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EXHIBIT 10.15
CONFIDENTIAL
July 20, 1998
Mr. Drew Levin
Team Communications Group, Inc.
12300 Wilshire Boulevard, Suite 400
Los Angeles, CA 90025
VIA FACSIMILE
RE: Credit Request for Team Communications Group, Inc.
Dear Drew:
We are pleased to express our interest in considering the credit accommodations
described below. This letter is not intended to constitute a commitment to lend
on the part of Imperial Bank ("Bank"), but only to summarize for discussion
purposes the credit accommodations which we are interested in considering at
this time.
BORROWER: Team Entertainment Group, Inc. and wholly owned
subsidiaries ("Team" or "the Company")
FACILITY: $10,000,000 collateralized revolving credit facility
("the Facility")
PURPOSE: To offset cash flow timing differences that arise
between the production and marketing of product and the
collection of related accounts and contracts
receivable.
MATURITY: July 31, 1999.
SECURITY: Perfected first security priority interest in all
assets of the Company including but not limited to all
domestic and foreign accounts, inventory, equipment,
accounts receivable, and contract receivables.
In addition, the following will be required:
Assignment of all copyrights and mortgage of copyrights including but not
limited to all film assets and pictures.
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Laboratory pledgeholder agreements with all facilities
holding physical elements of film and video product
produced by the Company.
Assignment of (or a right of equivalent access under)
all laboratory access letters or documents allowing
access to the physical elements of film, video and
television product coterminous with the rights of the
Company on acquired product.
COMMITMENT FEE: 2.0% of the amount of the Facility, which is due
and payable on signing of loan documentation.
UNUSED COMMITMENT FEE: 0.50% on unused portion of the Commitment Amount.
Calculation shall be on the basis of actual days
elapsed in a year of 360 days and payable quarterly in
arrears.
INTEREST RATE: One and a half percent (1.50%) above Imperial Bank's
announced Prime Rate as it may vary from time to time
on the portion of the commitment which is not secured
by cash. Calculation of interest shall be on the basis
of actual days elapsed in a year of 360 days and
payable monthly in arrears.
Two percent (2.00%) per annum plus the one, three, or
six month LIBOR rate as quoted from time to time to the
Bank on any cash-secured borrowings. No more than five
LIBOR loans may be outstanding at any one time and
shall be in amounts of not less than $1,000,000.
BORROWING BASE: Total outstandings under the Facility will be limited
to the amount eligible under the Borrowing Base
computed in accordance with the following: TIER 1, 90%
of all completed domestic product which includes
contracts receivable (or accounts receivable) from the
major US television networks, major pay cable channels
and cable networks, and independent television stations
due within the next rolling 12 months from the date of
calculation of the Borrowing Base plus TIER 2, 75% of
foreign contracts receivable (or accounts receivable)
from Approved Territories and debtors for completed
product due within 12 months from the date of
calculation of the Borrowing Base plus TIER 3, 15% of
foreign contracts receivable (or accounts receivable)
from Secondary Territories and debtors for completed
product due within 12 months from the date of
calculation of the Borrowing Base, plus TIER 4, 100% of
100% of all
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cash balances (certificates of deposit) and 85% to 90%
against liquid investments as deemed acceptable by
Imperial Bank.
Any payment more than 90 days past the contractual due
date shall be eliminated from the Borrowing Base.
Amounts due from a single obligor which represent
amounts in excess of 20% of the current total contract
and accounts receivable amount shall be eliminated from
the Borrowing Base. Bank, in its sole and absolute
discretion, will consider higher concentration
limitations on a case by case basis for individual
account debtors as the need arises.
Any obligor for which 25% of its balance exceeds 90
days past due will be eliminated from the Borrowing
Base (whichever is less). Additionally, any related
contra accounts payable will offset the related
receivable.
The Borrowing Base is further limited to caps on the
tiers as follows: TIER 1, $5,000,000; TIER 2,
$2,500,000 or 50% of eligible contract and accounts
receivable (whichever is less); and TIER 3, $1,000,000
or 20% of eligible contract and accounts receivable
(whichever is less) and TIER 4, $5,000,000.
MANDATORY
PREPAYMENT: At any time that the total outstandings exceed the
lesser of the Borrowing Base or the Commitment, the
Company shall pay down the outstandings within three
(3) calendar days.
REPRESENTATION
AND WARRANTIES: The usual for facilities and transactions of this type
and others, including but not limited to corporate
existence, good standing, authorization, financial
statements, title to assets and film rights, no
material adverse change, litigation, no violation of
agreements or instruments, compliance with laws, taxes,
and accuracy of information.
In connection with the foregoing credit facility, the following additional terms
and conditions will also apply.
FINANCIAL REPORTING
REQUIREMENTS:
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1.) Quarterly financial statements, within 45 days
after and as of the end of each fiscal quarter;
2.) Audited annual financial statements, within 90
days after and as of the end of each fiscal year;
3.) Accounts and contracts receivable agings within 15
days after and as of the end of each month in form
satisfactory to the Bank.
4.) A Borrowing Base Certificate, in a form
satisfactory to the Bank, presented within 15 days
after and as of the end of each month and the
amount of outstanding borrowings allowed at any
one time under the facility will be re-set upon
its presentation. Failure to present the
Certificate within three (3) business days after
the 15th of any month will result in an Event of
Default if there are any outstanding borrowings.
No further borrowings may occur prior to the
delivery of the certificate.
5.) Cash flow projections covering a rolling forward
12 month period, to be submitted quarterly within
45 days after and as of the end of each fiscal
quarter.
COVENANTS:
Normal negative, affirmative and financial covenants including but not limited
to the following:
1.) Reasonable financial covenants and ratios will be
established for earnings, tangible net worth,
working capital, leverage, capital expenditures
and other relevant figures. The covenants and
ratios will be based upon financial projections
which have been delivered by the Company and are
acceptable to Bank.
2.) Maintain adequate casualty and liability insurance
on all property.
3.) Comply with all federal, state and local laws and
regulations.
4.) No mortgage or pledge of any assets without
obtaining prior permission from Bank.
5.) The Company shall maintain all primary business
accounts at Bank.
6.) Any other covenant as deemed necessary by Bank.
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EXPENSES AND
INDEMNIFICATION: All out-of-pocket expenses of Imperial associated with
the performance of due diligence by Imperial, and with
the preparation, execution and delivery, waiver or
modification, and enforcement of the Credit Agreement,
and any other documentation contemplated hereby are to
be paid by the Company.
Such fees include the expenses of Imperial's counsel,
the cost of technical and other consultants,
specifically those costs associated with the periodic
ABL audits, as well as standard processing and
servicing fees.
CONDITIONS PRECEDENT
TO LENDING: Including but not limited to:
1.) Satisfactory completion of our credit and
financial investigation, which at the sole
discretion of Bank, shall evidence that all
information provided by the Company is accurate.
This investigation will include a Collateral
Examination by the Bank's Asset Based Lending
Group and an appraisal of the Company's
intellectual property by an appraiser approved by
Bank.
2.) No material adverse change in business,
operations, profits or prospects of the Borrower
or in the condition of assets of the above prior
to funding.
3.) Completion of all documentation and final terms of
the proposed financing satisfactory to Bank.
4.) Formal credit approval by Bank's Commercial Loan
Administration.
5.) Evidence satisfactory to Bank of the perfection of
all security interests to the lender and that
there are no prior security interests on any
collateral.
6.) $5,000,000 in cash held at Bank as collateral for
the line of credit.
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7.) The successful completion of an Initial Public
Offering with net proceeds to the Company of no
less than $6,500,000.
This letter is provided solely for you information and is delivered to you with
the understanding that neither it nor its substance shall be disclosed to any
third person, except those that are in a confidential relationship with you, or
where the same is required by law. As mentioned, this letter does not constitute
a commitment to lend on the part of Imperial Bank. We expect to engage in
further conversations with you and to obtain additional information before
deciding whether a commitment and under what terms and conditions for such
commitment would be made. While this letter may form the basis for future
discussions, you understand that Imperial Bank will not be committed to provide
credit to the Borrower unless the commitment is evidenced in writing.
Sincerely yours,
IMPERIAL ENTERTAINMENT GROUP
Valerie Brosset Morgan Rector
Assistant Vice President President
cc: Ken Libkin, Senior Vice President/Commercial Loan Administration
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