REVOLVING CREDIT LOAN AND SECURITY AGREEMENT
THIS REVOLVING CREDIT LOAN AND SECURITY AGREEMENT (this "Agreement")
is entered into as of the 16th day of April, 1997, by and between (i) UNAPIX
ENTERTAINMENT, INC., a Delaware corporation ("Unapix"), A PIX ENTERTAINMENT,
INC., a New York corporation ("A Pix"), and MIRAMAR IMAGES, INC., a Washington
corporation ("Miramar" and together with Unapix and A Pix, collectively the
"Borrowers"), and (ii) IMPERIAL BANK, a California chartered bank (the "Bank"),
with reference to the following:
PREAMBLE
A. The Borrowers are in the business of acquiring, marketing and
distributing Theatrical Pictures, Video Pictures, Television Programs and Audio
Recordings throughout the world.
B. The Borrowers desire a revolving credit facility in an amount not to
exceed $7,000,000.
C. Subject to the terms and conditions set forth herein, the Bank is
willing to make Advances to the Borrowers in an aggregate amount not in excess
of the Commitment.
NOW, THEREFORE, in consideration of the above facts, the mutual
covenants, agreements, representations and warranties contained herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, the parties hereto agree as follows:
TERMS
1. CERTAIN DEFINITIONS.
Unless (i) elsewhere defined herein, each capitalized term used in this
Agreement shall have the following meanings, and (ii) the context otherwise
requires, any of the following capitalized terms may be used in the singular or
the plural, depending on the reference:
"Acknowledgment" shall mean an acknowledgment of an Irrevocable Authority
executed by the applicable account debtor in substantially the form of
Exhibit E attached hereto or such other form as may be acceptable to the
Bank in its sole and absolute discretion.
"Act" shall have the meaning set forth in Section 12.2 hereof.
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"Acquisition Funds" means one or more acquisition funds established by
Unapix for the purpose of financing a portion of the acquisition costs of
Products.
"Actual Negative Cost" shall mean (i) for any Product produced or financed
by a Borrower or any of its Subsidiaries, the aggregate of all costs
incurred in the acquisition of underlying rights with respect to such item
of Product and the development, production, completion and delivery of the
final master negative that will be used to produce the preprint elements
from which the prints of the first general release or exhibition of such
item of Product will be made, including allocated overhead and capitalized
interest, and (ii) for any item of Product acquired or to be acquired by a
Borrower or any of its Subsidiaries, the consideration (including the
amount of all Negative Pick-Up Commitments) payable for such item of
Product by a Borrower or any Subsidiary plus if such item of Product is a
Theatrical Picture, all print and advertising costs to be incurred by a
Borrower or any of its Subsidiaries in connection with the theatrical
distribution of such item of Product in the United States and Canada.
"Adjusted Tangible Net Worth" shall mean, as at any date of determination,
the total of the Borrowers' and their Subsidiaries' Net Worth determined
in accordance with GAAP on a consolidated basis less the aggregate of (i)
intangible assets (including, without limitation, goodwill, trademarks,
service marks, patents, copyrights, patent applications, research and
development expenses, and organizational expenses), (ii) securities held
in the treasury of Borrowers' and their Subsidiaries, (iii) all capital
stock that is obligated to be redeemed (whether by maturity, mandatory
redemption, sinking fund obligations or otherwise), (iv) the unamortized
portion of the capitalized costs of issuing securities, (v) all sums held
in (or designated for) a sinking or analogous fund established for the
purpose of redeeming, retiring or prepaying securities which are not
already deducted pursuant to clause (iii) above, (vi) securities issued by
Persons other than Affiliates of the Borrowers which are not readily
marketable, (vii) all established reserves that are not deducted on the
balance sheet from the assets to which they relate, (viii) amounts due
from Affiliates, officers, directors, stockholders, and (ix) other
intangible assets classified as such in accordance with GAAP.
"Advances" shall mean the principal amount of all sums which the Bank
lends to any or all of the Borrowers pursuant to this Agreement.
"Affiliate" shall mean any Person who directly or indirectly through one
or more intermediaries, controls, is under common control with or is
controlled by, the applicable Person.
"Approved Account Debtors" shall have the meaning set forth in Section
3.2.1 hereof.
"Approved License Agreements" shall have the meaning set forth in Section
3.2.3 hereof.
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"Atlantic Bank" shall mean Atlantic Bank of New York.
"Atlantic Bank Letter of Credit" shall mean a letter of credit issued by
Atlantic Bank under the Atlantic Credit Facility, a copy of which is
attached hereto as Exhibit M.
"Atlantic Credit Facility" shall mean the credit facility provided to the
Borrowers by Atlantic Bank.
"Atlantic Repayment Confirmation Agreement" shall mean an agreement
between the Bank and Atlantic Bank in substantially the form attached
hereto as Exhibit K.
"Audio Recordings" shall mean all music, vocal and other audio recordings
set forth in compact discs, tapes, cassettes, records and any other audio
mechanical device.
"Availability Period" shall have the meaning set forth in Section 2.1.1
hereof.
"Bank" shall have the meaning set forth in the opening paragraph of this
Agreement.
"Bank Notice Letter" shall mean a notice, in the form of Exhibit H
attached hereto or such other form as may be acceptable to the Bank in its
sole and absolute discretion, notifying a third party bank or other
financial institution at which any Borrower maintains a bank account of
the Bank's security interest therein.
"BMG" shall mean Bertelsmann Music Group and its Affiliates.
"Borrowers" shall have the meaning set forth in the opening paragraph of
this Agreement.
"Borrowing Base" shall have the meaning set forth in Section 3.1 hereof.
"Borrowing Base Certificate" shall mean a certificate setting forth (i)
the amount of each component of the Borrowing Base on an account
debtor-by-account debtor and tier-by-tier basis as of a particular date,
(ii) a list of all Products related to accounts and contracts receivable
then to be included in the Borrowing Base, which list is created on a
quarterly basis and updated monthly, (iii) a list of the then Major
Account Debtors, (iv) a list of all Products for which a Borrower has
requested since the date of the immediately preceding Borrowing Base
Certificate from a laboratory, which is holding physical materials for
such Products, a quality check of any kind or nature for such Products,
and (v) such other items as may be requested by the Bank, from time to
time, such certificate to be in substantially the form of Exhibit J
attached hereto or in such other form as may be acceptable to the Bank in
its sole and absolute discretion.
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"Borrowing Base Reconciliation" shall mean a written reconciliation of the
changes in the Borrowing Base since the date of the most recent Borrowing
Base Certificate delivered to the Bank, which reconciliation sets forth in
reasonable detail the amount of sales and cash receipts by account debtors
since the date of the most recent Borrowing Base Certificate delivered to
the Bank and such other information as the Bank shall reasonably request
from time to time. The Borrowing Base Reconciliation shall be in a form
acceptable to the Bank in its sole and absolute discretion.
"Borrowing Base Reconciliation Delivery Date" shall mean the last day of
each month.
"Borrowing Certificate" shall mean a borrowing request executed by the
Borrowers in substantially the form attached hereto as Exhibit B or such
other form as may be acceptable to the Bank in its sole and absolute
discretion.
"Borrowing Base Certificate Delivery Date" shall mean the fifteenth (15th)
day of each month.
"Business Day" shall mean a day when banks are not authorized or required
to close in the State of California.
"Cash and Cash Equivalents" means (i) cash deposits and deposits in a
money market account which are maintained by a Borrower at the Bank or any
other commercial bank organized under the laws of the United States or any
State thereof or the District of Columbia having combined capital and
surplus of not less than $100,000,000, (ii) marketable direct obligations
issued or unconditionally guaranteed by the United States Government or
issued by any agency thereof and backed by the full faith and credit of
the United States, in each case maturing within one year from the date of
acquisition thereof, (iii) marketable direct obligations issued by any
State of the United States or any political subdivision of any such State
or any public instrumentality thereof maturing within one year from the
date of acquisition thereof and, at the time of acquisition, having the
highest rating obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc., (iv) commercial paper maturing no more
than one year from the date of creation thereof and, at the time of
acquisition, having the highest rating obtainable from either Standard &
Poor's Corporation or Moody's Investors Service, Inc., (v) certificates of
deposit or bankers' acceptances maturing within one year from the date of
acquisition thereof issued by the Bank or any other commercial bank
organized under the laws of the United States or any State thereof or the
District of Columbia having combined capital and surplus of not less than
$100,000,000, (vi) repos for underlying securities which meet the
definitions set forth in any of clauses (ii) through (iv) of this
paragraph and (vii) mutual funds holding only assets meeting one or more
of the definitions set forth in clauses (i) through (v) of this paragraph.
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"Cash Collateralized LC" shall have the meaning set forth in Section 2.4.5
hereof.
"Case Collateralized LC Sublimit" shall mean Seven Hundred Fifty Thousand
Dollars ($750,000).
"Closing Fee" shall have the meaning set forth in Section 4.1 hereof.
"Code" shall mean the Uniform Commercial Code in effect from time to time
in the relevant State or States.
"Collateral" shall have the meaning set forth in Section 8.2 hereof.
"Commercial Letter of Credit" shall mean a letter of credit obligation of
the Bank in favor of a designated third party beneficiary, under which
payment is made upon the presentation by the beneficiary of certain
documents and/or drafts to the Bank or its representative.
"Commercial Letter of Credit Fee" shall mean one and one-half percent
(1.5%) per annum of the principal amount of each Commercial Letter of
Credit.
"Commitment" shall have the meaning set forth in Section 2.1.1 hereof.
"Commitment Fee" shall have the meaning set forth in Section 4.3 hereof.
"Copyrights" shall have the meaning set forth in Section 8.2.1.1 hereof.
"Copyright Mortgages" shall mean the documents in respect of each of the
Products in substantially the form of Exhibit C attached hereto or such
other form as may be acceptable to the Bank in its sole and absolute
discretion.
"Costs" shall mean, collectively, all sums (other than Principal and
Interest) payable by all or any of the Borrowers pursuant to this
Agreement, including, without limitation, the Closing Fee, the Commitment
Fees and sums payable pursuant to Sections 13 and 15.7 hereof.
"Debt" shall mean, at any date of determination, the total of the
Borrowers' and their Subsidiaries' total liabilities determined in
accordance with GAAP on a consolidated basis.
"Debt to Adjusted Net Worth Ratio" shall mean the ratio of Debt to
Adjusted Tangible Net Worth.
"Determination Date" shall have the meaning set forth in Section 3.1
hereof.
"Discovery" shall mean The Discovery Channel.
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"Dollar" or "$" shall mean lawful money of the United States.
"Domestic" shall have the meaning set forth in Section 3.2.4 hereof.
"Drawdown Date" shall mean the day on which the Bank makes an Advance to
all or any of the Borrowers.
"East Texas" shall mean East Texas Distributors.
"Encumbrances" shall mean security interests, mortgages, pledges,
equities, encumbrances, conditional sales or other title retention
agreements, leases (excluding only operating leases for office equipment
and real property), rights, restrictions, reservations or charges or liens
of any nature, collectively.
"Environmental Laws" shall mean any and all federal, state, provincial,
local or municipal laws, rules, orders, regulations, statutes, ordinances,
codes, decrees or requirements of the United States, any State, foreign
country, state or province thereof or any municipality or other local
governmental division of any of the foregoing, or of any department,
commission, board, bureau, agency or instrumentality of the United States,
any State, foreign country, state or province thereof or municipality or
other local governmental division of any of the foregoing, regulating,
relating to or imposing liability or standards of conduct concerning any
Hazardous Material or environmental protection or health and safety, as
now or may at any time hereafter be in effect, including, without
limitation, the Clean Water Act, also known as the Federal Water Pollution
Control Act, 33 U.S.C. ss.ss. 1251, et seq.; the Clean Air Act, 42 U.S.C.
ss.ss. 7401, et seq.; the Federal Insecticide, Fungicide and Rodenticide
Act (FIFRA), 7 U.S.C. ss. 136; the Surface Mining Control and Reclamation
Act of 1977 (SMCRA), 30 U.S.C. ss.ss. 1201, et seq.; the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.
ss.ss. 9601, et seq.; the Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499, 100 Stat. 1613; the Emergency Planning and
Community Right-to-Know Act of 1986 (CEPCRA), 42 U.S.C. ss.ss. 11001, et
seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. ss.ss.
6901, et seq.; the Occupational Safety and Health Act of 1970 (OSHA) as
amended, 29 U.S.C. ss.ss. 655 and 657; the Carpenter-Presley-Tanner
Hazardous Substances Account Act; the California Health & Safety Code
ss.ss. 25300, et seq., together, in each case, with any amendment thereto,
and the regulations and rules adopted and the official publications
promulgated thereunder and all substitutions thereof.
"Environmental Liabilities" shall mean any claims, obligations or
liabilities, known or unknown, matured or not matured, absolute or
contingent, assessed or unassessed, where such claims, obligations or
liabilities would reasonably be expected to have a materially adverse
effect on the business or condition (financial or otherwise) of any of the
Borrowers or any of their respective Subsidiaries which in either case
have been or are imposed by reason of or based upon any provision
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of any Environmental Law, including, without limitation, any such claims,
obligations or liabilities relating to or arising out of or attributable,
in whole or in part, to the use, storage, treatment, release, processing,
distribution, transportation, manufacture, refinement, handling,
production or disposal of any Hazardous Materials by any of the Borrowers
or any Subsidiaries thereof, or any of their employees, agents,
representatives or predecessors in interest in connection with or in any
way arising from or relating to any or all of the Borrowers or any of
their respective Subsidiaries or any of their respective properties, or
relating to or arising from or attributable, in whole or in part, to the
use, storage, treatment, release, processing, distribution,
transportation, manufacture, refinement, handling, production or disposal
of any such Hazardous Materials, by any other Person on, under, at, from,
or in any way affecting, any of the properties owned or used by any of the
Borrowers or any of their respective Subsidiaries or any other location
where such could have a materially adverse effect on the business or
condition (financial or otherwise) of any of the Borrowers or any of their
respective Subsidiaries.
"Equipment" shall have the meaning set forth in Section 8.2.3 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
heretofore and hereafter amended, and any regulations promulgated
thereunder.
"ERISA Affiliate" shall mean, with respect to any or all Borrowers, all
trades or businesses (whether or not incorporated) which, together with
said Borrowers, are treated as a single employer under Section 414(b),
(c), (m) or (o) of the Internal Revenue Code.
"Estimated Revenue Expenses" shall have the meaning set forth in Section
3.2.6 hereof.
"Event of Default" shall have the meaning set forth in Section 11 hereof.
"Excluded Property" shall mean, collectively, all of the Borrowers'
rights, title and interests whether presently existing or hereafter
arising in all real property.
"Existing License Agreements" shall have the meaning set forth in Section
6.1.11 hereof.
"Existing Products" shall have the meaning set forth in Section 6.1.21
hereof.
"Facility" shall have the meaning set forth in Section 2.1.1 hereof.
"FASB No. 53" shall mean the Statement of Financial Accounting Standards
No. 53 promulgated by the Financial Accounting Standards Board as
heretofore and hereinafter amended, modified or supplemented.
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"Federal Reserve" shall have the meaning set forth in Section 2.12.1
hereof.
"Final Repayment Date" shall mean September 30, 1998.
"Foreign" shall have the meaning set forth in Section 3.2.5 hereof.
"GAAP" shall mean generally accepted accounting principles consistently
applied (except for accounting changes in response to applicable Financial
Accounting Standards Board releases or other authoritative
pronouncements).
"Hazardous Materials" shall mean (i) any chemical, compound, material,
mixture or substance that is now or hereafter defined or listed in, or
otherwise classified pursuant to, any Environmental Laws (as hereinafter
defined) as a "hazardous substance," "hazardous material," "hazardous
waste," "extremely hazardous waste," "infectious waste," "toxic
substance," "toxic pollutant" or any other formulation intended to define,
list, or classify substances by reason of deleterious properties such as
ignitability, corrosivity, reactivity, carcinogenicity, toxicity,
reproductive toxicity, or "EP toxicity" and (ii) any petroleum, natural
gas, natural gas liquid, liquefied natural gas, synthetic gas usable for
fuel (or mixtures of natural gas and such synthetic gas), ash produced by
a resource recovery facility utilizing a municipal solid waste stream, and
drilling fluids, produced waters, and other wastes associated with the
exploration, development or production of crude oil, natural gas, or
geothermal resources. The term "Hazardous Materials" specifically
includes, but is not limited to, each and every substance and material
which constitutes (a) a "hazardous substance" within the meaning of 42
U.S.C. ss. 9601(14); (b) a "hazardous substance" within the meaning of
California Health & Safety Code ss. 25316; (c) a "hazardous waste" within
the meaning of California Health & Safety Code ss. 25117; (d) an
"extremely hazardous waste" within the meaning of California Health &
Safety Code ss. 25115; and/or (e) a "hazardous substance," "hazardous
waste," or "extremely hazardous waste" under any regulations promulgated
pursuant to such statutory provisions, including, but not limited to, all
regulations adopted by the State of California Department of Toxic
Substances Control pursuant to California Health & Safety Code ss. 25141.
"HBO" shall mean Home Box Office.
"Indebtedness" shall mean, at any time and with respect to any Person, (i)
indebtedness of such Person for borrowed money (whether by loan or the
issuance and sale of debt instruments and/or securities) or for the
deferred purchase price of property or services purchased, (ii)
obligations of such Person in respect of letters of credit, acceptance
facilities, or drafts or similar instruments issued or accepted by banks
and other financial institutions for the account of such Person, (iii)
obligations of such Person under capitalized leases, and (iv) indebtedness
of others of the type described in clauses (i), (ii) and (iii) hereof
which (a) such Person has directly or indirectly assumed or guaranteed
and/or
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(b) is secured by a lien on assets of such Person, whether or not such
Person shall have assumed or guaranteed such indebtedness.
"Indemnified Liabilities" shall have the meaning set forth in Section 13.1
hereof.
"Indemnitees" shall have the meaning set forth in Section 13.1 hereof.
"Ingram" shall mean Ingram Entertainment, Inc.
"Interest" shall mean all interest amounts required to be paid by the
Borrowers pursuant to this Agreement.
"Interest Spread" shall mean (i) six and one-quarter percent (6.25%) per
annum with respect to any Costs not paid when due, and (ii) one and
one-quarter percent (1.25%) per annum with respect to Advances made under
the Facility; provided, however, that the Interest Spread shall be six and
one-quarter percent (6.25%) per annum on all overdue Interest and Advances
under the Facility (whether by maturity, acceleration or otherwise).
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986 and
the rules, regulations and notices issued thereunder, as now and hereafter
in effect, or any successor provision thereto.
"Investments" shall have the meaning set forth in Section 8.2.6 hereof.
"Irrevocable Authority" shall mean an irrevocable authority executed by
the appropriate Borrower instructing the applicable account debtor to
remit Product Payments to the Master Collection Account in substantially
the form of Exhibit D attached hereto or such other form as may be
acceptable to the Bank in its sole and absolute discretion.
"Laboratory Authorization Letter" shall mean an agreement for a particular
Product or Products in substantially the form of Exhibit G attached
hereto, or such other form as may be acceptable to the Bank in its sole
and absolute discretion.
"Laboratory Pledgeholder Agreement" shall mean an agreement for a
particular Product or Products in substantially the form of either of the
agreements attached hereto as Exhibits F-1 and F-2, as applicable, or such
other form as may be acceptable to the Bank in its sole and absolute
discretion.
"Letters of Credit" shall mean Commercial Letters of Credit, Standby
Letters of Credit and Cash Collateralized LCs.
"Letter of Credit Issuance Date" means the date on which any Letter of
Credit is issued by the Bank pursuant hereto.
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"Letter of Credit Drawdown" shall mean all payments made by the Bank in
honoring a Letter of Credit.
"Letter of Credit Drawdown Date" shall mean the date of any Letter of
Credit Drawdown.
"LC Cash Collateral Amount" shall have the meaning set forth in Section
5.3 hereof.
"License Agreements" shall mean any agreement, arrangement or
understanding now existing or hereafter entered into (including, without
limitation, so-called "output" or other multi-Product agreements), to
which any Borrower (or any agent of any Borrower acting on behalf of any
Borrower) is a party and pursuant to which any Borrower (or any agent of
any Borrower acting on behalf of any Borrower) has granted, sold,
conveyed, licensed, sublicensed, leased, subleased or otherwise
transferred rights to any Person with respect to the distribution,
subdistribution, sale, rental, lease, sublease, licensing, sublicensing,
exhibition, telecast, broadcast, transmission (including, without
limitation, by way of satellite or cable) or other use, exploitation or
disposition of any Product or any elements thereof (including, but not
limited to, all music and musical compositions, songs, negatives,
soundtracks and Literary Properties) and/or the Copyrights in any of the
foregoing or any part thereof in any media existing now or in the future
and in any territory (including, without limitation, motion picture,
television, "home video" and all other audio-visual device rights, audio
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); such
agreements shall include, without limitation, the Existing License
Agreements.
"License Payments" shall mean all amounts (including, without limitation,
so-called "minimum guarantees" and "advances") payable to or for the
benefit of any Borrower pursuant to any License Agreement whether
characterized as accounts, accounts receivable, general intangibles,
contract rights or otherwise; any and all sums, proceeds, money, products,
profits or increases payable to any Borrower pursuant to any License
Agreement; all chattel paper that may arise in connection with any License
Agreement and any and all amounts payable thereunder whether characterized
as accounts, accounts receivable, contracts receivable, general
intangibles or otherwise; and any and all proceeds of the foregoing
payable to any Borrower.
"Literary Properties" shall mean all literary and other properties which
are or may form the basis of any Product or which are or may be
incorporated into any Product, including, without limitation, all songs,
music, musical compositions, lyrics, scripts, screenplays and/or
photoplays based thereon in whole or in part; all component parts of any
Product consisting of such literary or other properties; all compact disc,
cassette, motion picture, television, "home video" and other audio
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and/or audio-visual device rights in and to any story underlying any
Product; all treatments of said stories and other literary material,
together with all preliminary and final photoplays, treatments, scenarios,
screenplays, scripts, bibles and storybooks at every stage thereof used or
to be used in connection with any Product; and all other literary material
upon which any Product is or may be adapted or based in whole or in part;
in each case whether now in existence or hereafter made, produced, created
or written and whether or not in possession of any Borrower.
"Loan" shall mean the aggregate amount of all outstanding Advances.
"Loan Documents" shall mean, collectively, this Agreement, the Note, all
Borrowing Certificates, Borrowing Base Certificates, Irrevocable
Authorities, Acknowledgments, Laboratory Pledgeholder Agreements,
Laboratory Authorization Letters, Bank Notice Letters, Trademark
Mortgages, UCC financing statements, Copyright Mortgages, and any other
certificates, financial statements, schedules, exhibits, documents or
agreements of any type or nature heretofore or hereafter executed and/or
delivered by or on behalf of any or all Borrowers to the Bank in any way
relating to or in furtherance of this Agreement or evidencing and/or
securing any of the Obligations in each case either as originally executed
or as the same may be Modified from time to time.
"Major Account Debtors" shall have the meaning set forth in Section 3.4
hereof.
"Master Collection Account" shall have the meaning set forth in Section
5.1 hereof.
"Merger Agreement" shall have the meaning set forth in Section 9.2 hereof.
"Minimum Adjusted Tangible Net Worth" shall have the meaning set forth in
Section 10.7.4 hereof.
"Modifications" shall mean amendments, alterations, supplements,
replacements, modifications or terminations, collectively.
"Modify" shall mean amend, alter, supplement, replace, modify or
terminate, collectively.
"Negative Pick-Up Commitment" shall mean the amount payable by the
Borrowers and their Subsidiaries for the Product in question which is not
produced by a Borrower or any of its wholly-owned Subsidiaries, including
amounts payable with respect to the Product in question where the payment
of such amounts is contingent upon the completion and delivery of such
Product to a Borrower and/or any of its Subsidiaries. For the avoidance of
doubt, the term "Negative Pick-Up Commitment" shall include, without
limitation, all amounts payable by the Borrowers and their Subsidiaries
with respect to the acquisition (whether by purchase, grant, assignment,
license, lease, rental or however else denominated or
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categorized) of any rights to exploit any item of Product not produced by
a Borrower or any of Borrowers' Subsidiaries in any medium, in any
territory(ies) of the world and for any duration and whether or not the
Borrowers or their Subsidiaries acquire any ownership interest in the
copyright of the applicable Product or any ownership of any physical
properties relating to such Product.
"Net Worth" shall mean, as at any date of determination, the total of the
Borrowers' and their Subsidiaries' capital stock, additional paid-in
capital and retained earnings (or less accumulated deficit) determined in
accordance with GAAP on a consolidated basis.
"Note" shall have the meaning set forth in Section 2.6 hereof.
"Obligations" shall mean, collectively, the Principal, together with
accrued Interest and Costs.
"Operating Account" shall have the meaning set forth in Section 5.2
hereof.
"P&A Expenses" shall mean all costs and expenses incurred by the Borrowers
to obtain, make, produce or acquire prints or other copies of Theatrical
Pictures and to advertise Theatrical Pictures.
"Permitted Encumbrances" shall have the meaning set forth on Schedule 1
attached hereto.
"Person" shall mean an individual or a corporation, association, limited
liability company, joint venture, partnership, trust or other private or
governmental entity.
"Physical Materials" shall have the meaning set forth in Section 8.2.1.3
hereof.
"Potential Event of Default" shall mean any event, act or condition which
with notice or lapse of time, or both, would constitute an Event of
Default.
"Prime Rate" shall mean the fluctuating per annum commercial rate of
interest announced by the Bank from time to time at its principal office
as the Bank's "prime rate."
"Principal" shall mean the aggregate of the Advances that are advanced to
or for the account of any or all of the Borrowers and that remains unpaid.
"Proceeds Collections Agreement" shall mean an agreement between the Bank,
the Borrowers and Atlantic Bank substantially in the form of Exhibit N
attached hereto or such other form as shall be acceptable to the Bank in
its sole and absolute discretion.
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"Producer" shall mean any Person who has licensed or otherwise granted
rights in a Product to any Borrower pursuant to a Rights-In Agreement.
"Products" shall mean all Audio Recordings and all Theatrical Pictures,
Video Pictures, Television Programs, and all other feature and non-feature
length motion pictures produced for release in any other medium in which
any Borrower now has or hereafter acquires any right, title or interest,
including, without limitation, the Existing Products.
"Product Payments" shall mean all amounts payable to or for the benefit of
any Borrower arising out of or in connection with the sale, license,
sublicense, lease, sublease, rent, subrent, distribution, exhibition,
broadcast, telecast or other exploitation of a Product or Products or
copies thereof whether characterized as accounts, accounts receivable,
general intangibles, contract rights or otherwise; any and all sums,
proceeds, money, products, profits or increases payable to any Borrower;
all chattel paper that may arise in connection therewith and any and all
amounts payable under such chattel paper whether characterized as
accounts, accounts receivable, contracts receivable, general intangibles
or otherwise; and any and all proceeds of the foregoing payable to any
Borrower; "Product Payments" shall include, without limitation, all
License Payments.
"Qualifying Accounts Receivable" shall have the meaning set forth in
Section 3.2.6 hereof.
"Qualifying Audio Recording" shall have the meaning set forth in Section
3.2.7 hereof.
"Qualifying Completed Picture" shall have the meaning set forth in Section
3.2.8 hereof.
"Qualifying Contracts Receivable" shall have the meaning set forth in
Section 3.2.10 hereof.
"Qualifying Uncompleted Picture" shall have the meaning set forth in
Section 3.2.9 hereof.
"Rate of Interest" shall mean (i) with respect to each Advance, the Prime
Rate plus the then applicable Interest Spread with respect to the Advance
in question, and (ii) with respect to any Costs or Interest not paid when
due hereunder, the Prime Rate plus the Interest Spread applicable to such
overdue Obligations.
"Relevant Foreign Jurisdictions" shall have the meaning set forth in
Section 6.1.1 hereof.
"Restricted Payment" shall mean (i) any distribution, dividend or other
direct or indirect payment in respect of any shares of any class of any
capital stock of a
13
Borrower or any of its Subsidiaries now or hereafter outstanding; (ii) any
purchase, redemption or other acquisition or reacquisition by any Borrower
or any of its Subsidiaries of any share of any class of any of its own
capital stock or other capital stock or equity interest of any other
Borrower or any of its Subsidiaries now or hereafter outstanding, (iii)
any payment made to retire, or obtain the surrender of any outstanding
warrants, puts or options or other rights to purchase or acquire any
shares of any class of any capital stock of any Borrower or of any of its
Subsidiaries now or hereafter outstanding, (iv) any loan by a Borrower or
any of its Subsidiaries to the holder of any shares of any class of any
capital stock of any Borrower or any of its Subsidiaries, and/or (v) any
payment of principal or other retirement of indebtedness of a Borrower or
any of its Subsidiaries which is subordinated by its terms, by agreement
or by operation of law (or is required by any Loan Document to be
subordinated) to the Obligations.
"Rights-In Agreements" shall mean any agreement, arrangement or
understanding now existing or hereafter entered into (including, without
limitation, so-called "output" or other multi-Product agreements), to
which any Borrower is a party and pursuant to which any Borrower has been
granted, sold, conveyed, licensed, sublicensed, leased, subleased or
otherwise transferred rights by any Person with respect to the
distribution, subdistribution, sale, rental, lease, sublease, licensing,
sublicensing, exhibition, telecast, broadcast, transmission (including,
without limitation, by way of satellite or cable) or other use,
exploitation or acquisition of any Product or any elements thereof
(including, but not limited to, all music and musical compositions,
negatives, soundtracks and Literary Properties) and/or the Copyrights in
any of the foregoing or any part thereof in any media existing now or in
the future and in any territory (including, without limitation, motion
picture, television, "home video" and all other audio and/or 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).
"Short Form Assignment" shall have the meaning set forth in Section
3.2.7.3 hereof.
"Show Time" shall mean Show Time Networks, Inc.
"Standby Letter of Credit" shall mean a letter of credit obligation of the
Bank in favor of a designated third party beneficiary, under which payment
is contingent on the failure of a Borrower to perform under the terms of
the contract or agreement with the beneficiary.
"Standby Letter of Credit Fee" shall mean one and one-half percent (1.5%)
per annum of the principal amount of each Standby Letter of Credit.
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"Standby Letter of Credit Sublimit" shall mean the limitation of One
Million Dollars ($1,000,000) on the aggregate principal sum of all undrawn
Standby Letters of Credit outstanding at given point in time.
"State" shall mean any state of the United States.
"Subsidiary" shall mean any corporation, association, limited liability
company, joint venture, partnership, trust or other entity which is
directly or indirectly through one or more intermediaries controlled by
the Person in question.
"Television Programs" shall mean all television series and programs,
made-for- television motion pictures and mini-series and all other feature
and non-feature length motion pictures produced for telecasting or
broadcasting on any form of television (including, without limitation,
free, pay, pay per view, near-pay per view, subscription, satellite, cable
and microwave).
"Theatrical Pictures" shall mean all feature and non-feature length motion
pictures produced for theatrical release in which any Borrower now has or
hereafter acquires any right, title or interest. For avoidance of doubt, a
Theatrical Picture may also come within the definition of a Video Picture.
"Third Party Payments" shall have the definition set forth in Section
3.2.11 hereof.
"Tier 1 Borrowing Base Component" shall have the meaning set forth in
Section 3.1.1 hereof.
"Tier 2 Borrowing Base Component" shall have the meaning set forth in
Section 3.1.2 hereof.
"Tier 3 Borrowing Base Component" shall have the meaning set forth in
Section 3.1.3 hereof.
"Tier 4 Borrowing Base Component" shall have the meaning set forth in
Section 3.1.4 hereof.
"Tier 5 Borrowing Base Component" shall have the meaning set forth in
Section 3.1.5 hereof.
"Tier 6 Borrowing Base Component" shall have the meaning set forth in
Section 3.1.6 hereof.
"Trademark Mortgages" shall mean the documents in respect of each
trademark, logo, trade name, service mark and/or service name of each
Borrower in substantially the form of Exhibit I attached hereto or in such
other form as may be acceptable to the Bank in its sole and absolute
discretion.
15
"United States" and "U.S." shall mean the United States of America and its
territories and possessions.
"Variable Rate Notes" shall mean those certain Variable Rate Senior
Subordinated Notes of Unapix in the aggregate principal amount of
$3,025,000.
"Video Pictures" shall mean all feature and non-feature length motion
pictures produced for "home video" release on videotape, cassette,
cartridge, disc or other "home video" medium in which any Borrower now has
or hereafter acquires any right, title or interest. Video Pictures,
include, without limitation, motion pictures commonly referred to as
"music videos" and motion pictures which match visual images with music
rather than attempting to tell a story. For the avoidance of doubt, a
Video Picture may also come within the definition of Theatrical Picture.
Unless the context otherwise requires, the following terms used in this
Agreement shall have the meanings ascribed to them in the Commercial Code of the
State of California: "account," "account debtor," "chattel paper," "general
intangibles," "goods," "instrument," "inventory," "money," "proceeds" and
"products."
2. THE LOANS.
2.1 Commitments and Availability Period. On the terms and subject to the
satisfaction or waiver by the Bank of the conditions set forth in this Agreement
and in reliance upon the representations and warranties of the Borrowers set
forth herein and in the other Loan Documents, the Bank agrees to lend:
2.1.1 Commitment. To the Borrowers, in the form of Advances and
Letters of Credit by way of a revolving credit facility (the "Facility")
in the aggregate sum owing hereunder of up to Seven Million Dollars
($7,000,000) (the "Commitment") from time to time during the period (the
"Availability Period") commencing on the execution date hereof and
expiring on September 30, 1998; provided, however, that subject to Section
2.1.2 hereof, at no time shall the sum of all Advances and all undrawn
amounts under all Letters of Credit at any time outstanding under the
Facility exceed the lesser of (i) the Commitment, or (ii) the then current
amount of the Borrowing Base; provided further, however, the aggregate sum
of all undrawn amounts under Standby Letters of Credit shall not at any
time exceed the Standby Letters of Credit Sublimit. Subject to the terms
and conditions of this Agreement, the Borrowers may borrow, repay and
reborrow amounts constituting the Commitment. Notwithstanding anything
herein to the contrary, no Letter of Credit shall remain outstanding after
the Final Repayment Date.
2.1.2 Excess Commitment. Notwithstanding anything to the contrary in
Section 2.1.1 hereof, the sum of all Advances and the undrawn amounts
under all Letters of Credit at any time outstanding under the Facility may
exceed the Commitment and/or the amount of the Borrowing Base with respect
to Cash
16
Collateralized LCs if the provisions of Section 2.5.5 hereof are met;
provided, however, at no time shall the aggregate sum of all undrawn
amounts under the Cash Collateralized LCs exceed the Cash Collateralized
LC Sublimit.
2.2 Notice and Making of Advances Other than Letter of Credit Drawdowns.
Subject to Section 2.4 hereof, whenever the Borrowers desire to draw down an
Advance, the Borrowers shall deliver to the Bank a Borrowing Certificate duly
completed and executed by all of the Borrowers prior to each requested Advance,
and such Borrowing Certificate shall be irrevocable. Such Borrowing Certificate,
to be effective, must be received by the Bank not later than 11:00 a.m., Los
Angeles time, on the requested Drawdown Date set forth in the Borrowing
Certificate. Subject to the terms and conditions of this Agreement, the Bank
shall fund the requested Advance by crediting the bank account of the Borrowers
at the Bank specified in the Borrowing Certificate for the amount of such
Advance.
2.3 Currency and Amount of Advances. Each Advance shall be made in
Dollars, and such Advances (other than the Advances made pursuant to Section 2.4
hereof) shall be in an aggregate principal amount of not less than $25,000, and
any Advance in excess of $25,000 shall be in an integral multiple of $25,000.
2.4 Atlantic Letter of Credit Advance and Other Advances. Upon the Bank
receiving from Atlantic Bank in accordance with the Proceeds Collections
Agreement a notice that Atlantic Bank has received the Atlantic Letter of Credit
for payment and Atlantic Bank intends to honor the same, the Bank will pay to
Atlantic Bank the amount then to be paid under the Atlantic Letter of Credit,
not to exceed Three Hundred Thousand Dollars ($300,000) when aggregated with all
other sums paid to Atlantic Bank pursuant to this Section 2.4 and the Proceeds
Collections Agreement with respect to the drawdown of the Atlantic Letter of
Credit. The Bank shall also be authorized to pay to Atlantic Bank any other sums
which the Bank has agreed to pay to Atlantic Bank pursuant to the Proceeds
Collections Agreement. Any sums paid to Atlantic Bank under this Section 2.4 and
the Proceeds Collections Agreement shall be deemed Advances made under this
Agreement. The Bank may make the Advances under this Section 2.4 without request
from the Borrower or Borrower's compliance with the requirements of Section 2.2
hereof. Until such time as the Bank's obligation to Atlantic Bank under the
Proceeds Collections Agreement has either terminated or been satisfied in full,
the Bank shall reserve out of the available Borrowing Base an amount equal to
the aggregate undrawn principal amount of the Atlantic Letter of Credit plus
$5,000. Such reserved amount of the Borrowing Base shall be unavailable to the
Borrower for purposes of making Advances or issuing Letters of Credit other than
making Advances under this Section 2.4.
2.5 Issuances of Letters of Credit.
2.5.1 Subject to the provisions of Section 2.2 hereof and Borrowers'
compliance with Section 4.2 hereof, the Borrower may request that the Bank
issue one or more Letters of Credit for the account of the Borrowers.
Whenever the Borrower desires the Bank to issue a Letter of Credit, the
Borrowers shall deliver
17
to the Bank a Borrowing Certificate duly completed and executed by the
Borrowers (together with the proposed form of Letter of Credit or
operative terms of the requested Letter of Credit), and such Borrowing
Certificate shall be irrevocable. Such Borrowing Certificate, to be
effective, must be received by the Bank not later than 9:00 a.m., Los
Angeles, California time, on the second (2nd) Business Day immediately
preceding the date on which such Letter of Credit is to be issued. The
Bank hereby agrees to issue such Letters of Credit for the account of the
Borrowers subject to the other terms and conditions of this Agreement.
Each Letter of Credit issued pursuant hereto shall expire no later than
the Final Repayment Date; and each such Letter of Credit shall contain
such other terms and provisions as the Bank and the Borrowers may mutually
agree.
2.5.2 Acceptance or payment of drafts under any Letter of Credit
shall be made in accordance with the terms of such Letter of Credit and,
in that connection, subject to the Bank's compliance with Section 5-109 of
the California Commercial Code, the Bank shall be entitled to honor any
drafts and accept any documents presented to it by the beneficiary of such
Letter of Credit in accordance with the terms of such Letter of Credit and
believed by the Bank to be genuine, absent gross negligence or willful
misconduct by the Bank. The Bank shall not have any duty to inquire as to
the accuracy or authenticity of any draft or other drawing documents which
may be presented to it. If the Bank shall have received documents which in
its good faith judgment constitute all of the documents which are required
to be presented before payment or acceptance of a draft under any Letter
of Credit, then the Bank shall be entitled to pay or accept such draft,
absent gross negligence or willful misconduct by the Bank.
2.5.3 Each Letter of Credit Drawdown shall constitute an Advance and
Interest shall accrue thereon from the related Letter of Credit Drawdown
Date.
2.5.4 Notwithstanding the termination of the Commitment and the
payment of the Advances, the obligations of the Borrowers under this
Section 2 shall remain in full force and effect until the Bank shall have
been released from its obligations with regard to any and all Letters of
Credit.
2.5.5 In the event that the Borrowers wish to obtain a Commercial
Letter of Credit or a Standby Letter of Credit (each a "Cash
Collateralized LC") at a time when the sum of all Advances and all undrawn
amounts under all Letters of Credit then outstanding and under such
requested Cash Collateralized LC exceeds the Commitment and/or the then
current amount of the Borrowing Base, the Bank will issue such Cash
Collateralized LC, provided that (i) there are not then in existence any
Events of Default or Potential Event of Default, (ii) the sum of all
undrawn amounts under all outstanding Cash Collateralized LCs and under
the requested Cash Collateralized LC does not exceed the Cash
Collateralized LC Sublimit, (iii) an amount equal to the sum of all drawn
and undrawn amounts under all previously issued Cash Collateralized LCs
and the requested Cash Collateralized LC is on deposit in the LC Cash
Collateralized Account, and (iv) the
18
Borrowers have complied with the requirements of Sections 2.5.1 and 4.1 or
4.2 hereof, as applicable.
2.6 The Note. The Principal (and Interest thereon) owing to the Bank under
the Facility shall be evidenced by the Note executed by the Borrowers and
payable to the Bank in the face amount of the Commitment. The Note shall be
payable only to the extent of the unpaid balance of the Principal (and Interest
thereon) owing from time to time under the Facility. The records of the Bank
shall be prima facie evidence of the Borrowers' actual indebtedness to the Bank
in the absence of manifest error. The Borrowers hereby agree that the Note shall
constitute evidence of the Principal (and Interest thereon) with the same force
and effect as if each Advance and each other indebtedness of the Borrowers to
the Bank arising hereunder was evidenced by a separate promissory note executed
by the Borrowers. Notwithstanding anything else herein or in the Note or any
other Loan Document to the contrary, all amounts advanced by the Bank to the
Borrowers shall be on a full, joint and several recourse basis against each of
the Borrowers irrespective of which Borrower or Borrowers receive and/or use the
Advances.
2.7 Computation and Payment of Interest.
2.7.1 Accrual of Interest. Interest shall accrue on (i) each Advance
commencing on the applicable Drawdown Date, (ii) all arrears of Interest
not paid when due, commencing on the next day following the applicable due
date, and (iii) all Costs not paid on or before the applicable due date,
commencing on the next day following the applicable due date; in each case
until repaid in full at the Rate of Interest. Interest shall be calculated
on the number of calendar days actually elapsed on the basis of a year of
360 days and shall be paid as stipulated in this Section 2.7, and each
change in the Rate of Interest resulting from a change in the Prime Rate
shall be effective from the date of the respective change in the Prime
Rate.
2.7.2 Payments of Interest. Interest shall be due and payable (i) on
the 20th day of each calendar month (or if such day is not a Business Day,
on the next Business Day thereafter), and (ii) at maturity (by
acceleration or otherwise).
2.8 Repayment of the Loan.
2.8.1 Final Repayment Date. Subject to the prepayment provisions set
forth in Section 2.8.2 hereof, all outstanding Advances under the Facility
shall be due and payable without notice, and the Borrowers shall pay all
such Advances to the Bank on or before the Final Repayment Date.
2.8.2 Mandatory Prepayments.
2.8.2.1 Loan Exceeds the Borrowing Base. Subject to Section
2.1.2 hereof, in the event that the Bank gives written notice to the
Borrowers that the then aggregate outstanding amount of the Loan
exceeds the then
19
existing Borrowing Base, the Loan shall be due and payable without
any further notice to the extent of such excess (together with
accrued Interest thereon), and the Borrowers shall repay such
amounts to the Bank within three (3) calendar days of delivery of
such written notice to the Borrowers.
2.8.2.2 Facility Loan Exceeds the Commitment. Subject to
Section 2.1.2 hereof, in the event the aggregate outstanding amount
of the Loan made under the Facility at any time exceeds the then
maximum amount of the Commitment, the Loan shall be due and payable
without notice to the extent of such excess (together with accrued
Interest thereon), and the Borrowers shall immediately repay the
amounts to the Bank.
2.8.2.3 Automatic Prepayment of All Obligations. All
Obligations shall be due and payable without notice or demand, and
the Borrowers shall pay all such Obligations to the Bank (including,
without limitation, by applying (in the sole and absolute discretion
of the Bank) any then outstanding credit balance in the Master
Collection Account, the Operating Account and/or the LC Cash
Collateral Account to the repayment of such Obligations) upon the
earliest to occur of any Event of Default specified in Sections 11.7
or 11.8 hereof.
2.8.2.4 Upon Demand. At the election of the Bank, upon
demand, all outstanding Obligations shall be due and payable upon
the occurrence of an Event of Default (other than any Event of
Default described in Section 11.7 or 11.8, for which no notice is
necessary), and the Borrowers shall pay all such Obligations to the
Bank, including, without limitation, by applying (in the sole and
absolute discretion of the Bank) any then outstanding credit balance
in the Master Collection Account, the Operating Account and/or the
LC Cash Collateral Account.
2.8.3 Optional Prepayments. The Borrowers may, upon at least five
(5) Business Days' prior written notice to the Bank, prepay any
outstanding Principal, either in whole or in part. All such prepayments
shall be accompanied by the payment of any accrued Interest on the amount
of the outstanding Principal prepaid. No such prepayments of Principal
shall be in an amount of less than $100,000 or lesser amount that may then
be outstanding.
2.9 Time and Place of Payments. The Borrowers shall make each payment
hereunder (and under any instrument delivered hereunder) to the Bank at the
office of the Bank set forth in, or designated by the Bank pursuant to Section
14 hereof, not later than 10:00 a.m. (Los Angeles time) on the day when due, in
freely transferable Dollars representing "same day" funds, and if necessary the
Borrowers shall procure (from either the payor of such funds or from the Bank,
at the election of the Borrowers) conversion of any payments from third parties
into Dollars, with the Borrowers bearing all costs and risks of any and all such
conversions. Whenever any payment to be made hereunder or under any instrument
delivered hereunder shall be stated to be due on a day other than
20
a Business Day, such payment shall be made on the next succeeding Business Day;
and such extension of time shall in each such case be included in the
computation and payment of Interest.
2.10 Application of Payments. Subject to Section 12.7 hereof, all payments
made hereunder in respect of any of the Obligations (whether optional or
mandatory) shall be credited first to Costs to the extent that Costs are then
due and have not previously been paid, then to Interest to the extent that
Interest on outstanding Principal is accrued and unpaid and then to Principal.
2.11 No Offset by the Borrowers; Net Payments. All payments by the
Borrowers under this Agreement shall be made without setoff or counterclaim and
in such amounts as may be necessary in order that all such payments (after
deduction or withholding for or on account of any present or future taxes of any
kind (other than income and franchise taxes of the Bank), imposts, levies,
assessments, duties, fees, deductions or other charges, restrictions, conditions
of whatever nature now or hereafter imposed, levied, collected or asserted to be
due or payable by or for the account of the United States or any foreign
country, or any State or foreign state or province, municipality or other
political subdivision or taxing authority thereof, and including any penalty or
fine or similar liabilities for the non-payment thereof) shall not be less than
the amounts otherwise specified to be paid under this Agreement. All payments
under this Agreement shall be made under all circumstances, irrespective of any
restrictions then existing in any jurisdiction and without regard to the
nationality, residence or domicile of the Bank or any of the Borrowers, and
without requiring any affidavit or the fulfillment of any other formality except
as otherwise expressly provided in this Agreement.
2.12 Capital Adequacy and Increased Cost of the Commitment.
2.12.1 If after the date first above written the adoption or
implementation of any applicable rule, law or regulation regarding capital
requirements for banks or bank holding companies, or any change therein
(including any change according to a prescribed schedule of increasing
requirements, whether or not currently known) or any change in the
interpretation or administration thereof by any foreign or domestic court,
central bank (including, without limitation, the Federal Reserve System of
the United States (the "Federal Reserve")), monetary authority or
comparable agency charged with the interpretation or administration
thereof, or compliance by the Bank with any request or directive of any
such Person regarding capital adequacy (whether or not having the force of
law) has the effect of reducing the return on the Bank's capital to a
level below that which the Bank could have achieved (taking into
consideration the Bank's policies with respect to capital adequacy
immediately before such adoption, implementation, change or compliance and
assuming that the Bank's capital was fully utilized prior to such
adoption, implementation, change or compliance) but for such adoption,
implementation, change or compliance as a consequence of the Loan or the
Commitment by any amount, the Borrowers shall pay to the Bank as an
additional fee from time to time on demand of the Bank such amount as
shall be necessary
21
to compensate the Bank for such reduction. The determination by the Bank
of such amount, if done on the basis of any reasonable averaging and
attribution methods, shall in the absence of manifest error be conclusive,
and, at the Borrowers' request, the Bank shall demonstrate in reasonable
detail the basis of such determination.
2.12.2 If any present or future applicable law (which expression, as
used in this Section 2.12.2, includes statutes, rules and regulations
thereunder and interpretations thereof by any competent court or by any
governmental or other regulatory body or official charged with the
administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made
upon or otherwise issued to the Bank by any central bank or other fiscal,
monetary or other authority (including, without limitation, the Federal
Reserve) (whether or not having the force of law)) shall:
2.12.2.1 subject the Bank to any tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature with respect to
this Agreement, the Loan or the Commitment (other than taxes based
upon or measured by the income or profits of the Bank); or
2.12.2.2 materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to the Bank of
Principal or Interest or any other amounts payable to the Bank under
this Agreement; or
2.12.2.3 impose or increase or render applicable any special
deposit, reserve, assessment, liquidity or other similar
requirements (whether or not having the force of law) against assets
held by, or deposits in or for the account of the Bank, or the Loan
or the Commitment; or
2.12.2.4 impose on the Bank any other conditions or
requirements with respect to this Agreement, the Loan, the
Commitment or any class of loans or commitments of which the Loan
forms a part;
and the result of any of the foregoing is:
(i) to increase the cost to the Bank of making, funding,
issuing, renewing, extending or maintaining the Loan and/or
the Commitment; or
(ii) to reduce the amount of Principal, Interest or
other amount payable to the Bank hereunder on account of any
of the Loan and/or the Commitment; or
(iii) to require the Bank to make any payment or to
forego any Interest or other sum payable hereunder, the amount
of
22
which payment or foregone Interest or other sum is calculated
by reference to the gross amount of any sum receivable or
deemed received by the Bank from the Borrowers hereunder;
then, and in each such case, the Borrowers will, upon demand
following receipt of written notice from the Bank, which written
notice shall include calculations in reasonable detail of the
amounts payable, pay to the Bank such additional amounts as will be
sufficient to compensate the Bank for such additional cost,
reduction, payment or foregone Interest or other sum, but without
duplication of any amount payable by the Borrowers pursuant to
Section 2.12.1 hereof. The determination by the Bank of any such
amount shall, in the absence of manifest error, be conclusive, and
at the Borrowers' request the Bank shall demonstrate the basis in
reasonable detail for such determination.
2.13 Late Payment Fee. The Borrowers recognize and agree that any default
in the payment of Principal, Interest, Fees, Costs or any other sum due
hereunder or under any of the other Loan Documents will result in additional
losses and expenses to the Bank which are difficult to quantify. Therefore, the
Borrowers agree that if the Borrowers fail to make any payment of Principal,
Interest, Fees, Costs or any other sum due hereunder or under any of the other
Loan Document within ten (10) days after the same is due and payable, then, in
addition to any and all other rights and remedies of the Bank hereunder, under
the other Loan Documents or otherwise at law or in equity, the Borrowers
(subject to the limitations set forth herein) shall also pay to the Bank a late
charge of five percent (5%) of the overdue amount in question as a reasonable
estimate of the Bank's losses and expenses due as a result of such overdue
amount. The assessment and collection of each such late charge shall be without
prejudice to all other rights of the Bank.
3. BORROWING BASE.
3.1 Borrowing Base Formula. The term "Borrowing Base" shall mean, as of
any date on which the amount thereof shall be determined (the "Determination
Date"), the aggregate of:
3.1.1 55% of each Qualifying Accounts Receivable payable with
respect to a Qualifying Completed Picture by a Domestic Approved Account
Debtor which is a home video distributor ("Tier 1 Borrowing Base
Component"); provided, however, that no Qualifying Accounts Receivable
shall be included in the Tier 1 Borrowing Base Component, which is older
than 60 days past the invoice due date and/or 120 days from the invoice
date for such receivable; plus
3.1.2 80% of each Qualifying Accounts Receivable (including those of
Unapix's International Division) payable with respect to a Qualifying
Completed Picture by a Domestic Approved Account Debtor which is a major
television network, major pay cable channel or major cable network listed
on Schedule 3.1.2
23
attached hereto ("Tier 2 Borrowing Base Component"); provided, however,
that no Qualifying Accounts Receivable shall be included in the Tier 2
Borrowing Base Component which is more than 90 days past due; plus
3.1.3 70% of each Qualifying Accounts Receivable payable with
respect to a Qualifying Completed Picture or a Qualifying Audio Recording
by a Domestic Approved Account Debtor which has purchased the Products
giving rise to such Qualifying Accounts Receivable at prices based on
"sale to ultimate consumers" basis (as opposed to "rental" basis) ("Tier 3
Borrowing Base Component"); provided, however, no Qualifying Account
Receivable shall be included in the Tier 3 Borrowing Base Component which
is more than 60 days past the invoice due date and/or 120 days past the
invoice date; plus
3.1.4 50% of each Qualifying Accounts Receivable or Qualifying
Contracts Receivable payable with respect to a Qualifying Completed
Picture or a Qualifying Audio Recording by a Foreign Approved Account
Debtor which is a theatrical, video, audio, compact disc or software
distributor, television network, pay cable channel or cable network, with
respect to theatrical, video, audio, compact disc or software, telecasting
or broadcasting rights on Foreign territories, acceptable to the Bank in
its sole and absolute discretion ("Tier 4 Borrowing Base Component");
provided, however, no Qualifying Account Receivable or Qualifying Contract
Receivable shall be included in the Tier 4 Borrowing Base Component which
is more than 120 days past due and provided further, however, a Qualifying
Contract Receivable shall only be included in the Tier 4 Borrowing Base
Component to the extent it is contractually obligated to be paid within 12
months of the Date of Determination (within 24 months of the Date of
Determination for Qualifying Contracts Receivable due from Discovery
International); plus
3.1.5 75% of each Qualifying Contracts Receivable payable with
respect to a Qualifying Completed Picture or a Qualifying Audio Recording
by a Domestic Approved Account Debtor to the extent such receivable is
contractually obligated to be paid within 12 months of the Date of
Determination (within 24 months of the Date of Determination for
Qualifying Contracts Receivable due from USA-SciFi Channel, HBO, Discovery
or Showtime) ("Tier 5 Borrowing Base Component"); plus
3.1.6 50% of each Qualifying Contracts Receivable payable with
respect to a Qualifying Uncompleted Picture (less a reserve to complete in
an amount acceptable to the Bank in its sole and absolute discretion) by a
Domestic Approved Account Debtor or a Foreign Approved Account Debtor, for
which the Qualifying Uncompleted Picture is contractually obligated to be
completed within said 24 months, to the extent such receivable is
contractually obligated to be paid within 24 months of the Date of
Determination ("Tier 6 Borrowing Base Component"); provided, however, that
in no event shall the aggregate amount of the Tier 6 Borrowing Base
Component exceed $1,500,000.
24
For the avoidance of doubt, on any given Determination Date, each Qualifying
Accounts Receivable or Qualifying Contracts Receivable shall only be included in
one tier of the Borrowing Base Components; provided, however, during the "life
cycle" of Qualifying Contracts Receivable they may be reclassified from a Tier 6
Borrowing Base Component to a Tier 5 Borrowing Base Component or a Tier 4
Borrowing Base Component and from a Tier 5 Borrowing Base Component to a Tier 2
Borrowing Base Component.
3.2 Borrowing Base Definitions. The following terms used in the
determination of the Borrowing Base shall have the following meanings:
3.2.1 Approved Account Debtors. The term "Approved Account Debtors"
shall mean each distributor, licensee, wholesaler or retail store chain of
any Borrower which (a) is located in an Approved Country, (b) is (i) a
major motion picture studio, (ii) a major television network, (iii) a
major pay cable channel or major cable network, (iv) a syndication
company, (v) a home video, audio or software distributor or licensee, (vi)
a subdistributor or sublicensee of distribution rights in a Foreign
Approved Country or (vii) Domestic video wholesaler or retail store chain
and (c) is approved by the Bank in writing from time to time in its sole
and absolute discretion; provided, however, that the Bank may at any time
reevaluate the creditworthiness of any Approved Account Debtors. In the
event the Bank, in its sole and absolute discretion, determines that an
Approved Account Debtor should no longer be an "Approved Account Debtor,"
the Bank shall give written notice of such fact to the Borrowers, and upon
delivery of such notice to the Borrowers, such Person shall no longer be
an "Approved Account Debtor" (and no otherwise Qualifying Accounts
Receivable or Qualifying Contracts Receivable of such Person (including,
without limitation, any receivables of such Person then included in the
Borrowing Base) shall be included in the Borrowing Base) unless and until
the Bank, in its sole and absolute discretion, re-approves, if ever, such
Person as an "Approved Account Debtor." Until such time as the $350,000
due BMG by Miramar as of April 16, 1997 has been satisfied in full and the
Borrowers provide written evidence of such fact in form and substance
satisfactory to the Bank, BMG shall not be an Approved Account Debtor.
3.2.2 Approved Countries. The term "Approved Countries" shall mean
all countries which are not listed on Schedule 3.2.2 provided, however,
that the Bank may at any time reevaluate any Approved Countries. In the
event the Bank, in its sole and absolute discretion, determines that an
Approved Country should no longer be an "Approved Country," the Bank shall
give written notice of such fact to the Borrowers, and upon delivery of
such notice to the Borrowers, such country shall no longer be an "Approved
Country" unless and until the Bank, in its sole and absolute discretion,
re-approves, if ever, such country as an "Approved Country."
3.2.3 Approved License Agreements. The term "Approved License
Agreements" shall mean each License Agreement approved from time to time
by the Bank in its sole and absolute discretion. The Bank hereby
preapproves the
25
forms of License Agreements attached hereto as Exhibit L; provided,
however, in the event the Borrowers anticipate making any material changes
to either such forms of License Agreements, they shall first furnish the
Bank with a draft of the proposed changes, and such proposed License
Agreement shall not constitute an "Approved License Agreement" unless and
until the Bank shall have approved in writing the furnished License
Agreement.
3.2.4 Domestic. The term "Domestic" shall mean the United States and
Canada and their respective territories and possessions.
3.2.5 Foreign. The term "Foreign" shall mean the entire universe
excluding Domestic.
3.2.6 Qualifying Accounts Receivable. The term "Qualifying Accounts
Receivable" shall mean at any date for which the amount thereof is to be
determined, an amount equal to (i) the sum of the face amount of all
minimum, non-refundable, uncollected accounts receivable (as defined in
accordance with GAAP and if applicable, GAAP guidelines of revenue
recognition of the sale of motion picture rights described in FASB No. 53)
which are contractually obligated to be paid to any Borrower from Approved
Account Debtors on or before a date certain (which must be pursuant to an
Approved License Agreement, with respect to Qualifying Accounts Receivable
regarding the Tier 4 Borrowing Base Component) less (ii) (a) that portion
of any account receivable in question for which there is a bona fide
request for a material credit, adjustment, compromise, offset,
counterclaim or dispute and (b) the sum of the following items payable by
the Borrowers (based on the Borrowers' then best estimate) (the "Estimated
Revenue Expenses"), which shall be deducted only once for each particular
Borrowing Base calculation: All Third Party Payments more than 30 days
past due, collection/distribution costs and expenses, withholdings, taxes,
remittances, levies and any other projected expenses of the Borrowers in
connection with the collection of such receivables; provided, however,
that Qualifying Accounts Receivable shall not include any accounts
receivable: (a) which, in the sole and absolute discretion of the Bank,
contains a material performance obligation or executory condition to be
performed by or caused to be performed by any Borrower or any other
Person, where any such obligation or condition is contingent upon future
events that are not within the sole and absolute control of a Borrower or
a film or audio laboratory which is directly obligated to a Borrower to
perform such performance obligation or condition; (b) for which the Bank
has not received an Irrevocable Authority and Acknowledgment executed by
the applicable Borrower and Approved Account Debtor (which includes,
without limitation, a prohibition against the Approved Account Debtor
(other than those listed on Schedule 3.2.6 attached hereto) exercising any
defenses or rights of setoff, counterclaim, reduction or recoupment
against such accounts receivable for any reason whatsoever) to the extent
required pursuant to Section 3.4 hereof; (c) as to which the Bank does not
have a perfected first priority security interest under the Code
(including, without limitation, any receivables with outstanding minimum
26
guarantees or advances owed to producers of the Product in question that
have been secured by unsubordinated liens against such Product in favor of
producers or their financiers); (d) which relate to a Product as to which
the Bank has not received one fully executed copy of a Laboratory
Pledgeholder Agreement (and/or if applicable, a Laboratory Authorization
Letter) covering all physical and sound elements required to be delivered
and/or made available to the Approved Account Debtor under the Approved
License Agreement in question, with respect to Qualifying Accounts
Receivable regarding the Tier 4 Borrowing Base Component; (e) for which
the Borrowers cannot warrant title to sufficient underlying rights to
justify such accounts receivable as determined in the Bank's sole and
absolute discretion; (f) that is payable by an Approved Account Debtor
which, when aggregated with all other accounts and contracts receivable of
such Approved Account Debtor included in the Borrowing Base, exceeds 20%
of the total Borrowing Base (or exceeds 30% of the Total Borrowing Base
with respect to BMG, Ingram, East Texas, HBO and Discovery) to the extent
of such excess; (g) payable in a currency (x) other than Dollars which is
not freely convertible into Dollars or (y) which may not be freely
withdrawn from the country where paid; (h) which relate to a Product that
does not constitute a "Qualifying Completed Picture"; (i) payable by an
Approved Account Debtor for which 25% or more of all accounts and
contracts receivable owing by such Approved Account Debtor to any Borrower
are more than 90 days or 120 days past due as applicable; (j) payable by
an Affiliate of any Borrower; (k) payable by an account debtor who is not
an Approved Account Debtor; (l) payable by an account debtor who is
insolvent, is subject to any bankruptcy in insolvency proceedings, or has
made a general assignment for the benefit of creditors; or (m) is payable
by any Person which is a governmental entity unless such receivable is
specifically assigned to the Bank.
3.2.7 Qualifying Audio Recording. The term "Qualifying Audio
Recording" shall mean, with respect to a given receivable in question, an
Audio Recording for which:
3.2.7.1 The Bank shall have received from the laboratory
(which has executed a Laboratory Pledgeholder Agreement and/or
Laboratory Authorization Letter, if applicable) with respect to such
Product, written certification (i) that it is holding on behalf of
the applicable Borrower, or the applicable Borrower has irrevocable
access to, physical materials labeled as being of such Product and
(ii) describing the type of such physical materials;
3.2.7.2 The Borrowers shall have delivered to the Bank two
original Copyright Mortgages executed by the Borrowers and covering
the Product in question;
3.2.7.3 The Borrowers shall have delivered to the Bank
evidence satisfactory to the Bank of the delivery to United States
Copyright Office for recording therein in the following order of (i)
an original short-form
27
assignment of rights (the "Short Form Assignment") (executed by the
Producer party to the Rights-In Agreement relating to the Product
which properly evidences the vesting in the Borrowers of the
ownership of the distribution and/or other rights in the Product
being granted and/or licensed by the Borrowers pursuant to the
Approved License Agreements relating to the Qualifying Accounts
Receivable and Qualifying Contracts Receivable to be included in the
Borrowing Base with respect to such Product, in accordance with the
laws of the United States, and (ii) an original Copyright Mortgage
executed by Borrowers which covers the Product; and
3.2.7.4 The Borrowers shall have delivered to the Bank a copy
of a receipt issued by the United States Copyright Office confirming
its receipt and acceptance for recording of the Short Form
Assignment and Copyright Mortgage referred to (and in the order set
forth) in Section 3.2.7.3 hereof.
3.2.8 Qualifying Completed Picture. The term "Qualifying Completed
Picture" shall mean, with respect to a given receivable in question,
either a Theatrical Picture, Video Picture or Television Program for
which:
3.2.8.1 The Bank shall have received from the laboratory
(which has executed a Laboratory Pledgeholder Agreement and/or
Laboratory Authorization Letter, if applicable) with respect to such
Product, written certification (i) that it is holding on behalf of
the applicable Borrower, or the applicable Borrower has irrevocable
access to, physical materials labeled as being such Product and (ii)
describing the type of such physical materials;
3.2.8.2 The Borrowers shall have delivered to the Bank two
original Copyright Mortgages executed by the Borrowers and covering
the Product (and each episode thereof with respect to a Television
Program) in question;
3.2.8.3 Notwithstanding having complied with Section 3.2.9.3
hereof, the Borrowers shall have delivered to the Bank evidence
satisfactory to the Bank of the delivery to the United States
Copyright Office for recording therein in the following order of (i)
an original short-form assignment of rights (the "Short Form
Assignment") (executed by the Producer party to the Rights-In
Agreement relating to the Product (and each episode thereof with
respect to a Television Program) in question) which properly
evidences the vesting in the Borrowers of the ownership of the
distribution and/or other rights in the Product (and each episode
thereof with respect to a Television Program) being granted and/or
licensed by the Borrowers pursuant to the Approved License
Agreements relating to the Qualifying Accounts Receivable and
Qualifying Contracts Receivable to be included in the Borrowing Base
with respect to such Product, in accordance with the laws
28
of the United States, and (ii) an original Copyright Mortgage
executed by Borrowers which covers the Product; and
3.2.8.4 The Borrowers shall have delivered to the Bank a copy
of a receipt issued by the United States Copyright Office confirming
its receipt and acceptance for recording of the Short Form
Assignment and Copyright Mortgage referred to (and in the order set
forth) in Section 3.2.8.3 hereof.
3.2.9 Qualifying Uncompleted Picture. The term "Qualifying
Uncompleted Picture" shall mean, with respect to a given receivable in
question, either a Theatrical Picture, Video Picture or Television Program
for which:
3.2.9.1 Except with respect to the Theatrical Picture
"Ushuaia" for which no completion bond shall be required, the
Borrowers shall have delivered to the Bank a fully executed
completion bond (together with a "cut through" certificate executed
by an insurance company or reinsurance company acceptable to the
Bank in its sole and absolute discretion) both in forms and
substance acceptable to the Bank, in its sole and absolute
discretion, issued by a completion bond company approved by the Bank
in its sole and absolute discretion, which completion bond
guarantees the delivery of the Qualifying Uncompleted Picture by the
due date in all License Agreements and guarantees payment to the
Bank of an amount equal to the aggregate of all Qualifying Contracts
Receivable included in the Borrowing Base pertaining to License
Agreements for which there has been a failure to deliver the
Qualifying Uncompleted Picture by the due date set forth in such
License Agreements;
3.2.9.2 The Borrowers shall have delivered to the Bank
evidence satisfactory to the Bank of the delivery to the United
States Copyright Office for recording therein in the following order
of (i) an original Short- Form Assignment (executed by the Producer
party to the Rights-In- Agreement relating to the Product (and each
episode thereof with respect to a Television Program) in question)
which properly evidences the vesting in the Borrowers of the
ownership of the distribution and/or other rights in the Product
(and each episode thereof with respect to a Television Program)
being granted and/or licensed by the Borrowers pursuant to the
Approved Licensed Agreements relating to the Qualifying Contracts
Receivable to be included in the Borrowing Base with respect to such
Product in accordance with the laws of the United States, and (ii)
an original Copyright Mortgage executed by Borrowers which covers
the Product (and each episode thereof with respect to a Television
Program);
3.2.9.3 The Borrowers shall have delivered to the Bank a copy
of a receipt issued by the United States Copyright Office confirming
its receipt and acceptance for recording of the Short Form
Assignment and Copyright Mortgage referred to in the order set forth
in Section 3.2.9.2 hereof.
29
3.2.10 Qualifying Contracts Receivable. The term "Qualifying
Contracts Receivable" shall mean at any date for which the amount thereof
is to be determined, an amount equal to (i) the sum of the face amount of
all minimum, non-refundable, uncollected contracts receivable (as defined
in accordance with GAAP guidelines of revenue recognition of the sale of
motion picture rights described in FASB No. 53) which are contractually
obligated to be paid to any Borrower from Approved Account Debtors on or
before a date certain pursuant to an Approved License Agreement less (ii)
(a) that portion of any receivable in question for which there is a bona
fide request for a material credit, adjustment, compromise, offset,
counterclaim or dispute and (b) the sum of the Estimated Revenue Expenses
which shall be deducted only once for each particular Borrowing Base
calculation; provided, however, that Qualifying Contracts Receivable shall
not include any contracts receivable: (a) which, in the sole and absolute
discretion of the Bank, contains a material performance obligation or
executory condition to be performed by or caused to be performed by any
Borrower or any other Person, where any such obligation or condition is
contingent upon future events that are not within the sole and absolute
control of a Borrower or a film or audio laboratory which is directly
obligated to a Borrower to perform such performance obligation or
condition; (b) for which the Bank has not received an Irrevocable
Authority and Acknowledgment executed by the applicable Borrower and
Approved Account Debtor (which includes, without limitation, a prohibition
against the Approved Account Debtor (other than those listed on Schedule
3.2.6 attached hereto) exercising any defenses or rights of setoff,
counterclaim, reduction or recoupment against such contracts receivable
for any reason whatsoever) to the extent required pursuant to Section 3.4
hereof; (c) as to which the Bank does not have a perfected first priority
security interest under the Code (including, without limitation, any
receivables associated with outstanding minimum guarantees or advances
owed to producers of the Product in question that have been secured by
unsubordinated liens against such Product in favor of producers or their
financiers); (d) which relate to a Product as to which the Bank has not
received one fully executed copy of a Laboratory Pledgeholder Agreement
(and/or if applicable, a Laboratory Authorization Letter) covering all
physical and sound elements required to be delivered and/or made available
to the Approved Account Debtor under the Approved License Agreement in
question; (e) for which the Borrowers cannot warrant title to sufficient
underlying rights to justify such contracts receivable as determined in
the Bank's sole and absolute discretion; (f) that is payable by an
Approved Account Debtor which, when aggregated with all other account and
contracts receivables of such Approved Account Debtor included in the
Borrowing Base, exceeds 20% of the total Borrowing Base (or exceeds 30% of
the total Borrowing Base with respect to BMG, Ingram, East Texas, HBO or
Discovery) to the extent of such excess; (g) payable in a currency (x)
other than Dollars which is not freely convertible into Dollars, or (y)
which may not be freely withdrawn from the country where paid; (h) which
relate to a Product that does not constitute a "Qualifying Completed
Picture" or a "Qualifying Uncompleted Picture", with respect to the Tier 6
Borrowing Base Component; (i) payable by an Approved Account Debtor for
which 25% or more of all accounts
30
and contracts receivable owing by such Approved Account Debtor to any
Borrower are more than 90 days or 120 days past due as applicable; (j)
payable by an Affiliate of any Borrower; (k) payable by an account debtor
who is not an Approved Account Debtor; (l) payable by an account debtor
who is insolvent, is subject to any bankruptcy or insolvency proceedings,
or has made a general assignment for the benefit of creditors; or (m) is
payable by any Person which is a governmental entity unless such
receivable is specifically assigned to the Bank.
3.2.11 Third Party Payments. The term "Third Party Payments" shall
mean all distribution fees, commissions, credits, participations,
residuals and similar amounts payable by any Borrower to or in favor of
any licensees, subdistributors, sales agents, producers and other third
parties with respect to a given Product.
3.2.12 Certain changes in the Borrowing Base Definitions. In the
event the Bank determines that (i) a particular account debtor of the
Borrowers is no longer an "Approved Account Debtor" (other than as a
result of that account debtor becoming insolvent or subject to any
bankruptcy or insolvency proceeding or having made a general assignment
for the benefit of creditors), (ii) a country is no longer an "Approved
Country" or (iii) a license agreement is no longer an "Approved License
Agreement" (other than as a result of changes in the form of agreement
made by the Borrowers), any accounts or contracts receivable already
included in the Borrowing Base on the date of such determination by the
Bank shall not be deleted from the Borrowing Base but no additional
accounts and/or contracts receivable shall be included in the Borrowing
Base which do not then meet the current definition of Qualifying Accounts
Receivable or Qualifying Contracts Receivable as a result of the Bank
making one or more of the determinations described in clauses (i), (ii) or
(iii) above.
3.2.13 First Priority Security Interest in Certain Products. The
Bank may from time to time in its sole and absolute discretion waive the
requirement that any security interest in a Product of a producer of such
Product and/or of the actors, writers and/or directors guilds be
subordinate and junior to the security interest in such Product of the
Bank before the accounts receivable and/or contracts receivable of the
Borrowers related to such Product may be included in the Borrowing Base.
The Borrowers acknowledge and agree that the Bank is under no obligation
to give such waivers.
3.2.14 SAG Security Interests. With respect to all Existing
Products, no receivable derived from such Existing Products shall be
excluded from the Borrowing Base merely because the Screen Actors Guild
has a security interest therein or in the Copyrights to such Existing
Products which is not subject and subordinate and junior to the security
interests therein of the Bank.
31
3.3 Borrowing Base Calculations.
3.3.1 Frequency. On or before each Borrowing Base Certificate
Delivery Date of each month, the Borrowers shall deliver to the Bank a
Borrowing Base Certificate calculated as of the end of the immediately
preceding month, together with the amount of Estimated Revenue Expenses
and supporting calculations. The failure of the Borrowers to deliver a
Borrowing Base Certificate within three (3) Business Days after a
particular Borrowing Base Certificate Delivery Date shall, at the election
of the Bank, constitute an Event of Default provided any Obligations are
then outstanding, and without limiting any of the Bank's other rights and
remedies upon the occurrence of an Event of Default, the Borrowers shall
not be permitted to borrow any further sums hereunder unless and until
they deliver to the Bank a Borrowing Base Certificate. On or before each
Borrowing Base Reconciliation Delivery Date, the Borrowers shall deliver
to the Bank a Borrowing Base Reconciliation calculated as of the date
which is the fifteenth (15th) day immediately prior to said Borrowing Base
Reconciliation Delivery Date, together with supporting calculations. The
failure of the Borrowers to deliver a Borrowing Base Reconciliation within
three (3) Business Days after a particular Borrowing Base Reconciliation
Delivery Date shall, at the election of the Bank, constitute an Event of
Default provided any Obligations are then outstanding, and without
limiting any of the Bank's other rights and remedies upon the occurrence
of an Event of Default, the Borrowers shall not be permitted to borrow any
further sums hereunder unless and until they deliver to the Bank a
Borrowing Base Reconciliation. Each remittance of documentation,
information and/or calculations furnished pursuant to this Section 3.3.1
shall be accompanied by a certificate executed by a senior executive
officer of each Borrower certifying that all such documentation,
information and calculations so remitted is true, complete and correct.
3.3.2 Informational Packages. In addition to the documentation and
information required to be furnished by the Borrowers pursuant to any
other provisions of this Agreement, the Borrowers shall also remit to the
Bank such other documentation and information (financial or otherwise,
including, without limitation, Rights-In Agreements, License Agreements
and other chain-of-title documentation) as may be reasonably requested
from time to time by the Bank to enable the Bank to timely evaluate and
review all Borrowing Base Certificates furnished from time to time
hereunder. Concurrently with the delivery to the Bank of each Borrowing
Base Certificate, the Borrowers shall deliver to the Bank any quality or
other reports regarding physical materials for Products prepared by
laboratories holding physical materials of Products, which reports have
not previously been provided to the Bank by the Borrowers. Each remittance
of documentation and/or information furnished from time to time pursuant
to this Section 3.3.2 shall be accompanied by a certificate executed by a
senior executive officer of each Borrower certifying that all such
documentation and information so remitted is true, complete and correct.
32
3.3.3 Reductions in Borrowing Base. In the event of any discovery by
the Bank of any document, information or fact which discloses that an item
then included in the Borrowing Base should not have been included in the
Borrowing Base (or included but at a lower value) as a result of incorrect
or incomplete documentation or information previously furnished by or on
behalf of any or all of the Borrowers, then the Bank shall give written
notice to the Borrowers of such fact, and upon delivery of such notice to
the Borrowers, the Borrowers shall have three (3) Business Days to consult
with the Bank to resolve any dispute concerning the Borrowing Base items
in question. In the event the dispute is not resolved in favor of the
Borrowers within said consultation period, then the Borrowing Base shall
be automatically readjusted at the end of the consultation period to
reflect the information contained in such notice.
3.4 Required Acknowledgements. With respect to Qualifying Accounts
Receivable and Qualifying Contracts Receivable, the Borrowers shall be required
to obtain appropriate executed Acknowledgements from (i) all of their respective
account debtors of receivables to be included in the Tier 2 Borrowing Base
Component, the Tier 5 Borrowing Base Component and the Tier 6 Borrowing Base
Component, and (ii) their respective top ten (10) account debtors based on gross
revenues of the Borrowers therefrom as of the Determination Date (the "Major
Account Debtors") of receivables included in the Tier 4 Borrowing Base. In lieu
of obtaining the Acknowledgements from the account debtors described in the
immediately preceding sentence, the Borrowers may include the text of the
Acknowledgement (together with the text of the Irrevocable Authority) in the
executed License Agreement in a manner acceptable to the Bank in its sole and
absolute discretion. In addition, the Borrowers shall be required (i) either to
deliver to all account debtors who have entered into a License Agreement
Irrevocable Authorities or to include the text of the Irrevocable Authorities in
the License Agreements in a manner acceptable to the Bank in its sole and
absolute discretion, and (ii) with respect to purchase or sales orders or
agreements (other than License Agreements) with any account debtor of any
Borrower to notify in writing such account debtors of the payment instructions
required pursuant to this Agreement in a manner acceptable to the Bank in its
reasonable discretion.
4. FEES.
4.1 Closing Fee. The Borrowers shall pay to the Bank a non-refundable
closing fee in the amount of $87,500 (the "Closing Fee"), such Closing Fee to be
payable upon mutual execution of this Agreement by the Borrowers and the Bank.
4.2 Letter of Credit Fees.
4.2.1 Commercial Letter of Credit Fees. Concurrently with the
issuance of a Commercial Letter of Credit as contemplated by Section 2.4
hereof, the Borrowers shall pay to the Bank the Commercial Letter of
Credit Fees with respect to such Commercial Letter of Credit.
33
4.2.2 Standby Letter of Credit Fees. Concurrently with the issuance
of a Standby Letter of Credit as contemplated by Section 2.4 hereof, the
Borrowers shall pay to the Bank the Standby Letter of Credit Fees with
respect to such Standby Letter of Credit.
4.3 Commitment Fees. The Borrowers shall pay to the Bank a non-refundable
commitment fee ("the Commitment Fee") equal to one half percent (1/2%) per annum
on the average unused portion of the Commitment calculated and payable quarterly
in arrears on the first Business Day of each calendar quarter and on the Final
Repayment Date. For purposes of calculation of the Commitment Fee, the aggregate
undrawn amount of all outstanding Letters of Credit shall be considered part of
the used portion of the Commitment.
5. ACCOUNTS.
5.1 Master Collection Account. The Borrowers covenant to cause all Product
Payments to be directly remitted by the applicable account debtors to an
operating account of the Borrowers established at the offices of the Bank and
numbered 60-001-081 (the "Master Collection Account"). Except as permitted in
this Section 5.1, the Borrowers shall not be permitted to deposit any funds in
the Master Collection Account without the prior written consent of the Bank. The
Borrowers shall not be entitled to pledge, hypothecate, transfer, direct,
withdraw or have access to any funds deposited in the Master Collection Account
until such time, if ever, as (i) all of the Obligations and all other sums,
liabilities and other obligations owing by the Borrowers to the Bank under the
Loan Documents shall have been indefeasibly paid in full; (ii) there are no
outstanding Letters of Credit; and (iii) the Bank shall have no further
obligation to lend any monies to the Borrowers or issue any Letters of Credit
under this Agreement. Other than as expressly provided in this Section 5.1, the
Master Collection Account shall be under the exclusive control of the Bank. At
the end of each Business Day, the Bank shall transfer an amount equal to the
then credit balance in the Master Collection Account to the Operating Account,
provided that on such Business Day no Event of Default or Potential Event of
Default is then occurring.
5.2 Operating Account. The Borrowers shall open an account at the offices
of the Bank and numbered 60-078-874 (the "Operating Account"). Unless and until
there is an Event of Default in existence the Borrowers shall be permitted to
deposit and withdraw funds from such account at their discretion, however, the
Borrowers shall not be permitted to pledge, encumber, or hypothecate the
Operating Account.
5.3 LC Cash Collateral Account. The Borrowers shall open an account at the
offices of the Bank (the"LC Cash Collateral Account") in which the Borrowers may
deposit with the prior written consent of the Bank sums of money in connection
with the issuance of Cash Collateralized LCs as contemplated by Section 2.4.5
hereof. The Borrowers shall not be entitled to pledge, hypothecate, transfer,
direct, withdraw or have access to any of the funds deposited in the LC Cash
Collateral Account until such time, if ever, as (i) all of the Obligations and
all other sums, liabilities and other obligations
34
owing by the Borrowers to the Bank under the Loan Documents shall have been
indefeasibly paid in full; (ii) there are no outstanding Letters of Credit; and
(iii) the Bank shall have no further obligation to lend any monies to the
Borrowers or to issue any Letters of Credit under this Agreement; provided,
however, subject to there not then being in existence any Event of Default or
Potential Event of Default upon the expiration of a Cash Collateralized LC
without such Letter of Credit being drawn upon and the return of such Cash
Collateralized LC to the Bank, an amount equal to the undrawn amount of such
expired Cash Collateralized LC shall be transferred by the Bank to the Operating
Account.
6. REPRESENTATIONS AND WARRANTIES.
6.1 For the purpose of inducing the Bank to enter into this Agreement and
to make the Advances, each Borrower hereby jointly and severally represents and
warrants to the Bank, as of the date hereof, as of each Drawdown Date and as of
each Letter of Credit Issuance Date (except to the extent that any such
representation or warranty expressly relates to an earlier date), that:
6.1.1 Good Standing and Corporate Power. Subject to the immediately
succeeding sentence, each Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction
of its incorporation (which jurisdictions are set forth on Schedule 6.1.1
attached hereto), and is qualified to transact business as a foreign
corporation in good standing in (i) the States of California and New York
with respect to Unapix and (ii) in each other jurisdiction where the
failure to be so qualified would have a material adverse effect on it, its
assets or properties, or the conduct of its business (which jurisdictions
together with the States of California and New York with respect to
Unapix) are hereinafter collectively referred to as the "Relevant Foreign
Jurisdictions"). Notwithstanding the immediately preceding sentence, A Pix
is merging with and into Unapix and such merger has as of the date of
execution of this Agreement become effective in the State of Delaware, but
not in the State of New York. The corporate charter or right to conduct
business of each Borrower in its jurisdiction of incorporation and the
Relevant Foreign Jurisdictions has never been suspended, revoked or
terminated. Each Borrower has the right, power and authority to own its
properties and assets and to transact the business in which it is engaged
and proposes to engage, including, without limitation, the power to
distribute and otherwise exploit the Products in accordance with each
License Agreement to which it is a party.
6.1.2 Binding Agreement. This Agreement and the other Loan Documents
(to the extent such other Loan Documents are intended to be of a
contractual nature), when executed and delivered, will constitute the
valid and legally binding obligations of the Borrower or Borrowers
executing the same and are enforceable in accordance with their respective
terms except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors rights generally.
35
6.1.3 Due Authorization; No Conflicts or Violations. The execution,
delivery and performance of this Agreement by each of the Borrowers, the
borrowings hereunder, the execution, delivery and performance of each of
the other Loan Documents to which any Borrower is a party, and the grant
of the security interests contemplated by this Agreement and the other
Loan Documents to which any Borrower is a party, (i) have been duly
authorized by all requisite corporate action of each of the Borrowers
(including, without limitation, requisite actions by the board of
directors and stockholders of each Borrower) and will not violate any
provision of any law, any order of any court or other agency of the United
States, any State or any foreign country, state or province having
jurisdiction, and (ii) will not violate any provision of the
certificate/articles of incorporation, bylaws or other formation, charter
or corporate governance document of any Borrower, or any provision of any
agreement or instrument to which any Borrower is a party or by which any
Borrower or any of its properties or assets may be bound, or be in
conflict with, result in a breach of or constitute a default under, any
such agreement or other instrument, or result in the creation or
imposition of any Encumbrance (other than a Permitted Encumbrance) of any
nature whatsoever upon the Collateral, or any of the Excluded Property.
6.1.4 Authorizations. All authorizations, approvals, registrations
or filings from or with (i) any governmental or public regulatory body or
authority of the United States, any State or of any foreign country,
state, province or other jurisdiction, or (ii) any other Person, required
for the execution, delivery or performance by each of the Borrowers of the
Loan Documents to which such Borrower is a party, have been obtained or
made and are in full force and effect.
6.1.5 Necessary Rights. The Borrowers own and control and have good,
valid and marketable title to, and will continue to own and control and
have good, valid and marketable title to, all rights necessary for the
development, production, distribution, subdistribution, sale, lease,
sublease, rental, license, sublicense, telecast, broadcast, transmission
(including, without limitation, by way of satellite or cable) and other
exploitation of all Products in accordance with the requirements contained
in any agreement relating to any Product to which any Borrower is a party,
including this Agreement, the License Agreements and Rights- In-Agreements
(including, without limitation, all rights necessary to perform all of the
Borrowers' obligations, to perform and observe all conditions referred to
herein or therein and to be in compliance with and observe all of the
Borrowers' representations and warranties made herein or therein); and own
and control and have good, valid and marketable title to all other
Collateral and all Excluded Property.
6.1.6 The Security Interests. This Agreement and the other Loan
Documents to be delivered to the Bank pursuant to Section 8.3 hereof, will
create and grant to the Bank valid security interests and charges in the
Collateral and, to the extent required, upon the filing of financing
statements under the Commercial Code of the States of California,
Connecticut, New York, South
36
Carolina and Washington, with respect thereto, and the Copyright Mortgages
in the United States Copyright Office, the Bank shall have perfected first
priority security interests in and liens on the Collateral described
therein subject to no other Encumbrances (other than Permitted
Encumbrances).
6.1.7 No Violation of Rights. None of the Products or any of the
component parts thereof will violate or infringe upon any copyright,
trademark, service mark, patent, trade name, service name, performing
right or any literary, dramatic, musical, artistic, personal, private,
civil, contract or property right or any other right of any Person or
contain any libelous or slanderous material or invade the rights of
privacy of any Person.
6.1.8 No Judgments, Litigation, Etc. Except as set forth on Schedule
6.1.8 attached hereto, there are no judgments or orders or actions at law
or in equity and no proceedings (including, without limitation, tax
audits) by or before any court, arbitrator, arbitration panel,
governmental commission, bureau or other administrative agency pending
(or, to the best knowledge of the Borrowers after due inquiry and
investigation, threatened) against any Borrower or any of its Subsidiaries
which individually would have a material adverse effect on the condition
(financial or otherwise) of any Borrower or on the Collateral.
6.1.9 No Defaults. There does not exist any Event of Default, and
none of the Borrowers is in default in any material respect in the payment
or performance of any of its obligations under any agreement, instrument
or undertaking to which any Borrower is a party or by which it or any of
its assets may be bound which may materially adversely affect its ability
to fully and timely perform all of its obligations under any Loan
Document, any License Agreement or any Rights-In-Agreement, or which would
adversely affect the Bank, the value of the Collateral or the Bank's
security interests therein.
6.1.10 Taxes. Each Borrower and each of its Subsidiaries has filed
or caused to be filed in all relevant jurisdictions such tax returns and
reports as are required to have been filed, and, except as set forth on
Schedule 6.1.10 hereto, all taxes and other charges required to be paid by
each Borrower and each of its Subsidiaries have been paid when due and
payable except for such filing or payment failures which would not
individually have a material adverse effect on the condition (financial or
otherwise) of any Borrower or on the Collateral.
6.1.11 Existing License Agreements. As of the date of execution of
this Agreement, Schedule 6.1.11 hereto completely and accurately sets
forth (i) a description of all currently existing License Agreements
(collectively, the "Existing License Agreements"), and (ii) identifies
each Existing License Agreement for which there exists (as of the date of
execution of this Agreement) payment instructions thereby instructing an
account debtor to remit one or more License Payments to any Person (other
than the Bank or any Borrower).
37
6.1.12 Furnishing of Documents. The Borrowers have furnished the
Bank with true and complete copies of (i) each Borrower's certificate
(articles) of incorporation, bylaws or other corporate formation, charter
or governance documents together with all amendments thereto, and (ii) all
License Agreements required to be furnished hereunder to the extent any
such agreements are in existence at least ten (10) days prior to the date
this representation and warranty is deemed made. Each of the agreements
set forth in clause (ii) above is in full force and effect and constitute
the binding obligations of all of the parties thereto in accordance with
their respective terms. There has been no default or accrued right of
termination under the agreements set forth above in clause (ii) by any
Borrower or to any Borrower's best knowledge (after due inquiry and
investigation), any other party under said agreements.
6.1.13 Financial Statements. The financial statements of the
Borrowers have been prepared in accordance with GAAP, are true and correct
and fairly present the consolidated financial position of the Borrowers
and their Subsidiaries as at the respective dates thereof, subject to year
end adjustments made to quarterly financial information made in accordance
with GAAP, and since such dates, neither the business, nor the assets nor
the condition (financial or otherwise) of the Borrowers or their
Subsidiaries have been materially adversely affected. None of the
Borrowers or any of their respective Subsidiaries has any material
contingent obligation, contingent liability (including, without
limitation, any contingent Environmental Liabilities), liability for
taxes, long-term lease or unusual forward or long-term commitment or
Environmental Liability, which is not reflected in the foregoing financial
statements or in the notes thereto.
6.1.14 Federal Reserve Regulations. None of the Borrowers are
engaged in the business of extending credit for the purpose of purchasing
or carrying "margin stock" within the meaning set forth in applicable
Regulations of the Board of Governors of the Federal Reserve System of the
United States, as the same may at any time be amended or modified and in
effect; and none of the proceeds of the Advances will be used for any
purpose which would violate any applicable Regulations of the Board of
Governors of the Federal Reserve System of the United States, as any of
the same may at any time be amended or modified and in effect; and none of
the proceeds of the Advances will be used to purchase or carry any such
"margin stock" or to extend credit to others for such purpose.
6.1.15 Fictitious Names; Chief Executive Office. Except as set forth
on Schedule 6.1.15 hereto, (i) no Borrower has conducted business during
the past five (5) calendar years, nor is any Borrower presently doing
business, under any name other than its name set forth on the first page
of this Agreement, including, without limitation, any trade name, and (ii)
each Borrower's chief executive office (within the meaning of Section
9-103 of the Uniform Commercial Code of the State of California) is
located in New York City, New York, at the address set forth in Section 14
hereof, and no Borrower has any other offices.
38
6.1.16 ERISA Compliance. Each Borrower and each ERISA Affiliate is
in compliance in all material respects with the provisions of ERISA which
are applicable to it. None of the Borrowers and ERISA Affiliates has
established (and does not maintain or contribute to) any employee benefit
plan or other plan covered by Title IV of ERISA (other than two "401(k)
Plans" for which there is no unfunded pension liability), does not
sponsor, maintain or contribute to any "multi-employer plan," as such term
is defined in Section 414(f) of the Internal Revenue Code, and has not
breached any fiduciary duty imposed upon it under Title I of ERISA.
6.1.17 Equity Interests. As of the date of execution of this
Agreement, Schedule 6.1.17 hereto completely and accurately sets forth all
corporations, partnerships, joint ventures or other entities in which any
Borrower has any record or beneficial interest. All of the outstanding
shares of capital stock or other equity interests in each Subsidiary of
any of the Borrowers (i) have been validly issued and are fully paid and
non-assessable, and (ii) are owned (both beneficially and of record) by
the Persons set forth on Schedule 6.1.17 hereto, free and clear of all
Encumbrances.
6.1.18 Ability to Borrow. No Borrower is, or will (during the
Availability Period or while any of the Obligations are outstanding) be,
(i) an "investment company," within the meaning of the Investment Company
Act of 1940, as amended or (ii) subject to regulation under the Public
Utility Holding Company Act of 1935, the Federal Power Act or any federal,
State, foreign, provincial or local statute or any other applicable law of
the United States, any State, or foreign country, state or province
thereof or any other jurisdiction, in each case limiting its ability to
incur indebtedness for money borrowed as contemplated hereby or by any
other Loan Document; and none of the Advances have been or will be used,
directly or indirectly, for any purpose other than the purposes described
in Section 9.1 hereof.
6.1.19 Existing Deposit Accounts. As of the date of execution of
this Agreement, Schedule 6.1.19 hereto completely and accurately sets
forth all deposit, collection, money market and other bank or similar
accounts of each Borrower established with all third party banks, savings
and loan associations, brokerage firms and all other financial
institutions wherever located.
6.1.20 Existing Trademarks, Service Marks, Etc. As of the date of
execution of this Agreement, Schedule 6.1.20 hereto completely and
accurately sets forth all registered or applied for copyrights,
trademarks, service marks, logos, and trade name and service name rights
of each Borrower.
6.1.21 Existing Products. As of the date of execution of this
Agreement, Schedule 6.1.21 hereto completely and accurately sets forth all
Products in which any Borrower has any interest (collectively, the
"Existing Products").
39
6.1.22 Existing Real Property Interests. As of the date of execution
of this Agreement, Schedule 6.1.22 hereto completely and accurately sets
forth all interests of each Borrower in real property, including, without
limitation, all real property leases.
6.1.23 Location of Physical Materials. As of the date of execution
of this Agreement, Schedule 6.1.23 hereto completely and accurately sets
forth the names and addresses of all laboratories that have possession of
any physical and/or sound materials or elements related to or used in
connection with any Product in which any Borrower has any interest.
6.1.24 Subsidiaries' Business Activities. Schedule 6.1.24 hereto
completely and accurately describes the nature of the business activities
for each Subsidiary of any Borrower during the past five years.
6.2 No Misrepresentations. No representation or warranty of any Borrower
made herein or in any other Loan Documents, and none of such documents
themselves contain, or will contain, a misstatement by or on behalf of any
Borrower of a material fact or omits, or will omit to state a material fact
required to be stated herein or therein in order to make the statements
contained herein or therein, in light of the circumstances under which they were
made, not misleading in any respect.
6.3 Making of and Survival of Representations and Warranties. All
representations and warranties of the Borrowers made herein and the other Loan
Documents shall survive the execution and delivery of this Agreement, the making
of any Advance and the issuance of any Letter of Credit, and shall be deemed
made jointly and severally again by each of the Borrowers as of each Drawdown
Date and Letter of Credit Issuance Date with the same force and effect as if
made on and as of each such date.
7. CONDITIONS PRECEDENT.
7.1 Upon Execution of Agreement. Concurrently with the execution of this
Agreement, the Borrowers shall have complied with each of the following
conditions precedent to the satisfaction of the Bank in its sole and absolute
discretion, unless otherwise waived in writing by the Bank in its sole and
absolute discretion:
7.1.1 Supporting Documents of the Borrowers. With respect to each
Borrower, the Bank shall have received certificates of a senior executive
officer of such Borrower acceptable to the Bank certifying: (i) that
attached thereto is a true and complete copy of resolutions of the board
of directors of such Borrower authorizing (x) such Borrower's performance
of all of its obligations under the Loan Documents, (y) the entering into
by said Borrower of all Loan Documents to which said Borrower is a party,
and (z) the execution and delivery by an officer of such Borrower of all
of the Loan Documents to which such Borrower is a party; (ii) as to the
incumbency and specimen signature of each officer, managing director,
employee or agent of such Borrower executing the certificate and each of
40
the other Loan Documents to which such Borrower is a party, on behalf of
such Borrower; (iii) that attached thereto are true and complete copies of
the certificate of incorporation, the bylaws or other corporate formation,
charter or governance documents of such Borrower together with all
amendments thereto; and (iv) that the representations and warranties set
forth in Section 6 hereof are true and correct.
7.1.2 Good Standing Certificates. The Bank shall have received from
each Borrower good standing certificates, dated as of a recent date,
issued by the Office of the Secretary of State or other appropriate
governmental authority of (i) the jurisdiction of incorporation of such
Borrower, and (ii) all other jurisdictions where such Borrower is
qualified to do business, in each case indicating that such Borrower is in
good standing. Where applicable, such good standing certificates shall
list the certificate/articles of incorporation or other corporate
formation, charter or other governance documents, all amendments thereto
and all other certificates and documents filed which relate to any
Borrower.
7.1.3 Payment of Closing Fee. The Closing Fee shall have been paid
to the Bank.
7.1.4 Closing Costs. The Borrowers shall have paid to the Bank all
Costs incurred to date by the Bank in connection with the negotiation,
review and preparation of this Agreement, the other Loan Documents and the
various transactions and documents contemplated herein and therein, and
the conducting of "due diligence" relating to this Agreement and the
various transactions contemplated herein.
7.1.5 Opening of Bank Accounts. The Borrowers shall have established
the Master Collection Account, the Operating Account and the LC Cash
Collateral Account, and all such other bank accounts as the Bank deems
appropriate to carry out the terms of this Agreement, and all documents
and procedures in connection therewith shall be satisfactory in form and
substance to the Bank in its sole and absolute discretion.
7.1.6 The Note. The Note shall have been duly executed by all of the
Borrowers and delivered to the Bank.
7.1.7 Opinions of Counsel for the Borrowers. The Bank shall have
received the favorable written opinions, addressed to the Bank and
satisfactory in form, scope and substance to the Bank and its counsel, of
(i) St. John & Wayne, L.L.C., counsel to the Borrowers, and (ii) such
other counsel to the Borrowers as the Bank may request.
7.1.8 Financing Statements. The Borrowers shall have executed and
delivered to the Bank financing statements with respect to the Collateral
under the
41
Uniform Commercial Codes of the States of California, Connecticut, New
York and South Carolina and such other jurisdictions as the Bank may
request.
7.1.9 Copyright Mortgage. The Borrowers shall have duly executed and
delivered to the Bank Copyright Mortgages describing the Collateral in a
form satisfactory for recording.
7.1.10 Notices to Third Party Bank. The Bank shall have received a
Bank Notice Letter executed by the Borrowers for each bank account
maintained by any Borrower at a third party bank or other financial
institution.
7.1.11 Stock Certificates and Similar Instruments. The Borrowers
shall have delivered to the Bank all stock certificates and similar
instruments representing all Investments of the Borrowers, together with
corresponding stock transfer (or appropriate equivalent) assignments duly
executed in blank by the appropriate Borrowers.
7.1.12 Security Instruments. The Bank shall have received (i) the
agreements and documents set forth in Section 8.3 hereof, and (ii)
evidence of the completion of all recordings and filings as may be
necessary or, in the opinion of the Bank, desirable to perfect and/or
continue the perfection of the security interests created by the Loan
Documents, including, but not limited to, any copyright filings and
financing statement filings and no report shall have been obtained by the
Bank listing any Borrower (by its present name or any previous name) as a
debtor and evidencing an Encumbrance on any of the Collateral (other than
Permitted Encumbrances).
7.1.13 Interparty, Subordination and Accommodation Pledge
Agreements. The Bank shall have entered into all such interparty,
subordination and/or accommodation pledge agreements (in such form, scope
and substance as are acceptable to the Bank in its sole and absolute
discretion) with all Persons that the Bank deems necessary or advisable,
including, without limitation, any Product financiers, trade unions,
guilds and similar organizations, co-venturers, co-owners and distributors
and licensees.
7.1.14 Insurance. The Bank shall have received such policies,
binders, endorsements and certificates as it may request in its sole and
absolute discretion, to evidence the Borrowers' compliance with the
insurance requirements of Section 9.5 hereof.
7.1.15 Due Diligence. The Bank shall have conducted (and be
satisfied with the results of) such due diligence regarding the Borrowers,
the Collateral and the transactions contemplated hereby as the Bank deems
appropriate.
7.1.16 Approvals. The Borrowers shall have procured the consents and
approvals from all United States, State, provincial, municipal and foreign
42
governmental agencies and authorities as are necessary to consummate the
transactions contemplated by the Loan Documents, and any other agreements
or documents referred to or contemplated therein.
7.1.17 Proceeds Collection Agreement. Atlantic Bank and the
Borrowers shall have executed and delivered to the Bank the Proceeds
Collection Agreement.
7.1.18 Additional Documents. The Bank shall have received such
additional documents, agreements and certificates as the Bank may request
in its sole and absolute discretion.
7.2 Advances and Letters of Credit. The obligation of the Bank to make any
Advance or issue any Letter of Credit is subject to the Borrowers' full
compliance with Section 7.1 hereof and each of the following conditions
precedent to the satisfaction of the Bank in its sole and absolute discretion,
unless otherwise waived in writing by the Bank in its sole and absolute
discretion:
7.2.1 Repayment of Atlantic Credit Facility. Prior to or
concurrently with the making of the initial Advance or issuance of any
Letter of Credit hereunder, (i) the Borrowers shall have repaid all
obligations owing under the Atlantic Credit Facility, and (ii) Atlantic
Bank shall have executed and delivered to the Bank the Atlantic Repayment
Confirmation Agreement together with all documents necessary to terminate
any and all security interests and liens securing the Atlantic Credit
Facility.
7.2.2 Compliance. At the time of the making of the requested Advance
or issuance of any requested Letter of Credit, (i) the Borrowers shall
have complied and then be in compliance with all terms, covenants and
conditions of this Agreement; (ii) there shall exist no Potential Event of
Default or Event of Default, and no such event will result from such
requested Advance or Letter of Credit, and (iii) each of the
representations and warranties made by the Borrowers herein or in any
other Loan Document shall be true and correct on and as of such date with
the effect as though such representations and warranties had been made on
and as of such date.
7.2.3 Borrowing Certificate. The Borrowers shall have timely
delivered to the Bank, in accordance with Section 2.2 hereof, and Section
2.4 hereof, if applicable, a Borrowing Certificate duly completed and
executed by all of the Borrowers.
7.2.4 Security Instruments. The Bank shall have received (i) the
agreements and documents set forth in Section 8.3 hereof, and (ii)
evidence of the completion of all recordings and filings as may be
necessary or, in the opinion of the Bank, desirable to perfect and/or
continue the perfection of the security interests created by the Loan
Documents, including, but not limited to, any copyright filings and
financing statement filings and no report shall have been
43
obtained by the Bank listing any Borrower (by its present name or any
previous name) as a debtor and evidencing an Encumbrance on any of the
Collateral (other than Permitted Encumbrances).
7.2.5 Payment of Certain Obligations. The Borrowers shall have paid
to the Bank all Interest and Costs then due and payable to and/or incurred
by the Bank through the Drawdown Date or Letter of Credit Issuance Date,
as the case may be.
7.2.6 Additional Documents. The Bank shall have received such
additional documents, agreements and certificates as the Bank may request
in its sole and absolute discretion.
7.3 Effect of Waiver of Condition. With respect to any waiver by the Bank
of any condition set forth in Sections 7.1 or 7.2 hereof in connection with the
making of the Advances or issuance of Letters of Credit:
7.3.1 Unless such waiver expressly provides otherwise in writing,
notwithstanding such waiver, the Bank shall have the right to request that
the Borrowers satisfy the condition(s) so waived at any time after such
Advances are made or Letters of Credit are issued, and the Borrowers shall
satisfy such condition(s) as soon as is reasonably practicable, but in no
event later than five (5) Business Days after such written request is made
by the Bank.
7.3.2 If such waiver is of an obligation to deliver to the Bank a
certificate or other document or instrument, unless such waiver expressly
provides otherwise in writing it shall not be deemed a waiver or discharge
of the representations, warranties, covenants or other substantive
provisions that would, in accordance with the terms hereof, be required to
be set forth in such certificate, document or instrument.
8. SECURITY INTEREST.
8.1 Grant of Security Interest. As security for the full and timely
payment and performance of all of the Obligations and any other liabilities of
or amounts owed by the Borrowers to the Bank arising out of this Agreement or
any of the other Loan Documents whether now existing or hereafter arising, each
of the Borrowers hereby grants a continuing security interest in and lien upon,
and mortgage, pledge and assign to the Bank for security purposes, the
"Collateral."
8.2 The Collateral. The term "Collateral" shall mean all of each
Borrower's now owned or hereafter acquired personal property, including, without
limitation, all assets, accounts, accounts receivable, contract receivables,
goodwill, contract rights, general intangibles, inventory, equipment, fixtures,
goods, investments, documents, instruments, returned merchandise, chattel paper,
cash, deposit accounts, completion bonds, policies of insurance and all
products, replacements or substitutions for, and proceeds of, and
44
accessions and additions to any and all of the foregoing property and interests
in property, and all payments under any indemnity, warranty or guarantee payable
by reason of loss or damage to or otherwise with respect to any of the foregoing
Collateral, and all books and records relating to any of the foregoing
Collateral. Notwithstanding the foregoing and for the avoidance of doubt, the
term "Collateral" shall expressly exclude the Excluded Property. Without in any
way limiting the generality of the foregoing, but subject to the immediately
preceding sentence, the Collateral shall specifically include all of each
Borrower's right, title and interest, now owned or hereafter acquired,
throughout the entire universe, in and to each and all of the following:
8.2.1 All Products (whether such Products are in preproduction,
production, being recorded, principal photography, post-production or
completed) and Literary Properties, including, without limitation, all of
each Borrower's right, title and interest in and to:
8.2.1.1 All common law and statutory copyrights and copyright
registrations, and applications for registration, now existing or
hereafter arising, United States and foreign, obtained or to be
obtained on or in connection with the Products, the Literary
Properties or any parts thereof or any underlying or component
element of any Product or Literary Property, including, but not
limited to, all copyrights on the property described in Sections
8.2.1.2 through 8.2.1.5 hereof together with the right to copyright
and all rights to renew or extend such copyrights and the right (but
not the obligation) of the Bank to sue in its own name and/or in the
name of any or all of the Borrowers for past, present and future
infringements of copyright (collectively, the "Copyrights");
8.2.1.2 All rights in and to all music, musical compositions,
lyrics and recordings used and to be used in, or derived from, any
of the Products, including, without limitation, all rights to
record, re-record, produce, reproduce, license, synchronize or
publish all or any of said music and musical compositions;
8.2.1.3 All physical properties of every kind or nature of or
relating to any of the Products and all versions thereof, to the
extent now or hereafter in existence, including, without limitation,
exposed film, developed film, positives, negatives, prints, answer
prints, special effects, preprint materials (including, without
limitation, negatives, positives, duplicate negatives,
inter-negatives, inter-positives, color reversals, intermediates,
lavenders, fine grain master prints and matrixes, master tapes,
discs, phonograph records, cassettes and cartridges, soundtracks,
recordings, audio and video tapes, discs, cassettes and cartridges,
master magnetic tracks, other optical soundtrack recordings and
music cue sheets, and all other forms of preprint elements used in
any way to produce prints or other copies or additional preprint
elements, whether now known or hereafter devised or created), audio
and video tapes, cassettes and discs (including,
45
without limitation, 8mm, CD-I, CD-ROM, DVD and VHD) of all types and
gauges, cutouts, trims and any and all other physical properties of
every kind and nature relating to any of the Products (including,
without limitation, stock footage) in whatever state of completion,
and all duplicates, drafts, versions, variations and copies of each
thereof (all of the foregoing collectively referred to as the
"Physical Materials"), and any and all rights of access to removal
and transfer of, and duplication and reproduction of, any and all of
the Physical Materials;
8.2.1.4 All production, sale, duplication, distribution,
subdistribution, leasing, subleasing, license, sublicense,
exhibition, telecasting, broadcasting, transmission (including,
without limitation, by way of microwave, satellite or cable),
ancillary, publishing, spinoff, collateral, allied, subsidiary,
merchandising and other exploitation rights pertinent or related to
the Products, including, without limitation, the following: (i) all
rights to produce remakes, sequels, pre-sequels or serials based in
whole or in part upon the Products, the Literary Properties, the
theme of the Products or the text or any part of the Literary
Properties; (ii) all rights throughout the world to sell copies of
the Products in the form of phonograph records, audio and/or audio
visual cassettes, tapes, video cartridges, discs, including, without
limitation, video and/or laser discs (including, without limitation,
CD-I, CD-ROM, DVD and VHD) or other devices, now known or hereafter
created, conceived or devised; (iii) all rights throughout the world
to exhibit the Products in theatres; (iv) all rights throughout the
world to telecast, broadcast, distribute, transmit (including,
without limitation, by way of microwave, satellite or cable) or
reproduce by means of television, including commercially sponsored,
sustaining and subscription, satellite, cable or pay, pay-per-view,
near pay- per-view television, by means of video cassettes, video
cartridges (including, without limitation, 8mm, video and laser
discs (including, without limitation, CD-I, CD-ROM, DVD and VHD),
tapes, cartridges, interactive video (whether such interactive video
is pay-per-view, computer generated, computer received, received via
cable television, supplied via computer modem, incorporated into
software, supplied via direct satellite reception or is incorporated
into a computer game, arcade game or home video game) or any other
scientific, mechanical, audio, audio-visual or electronic means,
methods, processes or devices, now known or hereafter created,
conceived or devised, the Products and any remake of, sequel or
pre-sequel to or serialization of the Products; (v) all rights to
produce primarily for television or similar use a motion picture or
series of motion pictures, by use of film, video, tape, disc
(including, without limitation, CD-I, CD-ROM, DVD and VHD),
cassette, cartridge or any other audio and/or audio-visual
mechanical device now known or hereafter devised, based upon the
Products, the Literary Properties or any part thereof, including,
without limitation, based upon any treatment, script, scenario or
the like used in the Products; (vi) all rights to reissue any of the
Products by means of film, tape, disc (including,
46
without limitation, CD-I, CD-ROM, DVD and VHD) or any other devices
now known or hereafter created, conceived or devised; (vii) all
merchandising rights, including, without limitation, all rights to
use, exploit and license others to use and exploit any and all
commercial tie-ups of any kind arising out of or connected with the
Literary Properties, the Products, the title or titles of the
Products and Literary Properties, and the characters of the Products
or of the Literary Properties; and (viii) the names or
characteristics of said characters in any of the Products or
Literary Properties, including, without limitation, any and all
commercial tie-ups, sponsorships, publishing, merchandising and
other exploitation in connection with or related to the Products,
any remake, prequel, sequel or serialization thereof or the Literary
Properties;
8.2.1.5 The dramatic, non-dramatic, stage, television, "home
video," radio and publishing rights in and to the Products, the
Literary Properties or any part thereof, and the right to obtain
Copyrights and renewals of Copyrights therein;
8.2.1.6 The titles of the Products and the Literary Properties
and all rights to the use thereof, including, without limitation,
rights protected by trademark and service mark laws against unfair
competition or any other applicable statutory or common law, or
other rule or principle of law; and all trademarks, trade names,
logos, service marks and service names, at any time owned or used by
any Borrower in connection with any of the Products;
8.2.1.7 All Product Payments and all accounts, accounts
receivable, contracts receivable, general intangibles, contract
rights and other rights which may arise or may have arisen in
connection with the creation, production, delivery, distribution,
exhibition, telecasting, broadcasting, licensing, renting, leasing,
sale or other exploitation of all or any part of the Products,
including, but not limited to, (i) all general intangibles and
contract rights for services or other performances by any third
parties, including Persons furnishing services or materials or both,
and recording artists, song writers, composers, musicians, actors,
writers, directors, individual producers or any and all other
performing or non-performing artists in any way connected with the
Products or the Literary Properties, (ii) all general intangibles
and contract rights relating to licenses of sound or other
equipment, and licenses for photographic or other processes relating
to the Products, and (iii) any and all other such rights as any
Borrower has, the ownership or control of which is necessary or
desirable, in the opinion of the Bank, in order to complete
production and distribution of the Products; with respect to each
agreement that is a part of the Collateral, the Collateral shall
include the right (but not the obligation) of the Bank and the
Borrowers, to modify such agreement, to perform
47
thereunder, to compel performance thereunder and otherwise to
exercise all remedies thereunder;
8.2.1.8 All documents issued by any pledgeholder or bailee
with respect to the Products or any of the Physical Materials; and
8.2.1.9 All insurance policies and completion bonds on or
connected with the Products or the production or distribution
thereof or the Physical Materials, and all proceeds which may be
derived therefrom.
8.2.2 All License Agreements, including, without limitation:
8.2.2.1 All presently existing and hereafter arising License
Payments, accounts, and other accounts receivable and general
intangibles or sums payable to any Borrower in respect of the
License Agreements; and all proceeds of any of the foregoing, of
every kind and character;
8.2.2.2 All sums, proceeds, money, products, profits and
increases, including money, profits or increases, or other property
presently owned or hereafter obtained from, in connection with or
related to the License Agreements;
8.2.2.3 All chattel paper which may arise in connection with
any and all of the License Agreements; and
8.2.2.4 All security interests granted to any or all of the
Borrowers under any License Agreements or any other agreements.
8.2.3 All machinery, electrical and electronic components,
equipment, fixtures, furniture, office machinery, vehicles, trailers,
implements and other tangible personal property of every kind and
description now owned or hereinafter acquired by any or all of the
Borrowers (including, without limitation, all wardrobes, props, mikes,
scenery, sound stages, movable, permanent or vehicular dressing rooms,
sets, lighting equipment, cameras and other photographic, sound recording
and editing equipment, projectors, film developing equipment and
machinery) and all goods of like kind or type hereafter acquired by the
Borrowers in substitution or replacement thereof, and all additions and
accessions thereto (collectively hereinafter referred to as the
"Equipment") and all rents, proceeds and products of the Equipment,
including, without limitation, all insurance covering the Equipment;
8.2.4 All inventions, processes, formulae, licenses, patents, patent
rights, trademarks, trademark rights, trademark registrations, service
marks, service mark rights, service mark registrations, trade names, trade
name rights, trade name registrations, service names, service name rights,
service name registrations, logos, indicia, corporate and company names,
business source or business identifiers and
48
renewals and extensions thereof, United States and foreign, and the
related goodwill and other like business property rights relating to the
Products, and the right (but not the obligation) to register claim under
any trademark, trade name, service mark, service name or patent and to
renew and extend such trademarks, trade names, service marks, service
names or patents and the right (but not the obligation) to sue in the name
of the Borrowers or in the name of the Bank for past, present or future
infringement of trademarks, trade names, service marks, service names or
patents;
8.2.5 All cash, cash equivalents and bank accounts of the Borrowers
wherever located, including, without limitation, the Master Collection
Account, the Operating Account and the LC Cash Collateral Account, and all
of the bank accounts set forth on Schedule 6.1.19 hereto and all drafts,
checks, certificates of deposit, notes, bills of exchange and other
writings which evidence a right to the payment of money and are not
themselves security agreements or leases and are of a type which in the
ordinary course of business is transferred by delivery with any necessary
endorsement or assignment, whether now owned or hereafter acquired;
8.2.6 All shares of stock and corresponding certificates
representing such shares of stock, all partnership interests (both general
and limited) and corresponding certificates representing such partnership
interests, all other equity interests and corresponding certificates
representing such other equity interests, all stock, partnership or other
entity transfer powers and similar evidences representing any ownership or
investment interests of any Borrower in any Person, including, but not
limited to, all shares of stock, stock certificates, partnership
interests, partnership certificates, other equity interests, certificates
representing other equity interests, and stock, partnership or other
entity transfer powers and other evidences of ownership interests in any
and all present and future Subsidiaries of any Borrower, whether partially
or wholly owned together with all cash, shares of stock, dividends and
other property at any time and from time to time received, receivable or
otherwise distributed or distributable in respect of or in exchange or
substitution for any or all of said shares and partnership or similar
interests (collectively, the "Investments");
8.2.7 All other personal property, assets and things of value of
every kind and nature, tangible or intangible, absolute or contingent,
legal or equitable, which any Borrower may be possessed of or entitled to
or which are now owned or hereafter acquired by them (but expressly
excluding the Excluded Property);
8.2.8 All inventory of prints, video laser discs (including, without
limitation, CD-I, CD-ROM, DVD and VHD), video cassettes, video cartridges,
video tapes, phonograph records, discs (including, without limitation,
laser discs and compact discs) advertising materials and all other items
of inventory;
49
8.2.9 All books and records relating to any and all of the foregoing
Collateral;
8.2.10 All Rights-In Agreements (including, without limitation, all
security interests granted to any of the Borrowers pursuant thereto or in
accordance therewith); and
8.2.11 All proceeds of, products of or accessions or additions to,
any and all of the foregoing Collateral.
For the avoidance of doubt, the term "Collateral" shall mean all of the
personal property described in this Section 8.2 whether now owned or hereafter
acquired by any or all of the Borrowers.
8.3 Security Documents. For the purpose of further evidencing or
perfecting the security interests granted by the Borrowers to the Bank, the
Borrowers agree to:
8.3.1 Execute and deliver, or cause to be executed and delivered, to
the Bank, a Laboratory Pledgeholder Agreement from each laboratory
(including, without limitation, video duplication and audio laboratories)
having possession of any Collateral owned by any Borrower;
8.3.2 Execute and deliver, or cause to be executed and delivered, to
the Bank, a Laboratory Authorization Letter from each laboratory having
possession of any Collateral as to which any Borrower has been granted
rights of access by any Person;
8.3.3 Execute and deliver, or cause to be executed and delivered, to
the Bank, Uniform Commercial Code financing statements and Bank Notice
Letters for all jurisdictions as may be, in the opinion of the Bank,
necessary to perfect and/or continue perfection of such security
interests;
8.3.4 (i) Execute and deliver, or cause to be executed and
delivered, to the Bank, the Copyright Mortgages and Trademark Mortgages,
and (ii) cause to be recorded in the United States Copyright Office and
the United States Patent and Trademark Office, as appropriate, an
additional original copy of each such Copyright Mortgage and Trademark
Mortgage;
8.3.5 Subject to Section 3.4 hereof, with respect to each Product
Payment, execute and deliver, and cause all account debtors of each such
Product Payment to execute and deliver, an Irrevocable Authority and
Acknowledgment to the Bank pursuant to which all such account debtors are
instructed and agree to remit all such Product Payments directly to the
Master Collection Account;
8.3.6 Deliver to the Bank all stock certificates (or other evidences
of ownership) evidencing the Investments (other than Investments
constituting any
50
Excluded Property), together with corresponding stock transfer assignments
(or similar instruments) executed in blank by the appropriate Borrower;
and
8.3.7 Execute and deliver, or cause to be executed and delivered, to
the Bank, such other instruments and documents as the Bank may request to
carry out and fulfill the purposes of this Agreement, all in form and
substance satisfactory to the Bank.
8.4 Borrowers to Deliver Funds to the Bank. In the event that any Borrower
receives any funds which should have been delivered directly to the Bank
pursuant to Sections 8.3.5 and 5.1 hereof, the Borrowers agree that such funds
are being held in trust for the Bank, and such Borrower shall, promptly upon
receipt thereof, deliver the same to the Bank.
8.5 Borrowers to Hold in Trust, Etc. The Borrowers agree that in the event
an Event of Default occurs, upon receipt by any Borrower of any Product Payments
not then included in the Borrowing Base, or any check, draft, note, trade
acceptance or other instrument evidencing an obligation to pay any such sum, to
hold the same in trust for the Bank, and to forthwith, without any notice or
demand whatsoever (all notices, demands, or other actions on the part of the
Bank being expressly waived), endorse, transfer, and deliver any such sums or
instruments, or both, to the Bank to be applied towards repayment of the
Obligations in accordance with the provisions of Section 12.7 hereof. Nothing
contained in this Section 8.5 shall be construed as limiting the Borrowers'
obligations under Sections 5.1, 8.3.5 and 8.4 hereof.
8.6 Filing and Recordation. The Borrowers shall, at their sole cost and
expense and in accordance with the Bank's instructions, execute and deliver all
documents of whatever kind and render such other assistance as may be necessary
to cause all of the agreements, instruments and documents executed pursuant to
Section 8.3 hereof to be duly recorded and/or filed in all places necessary, in
the opinion of the Bank, to perfect and protect the security interests and liens
of the Bank in the Collateral, and (without limiting the Borrowers' recording
and/or filing obligations pursuant to Section 8.3 hereof or elsewhere herein)
the Bank is hereby authorized to file or record all of such agreements,
instruments and documents. In the event that any re-recording or re-filing
thereof (or the filing or recording of any additional agreements, instruments
and/or documents) required to protect and preserve any such lien or security
interest, the Borrowers agree that they shall, at their sole cost and expense,
again promptly execute and deliver all documents of whatever kind and render
such other assistance as may be necessary to cause the same to be re-recorded
and/or re-filed (or any additional agreements, instruments and/or documents
filed or recorded) at the time and in the manner requested by the Bank.
Notwithstanding the foregoing, the Borrowers hereby authorize the Bank upon the
occurrence of an Event of Default to execute (or re-execute) in the name of the
Borrowers and/or to file or record (or re-file or re-record) any financing
statements, Copyright Mortgages, Trademark Mortgages or other documents or
instruments in respect of any security interests created pursuant to this
Agreement or any of the other Loan Documents which may at any time be required
and be
51
commercially practical in the reasonable opinion of the Bank, and the Borrowers
hereby irrevocably designate the Bank, its agents, representatives and designees
as agent and attorney-in-fact for the Borrowers for these purposes. Such
appointment is coupled with an interest and is therefore irrevocable.
8.7 Termination of Security Interest In All Collateral. Upon the (i) full
and complete indefeasible satisfaction of all of the Obligations and any other
liabilities or obligations of or amounts owing by the Borrowers to the Bank
pursuant to the Loan Documents, whether now existing or hereafter arising, (ii)
the expiration of all outstanding Letters of Credit, (iii) the termination of
the Bank's obligation to make any Advances to the Borrowers and to issue any
Letters of Credit hereunder, and (iv) submission by the Borrowers to the Bank of
appropriate termination statements or other instruments reflecting the
termination of the Bank's security interests in the Collateral, at the expense
of the Borrowers, the Bank shall promptly execute and return such instruments,
including, but not limited to, the Note marked "paid," to the Borrowers.
9. AFFIRMATIVE COVENANTS.
Each of the Borrowers hereby jointly and severally covenants to and agrees
with the Bank that, until indefeasible payment in full of all of the Obligations
and until such time as the Bank is no longer obligated to lend any funds or to
issue any letters of credit under this Agreement to the Borrowers, the Borrowers
will (unless otherwise waived in writing by the Bank):
9.1 Permitted Use of Proceeds. Use all the proceeds of the Advances for
only the following purposes:
9.1.1 Initial Advance. The initial Advance hereunder shall only be
used to pay in full all obligations owing to Atlantic Bank under the
Atlantic Bank Credit Facility; and
9.1.2 Subsequent Advances. Use all subsequent Advances to finance
the Borrowers' general working capital needs (including, without
limitation, the payment of Interest and Costs owing from time to time
hereunder).
9.2 Existence. Do or cause to be done all things necessary to comply with
all laws and regulations applicable to any or all of the Borrowers, and to
preserve, renew and keep in full force and effect (i) the corporate existence of
each Borrower in its place of incorporation and in all other jurisdictions where
such Borrower conducts business, and (ii) all rights, licenses, permits and
franchises of each Borrower; provided, however, A Pix shall be permitted to
complete its merger with and into Unapix pursuant to the Certificate of Merger,
dated August 8, 1996 (the "Certificate of Merger").
9.3 Performance Covenants.
52
9.3.1 Duly and timely comply with all the terms, conditions,
covenants and warranties set forth in this Agreement, the other Loan
Documents, the Rights- In-Agreements, and the License Agreements, all at
the times and places and in the manner set forth herein and therein, and
diligently protect the rights of the Borrowers and the Bank under such
agreements where the failure to protect such rights would have a material
adverse effect on any Borrower's or the Bank's interests therein;
9.3.2 At all times maintain or cause to be maintained in favor of
the Bank the security interests provided for under or pursuant to the Loan
Documents as valid and perfected first priority security interests in the
Collateral (subject only to Permitted Encumbrances); and
9.3.3 Diligently and timely defend the Collateral and the Bank's
rights therein against any and all Encumbrances (other than Permitted
Encumbrances).
9.4 Books, Records and Other Information. Maintain at all times true and
complete books, records and accounts in which true and correct entries shall be
made of the Borrowers' transactions in accordance with GAAP, including, without
limitation, books and records with respect to all costs and expenditures
incurred in connection with each Product. The Borrowers shall allow any
representative of the Bank to (i) examine all books, records, documents
(including, without limitation, License Agreements and Rights-In Agreements) and
files of each Borrower (including, without limitation, in connection with any
audit or verification of the Borrowing Base) and to make copies thereof, at such
reasonable times and on reasonable prior notice during business hours and as
often as the Bank may request, (ii) confirm directly with account debtors all
accounts receivable of the Borrowers (including accounts and contracts
receivable not reflected on the Borrowers' consolidated balance sheet in
accordance with GAAP and whether or not such accounts and contracts receivable
are included in the Borrowing Base) and (iii) obtain copies of physical
materials for Products held by any Borrower, laboratory or other third party for
the purpose of confirming the existence of any Product, the nature and quality
of such Product and other attributes thereof. The Borrowers shall promptly
furnish the Bank with such information respecting the Products or any other
Collateral or other information as the Bank may from time to time reasonably
request. Notwithstanding the foregoing, unless an Event of Default or Potential
Event of Default exists, the Bank shall limit its audit of the books and records
of the Borrowers to once every calendar year.
9.5 Insurance.
9.5.1 Procure, comply with all terms of, pay all premiums due on and
maintain in full force and effect so long as any sums shall remain owing
hereunder all insurance (with financially sound and reputable insurers
acceptable to the Bank) customary in the motion picture, video and
television industries for each Product, or necessary to adequately protect
each Borrower's assets, including, without limitation, errors and
omissions insurance, negative and soundtrack
53
insurance (except where such insurance is provided by the laboratories at
which Physical Materials are stored), other casualty insurance,
comprehensive and general and automobile liability insurance, third party
property damage insurance, third party liability insurance, miscellaneous
equipment floaters, all risk floaters, and workers' compensation or
equivalent employer's liability insurance;
9.5.2 Cause (i) all such above-described insurance to provide for
the benefit of the Bank that 30 days' prior written notice of suspension,
cancellation, termination, modification, non-renewal or lapse or material
change of coverage shall be given to the Bank; and (ii) all such
above-described insurance to name the Bank as the loss payee, an
additional insured or a named beneficiary (as the case may be);
9.5.3 Upon the request of the Bank, render a statement, in such
detail as the Bank may request, as to all such insurance coverage; and
9.5.4 If any Borrower fails to pay any premium required by such
insurance policies, the Bank may, in its sole discretion, pay the same and
an amount equal to such payment shall be deemed an Advance hereunder.
9.6 Notice of Events, Etc. Promptly give notice in writing to the Bank of
(i) the occurrence of any Event of Default or Potential Event of Default; (ii)
any action or event of which any Borrower has knowledge which might materially
and adversely affect the condition (whether financial or otherwise) of any
Borrower and/or the performance by any Borrower of any of its obligations under
any Loan Document or the security interests granted under any Loan Document;
(iii) any change in the name, chief executive office or the location of the
accounts, books and records of any Borrower, and (iv) any proposed Modification
to any agreement for which the consent of the Bank is required.
9.7 Financial Information. Cause to be delivered to the Bank:
9.7.1 As soon as practicable and in any event within 52 days after
the end of each of the first three fiscal quarters of each fiscal year of
Unapix an unaudited consolidated and consolidating balance sheet of Unapix
and its Subsidiaries as at the end of such period and the related
consolidated and consolidating statements of operations, consolidated
stockholders' equity (deficiency) and consolidated cash flow of Unapix and
its Subsidiaries for such quarter setting forth in each case in
comparative form the figures for the corresponding periods of the previous
fiscal year, all in reasonable detail and certified by the Chief Financial
Officer of Unapix that they fairly present the consolidated financial
condition of Unapix and its Subsidiaries as at the dates indicated and the
consolidated results of their operations for the periods indicated,
subject to changes resulting from audit and normal year-end adjustment;
9.7.2 As soon as practicable and in any event within 107 days after
the end of each fiscal year of Unapix, consolidated and consolidating
balance sheets
54
of Unapix and its Subsidiaries as at the end of such year and the related
consolidated and consolidating statements of operations, consolidated
stockholders' equity (deficiency) and consolidated cash flow of Unapix and
its Subsidiaries for such fiscal year, setting forth in each case, in
comparative form the consolidated and consolidating figures for the
previous year, all in reasonable detail and (i) in the case of such
consolidated financial statements, accompanied by a report thereon of
Richard A. Eisner & Company, LLP or other independent certified public
accountants of recognized international standing selected by the Borrowers
and satisfactory to the Bank (in its sole and absolute discretion) which
reports shall be without a "going concern" qualification or other material
qualifications, and shall state that such consolidated financial
statements present fairly the financial position of Unapix and its
Subsidiaries as at the dates indicated and the results of their operations
and cash flow for the periods indicated in conformity with GAAP applied on
a basis consistent with prior years (except as otherwise stated therein)
and that the examination by such accountants in connection with such
consolidated financial statements has been made in accordance with
generally accepted auditing standards and (ii) in the case of such
consolidating financial statements, certified by the chief financial or
other senior officer of Unapix, as applicable;
9.7.3 As soon as practicable and in any event no later than the date
of delivery to the Bank of the financial statements referred to in
Sections 9.7.1 and 9.7.2 hereof, a compliance certificate executed by the
Chief Financial Officer of Unapix (i) stating that such officer has
reviewed the terms of Section 10.7 hereof and has made, or caused to be
made under such officer's supervision, a review in reasonable detail of
the transactions of Unapix and its Subsidiaries during such fiscal period,
and (ii) demonstrating in reasonable detail compliance during and at the
end of the applicable accounting period with the covenants set forth in
Section 10.7 hereof; and
9.7.4 As soon as practical and in any event within 15 days after the
end of each month, monthly accounts receivable and accounts payable
reports of the Borrowers for the immediately preceding 30 days.
9.8 Further Assurances. At the Borrowers' sole cost and expense, duly
execute and deliver, or cause to be duly executed and delivered to the Bank such
further agreements, documents, instruments and information and do or cause to be
done such further acts as may be necessary or proper to evidence and/or perfect
the security interests of the Bank in the Collateral or to otherwise carry out
more effectively the provisions and purposes of the Loan Documents as the Bank
may from time to time request.
9.9 Supporting Documents. Deliver to the Bank copies duly certified by
representatives of the Borrowers of any documents relating to the Products as
the Bank may reasonably request.
55
9.10 Payment of Obligations. Duly and punctually pay or cause to be paid
all Obligations on the dates, at the places and in the manner set forth herein.
9.11 Rights In Products. As soon as any Product or any Literary Property
may be registered for copyright, take any and all actions as may be necessary to
register and/or cause to be registered all of the Borrowers' rights in such
Product or Literary Property (subject to the Copyright Mortgages), including,
without limitation, the Borrowers' rights in the copyrights thereof, all in
conformity with the laws of the United States and any and all relevant foreign
jurisdictions; and immediately deliver to the Bank written evidence of each such
filing for (and actual) registration of such rights, which rights shall
constitute part of the Collateral under the Loan Documents; and as soon as
practicable, execute and record or cause to be recorded all of the Copyright
Mortgages in conformity with the laws of the United States and any and all other
relevant jurisdictions, and immediately deliver to the Bank written evidence of
the submission thereof for recording (and as soon as available, a recorded copy
of each such Copyright Mortgage).
9.12 Laboratories; No Removal. To the extent any Borrower has control over
or rights to receive any of the physical elements of any Product, deliver or
cause to be delivered to a laboratory or laboratories all negative and preprint
material and all soundtrack material with respect thereto and prior to
requesting any such laboratory to deliver such negative or other preprint or
soundtrack material to another laboratory, the Borrowers shall provide the Bank
with a Laboratory Pledgeholder Agreement (and/or if applicable, Laboratory
Authorization Letter) executed by the Borrowers and such other laboratory. The
Borrowers hereby agree that without the prior written consent of the Bank, the
Borrowers shall not remove or cause the removal of any negative or preprint film
material or sound materials with respect to any Product (i) to a location
outside the United States or (ii) to any State where UCC-1 financing statements
have not been filed against the Borrowers for the benefit of the Bank describing
the Collateral.
9.13 Trademarks, Service Marks, Etc. Promptly notify the Bank upon each
registration or application for registration of any intangible rights,
including, but not limited to, all trademarks, trade names, logos, service
marks, patents and service names.
9.14 Compliance With Laws. At all times comply with the requirements of
all applicable laws, rules, regulations and orders of all governmental
authorities of the United States, the States, foreign countries, states,
provinces thereof and their respective counties, municipalities and other
subdivisions and of any other jurisdictions (whether domestic or foreign)
applicable to any or all of the Borrowers other than such noncompliance which in
the aggregate does not have a material adverse effect on the condition
(financial or otherwise) of any Borrower or on the Collateral.
9.15 Taxes and Claims. Timely file all tax returns and reports required to
be filed by any or all of the Borrowers; and duly pay and discharge (i) all
taxes, assessments and governmental charges upon or against any or all of the
Borrowers or the Collateral or any portion thereof prior to the date on which
penalties attach thereto, unless and to the extent that the same are being
diligently contested in good faith by appropriate
56
proceedings promptly instituted and appropriate reserves therefor as required by
GAAP have been established so long as by reason of such non-payment and contest
no material item or portion of the assets of any Borrower is in jeopardy of
being seized, levied upon or forfeited, and (ii) all lawful claims, including,
but not limited to, those for labor, materials, supplies, services or anything
else which might or could if unpaid become an Encumbrance upon any portion of
the Collateral, unless and to the extent that the same are being diligently
contested in good faith by appropriate proceedings and appropriate reserves or
other appropriate provision promptly instituted as shall be required in
conformity with GAAP therefor have been established so long as by reason of such
non-payment and contest no material item or portion of the assets of any
Borrower is in jeopardy of being seized, levied upon or forfeited.
9.16 Notice of Litigation. Promptly give notice in writing to the Bank of
all actual or threatened litigation to which any Borrower is (or may become) a
party, including any arbitration or other controversy, claim, suit or other
proceeding of which any Borrower has knowledge which may materially adversely
affect any Borrower, the Collateral, the exploitation of any Product or the
Bank's rights in the Collateral and/or under any of the Loan Documents, and
furnish to the Bank from time to time all information reasonably requested by
the Bank concerning the status of any such litigation, arbitration or other
proceeding.
9.17 Discharge of Liabilities. That all costs, expenses, obligations and
liabilities of each Borrower, including, without limitation, all costs of
developing, producing and exploiting the Products, shall be discharged as and
when they fall due except costs being diligently contested in good faith for
which appropriate reserves and provisions as required by GAAP have been made, so
long as by reason of such non-payment and contest no material item or portion of
the assets of any Borrower is in jeopardy of being seized, levied upon or
forfeited.
9.18 Progress of Products. The Borrowers shall (i) upon the request of the
Bank, keep the Bank fully informed of the progress of the development,
production and distribution or other exploitation of each Product by way of
monthly progress reports, (ii) deliver to the Bank copies of all License
Agreements and such other documents relating to the development, production or
exploitation of each Product or otherwise relating to the Collateral as the Bank
may request, and (iii) answer all inquiries of, and supply full details to, the
Bank of financial and other matters relating thereto as requested by the Bank.
9.19 Miscellaneous Collateral. Promptly (i) deliver to the Bank all
Investments of each Borrower (other than Investments consisting of Excluded
Property), as the same presently or hereafter exist, (ii) cause all Product
Payments included from time to time in the Borrowing Base to be paid by account
debtors directly into the Master Collection Account, and (iii) upon the
occurrence and continuation of an Event of Default, deliver to the Bank all cash
and cash equivalents, drafts, checks, certificates of deposit, notes, bills of
exchange or other writings which evidence a right of any Borrower to the payment
of any money.
57
9.20 SEC Filings. Promptly upon their becoming available, furnish the Bank
with copies of all financial statements, reports, notices and proxy statements
sent or made available generally by any Borrower to any of their security
holders, of all regular and periodic reports and all registration statements and
prospectuses, if any, filed by any Borrower with any national or regional
securities exchange, any inter-dealer quotation system (including, without
limitation, the National Association of Securities Dealers, Inc.) or with the
SEC or any governmental authority succeeding to any of its functions or similar
authority (whether governmental or otherwise) in any other jurisdiction and of
all press releases and other statements made available generally by any Borrower
to the public concerning material developments in the business of any Borrower.
10. NEGATIVE COVENANTS.
Each of the Borrowers hereby jointly and severally covenants to and agrees
with the Bank that, until indefeasible payment in full of all of the Obligations
and until such time as the Bank is no longer obligated to lend any funds or
issue any Letters of Credit under this Agreement to the Borrowers, the Borrowers
will not directly or indirectly without the prior written consent of the Bank:
10.1 Merger, Sale of Assets, Dissolution, Etc. (i) Enter into any
transaction of merger, consolidation, or similar transaction other than the
merger of A Pix with and into Unapix pursuant to the Merger Agreement, (ii)
transfer, sell, assign, lease or otherwise dispose of, in one or a series of
related transactions, any part of its properties or assets (other than pursuant
to this Agreement and License Agreements) which are necessary or desirable for
the proper conduct of the Borrowers' business, (iii) wind-up, liquidate or
dissolve, or (iv) agree to do any of the foregoing.
10.2 Prohibited Agreements. Enter into any agreement that would materially
and adversely affect the condition (financial or otherwise) of any Borrower or
lessen any of the rights granted to the Bank under any of the Loan Documents.
10.3 Indebtedness. Create, incur, assume or suffer to exist, contingently
or otherwise, any Indebtedness except:
10.3.1 The Obligations;
10.3.2 Indebtedness with respect to which any Borrower is not in
default that is secured only by Permitted Encumbrances;
10.3.3 Unsecured current accounts payable (i.e., payable within one
(1) year and not owing and unpaid in excess of ninety (90) days after
their due date) arising in the ordinary course of business of the
Borrowers (but in no event for money borrowed or evidenced by promissory
notes or similar instruments);
10.3.4 Unsecured Indebtedness under capital leases permitted
pursuant to Section 10.8 hereof;
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10.3.5 Indebtedness arising under the Atlantic Credit Facility,
provided that such Indebtedness is repaid in full upon or prior to the
funding of the initial Advance hereunder; and
10.3.6 The Variable Rate Notes in the aggregate principal amount of
$3,025,000.
10.3.7 The convertible notes of Unapix in the aggregate principal
amount of $6,225,000 (the "1996 Convertible Notes").
10.3.8 Unsecured convertible promissory notes of Unapix in the
aggregate amount of not more than $1,000,000 (the "1997 Convertible
Notes"), which notes shall accrue interest at a rate not to exceed 10% per
annum, and does not require any principal or other payments (other than
accrued interest, which may not be paid more frequently than monthly)
until after the Final Repayment Date, and which notes are convertible only
into the common stock of Unapix.
10.3.9 The Indebtedness of the Borrowers to the Acquisition Funds
(the "Acquisition Funds Indebtedness") in an aggregate principal amount of
not more than $5,000,000 outstanding at any time, which Indebtedness bears
interest at a rate which does not exceed 10% per annum and does not
require any principal or other payments (other than accrued interest and
profit participation payments which may not be paid more frequently than
monthly and principal payments which shall not exceed in the aggregate
$500,400 at any time) until after the Final Repayment Date.
10.3.10 Secured purchase money Indebtedness secured only by the
tangible personal property purchased thereby, which Indebtedness shall not
exceed the aggregate principal amount of $750,000 at any time.
10.3.11 Obligations to producers and licensors of Product and
residuals and/or salaries due to talent incurred in the ordinary course of
business of the Borrowers.
10.3.12 Unsecured indebtedness to a wholly-owned subsidiary of a
Borrower (other than a subsidiary which is a Borrower), which Indebtedness
shall not exceed $500,000 at any time.
10.3.13 Subordinated Indebtedness for borrowed money, provided that
such indebtedness is subordinated on terms and conditions satisfactory to
the Bank in its sole and absolute discretion, including, without
limitation, the terms set forth on Schedule 10.3.13 attached hereto and
made a part hereof.
10.3.14 Guarantees permitted under Section 10.6 hereof.
10.3.15 Unsecured indebtedness to a Borrower.
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10.3.16 The Borrowers shall be permitted to Modify any of the
Indebtedness permitted under this Section 10.3 provided that as Modified
such Indebtedness does not result in the breach of this Section 10.3 or
any other provision of this Agreement.
10.4 Encumbrances. Create, incur, assume or suffer to exist any
Encumbrance upon the Collateral except for Permitted Encumbrances.
10.5 Loans. Lend or advance money, credit or property to any Person,
except:
10.5.1 Non-cash loans or advances by the Borrowers to any of their
respective officers, directors, employees or consultants to purchase
equity securities of Unapix, which loans or advances are secured by the
pledge of the purchased securities.
10.5.2 Extensions of credit to customers of the Borrowers in the
ordinary course of business of the Borrowers.
10.5.3 Loans or advances to wholly-owned Subsidiaries of the
Borrowers (other than a subsidiary which is a Borrower) which in the
aggregate do not exceed $500,000 at any time.
10.5.4 Cash loans or advances to officers and employees of the
Borrowers which in the aggregate do not exceed $250,000 at any time.
10.5.5 Loans to The Jazz Store not exceeding in the aggregate
$193,000 at any time.
10.5.6 Unsecured loans to Borrowers.
10.6 General Prohibition on Guarantees. Guarantee, contingently or
otherwise, any obligations of any Person, except:
10.6.1 Guarantees of obligations of wholly-owned Subsidiaries of the
Borrowers which in the aggregate do not exceed $500,000 at any time.
10.6.2 Guarantees of obligations of corporations which with the
prior written approval of the Bank will become wholly-owned Subsidiaries
of the Borrowers, which guarantees in the aggregate will not exceed
$750,000 at any time.
10.6.3 Guarantees of minimum payments to producers and licensors of
Products given in the ordinary course of the Borrowers business directly
in connection with the acquisition of Products.
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10.6.4 Guarantee by Unapix of the stock price of 243,000 shares of
Unapix common stock, issued by Unapix in connection with its acquisition
of Miramar, which guarantee shall not exceed $1,100,000 at any time.
10.6.5 Guarantees of Indebtedness of any Borrower, which
Indebtedness is permitted under Section 10.3 hereof.
10.7 Financial Covenants.
10.7.1 Product Acquisitions. Permit the aggregate Actual Negative
Costs incurred by the Borrowers and their Subsidiaries to exceed
$22,000,000 for the year ended December 31, 1996 and $27,000,000 for the
year ending December 31, 1997.
10.7.2 P&A Expenses. Permit the aggregate P&A Expenses for the
Borrowers to exceed $2,000,000 for each fiscal year of the Borrowers.
10.7.3 Debt to Adjusted Net Worth Ratio. Permit the Debt to Adjusted
Net Worth Ratio to be greater than 3.5 to 1 at any time.
10.7.4 Adjusted Tangible Net Worth. Permit Adjusted Tangible Net
Worth to be less than $11,000,000 (the "Minimum Adjusted Tangible Net
Worth") at any time; provided, however, that solely for purposes of
applying the Adjusted Tangible Net Worth test on or after December 31,
1997, the Adjusted Tangible Net Worth on such date shall not be less than
the sum of (i) the Minimum Adjusted Tangible Net Worth plus (ii) 50% of
the accumulated net income after tax of the Borrowers computed in
accordance with GAAP on a consolidated basis for the year then ended, and
(iii) 100% of all proceeds (net of underwriting fees and expenses) from
the issuance and sale of any equity securities (and options, warrants and
other rights to purchase such equity securities) of any Borrower other
than from the conversion into equity of any convertible Indebtedness or
convertible preferred stock or the exercise of options and warrants, which
Indebtedness, preferred stock options or warrants are in existence as of
April 16, 1997.
10.7.5 Quarterly Losses. Permit the Borrowers to incur net losses
computed in accordance with GAAP on a consolidated basis for two (2)
consecutive quarters.
10.8 Leases. Be or become obligated as a lessee under any lease except for
leases in the ordinary course of the Borrowers' business for office equipment
and real property, except as contemplated by Section 6.1.22 hereof.
10.9 Prohibition of Modifications. Modify or permit or suffer to occur any
Modification (i) to any License Agreement underlying any receivable included in
the Borrowing Base, (ii) to the Variable Rate Notes, 1996 Convertible Notes or
1997 Convertible Notes or (iii) to any other agreement to which any Borrower is
a party or which requires the consent or approval of any Borrower to Modify that
would materially
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and adversely (a) affect the condition (financial or otherwise) of any Borrower,
(b) lessen the ability of any Borrower to perform its obligations under any Loan
Document, (c) lessen any of the rights granted to the Bank under any Loan
Document, (d) adversely affect the Collateral, and/or (e) adversely affect the
Bank's interests in the Collateral.
10.10 Business Activities. Engage in a line of business other than (i) the
acquisition, production and exploitation of Audio Recordings, Theatrical
Pictures, Video Pictures and Television Programs and (ii) the production,
distribution and dubbing of audio tapes and CDs. Permit any Subsidiary (other
than A Pix or Miramar) to engage in the acquisition, production or exploitation
of Audio Recordings, Theatrical Pictures, Video Pictures or Television Programs.
10.11 Affiliated Transactions. Deal with any Affiliate on terms that are
less favorable to any Borrower than those that might be obtained from
unaffiliated third parties.
10.12 Place of Business. Take any action with a view toward establishing,
or in fact establish, a new place of business, or change the name (or conduct
business other than under the current name) of any Borrower, without in each
case obtaining the express prior written consent of the Bank.
10.13 Title of Products. Change or permit a change of the title of any
Product without first obtaining the express prior written consent of the Bank.
10.14 Sale-Leaseback Transactions. Enter into or permit to exist any sale-
leaseback transactions.
10.15 Additional Subsidiaries and Capital Stock. Form or acquire, directly
or indirectly, any additional Subsidiaries; dispose of any Subsidiary; or issue
or permit to be issued any additional capital stock of Miramar, A Pix or any
Subsidiary of any Borrower without the express prior written consent of the Bank
other than as described on Schedule 10.15 hereof.
10.16 Bank Accounts. Other than pursuant to this Agreement, establish any
new bank accounts on and after the date of this Agreement without giving the
Bank thirty (30) days prior written notice.
10.17 Restricted Payments. Make any Restricted Payment except for:
10.17.1 The repayment of the Atlantic Credit Facility.
10.17.2 The payment of mandatory scheduled interest accruing from
time to time on the Variable Rate Notes, 1996 Convertible Notes and 1997
Convertible Notes pursuant to the terms thereof.
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10.17.3 The repayment of the principal amount of the Variable Rate
Notes, 1996 Convertible Notes and 1997 Convertible Notes but only to the
extent regularly scheduled pursuant to the terms thereof.
10.17.4 Dividends on shares of preferred stock of Unapix, which
shares were outstanding on March 31, 1997, and which dividends shall not
exceed $140,000 per calendar year.
10.17.5 Interest payments on the Acquisition Funds, which shall not
exceed $500,000 per calendar year, or profit participation payments.
10.17.6 Redemption payments on all warrants of Unapix outstanding as
of March 31, 1997, made in accordance with the current redemption
provisions of such warrants, which payments shall not exceed $300,000 at
any time.
10.17.7 Repayment of the Acquisition Fund that is in existence as of
April 16 1997, provided that at the time of such repayment Unapix has
raised from one or more other Acquisition Funds on terms and conditions
substantially identical to (or more favorable to Unapix than) the term and
conditions of the original Acquisition Fund an amount not less than the
aggregate amount repaid since April 16, 1997 in connection with such
initial Acquisition Fund.
10.17.8 Amounts paid upon the repurchase by Unapix of any fractional
shares of Unapix common stock arising from the conversion of any
convertible indebtedness.
Without in any way limiting the foregoing and for the avoidance of doubt,
except as expressly permitted in Sections 10.17.2 and 10.17.3 hereof, the
Borrowers shall not be permitted to make any prepayments of all or a portion of
the principal amount of (or interest on) the Variable Rate Notes, the 1996
Convertible Notes and 1997 Convertible Notes, including, without limitation,
accelerated principal repayments as a result of the occurrence of any event of
default under a breach of the Variable Rate Notes, 1996 Convertible Notes and
1997 Convertible Notes.
10.18 License Agreements and Other Agreements. Enter into or agree to be
bound in any way by any License Agreement, purchase or sales orders or other
agreements with any distributor or licensee, or retail or wholesale customer who
is not given at the time of entering into such License Agreement or other
agreement or accepting such purchase or sales orders an Irrevocable Authority or
other written payment instructions in a manner as set forth in Section 3.4
hereof, but without the obligation to receive back a written receipt and
acceptance by such party of the Irrevocable Authority or other payment
instructions except to the extent an Acknowledgment is required under Section
3.4 hereof.
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10.19 New Acquisition Funds. Establish any new Acquisition Funds or Modify
the terms and provisions of the existing Acquisition Fund except with such terms
and provisions which are reasonably acceptable to the Bank.
11. EVENTS OF DEFAULT.
An "Event of Default" shall mean the occurrence of any of the following
events:
11.1 A default in the payment when due and in the manner prescribed herein
of any installment of Principal or Interest or any other Obligation and such
default shall not be cured within three (3) Business Days after notice of
default given to the Borrowers, which notice may be given orally, and which
notice is not required in the event concurrently therewith there is in existence
an Event of Default described in Sections 11.7 or 11.8.
11.2 The failure, refusal or neglect of any or all of the Borrowers to
observe or perform for any reason any of the material covenants, conditions,
agreements or provisions contained in any Loan Document or in any of the other
agreements or instruments referenced herein or contemplated hereby (other than
the payment of any Obligation of which the failure to pay constitutes an Event
of Default described in Section 11.1 hereof) or to execute and deliver any
documents, agreements or instruments requested by the Bank hereunder or
thereunder, provided that if such failure, refusal or neglect (other than
resulting in a breach of or default under Section 3.3.1 hereof) is capable of
remedy the Borrowers shall be entitled to cure the same within 30 days of the
Borrowers' receipt of written notice from the Bank of the occurrence of such
failure, refusal or neglect.
11.3 Any representation or warranty made by the Borrowers in any Loan
Document, or any report, certificate, financial statement or other instrument
furnished by or on behalf of any Borrower in connection with any Loan Document
shall prove to have been false or misleading in any material respect.
11.4 A default or breach (without regard to any notice or period of cure)
with respect to the payment of any indebtedness for borrowed money of any
Borrower to any third party (including, without limitation, the Variable Rate
Notes, 1996 Convertible Notes, and 1997 Convertible Notes) when due or in
performance of any other obligation incurred in connection with any such
indebtedness for borrowed money by any Borrower which accelerates (or permits
the acceleration of) any such indebtedness in an amount not less than $250,000
or would have a material adverse effect upon the Collateral or any Borrower's
ability to fully and timely perform all of its obligations the Loan Documents.
11.5 The Bank shall cease to have valid and perfected first priority
security interests (subject only to Permitted Encumbrances) at any time for any
reason in the Collateral or any portion thereof, other than Collateral or any
portion or portions thereof with an aggregate fair market value of less than
$250,000.
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11.6 If any judgment in an amount not less than $250,000 against any
Borrower or any of its property or assets which would or might adversely affect
(i) its ability to perform its obligations under any Loan Document, any License
Agreement or any other material agreement to which any Borrower, is a party,
and/or (ii) the Collateral and/or the Bank's rights therein, remains unpaid,
unstayed or undismissed for a period of more than 30 days.
11.7 Any Borrower shall be dissolved or shall sustain the loss,
cancellation or forfeiture of its legal status or good standing by reason of any
judicial, extra-judicial or administrative proceedings or otherwise (other than
the merger of A Pix with and into Unapix pursuant to the Certificate of Merger),
or shall (i) apply for or consent to the appointment of a receiver, trustee or
liquidator of any such Person or of all or a substantial part of any such
Person's assets; (ii) be unable to, or admit in writing its inability to, pay
its debts as they mature; (iii) make a general assignment for the benefit of
creditors; (iv) be adjudicated a bankrupt or insolvent; (v) file a voluntary
petition in bankruptcy or a petition or an answer seeking reorganization or an
arrangement for the benefit of creditors or take advantage of any insolvency law
in its capacity as a debtor; (vi) interpose an answer admitting the material
allegations of the petition filed against any such Person in any bankruptcy,
reorganization or insolvency proceedings; (vii) take any action which would have
the effect of dissolving any such Person (or a stockholder thereof takes any
such action); or (viii) take any action for the purpose of effecting any of the
foregoing.
11.8 Any (i) involuntary petition is filed against any Borrower seeking to
subject such Person to any bankruptcy, insolvency or similar laws and such
petition shall remain unstayed or not be withdrawn for a period of ninety (90)
days; or (ii) an order, judgment or decree shall be entered against any Borrower
by any court of competent jurisdiction approving a petition seeking its
reorganization or appointment of a receiver, trustee or liquidator of any such
Person or of all or a substantial part of its assets and such order, judgment or
decree shall continue and stay in effect for a period of ninety (90) days.
11.9 A material adverse change in the business, assets, condition
(financial or otherwise, and whether progressive, sudden or otherwise) of any
Borrower which would or might materially and adversely affect (i) the ability of
such Person to perform its obligations under any Loan Document, any License
Agreement, Rights-In Agreement or any other material agreement to which such
Borrower is a party, and/or (ii) the Collateral and/or the Bank's rights
therein.
11.10 It shall become unlawful for the Bank to continue to fund or
maintain the Commitment or to perform its obligations hereunder.
11.11 It shall not be an Event of Default hereunder if the security
interest of any producer of a Product or of the actors, writers and/or directors
guilds with respect to a Product is senior to the security interest therein of
the Bank; however the accounts receivable and contracts receivable related to
such Product (subject to Sections 3.2.13 and 3.2.14 hereof) may not be included
in the Borrowing Base.
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12. REMEDIES; APPLICATION OF PROCEEDS.
12.1 The Bank may, upon the occurrence of an Event of Default, exercise
any one or more of the following rights and remedies:
12.1.1 If the Commitment or any portion thereof has not yet been
advanced, declare the obligations of the Bank to honor the Commitment
immediately terminated, whereupon the obligation of the Bank to make
Advances and issue any Letters of Credit shall terminate immediately;
12.1.2 Declare the Note and all Obligations to be forthwith due and
payable, whereupon all such Obligations shall be accelerated and shall
become immediately due and payable without presentation, demand or notice
of any kind to the Borrowers (all of which are hereby waived by the
Borrowers), except that if an Event of Default specified in Section 11.7
or 11.8 shall occur with respect to any or all Borrowers, such
acceleration shall be automatic and no declaration or other act of any of
the Bank shall be necessary to effect such acceleration;
12.1.3 Proceed to protect and enforce the rights of the Bank to
payment of the Obligations and its rights to proceed against the
Collateral and exercise its remedies whether by suit in equity or by
action at law, or both, whether for the specific performance of any
covenant, agreement or other provision of any of the Loan Documents or any
other legal or equitable right or remedy of the Bank;
12.1.4 At any time or from time to time, without notice to the
Borrowers (any such notice being hereby expressly waived), set off and
appropriate and apply any and all monies, securities, instruments and
deposits (general or special, including, but not limited to, any
indebtedness evidenced by certificates of deposit, whether matured or
unmatured) and any other indebtedness at any time held or owing by the
Bank to or for the credit or the account of any of the Borrowers against
and/or on account of the Obligations, irrespective of whether or not (i)
the Bank shall have made any demand hereunder, or (ii) the Bank shall have
declared the Obligations to be due and payable and although any of the
Obligations may be contingent or unmatured. The Borrowers hereby grant to
the Bank a security interest in and lien upon all such monies, securities,
instruments and deposits. No security interest, lien or right of setoff
shall be deemed to have been waived by any act or conduct on the part of
the Bank, or by any neglect to exercise such right of setoff or to enforce
such a lien, or by any delay in so doing, and every right of setoff shall
continue in full force and effect until such right of setoff is
specifically waived or released by an instrument in writing executed by
the Bank;
12.1.5 In addition to those actions that may otherwise be permitted
to be taken by the Bank under any of the Loan Documents, with respect to
the Collateral, take the following actions:
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12.1.5.1 Collections, Etc. The Bank may demand, sue for,
collect or receive, in the name of the Bank or in the name of the
Borrowers, or otherwise, any money or property at any time payable
or receivable on account of or in exchange for, or make any
compromise or settlement deemed desirable with respect to, any of
the Collateral (but the Bank shall be under no obligation to do so),
or extend the time of payment, arrange for payment in installments,
or otherwise modify the term of, or release, any of the Collateral,
without thereby incurring responsibility to discharge, or
discharging, or otherwise affecting any liability of the Borrowers.
The Bank shall not be required to take any steps to preserve any
rights against other parties to the Collateral. The Bank may (but is
not obligated to) make such payments and take all such actions as
the Bank deems necessary to protect the Bank's security interest in
the Collateral and/or the value thereof, and the Bank is hereby
authorized (without limiting the general nature of the authority
hereinabove conferred) to pay, purchase, contest or compromise any
Encumbrance; and
12.1.5.2 Possession and Sale of Collateral, Etc. The Bank may
exercise in respect of the Collateral, all other rights and remedies
hereunder and all the rights and remedies of a secured party under
the Code. In addition, the Bank may notify any and all account
debtors of the Borrowers to make all further Product Payments to the
Bank, and enter upon each premises of wherever the Collateral may be
and take possession of the Collateral and demand and receive such
possession from any Person who has possession thereof; and take such
measures as it may deem necessary or proper for the care or
protection thereof, including the right to remove all or any portion
of the Collateral (but the Bank shall not be obligated to do so).
With or without taking such possession, the Bank may sell or cause
to be sold, whenever the Bank shall decide, in one or more sales or
parcels, and at such price or prices and upon such other terms as
the Bank may deem commercially reasonable (irrespective of the
impact of any such sales on the market price of such assets), and
for cash or on credit or for future delivery, without assumption of
any credit risk, all or any portion of the Collateral at any
broker's board or at public or private sale. The Bank may be the
purchaser of any or all of the Collateral so sold and shall be
entitled, for the purpose of bidding and making settlement or
payment of the purchase price for all or any portion of such assets
sold at any such public or private sale, to use and apply any or all
of the Obligations as a credit on account of the purchase price
payable by the Bank at such sale. Each purchaser (including the
Bank) at any such sales shall thereafter hold the Collateral
purchased absolutely free from any claim or right of whatever kind,
including any equity of redemption of the Borrowers, any such
demand, notice, claim, right and equity being hereby expressly
waived and released. The Borrowers agree that, to the extent notice
of sale shall be required by law, at least ten (10) Business Days'
notice of sale to the Borrowers of the time and place of any public
sale or the time after which
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any private sale is to be made shall constitute reasonable
notification. The Bank shall not be obligated to make any sale of
the Collateral regardless of notice of sale having been given. The
Bank 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. The Borrowers hereby waive any claims against
the Bank arising by reason of the fact that the price at which any
Collateral may have been sold at such a private sale was less than
the price which might have been obtained at a public sale, even if
the Bank accepts the first offer received and does not offer such
Collateral to more than one offeree; and
12.1.6 The Bank may exercise all other rights and remedies available
at law or in equity (or both) pursuant to any applicable law, statute,
rule or regulation.
12.2 Securities Law Provision. The Borrowers hereby recognize that,
because of present or future circumstances, the Bank may be unable to effect a
sale to the public of all or part of the Collateral by reason of certain
prohibitions in the Securities Act of 1933, as amended (the "Act") or other
federal or State securities laws, but may be compelled to resort to one or more
sales to a restricted group of purchasers who may be required to agree to
acquire all or a part of the Collateral for their own account, for investment
and not with a view to the distribution or resale thereof. The Borrowers agree
that sales so made may be at prices and on other terms less favorable than if
the Collateral were sold to the public, and that the Bank shall have no
obligation to delay the sale of any Collateral for the period of time necessary
to permit the Borrowers to register the Collateral for sale to the public under
the Act or any other federal or State securities laws. The Borrowers agree that
negotiated sales made under the foregoing circumstances, whether on cash or
credit terms, shall be deemed to have been made in a commercially reasonable
manner. The Borrowers shall at all times cooperate with the Bank and shall
satisfy any requirements under the Act and any other federal or State securities
or other laws and regulations applicable to the sale of the Collateral by the
Bank.
12.3 Appointment of Laboratory as Pledgeholder. Any laboratory which has
possession of any of the Collateral is hereby constituted and appointed by the
Borrowers as pledgeholder for the Bank and upon the occurrence of an Event of
Default, each such pledgeholder is hereby authorized to sell all or any portion
of the Collateral upon the order and direction of the Bank and the Borrowers
hereby waive any and all claims for damages or otherwise for any action taken by
such pledgeholder.
12.4 Appointment of a Receiver. Upon the occurrence of an Event of
Default, the Bank shall be entitled to the appointment of a receiver, to take
possession of all or any portion of the Collateral and to exercise such powers
as the court shall confer upon the receiver.
12.5 Power of Attorney. Each of the Borrowers does hereby irrevocably
make, constitute, and appoint the Bank and its officers and designees as its
true and lawful
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attorney-in-fact, with full power in the name of the Bank and/or the Borrowers,
to take the following actions upon the occurrence of an Event of Default: to
receive, open and dispose of all mail addressed to the Borrowers; and to endorse
any notes, checks, drafts, money orders or other evidences of payment relating
to the Collateral that may come into the possession of the Bank with full power
and right to cause the Borrowers' mail to be transferred to the Bank's own
offices or otherwise; and to do any and all other acts necessary or proper to
carry out the intent of this Agreement; to enforce all of the Borrowers' rights
under and pursuant to all agreements with respect to the Collateral, all for the
sole benefit of the Bank, and to enter into such other agreements as may be
necessary to complete the distribution, delivery and exploitation of the
Products, to enter into and perform such agreements as may be necessary in order
to carry out the terms, covenants, and conditions of this Agreement which are
required to be observed or performed by the Borrowers, to execute such other and
further mortgages, pledges and assignments of the Collateral as the Bank may
require for the purpose of protecting, maintaining, or enforcing the security
interests granted to the Bank by this Agreement and the other Loan Documents,
and to do any and all other things necessary or proper to carry out the
intention of this Agreement and the other Loan Documents; and the Borrowers
hereby ratify and confirm all that the Bank as such attorney-in-fact or its
substitutes shall properly do by virtue of this power of attorney. Such powers
of attorney are coupled with an interest and are therefore irrevocable. The
Bank's right to open the Borrowers' mail granted herein shall not constitute a
waiver by the Borrowers of any attorney-client confidentiality privilege, if
any, with respect to such mail.
12.6 Rights and Remedies Cumulative. No right or remedy conferred upon the
Bank herein or in any of the other Loan Documents or otherwise available at law
or in equity (or both) shall be exclusive of any other right or remedy contained
herein or therein or otherwise made available. All such rights and remedies are
cumulative and are not exclusive of any right or remedy which the Bank may
otherwise have.
12.7 Application of Proceeds After Event of Default. After the occurrence
of an Event of Default, all Collateral in the form of cash, all income on the
Collateral and all proceeds from any sale or other disposition of the Collateral
pursuant hereto shall be applied (in such order as the Bank shall in its sole
discretion determine) as follows:
12.7.1 To the payment of all Costs and to all other costs or
expenses incurred in connection with any sale of the Collateral,
including, but not limited to, all court costs and the fees and expenses
of counsel for the Bank in connection therewith, to the extent that such
advances, costs, or expenses shall not have been paid previously to the
Bank;
12.7.2 To the payment of Interest (other than Interest accrued on
the Principal);
12.7.3 To the payment of Interest on the Principal;
12.7.4 To the repayment of Principal; and
69
12.7.5 To the repayment of all other sums, liabilities and
obligations then owing by the Borrowers to the Bank under any other
agreements or instruments.
Any amounts remaining after such applications shall be remitted to
the Borrowers or as a court of competent jurisdiction may otherwise
direct.
13. INDEMNIFICATION.
13.1 The Borrowers jointly and severally agree to, and hereby do,
indemnify, pay and hold the Bank and its officers, directors, employees and
agents (collectively called the "Indemnitees") harmless from and against any and
all liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, claims, costs (including, without limitation, settlement costs and
payments), expenses, fines and disbursements of any kind or nature whatsoever,
known or unknown, contingent or otherwise (including, without limitation, the
fees and disbursements of counsel for such Indemnitees in connection with any
investigative, administrative or judicial proceeding, whether or not such
Indemnitee shall be designated a party thereto), which may be imposed on,
incurred by, or asserted against that Indemnitee, arising out of, or in any way
related to, the Bank entering into this Agreement or making the Advances or
issuing the Letters of Credit, or the use or intended use of the proceeds of the
Advances or Letters of Credit (including, without limitation, any and all sums,
losses and costs incurred by the Bank pursuant to its indemnification
obligations under the Atlantic Repayment Confirmation Agreement and Laboratory
Pledgeholder Agreements) (the "Indemnified Liabilities"), except any Indemnified
Liabilities resulting solely from the gross negligence or willful misconduct of
the Bank. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in the preceding sentence may be unenforceable because it violates any
law or public policy, the Borrowers shall contribute the maximum portion which
they are permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by the Indemnitees or any
of them.
13.2 In the event that any suit, action, investigation, claim or
proceeding is begun, made or instituted as a result of which the Borrowers may
become obligated to any Indemnitee hereunder, the Borrowers jointly and
severally agree to defend, contest or otherwise protect against any such suit,
action, investigation, claim or proceeding at their sole cost and expense, using
counsel acceptable to the Indemnitee. Each Indemnitee shall have the right, but
not the obligation, to participate, at its own expense, in the defense thereof
by counsel of its choice. In the event that the Borrowers fail timely to so
defend, contest or otherwise protect, the Indemnitee shall have the right to do
so, including, without limitation, the right to make any compromise or
settlement thereof on behalf of the Borrowers, and to recover all attorneys'
fees, disbursements and all amounts paid as a result thereof.
13.3 The indemnifications contained in this Section 13 shall survive the
termination of the other provisions of this Agreement and the repayment of all
of the Obligations, and shall constitute separate and independent joint and
several obligations of the Borrowers from their other obligations under this
Agreement.
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14. NOTICES.
All notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be deemed to have
been duly given if telecopied or if delivered by messenger or courier delivery,
or sent by first class mail (or air mail where available), postage prepaid,
certified or registered, return receipt requested, as set forth below or at such
other address as may be furnished in writing:
If to the Borrowers:
c/o Unapix Entertainment, Inc.
200 Madison Avenue
New York, NY 10016
Attention: Dan Murphy, CFO
Telecopier No.: (212) 252-7630
With a copy to:
Unapix Entertainment, Inc.
200 Madison Avenue, 24th Floor
New York, NY 10016
Attention: Michael Epps, Esq.
Telecopier No.: (212) 252-7630
If to the Bank:
Imperial Bank
9777 Wilshire Boulevard
Beverly Hills, CA 90212
Attention: Patrick Lee,
Entertainment Industries Group
Telecopier No.: (310) 281-2476
With a copy to:
Mitchell, Silberberg & Knupp LLP
11377 West Olympic Boulevard
Los Angeles, CA 90064-1633
Attention: Anthony Adler, Esq.
Telecopier No.: (310) 312-3785
Any notice given by messenger or courier delivery as provided in this Section 14
shall be deemed given when delivered if during normal business hours on a
Business Day (or if not, the next Business Day after delivery); any notice given
by telecopier as provided herein shall be deemed given when sent if during
normal business hours on a Business Day (or, if not, the next Business Day after
it is sent), provided that at the time such
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telecopy is sent, the sending party receives written confirmation of receipt and
forwards a copy of the notice by mail, messenger or courier delivery as provided
herein; any notice given by first class mail, postage prepaid, certified or
registered, return receipt requested shall be deemed given five (5) Business
Days after the date of mailing. Any party may by notice to the other change the
address at which notices and demands may be given to it.
15. MISCELLANEOUS.
15.1 No Waiver. No failure or delay on the part of the Bank in notifying
the Borrowers of an Event of Default or Potential Event of Default, or in
exercising, or partial exercise of, any right, power or privilege hereunder
shall operate as a waiver of any Event of Default, Potential Event of Default,
or privilege or right hereunder or otherwise or preclude any other or further
exercise of any other right power or privilege.
15.2 Governing Law; Successors and Assigns. This Agreement shall be
subject to, construed and governed by, the laws of the State of California
without giving effect to such state's conflicts of law provisions. This
Agreement may not be assigned, pledged, hypothecated or otherwise encumbered by
the Borrowers. Subject to the foregoing sentence, this Agreement shall inure to
the benefit of the Bank (and its successors and assigns) and the Borrowers, and
shall be binding upon the successors and assigns of the parties hereto.
15.3 Dispute Reference.
15.3.1 Other than (i) non-judicial foreclosure and all matters in
connection therewith regarding security interests in real or personal
property; or (ii) the appointment of a receiver, or the exercise of other
provisional remedies (any and all of which may be initiated pursuant to
applicable law), each controversy, dispute or claim between the parties
arising out of or relating to this Agreement or any of the other Loan
Documents, which controversy, dispute or claim is not settled in writing
within thirty (30) days after the "Claim Date" (defined as the date on
which a party subject to the Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California in accordance with the provisions of
Section 638, et seq., of the California Code of Civil Procedure ("CCP"),
or their successor section, which shall constitute the exclusive remedy
for the settlement of any controversy, dispute or claim concerning this
Agreement or any of the other Loan Documents, including whether such
controversy, dispute or claim is subject to the reference proceeding and
except as set forth above, the parties waive their rights to initiate any
legal proceedings against each other in any court or jurisdiction other
than the Superior Court of the County of Los Angeles (the "Court"). The
referee shall be a retired Judge of the Court selected by mutual agreement
of the parties, and if they cannot so agree within forty-five (45) days
after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his or her representative). The referee
shall be appointed to sit as a temporary judge, with
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all of the powers for a temporary judge as authorized by law, and upon
selection should take and subscribe to the oath of office as provided for
in Rule 244 of the California Rules of Court (or any subsequently enacted
Rule). Each party shall have one peremptory challenge pursuant to CCP
Section 170.6. The referee shall (a) be requested to set the matter for
hearing within sixty (60) days after the Claim Date and (b) try any and
all issues of law or fact and report a statement of decision upon them, if
possible, within ninety (90) days of the Claim Date. Any decision rendered
by the referee will be final, binding and conclusive and judgment and
shall be entered pursuant to the CCP Section 644 in any court in the State
of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any
other party of the nature of the controversy, dispute or claim, by filing
a petition for a hearing and/or trial. All discovery permitted by this
Agreement shall be completed no later than fifteen (15) days before the
first hearing date established by the referee. The referee may extend such
period in the event of a party's refusal to provide the requested
discovery for any reason whatsoever, including, without limitation, legal
objections raised to such discovery or unavailability of a witness due to
absence or illness. No party shall be entitled to "priority" in conducting
discovery. Depositions may be taken by either party upon seven (7) days
written notice, and request for production or inspection of documents
shall be responded to within ten (10) days after service. All disputes
relating to discovery which cannot be resolved by the parties shall be
submitted to the referee whose decision shall be final and binding upon
the parties. Pending appointment of the referee as provided herein, the
Court is empowered to issue temporary and/or provisional remedies, as
appropriate.
15.3.2 Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is conducted,
including the time and place and all hearings, the order of presentation
of evidence, and all other questions that arise with respect to the course
of the reference proceeding. All proceedings and hearings conducted before
the referee, except for trial, shall be conducted without a court
reporter, except that when any party so requests, a court reporter will be
used at any hearing conducted before the referee. The party making such a
request shall have the obligation to arrange for and pay for the court
reporter. The costs of the court reporter at the trial shall be borne
equally by the parties.
15.3.3 The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the
State of California will be applicable to the reference proceeding. The
referee shall be empowered to enter equitable as well as legal relief, to
provide all temporary and/or provisional remedies and to enter equitable
orders that will be binding upon the parties. The referee shall issue a
single judgment at the close of the reference proceeding which shall
dispose of all of the claims of the parties that are the subject of the
reference. The parties hereto expressly reserve the right to contest or
appeal from the final
73
judgment or any appealable order or appealable judgment entered by the
referee. The parties hereto expressly reserve the right to findings of
fact, conclusions of law, a written statement of decision, and the right
to move for a new trial or a different judgment, which new trial, if
granted, is also to be a reference proceeding under this provision.
15.3.4 In the event that the enabling legislation which provides for
appointment of a referee is repealed (and no successor statute is
enacted), any dispute between the parties that would otherwise be
determined by the reference procedure herein described will be resolved
and determined by arbitration. The arbitration will be conducted by a
retired Judge of the Court, in accordance with Section 1280 through
Section 1294.2 of the CCP as amended from time to time. The limitations
with respect to discovery as set forth hereinabove shall apply to any such
arbitration proceeding.
15.3.5 For purposes of this Section 15.3., the Borrowers shall be
deemed to be one party.
15.4 Headings. Section headings are included for the sake of convenience
only and shall not affect the interpretation of any provision of this Agreement.
15.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original Agreement, but all of
which together shall constitute one and the same instrument.
15.6 Entire Agreement. The Loan Documents and all other agreements and
documents referred to herein set forth the entire agreement and understanding of
the parties concerning the subject matter of this Agreement and supersedes all
prior agreements, arrangements, and understandings regarding such subject matter
between the parties hereto, which agreements, arrangements and understandings
are merged herein.
15.7 Costs. Whether or not the transactions hereby contemplated shall be
consummated, the Borrowers jointly and severally agree to pay all out-of-pocket
costs and expenses incurred by the Bank in connection with the transactions
hereby contemplated (including, without limitation, the performance of any due
diligence by the Bank) and the syndication, preparation, negotiation, execution,
delivery, waiver, Modification and administration of this Agreement, the other
Loan Documents and any other documentation contemplated hereby or thereby, the
making of the Advances, the issuance of Letters of Credit and/or the enforcement
or protection of the rights of the Bank in connection therewith, including, but
not limited to, any internally allocated audit costs, the fees and disbursements
of Mitchell, Silberberg & Knupp LLP, counsel for the Bank, and any other counsel
that the Bank shall retain from time to time, fees and expenses of technical or
other consultants engaged by the Bank as well as all out-of-pocket costs and
expenses incurred by the Bank in connection with any action which may be
instituted by any Person against the Bank in respect of the foregoing, or as a
result of any
74
transaction, action or non-action arising from the foregoing, including, but not
limited to, the fees and disbursements of Mitchell, Silberberg & Knupp LLP,
counsel for the Bank. Such payments shall be made on the date of execution of
this Agreement and thereafter on demand. The Borrowers jointly and severally
agree that they shall indemnify the Bank from and hold it harmless against any
documentary taxes, assessments or charges made by any governmental authority by
reason of the execution and delivery of this Agreement or any other Loan
Document. The joint and several obligations of the Borrowers under this Section
shall survive the termination of this Agreement and/or the payment of the
Obligations. All Costs shall be due and payable within ten (10) days of the
Borrowers' receipt of the Bank's request for payment. With respect to the audit
costs referenced above for the audits to be conducted as contemplated by Section
9.4 hereof, unless there shall exist an Event of Default at the time of an
audit, the costs thereof shall not exceed $500 per day plus out-of-pocket
expenses with an aggregate maximum amount of $5,000 per audit.
15.8 Survival of Agreement, Representations and Warranties, Etc. All
warranties, representations, covenants and agreements made by any Borrower
herein or in any certificate or other instrument delivered by any Borrower or on
its behalf in connection with this Agreement or any other Loan Documents shall
be considered to have been relied upon by the Bank, shall survive the making of
the Loan herein contemplated and the execution and delivery to the Bank of the
Note regardless of any investigation made by the Bank or on its behalf and shall
continue in full force and effect. All statements in any such certificates or
other instrument shall constitute joint and several representations and
warranties by the Borrowers hereunder.
15.9 Severability. Any provision of this Agreement or any other Loan
Document which is invalid, illegal or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without invalidating the remaining provisions
hereof or thereof, and any such invalidity, illegality or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision in
any other jurisdiction.
15.10 Amendments. No Modification or waiver of any provision of this
Agreement or any of the other Loan Documents, and no consent to any departure by
the Borrowers herefrom or therefrom (including, without limitation, any
Modification to or deviation from any form of Loan Document required to be
delivered hereunder by all or any of the Borrowers), shall in any event be
effective unless the same shall be in writing and signed by the Bank and then
such waiver or consent shall be effective only in the specific instance and for
the purpose for which given.
15.11 Maximum Interest, Fees, Charges and Reimbursements. Notwithstanding
anything contained herein or in any other Loan Documents to the contrary, in no
event shall the Bank be entitled to receive Interest or fees, other charges and
cost reimbursements with respect to the Loan or the Commitment in amounts which,
when added to all of the other Interest, fees, other charges or cost
reimbursements charged, paid to or received by the Bank on the Loan or the
Commitment, causes the Interest and the
75
fees, other charges and cost reimbursements with respect to the Loan to exceed
the highest lawful amount thereof. The Borrowers and the Bank intend to comply
with the applicable law governing the highest lawful amount of interest, fees,
charges and cost reimbursements. If the applicable law is ever judicially
interpreted so as to render usurious or unlawful any amount called for under the
Loan Documents, or contracted for, charged, taken, reserved or received with
respect to the Loan, or if acceleration of the Final Repayment Date of the Loan
or if any prepayment by the Borrowers results in the Borrowers having paid or
demand having been made on the Borrowers to pay, any interest, fees or other
charges in excess of the amount permitted by applicable law, then all excess
amounts theretofore collected by the Bank shall be credited on the Principal
(or, if the Loan has been or would thereby be paid in full, such excess amounts
shall be refunded to the Borrowers), and the provisions of the Loan and all
other Loan Documents and any demand on the Borrowers shall immediately be deemed
reformed and the amounts thereafter collectible thereunder and hereunder shall
be reduced, without the necessity of the execution of any new document, so as to
comply with the applicable law, but so as to permit the recovery of the fullest
amount otherwise called for thereunder and hereunder. The right to accelerate
the Final Repayment Date of the Loan does not include the right to accelerate
any Interest which has not otherwise accrued on the date of such acceleration,
and the Bank does not intend to collect any unearned Interest in the event of
acceleration. All sums paid or agreed to be paid to the Bank for the use,
forbearance or extension of the Loan shall, to the extent permitted by
applicable law, be amortized, prorated, allocated and spread through the full
term of the Loan until payment in full so that the rate or amount of Interest,
fees and other charges on account of the Loan does not exceed the applicable
usury or other ceilings. By execution of this Agreement, the Borrowers
acknowledge that they believe the Loan to be nonusurious and otherwise lawful
and agree that if, at any time, the Borrowers should have reason to believe that
the Loan is in fact usurious or otherwise unlawful, they will give the Bank
written notice of their belief and the reasons why the Borrowers believe the
Loan to be usurious or otherwise unlawful, and the Borrowers agree that the Bank
shall have ninety (90) days following its receipt of such written notice in
which to make appropriate refund or other adjustment in order to correct such
condition if it in fact exists.
15.12 Joint and Several Liability. Each of the Borrowers shall be
absolutely and unconditionally jointly and severally liable for each and every
sum, liability, obligation, undertaking and covenant from time to time owing by
any or all of the Borrowers hereunder, under the Note and/or any other Loan
Documents, including, without limitation, the obligation to timely repay in full
all Obligations at the times and in the manner set forth in this Agreement. Each
Borrower further acknowledges and agrees that the Bank may proceed to exercise
all or a portion of the Bank's rights and remedies hereunder and under the Note
and the other Loan Documents against any Borrower (and/or such Borrower's share
of the Collateral) without first proceeding to exercise or exhaust its rights
and remedies against another Borrower (and/or such other Borrower's share of the
Collateral). Each of A Pix and Miramar does hereby irrevocably make, constitute
and appoint Unapix and its officers and designees as its true and lawful
attorney-in-fact, with full power and authorization in the name of each of A Pix
and Miramar under this Agreement and each of the other Loan Documents to take
such
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action on its behalf as contemplated by this Agreement and the other Loan
Documents to be taken by A Pix and Miramar including, without limitation, the
execution and delivery on behalf of each of A Pix and Miramar of any and all
Borrowing Certificates, Borrowing Base Certificates and any other officers'
certificates contemplated in this Agreement or any of the other Loan Documents.
Such powers of attorney are coupled with an interest and are therefore
irrevocable.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the date first above written.
UNAPIX ENTERTAINMENT, INC.,
a Delaware corporation
By: /s/ David M. Fox
----------------------------------
Its: Pres & CEO
A PIX ENTERTAINMENT, INC.,
a New York corporation
By: /s/ David M. Fox
----------------------------------
Its: Co-Chairman
MIRAMAR IMAGES, INC.,
a Washington corporation
By: /s/ G. Paul Sullivan
----------------------------------
Its: President
IMPERIAL BANK
By: /s/
----------------------------------
Its: VP