount shall be ratably reduced for each Scheduled Installment
occurring after the date the Agent receives in the Collection Account the first
$2,700,000 of collections in
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respect of the Related Receivables (the "Related Receivables Collection Date").
In computing such ratable reduction, the following procedure shall be used: (1)
subtract from the principal balance of the Loans then outstanding the amount of
$2,700,000 (the difference being the "Subtotal"); (2) divide the Subtotal by the
number of remaining monthly Scheduled Installments of principal due to be paid
on the Loans at such time; and (3) the quotient of (2) shall be the new monthly
Scheduled Installment. Because the recomputation of the Scheduled Installment on
the Related Receivables Collection Date reflects all prior prepayments of
principal on the Loans, only prepayments of the principal of the Loans occurring
after the Related Receivables Collection Date shall be counted toward reducing
any Scheduled Installments after the Related Receivables Collection Date
pursuant to Section 1.5(C) hereto.
(B) Notes. Borrower shall execute and deliver to each Lender a
Note to evidence the Loans, such Note to be in the principal amount of such
Lender's Pro Rata Share of the Loans. In the event of an assignment under
subsection 8.1, Borrower shall, upon surrender of the assigning Lender's Note,
issue a new Note to reflect the interests of the assigning Lender and the Person
to which interests are to be assigned.
(C) Funding Authorization. The proceeds of the Loans made
pursuant to this Agreement are to be funded by Agent by wire transfer to the
parties, in the amounts and to the accounts designated by Borrower in the
Disbursement Direction Letter to be delivered by Borrower to Agent on or prior
to the Closing Date.
1.2 Interest and Related Fees.
(A) Interest. Except as provided in subsection 1.2(B) and/or (H)
hereof, from the date the Loans are made and the date the other Obligations
become due, the Loans and the other Obligations shall bear interest at the rate
of the sum of LIBOR plus 462.50 basis points ("LIBOR Loans").
"LIBOR" means, for each Interest Period, a rate per annum equal
to:
(a) the offered rate for deposits in U.S. dollars in an
amount comparable to the amount of the applicable Loans in the London interbank
market which is published by the British Bankers' Association, and that
currently appears on Telerate Page 3750, or any other source available to Agent,
as of 11:00 a.m. (London time) on the day which is two (2) Business Days prior
to the first day of the relevant Interest Period for a term comparable to such
Interest Period; or if, for any reason, such a rate is not published by the
British Bankers' Association on Telerate or any other source available to Agent,
the rate per annum equal to the average rate (rounded upwards, if necessary, to
the nearest 1/100 of 1%) at which Agent determines that U.S. dollars in an
amount comparable to the amount of the applicable Loans are being offered to
prime banks at approximately 11:00 a.m. (London time) on the day which is two
(2) Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period for settlement in immediately available funds
by leading banks in the London interbank market selected by Agent; divided by
(b) a number equal to 1.0 minus the aggregate (but without
duplication) of the rates (expressed as a decimal fraction) of reserve
requirements in effect on the
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day which is two (2) Business Days prior to the beginning of such Interest
Period (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other governmental authority having jurisdiction with
respect thereto, as now and from time to time in effect) for Eurocurrency
funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of
such Board) which are required to be maintained by a member bank of the Federal
Reserve System; such rate to be rounded upward to the next whole multiple of
one-sixteenth of one percent (.0625%).
Subject to paragraphs (B) and (H) below, each LIBOR Loans may be
obtained for a one month period (each being an "Interest Period"). With respect
to all LIBOR Loans: (a) the Interest Period will commence on the date that the
LIBOR Loan is made, or in the case of immediately successive Interest Periods,
each successive Interest Period shall commence on the day on which the next
preceding Interest period expires, (b) if the Interest Period expires on a day
that is not a Business Day, then it will expire on the next Business Day (unless
the result of such extension would be to extend such Interest Period into
another calendar month in which event such Interest Period shall end on the
immediately preceding Business Day), (c) any Interest Period that begins on the
last Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such Interest
Period) shall end on the last Business Day of a calendar month at the end of
such Interest Period) shall end on the last Business Day of a calendar month,
and (d) no Interest Period shall extend beyond the Termination Date.
(B) Illegality. Notwithstanding any other provisions hereof, if
any law, rule, regulation, treaty or directive or interpretation or application
thereof shall make it unlawful for any Lender to make, fund or maintain a LIBOR
Loan, such Lender shall promptly give notice of such circumstances to Agent,
Borrower and the other Lenders. In such an event, such Lender's outstanding Pro
Rata Share of LIBOR Loans shall be converted automatically to a Loan bearing
interest at the "Base Rate" (as hereinafter defined) on the last day of the
Interest Period thereof or at such earlier time as may be required by law. The
Loan, if converted into a Base Rate Loan, shall bear interest at the rate of the
sum of the Base Rate plus a margin to be determined by Agent as soon as
practicable after such event which will equate to the yield above Agent's cost
of funds which Agent was receiving on the Loans immediately prior to such
conversion of the Loans into the Base Rate Loans.
"Base Rate" means a variable rate of interest per annum equal to
the greater of (a) the rate of interest from time to time published by the Board
of Governors of the Federal Reserve System in Federal Reserve statistical
release H.15 (519) entitled "Selected Interest Rates" as the Bank prime loan
rate or (b) the Federal Funds Effective Rate plus fifty (50) basis points. Base
Rate also includes rates published in any successor publications of the Federal
Reserve System reporting the Bank prime loan rate or its equivalent. The
statistical release generally sets forth a Bank prime loan rate for each
business day. The applicable Bank prime loan rate for any date not set forth
shall be the rate set forth for the last preceding date. In the event the Board
of Governors of the Federal Reserve System ceases to publish a Bank prime loan
rate or equivalent, the term "Base Rate" shall mean a variable rate of interest
per annum equal to the highest of the "prime rate," "reference rate," "base
rate" or other similar rate as determined by Agent announced from time to time
by any of the three largest banks (based on combined capital and surplus)
headquartered in New York, New York (with the understanding that any such rate
may
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merely be a reference rate and may not necessarily represent the lowest or best
rate actually charged to any customer by such bank).
(C) Closing Fee. Borrower shall pay Agent, for the benefit of all
Lenders (based upon their respective Pro Rata Shares) in connection with the
extension of the Loans, a fee in the amount equal to two percent (2%) of the
Loan Amount on Closing Date ("Closing Fee").
(D) Computation of Interest and Related Fees. Interest on the
Loans and all other Obligations, including any fees set forth in this subsection
1.2, shall be calculated daily on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed in the period during which it
accrues. The date of funding a Base Rate Loans and the first day of an Interest
Period with respect to a LIBOR Loan shall be included in the calculation of
interest. The date of payment of a Base Rate Loan and the last day of an
Interest Period with respect to a LIBOR Loan shall be excluded from the
calculation of interest. If a Loan is repaid on the same day that it is made,
one (1) days' interest shall be charged. Interest on all Base Rate Loans is
payable in arrears on the first day of each month and on the maturity of such
Loans, whether by acceleration or otherwise. Interest on LIBOR Loans shall be
payable on the last day of the applicable Interest Period. In addition, interest
on LIBOR Loans is due on the maturity of such Loans, whether by acceleration or
otherwise.
(E) Default Rate of Interest. At the election of Agent or
Requisite Lenders, after the occurrence of an Event of Default and for so long
as it continues, the Loans and other Obligations shall bear interest at a rate
that is 3 percent (3.0%) in excess of the rates otherwise payable under this
Agreement.
(F) Excess Interest. Under no circumstances will the rate of
interest chargeable be in excess of the maximum amount permitted by law. If
excess interest is charged and paid in error, then the excess amount will be
promptly refunded or applied to repayment or prepayment of principal in the
manner set forth in subsection 1.5(C).
(G) LIBOR Election. The Loans will be made on the Closing Date as
LIBOR Loans and, until paid in full, or except as provided in subsections 1.2(B)
and (H) hereof, will be automatically continued as LIBOR Loans for a New
Interest Period in an amount equal to the outstanding principal amount of the
Loans after giving effect to any payments and/or prepayments of the same
occurring on or before the last day of the Interest Period then ended.
(H) Inability to Determine LIBOR. In the event, prior to
commencement of any Interest Period relating to a LIBOR Loan, Agent shall
determine or be notified in writing by Requisite Lenders that adequate and
reasonable methods do not exist for ascertaining LIBOR, Agent shall promptly
provide notice of such determination to Borrower and Lenders (which shall be
conclusive and binding on Borrower and Lenders). In such event the LIBOR Loans
will automatically, on the last day of the then current Interest Period relating
thereto, become a Base Rate Loan until Agent or Requisite Lenders determine that
the circumstances giving rise to such conversion into Base Rate Loan no longer
exist, in which event Agent upon the instructions of Requisite Lenders, shall so
notify Borrower and Lenders and upon their instructions the Base Rate Loan shall
be converted into LIBOR Loan on the third Business Day after such date.
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1.3 Expenses and Attorneys Fees. Borrower agrees to promptly pay
all fees, costs and expenses (including without limitation reasonable attorneys'
and consultants' fees and expenses and appraisal fees) incurred by Agent in
connection with any matters contemplated by or arising out of the Loan
Documents, in connection with the examination, review, due diligence
investigation, documentation, negotiation, closing and syndication of the
transactions contemplated herein and in connection with the continued
administration of the Loan Documents including any amendments, modifications,
consents and waivers. Borrower agrees to promptly pay all fees, costs and
expenses (including attorneys' fees and expenses) incurred by Agent and Lenders
in connection with any action to enforce any Loan Document or to collect any
payments due from Borrower or any other Loan Party. All fees, costs and expenses
for which Borrower is responsible under this subsection 1.3(B) shall be deemed
part of the Obligations when incurred, payable in accordance with the final two
sentences of subsection 1.4 and secured by the Collateral.
1.4 Payments. All payments by Borrower of the Obligations shall
be made in same day funds and delivered to Agent, for the benefit of Agent and
Lenders, as applicable, by wire transfer to the following account or such other
place as Agent may from time to time designate in writing (the "Collection
Account").
Bank One
Three Bank One Plaza
Chicago, Illinois 60670
ABA number: 071000013
For credit to: Heller EMX, Inc.
Account Number: 104-9295
Whenever any payment to be made hereunder shall be stated to be due on a day
that is not a Business Day, the payment may be made on the next succeeding
Business Day and such extension of time shall be included in the computation of
the amount of interest and fees due hereunder. All payments received and other
amounts deposited into the Collection Account during each Interest Period will
be applied to the Obligations on the last day of each Interest Period (including
without limitation, all payments received in the Collection Account from the
licensing and exploitation of the Series).
1.5 Prepayments.
(A) Voluntary Prepayments of the Loans. At any time, Borrower may
prepay the Loans and all other Obligations, in whole or in part, without premium
or penalty. Voluntary prepayments of the Loans shall be applied in accordance
with subsection 1.5(C) or as otherwise may be agreed by Requisite Lenders.
(B) Mandatory Prepayments. The Borrower shall prepay the Loans
and all other Obligations by the following amounts, as and when received by or
are payable to the Borrower unless otherwise indicated: (a) all proceeds of any
sale or assignment of substantially all of Borrower's rights in the Series
and/or Related Receivables in any single transaction or group of related
transactions other than with Sales Agent pursuant to the Sales Agent Agreement;
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and (b) all proceeds of any Related Receivables received in accordance with the
Sales Agent Agreement (as defined therein).
(C) Application of Proceeds. The prepayments set forth in
subsection 1.5(A) above shall be applied to reduce the next Scheduled
Installments of the Loans. Except for Related Receivables Excess Payments, the
prepayments set forth in Subsection 1.5(B) shall be applied to the ratable
reduction of the remaining Scheduled Installments of the Loans, it being
understood and agreed that with respect to the mandatory prepayments with the
proceeds of the Related Receivables received on or prior to the Related
Receivables Collection Date, such ratable reduction of Scheduled Installments
shall occur pursuant to Section 1.1(A). Notwithstanding the foregoing, all
Related Receivables Excess Payments shall be applied to the Scheduled
Installments of the Loans in inverse order of maturity.
1.6 Maturity. All of the Obligations shall become due and payable
as otherwise set forth herein, but in any event all of the remaining Obligations
shall become due and payable upon termination of the Credit Agreement. Until all
Obligations have been fully paid and satisfied (other than contingent
indemnification obligations to the extent no unsatisfied claim has been
asserted), Agent shall be entitled to retain the security interests in the
Collateral granted under the Security Documents and the ability to exercise all
rights and remedies available to them under the Loan Documents and applicable
laws.
1.7 Loan Accounts. Agent will maintain loan account records
("Loan Account") for (a) all Loans, interest charges and payments thereof, (b)
the charging and payment of all fees, costs and expenses and (c) all other
debits and credits pursuant to this Agreement. The balance in the Loan Account
shall be presumptive evidence of the amounts due and owing to Lenders, provided
that any failure by Agent to so record shall not limit or affect the Borrower's
obligation to pay. Within five (5) days of the first of each month, Agent shall
provide a statement for the Loan Account setting forth the principal and
interest due thereon. Borrower must deliver a written objection within sixty
(60) days after receipt of the statement or the statement will be presumptive
evidence of the Obligations absent manifest error. During the continuance of an
Event of Default, Borrower irrevocably waives the right to direct the
application of any and all payments and Borrower hereby irrevocably agrees that
Agent shall have the continuing exclusive right to thereafter apply payments in
any manner it deems appropriate.
1.8 Yield Protection.
(A) Capital Adequacy and Other Adjustments. In the event that any
Lender shall have determined that the adoption after the date hereof of any law,
treaty, governmental (or quasi-governmental) rule, regulation, guideline or
order regarding capital adequacy, reserve requirements or similar requirements
or compliance by any Lender or any corporation controlling such Lender with any
request or directive regarding capital adequacy, reserve requirements or similar
requirements (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) from any central bank or governmental
agency or body having jurisdiction does or shall have the effect of increasing
the amount of capital, reserves or other funds required to be maintained by such
Lender or any corporation controlling such Lender and thereby reducing the rate
of return on such Lender's or such corporation's capital as a consequence of its
obligations hereunder, then Borrower shall from time to time within fifteen
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(15) days after notice and demand from such Lender (together with the
certificate referred to in the next sentence and with a copy to Agent) pay to
Agent, for the account of such Lender, additional amounts sufficient to
compensate such Lender for such reduction. A certificate as to the amount of
such cost and showing the basis of the computation of such cost submitted by
such Lender to Borrower and Agent shall, absent manifest error, be final,
conclusive and binding for all purposes.
(B) Increased LIBOR Funding Costs. If, after the date hereof, the
introduction of, change in or interpretation of any law, rule, regulation,
treaty or directive would impose or increase reserve requirements (other than as
taken into account in the definition of LIBOR) or otherwise increase the cost to
any Lender of making or maintaining a LIBOR Loan, then Borrower shall from time
to time within fifteen (15) days after notice and demand from Agent (together
with the certificate referred to in the next sentence) pay to Agent, for the
account of all such affected Lenders, additional amounts sufficient to
compensate such Lenders for such increased cost. A certificate as to the amount
of such cost and showing the basis of the computation of such cost submitted by
Agent on behalf of all such affected Lenders to Borrower shall, absent manifest
error, be final, conclusive and binding for all purposes.
1.9 Taxes.
(A) No Deductions. Any and all payments or reimbursements made
hereunder or under the Note shall be made free and clear of and without
deduction for any and all taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto of any nature whatsoever
imposed by any taxing authority, excluding such taxes to the extent imposed on
Agent's or a Lender's net income by the jurisdiction in which Agent or such
Lender is organized. If Borrower shall be required by law to deduct any such
amounts from or in respect of any sum payable hereunder to any Lender or Agent,
then the sum payable hereunder shall be increased as may be necessary so that,
after making all required deductions, such Lender or Agent receives an amount
equal to the sum it would have received had no such deductions been made.
(B) Changes in Tax Laws. In the event that, subsequent to the
Closing Date, (1) any changes in any existing law, regulation, treaty or
directive or in the interpretation or application thereof, (2) any new law,
regulation, treaty or directive enacted or any interpretation or application
thereof, or (3) compliance by Agent or any Lender with any request or directive
(whether or not having the force of law) from any governmental authority, agency
or instrumentality:
(a) does or shall subject Agent or any Lender to any tax
of any kind whatsoever with respect to this Agreement, the other Loan
Documents or the Loans made hereunder, or change the basis of taxation
of payments to Agent or such Lender of principal, fees, interest or any
other amount payable hereunder (except for net income taxes, or
franchise taxes imposed in lieu of net income taxes, imposed generally
by federal, state or local taxing authorities with respect to interest
or commitment fees or other fees payable hereunder or changes in the
rate of tax on the overall net income of Agent or such Lender); or
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(b) does or shall impose on Agent or any Lender any other
condition or increased cost in connection with the transactions
contemplated hereby or participations herein;
and the result of any of the foregoing is to increase the cost to Agent or any
such Lender of making the Loans hereunder, as the case may be, or to reduce any
amount receivable hereunder, then, in any such case, Borrower shall promptly pay
to Agent or such Lender, upon its demand, any additional amounts necessary to
compensate Agent or such Lender, on an after-tax basis, for such additional cost
or reduced amount receivable, as determined by Agent or such Lender with respect
to this Agreement or the other Loan Documents. If Agent or such Lender becomes
entitled to claim any additional amounts pursuant to this subsection, it shall
promptly notify Borrower of the event by reason of which Agent or such Lender
has become so entitled. A certificate as to any additional amounts payable
pursuant to the foregoing sentence submitted by Agent or such Lender to Borrower
shall, absent manifest error, be final, conclusive and binding for all purposes.
(C) Foreign Lenders. Each Lender organized under the laws of a
jurisdiction outside the United States (a "Foreign Lender") as to which payments
to be made under this Agreement or under the Note(s) are exempt from United
States withholding tax or are subject to United States withholding tax at a
reduced rate under an applicable statute or tax treaty shall provide to Borrower
and Agent (1) a properly completed and executed Internal Revenue Service Form
4224 or Form 1001 or other applicable form, certificate or document prescribed
by the Internal Revenue Service of the United States certifying as to such
Foreign Lender's entitlement to such exemption or reduced rate of withholding
with respect to payments to be made to such Foreign Lender under this Agreement
and under the Notes (a "Certificate of Exemption") or (2) a letter from any such
Foreign Lender stating that it is not entitled to any such exemption or reduced
rate of withholding (a "Letter of Non-Exemption"). Prior to becoming a Lender
under this Agreement and within fifteen (15) days after a reasonable written
request of Borrower or Agent from time to time thereafter, each Foreign Lender
that becomes a Lender under this Agreement shall provide a Certificate of
Exemption or a Letter of Non-Exemption to Borrower and Agent. If a Foreign
Lender is entitled to an exemption with respect to payments to be made to such
Foreign Lender under this Agreement (or to a reduced rate of withholding) and
does not provide a Certificate of Exemption to Borrower and Agent within the
time periods set forth in the preceding paragraph, Borrower shall withhold taxes
from payments to such Foreign Lender at the applicable statutory rates and
Borrower shall not be required to pay any additional amounts as a result of such
withholding, provided that all such withholding shall cease upon delivery by
such Foreign Lender of a Certificate of Exemption to Borrower and Agent.
1.10 Optional Prepayment/Replacement of Lenders. Within fifteen
(15) days after receipt by Borrower of written notice and demand from any Lender
for payment pursuant to subsection 1.8 or 1.9 or, as provided in subsection
8.3(C), in the case of certain refusals by any Lender to consent to certain
proposed amendments, modifications, terminations or waivers with respect to this
Agreement that have been approved by Requisite Lenders (any such Lender
demanding such payment or refusing to so consent being referred to herein as an
"Affected Lender"), Borrower may, at its option, notify Agent and such Affected
Lender of its intention to do one of the following:
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(A) Borrower may obtain, at Borrower's expense, a replacement
Lender ("Replacement Lender") for such Affected Lender, which Replacement Lender
shall be reasonably satisfactory to Agent. In the event Borrower obtains a
Replacement Lender that will purchase all outstanding Obligations owed to such
Affected Lender and assume its commitments hereunder within ninety (90) days
following notice of Borrower's intention to do so, the Affected Lender shall
sell and assign all of its rights and delegate all of its obligations under this
Agreement to such Replacement Lender in accordance with the provisions of
subsection 8.1, provided that Borrower has reimbursed such Affected Lender for
any administrative fee payable pursuant to subsection 8.1 and, in any case where
such replacement occurs as the result of a demand for payment pursuant to
subsection 1.8 or 1.9, paid all amounts required to be paid to such Affected
Lender pursuant to subsection 1.8 or 1.9 through the date of such sale and
assignment; or
(B) Borrower may prepay in full all outstanding Obligations owed
to such Affected Lender and terminate such Affected Lender's Pro Rata Share of
the Loans in which case the outstanding principal balance of the Loans shall be
reduced by the amount of such Pro Rata Share. Borrower shall, within ninety (90)
days following notice of its intention to do so, prepay in full all outstanding
Obligations owed to such Affected Lender (including, in any case where such
prepayment occurs as the result of a demand for payment for increased costs,
such Affected Lender's increased costs for which it is entitled to reimbursement
under this Agreement through the date of such prepayment), and terminate such
Affected Lender's obligations under the Loans.
SECTION 2.
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that until payment in full of all
Obligations (other than contingent indemnification obligations to the extent no
unsatisfied claim has been asserted), Borrower shall perform and comply with all
covenants in this Section 2.
2.1 Compliance With Laws and Contractual Obligations.
Borrower will (a) comply with (i) the requirements of all
applicable laws, rules, regulations and orders of any governmental authority
(including, without limitation, laws, rules, regulations and orders relating to
taxes, employer and employee contributions, securities, employee retirement and
welfare benefits, environmental protection matters and employee health and
safety) as now in effect and which may be imposed in the future in all
jurisdictions in which Borrower is now doing business or may hereafter be doing
business and (ii) the obligations, covenants and conditions contained in all
Contractual Obligations of Borrower, as applicable other than those laws, rules,
regulations, orders and provisions of such Contractual Obligations the
noncompliance with which could not be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect, and (b) maintain or
obtain all licenses, qualifications and permits now held or hereafter required
to be held by Borrower, for which the loss, suspension, revocation or failure to
obtain or renew, could reasonably be expected to have, either individually or in
the aggregate, a Material Adverse Effect. This subsection 2.1 shall not preclude
the Borrower from contesting any taxes or other payments, if they are being
diligently
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contested in good faith in a manner which stays enforcement thereof and if
appropriate expense provisions have been recorded in conformity with GAAP.
Borrower represents and warrants that, it (i) is in compliance with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority as now in effect other than those laws, rules,
regulations, orders and provisions of such Contractual Obligations the
noncompliance with which could not be reasonably expected to have, either
individually or in the aggregate, a Material Adverse Effect and (ii) maintains
all licenses, qualifications and permits referred to above.
"Contractual Obligations," as applied to any Person, means any
indenture, mortgage, deed of trust, contract, undertaking, agreement or other
instrument to which that Person is a party or by which it or any of its
properties is bound or to which it or any of its properties is subject
including, without limitation, the Related Transactions Documents.
2.2 Insurance.
(A) At all times, at is sole cost and expense, the Borrower shall
maintain (or cause the Sales Agent to maintain) insurance against loss or damage
to the Collateral with responsible and reputable insurance companies or
associations reasonably satisfactory to the Agent in such amount and covering
such risks as are usually carried by companies engaged in similar business and
owning similar property in the same general area as the area in which such
property is located, which shall be limited to errors and omissions insurance on
the Series. All such insurance policies covering the Collateral shall name the
Borrower as named insured or an additional insured and shall name Agent as
additional insured without Agent being liable for premiums or other cost or
expenses.
(B) Borrower represents and warrants that it maintains all
insurance described above and will deliver evidence thereof to Agent. In the
event Borrower fails to provide Agent with evidence of the insurance coverage
required by this Agreement, Agent may purchase insurance at Borrower's expense
to protect Agent's interests in the Collateral. This insurance may, but need
not, protect Borrower's interests. The coverage purchased by Agent may not pay
any claim made by Borrower or any claim that is made against Borrower in
connection with the Collateral. Borrower may later cancel any insurance
purchased by Agent, but only after providing Agent with evidence that Borrower
has obtained insurance as required by this Agreement. If Agent purchases
insurance for the Collateral, Borrower will be responsible for the costs of that
insurance, including interest and other charges imposed by Agent in connection
with the placement of the insurance, until the effective date of the
cancellation or expiration of the insurance. The costs of the insurance may be
added to the Obligations. The costs of the insurance may be more than the cost
of insurance Borrower is able to obtain on its own.
2.3 Inspection; Lender Meeting. Borrower shall permit any
authorized representatives of Agent to visit and inspect any of the properties
of Borrower, including its financial and accounting records, and to make copies
and take extracts therefrom, and to discuss its affairs, finances and business
with its officers and certified public accountants, at such reasonable times
during normal business hours and as often as may be reasonably requested.
Representatives of each Lender will be permitted to accompany representatives of
Agent during each visit, inspection and discussion referred to in the
immediately preceding sentence. Without in any way limiting the foregoing,
Borrower will participate and will cause its key management
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personnel to participate in a meeting with Agent and Lenders at least once
during each year, which meeting shall be held at such time and such place as may
be reasonably requested by Agent.
2.4 Organizational Existence. Borrower will at all times preserve
and keep in full force and effect its organizational existence and all rights
and franchises material to its business.
2.5 Collection of Gross Receipts.
(A) Borrower shall contractually require Sales Agent to
contractually require all Distributors to pay all Gross Receipts, including all
payments of the Minimum Guarantee under Sales Agent Agreement, directly to the
Collection Account or to Agent for deposit into the Collection Account, for the
benefit of Agent and Lenders.
(B) Upon receipt by Borrower or the Sales Agent of any Gross
Receipts or of any check, draft, note, trade acceptance or other instrument
evidencing an obligation to pay any such revenues, Borrower agrees (and shall
cause the Sales Agent to agree) to hold the same in trust for the Agent and
forthwith, without any notice or demand whatsoever (all such notices, demands or
other actions being expressly waived), to endorse, transfer and deliver any such
sums or instruments, or both, to the Collection Account, for the benefit of
Agent and the Lenders.
2.6 Performance and Amendment of Agreements, Etc.
(A) Borrower shall supervise and monitor the performance of and
payments under the Sales Agent Agreement. Borrower shall fully perform all of
its obligations under the Sales Agent Agreement and the Distribution Agreements,
and shall enforce all of its rights and remedies thereunder as it deems
appropriate in its business judgment; provided, however, that Borrower shall not
take any action or fail to take any action with respect to the Sales Agent
Agreement, or a Distribution Agreement which would result in a waiver or other
loss of any material right or remedy of Borrower thereunder.
(B) Borrower shall not, without Agent's prior written approval,
modify, amend, supplement, compromise, satisfy, release, terminate or discharge
the Sales Agent Agreement, any Distribution Agreement, any collateral securing
the same, any Person liable directly or indirectly with respect thereto, or any
agreement relating to the Sales Agent Agreement or any Distribution Agreement or
the collateral therefor in any way which materially adversely affects Agent's
rights in and to the Collateral.
2.7 Physical Properties and Rights. Subject to such access as
shall be necessary to perform Borrower's obligations under the Sales Agent
Agreement or the Distribution Agreements, with respect to all Physical
Properties now or hereafter in the (actual or constructive) possession of
Borrower, Borrower shall act as pledgeholder for Agent with the same effect as
if Agent were a pledgee in possession of such Physical Properties and rights.
2.8 Further Assurances.
(A) Borrower shall from time to time execute such guaranties,
financing statements, documents, security agreements and reports as Agent or
Requisite Lenders at any
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time may reasonably request to evidence, perfect or otherwise implement the
guaranties and security for repayment of the Obligations contemplated by the
Loan Documents.
(B) In the event Borrower acquires an interest in real property
after the Closing Date, Borrower shall deliver to Agent a fully executed
mortgage or deed of trust over such real property in form and substance
satisfactory to Agent, together with such title insurance policies, surveys,
appraisals, evidence of insurance, legal opinions, environmental assessments and
other documents and certificates as shall be required by Agent and are
consistent with requirements imposed with respect to real property interests of
Borrower on the Closing Date.
2.9 Other Covenants. Borrower will (i) engage only in the
business of owning the Series and Related Receivables and performing its
obligations under the Loan Documents and Sales Agent Documents; (ii) conduct its
affairs strictly in accordance with its operating agreement and certificate of
formation and observe all necessary, appropriate, and customary corporate,
limited liability company and other organizational formalities, including
keeping separate and accurate minutes of meetings of its board of directors,
shareholders, managers, members or partners, as the case may be, passing all
resolutions or consents necessary to authorize actions to be taken, and
maintaining accurate and separate books, records and accounts and in a manner
permitting its assets and liabilities to be easily separated and readily
ascertained; (iii) ensure that its assets are not commingled with the assets of
any other Person; (iv) conduct its business solely in its own name and through
its respective duly authorized managers, members, officers or agents so as not
to mislead others as to the identity of such Person with which those others are
concerned; and (v) conduct its operations without an intent to hinder, delay or
defraud any creditors in connection with its respective assets and operations.
SECTION 3.
NEGATIVE COVENANTS
Borrower covenants and agrees that until payment in full of all
Obligations (other than contingent indemnification obligations to the extent no
unsatisfied claim has been asserted), Borrower shall perform and comply with all
covenants in this Section 3.
3.1 Indebtedness. Borrower will not create incur, assume, or
otherwise become or remain directly or indirectly liable with respect to any
indebtedness, obligations or other liabilities which will not be paid in full on
the Closing Date, other than the Obligations.
3.2 Liens and Related Matters.
(A) No Liens. Borrower will not directly or indirectly create,
incur, assume or permit to exist any Lien on or with respect to the Collateral
any property or asset of Borrower, whether now owned or hereafter acquired or
any income or profits therefrom, other than the Permitted Encumbrances.
(B) Negative Pledges. Borrower will not directly or indirectly
enter into or assume any agreement (other than the Loan Documents) prohibiting
the creation or assumption of any Lien upon its properties or assets, whether
now owned or hereafter acquired.
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3.3 Investments. Borrower will not directly or indirectly make or
own any Investment in any Person.
"Investment" means (i) any direct or indirect purchase or other
acquisition by Borrower of any beneficial interest in, including stock,
partnership interest or other equity securities of, or ownership interest in,
any other Person; and (ii) any direct or indirect loan, advance or capital
contribution by Borrower to any other Person, including all indebtedness and
accounts receivable from that other Person that are not current assets or did
not arise from sales to that other Person in the ordinary course of business.
3.4 Contingent Obligations. Borrower will not directly or
indirectly create or become or be liable with respect to any Contingent
Obligation except those resulting from endorsement of negotiable instruments for
collection in the ordinary course of business.
"Contingent Obligation," as applied to any Person, means any
direct or indirect liability of that Person: (i) with respect to any
indebtedness, lease, dividend or other obligation of another Person if the
purpose or intent of the Person incurring such liability, or the effect thereof,
is to provide assurance to the obligee of such liability that such liability
will be paid or discharged, or that any agreements relating thereto will be
complied with, or that the holders of such liability will be protected (in whole
or in part) against loss with respect thereto; (ii) with respect to any letter
of credit issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings; (iii) under any foreign exchange
contract, currency swap agreement, interest rate swap agreement or other similar
agreement or arrangement designed to alter the risks of that Person arising from
fluctuations in currency values or interest rates; (iv) to make take-or-pay or
similar payments if required regardless of nonperformance by any other party or
parties to an agreement, or (v) pursuant to any agreement to purchase,
repurchase or otherwise acquire any obligation or any property constituting
security therefor, to provide funds for the payment or discharge of such
obligation or to maintain the solvency, financial condition or any balance sheet
item or level of income of another. The amount of any Contingent Obligation
shall be equal to the amount of the obligation so guaranteed or otherwise
supported or, if not a fixed and determined amount, the maximum amount so
guaranteed.
3.5 Restricted Junior Payments(A) . Borrower will not directly or
indirectly declare, order, pay, make or set apart any sum for any Restricted
Junior Payment, except that Borrower may distribute to its members the full
amount of the "Placement Fee" (as defined in the Sales Agent Agreement) received
by Borrower on the Closing Date.
"Restricted Junior Payment" means: (i) any dividend or other
distribution, direct or indirect, on account of any shares of any class of stock
or other equity security of, or ownership interest in, Borrower now or hereafter
outstanding, except a dividend payable solely in shares of that class of stock
to the holders of that class; (ii) any redemption, conversion, exchange,
retirement, sinking fund or similar payment, purchase or other acquisition for
value, direct or indirect, of any shares of any class of stock or other equity
security of, or ownership interest in, Borrower now or hereafter outstanding;
(iii) any payment or prepayment of interest on, principal of, premium, if any,
redemption, conversion, exchange, purchase, retirement, defeasance, sinking fund
or similar payment with respect to, any Indebtedness subordinated to
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the Obligations; and (iv) any payment made to retire, or to obtain the surrender
of, any outstanding warrants, options or other rights to acquire shares of any
class of stock or other equity security of, or ownership interest in, Borrower
now or hereafter outstanding.
3.6 Restriction on Fundamental Changes. Borrower will not
directly or indirectly: (a) amend, modify or waive any term or provision of its
organizational documents, including without limitation its certificate of
formation or certificate of organization, or operating agreement unless required
by law; (b) enter into any transaction of merger or consolidation; (c)
liquidate, wind-up or dissolve itself (or suffer any liquidation or
dissolution); or acquire by purchase or otherwise all or any substantial part of
the business or assets of any other Person.
3.7 Disposal of Assets. Borrower will not directly or indirectly
convey, sell, lease, sublease, transfer or otherwise dispose of, or grant any
Person an option to acquire, in one transaction or a series of related
transactions, any of its property, business or assets, whether now owned or
hereafter acquired, except for the transactions contemplated by the Sales Agent
Agreement and the Distribution Agreements which Sales Agent shall enter into on
behalf of the Borrower for the purpose of exploiting and distributing the Series
in the ordinary course of business.
3.8 Transactions with Affiliates. Borrower will not directly or
indirectly enter into or permit to exist any transaction (including the
purchase, sale, lease or exchange of any property or the rendering of any
management, consulting, investment banking, advisory or other similar services)
with any Affiliate or any director, officer or employee of Borrower.
3.9 Fiscal Year. Borrower will not change its fiscal year.
3.10 Press Release, Public Offering Materials. Borrower will not
disclose the name of Agent or any Lender in any press release unless Agent or
the applicable Lender has approved the content of any such disclosure.
3.11 Subsidiaries. Borrower will not directly or indirectly
establish, create or acquire any Subsidiary.
3.12 Bank Accounts. Borrower will not establish any bank accounts
without prior written notice to Agent and unless Agent or Borrower and the bank
at which the account is to be opened enter into a tri-party agreement regarding
such bank account pursuant to which such bank acknowledges the security interest
of Agent in such bank account and agrees to limit its set-off rights on terms
satisfactory to Agent. As of the Closing Date Borrower has no bank accounts.
3.13 Original Physical Properties. Borrower shall not deposit or
place any original negative, sound, optical or other special effects material
(including, without limitation, the final, complete, composite master negative
of the Series) outside of the Laboratory.
3.14 Employees. Borrower will not hire any employee other than
Gerald A. John Kelly and/or Roy McAree and shall not pay any compensation (other
than Borrower's Placement Fee) to any employee.
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SECTION 4.
INFORMATION AND REPORTING
Borrower covenants and agrees that until payment in full of all
Obligations (other than contingent indemnification obligations to the extent no
unsatisfied claim has been asserted), Borrower shall perform and comply with all
covenants in this Section 4.
4.1 Financial Statements and Other Reports. Borrower will
maintain a system of accounting established and administered in accordance with
sound business practices to permit preparation of financial statements in
conformity with GAAP (it being understood that monthly financial statements are
not required to have footnote disclosures). Borrower will deliver each of the
financial statements and other reports described below to Agent.
(A) Quarterly Financials. As soon as available and in any event
within thirty (30) days after the end of each fiscal quarter (including the last
fiscal quarter of Borrower's fiscal year), Borrower will deliver the
consolidated balance sheet of Borrower, as at the end of such fiscal quarter,
and the related consolidated statements of income, stockholders' equity and cash
flow for such quarter and for the period from the beginning of the then current
fiscal year of Borrower to the end of such quarter.
(B) Year-End Financials. As soon as available and in any event
within ninety (90) days after the end of each fiscal year of Borrower, Borrower
will deliver the consolidated balance sheet of Borrower, as at the end of such
year, and the related consolidated statements of income, stockholders' equity
and cash flow for such fiscal year.
(C) Compliance Certificate. Together with each delivery of
financial statements of Borrower pursuant to subsections 4.1(A) and 4.1(B)
above, Borrower will delivery a fully and properly completed Compliance
Certificate (in substantially the same form as Exhibit 4.1(C)) signed by
Borrower's chief executive officer or chief financial officer.
(D) Accountants' Reports. Promptly upon receipt thereof, Borrower
will deliver copies of all significant reports submitted by Borrower's firm of
certified public accountants in connection with each annual, interim or special
audit or review of any type of the financial statements or related internal
control systems of Borrower made by such accountants, including any comment
letter submitted by such accountants to management in connection with their
services.
(E) Events of Default, Etc. Promptly upon any officer of Borrower
obtaining knowledge of any of the following events or conditions, Borrower shall
deliver copies of all notices given or received by Borrower with respect to any
such event or condition and a certificate of Borrower's chief executive officer
specifying the nature and period of existence of such event or condition and
what action Borrower has taken, is taking and proposes to take with respect
thereto: (1) any condition or event that constitutes, or which could reasonably
be expected to result in the occurrence of, an Event of Default or Default; (2)
any notice that any Person has given to Borrower or any other action taken with
respect to a claimed default or event or condition of the type referred to in
subsection 6.1(B); (3) any event or condition that could
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reasonably be expected to result in any Material Adverse Effect; (4) any breach
or default under the Sales Agent Agreement; or (5) any default or event of
default with respect to any Indebtedness of Borrower.
(F) Litigation. Promptly upon any officer of Borrower obtaining
knowledge of (1) the institution of any action, suit, proceeding, governmental
investigation or arbitration against or affecting Borrower or any property of
Borrower not previously disclosed by Borrower to Agent or (2) any material
development in any action, suit, proceeding, governmental investigation or
arbitration at any time pending against or affecting Borrower or any property of
Borrower which, in each case, could reasonably be expected to have a Material
Adverse Effect, Borrower will promptly give notice thereof to Agent and provide
such other information as may be reasonably available to them to enable Agent
and its counsel to evaluate such matter.
(G) Notice of Company and other Changes. Borrower shall provide
prompt written notice of (1) all jurisdictions in which Borrower becomes
qualified after the Closing Date to transact business, (2) any change after the
Closing Date in the membership interests of Borrower or any amendment to its
operating agreement, certificate of formation and/or organization, and (3) any
other event that occurs after the Closing Date which would cause any of the
representations and warranties in Section 5 of this Agreement or in any other
Loan Document to be untrue or misleading in any material respect. The foregoing
notice requirement shall not be construed to constitute Requisite Lenders'
consent to any transaction referred to above which is not expressly permitted by
the terms of this Agreement.
(H) Other Information. With reasonable promptness, Borrower will
deliver such other information and data with respect to Borrower as from time to
time may be reasonably requested by Agent.
4.2 Accounting Terms, Utilization of GAAP for Purposes of
Calculations Under Agreement. For purposes of this Agreement, all accounting
terms not otherwise defined herein shall have the meanings assigned to such
terms in conformity with GAAP. Financial statements and other information
furnished to Agent pursuant to subsection 4.1 shall be prepared in accordance
with GAAP as in effect at the time of such preparation. No "Accounting Changes"
(as defined below) shall affect financial covenants, standards or terms in this
Agreement; provided that Borrower shall prepare footnotes to each Compliance
Certificate and the financial statements required to be delivered hereunder that
show the differences between the financial statements delivered (which reflect
such Accounting Changes) and the basis for calculating financial covenant
compliance (without reflecting such Accounting Changes). "Accounting Changes"
means: (a) changes in accounting principles required by GAAP and implemented by
Borrower; (b) changes in accounting principles recommended by Borrower's
certified public accountants and implemented by Borrower; and (c) changes in
carrying value of Borrower's assets, liabilities or equity accounts resulting
from (i) the application of purchase accounting principles (A.P.B. 16 and/or 17
and EITF 88-16 and FASB 109) to the Related Transactions or (ii) as the result
of any other adjustments that, in each case, were applicable to, but not
included in, the Pro Forma. All such adjustments described in clause (c) above
resulting from expenditures made subsequent to the Closing Date (including, but
not limited to, capitalization of costs and expenses or payment of pre-Closing
Date liabilities) shall be treated as expenses in the period the expenditures
are made.
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SECTION 5.
REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into the Loan Documents, to
make the Loans, Borrower represents, warrants and covenants to Agent and each
Lender that the following statements are and, after giving effect to the Related
Transactions, will remain true, correct and complete for until payment in full
of all Obligations:
5.1 Disclosure. No representation or warranty of the Borrower
contained in this Agreement, the financial statements referred to in subsection
5.5, the other Related Transactions Documents or any other document, certificate
or written statement furnished to Agent or any Lender by or on behalf of
Borrower for use in connection with the Loan Documents or the Related
Transactions Documents contains any untrue statement of a material fact or
omitted, omits or will omit to state a material fact necessary in order to make
the statements contained herein or therein not misleading in light of the
circumstances in which the same were made.
5.2 No Material Adverse Effect. Since July 12, 2000 there have
been no events or changes in facts or circumstances affecting the Borrower which
individually or in the aggregate have had or could reasonably be expected to
have a Material Adverse Effect and that have not been disclosed herein or in the
attached Schedules.
5.3 No Conflict. The consummation of the Related Transactions
does not and will not violate or conflict with any laws, rules, regulations or
orders of any governmental authority or violate, conflict with, result in a
breach of, or constitute a default (with due notice or lapse of time or both)
under any Contractual Obligation of the Borrower except if such violations,
conflicts, breaches or defaults have either been waived on or before the Closing
Date or could not reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect.
5.4 Organization, Powers, Capitalization and Good Standing
(A) Organization and Powers. Borrower is duly organized, validly
existing and in good standing under the laws of its jurisdiction of organization
and qualified to do business in all states where such qualification is required
except where failure to be so qualified could not reasonably be expected to have
a Material Adverse Effect. The jurisdiction of organization and all
jurisdictions in which the Borrower is qualified to do business are set forth on
Schedule 5.4. Borrower has all requisite organizational power and authority to
own and operate its properties, to carry on its business as now conducted and
proposed to be conducted, to enter into each Related Transactions Document to
which it is a party and to incur the Obligations, grant liens and security
interests in the Collateral and carry out the Related Transactions.
(B) Binding Obligation. This Agreement is, and the other Related
Transactions Documents when executed and delivered will be, the legally valid
and binding obligations of the applicable parties thereto, each enforceable
against each of such parties, as applicable, in accordance with their respective
terms.
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5.5 Financial Statements and Projections. All financial
statements concerning Borrower which have been or will hereafter be furnished to
Agent pursuant to this Agreement, including those listed below, have been or
will be prepared in accordance with GAAP consistently applied (except as
disclosed therein) and do or will present fairly the financial condition of the
entities covered thereby as at the dates thereof and the results of their
operations for the periods then ended.
5.6 Intellectual Property. Borrower owns, is licensed to use or
otherwise has the right to use, all patents, trademarks, trade names,
copyrights, technology, know-how and processes used in or necessary for the
conduct of its business as currently conducted that are material to the
condition (financial or other), business or operations of Borrower (collectively
called "Intellectual Property") and all such Intellectual Property is identified
on Schedule 5.6 and fully protected and/or duly and properly registered, filed
or issued in the appropriate office and jurisdictions for such registrations,
filings or issuances. Except as disclosed in Schedule 5.6, the use of such
Intellectual Property by Borrower does not and has not been alleged by any
Person to infringe on the rights of any Person.
5.7 Investigations, Audits, Etc. Except as set forth on Schedule
5.7, Borrower is not subject of any review or audit by the Internal Revenue
Service or any governmental investigation concerning the violation or possible
violation of any law.
5.8 Employee Matters. Borrower has no employees other than Jerry
Kelly.
5.9 Solvency. Borrower: (a) owns and will own assets the fair
saleable value of which are (i) greater than the total amount of its liabilities
(including contingent liabilities) and (ii) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they
become absolute and matured considering all financing alternatives and potential
asset sales reasonably available to it; (b) has capital that is not unreasonably
small in relation to its business as presently conducted or after giving effect
to any contemplated transaction; and (c) does not intend to incur and does not
believe that it will incur debts beyond its ability to pay such debts as they
become due.
5.10 Year 2000. Borrower has made an assessment of the microchip
and computer-based systems and the software used in its business and has
determined that such systems and software are Year 2000 Compliant. For purposes
of this paragraph, "Year 2000 Compliant" means that all software, embedded
microchips and other processing capabilities utilized by, and material to the
business operations or financial condition of, Borrower and its Subsidiaries are
able to interpret, store, transmit, receive and manipulate data on and involving
all calendar dates correctly and without causing any abnormal ending scenarios
in relation to dates in and after the Year 2000. Borrower is not aware of any
circumstances that would be reasonably likely to result in a material adverse
change in the business or financial condition of Borrower as a result of the
failure of Borrower to have become Year 2000 Compliant prior to January 1, 2000.
Borrower will promptly notify Agent if it becomes aware of any such
circumstances after the date hereof.
5.11 Use of Proceeds, Margin Regulations. No part of the proceeds
of the Loans will be used for "buying" or "carrying" "margin stock" within the
respective meanings of
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such terms under Regulation U of the Board of Governors of the Federal Reserve
System as now and from time to time hereafter in effect or for any other purpose
that violates the provisions of the regulations of the Board of Governors of the
Federal Reserve System. If requested by Agent, Borrower will furnish to Agent
and each Lender a statement to the foregoing effect in conformity with the
requirements of FR Form G-3 or FR Form O-1, as applicable, referred to in
Regulation U.
5.12 Rights in the Series and Collateral. Upon payment of the
Acquisition Price, Borrower will own all right, title and interest in or to the
Series in the Territory and the Related Receivables (as defined in the
Acquisition Agreement) subject only to Permitted Encumbrances.
5.13 Delivery. The Borrower has accepted delivery of the Series
in accordance with the Acquisition Agreement. There are no items which are
necessary to effectuate delivery to any Distributor which were not included in
the Physical Properties received pursuant to the Acquisition Agreement.
5.14 Assets
Borrower has no assets other than the Series, Related Receivables
and rights under the Sales Agent Documents.
SECTION 6.
DEFAULT, RIGHTS AND REMEDIES
6.1 Event of Default. "Event of Default" shall mean the
occurrence or existence of any one or more of the following:
(A) Payment. Failure to pay, within three (3) days after receipt
by Borrower of written notice from Agent or Requisite Lenders, any installment
or other payment of principal of any Loan, any interest on any Loan or any other
amount due under this Agreement or any of the other Loan Documents;
(B) Default in Other Agreements. (1) Failure of Borrower to pay
when due or within any applicable grace period any principal or interest on
Indebtedness (other than the Loans) or any Contingent Obligations or (2) breach
or default of Borrower, or the occurrence of any condition or event, with
respect to any Indebtedness (other than the Loans) or any Contingent
Obligations, if the effect of such failure to pay, breach, default or occurrence
is to cause or to permit the holder or holders then to cause, Indebtedness
and/or Contingent Obligations to become or be declared due prior to their stated
maturity; or
(C) Other Defaults Under Loan Documents. Borrower breaches any
representation or warranty or defaults in the performance of or compliance with
any term contained in this Agreement, the other Loan Documents, the Sales Agent
Document or the Inter-Party Agreement (other than occurrences described in other
provisions of this subsection 6.1 for which a different grace or cure period is
specified or which constitute immediate Events of Default) and such default is
not remedied or waived within thirty (30) days after the earlier of (1)
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receipt by Borrower of notice from Agent or Requisite Lenders of such default or
(2) actual knowledge of Borrower of such default; or
(D) Sales Agent Default. Any Sales Agent Default (as defined in
the Inter-Party Agreement) occurs; or
(E) Involuntary Bankruptcy; Appointment of Receiver, Etc. (1) A
court enters a decree or order for relief with respect to Borrower in an
involuntary case under the Bankruptcy Code, which decree or order is not stayed
or other similar relief is not granted under any applicable federal or state
law; or (2) the continuance of any of the following events for forty-five (45)
days unless dismissed, bonded or discharged: (a) an involuntary case is
commenced against Borrower, under any applicable bankruptcy, insolvency or other
similar law now or hereafter in effect; or (b) a decree or order of a court for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Borrower, or over all or a substantial
part of its property, is entered; or (c) an interim receiver, trustee or other
custodian is appointed without the consent of Borrower, for all or a substantial
part of the property of Borrower; or
(F) Voluntary Bankruptcy; Appointment of Receiver, Etc. (1)
Borrower commences a voluntary case under the Bankruptcy Code, or consents to
the entry of an order for relief in an involuntary case or to the conversion of
an involuntary case to a voluntary case under any such law or consents to the
appointment of or taking possession by a receiver, trustee or other custodian
for all or a substantial part of its property; or (2) Borrower makes any
assignment for the benefit of creditors; or (3) the Board of Directors of
Borrower adopts any resolution or otherwise authorizes action to approve any of
the actions referred to in this subsection 6.1 (G); or
(G) Judgment and Attachments. Any money judgment, writ or warrant
of attachment, or similar process (other than those described elsewhere in this
subsection 6.1) involving (1) an amount in any individual case in excess of
$100,000 or (2) an amount in the aggregate at any time in excess of $100,000 (in
either case to the extent not adequately covered by insurance as to which the
insurance company has acknowledged coverage) is entered or filed against
Borrower or any of its respective assets and remains undischarged, unvacated,
unbonded or unstayed for a period of sixty (60) days or in any event later than
five (5) Business Days prior to the date of any proposed sale thereunder; or
(H) Dissolution. Any order, judgment or decree is entered against
Borrower decreeing the dissolution or split up of Borrower and such order
remains undischarged or unstayed for a period in excess of fifteen (15) days; or
(I) Solvency. Borrower ceases to be solvent (as represented in
subsection 5.9) or admits in writing its present or prospective inability to pay
its debts as they become due; or
(J) Injunction. Borrower is enjoined, restrained or in any way
prevented by the order of any court or any administrative or regulatory agency
from conducting all or any material part of its business for more than fifteen
(15) days; or
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(K) Invalidity. Any of this Agreement, the Inter-Party Agreement,
any other Loan Document, any Sales Agent Document for any reason, other than a
partial or full release in accordance with the terms thereof , ceases to be in
full force and effect, or is declared to be null and void, or any party other
than Agent shall deny that it has any further obligation under this Agreement,
the Inter-Party Agreement, any other Loan Document, any Sales Agent Document, or
gives notice to such effect; or
(L) Damage, Strike, Casualty. Any material damage to, or loss,
theft or destruction of, any Collateral, whether or not insured, or any strike,
lockout, labor dispute, embargo, condemnation, act of God or public enemy, or
other casualty which causes, for more than fifteen (15) consecutive days, the
cessation or substantial curtailment of revenue producing activities of
Borrower, if any such event or circumstance could reasonably be expected to have
a Material Adverse Effect; or
(M) Licenses and Permits. The loss, suspension or revocation of,
or failure to renew, any license or permit now held or hereafter acquired by
Borrower, if such loss, suspension, revocation or failure to renew could
reasonably be expected to have a Material Adverse Effect; or
(N) Failure of Security. Agent, for the benefit of Agent and
Lenders, does not have or ceases to have a valid and perfected first priority
security interest in the Collateral (subject to Permitted Encumbrances) or any
substantial portion thereof, in each case, for any reason other than the failure
of Agent to take any action within its control; or
6.2 Change in Control. Gerald A. John Kelly and Roy McAree cease
to beneficially and of record own and control, directly or indirectly, free and
clear of all liens, all of the issued and outstanding membership and other
equity interests in Borrower.
6.3 Acceleration and Other Remedies. Upon the occurrence of any
Event of Default described in subsections 6.1 (E) or 6.1 (F), the unpaid
principal amount of and accrued interest and fees on the Loans and all other
Obligations shall automatically become immediately due and payable, without
presentment, demand, protest, notice of intent to accelerate, notice of
acceleration or other requirements of any kind, all of which are hereby
expressly waived by Borrower. Upon the occurrence and during the continuance of
any other Event of Default, Agent may, and at the request of the Requisite
Lenders, Agent shall, by written notice to Borrower (a) declare all or any
portion of the Loans and all or any portion of the other Obligations to be, and
the same shall forthwith become, immediately due and payable together with
accrued interest thereon, and (b) exercise any other remedies which may be
available under the Loan Documents, Sales Agent Documents or applicable law.
6.4 Termination of Sales Agent and Borrower's Sales
(A) At any time after the occurrence of an Event of Default,
Agent shall have the right, at its option and upon notice to the Borrower and
Sales Agent, to terminate the Sales Agent Agreement and all rights of the Sales
Agent under the Sales Agent Agreement or otherwise, and all rights of the
Borrower (and the Sales Agent on behalf of Borrower) to distribute or otherwise
market the Series shall also be terminated. As provided in the Sales
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Agent Agreement, termination of the Sales Agent shall not release or discharge
the obligations of the Sales Agent to satisfy the Minimum Guarantee or the
Guaranteed Obligations (as defined in the Inter-Party Agreement).
(B) In the event that Agent elects to terminate the rights of the
Sales Agent under the Sales Agent Agreement and/or elects to terminate the
Borrower's right to distribute or otherwise market the Series, Agent shall be
entitled, at any time thereafter, to exercise all rights and remedies under
hereunder, and/or replace the Sales Agent with a Person selected by Agent or
market the Series itself or through its designees, including the right to sell
any and all rights in and to the Series which have not been sold by the Borrower
(or the Sales Agent on the Borrower's behalf) on terms and conditions which
Agent, in its sole and absolute discretion, deems appropriate under the
circumstances. The Borrower ratifies all acts of Agent taken pursuant to the
Power of Attorney. Agent shall not be liable for any acts or omissions or for
any error of judgment or mistake of law with respect to any take or not taken
pursuant to the Power of Attorney. Agent's powers under the Power of Attorney,
being coupled with an interest, are irrevocable until this Agreement has been
terminated and the Obligations have been fully paid in cash.
(C) In the event that Agent elects to terminate the rights of the
Sales Agent under the Sales Agent Agreement, then payment of any and all fees,
commissions, expense reimbursements, marketing costs and any other sums payable
to the Sales Agent with respect to the Series, including all amounts payable to
the Sales Agent under the Sales Agent Agreement shall be deferred and shall not
be due and payable until all Obligations have been satisfied in full.
6.5 Attorney-in-Fact. Upon the occurrence of an Event of Default,
which occurrence is continuing, the Borrower hereby constitutes and appoints
Agent as its true and lawful attorney-in-fact, in its place and stead and with
full power of substitution, either in the Agent's own name or in the name of the
Borrower to do the following (the "Power of Attorney"):
(A) Renegotiate the Sales Agent Agreement, the Distribution
Agreements, or such other agreements as Agent has a Lien in pursuant to the
terms hereof as Agent in its sole and exclusive discretion deems proper;
(B) Require, demand, collect, receive, settle, adjust, compromise
and to give acquittances and receipts for the payment of any and all money
payable pursuant to the Distribution Agreements or such other agreements
included in the Collateral and such licenses and agreements as Agent may enter
into as aforesaid; and
(C) Terminate the Sales Agent Agreement and/or replace Sales
Agent with a Person selected by Agent.
6.6 Performance by Agent. If Borrower shall fail to perform any
covenant, duty or agreement contained in any of the Loan Documents, Agent may
perform or attempt to perform such covenant, duty or agreement on behalf of
Borrower after the expiration of any cure or grace periods set forth herein. In
such event, Borrower shall, at the request of Agent, promptly pay any amount
reasonably expended by Agent in such performance or attempted performance to
Agent,
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together with interest thereon at the highest rate of interest in effect upon
the occurrence of an Event of Default as specified in subsection 1.2(E) from the
date of such expenditure until paid. Notwithstanding the foregoing, it is
expressly agreed that Agent shall not have any liability or responsibility for
the performance of any obligation of Borrower under this Agreement or any other
Loan Document.
SECTION 7.
CONDITIONS TO LOANS
The obligation of Lenders to make the Loans on the Closing Date
is subject to the delivery of all documents listed on, the taking of all actions
set forth on and the satisfaction of all other conditions precedent listed on
Schedule 7.1, all in form and substance, or in a manner, satisfactory to the
Agent and Lenders.
SECTION 8.
ASSIGNMENT AND PARTICIPATION
8.1 Assignments and Participations.
(A) Assignments. Each Lender may from time to time assign,
subject to the terms of an Assignment and Acceptance Agreement, its rights and
delegate its obligations under this Agreement to another Person, provided that
(a) such Lender (excluding Heller) shall first obtain the written consent of
Agent, which consent shall not be unreasonably withheld; (b) the Pro Rata Share
of the Loans being assigned shall in no event be less than the lesser of (i)
$2,000,000 and (ii) the entire amount of the Pro Rata Share of the Loans of the
assigning Lender; and (c) upon the consummation of each such assignment the
assigning Lender shall pay Agent an administrative fee of $3,500. The
administrative fee referred to in clause (c) of the preceding sentence shall not
apply to an assignment described in paragraph (E). In the case of an assignment
authorized under this subsection 8.1, the assignee shall have, to the extent of
such assignment, the same rights, benefits and obligations as it would if it
were an initial Lender hereunder. The assigning Lender shall be relieved of its
obligations hereunder with respect to its Pro Rata Share of the Loans or
assigned portion thereof. Borrower hereby acknowledges and agrees that any
assignment will give rise to a direct obligation of Borrower to the assignee and
that the assignee shall be considered to be a Lender hereunder.
(B) Recording of Assignments. Agent shall maintain at its office
in Chicago, Illinois a copy of each Assignment and Acceptance Agreement
delivered to it and a register for the recordation of the names and addresses of
Lenders, and the commitments of, and principal amount of the Loans owing to each
Lender pursuant to the terms hereof from time to time (the "Register"). The
entries in the Register shall be presumptive evidence of the amounts due and
owing to Lender in the absence of manifest error. Borrower, Agent and each
Lender may treat each Person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by Borrower and any Lender, at any
reasonable time upon reasonable prior notice.
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(C) Acceptance of Assignment by Agent. Upon its receipt of a duly
completed Assignment and Acceptance Agreement executed by an assigning Lender
and its assignee (together with the Note(s) subject to such assignment) and the
administrative fee referred to above, Agent shall (subject to the consent of
Agent to such assignment, if required) (1) accept such Assignment and Acceptance
Agreement, (2) record the information contained therein in the Register and
replace Schedule 10.1(C) to reflect such Assignment and Acceptance Agreement and
(3) give prompt notice thereof to Borrower and Lenders. Upon request by Agent,
Borrower shall promptly execute and deliver to Agent Note(s) evidencing the
Obligations owed by Borrower to the assignee and, if applicable, the assigning
Lender, after giving effect to the assignment. Agent shall cancel the Note(s)
delivered to it by the assigning Lender and deliver the new Note(s) to the
assignee and, unless the assigning Lender has assigned all of its interests
under this Agreement, the assigning Lender.
(D) Participations. Any Lender may sell participations in all or
any part of its Pro Rata Share of the Loans to another Person provided that such
Lender (excluding Heller) shall first obtain the prior written consent of Agent,
which consent shall not be unreasonably withheld, and any such participation
shall be in a minimum amount of $2,000,000. All amounts payable by Borrower
hereunder shall be determined as if that Lender had not sold such participation
and the holder of any such participation shall not be entitled to require such
Lender to take or omit to take any action hereunder except action directly
effecting (i) any reduction in the principal amount or interest rate payable
with respect to any Loan in which such holder participates; (ii) any extension
of the Termination Date, or the date on which any Scheduled Installment is to be
paid or the date fixed for any payment of interest payable with respect to any
Loan in which such holder participates; or (iii) any release of all or
substantially all of the Collateral (except if the sale, disposition or release
of such Collateral is permitted under subsection 3.7 or 8.2 or any other Loan
Document). Borrower hereby acknowledges and agrees that any participation will
give rise to a direct obligation of Borrower to the participant, and the
participant shall for purposes of subsections 1.8, 1.9, 8.4 and 9.1 be
considered to be a Lender hereunder.
(E) Transactions with the Federal Reserve Bank; Assignments to
Affiliates. Notwithstanding any other provision of this Agreement, any Lender
may at any time, following written notice to Agent, (a) create a security
interest in all or any portion of its rights under this Agreement or the other
Loan Documents in favor of any Federal Reserve Bank in accordance with
Regulation A of the Board of Governors of the Federal Reserve System and (b)
assign all or any portion of its funded loans to an Affiliate of such Lender
which is at least 50% owned by such Lender or its parent company, to one or more
other Lenders or to a Related Fund. For purposes of this paragraph, a "Related
Fund" shall mean, with respect to any Lender, a fund or other investment vehicle
that invests in commercial loans and is managed by the same investment advisor
as such Lender or by an Affiliate of such investment advisor.
(F) Other Matters. Except as otherwise provided in this
subsection 8.1 no Lender shall, as between Borrower and that Lender, be relieved
of any of its obligations hereunder as a result of any sale, assignment,
transfer or negotiation of, or granting of a participation in, all or any part
of the Loans, the Notes or other Obligations owed to such Lender. Each Lender
may furnish any information concerning Borrower in the possession of that Lender
from time to time to assignees and participants (including prospective assignees
and participants), subject to the provisions of subsection 9.13. Borrower agrees
that it will use its
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best efforts to assist and cooperate with Agent and any Lender in any manner
reasonably requested by Agent or such Lender to effect the sale of a
participation or an assignment described above, including without limitation
assistance in the preparation of appropriate disclosure documents or placement
memoranda. Notwithstanding anything contained in this Agreement to the contrary,
so long as the Requisite Lenders shall remain capable of making LIBOR Loans, no
Person shall become a Lender hereunder unless such Person shall also be capable
of making LIBOR Loans.
8.2 Agent
(A) Appointment. Each Lender hereby designates and appoints
Heller as its Agent under this Agreement and the other Loan Documents, and each
Lender hereby irrevocably authorizes Agent to execute and deliver the Security
Documents and to take such action or to refrain from taking such action on its
behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers as are set forth herein or therein, together with such
other powers as are reasonably incidental thereto. Agent is authorized and
empowered to amend, modify, or waive any provisions of this Agreement or the
other Loan Documents on behalf of Lenders subject to the requirement that
certain of Lenders' consent be obtained in certain instances as provided in this
subsection 8.2 and subsections 8.3 and 9.2. The provisions of this subsection
8.2 are solely for the benefit of Agent and Lenders and neither Borrower nor any
other party shall have any rights as a third party beneficiary of any of the
provisions hereof. In performing its functions and duties under this Agreement,
Agent shall act solely as agent of Lenders and does not assume and shall not be
deemed to have assumed any obligation toward or relationship of agency or trust
with or for Borrower or any other party. Agent may perform any of its duties
hereunder, or under the Loan Documents, by or through its agents or employees.
(B) Nature of Duties. The duties of Agent shall be mechanical and
administrative in nature. Agent shall not have by reason of this Agreement a
fiduciary relationship in respect of any Lender. Nothing in this Agreement or
any of the Loan Documents, express or implied, is intended to or shall be
construed to impose upon Agent any obligations in respect of this Agreement or
any of the Loan Documents except as expressly set forth herein or therein. Each
Lender shall make its own independent investigation of the financial condition
and affairs of Borrower in connection with the extension of credit hereunder and
shall make its own appraisal of the creditworthiness of Borrower, and Agent
shall have no duty or responsibility, either initially or on a continuing basis,
to provide any Lender with any credit or other information with respect thereto
(other than as expressly required herein). If Agent seeks the consent or
approval of any Lenders to the taking or refraining from taking any action
hereunder, then Agent shall send notice thereof to each Lender. Agent shall
promptly notify each Lender any time that the Requisite Lenders have instructed
Agent to act or refrain from acting pursuant hereto.
(C) Rights, Exculpation, Etc. Neither Agent nor any of its
officers, directors, employees or agents shall be liable to any Lender for any
action taken or omitted by them hereunder or under any of the Loan Documents, or
in connection herewith or therewith, except that Agent shall be liable to the
extent of its own gross negligence or willful misconduct as determined by a
court of competent jurisdiction. Agent shall not be liable for any apportionment
or distribution of payments made by it in good faith and if any such
apportionment or
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distribution is subsequently determined to have been made in error the sole
recourse of any Lender to whom payment was due but not made, shall be to recover
from other Lenders any payment in excess of the amount to which they are
determined to be entitled (and such other Lenders hereby agree to return to such
Lender any such erroneous payments received by them). In performing its
functions and duties hereunder, Agent shall exercise the same care which it
would in dealing with loans for its own account, but neither Agent nor any of
its agents or representatives shall be responsible to any Lender for any
recitals, statements, representations or warranties herein or for the execution,
effectiveness, genuineness, validity, enforceability, collectibility, or
sufficiency of this Agreement or any of the Loan Documents or the transactions
contemplated thereby, or for the financial condition of Borrower or Sales Agent.
Agent shall not be required to make any inquiry concerning either the
performance or observance of any of the terms, provisions or conditions of this
Agreement or any of the Loan Documents or the financial condition of Borrower or
Sales Agent, or the existence or possible existence of any Default or Event of
Default. Agent may at any time request instructions from Lenders with respect to
any actions or approvals which by the terms of this Agreement or of any of the
Loan Documents Agent is permitted or required to take or to grant, and if such
instructions are promptly requested, Agent shall be absolutely entitled to
refrain from taking any action or to withhold any approval and shall not be
under any liability whatsoever to any Person for refraining from any action or
withholding any approval under any of the Loan Documents until it shall have
received such instructions from Requisite Lenders or all or such other portion
of the Lenders as shall be prescribed by this Agreement. Without limiting the
foregoing, no Lender shall have any right of action whatsoever against Agent as
a result of Agent acting or refraining from acting under this Agreement or any
of the other Loan Documents in accordance with the instructions of Requisite
Lenders and, notwithstanding the instructions of Requisite Lenders, Agent shall
have no obligation to take any action if it believes, in good faith, that such
action exposes Agent to any liability for which it has not received satisfactory
indemnification in accordance with subsection 8.2(E).
(D) Reliance. Agent shall be entitled to rely, and shall be fully
protected in relying, upon any written or oral notices, statements,
certificates, orders or other documents or any telephone message or other
communication (including any writing, telex, telecopy or telegram) believed by
it in good faith to be genuine and correct and to have been signed, sent or made
by the proper Person, and with respect to all matters pertaining to this
Agreement or any of the Loan Documents and its duties hereunder or thereunder.
Agent shall be entitled to rely upon the advice of legal counsel, independent
accountants, and other experts selected by Agent in its sole discretion.
(E) Indemnification. Lenders will reimburse and indemnify Agent
for and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including, without
limitation, attorneys' fees and expenses), advances or disbursements of any kind
or nature whatsoever which may be imposed on, incurred by, or asserted against
Agent in any way relating to or arising out of this Agreement or any of the Loan
Documents or any action taken or omitted by Agent under this Agreement or any of
the Loan Documents, in proportion to each Lender's Pro Rata Share, but only to
the extent that any of the foregoing is not reimbursed by Borrower; provided,
however, that no Lender shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses, advances or disbursements to the extent resulting from Agent's gross
negligence
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or willful misconduct as determined by a court of competent jurisdiction. If any
indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be
insufficient or become impaired, Agent may call for additional indemnity and
cease, or not commence, to do the acts indemnified against even if so directed
by Requisite Lenders until such additional indemnity is furnished. The
obligations of Lenders under this subsection 8.2(E) shall survive the payment in
full of the Obligations and the termination of this Agreement.
(F) Heller Individually. With respect to its obligations under
the Loans made by it, Heller shall have and may exercise the same rights and
powers hereunder and is subject to the same obligations and liabilities as and
to the extent set forth herein for any other Lender. The terms "Lenders" or
"Requisite Lenders" or any similar terms shall, unless the context clearly
otherwise indicates, include Heller in its individual capacity as a Lender or
one of the Requisite Lenders. Heller may lend money to, acquire equity or other
ownership interests in, and generally engage in any kind of banking, trust or
other business with Borrower or Sales Agent as if it were not acting as Agent
pursuant hereto.
(G) Successor Agent.
(1) Resignation. Agent may resign from the performance of
all its agency functions and duties hereunder at any time by giving at least
thirty (30) Business Days' prior written notice to Borrower and the Lenders.
Such resignation shall take effect upon the acceptance by a successor Agent of
appointment pursuant to clause (2) below or as otherwise provided below.
(2) Appointment of Successor. Upon any such notice of
resignation pursuant to clause (1) above, Requisite Lenders shall appoint a
successor Agent which, unless an Event of Default has occurred and is
continuing, shall be reasonably acceptable to Borrower. If a successor Agent
shall not have been so appointed within the thirty (30) Business Day period
referred to in clause (1) above, the retiring Agent, upon notice to Borrower,
shall then appoint a successor Agent who shall serve as Agent until such time,
if any, as Requisite Lenders appoint a successor Agent as provided above.
(3) Successor Agent. Upon the acceptance of any
appointment as Agent under the Loan Documents by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations under the Loan
Documents. After any retiring Agent' s resignation as Agent, the provisions of
this subsection 8.2 shall inure to its benefit as to any actions taken or
omitted to be taken by it while it was Agent.
(H) Collateral Matters.
(1) Release of Collateral. Lenders hereby irrevocably
authorize Agent, at its option and in its discretion, to release any Lien
granted to or held by Agent upon any Collateral (i) upon payment and
satisfaction of all Obligations (other than contingent indemnification
obligations to the extent no claims giving rise thereto have been asserted);
(ii) constituting property being sold or disposed of if Borrower certifies to
Agent that the sale or
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disposition is made in compliance with the provisions of this Agreement (and
Agent may rely in good faith conclusively on any such certificate, without
further inquiry); or (iii) in accordance with the provisions of the next
sentence. In addition, with the consent of Requisite Lenders, Agent may release
any Lien granted to or held by Agent upon any Collateral having a book value not
greater than ten percent (10%) of the total book value of all Collateral, either
in a single transaction or in a series of related transactions; provided,
however, that in no event will Agent, acting under the authority granted to it
pursuant to this sentence, release Collateral having a total book value in
excess of twenty percent (20%) of the book value of all Collateral, as
determined by Agent, during any calendar year.
(2) Confirmation of Authority; Execution of Releases.
Without in any manner limiting Agent's authority to act without any specific or
further authorization or consent by, Lenders (as set forth in subsection
8.2(H)(1)), each Lender agrees to confirm in writing, upon request by Agent or
Borrower, the authority to release any Collateral conferred upon Agent under
clauses (i) and (ii) of subsection 8.2(H)(1). Upon receipt by Agent of any
required confirmation from the Requisite Lenders of its authority to release any
particular item or types of Collateral, and upon at least ten (10) Business Days
prior written request by Borrower, Agent shall (and is hereby irrevocably
authorized by Lenders to) execute such documents as may be necessary to evidence
the release of the Liens granted to Agent upon such Collateral; provided,
however, that (i) Agent shall not be required to execute any such document on
terms which, in Agent's opinion, would expose Agent to liability or create any
obligation or entail any consequence other than the release of such Liens
without recourse or warranty, and (ii) such release shall not in any manner
discharge, affect or impair the Obligations or any Liens upon (or obligations of
any Borrower in respect of), all interests retained by Borrower, including
(without limitation) the proceeds of any sale, all of which shall continue to
constitute part of the Collateral.
(3) Absence of Duty. Agent shall have no obligation
whatsoever to any Lender or any other Person to assure that the property covered
by the Security Documents exists or is owned by Borrower or is cared for,
protected or insured or has been encumbered or that the Liens granted to Agent
have been properly or sufficiently or lawfully created, perfected, protected or
enforced or are entitled to any particular priority, or to exercise at all or in
any particular manner or under any duty of care, disclosure or fidelity, or to
continue exercising, any of the rights, authorities and powers granted or
available to Agent in this subsection 8.2(H) or in any of the Loan Documents, it
being understood and agreed that in respect of the property covered by the
Security Documents or any act, omission or event related thereto, Agent may act
in any manner it may deem appropriate, in its discretion, given Agent's own
interest in property covered by the Security Documents as one of the Lenders and
that Agent shall have no duty or liability whatsoever to any of the other
Lenders, provided that Agent shall exercise the same care which it would in
dealing with loans for its own account.
(I) Agency for Perfection. Agent and each Lender hereby appoint
each other Lender as agent for the purpose of perfecting Agent's security
interest in assets which, in accordance with the Uniform Commercial Code in any
applicable jurisdiction, can be perfected only by possession. Should any Lender
(other than Agent) obtain possession of any such assets, such Lender shall
notify Agent thereof, and, promptly upon Agent's request therefor, shall deliver
such assets to Agent or in accordance with Agent's instructions. Each Lender
agrees that it will not have any right individually to enforce or seek to
enforce any Security Document or to
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realize upon any collateral security for the Loans unless instructed to do so by
Agent, it being understood and agreed that such rights and remedies may be
exercised only by Agent.
(J) Notice of Default. Agent shall not be deemed to have
knowledge or notice of the occurrence of any Default or Event of Default except
with respect to defaults in the payment of principal, interest and fees required
to be paid to Agent for the account of Lenders, unless Agent shall have received
written notice from a Lender or Borrower referring to this Agreement, describing
such Default or Event of Default and stating that such notice is a "notice of
default". Agent will notify each Lender of its receipt of any such notice. Agent
shall take such action with respect to such Default or Event of Default as may
be requested by Requisite Lenders in accordance with Section 6. Unless and until
Agent has received any such request, Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interests
of Lenders.
8.3 Amendments, Consents and Waivers.
(A) Except as otherwise provided in subsection 8.2, this
subsection 8.3 or in subsection 9.2 and except as to matters set forth in other
subsections hereof or in any other Loan Document as requiring only Agent's
consent, the consent of Requisite Lenders and Borrower will be required to
amend, modify, terminate, or waive any provision of this Agreement or any of the
other Loan Documents.
(B) In the event Agent requests the consent of a Lender and does
not receive a written consent or denial thereof within ten (10) Business Days
after such Lender's receipt of such request, then such Lender will be deemed to
have denied the giving of such consent.
(C) If, in connection with any proposed amendment, modification,
termination or waiver of any of the provisions of this Agreement requiring the
consent or approval of all Lenders under subsection 9.2, the consent of
Requisite Lenders is obtained but the consent of one or more other Lenders whose
consent is required is not obtained, then Borrower shall have the right, so long
as all such non-consenting Lenders are either replaced or prepaid as described
in clauses JA) or (B) below, to either (A) replace the non-consenting Lenders
with one or more Replacement Lenders pursuant to subsection 1.10(A) so long as
each such Replacement Lender consents to the proposed amendment, modification,
termination or waiver or (B) prepay in full the Obligations of the
non-consenting Lenders and terminate the non-consenting Lenders' Pro Rata Shares
of the Loans in accordance with subsection 1.10(B).
8.4 Set Off and Sharing of Payments. In addition to any rights
now or hereafter granted under applicable law and not by way of limitation of
any such rights, during the continuance of any Event of Default, each Lender is
hereby authorized by Borrower at any time or from time to time, with reasonably
prompt subsequent notice to Borrower (any prior or contemporaneous notice being
hereby expressly waived) to set off and to appropriate and to apply any and all
(A) balances held by such Lender at any of its offices for the account of
Borrower (regardless of whether such balances are then due to Borrower), and (B)
other property at any time held or owing by such Lender to or for the credit or
for the account of Borrower, against and on account of any of the Obligations;
except that no Lender shall exercise any such
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right without the prior written consent of Agent. Any Lender exercising a right
to set off shall purchase for cash (and the other Lenders shall sell) interests
in each of such other Lender's Pro Rata Share of the Obligations as would be
necessary to cause all Lenders to share the amount so set off with each other
Lender in accordance with their respective Pro Rata Shares. Borrower agrees, to
the fullest extent permitted by law, that any Lender may exercise its right to
set off with respect to amounts in excess of its Pro Rata Share of the
Obligations and upon doing so shall deliver such amount so set off to the Agent
for the benefit of all Lenders in accordance with their Pro Rata Shares.
8.5 Disbursements of Advances; Return of Payment.
(A) Interest and Fee Payments. On the first (1st) Business Day of
each month or such other date that Agent may hereafter elect by notifying
Lenders in writing ("Interest Settlement Date"), Agent will advise each Lender
by telephone or telecopy of the amount of such Lender's Pro Rata Share of
interest and fees on each of the Loans as of the end of the last day of the
immediately preceding month. Provided that such Lender has made all payments
required to be made by it under this Agreement, Agent will pay to such Lender,
by wire transfer to such Lender's account (as specified by such Lender on the
signature page of this Agreement or the applicable Assignment and Acceptance
Agreement, as amended by such Lender form time to time after the date hereof
pursuant to the notice provisions contained herein or in the applicable
Assignment and Acceptance Agreement) not later than 3:00 p.m. Chicago time on
the next Business Day following the Interest Settlement Date, such Lender's Pro
Rata Share of interest and fees on each of the Loans.
(B) Principal Payments. Payments of principal of the Loans will
be settled on the date of receipt if received by Agent on the first Business Day
of a month and on the Business Day immediately following the date of receipt if
received on any day other than the first Business Day of a month.
(C) Availability of Lender's Pro Rata Share.
(1) Unless Agent shall have received notice from a Lender
prior to a scheduled funding date that such Lender will not make available its
Pro Rata Share of a Loan requested by Borrower, Agent may assume that such
Lender has made such amount available to Agent on the Business Day following the
next settlement date for receipt of its Pro Rata Share of the funding of any
Loan. If a Lender has not in fact made its Pro Rata Share available to the Agent
on such date (any such Lender a "Defaulting Lender"), then the Defaulting Lender
and Borrower severally agree to pay to Agent forthwith on demand such amount
without set-off, counterclaim or deduction of any kind, together with interest
thereon, for each day from and including the date such amount is made available
to Agent by Borrower or such Defaulting Lender to but excluding the date of
payment to Agent, and (a) in the case of the Defaulting Lender, the greater of
the Federal Funds Effective Rate and a rate determined by Agent in accordance
with banking industry rules on interbank compensation or (b) in the case of
Borrower, the interest rate applicable under this Agreement with respect to such
Loan.
(2) Agent shall not be obligated to transfer to a
Defaulting Lender any payment made by Borrower to Agent or any amount otherwise
received by Agent for application
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to the Obligations nor shall Defaulting Lender be entitled to the sharing of any
interest, fees or other payments hereunder until full payment is made to Agent
in the manner described above.
(3) For purposes of voting or consenting to matters with
respect to the Loan Documents, a Defaulting Lender shall be deemed not to be a
"Lender" and such Defaulting Lender's commitments and outstanding Loans shall be
deemed to be zero until full payment is made to Agent in the manner described
above.
(D) Return of Payments
(1) If Agent pays an amount to a Lender under this
Agreement in the belief or expectation that a related payment has been or will
be received by Agent from Borrower and such related payment is not received by
Agent, then Agent will be entitled to recover such amount from such Lender
without set-off, counterclaim or deduction of any kind together with interest
thereon, for each day from and including the date such amount is made available
by Agent to such Lender to but excluding the date of repayment to Agent, at the
greater of the Federal Funds Effective Rate and a rate determined by Agent in
accordance with banking industry rules on interbank compensation.
(2) If Agent determines at any time that any amount
received by Agent under this Agreement must be returned to Borrower or paid to
any other person pursuant to any requirement of law, court order or otherwise,
then, notwithstanding any other term or condition of this Agreement, Agent will
not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent
has distributed to such Lender, together with interest at such rate, if any, as
Agent is required to pay to Borrower or such other Person, without set-off,
counterclaim or deduction of any kind.
SECTION 9.
MISCELLANEOUS
9.1 Indemnities. Borrower agrees to indemnify, pay, and hold
Agent, each Lender and their respective officers, directors, employees, agents,
and attorneys (the "Indemnitees") harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs and expenses (including all reasonable fees and expenses of
counsel to such Indemnitees) of any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Indemnitee as a result of such
Indemnitees being a party to this Agreement or the transactions consummated
pursuant to this Agreement or otherwise relating to any of the Related
Transactions; provided that Borrower shall have no obligation to an Indemnitee
hereunder with respect to liabilities to the extent resulting from the gross
negligence or willful misconduct of that Indemnitee as determined by a court of
competent jurisdiction. If and to the extent that the foregoing undertaking may
be unenforceable for any reason, Borrower agrees to make the maximum
contribution to the payment and satisfaction thereof which is permissible under
applicable law. This subsection and other indemnification provisions contained
within the Loan Documents shall survive the termination of this Agreement.
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9.2 Amendments and Waivers. Except as otherwise provided
herein, no amendment, modification, termination or waiver of any provision of
this Agreement, the Notes or any of the other Loan Documents, or consent to any
departure by any Loan Party therefrom, shall in any event be effective unless
the same shall be in writing and signed by Requisite Lenders (or Agent, if
expressly set forth herein, in any Note or in any other Loan Document) and the
applicable Loan Party; provided, that except to the extent permitted by the
applicable Assignment and Acceptance Agreement, no amendment, modification,
termination or waiver shall, unless in writing and signed by all Lenders, do any
of the following: (a) increase any Lender's Pro Rata Share of the Loans; (b)
reduce the principal of or the rate of interest on the Loans or the fees payable
with respect to the Loans; (c) extend the Termination Date, the date on which
any Scheduled Installment is to be paid or any date fixed for any payment of
interest or fees; (d) change the definition of the term Requisite Lenders or the
percentage of Lenders which shall be required for Lenders to take any action
hereunder; (e) release Collateral (except if the sale, disposition or release of
such Collateral is permitted under subsection 3.7 or 8.2 or any other Loan
Document); (f) amend or waive this subsection 9.2 or the definitions of the
terms used in this subsection 9.2 insofar as the definitions affect the
substance of this subsection 9.2; or (g) consent to the assignment, delegation
or other transfer by Borrower or any other Loan Party of any of its rights and
obligations under any Loan Document; and provide, further, that no amendment,
modification, termination or waiver affecting the rights or duties of Agent
under any Loan Document shall in any event be effective, unless in writing and
signed by Agent, in addition to all Lenders required to take such action.
Notwithstanding anything to the contrary in this subsection 9.2, Agent and
Borrower may execute amendments to this Agreement and the other Loan Documents
for the purpose of correcting typographical errors without the consent of
Lenders. Each amendment, modification, termination or waiver shall be effective
only in the specific instance and for the specific purpose for which it was
given. No amendment, modification, termination or waiver shall be required for
Agent to take additional Collateral pursuant to any Loan Document. No notice to
or demand on Borrower in any case shall entitle to any other or further notice
or demand in similar or other circumstances. Any amendment, modification,
termination, waiver or consent effected in accordance with this subsection 9.2
shall be binding upon each holder of the Notes at the time outstanding, each
future holder of the Notes.
9.3 Notices. Any notice or other communication required shall
be in writing addressed to the respective party as set forth below and may be
personally served, telecopied, sent by overnight courier service or U.S. mail
and shall be deemed to have been given: (a) if delivered in person, when
delivered; (b) if delivered by telecopy, on the date of transmission if
transmitted on a Business Day before 4:00 p.m. Chicago time; (c) if delivered by
overnight courier, one (1) Business Day after delivery to the courier properly
addressed; or (d) if delivered by U.S. mail, four (4) Business Days after
deposit with postage prepaid and properly addressed.
Notices shall be addressed as follows:
If to Borrower: CALL OF THE WILD DISTRIBUTION, LLC
3957 Maplewood Drive
Seaford, NY 11753
ATTN: Gerald A. John Kelly
Telecopy: (516) 679-0045
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With a copy to: Loeb & Loeb LLP
345 Park Avenue, 18th Floor
New York, NY 10145
ATTN: Roger Arar
Telecopy: (212) 407-4990
If to Agent or Heller: HELLER EMX, INC.
150 East 42nd Street
New York, NY 10017
ATTN: Ralph Willis
Telecopy: (212) 880-7003
With a copy to: Latham & Watkins
53rd at Third, Suite 1000
885 Third Avenue
ATTN: Hendrik de Jong
Telecopy: (212) 751-4864
If to a Lender: To the address set forth on the signature page
hereto or in the applicable Assignment and
Acceptance Agreement
9.4 Failure or Indulgence Not Waiver, Remedies Cumulative. No
failure or delay on the part of Agent or any Lender to exercise, nor any partial
exercise of, any power, right or privilege hereunder or under any other Loan
Documents shall impair such power, right, or privilege or be construed to be a
waiver of any Default or Event of Default. All rights and remedies existing
hereunder or under any other Loan Document are cumulative to and not exclusive
of any rights or remedies otherwise available.
9.5 Marshaling, Payments Set Aside. Neither Agent nor any
Lender shall be under any obligation to marshal any assets in payment of any or
all of the Obligations. To the extent that Borrower makes payment(s) or Agent
enforces its Liens or Agent or any Lender exercises its right of set-off, and
such payment(s) or the proceeds of such enforcement or set-off is subsequently
invalidated, declared to be fraudulent or preferential, set aside, or required
to be repaid by anyone, then to the extent of such recovery, the Obligations or
part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor, shall be revived and continued in full force and effect as if
such payment had not been made or such enforcement or set-off had not occurred.
9.6 Severability. The invalidity, illegality, or
unenforceability in any jurisdiction of any provision under the Loan Documents
shall not affect or impair the remaining provisions in the Loan Documents.
9.7 Lenders' Obligations Several, Independent Nature of
Lenders' Rights. The obligation of each Lender hereunder is several and not
joint and no Lender shall be responsible for the obligation or commitment of any
other Lender hereunder. In the event that any Lender at any time should fail to
make a Loan as herein provided, the Lenders, or any of them, at their sole
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option, may make the Loan that was to have been made by the Lender so failing to
make such Loan. Nothing contained in any Loan Document and no action taken by
Agent or any Lender pursuant hereto or thereto shall be deemed to constitute
Lenders to be a partnership, an association, a joint venture or any other kind
of entity. The amounts payable at any time hereunder to each Lender shall be a
separate and independent debt.
9.8 Headings. Section and subsection headings are included
herein for convenience of reference only and shall not constitute a part of this
Agreement for any other purposes or be given substantive effect.
9.9 Applicable Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.
9.10 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns except that Borrower may not assign its rights or
obligations hereunder without the written consent of all Lenders.
9.11 No Fiduciary Relationship, Limited Liability. No
provision in the Loan Documents and no course of dealing between the parties
shall be deemed to create any fiduciary duty owing to Borrower by Agent or any
Lender. Borrower agrees that neither Agent nor any Lender shall have liability
to Borrower (whether sounding in tort, contract or otherwise) for losses
suffered by Borrower in connection with, arising out of, or in any way related
to the transactions contemplated and the relationship established by the Loan
Documents, or any act, omission or event occurring in connection therewith,
unless and to the extent that it is determined that such losses resulted from
the gross negligence or willful misconduct of the party from which recovery is
sought as determined by a court of competent jurisdiction. Neither Agent nor any
Lender shall have any liability with respect to, and Borrower hereby waives,
releases and agrees not to sue for, any special, indirect or consequential
damages suffered by Borrower in connection with, arising out of, or in any way
related to the Loan Documents or the transactions contemplated thereby.
9.12 Construction. Agent, each Lender and Borrower acknowledge
that each of them has had the benefit of legal counsel of its own choice and has
been afforded an opportunity. to review the Loan Documents with its legal
counsel and that the Loan Documents shall be construed as if jointly drafted by
Agent, each Lender and Borrower.
9.13 Confidentiality. Agent and each Lender agree to exercise
their best efforts to keep confidential any non-public information delivered
pursuant to the Loan Documents and identified as such by Borrower and not to
disclose such information to Persons other than those employed by or engaged by
Agent or such Lender and those employed by or engaged by Agent's or such
Lender's assignees or participants, or potential assignees or participants. This
subsection shall not apply to disclosures required to be made by Agent or any
Lender to any regulatory or governmental agency or pursuant to legal process.
The obligations of Agent and Lenders under this subsection 9.13 shall supersede
and replace the obligations of Agent and Lenders under any
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confidentiality agreement in respect of this financing executed and delivered by
Agent or any Lender prior to the date hereof.
9.14 CONSENT TO JURISDICTION. BORROWER HEREBY CONSENTS TO THE
JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN THE CITY OF NEW YORK,
STATE OF NEW YORK AND IRREVOCABLY AGREES THAT, SUBJECT TO AGENT'S ELECTION, ALL
ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER
LOAN DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. BORROWER EXPRESSLY SUBMITS AND
CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON BORROWER BY
CERTIFIED OR REGISTERED MAIL, RETURN-RECEIPT REQUESTED, ADDRESSED TO BORROWER,
AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO MADE SHALL BE COMPLETE
TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED. IN ANY LITIGATION, TRIAL,
ARBITRATION OR OTHER DISPUTE RESOLUTION PROCEEDING RELATING TO THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS, ALL DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
OF BORROWER OR OF ITS AFFILIATES SHALL BE DEEMED TO BE EMPLOYEES OR MANAGING
AGENTS OF BORROWER FOR PURPOSES OF ALL APPLICABLE LAW OR COURT RULES REGARDING
THE PRODUCTION OF WITNESSES BY NOTICE FOR TESTIMONY (WHETHER IN A DEPOSITION, AT
TRIAL OR OTHERWISE). BORROWER AGREES THAT AGENT'S OR ANY LENDER'S COUNSEL IN ANY
SUCH DISPUTE RESOLUTION PROCEEDING MAY EXAMINE ANY OF THESE INDIVIDUALS AS IF
UNDER CROSS-EXAMINATION AND THAT ANY DISCOVERY DEPOSITION OF ANY OF THEM MAY BE
USED IN THAT PROCEEDING AS IF IT WERE AN EVIDENCE DEPOSITION. BORROWER IN ANY
EVENT WILL USE ALL COMMERCIALLY REASONABLE EFFORTS TO PRODUCE IN ANY SUCH
DISPUTE RESOLUTION PROCEEDING, AT THE TIME AND IN THE MANNER REQUESTED BY AGENT
OR ANY LENDER, ALL PERSONS, DOCUMENTS (WHETHER IN TANGIBLE, ELECTRONIC OR OTHER
FORM) OR OTHER THINGS UNDER ITS CONTROL AND RELATING TO THE DISPUTE.
9.15 WAIVER OF JURY TRIAL. BORROWER, AGENT AND EACH LENDER
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
BORROWER, AGENT AND EACH LENDER ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL
INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THAT
EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS.
BORROWER, AGENT AND EACH LENDER WARRANT AND REPRESENT THAT EACH HAS HAD THE
OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL COUNSEL, AND THAT EACH
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
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9.16 Survival of Warranties and Certain Agreements. All
agreements, representations and warranties made herein shall survive the
execution and delivery of this Agreement, the making of the Loans.
Notwithstanding anything in this Agreement or implied by law to the contrary,
the agreements of Borrower set forth in subsections 1.3, 1.8, 1.9 and 9.1 shall
survive the repayment of the Obligations and the termination of this Agreement.
9.17 Entire Agreement. This Agreement, the Notes, the
Inter-Party Agreement and the other Loan Documents embody the entire agreement
among the parties hereto and supersede all prior commitments, agreements,
representations, and understandings, whether oral or written, relating to the
subject matter hereof, and may not be contradicted or varied by evidence of
prior, contemporaneous, or subsequent oral agreements or discussions of the
parties hereto.
9.18 Counterparts; Effectiveness. This Agreement and any
amendments, waivers, consents or supplements may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all of
which counterparts together shall constitute but one in the same instrument.
This Agreement shall become effective upon the execution of a counterpart hereof
by each of the parties hereto.
SECTION 10.
DEFINITIONS
10.1 Certain Defined Terms. The terms defined below are used
in this Agreement as so defined. Terms defined in the preamble and recitals to
this Agreement are used in this Agreement as so defined.
"Acquisition Agreement" means the Purchase Agreement, dated on or
about the date hereof, between the Borrower and Sales Agent pursuant to
which Borrower has acquired, in consideration for the payment of the
Acquisition Price, the Series, Related Receivables (as defined in the
Acquisition Agreement) and certain other rights with respect thereto.
"Acquisition Documents" means the Acquisition Agreement, the
Sales Agent Agreement and the other documents executed by Sales Agent
with or in favor of Borrower in connection therewith.
"Acquisition Price" means the sum $8,139,428.
"Affiliate" means any Person (a) directly or indirectly
controlling, controlled by, or under common control with, Borrower; (b)
directly or indirectly owning or holding five percent (5%) or more of
any equity interest in Borrower; or (c) five percent (5%) or more of
whose voting stock or other equity interest is directly or indirectly
owned or held by Borrower. For purposes of this definition, "control"
(including with correlative meanings, the terms "controlling",
"controlled by" and "under common control with") means the possession
directly or indirectly of the power to direct or cause the direction of
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the management and policies of a Person, whether through the ownership
of voting securities or by contract or otherwise. Notwithstanding the
foregoing, none of Agent, any Lender nor any of their respective
Affiliates shall be considered an Affiliate of Borrower.
"Agent" means Heller in its capacity as agent for the Lenders
under this Agreement and each of the other Loan Documents and any
successor in such capacity appointed pursuant to subsection 8.2.
"Agreement" means this Credit Agreement (including all schedules,
subschedules and exhibits hereto), as the same may from time to time be
amended, supplemented or otherwise modified.
"Asset Disposition" means the disposition whether by sale, lease,
transfer, loss, damage, destruction, casualty, condemnation or otherwise
of any or all of the assets of Borrower.
"Assignment and Acceptance Agreement" means an agreement among
Agent, a Lender and such Lender's assignee regarding their respective
rights and obligations with respect to assignments of the Loans and
other interests under this Agreement and the other Loan Documents,
substantially in the form of Exhibit 10.1(A).
"Bankruptcy Code" means Title 11 of the United States Code
entitled "Bankruptcy", as amended from time to time or any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect
and all rules and regulations promulgated thereunder.
"Base Rate Loans" means Loans that accrue interest determined by
reference to the Base Rate.
"Borrower" shall have the meaning ascribed to that term in the
preamble of this Agreement.
"Business Day" means (a) for all purposes other than as covered
by clause (b) below, any day excluding Saturday, Sunday and any day
which is a legal holiday under the laws of the State of Illinois or the
Commonwealth of Pennsylvania, or is a day on which banking institutions
located in any such states are closed and (b) with respect to all
notices, determinations, fundings and payments in connection with the
Loans if bearing interest at the LIBOR, any day that is a Business Day
described in clause (a) above and that is also a day for trading by and
between banks in Dollar deposits in the applicable interbank LIBOR
market.
"Cash Equivalents" means: (i) marketable securities (A) issued or
directly and unconditionally guaranteed as to interest and principal by
the United States government or (B) issued by any agency of the United
States government the obligations of which are backed by the full faith
and credit of the United States, in each case maturing within one year
after acquisition thereof; (ii) marketable direct obligations issued by
any state of the United States of America or any political subdivision
of any such state or any public instrumentality thereof, in each case
maturing within one year after acquisition thereof
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and having, at the time of acquisition, a rating of at least A-1 from
Standard & Poor's Ratings Group ("S&P") or at least P-1 from Moody's
Investors Service, Inc. ("Moody's"); (iii) commercial paper maturing no
more than one year from the date of acquisition and, at the time of
acquisition, having a rating of at least A-1 from S&P or at least P-1
from Moody's; (iv) certificates of deposit or bankers' acceptances
issued or accepted by any Lender or by any commercial bank organized
under the laws of the United States of America or any state thereof or
the District of Columbia that is at least (A) "adequately capitalized"
(as defined in the regulations of its primary Federal banking regulator)
and (B) has Tier I capital (as defined in such regulations) of not less
than $250,000,000, in each case maturing within one year after issuance
or acceptance thereof; and (v) shares of any money market mutual or
similar funds that (A) has substantially all of its assets invested
continuously in the types of investments referred to in clauses (i)
through (iv) above, (B) has net assets of not less than $500,000,000 and
(C) has the highest rating obtainable from either S&P or Moody's.
"Closing Date" means___________________________, 2000.
"Collateral" means, collectively: (a) all equity securities and
other property pledged pursuant to the Security Documents; (b) all
"Collateral" as defined in the Security Documents; (c) all real property
mortgaged pursuant to the Security Documents; and (d) any property or
interest provided in addition to or in substitution for any of the
foregoing.
"Collection Account" has the meaning set forth in Section 1.4
hereto.
"Default" means a condition or event that, after notice or lapse
of time or both, would constitute an Event of Default if that condition
or event were not cured or removed within any applicable grace or cure
period.
"Distribution Agreement" means an agreement between the Borrower
(or the Sales Agent on behalf of the Borrower) and a Distributor, now or
hereafter entered into, pursuant to which the Distributor has been
granted, sold, conveyed, licensed, sub-licensed, leased, sub-leased, or
otherwise transferred rights with respect to the distribution,
sub-distribution, sale, rental, lease, sub-lease, licensing,
sub-licensing, exhibition, telecast, broadcast, transmission (including,
without limitation, by way of satellite or cable) or other use,
exploitation or disposition of the Series or any elements thereof
(including, but not limited to, all music and musical compositions;
negatives; soundtracks; and Literary Properties) and/or the copyright in
any of the foregoing or any part thereof in any media existing now or in
the future and in any territory specified therein (including, without
limitation, motion picture, television, "home video" and all other
audio-visual device rights, merchandising and commercial tie-ups,
soundtrack album, music publishing, novelization and publishing rights,
trailer rights, and all other allied, incidental, ancillary, and
subsidiary rights), and any permitted amendments, modifications and
supplements thereto.
"Distributor" means a Person (other than Sales Agent) regularly
engaged in the business of distributing and otherwise exploiting motion
pictures.
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"Federal Funds Effective Rate" means, for any day, the weighted
average (rounded upwards, if necessary, to the next 1/100th of 1%) of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published
on the next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day that is a
Business Day, the average (rounded upwards, if necessary, to the next
1/100th of 1%) of the quotations for such day for such transactions
received by Agent from three Federal funds brokers of recognized
standing selected by it.
"GAAP" means generally accepted accounting principles as set
forth in statements from Auditing Standards No. 69 entitled "The Meaning
of `Present Fairly in Conformance with Generally Accepted Accounting
Principles in the Independent Auditors Reports'" issued by the Auditing
Standards Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial
Accounting Standards Board that are applicable to the circumstances as
of the date of determination.
"Gross Receipts" shall have the meaning as defined in the Sales
Agent Agreement.
"Indebtedness" as applied to any Person, means: (a) all
indebtedness for borrowed money; (b) that portion of obligations with
respect to capital leases that is properly classified as a liability on
a balance sheet in conformity with GAAP; (c) any obligation under any
lease (a "synthetic lease") treated as an operating lease under GAAP and
as a loan or financing for United States income tax purposes or
creditors rights purposes; (d) notes payable and drafts accepted
representing extensions of credit whether or not representing
obligations for borrowed money; (e) any obligation owed for all or any
part of the deferred purchase price of property or services if the
purchase price is due more than six (6) months from the date the
obligation is incurred or is evidenced by a note or similar written
instrument; (f) "earnouts" and similar payment obligations; and (g) all
indebtedness secured by any Lien on any property or asset owned or held
by that Person regardless of whether the indebtedness secured thereby
shall have been assumed by that Person or is nonrecourse to the credit
of that Person.
"Inter-Party Agreement" means the Inter-Party Agreement among the
Borrower, Sales Agent and Agent dated on or about the date hereof, as
the same may be amended, restated or otherwise modified from time to
time.
"IRC" means the Internal Revenue Code of 1986, as amended from
time to time and all rules and regulations promulgated thereunder.
"Laboratory" means International Image Services Corp., Broadcast
Standards, Inc., Rainmaker Digital Pictures and FACS Records Centre Inc.
"Laboratory Pledgeholder Agreement" means the Laboratory
Pledgeholder Agreement among Agent, the Borrower, Sales Agent and the
Laboratory, dated on or
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about the date hereof, as the same may be amended, restated or otherwise
modified from time to time.
"Lender" or "Lenders" means Heller in its individual capacity and
each other financial institution listed on the signature pages hereof
together with their successors and permitted assigns pursuant to
subsection 8.1.
"Lien" means any lien, mortgage, pledge, security interest,
charge, encumbrance or governmental levy or assessment of any kind,
whether voluntary or involuntary (including any conditional sale or
other title retention agreement and any lease in the nature thereof),
and any agreement to give any lien, mortgage, pledge, security interest,
charge or encumbrance.
"Literary Property" means all of Borrower's rights, if any, in
and to the rights of every kind and nature (including, without
limitation, copyrights) in and to the screenplay referred to in the
chain of title documents and any other literary, musical, dramatic or
other literary material of any kind or nature upon which, in whole or in
part, the Series is or may be based, or from which it is or may be
adapted or inspired or which may be or has been used or included in the
Series including, without limitation, all scripts, scenarios,
screenplays, bibles, stories, treatments, novels, outlines, books,
titles, concepts, manuscripts or other properties or materials of any
kind or nature in whatever state of completion and all drafts, versions
and variations thereof.
"Loan Documents" means this Agreement, the Notes, the Laboratory
Pledgholder Agreement, the Inter-Party Agreement, the Security Documents
and all other instruments, documents and agreements executed by or on
behalf of Borrower and delivered concurrently herewith or at any time
hereafter to or for the benefit of Agent or any Lender in connection
with the Loans and other transactions contemplated by this Agreement,
all as amended, supplemented or modified from time to time.
"Loan Exposure" means, with respect to any Lender, as of any date
of determination, the outstanding principal amount of the Loans of such
Lender, provided, however, that at any time prior to the making of the
Loans, the Loan Exposure of any Lender shall be equal to the commitment
amount of such Lender with respect to the Loans set forth on Schedule
10.1(C).
"Loan Party" means, collectively, Borrower , Sales Agent and Call
of the Wild Productions Inc.
"Material Adverse Effect" means (a) a material adverse effect
upon the business, operations, properties, assets or condition
(financial or otherwise) of Borrower or (b) the impairment of the
ability of Borrower to perform its obligations under any Loan Document
to which it is a party or of Agent or any Lender to enforce any Loan
Document or collect any of the Obligations. In determining whether any
individual event would result in a Material Adverse Effect,
notwithstanding that such event does not of itself have such effect, a
Material Adverse Effect shall be deemed to have occurred if the
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cumulative effect of such event and all other then existing events would
result in a Material Adverse Effect.
"Minimum Guarantee" shall have the same meaning as defined in the
Sales Agent Agreement.
"Net Proceeds" means cash proceeds received by Borrower from any
Asset Disposition (including insurance proceeds, awards of condemnation,
and payments under notes or other debt securities received in connection
with any Asset Disposition), net of (a) the costs of such sale, lease,
transfer or other disposition (including taxes attributable to such
sale, lease or transfer) and (b) amounts applied to repayment of
Indebtedness (other than the Obligations) secured by a Lien on the asset
or property disposed.
"Note" or "Notes" means one or more of the promissory notes of
Borrower substantially in the form of Exhibit 10.1(B), or any
combination thereof.
"Obligations" means all obligations, liabilities and indebtedness
of every nature of Borrower from time to time owed to Agent or any
Lender under the Loan Documents including the principal amount of all
debts, claims and indebtedness, accrued and unpaid interest and all
fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, heretofore, now and/or from time to time
hereafter owing, due or payable whether before or after the filing of a
proceeding under the Bankruptcy Code by or against Borrower.
"Permitted Encumbrances" means, (a) the rights of the Agent and
the Lenders under the Loan Documents, (b) the rights granted to the
Sales Agent under the Sales Agent Agreement and the rights granted to
Distributors under Distribution Agreements, all of which shall be
subject and subordinate to the rights of the Agent and the Lenders under
the Loan Documents, (c) any Lien of the Laboratory which maintains the
original Physical Properties of the Series provided for under a
Laboratory Pledgeholder Agreement in form and substance acceptable to
Agent, provided such Liens (i) occur in the ordinary course of
distributing the Series, (ii) are for an aggregate amount which does not
at any time exceed the sum of Twenty-Five Thousand Dollars ($25,000) and
(iii) are security for amounts that, at the time the Lien is granted,
are not yet due and payable or are being contested in good faith; (d)
the Discovery License (as defined in the Sales Agent Agreement).
"Person" means and includes natural persons, corporations,
limited liability companies, limited partnerships, limited liability
partnerships, general partnerships, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land
trusts, business trusts or other organizations, whether or not legal
entities, and governments and agencies and political subdivisions
thereof and their respective permitted successors and assigns (or in the
case of a governmental. person, the successor functional equivalent of
such Person).
"Physical Properties" means, to the extent of Borrower's interest
therein, all physical properties of every kind or nature of or relating
to the Series and all versions
41
133
thereof, including, without limitation, all physical properties relating
to the development, production, completion, delivery, exhibition,
distribution or other exploitation of the Series, and all versions
thereof or any part thereof, including, without limitation, the Literary
Property, exposed film, developed film, positives, negatives, prints,
answer prints, special effects, pre-print materials (including
interpositives, negatives, duplicate negatives, internegatives, color
reversals, intermediates, lavenders, fine grain master prints and
matrices and all other forms of pre-print elements which may be
necessary or useful to produce prints or other copies or additional
pre-print elements, whether now known or hereafter devised) soundtracks,
recordings, audio and video tapes and discs of all types and gauges,
cutouts, trims and any and all other physical properties of every kind
and nature relating to the Series in whatever state of completion, and
all duplicates, drafts, versions, variations and copies of each thereof.
"Pro Rata Share" means (a) with respect to a Lender's obligation
to lend a portion of the Loans and such Lender's right to receive
payments of interest and principal with respect thereto, the percentage
obtained by dividing (i) the Loan Exposure of such Lender by (ii) the
aggregate Loan Exposure of all Lenders.
"Related Transactions" means the execution and delivery of the
Related Transactions Documents, the funding of the Loans on the Closing
Date, the consummation of the transactions contemplated under the
Acquisition Documents, and the payment of all fees, costs and expenses
associated with all of the foregoing.
"Related Transactions Documents" means the Loan Documents, the
Acquisition Documents and all other agreements, instruments and
documents executed or delivered in connection with the Related
Transactions.
"Related Receivables" means all CAVCO, GST or other similar
grants, subsidies and reimbursements related to the Series whether
received prior to, on or after the date of this Agreement.
"Related Receivables Collection Date" has the meaning set forth
in Section 1.1(A) hereof. "Related Receivables Excess Payments" shall
mean all amounts in excess of $2,700,000 received by Agent after the
Related Receivables Collection Date derived from the collection of the
Related Receivables.
"Requisite Lenders" means Lenders (other than Defaulting Lenders)
having sixty-six and two-thirds percent (66-2/3%) or more of the
aggregate outstanding principal balance of the Loans.
"Sales Agent" means Team Communications Group, Inc.
"Sales Agent Agreement" means that certain Sales Agent and
Minimum Guarantee Agreement dated on or about the date hereof between
the Borrower and the Sales Agent with respect to the exploitation of the
Series by the Sales Agent on behalf of
42
134
Borrower, as modified, supplemented and amended by any amendments
thereto permitted under the terms hereof.
"Sales Agent Documents" means, collectively, the Sales Agent
Agreement, the Acquisition Documents and each of the other documents
executed by Sales Agent with or in favor of Borrower in connection
therewith.
"Security Documents" means all instruments, documents and
agreements executed by or on behalf of any Person to guaranty or provide
collateral security with respect to the Obligations including, without
limitation, any security agreement or pledge agreement, any guaranty of
the Obligations, any mortgage or deed of trust, and all instruments,
documents and agreements executed pursuant to the terms of the
foregoing.
"Series" means the color, full-length, television series,
cinematographic film and photoplay, for the first thirteen episodes
entitled "CALL OF THE WILD," as more fully described in the Acquisition
Agreement, including the sound records thereof, as well as trailers and
clips thereof, produced by means of any photographic, electronic,
mechanical or other processes or devices now or hereafter known,
invented, used or contemplated, by which photographs, films, drawings,
images or other visual reproductions or representations are or may be
printed, imprinted, recorded or otherwise preserved on film, tape or any
other material of any description (whether translucent or not) for later
projection, exhibition or transmission by any means or media now known
or hereafter devised, in such manner that the same are or appear to be
in motion or in sequence on a screen, mirror, tube or other medium or
device, whether or not accompanied by sound record.
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association or other business
entity of which more than fifty percent (50%) of the total voting power
of shares of stock (or equivalent ownership or controlling interest)
entitled (without regard to the occurrence of any contingency) to vote
in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person or one
or more of the other Subsidiaries of that Person or a combination
thereof.
"Termination Date" means the earliest to occur of (a)
_____________, 2002 or (b) the Loans provided hereunder are terminated
by Agent pursuant to Section 6.2.
"Territory" shall have the meaning as defined in the Sales Agent
Agreement.
10.2 Other Definitional Provisions. References to "Sections",
"subsections", "Exhibits," "Schedules" and "subschedules" shall be to Sections,
subsections, Exhibits, Schedules and subschedules, respectively, of this
Agreement unless otherwise specifically provided. Any of the terms defined in
subsection 10.1 may, unless the context otherwise requires, be used in the
singular or the plural depending on the reference. References to an agreement
shall include all amendments, restatements, modifications and supplements to
such agreement, subject to such consents or approvals of Agent or any Lenders as
may be required by the terms of this Agreement. In this Agreement, "hereof,"
"herein," "hereto," "hereunder" and
43
135
the like mean and refer to this Agreement as a whole and not merely to the
specific section, paragraph or clause in which the respective word appears;
words importing any gender include the other gender; references to "writing"
include printing, typing, lithography and other means of reproducing words in a
tangible visible form; the words "including," "includes" and "include" shall be
deemed to be followed by the words "without limitation"; references to
agreements and other contractual instruments shall be deemed to include
subsequent amendments, assignments, and other modifications thereto, but only to
the extent such amendments, assignments and other modifications are not
prohibited by the terms of this Agreement or any other Loan Document; references
to Persons include their respective permitted successors and assigns or, in the
case of governmental Persons, Persons succeeding to the relevant functions of
such Persons; and all references to statutes and related regulations shall
include any amendments of same and any successor statutes and regulations.
[Signature Page Follows]
44
136
Witness the due execution hereof by the respective duly
authorized officers of the undersigned as of the date first written above.
CALL OF THE WILD DISTRIBUTION, LLC,
as Borrower
By:
--------------------------------------
Title:
--------------------------------
HELLER EMX, INC., as
Agent and a Lender
By:
--------------------------------------
Title: Vice President
[Signature Page to Credit Agreement]
45
137
LIST OF EXHIBITS AND SCHEDULES
Exhibits
Exhibit 4.1(C) -- Compliance Certificate
Exhibit 10.1(A) -- Assignment and Acceptance Agreement
Exhibit 10.1(B) -- Notes
Schedules
Schedule 5.4(A) -- Jurisdictions of Organization and Qualifications
Schedule 5.6 -- Intellectual Property
Schedule 5.7 -- Investigations and Audits
Schedule 7.1 -- Conditions to Loans
Schedule 10.1(C) -- Pro Rata Shares and Commitment Amounts
138
Exhibit 4.1(C)
Compliance Certificate
To: Heller EMX, Inc., as Agent
Please refer to the Credit Agreement dated as of October ___,
2000 (as amended or otherwise modified from time to time, the "Credit
Agreement") and entered into by and among CALL OF THE WILD DISTRIBUTION, LLC,
("Borrower"), the financial institutions who are or hereafter become parties
thereto as "Lenders" (as defined in subsection 10.1 thereof), and HELLER EMX,
INC., as "Agent".
Borrower hereby certifies to you that no Default or Event of
Default has occurred and is continuing.
Witness the due execution hereof by the respective duly
authorized officers of the undersigned on ___________ ______, ________.
CALL OF THE WILD DISTRIBUTION, LLC,
as Borrower
By:
---------------------------------------
Title:
---------------------------------
Exh. 4.1(C)-1
139
Exhibit 10.1(A)
Assignment and Acceptance Agreement
ASSIGNMENT AND ACCEPTANCE AGREEMENT
This ASSIGNMENT AND ACCEPTANCE AGREEMENT (this "Agreement") is entered
into by and between the parties designated as Assignor ("Assignor") and Assignee
("Assignee") above the signatures of such parties on the Schedule of Terms
attached hereto and hereby made an integral part hereof (the "Schedule of
Terms") and relates to the Credit Agreement described in the Schedule of Terms
(as the same has been amended, supplemented or otherwise modified to the date
hereof and as it may hereafter be further amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"; the terms defined therein
and not otherwise defined herein being used herein as therein defined).
IN CONSIDERATION of the agreements, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
SECTION 1. Assignment and Assumption.
(a) Effective as of the Settlement Date specified in Item 5 of the
Schedule of Terms (the "Settlement Date"), Assignor hereby sells and assigns to
Assignee, without recourse, representation or warranty (except as expressly set
forth herein), and Assignee hereby purchases and assumes from Assignor, that
percentage interest in all of Assignor's rights and obligations as a Lender
arising under the Credit Agreement and the other Loan Documents which
represents, as of the Settlement Date, the percentage interest specified in Item
3 of the Schedule of Terms of all rights and obligations of Lenders arising
under the Credit Agreement and the other Loan Documents with respect to any
outstanding Loans (the "Assigned Share").
(b) In consideration of the assignment described above, Assignee hereby
agrees to pay to Assignor, on the Settlement Date, the principal amount of any
outstanding Loans included within the Assigned Share, such payment to be made by
wire transfer of immediately available funds in accordance with the applicable
payment instructions set forth in Item 6 of the Schedule of Terms.
(c) Assignor agrees to pay to Assignee a closing fee in the amount
specified in Item 4 of the Schedule of Terms.
(d) Assignor and Assignee hereby agree that, upon giving effect to the
assignment and assumption described above, (i) Assignee shall be a party to the
Credit Agreement and shall have all of the rights and obligations under the Loan
Documents, and shall be deemed to have made all of the covenants and agreements
contained in the Loan Documents, arising out of or otherwise related to the
Assigned Share, and (ii) Assignor shall be absolutely released from any of such
obligations, covenants and agreements assumed or made by Assignee in respect of
the Assigned Share. Assignee hereby acknowledges and agrees that the agreement
set forth in this
Exh. 10.1(A)-1
140
Section 1(d) is expressly made for the benefit of Borrower, Agent, Assignor and
the other Lenders and their respective successors and permitted assigns.
(e) Assignor and Assignee hereby acknowledge and confirm their
understanding and intent that (i) this Agreement shall effect the sale and
assignment by Assignor and the purchase and assumption by Assignee of Assignor's
rights and obligations with respect to the Assigned Share, (ii) any other
assignments by Assignor of a portion of its rights and obligations with respect
to any outstanding Loans shall have no effect on the Pro Rata Share of Assignee
set forth in Item 3 of the Schedule of Terms or on the interest of Assignee in
any outstanding Loans corresponding thereto, and (iii) from and after the
Settlement Date, Agent shall make all payments under the Credit Agreement in
respect of the Assigned Share (including without limitation all payments of
principal and accrued but unpaid interest (1)[and Closing Fees] with respect
thereto) (A) in the case of any such interest {and fees that shall have accrued
prior to the Settlement Date, to Assignor, and (B) in all other cases, to
Assignee; provided that Assignor and Assignee shall make payments directly to
each other in accordance with the payment instructions set forth in Item 6 of
the Schedule of Terms to the extent necessary to effect any appropriate
adjustments in any amounts distributed to Assignor and/or Assignee by Agent
under the Loan Documents in respect of the Assigned Share in the event that, for
any reason whatsoever, the payment of consideration contemplated by Section 1(b)
occurs on a date other than the Settlement Date.
SECTION 2. Certain Representations, Warranties and Agreements.
(a) Assignor represents and warrants that it is the legal and
beneficial owner of the Assigned Share, free and clear of any adverse claim.
(b) Assignor hereby represents and warrants that Item 3 of the Schedule
of Terms correctly sets forth the aggregate amount of the Loans and the Assigned
Share being transferred to Assignee pursuant to this Agreement as described
above.
(c) Assignor represents and warrants that it has delivered to Agent the
Notes delivered to Assignor by Borrower pursuant to the Credit Agreement and
requests that Agent exchange such Notes for new Notes executed by Borrower
payable to Assignor and Assignee in the amounts necessary to reflect the
transaction contemplated by this Agreement.
(d) Assignor makes no representation and warranty to Assignee with
respect to, and shall not be responsible to Assignee for, the execution,
effectiveness, genuineness, validity, enforceability, collectibility or
sufficiency of any of the Loan Documents or for any representations, warranties,
recitals or statements made therein or made in any written or oral statements or
in any financial or other statements, instruments, reports or certificates or
any other documents furnished or made by or on behalf of Borrower in connection
with the Loan Documents and the transactions contemplated thereby or for the
financial condition or business affairs of Borrower, nor shall Assignor be
required to ascertain or inquire as to (i) the performance or observance of any
of the terms, conditions, provisions, covenants or agreements
- --------
(1) INSERT FEE PROVISION ONLY IF APPLICABLE.
Exh. 10.1(A)-2
141
contained in any of the Loan Documents, (ii) the use of the proceeds of the
Loans, (iii the existence or possible existence of any Event of Default or
Default.
(e) Assignee represents and warrants that it satisfies any eligibility
requirements to be a Lender under the Credit Agreement; that it is not a foreign
person (i.e., a person other than a United States person for United States
Federal income tax purposes) or, if it is a foreign person, that it has
delivered to Agent the documentation required by paragraph 3(h)(iv) below; that
it has experience and expertise in the making or the purchasing of loans such as
the Loans; that it has acquired the Assigned Share for its own account and
without any present intention of selling all or any portion of such interest;
and that it has received, reviewed and approved a copy of the Credit Agreement
(including all Exhibits and Schedules thereto) and copies of all other Loan
Documents which it has requested.
(f) Assignee represents and warrants that it has received from Assignor
such financial information regarding Borrower and the other Loan Parties as
Assignee has requested, that it has made its own independent investigation of
the financial condition and affairs of Borrower and the other Loan Parties in
connection with the assignment evidenced by this Agreement, and that it has made
and shall continue to make its own appraisal of the creditworthiness of Borrower
and the other Loan Parties. Assignor shall have no duty or responsibility,
either initially or on a continuing basis, to make any such investigation or any
such appraisal on behalf of Assignee or to provide Assignee with any other
credit or other information with respect thereto, whether coming into its
possession before the Settlement Date or at any time or times thereafter, and
Assignor shall not have any responsibility with respect to the accuracy of or
the completeness of any information provided to Assignee.
(g) Each party to this Agreement represents and warrants to the other
party hereto that it has full power and authority to enter into this Agreement
and to perform its obligations hereunder in accordance with the provisions
hereof, that this Agreement has been duly authorized, executed and delivered by
such party and that this Agreement constitutes a legal, valid and binding
obligation of such party, enforceable against such party in accordance with its
terms, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally and by general principles of equity.
SECTION 3. Miscellaneous.
(a) Each of Assignor and Assignee hereby agrees from time to time, upon
request of the other such party hereto, to take such additional actions and to
execute and deliver such additional documents and instruments as such other
party may reasonably request to effect the transactions contemplated by, and to
carry out the intent of, this Agreement.
(b) Neither this Agreement nor any term hereof may be changed, waived,
discharged or terminated, except by an instrument in writing signed by the party
(including, if applicable, any party required to evidence its consent to or
acceptance of this Agreement) against whom enforcement of such change, waiver,
discharge or termination is sought.
Exh. 10.1(A)-3
142
(c) Unless otherwise specifically provided herein, any notice or other
communication herein required or permitted to be given shall be in writing and
may be personally served or sent by telecopy or United States mail or courier
service and shall be deemed to have been given when delivered in person or by
courier service, upon receipt of telecopy, or three Business Days after
depositing it in the United States mail with postage prepaid and properly
addressed. For the purposes hereof, the notice address of each of Assignor and
Assignee shall be as set forth on the Schedule of Terms or, as to either such
party, such other address as shall be designated by such party in a written
notice delivered to the other such party. In addition, the notice address of
Assignee set forth on the Schedule of Terms shall serve as the initial notice
address of Assignee for purposes of the Credit Agreement.
(d) In case any provision in or obligation under this Agreement shall
be invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be
affected or impaired thereby.
(e) THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES.
(f) This Agreement shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective successors and assigns.
(g) This Agreement may be executed in one or more counterparts and by
different parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed an original, but all such counterparts
together shall constitute but one and the same instrument; signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature pages are physically attached to the same
document.
(h) This Agreement shall become effective upon the date (the "Effective
Date") upon which all of the following conditions are satisfied: (i) the
execution of a counterpart hereof by each of Assignor and Assignee, (ii) the
execution of a counterpart hereof by as evidence of its consent hereto to the
extent required under subsection 8.1 of the Credit Agreement, (iii) the receipt
by Agent of the administrative fee referred to in subsection 8.1 of the Credit
Agreement, (iv) in the event Assignee is a foreign person (i.e., a person other
than a United States person for United States Federal income tax purposes), the
receipt by Agent of Internal Revenue Service Form W-8ECI or Form W-8BEN or such
other forms, certificates or other evidence with respect to United States
Federal income tax withholding matters that are required under the Internal
Revenue Code to establish that Assignee shall be entitled to receive payments of
principal, interest and fees under the Credit Agreement free from or at a
reduced rate of withholding of United States Federal income tax properly
completed and executed by Assignee, and (v) the receipt by Agent of originals or
telecopies of the counterparts described above.
Exh. 10.1(A)-4
143
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized, such execution being made as of the Effective Date in the applicable
spaces provided on the Schedule of Terms.
[Remainder of page intentionally left blank]
Exh. 10.1(A)-5
144
SCHEDULE OF TERMS
1. Borrower: Call of the Wild Distribution, LLC
2. Name and Date of Credit Agreement: Credit Agreement dated as of
October__________, 2000 by and among Call of the Wild Distribution, LLC,
the financial institutions listed therein as Lenders, and Heller EMX,
Inc., as Agent for Lenders.
3. Amounts/Pro Rata Share:
Amount Pro Rata Share
------ --------------
Aggregate Outstanding Balance of $____________ N/A
Loans for all Lenders:
Assigned Share of Loans: $____________ _____%
[4. Closing Fee: $_________, which is _____% of the Assigned Share]
5. Settlement Date:___________________, _________
6. Payment Instructions:
ASSIGNOR: ASSIGNEE:
----------------------- --------------------------
ABA No.: ABA No.:
---------------- -----------------
Account No.: Account No.:
------------- --------------
Name: Heller EMX, Inc. Name:
---------------------
Reference: Reference:
--------------- -----------------
7. Notice Addresses:
ASSIGNOR: ASSIGNEE:
Heller EMX, Inc.
150 East 42nd Street --------------------------
New York, NY 10017 --------------------------
Attention: Ralph Willis --------------------------
Attention:
----------------
8. Signatures:
HELLER EMX, INC., [NAME OF ASSIGNEE], a [TYPE OF
a Delaware corporation, as Assignor ENTITY AND JURISDICTION OF
Exh. 10.1(A)-6
145
ORGANIZATION], as Assignee
By: By:
--------------------------- -------------------------------
Title: Title:
------------------------ ---------------------------
Exh. 10.1(A)-7
146
Exhibit 10.1(B)
Notes
NOTE
$8,139,428.00 New York, New York
__________, ______
FOR VALUE RECEIVED, the undersigned, CALL OF THE WILD
DISTRIBUTION, LLC, a Delaware limited liability company ("Borrower"), HEREBY
UNCONDITIONALLY PROMISES TO PAY to the order of HELLER EMX, INC, a Delaware
corporation, acting in its capacity as agent for Lenders ("Agent"), at the
offices of Agent, at its address at 150 East 42nd Street, New York, New York,
10017, or at such other place as Agent may designate from time to time in
writing, in lawful money of the United States of America and in immediately
available funds, in the principal sum of EIGHT MILLION ONE HUNDRED THIRTY-NINE
THOUSAND FOUR HUNDRED TWENTY-EIGHT DOLLARS AND ZERO CENTS ($8,139,428.00).
This Note was executed and delivered pursuant to, and evidences
indebtedness of Borrower incurred under, that certain Credit Agreement dated as
of October ___, 2000 by and among Borrower, each of the Lenders party thereto
from time to time, and Agent (as the same may be amended, restated, supplemented
or otherwise modified and in effect from time to time, the "Credit Agreement"),
to which reference is hereby made for a statement of the terms and conditions
under which the Loan evidenced hereby was made and is to be repaid and for a
statement of Agent's and Lender's remedies upon the occurrence of an Event of
Default. Capitalized terms used herein but not otherwise specifically defined
shall have the meanings ascribed to such terms in the Credit Agreement.
Borrower hereby unconditionally promises to pay interest on the
outstanding unpaid principal amount hereof, at the rates and times provided in
the Credit Agreement. Interest shall be calculated daily on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed in the period
during which it accrues.
If a payment becomes due and payable hereunder other than on a
Business Day, the due date of such payment shall be extended to the next
succeeding Business Day, and interest shall be payable thereon during such
extension at the rate specified above. Under no circumstances will the rate of
interest chargeable hereunder be in excess of the maximum amount permitted by
law. If excess interest is charged and paid in error, then the excess amount
will be promptly refunded.
Borrower hereby waives demand, presentment, protest
demand, presentment, protest and nonpayment.
Exh. 10.1(B)-1
147
THIS NOTE HAS BEEN DELIVERED AT NEW YORK, NEW YORK AND
SHALL BE GOVERNED BY AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS
PRINCIPLES. WHENEVER IN THIS NOTE REFERENCE IS MADE TO THE AGENT, THE LENDER OR
A BORROWER, SUCH REFERENCE SHALL BE DEEMED TO INCLUDE, AS APPLICABLE, A
REFERENCE TO THEIR RESPECTIVE SUCCESSORS AND ASSIGNS. THE PROVISIONS OF THIS
NOTE SHALL BE BINDING UPON AND SHALL INURE TO THE BENEFIT OF SUCH SUCCESSORS AND
ASSIGNS. EACH BORROWER'S SUCCESSORS AND ASSIGNS SHALL INCLUDE, WITHOUT
LIMITATION, A RECEIVER, TRUSTEE OR DEBTOR IN POSSESSION OF OR FOR SUCH BORROWER.
CALL OF THE WILD DISTRIBUTION, LLC, a
Delaware limited liability company
By:
-------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
Exh. 10.1(B)-2
148
Schedule 5.4(A)
Jurisdictions of Organization and Qualifications
Jurisdiction of Organization: Delaware
Jurisdiction of Due Qualification: Delaware and New York
Sch. 5.4(A)-1
149
Schedule 5.6
Intellectual Property
All rights with respect to the Series acquired pursuant to the Acquisition
Agreement.
Sch. 5.6-1
150
Schedule 5.7
Investigations and Audits
None.
Sch. 5.7-1
151
Schedule 7.1
Conditions to Loans
(A) Fully executed copies of the Acquisition Documents, including
the chain-of-title documents evidencing that the Borrower has been assigned,
pursuant to and in accordance with the terms of the Acquisition Agreement, all
of the rights in and to the Related Receivables and the Series as well as in the
underlying and included Literary Properties and Physical Properties necessary
for Borrower and Sales Agent to exploit the Series as contemplated by the Sales
Agent Agreement and the Distribution Agreements, and that all payments for such
rights have been paid, together with a protective UCC-1 Financing Statements
with respect to the Related Receivables, the Series and related rights naming
Sales Agent as debtor, Borrower as secured party and Agent as assignee of
secured party;
(B) An examination of the relevant UCC and PPSA Filing Offices
and records of the United States and Canadian Copyright Office (including,
without limitation, a copyright and title search report on the Series)
acceptable to Agent and its counsel, reveals no interest of any third party
which is contrary to the rights granted to Borrower under the Acquisition
Documents or the Agent under the Loan Documents;
(C) Except for the payment of the Acquisition Price, all
conditions precedent to the consummation of the Acquisition Agreement shall have
been met and Borrower shall have accepted delivery of the Series from Sales
Agent;
(D) Agent shall have received this Agreement and all of the
following items, together with all exhibits, attachments and supplementary
documents which are not elsewhere identified in this Schedule 7.1, such items to
be in form and substance satisfactory to the Agent, and to be executed by all
parties thereto when the nature of such items so requires:
(1) Note of Borrower;
(2) Security Agreement of Borrower;
(3) Security Agreement of Sales Agent;
(4) Copyright Mortgage and Security Agreement of Call of
the Wild Productions Inc. ("CTWP");
(5) Inter-Party Agreement of each of Borrower and Sales
Agent;
(6) Acknowledgment copies of proper financing statements
and PPSA filings, duly filed on or before the Closing Date under the UCC and
PPSA of all jurisdictions that Agent may deem necessary or desirable in order to
perfect the Agent's Liens with respect to each of Borrower, CTWP and Sales
Agent;
Sch. 7.1-1
152
(7) Payoff of Obligations and Release of Liens Letter duly
executed by Imperial Bank ("Imperial"), under which Imperial undertook to
deliver to Agent's counsel such UCC-3 and PPSA Termination Statements and
copyright mortgage releases and other instruments, in form and substance
satisfactory to Agent, as shall be necessary to terminate all financing
statements and copyright mortgage in favor of Imperial;
(8) Intercreditor Agreement duly executed by Discovery
Communications, Inc. ("DCI") and Agent under which DCI agreed to subordinate the
DCI Security Interest related to the Series (other than the DCI Rights) to
Agent's security interest granted by Borrower, CTWP and Sales Agent under the
Security Documents;
(9) UCC-3 Partial Release Statement duly executed by
Mercantile National Bank, releasing all Liens in and to the Series and the
Related Receivables, in a form and substance satisfactory to Agent;
(10) Collateral Assignment of CTWP Agreements (as defined
below) executed by Sales Agent and acknowledged by CTWP;
(11) Certificate of the Managers/Members of the Borrower
certifying to the following: (1) a certified copy of the operating agreement of
the Borrower authorizing the execution, delivery and performance of this
Agreement, the other Loan Documents, the Sales Agent Documents, and the
transactions contemplated thereby, and such other documents relating thereto as
Agent reasonably may request; (2) a copy of the articles of formation or
articles of organization of the Borrower, certified by the Secretary of State of
Delaware; and (3) signature and incumbency certificates of the Borrower's
officers and/or managers who are authorized to execute this Agreement, the other
Loan Documents and the Sales Agent Documents;
(12) Certificate of Good Standing from the Secretary of
State of Delaware, the Secretary of State of New York and the Secretary of State
of each jurisdiction in which the Borrower is qualified to do business, each
dated a recent date prior to the Closing Date;
(13) Such opinions of counsel for the Borrower as Agent
shall request, each such opinion to be in a form, scope, and substance
satisfactory to the Agent and its counsel;
(14) Certificate of the Secretary of the Sales Agent
certifying to the following: (1) a copy of resolutions of the directors of the
Sales Agent authorizing the execution, delivery and performance of the Loan
Documents and the Sales Agent Documents to which Sales Agent is a party, and the
transactions contemplated thereby, and such other documents relating thereto as
Agent reasonably may request; (2) a copy of the articles of incorporation of the
Sales Agent, certified by the Secretary of State of California; and (3) a
certified copy of the bylaws of the Sales Agent;
(15) Certificate of Good Standing from the Secretary of
State of California, the Secretary of State of each jurisdiction in which the
Sales Agent is qualified to do business, each dated a recent date prior to the
Closing Date;
Sch. 7.1-2
153
(16) Such opinions of counsel for the Sales Agent as Agent
shall request, each such opinion to be in a form, scope, and substance
satisfactory to the Agent and its counsel;
(17) Certificate of the Secretary of CTWP certifying to
the following: (1) a copy of resolutions of the directors of CTWP authorizing
the execution, delivery and performance of the Loan Documents to which CTWP is a
party, and the transactions contemplated thereby, and such other documents
relating thereto as Agent reasonably may request; (2) a copy of the memorandum
and articles of incorporation of CTWP, certified by the Secretary of State or
equivalent of British Columbia; and (3) signature and incumbency certificates of
CTWP's officers who are authorized to execute the Loan Documents to which it is
a party;
(18) Certificate of Good Standing from the Secretary of
State or equivalent of British Columbia, dated a recent date prior to the
Closing Date;
(19) Laboratory Pledgeholder Agreement of each Laboratory,
Borrower and Sales Agent;
(20) Laboratory Access Letter (as defined in the
Acquisition Agreement);
(21) Certificates and other evidence, in form, scope, and
substance, reasonably satisfactory to Agent, of all insurance coverage as
required pursuant to Section 2.3 which shall note Agent as an additional insured
and/or loss payee, as applicable;
(22) Closing Certificate of each of Borrower and Sales
Agent;
(23) Disbursement Direction Letter of Borrower.
(E) No order, judgment or decree of any court, arbitrator or
governmental authority shall purport to enjoin or restrain any Lender from
making the Loans on the Closing Date;
(F) The representations and warranties contained in Section 5 of
this Agreement and elsewhere herein and in the Loan Documents shall be true,
correct and complete in all material respects on the Closing Date to the same
extent as though made on and as of that date, except for any representation or
warranty expressly limited by its terms to a specific date;
(G) No Default or Event of Default shall exist on the Closing
Date, or would exist after giving effect to the Loans to be made on such date;
(H) The Borrower and/or Sales Agent shall have paid all attorney
costs, the Closing Fee and all other fees and expenses of Agent incurred in
connection with any of the Loan Documents due hereunder to Agent and to other
Persons on or prior to the Closing Date;
Sch. 7.1-3
154
(I) All proceedings taken in connection with the execution of
this Agreement and all other Loan Documents and all documents and papers
relating thereto shall be satisfactory in form, scope, and substance to Agent;
(J) Borrower shall have delivered such other documents as Lender
may reasonably request in order to effect fully the purposes of this Agreement,
the other Loan Documents and the Sales Agent Documents;
(K) Agent shall have received an appraisal from an appraiser
satisfactory to Agent confirming the minimum projections of the international
distribution rights set forth in the projections provided by Sales Agent to
Agent prior to the Closing Date;
(L) Agent shall have received the transfer documents related to
assignment of CAVCO and GST proceeds (i) from CTWP to Sales Agent, (ii) from
Sales Agent to Borrower, and (iii) from Borrower to Agent;
(M) Agent shall have received a legal opinion of the counsel for
CTWP which confirms that the assignments of the CAVCO and GST proceeds are
valid, enforceable, do not require any consent or approval from any governmental
authority or any other third party and directly enforceable against the obligor,
in a form, scope, and substance satisfactory to the Agent and its counsel;
(N) Agent shall have received copies of all agreements relating
to the financing between Sales Agent and Abracadabra Entertainment, LLC;
(O) Agent shall have received the duly executed amended and
restated Sales Agency Agreement and Distribution Agreement between CTWP and
Sales Agent (together, the "CTWP Agreements") which reflect Agent as the lender
entitled to priority repayment of the Loans and the Heller Share (as defined in
the Inter-Party Agreement) prior to payment of any amount to CTWP;
(P) Agent shall have completed to its satisfaction the due
diligence of Borrower and Sales Agent and their business, management, operations
and any other areas that Agent deemed necessary, including, without limitation,
the due diligence of Frankfurter Film Productions litigation in which Sales
Agent is currently involved;
(Q) Agent shall have been provided with a draft of Sales Agent's
financial statements for all United States subsidiaries and affiliates for the
period ended June 30, 2000 and a draft of its corporate consolidated financial
statements for all subsidiaries, (including foreign subsidiaries, as applicable)
and the content of such financial statements shall have been deemed acceptable
by Agent;
(R) Agent shall have been provided with a draft of Sales Agent's
financial statements for all United States subsidiaries and affiliates for the
period ended August 31, 2000;
(S) The Agent shall have received, in a form and substance
satisfactory to Agent, evidence that on or prior to the Closing Date Mr. Nick
Kahla has not perfected the security interest held by him in respect of the
Collateral;
Sch. 7.1-4
155
(T) Sales Agent' counsel shall have issued a letter to Agent
which discusses the status of Sales Agent's legal proceedings with Beyond
Entertainment and confirms that the likely outcome will not impose any material
liability on Sales Agent;
(U) Agent shall have received in the Collection Account all
Pre-Closing Proceeds specified on Schedule 4 of the Purchase Agreement; and
(V) No material adverse change in the property, business,
operations or condition (financial or otherwise) or prospects of the Borrower or
Sales Agent shall have occurred since the completion of the due diligence.
Sch. 7.1-5
156
Schedule 10.1(C)
Pro Rata Shares and Commitment Amounts
Heller EMX, Inc. - 100% of all Commitments.
Sch. 10.1(C)
157
SECURITY AGREEMENT
{TEAM COMMUNICATIONS GROUP, INC.}
THIS SECURITY AGREEMENT is dated as of October __, 2000 between TEAM
COMMUNICATIONS GROUP, INC., a California corporation ("Debtor"), and HELLER EMX,
INC., a Delaware corporation, in its capacity as agent ("Agent") for the Lenders
party to the Credit Agreement described below.
W I T N E S S E T H :
WHEREAS, Call of the Wild Distribution, LLC, a Delaware limited
liability company ("Borrower"), Agent and Lenders are parties to a Credit
Agreement dated on or about the date hereof (as the same may be amended and in
effect from time to time, the "Credit Agreement"), pursuant to which Lenders
have agreed to make loans and other financial accommodations available to
Borrower;
WHEREAS, Debtor has executed an Inter-Party Agreement (the "Inter-Party
Agreement") and a Sales Agency and Minimum Guarantee Agreement dated on or about
the date hereof (as the same may be amended, supplemented or otherwise modified
from time to time, the "Sales Agent Agreement").
WHEREAS, in order to secure the payment and performance of Debtor's
obligations under the Inter-Party Agreement and Sales Agent Agreement, Debtor
has agreed to grant to Agent, for the benefit of Agent and Lenders, the security
interests contemplated by this Agreement;
NOW, THEREFORE, in consideration of the premises and in order to induce
Lenders to make the loans and other financial accommodations available to
Borrower under the Credit Agreement, Debtor hereby agrees with Agent, for the
benefit of Agent and Lenders, as follows:
SECTION 1. Definitions
1.1 Certain Defined Terms. Terms defined in the Credit Agreement and not
otherwise defined herein shall have the respective meanings provided for in the
Credit Agreement. The following terms, as used herein, have the meanings set
forth below:
"Accounts" means all "accounts" (as defined in the UCC) now owned or
hereafter created or acquired by Debtor and all of the following now owned or
hereafter created or acquired by Debtor: (a) accounts receivable, contract
rights, book debts, notes, drafts and other obligations or indebtedness owing to
Debtor arising from the sale, lease or exchange of goods or other property
and/or the performance of services; (b) Debtor's rights in, to and under all
purchase orders for
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goods, services or other property; (c) Debtor's rights to any goods, services or
other property represented by any of the foregoing (including returned or
repossessed goods and unpaid sellers' rights of rescission, replevin,
reclamation and rights to stoppage in transit); (d) monies due to or to become
due to Debtor under all contracts for the sale, lease or exchange of goods or
other property and/or the performance of services including the right to payment
of any interest or finance charges with respect thereto (whether or not yet
earned by performance on the part of Debtor); and (e) all collateral security
and guaranties of any kind given by any Person with respect to any of the
foregoing.
"Collateral" has the meaning assigned to that term in Section 2.
"Copyrights" means collectively all of the following now owned or
hereafter created or acquired by Debtor: (a) all copyrights, rights and
interests in copyrights, works protectable by copyright, copyright registrations
and copyright applications; (b) all renewals of any of the foregoing; (c) all
income, royalties, damages and payments now or hereafter due and/or payable
under any of the foregoing or with respect to any of the foregoing, including,
without limitation, damages or payments for past, present or future
infringements of any of the foregoing; (d) the right to sue for past, present
and future infringements of any of the foregoing; and (e) all rights
corresponding to any of the foregoing throughout the world.
"CTWP Agreements" mean the Sales Agency Agreement and Distribution
Agreement between Debtor and Producer (as defined below) dated as of October 15,
1999, as the same may be amended, restated or otherwise modified from time to
time.
"Documents" means all "documents" (as defined in the UCC) or other
receipts covering, evidencing or representing goods now owned or hereafter
acquired by Debtor including, without limitation, all bills of lading, dock
warrants, dock receipts, warehouse receipts and orders for the delivery of
goods, and any other document which in the regular course of business or
financing is treated as adequately evidencing that the Person in possession of
it is entitled to receive, hold and dispose of the document and the goods it
covers.
"Equipment" means all "equipment" (as defined in the UCC) now owned or
hereafter acquired by Debtor including, without limitation, all machinery, motor
vehicles, trucks, trailers, vessels, aircraft, rolling stock and all other
tangible personal property (other than Inventory) and all parts thereof and all
additions and accessions thereto and replacements therefor.
"Fixtures" means all "fixtures" (as defined in the UCC) now owned or
hereafter acquired by Debtor including, without limitation, plant fixtures,
trade fixtures and business fixtures, wherever located, and all additions and
accessions thereto and replacements therefor.
"General Intangibles" means all "general intangibles" (as defined in the
UCC) now owned or hereafter created or acquired by Debtor including, without
limitation, (a) all agreements, leases, licenses and contracts to which Debtor
is or may become a party; (b) all obligations or indebtedness owing to Debtor
(other than Accounts) or other rights to receive payments of money from whatever
source arising and all collateral security therefor; (c) all tax
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refunds and tax refund claims; (d) all Patents, Trademarks and Copyrights; (e)
all choses in action and causes of action; and (f) all trade secrets and other
confidential information relating to the business of Debtor including, without
limitation: the names and addresses of, and credit and other business
information concerning, Debtor's past, present or future customers; the prices
which Debtor obtains for its services or at which it sells merchandise; policies
and procedures pertaining to the sale and design of equipment, components,
devices and services furnished by Debtor; information concerning suppliers of
Debtor; and information concerning the manner of operation, business plans,
projections, and all other information of any kind or character, whether or not
reduced to writing, with respect to the conduct by Debtor of its business not
generally known by the public.
"Instruments" means all "instruments", "chattel paper" and "letters of
credit" (each as defined in the UCC) in which Debtor now has or hereafter
acquires any rights including, without limitation, all checks, drafts, notes,
bonds, debentures and certificates of deposit.
"Inventory" means all "inventory" (as defined in the UCC) now owned or
hereafter acquired by Debtor, wherever located, including, without limitation,
finished goods, raw materials, work in process and other materials and supplies
(including packaging and shipping materials) used or consumed in the manufacture
or production thereof and goods which are returned to or repossessed by Debtor.
"Investment Property" means all "investment property" (as defined in the
UCC) now owned or hereafter acquired by Debtor including, without limitation,
all securities (certificated and uncertificated), securities accounts,
securities entitlements, commodity contracts and commodity accounts (as each
such term is defined in the UCC).
"Literary Properties" has the meaning assigned to that term in Section
2.
"Patents" means collectively all of the following now owned or hereafter
created or acquired by Debtor: (a) all patents and patent applications and the
inventions and improvements described and claimed therein, and patentable
inventions; (b) the reissues, divisions, continuations, renewals, extensions and
continuations-in-part of any of the foregoing; (c) all income, royalties,
damages and payments now or hereafter due and/or payable under any of the
foregoing or with respect to any of the foregoing, including, without
limitation, damages and payments for past, present and future infringements of
any of the foregoing; (d) the right to sue for past, present and future
infringements of any of the foregoing; and (e) all rights corresponding to any
of the foregoing throughout the world.
"Permitted Encumbrances" means, (a) the rights and Liens in favor of the
Agent, (b) the rights granted to the Borrower under the Purchase Agreement (as
defined in the Inter-Party Agreement) and the rights granted to licensees,
sub-licensees, lessees, sub-lessees, or other transferrees in connections with
the exploitation of the Series, all of which shall be subject and subordinate to
the Liens and rights of the Agent under this Agreement and the other Loan
Documents, (c) any Lien of the laboratory which maintains the original Physical
Properties of the Series provided for under a Laboratory Pledgeholder Agreement
in form and substance
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acceptable to Agent, provided such Liens (i) occur in the ordinary course of
distributing the Series, (ii) are for an aggregate amount which does not at any
time exceed the sum of Twenty-Five Thousand Dollars ($25,000) and (iii) are
security for amounts that, at the time the Lien is granted, are not yet due and
payable or are being contested in good faith; (d) the Discovery License (as
defined in the Sales Agent Agreement).
"Physical Properties" has the meaning assigned to that term in Section
2.
"Proceeds" means all "proceeds" (as defined in the UCC) of, and all
other profits, rentals or receipts, in whatever form, arising from the
collection, sale, lease, exchange, assignment, licensing or other disposition
of, or realization upon, any Collateral including, without limitation, all
claims of Debtor against third parties for loss of, damage to or destruction of,
or for proceeds payable under, or unearned premiums with respect to, policies of
insurance with respect to any Collateral, and any condemnation or requisition
payments with respect to any Collateral, in each case whether now existing or
hereafter arising.
"Producer" means Call of the Wild Productions Inc., a British Columbia
corporation.
"Related Receivables" means the right to receive (as assignee of
Producer) CAVCO, GST or other similar grants, subsidies and reimbursements
related to the Series whether received prior to, on or after the date of this
Agreement.
"Sales Agent Agreement" has the meaning set forth in the Recitals.
"Secured Obligations" has the meaning assigned to that term in Section
3.
"Security Interests" means the security interests granted pursuant to
Section 2 hereof, as well as all other security interests created or assigned as
additional security for the Secured Obligations pursuant to the provisions of
this Agreement and the other Loan Documents.
"Series" means the first thirteen (13) one-hour episodes of the
television series entitled "Jack London's Call of the Wild" and comprises a
connected and continuous series of scenes telling or presenting a complete story
and is suitable for public exhibition in any and all media including by means of
videograms and television exhibition. The Series is produced by Producer. The
Series includes, without limitation, the cinematographic film photoplay and
sound records thereof, as well as trailers and clips thereof, produced by means
of any photographic, electronic, mechanical or other processes or devises now or
hereafter known, invented, used or contemplated, by which photographs, films,
drawings, images or other visual reproductions or representations are or may be
printed, imprinted, recorded or otherwise preserved on film, tape or any other
material of any description (whether translucent or not) for later projection,
exhibition or transmission by any means or media now known or hereafter devised,
in such manner that the same are or appear to be in motion or in sequence on a
screen, mirror, tube or other medium or device, whether or not accompanied by
sound record.
"Territory" shall mean the universe excluding Canada.
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"Trademarks" means, as it relates to the Series, collectively all of the
following now owned or hereafter created or acquired by Debtor: (a) all
trademarks, trade names, corporate names, company names, business names,
fictitious business names, trade styles, service marks, logos, other business
identifiers, prints and labels on which any of the foregoing have appeared or
appear, all registrations and recordings thereof, and all applications in
connection therewith; (b) all renewals thereof; (c) all income, royalties,
damages and payments now or hereafter due and/or payable under any of the
foregoing or with respect to any of the foregoing including, without limitation,
damages and payments for past, present and future infringements of any of the
foregoing; (d) the right to sue for past, present and future infringements of
any of the foregoing; (e) all rights corresponding to any of the foregoing
throughout the world; and (f) all goodwill associated with and symbolized by any
of the foregoing.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the State of New York, provided that if by reason of mandatory provisions of
law, the perfection or the effect of perfection or non-perfection of the
Security Interests in any Collateral or the availability of any remedy hereunder
is governed by the Uniform Commercial Code as in effect on or after the date
hereof in any other jurisdiction, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection or availability of
such remedy.
1.2 Other Definition Provisions. References to "Sections,"
"subsections," "Exhibits" and "Schedules" shall be to Sections, subsections,
Exhibits and Schedules, respectively, of this Agreement unless otherwise
specifically provided. Any of the terms defined in subsection 1.1 may, unless
the context otherwise requires, be used in the singular or the plural depending
on the reference. All references to statutes and related regulations shall
include (unless otherwise specifically provided herein) any amendments of same
and any successor statutes and regulations.
SECTION 2. Grant of Security Interests
To secure the payment, performance and observance of the Secured
Obligations, Debtor hereby grants to Agent, for the benefit of Agent and
Lenders, a continuing security interest in, right of setoff against, and an
assignment to Agent of, all right, title and interest of Debtor in all of the
following personal property, whether now owned or existing or hereafter acquired
or arising and regardless of where located including, without limitation, the
following (all being collectively referred to herein as the "Collateral"):
All of Debtor's right, title, and interest in and to the Series, the
Related Receivables, the Sales Agent Agreement and the CTWP Agreements, together
with all products and Proceeds thereof in whatever form, including, without
limitation, all Inventory, Accounts, General Intangibles (including copyrights,
patents and trademarks), Documents, Instruments, Investment Property, Equipment
which arise from the Series, the Related Receivables, the Sales Agent Agreement
and/or the CTWP Agreements but excluding, in any event, the pre-existing license
agreement between Producer and Discovery Communications Inc. dated as of January
7, 1999 (and any amounts payable thereunder). Subject to such exclusion, the
Collateral shall include, to
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the extent they are owned by Debtor (it being understood that this definition
does not constitute a representation that each and all the various rights listed
are owned by Debtor), without limitation, the following particular rights and
properties:
(i) all scenarios, screenplays and/or scripts at every stage of
the development of the Series;
(ii) all common law and statutory copyright and other rights in
all literary and other properties with respect to the Series ("Literary
Properties") that form the basis of the Series or which are or will be
incorporated into the Series, all component parts of the same Series consisting
of the Literary Properties and other properties, all motion picture rights in
and to the story, all treatments of said story and other literary material,
together with all preliminary and final screenplays (including the screenplay
(the "Screenplay"), and all drafts prior thereto) used and to be used in
connection with the Series, and all other literary material upon which the
Series is based or from which it is adapted;
(iii) all motion picture rights in and to all music and musical
compositions connected with the Series, including, without limitation, all
rights to record, re-record, produce, reproduce, or synchronize all of said
music and musical compositions in and in connection with motion pictures;
(iv) all exposed and/or delivered negative film, sound tracks,
positive prints, cutouts and trims connected with the Series, whether or not in
completed form or in some state of completion;
(v) all collateral, allied, subsidiary and merchandising rights
appurtenant or related to the Series now or hereafter owned or controlled by
Debtor, including, without limitation, the following rights: Literary
Properties, or the text or any part of the Literary Properties; all rights
throughout the world to broadcast, transmit and/or reproduce by means of
television (including, without limitation, free, commercially sponsored,
sustaining, subscription, cable and pay television) or by any process analogous
thereto, now known or hereafter devised, the Series; all rights to produce
primarily for television or similar use, by use of film or any other medium now
known or hereafter devised, a motion picture or series of motion pictures based
upon the Series, the Literary Properties, or any part thereof, including,
without limitation, any script, scenario or the like used in the Series; all
merchandising rights including, without limitation, all rights to use, exploit,
and license others to use and exploit any commercial tie-ups of any kind arising
out of or connected with the Literary Properties, the Series, the title or
titles of the Series, the characters of the Series or the Literary Properties,
or the names or characteristics of such characters and including further,
without limitation, any commercial exploitation in connection with or related to
the Series or the Literary Properties;
(vi) all statutory copyrights, domestic and foreign, obtained or
to be obtained on the Series, together with any and all copyrights obtained or
to be obtained in connection with the Series or any underlying or component
elements of the Series, including, without limitation, all copyrights on the
property described in subparagraphs (i) through (v) of this definition,
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together with the right to register for copyright, and all rights to renew or
extend such registration and the right to sue in the name of Debtor for past,
present, or future infringements of copyrights;
(vii) all insurance policies connected with the Series and all
proceeds which may be derived therefrom;
(viii) all rights to distribute, sell, rent, license the
exhibition of, and otherwise exploit and turn to account the Series, the
negatives, sound tracks, prints, and motion picture rights in and to the
Literary Properties, other literary material upon which the Series is based or
from which it is adapted, and such music and musical compositions used or to be
used in the Series;
(ix) any and all sums, proceeds, money, products, profits, or
increases and any other money profits or increases (as those terms are used in
the Uniform Commercial Code or otherwise) or other property obtained or to be
obtained from the distribution, exhibition, sale, or other uses or dispositions
of the Series or any part of the Series in the Territory, including, without
limitation, all proceeds, profits, products, and increases, whether in money or
otherwise, from the sale, rental, or licensing of the Series and/or any of the
elements of the Series, whether pursuant to the any agreements for sale, rental,
licensing or other distribution of the Series ("Distribution Agreements") or
otherwise, in any and all media, including collateral, allied, subsidiary, and
merchandising rights, and amounts recovered as damages by reason of unfair
competition, copyright infringement, breach of any contract or infringement of
any rights, or derived therefrom in any manner whatsoever;
(x) the dramatic, non-dramatic, stage, television, radio, and
publishing rights, title and interests in and to the Series, to the extent owned
by Debtor, and the rights to register for copyrights and renewals of same
therein, and the right to sue in Debtor's name or in the Purchaser's name for
past, present, and future infringements of copyright;
(xi) the title of the Series and all rights of Debtor to the use
thereof, including, without limitation, rights protected pursuant to any
trademark, service mark, or unfair competition law, and/or the rules and
principles of law related to any other applicable statute, common law decision,
or other rule or principle of law;
(xii) all contract rights and general intangibles which grant to
any person any right to acquire, produce, develop, reacquire, finance, release,
sell, distribute, lease, sublease, market, license, sublicense, exhibit,
broadcast, transmit, reproduce, publicize or otherwise exploit the Series or any
rights in the Series, including any and all Distribution Agreements;
(xiii) with respect to the Series, all Accounts and/or other
rights to payment which Debtor presently owns or which may arise in favor of
Debtor in the future, including, without limitation, any refund under a
completion guarantee, all Accounts and/or rights to payment due from exhibitors
in connection with the distribution of the Series (including all Distribution
Agreements), and all Accounts and/or rights to payment arising from exploitation
of
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any and all of the collateral, allied, subsidiary, merchandising, and other
rights in connection with the Series.
(xiv) any and all General Intangibles in connection with the
Series not elsewhere included in this definition, including, without limitation,
any and all General Intangibles consisting of any right to payment which may
arise in the distribution or exploitation of any of the rights set out herein,
and any and all General Intangible rights in favor of Debtor in connection with
the Series for services or other performances by any third parties, including
actors, writers, directors, individual producers, and/or any and all other
performing or non-performing parties or artists in any way connected with the
Series, any and all General Intangible rights in favor of Debtor relating to
licenses of sound or other equipment in connection with the Series, and licenses
for photographic or other processes, and any and all General Intangibles related
to the exhibition, distribution or exploitation of the Series including General
Intangibles related to or which grow out of the exhibition of the Series and the
exploitation of any and all other rights in the Series set out in this
definition;
(xv) any and all "goods" (as that term is defined in the UCC)
including Inventory which may arise in connection with the creation, production,
or delivery of the Series and which goods, pursuant to any production or
distribution agreement or otherwise, are owned by Debtor;
(xvi) each and all of the rights, regardless of denomination,
which arise in connection with the creation, production, completion of
production, delivery, distribution, or other exploitation of the Series,
including, without limitation, any and all rights in favor of Debtor, the
ownership or control of which are or may become necessary or desirable, in the
opinion of Agent, in order to complete production of the Series in the event
that Agent exercises any rights it may have to take over and complete production
of the Series;
(xvii) any and all documents issued by any pledgeholder or bailee
with respect to the Series or with respect to any negatives, sound tracks or
prints (whether or not in completed form) connected therewith;
(xviii)any and all rights of Debtor under contracts relating to
the production of the Series, which have been delivered to Agent pursuant to
this Agreement;
(xix) all of the Debtor's right, title and interest in, to and
under the Sales Agent Agreement, including Debtor's rights to receive payments
thereunder, and all other rights to receive film rentals, license fees,
distribution fees, producer's shares, royalties and other amounts of every
description including, without limitation, from (1) theatrical exhibitors,
non-theatrical exhibitors, television networks and stations and airlines, cable
television systems, pay television operators, whether on a subscription, per
program charge basis or otherwise, and other exhibitors, (2) distributors,
subdistributors, lessees, sublessees, licensees and sublicensees (including any
subsidiary) and (3) any other Person that distributes, exhibits or exploits the
Series or the Literary Property or elements or components of the Series or the
Literary Property or rights relating thereto;
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(xx) all title or titles of the Series and all of the Debtor's
rights to the exclusive use thereof including rights protected pursuant to
trademark, service mark, unfair competition and/or other laws, rules or
principles of law or equity;
(xxi) with respect to the Series, all inventions, processes,
formulae, licenses, patents, patent rights, trademarks, trademark rights,
service marks, service mark rights, trade names, trade name rights, logos,
indicia, corporate and Debtor names, business source or business identifiers and
renewals and extensions thereof, domestic and foreign, whether now owned or
hereafter acquired, and the accompanying good will and other like business
property rights relating to the Series, and the right (but not the obligation)
to register claim under trademark or patent and to renew and extend such
trademarks or patents and the right (but not the obligation) to sue in the name
of Debtor or in the name of Agent for past, present or future infringement of
trademark or patent; and
(xxii) All accessions to, substitution for, and replacements,
proceeds, and proceeds of proceeds of any of the foregoing, including, without
limitation, proceeds of any insurance policies, claims against third parties,
with respect to the foregoing.
SECTION 3. Security for Obligations
This Agreement secures the payment and performance of Debtor's
indebtedness and obligations under the Inter-Party Agreement and the Sales Agent
Agreement and all indebtedness, liabilities and obligations of Debtor now
existing or hereafter created or arising under this Agreement and all renewals,
extensions, restructurings and refinancings of any of the above (all such
indebtedness, liabilities and obligations of Debtor being collectively referred
to herein as the "Secured Obligations").
SECTION 4. Debtor Remains Liable
Anything herein to the contrary notwithstanding: (a) Debtor shall remain
liable under the contracts and agreements included in the Collateral to the
extent set forth therein to perform all of its duties and obligations thereunder
to the same extent as if this Agreement had not been executed; (b) the exercise
by Agent of any of the rights hereunder shall not release Debtor from any of its
duties or obligations under the contracts and agreements included in the
Collateral; and (c) neither Agent nor any Lender shall have any obligation or
liability under the contracts and agreements included in the Collateral by
reason of this Agreement, nor shall Agent nor any Lender be obligated to perform
any of the obligations or duties of Debtor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.
SECTION 5. Representations and Warranties
In order to induce Agent and each Lender to enter into this Agreement,
Debtor represents and warrants to Agent and to each Lender as follows:
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5.1 Binding Obligation. This Agreement is the legally valid and binding
obligation of Debtor, enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium, or similar laws or equitable principles relating to or limiting
creditor's rights generally.
5.2 Office and Collateral Locations. The Debtor represents and warrants
to the Agent that the Debtor's chief executive office, its books and records,
and copies of the Physical Properties of the Series are located at the Debtor's
address(es) and laboratories described on Schedule I.
5.3 Ownership of Collateral; Bailees. Except for matters disclosed on
Schedule III, other Permitted Encumbrances and the Security Interests, Debtor
owns the Collateral which it acquired from Producer pursuant to the CTWP
Agreements, and will own such after-acquired Collateral, free and clear of any
Lien. No effective financing statement or other form of lien notice covering all
or any part of the Collateral is on file in any recording office, except for
those in favor of Agent and as disclosed on Schedule III. Except as disclosed on
Schedule III, none of the Collateral is in the possession of any consignee,
bailee, warehouseman, laboratory, agent or processor.
5.4 Fictitious Names. Debtor has no other places of business except
those separately specified on Schedule I. Debtor does not do business and has
not done business during the past five years under any tradename or fictitious
business name except as disclosed on Schedule II. Except as disclosed on
Schedule II, Debtor has not acquired assets from any Person, other than assets
acquired in the ordinary course of Borrower's business, during the past five
years.
5.5 Perfection. Agent has a valid, perfected and, except for the
Permitted Encumbrances, first priority security interest in the Collateral,
securing the payment of the Secured Obligations, and such Security Interests are
entitled to all of the rights, priorities and benefits afforded by the UCC or
other applicable law as enacted in any relevant jurisdiction which relates to
perfected security interests.
5.6 Governmental Authorizations; Consents. No authorization, approval or
other action by, and no notice to or filing with, any domestic or foreign
governmental authority or regulatory body or consent of any other Person is
required either (a) for the grant by Debtor of the Security Interests granted
hereby or for the execution, delivery or performance of this Agreement by Debtor
or (b) for the perfection of or the exercise by Agent of its rights and remedies
hereunder (except as may have been taken by or at the direction of Debtor or
Agent).
5.7 Accurate Information. All information heretofore, herein or
hereafter supplied to Agent by or on behalf of Debtor with respect to the
Collateral is and will be accurate and complete in all material respects.
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SECTION 6. Further Assurances; Covenants
6.1 Other Documents and Actions. Debtor will, from time to time, at its
expense, promptly execute and deliver all further instruments and documents and
take all further action that may be necessary or desirable, or that Agent may
request, in order to create, perfect and protect any security interests granted
or purported to be granted hereby or pursuant to any other Loan Document or to
enable Agent to exercise and enforce its rights and remedies hereunder, or under
any other Loan Document with respect to any Collateral. Without limiting the
generality of the foregoing, Debtor will: (a) execute and file such financing or
continuation statements, or amendments thereto and such other instruments,
documents or notices, as may be necessary or desirable, or as Agent may request,
in order to create, perfect and preserve the security interests granted or
purported to be granted hereby or pursuant to any other Loan Document; (b) at
any reasonable time, upon demand by Agent, exhibit the Collateral to allow
inspection of the Collateral by Agent or Persons designated by Agent and to
examine and make copies of the records of Debtor related thereto, and to discuss
the Collateral and the records of Debtor with respect thereto with, and to be
advised as to the same by, Debtor's officers and employees and, after the
occurrence and during the continuance of an Event of Default, in the case of the
Accounts, Documents, General Intangibles, Instruments and Investment Property
with any Person which is or may be obligated thereon; and (c) upon Agent's
request, appear in and defend any action or proceeding that may affect Debtor's
title to or Agent's security interest in the Collateral.
6.2 Agent Authorized. Debtor hereby authorizes Agent to file one or more
financing or continuation statements, and amendments thereto (or similar
documents required by any laws of any applicable jurisdiction), relating to all
or any part of the Collateral without the signature of Debtor where permitted by
law.
6.3 Corporate or Name Change. Debtor will give Agent at least thirty
(30) days prior written notice of any change in Debtor's name, identity, mailing
address or corporate structure. With respect to any such change, Debtor will
promptly execute and deliver such documents and take such actions as Agent deems
necessary or desirable to create, perfect and preserve the security interests of
Agent in the Collateral.
6.4 Business Locations. Subject to the next sentence, Debtor will keep
the Collateral at the locations specified on Schedule I. Debtor covenants and
agrees that in the event (a) the title or titles of the Series or the name or
any trade name of Debtor is to be changed or modified in any manner, (b) Debtor
proposes to acquire or use a new trade name, (c) the chief executive office of
Debtor is to be relocated to a place other than its present address as stated in
Schedule I hereof, or (d) there is proposed to be a change in location or name
of any laboratory which holds, or which is expected to process, any original
negative, sound, optical or other special effects material including, without
limitation, the final, complete composite master negative of the Series, then
Debtor shall provide thirty (30) days prior written notice to Agent and, prior
to making any such change or modification, shall execute and deliver to Agent
such further documents and do such other acts and things as Agent may request in
order to carry out the
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purposes of this Agreement including, without limitation, the execution and
delivery of financing statements, amendments, copyright assignments and
mortgages, and laboratory pledgeholder agreements, necessary or desirable to
continue and/or perfect Agent's Lien in the Collateral.
6.5 Account Covenants. Except as otherwise provided in this subsection
6.5, Debtor shall continue to collect, at its own expense, all amounts due or to
become due Debtor under the Accounts arising from the Collateral (the "Series
Accounts") and apply such amounts as are so collected to the outstanding
balances thereof. In connection with such collections, Debtor may take (and, at
Agent's direction, shall take) such action as Debtor or Agent may deem necessary
or advisable to enforce collection of the Series Accounts; provided, that Agent
shall have the right at any time after the occurrence and during the continuance
of a Default or an Event of Default to: (a) notify the customers or obligors
under any Series Accounts of the assignment of such Series Accounts to Agent and
to direct such customers or obligors to make payment of all amounts due or to
become due directly to Agent; (b) enforce collection of any such Series
Accounts; and (c) adjust, settle or compromise the amount or payment of such
Series Accounts. After the occurrence and during the continuance of a Default or
an Event of Default (i) all amounts and Proceeds received by Debtor with respect
to the Series Accounts shall be received in trust for the benefit of Agent (on
behalf of Lenders), shall be segregated from other funds of Debtor and shall be
forthwith paid over to Agent in the same form as so received (with any necessary
endorsement) to be deposited in the Collection Account. Debtor shall not adjust,
settle or compromise the amount or payment of any Series Account, or release
wholly or partly any customer or obligor thereof, or allow any credit or
discount thereon (other than credits and discounts in the ordinary course of
business and in amounts which are not material to Debtor) without the prior
consent of Agent.
6.6 Intellectual Property Covenants. Debtor shall preserve and maintain
all copyrights related to the Series and use its best efforts to obtain any
consents, waivers or agreements necessary to enable Agent to exercise its
remedies with respect to the copyrights related to the Series. Debtor shall not
abandon any material right to file a copyright application with respect to the
Series nor shall Debtor abandon any material pending copyright application or
copyright with respect to the Series without the prior written consent of Agent.
Debtor represents and warrants to Agent that the execution, delivery and
performance of this Agreement by Debtor will not violate or cause a default
under any of the copyrights relating to the Series or any agreement in
connection therewith.
6.7 Protection of Collateral; Insurance. Debtor will do nothing to
impair the rights of Agent in the Collateral. Debtor shall at all times maintain
insurance with respect to the Collateral in compliance with the requirements of
the Purchase Agreement. Debtor assumes all liability and responsibility in
connection with the Collateral acquired by it, and the liability of Debtor to
pay the Secured Obligations shall in no way be affected or diminished by reason
of the fact that such Collateral may be lost, stolen, damaged, or for any reason
whatsoever unavailable to Debtor.
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6.8 Taxes and Claims. Debtor will pay when due all property and other
taxes, assessments and governmental charges imposed upon, and all claims
against, the Collateral (including claims for labor, materials and supplies);
provided that no such tax, assessment or charge need be paid if Debtor is
contesting the same in good faith by appropriate proceedings promptly instituted
and diligently conducted and if Debtor has established such reserve or other
appropriate provision, if any, as shall be required in conformity with GAAP; and
provided further that the same can be contested without risk of loss or
forfeiture or material impairment of the Collateral or the use thereof.
6.9 Collateral Description. Debtor will furnish to Agent, from time to
time upon request, statements and schedules further identifying and describing
the Collateral and such other information, reports and evidence concerning the
Collateral (and in particular the Series Accounts) as Agent may reasonably
request, all in reasonable detail.
6.10 Use of Collateral. Debtor will not use or permit any Collateral to
be used unlawfully or in violation of any provision of applicable law, or any
policy of insurance covering any of the Collateral.
6.11 Records of Collateral. Debtor shall keep full and accurate books
and records relating to the Collateral and shall stamp or otherwise mark such
books and records in such manner as Agent may reasonably request indicating that
the Collateral is subject to the Security Interests.
6.12 Federal Claims. Debtor shall notify Agent of any Collateral which
constitutes a claim against the United States government or any instrumentality
or agency thereof, the assignment of which claim is restricted by federal law.
Upon the request of Agent, Debtor shall take such steps as may be necessary to
comply with any applicable federal assignment of claims laws and other
comparable laws.
SECTION 7. Agent Appointed Attorney-in-Fact
7.1 Debtor hereby irrevocably appoints Agent as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor, Agent or otherwise, from time to time in Agent's discretion,
at any time an Event of Default or Sales Agent Default has occurred and remains
continuing, to take any action (other than those described in Section 7.2 below)
and to execute any instrument that Agent may deem necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation:
(a) to obtain and adjust insurance required to be paid to Agent;
(b) to ask, demand, collect, sue for, recover, compound, receive
and give acquittance and receipts for moneys due and to become due under
or in respect of any of the Collateral;
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(c) to receive, endorse, and collect any drafts or other
Instruments, Documents and chattel paper, in connection with clauses (a)
and (b) above;
(d) to file any claims or take any action or institute any
proceedings that Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce the rights
of Agent with respect to any of the Collateral;
(e) to pay or discharge taxes or Liens levied or placed upon or
threatened against the Collateral, the legality or validity thereof and
the amounts necessary to discharge the same to be determined by Agent in
its sole discretion, and such payments made by Agent to become
obligations of Debtor to Agent, due and payable immediately without
demand;
(f) to sign and endorse any invoices, freight or express bills,
bills of lading, storage or warehouse receipts, assignments,
verifications and notices in connection with Series Accounts and other
documents relating to the Collateral;
(g) to lease, license, sell or otherwise dispose of the Series
and/or such distribution rights in and to the Series and such rights
therein as have not been disposed of on the date of such default by
Debtor as permitted hereunder (or to engage others to do so with the
costs and expenses thereof to be recoupable by Agent as provided
herein);
(h) to negotiate such lease, license, sale or other agreements
and to enter into such agreements on behalf of Debtor on such terms and
conditions (not in conflict with the terms and conditions of such
agreements) consistent with this Agreement as have theretofore been
entered into by Debtor and which Agent has been made aware of, as Agent
deems appropriate; and
(i) generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral as fully and
completely as though Agent were the absolute owner thereof for all
purposes, and to do, at Agent's option and Debtor's expense, at any time
or from time to time, all acts and things that Agent deems necessary to
protect, preserve or realize upon the Collateral; provided, however,
that nothing herein contained shall be construed as requiring or
obligating Agent to make any demand, or to make any inquiry as to the
nature or sufficiency of any payment received by it, or to present or
file any claim or notice or take any action with respect to any of the
Collateral or the money due or to become due thereunder or the property
covered thereby, and no action taken or omitted to be taken by Agent
with respect to any of the Collateral shall give rise to any defense,
counterclaim or setoff in favor of Debtor or to any claim or action
against Agent.
7.2 Debtor hereby further irrevocably appoints Agent as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor, Agent or otherwise, from time to time in Agent's discretion,
at any time a Sales Agent Default under Section 12.1 (a), (e), or (f) of the
Inter-Party Agreement has occurred and remains continuing, or
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all Guaranteed Obligations (as defined in the Inter-Party Agreement) have been
declared immediately due and payable under Section 12.2 of the Inter-Party
Agreement, to take any action and to execute any instrument that Agent may deem
necessary or advisable to accomplish the purposes of this Agreement, including,
without limitation:
(a) to renegotiate the Sales Agent Agreement, the Distribution
Agreements, or such other agreements as Agent has a Lien in pursuant to
the terms hereof as Agent in its sole and exclusive discretion deems
proper;
(b) to require, demand, collect, receive, settle, adjust,
compromise and to give acquittances and receipts for the payment of any
and all money payable pursuant to the Distribution Agreements or such
other agreements included in the Collateral and such licenses and
agreements as Agent may enter into as aforesaid; and
(c) to terminate the Sales Agent Agreement and/or replace the
Sales Agent thereunder with a Person selected by Agent.
7.3 Neither Agent nor its attorneys will be liable for any acts or
omissions or for any error of judgment or mistake of fact or law arising
pursuant to this Section 7. Debtor ratifies and confirms all acts taken by Agent
as such attorney-in-fact or its substitutes by virtue of the power of attorney
contained in this Section 7. This power, being coupled with an interest, is
irrevocable until this Agreement has been terminated and the Obligations have
been fully satisfied.
SECTION 8. Transfers and Other Liens
Except as otherwise permitted herein or by the Inter-Party Agreement,
Debtor shall not:
(a) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Collateral,
except pursuant to the terms of the Sales Agent Agreement, the Series in
the ordinary course of business; or
(b) create or suffer to exist any lien, security interest or
other charge or encumbrance upon or with respect to any of the
Collateral except for Permitted Encumbrances.
SECTION 9. Remedies
(a) If any Event of Default shall have occurred and be
continuing, Agent may exercise in respect of the Collateral, in addition
to all other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected
Collateral) and also may: (i) require Debtor to, and Debtor hereby
agrees that it will, at its expense and upon request of Agent forthwith,
assemble all or part of the Collateral as directed by Agent and make it
available to Agent at any reasonable place or places designated by Agent
in which event Debtor shall at its own expense (A) forthwith cause the
same to be
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moved to the place or places so designated by Agent and thereby
delivered to Agent, (B) store and keep any Collateral so delivered to
Agent at such place or places pending further action by Agent, and (C)
while Collateral shall be so stored and kept, provide such guards and
maintenance services as shall be necessary to protect the same and to
preserve and maintain the Collateral in good condition; (ii) withdraw
all cash in the Collection Account and apply such monies in payment of
the Secured Obligations; and (iii) without notice except as specified
below, sell, lease or otherwise dispose of the Collateral or any part
thereof in one or more parcels at public or private sale, and without
the necessity of gathering at the place of sale of the property to be
sold, at any of the Agent's offices or elsewhere, at such time or times,
for cash, on credit or for future delivery, and at such price or prices
and upon such other terms as Agent may deem commercially reasonable.
Debtor agrees that, to the extent notice of sale shall be required by
law, at least ten (10) days notice to Debtor of the time and place of
any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. At any sale of the Collateral,
if permitted by law, Agent may bid (which bid may be, in whole or in
part, in the form of cancellation of indebtedness) for the purchase of
the Collateral or any portion thereof for the account of Agent (on
behalf of Lenders). Agent shall not be obligated to make any sale of
Collateral regardless of notice of sale having been given. Agent may
adjourn any public or private sale from time to time by announcement at
the time and place fixed therefor, and such sale may, without further
notice, be made at the time and place to which it was so adjourned. To
the extent permitted by law, Debtor hereby specifically waives all
rights of redemption, stay or appraisal which it has or may have under
any law now existing or hereafter enacted.
(b) Upon the occurrence and during the continuance of an Event of
Default, Agent or its agents or attorneys shall have the right without
notice or demand or legal process (unless the same shall be required by
applicable law), personally, or by agents or attorneys, (i) to enter
upon, occupy and use any premises owned or leased by Debtor or where the
Collateral is located (or is believed to be located) until the Secured
Obligations are paid in full without any obligation to pay rent to
Debtor, to render the Collateral useable or saleable and to remove the
Collateral or any part thereof therefrom to the premises of Agent or any
agent of Agent for such time as Agent may desire in order to effectively
collect or liquidate the Collateral and use in connection with such
removal any and all services, supplies and other facilities of Debtor;
(ii) to take possession of Debtor's original books and records, to
obtain access to Debtor's data processing equipment, computer hardware
and software relating to the Collateral and to use all of the foregoing
and the information contained therein in any manner Agent deems
appropriate; and (iii) to notify postal authorities to change the
address for delivery of Debtor's mail to an address designated by Agent
and to receive, open and dispose of all mail addressed to Debtor.
(c) Debtor acknowledges and agrees that a breach of any of the
covenants contained in Sections 5, 6 and 8 hereof will cause irreparable
injury to Agent and that Agent has no adequate remedy at law in respect
of such breaches and therefore agrees,
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without limiting the right of Agent to seek and obtain specific
performance of other obligations of Debtor contained in this Agreement,
that the covenants of Debtor contained in the Sections referred to in
this Section shall be specifically enforceable against Debtor.
SECTION 10. Assigned Agreements
If an Event of Default has occurred and is continuing, Debtor hereby
irrevocably authorizes and empowers Agent, without limiting any other
authorizations or empowerments contained in any of the other Loan Documents, to
assert, either directly or on behalf of Debtor, any claims Debtor may have, from
time to time, against any other party to any of the agreements to which Debtor
is a party or to otherwise exercise any right or remedy of Debtor under any such
agreements (including, without limitation, the right to enforce directly against
any party to any such agreement all of Debtor's rights thereunder, to make all
demands and give all notices and to make all requests required or permitted to
be made by Debtor thereunder).
SECTION 11. Limitation on Duty of Agent with Respect to Collateral
Beyond the safe custody thereof, Agent shall have no duty with respect
to any Collateral in its possession or control (or in the possession or control
of any agent or bailee) or with respect to any income thereon or the
preservation of rights against prior parties or any other rights pertaining
thereto. Agent shall be deemed to have exercised reasonable care in the custody
and preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which it accords its own
property. Agent shall not be liable or responsible for any loss or damage to any
of the Collateral, or for any diminution in the value thereof, by reason of the
act or omission of any warehouseman, carrier, forwarding agency, consignee or
other agent or bailee selected by Agent in good faith.
SECTION 12. Application of Proceeds
Upon the occurrence and during the continuance of an Event of Default,
the proceeds of any sale of, or other realization upon, all or any part of the
Collateral and any cash held in the Collection Account shall be applied in
accordance with the terms of the Inter-Party Agreement.
SECTION 13. Expenses
Debtor shall pay all costs, fees and expenses of protecting, storing,
warehousing, appraising, insuring, handling, maintaining and shipping the
Collateral, all costs, fees and expenses of creating, perfecting, maintaining
and enforcing the Security Interests, and any and all excise, property, sales
and use taxes imposed by any federal, state, local or foreign authority on any
of the Collateral, or with respect to periodic appraisals and inspections of the
Collateral, or with respect to the sale or other disposition thereof. If Debtor
fails to promptly pay any portion of the above costs, fees and expenses when due
or to perform any other obligation of Debtor under this Agreement, Agent or any
other Lender may, at its option, but shall not be required to, pay or perform
the same and charge Debtor's account for all fees, costs and expenses incurred
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therefor, and Debtor agrees to reimburse Agent or such Lender therefor on
demand. All sums so paid or incurred by Agent or any other Lender for any of the
foregoing, any and all other sums for which Debtor may become liable hereunder
and all fees, costs and expenses (including attorneys' fees, legal expenses and
court costs) incurred by Agent or any other Lender in enforcing or protecting
the Security Interests or any of their rights or remedies under this Agreement
shall be payable on demand, shall constitute Secured Obligations, shall bear
interest until paid at the highest rate provided in the Credit Agreement and
shall be secured by the Collateral.
SECTION 14. Termination of Security Interests; Release of Collateral
Upon payment in full of all Secured Obligations, the Security Interests
shall terminate. Upon such termination of the Security Interests, Agent will, at
the expense of Debtor, execute and deliver to Debtor such documents as Debtor
shall reasonably request to evidence the termination of the Security Interests.
SECTION 15. Notices
All notices, approvals, requests, demands and other communications
hereunder shall be given (i) if to Debtor, to Debtor's address set forth in the
Inter-Party Agreement and (ii) if to Agent, to Agent's address set forth in the
Inter-Party Agreement, in each case in accordance with the notice provisions of
the Credit Agreement.
SECTION 16. Successors and Assigns
This Agreement is for the benefit of Agent and Lenders and their
respective successors and assigns, and in the event of an assignment of all or
any of the Secured Obligations, the rights hereunder, to the extent applicable
to the Secured Obligations so assigned, may be transferred with such Secured
Obligations. This Agreement shall be binding on Debtor and its successors and
assigns; provided that Debtor may not delegate its obligations under this
Agreement without Agent's prior written consent.
SECTION 17. Changes in Writing
No amendment, modification, termination or waiver of any provision of
this Agreement shall be effective unless the same shall be in writing signed by
Agent.
SECTION 18. Applicable Law
THIS AGREEMENT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES.
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SECTION 19. Failure or Indulgence Not Waiver; Remedies Cumulative
No failure or delay on the part of Agent or any Lender in the exercise
of any power, right or privilege hereunder shall impair such power, right or
privilege or be construed to be a waiver of any default or acquiescence therein,
nor shall any single or partial exercise of any such power, right or privilege
preclude other or further exercise thereof or any other right, power or
privilege. All rights and remedies existing under this Agreement are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
SECTION 20. Headings
Section and subsection headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose or be given any substantive effect.
SECTION 21. Counterparts
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument and any of the
parties hereto may execute this Agreement by signing any such counterpart.
SECTION 22. Survival
All representations and warranties of Debtor contained in this Agreement
shall survive the execution and delivery of this Agreement.
[SIGNATURE PAGE FOLLOWS]
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Witness the due execution hereof by the respective duly authorized
officers of the undersigned as of the date first written above.
TEAM COMMUNICATIONS GROUP, INC.,
as Debtor
By:______________________________________
Title:___________________________________
HELLER EMX, INC., as Agent
By:______________________________________
Title:___________________________________
[Signature Page to Team Security Agreement]
177
SCHEDULE I
Chief Executive Office; Locations of Books and
Records and Physical Properties
1. Chief Executive Office and Location 11818 Wilshire Blvd., 2nd Floor
of Books and Records: Los Angeles, CA 90025
2. Locations of Physical Properties of International Image Services
Series: Corp.: 1704 Stewart Street, Santa
Monica, CA 90404
Broadcast Standards, Inc.: 2044
Cotner Avenue, Los Angels, CA 90025
Rainmaker Digital Pictures: 50
West 2nd Avenue, Vancouver, BC,
V5Y 1B3
FACS Records Centre Inc.: 8825
North Brook Court, Burnaby, BC,
V5J 5J1
3. Laboratory Locations: International Image Services
Corp.: 1704 Stewart Street, Santa
Monica, CA 90404
Broadcast Standards, Inc.: 2044
Cotner Avenue, Los Angels, CA 90025
Rainmaker Digital Pictures: 50
West 2nd Avenue, Vancouver, BC,
V5Y 1B3
FACS Records Centre Inc.: 8825
North Brook Court, Burnaby, BC,
V5J 5J1
I-1
178
SCHEDULE II
Tradenames and Fictitious Names
(Present and Past Five Years)
Fictitious Names: None.
Tradenames: Team Entertainment Group
II-1
179
SCHEDULE III
Liens; Financing Statements; Goods in Possession
of Consignees, Laboratories, Bailees, Warehousemen, Agents
and Processors
Liens: No Liens except for Permitted Encumbrances.
Physical Properties of Series
are held at the following
Laboratories: International Image Services Corp.:
1704 Stewart Street, Santa Monica, CA 90404
Broadcast Standards, Inc.: 2044 Cotner Avenue,
Los Angels, CA 90025
Rainmaker Digital Pictures: 50 West 2nd Avenue,
Vancouver, BC, V5Y 1B3
FACS Records Centre Inc.: 8825 North Brook
Court, Burnaby, BC, V5J 5J1
III-1