================================================================
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
among
POINT.360
as Borrower
THE LENDERS PARTIES HERETO,
and
UNION BANK OF CALIFORNIA, N.A.
as Agent
Dated as of May 2, 2002
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TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS...................................................1
1.1 Defined Terms.................................................1
1.2 Other Definitional Provisions................................14
SECTION 2. AMOUNT AND TERMS OF LOANS....................................15
2.1 Loans........................................................15
2.2 Agreements Regarding Existing Letter of Credit...............16
2.3 Optional Prepayments.........................................18
2.4 Mandatory Prepayments........................................19
2.5 Interest Rates and Payment Dates.............................19
2.6 Computation of Interest and Fees.............................19
2.7 Pro Rata Treatment and Payments..............................20
2.8 Increased Costs..............................................20
2.9 Taxes........................................................20
2.10 Mitigation of Costs..........................................21
2.11 Amendment Fee................................................21
SECTION 3. REPRESENTATIONS AND WARRANTIES...............................22
3.1 Organization and Good Standing...............................22
3.2 Power and Authority..........................................22
3.3 Validity and Legal Effect....................................22
3.4 No Violation of Laws or Agreements...........................22
3.5 Title to Assets; Existing Encumbrances; Legal Names..........22
3.6 Capital Structure; Equity Ownership..........................23
3.7 Subsidiaries and Affiliates..................................23
3.8 Material Contracts...........................................23
3.9 Taxes and Assessments........................................23
3.10 Litigation and Legal Proceedings.............................24
3.11 Accuracy of Financial Information............................24
3.12 Accuracy of Other Information................................24
3.13 Compliance with Laws Generally...............................24
3.14 ERISA Compliance.............................................24
3.15 Environmental Compliance.....................................25
3.16 Federal Regulations..........................................26
3.17 Fees and Commissions.........................................26
3.18 Solvency.....................................................26
3.19 Investment Company Act; Public Utility Holding Company Act...26
3.20 Nature of Business...........................................26
3.21 Event of Default.............................................26
3.22 Ranking of Loans.............................................26
SECTION 4. CONDITIONS PRECEDENT.........................................27
4.1 Conditions to Restatement Date...............................27
4.2 Condition Subsequent.........................................29
SECTION 5. AFFIRMATIVE COVENANTS........................................30
5.1 Financial Statements.........................................30
5.2 Certificates; Other Information..............................31
5.3 Payment of Obligations.......................................33
5.4 Conduct of Business and Maintenance of Existence.............33
5.5 Maintenance of Property......................................33
5.6 Insurance....................................................33
5.7 Inspection of Property; Books and Records; Discussions.......33
5.8 Environmental Laws...........................................34
5.9 Compliance With Laws, Etc....................................34
5.10 Certain Obligations Respecting Subsidiaries;
Prohibitions on Certain Agreements...........................35
5.11 Interest Rate Protection.....................................35
5.12 Reviews and Appraisals.......................................35
5.13 Financial Consultant.........................................35
5.14 Bank Accounts................................................35
5.15 Landlord Consents............................................35
SECTION 6. NEGATIVE COVENANTS...........................................36
6.1 Financial Condition Covenants................................35
6.2 Limitation on Indebtedness...................................37
6.3 Limitation on Liens..........................................38
6.4 Limitation on Fundamental Changes............................39
6.5 Limitation on Sale of Assets.................................39
6.6 Limitation on Dividends......................................39
6.7 Limitation on Investments, Loans and Advances................39
6.8 Transactions with Affiliates.................................40
6.9 Fiscal Year..................................................40
6.10 Sale-Leaseback Transactions..................................40
6.11 Lines of Business............................................40
6.12 Certain Accounting Changes...................................41
SECTION 7. EVENTS OF DEFAULT............................................41
SECTION 8. THE AGENT....................................................43
8.1 Appointment..................................................43
8.2 Delegation of Duties.........................................43
8.3 Exculpatory Provisions.......................................43
8.4 Reliance by the Agent........................................44
8.5 Notice of Default............................................44
8.6 Non-Reliance on the Agent and Other Lenders..................44
8.7 Indemnification..............................................45
8.8 The Agent in Its Individual Capacity.........................45
8.9 Successor Agent..............................................45
8.10 Collateral Documents.........................................46
SECTION 9. MISCELLANEOUS................................................46
9.1 Amendments and Waivers.......................................46
9.2 Notices......................................................47
9.3 No Waiver; Cumulative Remedies...............................47
9.4 Survival of Representations and Warranties...................48
9.5 Payment of Expenses and Taxes................................48
9.6 Successors and Assigns; Participations; Purchasing Lenders...49
9.7 Adjustments; Set-Off.........................................51
9.8 Counterparts.................................................52
9.9 Severability.................................................52
9.10 Integration..................................................52
9.11 GOVERNING LAW................................................52
9.12 Acknowledgements.............................................52
9.13 Headings.....................................................52
9.14 Copies of Certificates, Etc..................................52
9.15 Treatment of Certain Information; Confidentiality............52
9.16 Consent to Jurisdiction; Waiver of Jury Trial................53
9.17 Waivers......................................................54
9.18 Effect of Amendment and Restatement..........................55
Exhibits
A Form of Note
B Form of Assignment and Acceptance
C Form of Release Agreement
D Form of Officer's Certificate
E Form of Covenant Compliance Certificate
F Projections
Schedules
2.1 Loan Amounts
3.1 Business Qualification Jurisdictions
3.5 Legal and Trade Names
3.6 Capital Structure; Equity Ownership
3.7 Subsidiaries and Affiliates
3.10 Litigation
5.15 Value of Certain Personal Property
6.3 Liens
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
THIS THIRD AMENDED AND RESTATED CREDIT AGREEMENT, dated as of May 2,
2002, among (1) POINT.360, a California corporation (the "Borrower"), (2) the
several banks and other financial institutions parties to this Agreement (the
"Lenders"), and (3) UNION BANK OF CALIFORNIA, N.A., as Agent for the Lenders
hereunder ("UBOC"; in its capacity as agent, the "Agent").
RECITALS
A. The Borrower, the Agent, and certain banks and other financial
institutions named as Lenders therein are parties to that certain Second Amended
and Restated Credit Agreement dated as of September 28, 2000, as amended by that
certain First Amendment to Second Amended and Restated Credit Agreement and
Waiver, dated as of April 5, 2001, that certain Second Amendment to Second
Amended and Restated Credit Agreement and Forbearance, dated as of June 11, 2001
and that certain Third Amendment to Second Amended and Restated Credit Agreement
and Forbearance, dated as of July 20, 2001 (such Credit Agreement, as so
amended, the "Existing Agreement") pursuant to which the Lenders made available
to the Borrower a revolving credit facility, with a letter of credit
subfacility, upon the terms and conditions therein set forth.
B. As of the date hereof, prior to the principal repayment contemplated
by Section 4.1, the aggregate principal amount of revolving loans outstanding
under the Existing Agreement is $28,999,484. The sole Letter of Credit
outstanding was issued by the Agent on January 30, 1998 to O.D.S. Technologies,
LP in the face amount of $92,239.20 and bearing letter of credit no. 306S230996
(the "Existing Letter of Credit"). There is no past-due interest outstanding.
C. The Borrower is in default of its obligations under the Existing
Agreement. The Borrower has requested that the Agent and the Lenders (i) agree
to restructure such obligations on the terms set forth herein and (ii) waive
such existing defaults. The Agent and the Lenders have agreed to such
restructuring and such waiver, in each case subject to the terms and conditions
set forth herein.
D. Accordingly, the Borrower, the Agent and the Lenders agree that the
Existing Agreement is hereby amended and restated in its entirety, subject to
satisfaction of the conditions set forth in Section 4.1, on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, the following terms shall have the
following meanings:
"ACCOUNTS RECEIVABLE": all of the Borrower's or any Domestic
Subsidiary's now owned or hereafter acquired (a) accounts receivable for the
sale of inventory or the performance of services, book debts and other forms of
obligations, whether arising out of goods sold or services rendered or from any
other transaction; (b) rights in, to and under all purchase orders or receipts
for goods or services; (c) rights to any goods represented or purported to be
represented by any of the foregoing (including unpaid sellers' rights of
rescission, replevin, reclamation and stoppage in transit and rights to
returned, reclaimed or repossessed goods); (d) moneys due or to become due to
the Borrower or any Domestic Subsidiary under all purchase orders and contracts
for the sale of goods or the performance of services or both by the Borrower or
any Domestic Subsidiary (whether or not yet earned by performance on the part of
the Borrower or such Domestic Subsidiary), including the proceeds of the
foregoing; (e) any notes, drafts, letters of credit, insurance proceeds or other
instruments, documents and writings evidencing or supporting the foregoing; and
(f) all collateral security and guarantees of any kind given by any other Person
with respect to any of the foregoing.
"ACCOUNTANTS": such firm of independent certified public accountants of
recognized regional or national standing as shall be selected by the Borrower
and acceptable to the Majority Lenders (such acceptance by the Majority Lenders
not to be unreasonably withheld, and to be in writing).
"AFFILIATE": as to any Person, (a) any other Person which, directly or
indirectly, is in control of, is controlled by, or is under common control with,
such Person or (b) any Person who is a director, officer or partner (i) of such
Person or (ii) of any Subsidiary of such Person. For purposes of this
definition, "control" of a Person means the power, directly or indirectly, to
direct or cause the direction of the management and policies of such Person
whether by contract or otherwise.
"AGENT": as defined in the preamble hereto.
"AGGREGATE LOAN AMOUNT": at any time of determination, the aggregate
principal amount of Loans outstanding at such time.
"AGREEMENT": this Third Amended and Restated Credit Agreement, as
amended, waived, supplemented or otherwise modified from time to time.
"APPLICABLE LENDING OFFICE": for any Lender, its office for Loans
specified below its signature on the signature pages hereof or in the Assignment
and Acceptance pursuant to which it became a party hereto, as the case may be,
any of which offices may, upon 10 days' prior written notice to the Agent and
the Borrower, be changed by such Lender.
"ASSET DISPOSITION": the sale, sale and leaseback, transfer, conveyance,
exchange, long-term lease accorded sales treatment under GAAP or similar
disposition (including by means of a merger, consolidation, amalgamation, joint
venture or other substantive combination) of any of the Properties, business or
assets (other than marketable securities, including "margin stock" within the
meaning of Regulation U, liquid investments and other financial instruments but,
including, without limitation, the assignment of any lease, license or permit
relating to the Properties) of the Borrower or any of its Subsidiaries to any
Person or Persons other than to the Borrower or any Guarantor.
"ASSIGNMENT AND ACCEPTANCE": an Assignment and Acceptance substantially
in the form of Exhibit B to this Agreement.
"BENEFITTED LENDER": as defined in Section 9.7.
"BORROWER": as defined in the preamble hereto.
"BUSINESS DAY": a day other than a Saturday, Sunday or other day on
which commercial banks in the State of California are authorized or required by
law to close.
"CAPITAL EXPENDITURES": for any period, expenditures (including, without
limitation, the aggregate amount of Capitalized Lease Obligations incurred
during such period) made by the Borrower or any of its Subsidiaries to acquire
or construct fixed assets, plant and equipment (including renewals, improvements
and replacements, but excluding repairs) during such period computed in
accordance with GAAP.
"CAPITALIZED LEASE OBLIGATIONS": obligations for the payment of rent for
any real or personal property under leases or agreements to lease that, in
accordance with GAAP, have been or should be capitalized on the books of the
lessee and, for purposes hereof, the amount of any such obligation shall be the
capitalized amount thereof determined in accordance with GAAP.
"CAPITAL STOCK": any and all shares, interests, participations or other
equivalents (however designated) of capital stock of a corporation, any and all
equivalent ownership interests in a Person (other than a corporation), any and
all warrants, options or rights to purchase any of the foregoing or any other
securities convertible into any of the foregoing.
"CASH": unrestricted cash held in a deposit account with the Agent or a
Lender; provided that "Cash" shall not include funds in the Cash Collateral
Account (unless and until such funds are returned to the Borrower in accordance
with Section 2.2).
"CASH COLLATERAL ACCOUNT": as defined in Section 2.2(a).
"CASH INCOME TAXES": for any period, cash income taxes paid by the
Borrower and its Subsidiaries.
"CODE": the Internal Revenue Code of 1986, as amended from time to time.
"COLLATERAL": all of the property (tangible or intangible) purported to
be subject to the lien or security interest purported to be created by any
mortgage, deed of trust, security agreement, pledge agreement, assignment or
other security document heretofore or hereafter executed by the Borrower as
security for all or part of the Obligations.
"COLLATERAL DOCUMENTS": the Security Agreement, any Control Agreements
executed pursuant to the Security Agreement, all Form UCC-1 Financing Statements
and amendments thereto and any other document encumbering the Collateral or
evidencing or perfecting a security interest therein for the benefit of the
Lenders executed by the Borrower.
"COMMONLY CONTROLLED ENTITY": as to any Person, an entity, whether or
not incorporated, which is under common control with such Person within the
meaning of Section 4001 of ERISA or is part of a group which includes such
Person and which is treated as a single employer under Section 414 of the Code.
"CONTRACTUAL OBLIGATION": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CONTROL AGREEMENT": a control agreement, restricted account agreement
or similar agreement or document, in each case in form and substance
satisfactory to the Agent and entered into for the purpose of perfecting a
security interest in one or more deposit accounts or securities accounts of the
Obligors.
"COVENANT COMPLIANCE CERTIFICATE": a certificate of a senior financial
officer of the Borrower, substantially in the form of Exhibit E hereto, with
regard to (and setting forth the calculations for) each of the covenants set
forth in this Agreement.
"DEBT SERVICE": for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (a) all regularly scheduled payments or
regularly scheduled prepayments of principal of Indebtedness (including, without
limitation, the principal component of any payments in respect of Capitalized
Lease Obligations) made during such period plus (b) all Interest Expense for
such period.
"DEFAULT": any of the events specified in Section 7, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"DOLLARS" AND "$": dollars in lawful currency of the United States.
"DOMESTIC SUBSIDIARY": each Subsidiary organized under the laws of the
United States or any state thereof.
"EBITDA": for any period, Net Income after eliminating extraordinary
gains and losses, plus (i) provisions for income taxes, (ii) depreciation and
amortization, (iii) Interest Expense, (iv) the amount of any charge taken by the
Borrower solely for the adoption of FASB Rule 142 and (v) the fees contemplated
by Section 4.1(e) and paid by the Borrower in connection with the execution of
this Agreement.
"ELIGIBLE ACCOUNTS RECEIVABLE": an Account Receivable which is
acceptable to the Agent, but in no event shall Eligible Accounts Receivable
include any Account Receivable:
(a) that does not arise from the sale of finished goods in the ordinary
course of the Borrower's or a Domestic Subsidiary's business;
(b) that is not subject to a valid, perfected first priority Lien in favor
of the Agent;
(c) as to which any covenant, representation or warranty contained in the
Loan Documents with respect to such Account Receivable has been
breached;
(d) that is not owned by the Borrower or any Domestic Subsidiary or is
subject to any right, claim or interest of another Person other than the
Lien in favor of the Agent;
(e) with respect to which an invoice has not been sent;
(f) that is due and payable from a buyer located outside of the United
States, but only to the extent that inclusion of such Accounts
Receivable as Eligible Accounts Receivable would result in Accounts
Receivables due and payable from buyers located outside of the United
States constituting in excess of 10% of the aggregate Eligible Accounts
Receivable;
(g) that is not paid within 120 days from the date of the invoice;
(h) that arises from a sale of goods to or performance of services for an
Affiliate of the Borrower, or an employee of the Borrower or an
Affiliate of the Borrower;
(i) that the Agent, in its reasonable judgment, deems uncollectible for any
reason;
(j) that is due and payable in a currency other than Dollars;
(k) that is due and payable from a buyer who (i) applies for, suffers, or
consents to the appointment of, or the taking of possession by, a
receiver, custodian, trustee or liquidator of itself or of all or a
substantial part of its property or calls a meeting of its creditors,
(ii) admits in writing its inability, or is generally unable, to pay its
debts as they become due or ceases operations of its present business,
(iii) makes a general assignment for the benefit of creditors, (iv)
commences a voluntary case under any state or federal bankruptcy laws
(as now or hereafter in effect), (v) is adjudicated as bankrupt or
insolvent, (vi) files a petition seeking to take advantage of any other
law providing for the relief of debtors, (vii) acquiesces to, or fails
to have dismissed, any petition which is filed against it in any
involuntary case under such bankruptcy laws, or (viii) takes any action
for the purpose of effecting any of the foregoing;
(l) that arises from a bill-and-hold, guaranteed sale, sale-and-return, sale
on approval, consignment or any other repurchase or return basis or is
evidenced by chattel paper;
(m) for which the goods giving rise to such Account Receivable have not been
shipped and delivered to and accepted by the buyer or the services
giving rise to such Account Receivable have not been performed by the
Borrower or any Domestic Subsidiary and accepted by the buyer or the
Account Receivable otherwise does not represent a final sale;
(n) that is subject to any offset, deduction, defense, dispute, or
counterclaim or the buyer is also a creditor or supplier of the Borrower
or any Domestic Subsidiary or the Account Receivable is contingent in
any respect or for any reason;
(o) for which the Borrower or any Domestic Subsidiary has made any agreement
with the buyer for any deduction therefrom, except for (i) discounts or
allowances made in the ordinary course of business for prompt payment
and (ii) cooperative advertising discounts; (p) for which any of the
goods giving rise to such Account Receivable have been returned,
rejected or repossessed, or for which any part of the payment due from
buyer is overdue; or
(q) that arises from or out of any contract or other agreement involving the
United States of America, any agency or instrumentality of the United
States of America, or any entity entitled to full of partial immunity
under the laws applicable in any domestic or foreign jurisdiction or any
entity to which an assignment of claims is subject to consent.
"ENVIRONMENTAL CONTROL STATUTES": as defined in Section 3.15.
"EPA": as defined in Section 3.15.
"EQUITY OFFERING": the sale or issuance (or reissuance) by the Borrower
or any Subsidiary of any equity interest (common stock, preferred stock,
partnership interests, member interests or otherwise) or any options, warrants,
convertible securities or other rights to purchase such beneficial or equity
interests.
"EQUITY RIGHTS": with respect to any Person, any subscriptions, options,
warrants, commitments, preemptive rights or agreements of any kind (including,
without limitation, any stockholders' or voting trust agreements) for the
issuance, sale, registration or voting of, or securities convertible into, any
additional shares of capital stock of any class, or partnership or other
ownership interests of any type in, such Person.
"EQUITYHOLDER AGREEMENTS": each shareholder agreement, limited liability
company agreement, partnership agreement, voting agreement, buy-sell agreement,
option, warrant, put, call, or right of first refusal, and any other agreement
or instrument with conversion rights into equity of the Borrower or any
Subsidiary either (a) between the Borrower or any Subsidiary and any holder or
prospective holder of any equity interest of the Borrower or any Subsidiary
(including interests convertible into such equity) or (b) otherwise between any
two or more such holders of equity interests.
"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time.
"ERISA AFFILIATE": as to any Person, each trade or business including
such Person, whether or not incorporated, which together with such Person would
be treated as a single employer under Section 4001(a)(14) of ERISA.
"EVENT OF DEFAULT": any of the events specified in Section 7, provided
that any requirement for the giving of notice, the lapse of time, or both, or
any other condition, has been satisfied.
"EXCLUDED TAXES": all taxes imposed on or by reference to the net income
of the Agent or any Lender or its Applicable Lending Office by any Governmental
Authority and all franchise taxes, taxes on doing business or taxes measured by
capital or net worth imposed on the Agent or on any Lender or its Applicable
Lending Office by any Governmental Authority and any taxes imposed by any
Governmental Authority arising as a consequence of the failure of any Lender to
provide accurate documentation required to be provided by such Lender pursuant
to Section 2.9(b).
"EXISTING AGREEMENT": as defined in the Recitals hereto.
"EXISTING LETTER OF CREDIT": as defined in the Recitals hereto.
"FIXED CHARGE RATIO": as at any date of determination, with respect to
any period, determined on a consolidated basis for the Borrower and its
Subsidiaries, the ratio of EBITDA less Capital Expenditures divided by Fixed
Charges for such period.
"FIXED CHARGES": for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (i) Debt Service for such period
(excluding (A) the $2,000,000 Reduction Installment due on the Restatement Date
and (B) $1,000,000 of the Reduction Installment due on December 31, 2002) and
(ii) Cash Income Taxes for such period.
"FUNDED DEBT": the sum of the outstanding principal balance of all
Indebtedness (including, but not limited to, Indebtedness to the Lenders and
Capitalized Lease Obligations) of Borrower and its Subsidiaries on a
consolidated basis.
"GAAP": generally accepted accounting principles in the United States in
effect from time to time.
"GOVERNMENTAL AUTHORITY": any nation or government, any federal, state
or other political subdivision thereof and any federal, state or local entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"GUARANTEE AMENDMENT": an amendment to each Guarantee existing on the
Restatement Date, in each case in form and substance satisfactory to the Agent.
"GUARANTEE OBLIGATION": as to any Person (the "guaranteeing person"),
any obligation (without duplication) of (a) the guaranteeing person or (b)
another Person (including, without limitation, any bank under any letter of
credit) to induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either case
guaranteeing or in effect guaranteeing any Indebtedness, leases, dividends or
other obligations (the "primary obligations") of any other third Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, any obligation of the guaranteeing person, whether or not
contingent, (i) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (ii) to advance or supply
funds for the purchase or payment of any such primary obligation or to maintain
working capital or equity capital of the primary obligor or otherwise to
maintain the net worth or solvency of the primary obligor, (iii) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such primary obligation of the ability of the primary obligor to make
payment of such primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect thereof;
provided, however, that the term Guarantee Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary course of
business. The amount of any Guarantee Obligation of any guaranteeing person
shall be deemed to be the lesser of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which such Guarantee
Obligation is made and (b) the maximum amount for which such guaranteeing person
may be liable pursuant to the terms of the instrument embodying such Guarantee
Obligation, unless such primary obligation and the maximum amount for which such
guaranteeing person may be liable are not stated or determinable, in which case
the amount of such Guarantee Obligation shall be such guaranteeing person's
maximum reasonably anticipated liability in respect thereof as determined by the
Borrower in good faith.
"GUARANTEES": the Second Amended and Restated Guarantees made by each of
VDIMI and Multi-Media, each as amended by a Guarantee Amendment, and all other
guarantees executed by a Guarantor in favor of the Agent for the benefit of the
Lenders, in form and substance reasonably satisfactory to the Agent, as the same
may be amended or modified from time to time in accordance with the terms
hereof.
"GUARANTOR COLLATERAL": all of the property (tangible or intangible)
purported to be subject to the lien or security interest purported to be created
by any mortgage, deed of trust, security agreement, pledge agreement, assignment
or other security document heretofore or hereafter executed by any Guarantor as
security for all or part of the Obligations or the Guarantees.
"GUARANTOR COLLATERAL DOCUMENTS": the Guarantor Security Agreements, any
Control Agreements executed pursuant to any Guarantor Security Agreement, all
Form UCC-1 Financing Statements and amendments thereto and any other document
encumbering the Guarantor Collateral or evidencing or perfecting a security
interest therein for the benefit of the Lenders executed by any Guarantor.
"GUARANTOR SECURITY AGREEMENTS": the security agreements, in form and
substance reasonably satisfactory to the Agent, made by each Subsidiary in favor
of the Agent, for the benefit of the Lenders, as the same may be amended from
time to time in accordance with the terms hereof.
"GUARANTORS": each Subsidiary.
"HAZARDOUS MATERIAL": collectively, (a) any petroleum or petroleum
products, flammable materials, explosives, radioactive materials, asbestos, urea
formaldehyde foam insulation, and transformers or other equipment that contain
polychlorinated biphenyls ("PCB's"), (b) any chemicals or other materials or
substances that are now or hereafter become defined as or included in the
definition of "hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic substances",
"toxic pollutants", "contaminants", "pollutants" or words of similar import
under any Environmental Control Statute and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Control Statute.
"INDEBTEDNESS": of any Person at any date, without duplication, (a) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services (other than trade liabilities (other than for
borrowed money) incurred in the ordinary course of business so long as such
trade liabilities are payable within 90 days of the date the respective goods
are delivered or the respective services are rendered) or which is evidenced by
a note, bond, debenture or similar instrument, (b) all obligations of such
Person under Capitalized Lease Obligations, (c) all obligations of such Person
in respect of acceptances issued or created for the account of such Person, (d)
all liabilities secured by any Lien on any property owned by such Person even
though such Person has not assumed or otherwise become liable for the payment
thereof, (e) all obligations of such Person, whether absolute or contingent, in
respect of letters of credit opened for the account of such Person, (f) all
obligations of such Person under Non-Compete Agreements and (g) all Guarantee
Obligations of such Person in respect of any indebtedness, obligations or
liabilities of any other Person of the type referred to in clauses (a) through
(f) of this definition.
"INSOLVENCY": with respect to any Multiemployer Plan, the condition that
such Plan is insolvent within the meaning of Section 4245 of ERISA.
"INTEREST EXPENSE": for any period, the sum, for the Borrower and its
Subsidiaries (determined on a consolidated basis without duplication in
accordance with GAAP), of the following: (i) all interest on Funded Debt
(including, without limitation, the interest component of any payments in
respect of Capitalized Lease Obligations) which was paid, payable and/or accrued
for such period and (ii) all commitment, letter of credit or line of credit fees
paid, payable and/or accrued for such period (without duplication of previous
amounts) to any lender in exchange for such lender's commitment to lend.
"INTEREST PAYMENT DATE": (a) the first day of each month and (b) on the
day on which the Loans become due and payable in full and are paid or prepaid in
full.
"INTEREST RATE PROTECTION AGREEMENT": shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, or
interest rate hedging agreement or other similar agreement or arrangement.
"INVESTMENT": as defined in Section 6.7.
"LETTER OF CREDIT REQUEST": with respect to the Existing Letter of
Credit, the letter of credit application executed by the Borrower on the Agent's
standard form.
"LANDLORD CONSENT": a waiver and consent, in form and substance
reasonably satisfactory to the Agent, of each Person who is the owner of real
property leased to the Borrower or any Guarantor.
"LENDERS": as defined in the preamble hereto and Section 8.8.
"LIEN": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any Capitalized Lease Obligation having substantially the
same economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction in respect of any of the foregoing).
"LOAN": as defined in Section 2.1(a).
"LOAN DOCUMENTS": this Agreement, the Notes, the Collateral Documents,
the Landlord Consents, the Release Agreement, the Guarantor Collateral Documents
and the Guarantees and any other agreement executed by an Obligor in connection
therewith and herewith including, but not limited to, UCC-1 Financing Statements
and amendments thereto, the Letter of Credit Request, and the fee sideletter
executed between the Borrower and the Agent, as such agreements and documents
may be amended, supplemented and otherwise modified from time to time in
accordance with the terms hereof.
"LOAN PERCENTAGE": as to any Lender at any time, the percentage of the
Aggregate Loan then constituted by the outstanding principal amount of such
Lender's Loans.
"MAJORITY LENDERS": Lenders having at least 51% of the aggregate
outstanding principal amount of the Loans, provided that during any such time as
UBOC alone would otherwise constitute a Majority Lender under the definition set
forth above, "Majority Lenders" shall be deemed to refer to UBOC and at least
one other Lender.
"MARGIN STOCK": as defined in Regulation U.
"MATERIAL ADVERSE EFFECT": a material adverse effect on (a) the
business, operations, property, financial condition, prospects or liabilities of
the Borrower and its Subsidiaries taken as a whole, (b) the ability of any
Obligor to perform its respective obligations under the Loan Documents, (c) the
validity or enforceability of any of the Loan Documents or the rights or
remedies of the Agent and the Lenders hereunder or thereunder or (d) the timely
payment of the principal of or interest on the Loans or other amounts payable in
connection therewith.
"MATERIAL CONTRACTS": each contract and agreement, including, but not
limited to, site leases and licenses, material to the financial condition or
operation of the Borrower or any Subsidiary.
"MATURITY DATE": December 31, 2004, or such earlier date as the Loans
shall become due and payable in full in accordance with the terms hereof
(whether by acceleration or otherwise).
"MULTI-MEDIA": Multi-Media Services, Inc., a California corporation.
"MULTIEMPLOYER PLAN": a plan which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"NET BOOK VALUE": net book value as determined in accordance with GAAP.
"NET INCOME": net income as determined in accordance with GAAP.
"NET PROCEEDS": with respect to any Equity Offering, the net amount
equal to the aggregate amount received in cash (including any cash received by
way of deferred payment pursuant to a note receivable, other non-cash
consideration or otherwise, but only as and when such cash is so received) in
connection with such Equity Offering minus the reasonable fees, commissions and
other out-of-pocket expenses incurred by the Borrower in connection with such
Equity Offering (other than amounts payable to Affiliates of the Person making
such Equity Offering).
"NON-COMPETE AGREEMENTS": all agreements pursuant to which the Borrower
or any Subsidiary has agreed to make payments (whether in cash or in kind) to
another Person for the agreement of such Person not to compete with the Borrower
or such Subsidiary in a given area.
"NOTE" AND "NOTES": as defined in Section 2.1(b).
"OBLIGATIONS": the unpaid principal of and interest on (including,
without limitation, interest accruing after the maturity the Loans and interest
accruing on or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, reorganization or like proceeding, relating to
the Borrower, whether or not a claim for post-filing or post-petition interest
is allowed in such proceeding and whether or not at a default rate) the Notes,
and all other obligations and liabilities of the Obligors to the Agent and the
Lenders, whether direct or indirect, absolute or contingent, due or to become
due, or now existing or hereafter incurred, which may arise under, out of, or in
connection with, this Agreement, the Notes, any other Loan Document and any
other document made, delivered or given in connection herewith or therewith,
including, but not limited to, any Interest Rate Protection Agreement to which
the Agent or any Lender is party, whether on account of principal, interest,
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all reasonable fees and disbursements of counsel (including
the allocated reasonable cost of internal counsel) to the Agent or the Lenders
that are required to be paid by the Borrower pursuant to the terms of this
Agreement) or otherwise.
"OBLIGOR": the Borrower, each Guarantor and any other Person (other than
the Agent or a Lender) obligated under any Loan Document.
"OPERATING MACHINERY AND EQUIPMENT": the Net Book Value of all of the
machinery and equipment set forth in the notes to the Borrower's consolidated
balance sheet, as determined in accordance with GAAP consistently applied.
"ORGANIC DOCUMENTS": relative to any entity, its certificate or articles
of incorporation or organization, its by-laws or operating agreement, any
Equityholder Agreements, its partnership agreement, and any other agreements or
documents relating to the control or management of any such entity (whether
existing as corporation, a partnership, a limited liability company or
otherwise).
"PARTICIPANT": as defined in Section 9.6(b).
"PBGC": the Pension Benefit Guaranty Corporation established pursuant to
Subtitle A of Title IV of ERISA or any successor thereto.
"PERSON": any individual, firm, partnership, joint venture, corporation,
association, limited liability company, business enterprise trust,
unincorporated organization, government or department or agency thereof or other
entity, whether acting in an individual, fiduciary or other capacity.
"PLAN": as to any Person, any plan (other than a Multiemployer Plan)
subject to Title IV of ERISA maintained for employees of such Person or any
ERISA Affiliate of such Person (and any such plan no longer maintained by such
Person or any of such Person's ERISA Affiliates to which such Person or any of
such Person's ERISA Affiliates has made or was required to make any
contributions within any of the five preceding years).
"PROHIBITED TRANSACTION": with respect to any Plan, a prohibited
transaction (as defined in Section 406 of ERISA) with respect to such Plan.
"PROJECTIONS": those certain projections delivered by the Borrower to
the Agent and the Lenders in connection with this Agreement, a copy of which is
attached hereto as Exhibit F.
"PROPERTIES": the collective reference to the real and personal
(tangible and intangible) property owned, leased, used, occupied or operated,
under license or permit by the Obligors.
"PURCHASING LENDERS": as defined in Section 9.6(c).
"REFERENCE RATE": the rate of interest per annum publicly announced from
time to time by Union Bank of California, N.A. as its "reference rate" in effect
at its office in Los Angeles, California. Any change in the Reference Rate shall
be effective on the effective date specified in the public announcement of such
change. The Reference Rate is an index rate determined by UBOC from time to time
as a means of pricing certain extensions of credit and is neither directly tied
to any external rate of interest or index nor necessarily the lowest rate of
interest charged by UBOC at any given time.
"REGISTER": as defined in Section 9.6(d).
"REGULATION D": Regulation D of the Board of Governors of the Federal
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"REGULATION U": Regulation U of the Board of Governors of the Federal
Reserve System, as the same is from time to time in effect, and all official
rulings and interpretations thereunder or thereof and any successor regulation
thereto.
"RELEASE AGREEMENT": a Release Agreement, in the form of Exhibit C
hereto, executed by the Borrower and each Guarantor in favor of the Agent and
the Lenders.
"REORGANIZATION": with respect to any Multiemployer Plan, the condition
that such plan is in reorganization within the meaning of Section 4241 of ERISA.
"REPORTABLE EVENT": any of the events set forth in Section 4043(b) of
ERISA, other than those events as to which the thirty day notice period is
waived under PBGC regulations.
"REQUIREMENT OF LAW": as to any Person, the Organic Documents of such
Person, and any law, treaty, rule or regulation, determination or policy
statement or interpretation of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any of its
property or to which such Person or any of its property is subject.
"RESPONSIBLE OFFICER": with respect to the Borrower or any Subsidiary,
the chief executive officer or the president, or, with respect to financial
matters, the chief financial officer, treasurer or controller of such entity.
"RESTATEMENT DATE": the date on which the conditions precedent set forth
in Section 4.1 have been satisfied.
"RESTRICTED PAYMENTS": as defined in Section 6.6.
"SECURITY AGREEMENT": the Second Amended and Restated Security Agreement
dated as of September 28, 2000, made by the Borrower in favor of the Agent, for
the benefit of the Lenders, in respect of the tangible and intangible personal
property of the Borrower described therein, as amended by the applicable
Security Agreement Amendment, as the same may be further amended from time to
time in accordance with the terms hereof.
"SECURITY AGREEMENT AMENDMENT": an amendment to the Security Agreement,
and each Guarantor Security Agreement existing on the Restatement Date, in each
case in form and substance satisfactory to the Agent.
"SINGLE EMPLOYER PLAN": any Plan which is covered by Title IV of ERISA,
but which is not a Multiemployer Plan.
"SOLVENT": when used with respect to any Person, that:
(i) the present fair salable value of such Person's assets is in
excess of the total amount of the probable liability on such
Person's liabilities;
(ii) such Person is able to pay its debts as they become due;
(iii)such Person does not have unreasonably small capital to carry
on such Person's business as theretofore operated and all businesses
in which such Person is about to engage; and
(iv) such Person is not otherwise insolvent as defined in Section
3439.02 of the California Civil Code and as defined in 11 U.S.C.
Section 101 (32) of the Bankruptcy Code.
"SUBSIDIARY": as to any Person at any time of determination, a
corporation, partnership or other entity of which shares of stock or other
ownership interests having ordinary voting power to elect a majority of the
board of directors or other persons performing similar functions of such
corporation, partnership or other entity (other than stock or such other
ownership interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation, partnership or other entity are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries or Subsidiaries, or both, by such Person. Unless
otherwise qualified, all references to a "Subsidiary" or to "Subsidiaries" in
this Agreement shall refer to a Subsidiary or Subsidiaries of the Borrower.
"TAXES": as defined in Section 2.9.
"TERMINATION EVENT": (i) a Reportable Event, (ii) the institution of
proceedings to terminate a Single Employer Plan by the PBGC under Section 4042
of ERISA, (iii) the appointment by the PBGC of a trustee to administer any
Single Employer Plan or (iv) the existence of any other event or condition that
would reasonably be expected to constitute grounds under Section 4042 of ERISA
for the termination of, or the appointment by the PBGC of a trustee to
administer, any Single Employer Plan.
"TRANSFEREE": as defined in Section 9.6(f).
"UBOC": as defined in the Recitals hereto.
"UCC": the Uniform Commercial Code as the same may be in effect from
time to time in the State of California.
"VDIMI": VDI Multimedia, Inc., a Delaware corporation.
"WHOLLY OWNED SUBSIDIARY": with respect to any Person, any corporation,
partnership or other entity of which all of the equity securities or other
ownership interests (other than, in the case of a corporation, directors'
qualifying shares) are directly or indirectly owned or controlled by such Person
or one or more Wholly Owned Subsidiaries of such Person.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Unless otherwise specified therein, all terms defined in this Agreement
shall have such defined meanings when used in the Notes, any other Loan
Document or any certificate or other document made or delivered pursuant
hereto or thereto.
(b) As used herein, in the Notes, in any other Loan Document, and in any
certificate or other document made or delivered pursuant hereto or
thereto, accounting terms not defined in Section 1.1 and accounting
terms partly defined in Section 1.1, to the extent not defined, shall
have the respective meanings given to them under GAAP.
(c) The words "hereof," "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and Section,
subsection, Schedule and Exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally applicable
to both the singular and plural forms of such terms.
(e) For the purpose of determining financial covenant compliance hereunder
for any period, divestitures and asset sales occurring during such
period will be included in the calculations for such period on a pro
forma basis, and will be deemed to have occurred on the first day of
such period.
SECTION 2. AMOUNT AND TERMS OF LOANS
2.1 LOANS.
(a) Upon the occurrence of the Restatement Date, the revolving loans owing
to each Lender under the Existing Agreement shall be deemed to be a term
loan (each a "Loan," and collectively, the "Loans") payable to such
Lender in the amount set forth on Part 1 of Schedule 2.1 with respect to
such Lender. Each Lender may maintain its Loan by or through any
Applicable Lending Office. For the avoidance of doubt, in no event will
any borrowings or credit advances be available hereunder, all
commitments of the Lenders to lend or make extensions of credit having
been terminated under the Existing Agreement.
(b) The Loans made by each Lender to the Borrower shall be evidenced by a
promissory note of the Borrower, substantially in the form of Exhibit A
(a "Note"), with appropriate insertions therein as to payee, date and
principal amount, payable to the order of such Lender and representing
the obligations of the Borrower to pay the aggregate unpaid principal
amount of Loans made by such Lender to the Borrower, with interest
thereon as prescribed in Sections 2.5 and 2.6. Each Lender is hereby
authorized (but not required) to record the date and amount of each
payment or prepayment of principal of its Loans made to the Borrower in
the books and records of such Lender, and any such recordation shall
constitute prima facie evidence of the accuracy of the information so
recorded. The failure of any Lender to make any such recordation or
notation in the books and records of the Lender (or any error in such
recordation or notation) shall not affect the obligations of the
Borrower hereunder or under the Notes. Each Note shall (i) be dated the
Restatement Date, (ii) provide for the payment of interest in accordance
with Sections 2.5 and 2.6 and (iii) be stated to be payable in full on
the Maturity Date.
(c) On each date described in the following table (each a "Reduction Date"),
the Borrower shall repay the principal of the Loans in an aggregate
amount equal to the amount set forth below opposite such Reduction Date
(each such payment, a "Reduction Installment"):
REDUCTION
REDUCTION DATE INSTALLMENT
-------------- -----------
Restatement Date 2,000,000.00
May 31, 2002 325,000.00
June 30, 2002 325,000.00
July 31, 2002 283,333.33
August 31, 2002 283,333.33
September 30, 2002 283,333.34
October 31, 2002 333,333.33
November 30, 2002 333,333.33
December 31, 2002 1,333,333.34
January 31, 2003 416,666.66
February 28, 2003 416,666.67
March 31, 2003 416,666.67
April 30, 2003 416,666.66
May 31, 2003 416,666.67
June 30 2003 416,666.67
July 31 2003 416,666.66
August 31, 2003 416,666.67
September 30, 2003 416,666.67
October 31, 2003 416,666.66
November 30, 2003 416,666.67
December 31, 2003 416,666.67
January 31, 2004 500,000.00
February 28, 2004 500,000.00
March 31, 2004 500,000.00
April 30, 2004 500,000.00
May 31, 2004 500,000.00
June 30, 2004 500,000.00
July 31, 2004 500,000.00
August 31, 2004 500,000.00
September 30, 2004 500,000.00
October 31, 2004 500,000.00
November 30, 2004 500,000.00
December 31, 2004 12,999,484.00
(d) All outstanding Loans shall be due and payable, to the extent not
previously paid in accordance with the terms hereof, on the Maturity
Date. The aggregate amount payable to any Lender on any Reduction Date
shall be determined in accordance with the provisions of Section 2.7.
(e) Each Reduction Installment shall be accompanied by accrued interest on
the amount being prepaid to the date of such prepayment.
2.2 AGREEMENTS REGARDING EXISTING LETTER OF CREDIT(A).
(a) The Borrower shall at all times maintain with the Agent, for the benefit
of the Agent in its capacity as issuer of the Existing Letter of Credit,
a cash collateral account (the "Cash Collateral Account"), in at least
the outstanding face amount of such letter of credit. Such account shall
be pledged to the Agent pursuant to the Security Agreement, shall be
under the sole dominion and control of the Agent, and the Borrower shall
have no right to make withdrawals therefrom. Within ten Business Days
following cancellation or termination of such letter of credit, and
reimbursement to the Agent of all amounts owing to the Agent with
respect thereto, any remaining funds in such account shall be returned
to the Borrower; provided that if a Default shall have occurred and be
continuing, such funds shall instead be deemed to be held by the Agent,
for the benefit of itself and the Lenders, as collateral for all
Obligations.
(b) Each Lender confirms and acknowledges that it holds an undivided
interest and participation in the Existing Letter of Credit, each
drawing thereunder and the obligations of the Borrower under this
Agreement in respect thereof in an amount equal to the product of (i)
such Lender's Loan Percentage and (ii) the maximum amount available to
be drawn under such Letter of Credit (assuming compliance with all
conditions to drawing) which amount is, as of the Restatement Date, as
set forth in Part 2 of Schedule 2.1. The payment by the Agent of a draft
drawn under the Existing Letter of Credit shall first be made from the
Cash Collateral Account. In the event that amounts on deposit in the
Cash Collateral Account are insufficient to compensate the Agent for
such drawing, each Lender agrees to forward to the Agent, within one
Business Day following notice thereof from the Agent to the Lenders,
funds (the "Letter of Credit Funds") in an amount equal to the amount of
such Lender's participation in such drawing for application to repay the
Agent. Any Letter of Credit Funds funded by any Lender hereunder shall
be due and payable by the Borrower upon demand, shall be deemed to be
Obligations hereunder, and shall accrue interest at the rate specified
in Section 2.6(b) until repaid in full.
(c) The obligations of the Borrower with respect to the Existing Letter of
Credit, the Letter of Credit Request with respect thereto, and any other
agreement or instrument relating to such Letter of Credit shall be
absolute, unconditional and irrevocable and shall be paid strictly in
accordance with the terms of the aforementioned documents under all
circumstances, including the following:
(i) any lack of validity or enforceability of such Letter of Credit,
this Agreement or any other Loan Document;
(ii) the existence of any claim, setoff, defense or other right that
the Borrower may have at any time against any beneficiary or
transferee of such Letter of Credit (or any Person for whom any such
beneficiary or transferee may be acting), the Agent, any Lender
(other than the defense of payment to a Lender in accordance with
the terms of this Agreement) or any other Person, whether in
connection with this Agreement, any other Loan Document, the
transactions contemplated hereby or thereby or any unrelated
transaction;
(iii) any statement or other document presented under such Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in
any respect, or any statement therein being untrue or inaccurate in
any respect whatsoever; provided that payment by the Agent under
such Letter of Credit shall not have constituted gross negligence or
willful misconduct of the Agent under the circumstances in question,
as determined by a final judgment of the highest applicable court;
and
(iv) any exchange, release or nonperfection of any Collateral or
other collateral, or any release, amendment or waiver of or consent
to departure from any Guarantee, other Loan Document or other
guaranty, for any of the Obligations of the Borrower.
(d) The Borrower shall pay to the Agent for its own account, with respect to
such Letter of Credit, from time to time, such additional fees and
charges (including cable charges) as are generally associated with
letters of credit, in accordance with the Agent's standard internal
charge guidelines and the related Letter of Credit Request.
(e) The Borrower agrees to the provisions in the Letter of Credit Request
form; provided, however, that the terms of the Loan Documents shall take
precedence if there is any inconsistency between the terms of the Loan
Documents and the terms of said form.
(f) The Borrower assumes all risks of the acts or omissions of any
beneficiary or transferee of such Letter of Credit with respect to its
use of such Letter of Credit. Neither the Agent nor any Lender nor any
of their respective officers or directors shall be liable or responsible
for (i) the use that may be made of such Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; or
(ii) the validity, sufficiency or genuineness of documents, or of any
endorsement thereof, even if such documents should prove to be in any or
all respects invalid, insufficient, fraudulent or forged; provided that,
with respect to clause (ii) of this Section 2.2(f), the Borrower shall
retain any and all rights it may have against the Agent for any
liability arising out of the gross negligence or willful misconduct of
the Agent, as determined by a final judgment of the highest applicable
court. In furtherance and not in limitation of the foregoing, the Agent
may accept any document that appears on its face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary.
(g) The Borrower hereby indemnifies and holds harmless each Lender and the
Agent from and against any and all claims and damages, losses,
liabilities, costs or expenses that such Lender or the Agent may incur
(or that may be claimed against such Lender or the Agent by any Person
whatsoever) by reason of or in connection with the execution and
delivery or transfer of or payment or refusal to pay by the Agent, as
issuer of such Letter of Credit; provided that the Borrower shall not be
required to indemnify any Lender or the Agent for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the
extent, caused by (x) the willful misconduct or gross negligence of the
Agent, as issuer of such Letter of Credit, in determining whether a
request presented under such Letter of Credit complied with the terms of
such Letter of Credit or (y) in the case of the Agent, as issuer of such
Letter of Credit, the Agent's failure to pay under such Letter of Credit
after the presentation to it of a request strictly complying with the
terms and conditions of such Letter of Credit. Nothing in this Section
2.2 is intended to limit the other obligations of the Borrower, any
Lender, or the Agent under this Agreement.
2.3 OPTIONAL PREPAYMENTS. The Borrower may at any time and from time to time,
prepay the Loans, in whole or in part, without premium or penalty, upon at least
one Business Day's irrevocable written notice from the Borrower to the Agent,
specifying the date and amount of prepayment. Upon receipt of any such notice
from the Borrower, the Agent shall promptly notify each Lender thereof. If any
such notice is given, the amount specified in such notice shall be due and
payable by the Borrower on the date specified therein, together with accrued
interest to such date on the amount prepaid. Each prepayment hereunder shall be
applied to the outstanding Reduction Installments in the order designated by the
Borrower in such notice or, if not so designated, in inverse order of maturity.
Partial prepayments of the Loans shall be in an aggregate principal amount of
$250,000 and integral multiples of $100,000 in excess thereof. For the avoidance
of doubt, no amounts prepaid under this Section 2.3 shall be available for
reborrowing.
2.4 MANDATORY PREPAYMENTS.
(a) If the Borrower or any of its Subsidiaries receives insurance proceeds
or condemnation proceeds with respect to any of their Properties which
are not fully applied (or contractually committed pursuant to
contract(s) approved by the Agent in its reasonable discretion) toward
the repair or replacement of such damaged or condemned Property within
30 days of the receipt thereof, the Borrower shall, on such 30th day
prepay the Loans in an amount equal to the amount of such proceeds not
so applied.
(b) In the event that the Borrower or any of its Subsidiaries makes an
Equity Offering, the Borrower shall immediately prepay the Loans in an
amount equal to 100% of the Net Proceeds of such Equity Offering;
provided that if such Equity Offering is the result of the exercise of
an option or other right to purchase beneficial or equity interests in
the Borrower pursuant to the 1996 Stock Incentive Plan or the 2000
Non-Qualified Stock Option Plan, each as in effect as of the Restatement
Date, then such prepayment shall be in an amount equal to 50% of the Net
Proceeds of such Equity Offering. No such prepayment shall limit or
restrict the rights and remedies of the Lenders under the Loan Documents
upon the occurrence and during the continuance of a Default.
(c) Each prepayment of the Loans pursuant to this Section 2.4 shall be (i)
applied to the outstanding Reduction Installments in inverse order of
maturity and (ii) accompanied by payment in full of all accrued interest
thereon to and including the date of such prepayment. The Borrower
agrees to give the Agent at least five Business Days' irrevocable
written notice of any prepayment under this Section 2.4. For the
avoidance of doubt, no amounts prepaid under this Section 2.4 shall be
available for reborrowing.
2.5 INTEREST RATES AND PAYMENT DATES.
(a) Each Loan shall bear interest at a rate per annum equal to the Reference
Rate plus 1.25%.
(b) If any Default shall have occurred and be continuing, all amounts
outstanding shall bear interest at a rate per annum equal to the
Reference Rate plus 3.25% from the date of the occurrence of such
Default until such Default is no longer continuing (after as well as
before judgment).
(c) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (b) of this
Section shall be payable on demand.
2.6 COMPUTATION OF INTEREST AND FEES.
(a) Interest on the Loans shall be calculated on the basis of a 365- (or
366-, as the case may be), day year for the actual days elapsed, and
interest on all other Obligations of the Borrower shall be calculated on
the basis of a 360-day year for the actual days elapsed. Any change in
the interest rate on a Loan resulting from a change in the Reference
Rate shall become effective as of the opening of business on the day on
which such change in the Reference Rate is announced. The Agent shall as
soon as practicable notify the Borrower and the Lenders of the effective
date and the amount of each such change in interest rate.
(b) Each determination of an interest rate by the Agent pursuant to any
provision of this Agreement shall be conclusive and binding on the
Borrower and the Lenders in the absence of manifest error.
2.7 PRO RATA TREATMENT AND PAYMENTS. Each payment (including each prepayment) by
the Borrower on account of principal of and interest on the Loans shall be made
pro rata according to the respective outstanding principal and interest amounts
of the Loans then held by the Lenders. All payments (including prepayments) to
be made by the Borrower hereunder and under the Notes, whether on account of
principal, interest, fees or otherwise, shall be made without set off or
counterclaim and shall be made prior to 12:00 Noon, Los Angeles time, on the due
date thereof to the Agent, for the account of the applicable Lenders, at the
Agent's office specified in Section 9.2, in Dollars and in immediately available
funds. The Agent shall distribute such payments to the applicable Lenders
promptly upon receipt in like funds as received. If any payment hereunder
becomes due and payable on a day other than a Business Day, such payment shall
be extended to the next succeeding Business Day, and, with respect to payments
of principal, interest thereon shall be payable at the then applicable rate
during such extension.
2.8 INCREASED COSTS. If, after the date of this Agreement, the introduction of
or any change in any applicable law, rule, regulation or guideline regarding
capital adequacy, or any change in the interpretation or administration thereof
by any Governmental Authority, central bank or the National Association of
Insurance Commissioners or comparable agency charged with the interpretation or
administration thereof, affects the amount of capital required or expected to be
maintained by any Lender or any corporation controlling any Lender, and such
Lender (taking into consideration such Lender's or such corporation's policies
with respect to capital adequacy) determines that the amount of capital
maintained by such Lender or such corporation which is attributable to or based
upon the Loans or this Agreement must be increased as a consequence of such
introduction or change by an amount deemed by such Lender to be material, then,
upon demand of the Agent at the request of such Lender, the Borrower shall
immediately pay to the Agent on behalf of such Lender, additional amounts
sufficient to compensate such Lender or such corporation for the increased costs
to such Lender or corporation of such increased capital. Any such demand shall
be accompanied by a certificate of such Lender setting forth in reasonable
detail the computation of any such increased costs, which certificate shall be
conclusive, absent manifest error. This covenant shall survive the termination
of this Agreement and the payment of the Notes and all other amounts payable
hereunder.
2.9 TAXES.
(a) All payments made by the Borrower in respect of the Obligations shall be
made free and clear of, and without deduction or withholding for or on
account of, any present or future income, stamp or other taxes, levies,
imposts, duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority or any political subdivision or taxing authority
thereof or therein, other than Excluded Taxes (all such non-Excluded
Taxes being hereinafter called "Taxes"). If any Taxes are required to be
withheld from any amounts payable to the Agent or any Lender in respect
of the Obligations, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent or such
Lender (after payment of all Taxes) interest or any such other amounts
payable hereunder at the rates or in the amounts specified in this
Agreement and the Notes. The Agent or a Lender, as the case may be,
shall deliver to the Borrower a certificate in good faith setting forth
the amount of such Taxes, the calculation of such Taxes and an
explanation of the requirement therefor, all in reasonable detail and
such certificate shall be conclusive, absent manifest error. Whenever
any Taxes are payable by the Borrower, as promptly as possible
thereafter, the Borrower shall send to the Agent, for its own account or
for the account of such Lender, as the case may be, a copy of an
original official receipt received by the Borrower showing payment
thereof or such other evidence of payment reasonably satisfactory to the
Agent. If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Agent the required
receipts or other required documentary evidence, the Borrower shall
indemnify the Agent and the Lenders for any incremental taxes, interest
or penalties (and related reasonable fees and expenses of counsel) that
may become payable by the Agent or any Lender as a result of any such
failure. The agreements in this Section shall survive the termination of
this Agreement and the payment of the Notes and all other amounts
payable hereunder.
(b) Each Lender that is not organized under the laws of the United States of
America or a state thereof agrees that it will deliver to the Borrower
and the Agent two duly completed copies of United States Internal
Revenue Service Form W-9, W-8BEN and/or W-8ECI (as applicable to it), or
successor applicable form(s), as the case may be. Each such Lender also
agrees to deliver to the Borrower and the Agent two further copies of
Form W-9, W-8BEN and/or W-8ECI (as applicable to it), or successor
applicable form(s) or other manner of certification, as the case may be,
on or before the date that any such form expires or becomes obsolete or
after the occurrence of any event requiring a change in the most recent
form previously delivered by it to the Borrower and the Agent, and such
extensions or renewals thereof as may reasonably be requested by the
Borrower or the Agent, unless in any such case an event beyond the
control of such Lender (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any
such delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly completing and
delivering any such form with respect to it and such Lender so advised
the Borrower and the Agent. Each such Lender shall certify pursuant to
such form(s) that it is entitled to receive payments under this
Agreement without deduction or withholding of any United States federal
income taxes, or that it is entitled to an exemption from United States
backup withholding tax, as applicable.
2.10 MITIGATION OF COSTS. If any Lender, by changing its Applicable Lending
Office or taking any other reasonable action, so long as making such change or
taking such other action is not disadvantageous to it in any financial,
regulatory or other respect, can mitigate any adverse effect on the Borrower
under Section 2.8 or 2.9, such Lender shall take such action.
2.11 AMENDMENT FEE. The Borrower shall pay to the Agent, for the benefit of the
Lenders on a pro rata basis, an amendment fee of $300,000. Such fee shall be
deemed earned in full on the Restatement Date, and no part of such fee shall
refundable notwithstanding any earlier termination of this Agreement or early
repayment of the Loans. Such fee shall be payable in immediately available funds
as follows: (i) $50,000 of such fee shall be payable on the Restatement Date and
(ii) $250,000 of such fee shall be payable on June 30, 2003; provided that,
notwithstanding the foregoing, the $250,000 installment referred to in clause
(ii) shall be waived by the Lenders if all Obligations of the Agent and the
Lenders shall have been paid in full on or before June 30, 2003.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement, the Borrower hereby
represents and warrants to the Agent and each Lender that:
3.1 ORGANIZATION AND GOOD STANDING. The Borrower and each Subsidiary (a) is duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation as indicated on Schedule 3.1, (b) has all
requisite corporate power and authority to own its properties and to conduct its
business as now conducted and as currently proposed to be conducted and (c) is
duly qualified to conduct business as a foreign corporation and is currently in
good standing in each state and jurisdiction in which it conducts business
except, in each case referred to in clause (c), to the extent that the failure
to do so could not reasonably be expected to have a Material Adverse Effect.
Each state and jurisdiction in which the Borrower or any Subsidiary is or should
be qualified to conduct business is listed on Schedule 3.1.
3.2 POWER AND AUTHORITY. The Borrower and each Subsidiary has all requisite
power and authority under applicable law and under its Organic Documents to
execute, deliver and perform its respective obligations under the Loan Documents
to which it is a party. All actions, waivers and consents (corporate, regulatory
and otherwise) necessary or appropriate for the Borrower and each Subsidiary to
execute, deliver and perform the Loan Documents to which it is a party have been
taken and/or received.
3.3 VALIDITY AND LEGAL EFFECT. This Agreement constitutes, and the other Loan
Documents to which the Borrower or any Subsidiary is a party constitute (or will
constitute when executed and delivered), the legal, valid and binding
obligations of the Borrower or such Subsidiary, as applicable, enforceable
against it in accordance with the terms thereof, except as such enforceability
may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or
similar laws of general applicability affecting the enforcement of creditors'
rights and (b) the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.4 NO VIOLATION OF LAWS OR AGREEMENTS. The execution, delivery and performance
of the Loan Documents (a) will not violate or contravene any Requirement of Law,
(b) will not result in any material breach or violation of, or constitute a
material default under, any agreement or instrument by which the Borrower or any
Subsidiary, or any of its property, may be bound, and (c) will not result in or
require the creation of any Lien upon or with respect to any property of the
Borrower or any Subsidiary, whether such property is now owned or hereafter
acquired.
3.5 TITLE TO ASSETS; EXISTING ENCUMBRANCES; LEGAL NAMES. The Borrower and each
Subsidiary has good and marketable title to all of its real and personal
properties and assets, free and clear of any Liens (other than those permitted
by Section 6.3). Neither the Borrower nor any Subsidiary has used (or permitted
the filing of any financing statement under) any legal or operating name at any
time during the twelve consecutive calendar months immediately preceding the
execution of this Agreement, except as identified on Schedule 3.5.
3.6 CAPITAL STRUCTURE; EQUITY OWNERSHIP. The authorized capital stock of the
Borrower consists of an aggregate of 50,000,000 shares of common stock, without
par value, 8,995,704 shares of which are issued and outstanding, and 5,000,000
shares of preferred stock, without par value, no shares of which are issued and
outstanding. All of the issued and outstanding shares of common stock of the
Borrower are duly and validly issued and outstanding, and each of such shares is
fully paid and nonassessable. Except as set forth on Schedule 3.6, there are no
outstanding Equity Rights with respect to the Borrower or any Subsidiary and
there are no outstanding obligations of the Borrower or any of its Subsidiaries
to repurchase, redeem, or otherwise acquire any shares of capital stock of the
Borrower, nor are there any outstanding obligations of the Borrower or any of
its Subsidiaries to make payments to any Person, such as "phantom stock"
payments, where the amount thereof is calculated with reference to the fair
market value or equity value of Borrower or any of its Subsidiaries.
3.7 SUBSIDIARIES AND AFFILIATES. Schedule 3.7 accurately and completely
discloses (i) each Subsidiary and Affiliate of the Borrower (other than its
officers and directors), (ii) each Person holding ownership interests in such
Subsidiary and (iii) the nature of the ownership interests held by each such
Person and the percentage of ownership of such Subsidiary represented by such
ownership interests.
3.8 MATERIAL CONTRACTS. Schedule 3.8 attached hereto sets forth a description of
the Material Contracts of the Borrower and the Subsidiaries as of the
Restatement Date. Neither the Borrower nor any Subsidiary has committed any
unwaived breach or default under any Material Contract, and the Borrower has no
knowledge or reason to believe that any other party to any Material Contract has
committed any unwaived breach or default thereof. Each of the Material Contracts
is a legal, valid and binding obligation of the Borrower or the Subsidiaries
party thereto, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability. The Borrower has made available to the
Lenders and the Agent a complete and correct copy of each Material Contract
(including in each case all exhibits, schedules and disclosure letters referred
to therein or delivered pursuant thereto, if any) and all amendments thereto and
other side letters or agreements affecting the terms thereof. Neither the
Borrower nor any of its Subsidiaries is party to any current agreements or
letters of intent providing for the acquisition or disposition of any assets.
3.9 TAXES AND ASSESSMENTS. The Borrower and each Subsidiary has timely filed all
required tax returns and reports (federal, state and local) or has properly
filed for extensions of the time for the filing thereof. The Borrower has no
knowledge of any deficiency, penalty or additional assessment due or appropriate
in connection with any such taxes. All taxes (federal, state and local) imposed
upon the Borrower or any Subsidiary or any of its properties, operations or
income have been paid and discharged prior to the date when any interest or
penalty would accrue for the nonpayment thereof, except for those taxes being
contested in good faith by appropriate proceedings diligently prosecuted and
with adequate reserves reflected on the financial statements in accordance with
GAAP. There are no taxes imposed on the Borrower or its Subsidiaries by any
political subdivision or taxing authority due or payable either on or by virtue
of the execution and delivery by the Borrower, the Subsidiaries, the Agent, or
the Lenders of this Agreement or any other Loan Document to which the Borrower
or the Subsidiaries are party, or on any payment to be made by the Borrower
pursuant hereto or thereto.
3.10 LITIGATION AND LEGAL PROCEEDINGS. Except as disclosed on Schedule 3.10,
there is no litigation, claim, investigation, administrative proceeding, labor
controversy or similar action that is pending or, to the knowledge of the
Borrower, threatened (i) with respect to any Loan Document or the transactions
contemplated thereby, or (ii) against the Borrower, any Subsidiary or any
Property which, if determined adversely to the Borrower or any Subsidiary, would
reasonably be expected to have a Material Adverse Effect.
3.11 ACCURACY OF FINANCIAL INFORMATION.
(a) All information previously furnished to the Agent and the Lenders that
was prepared by or on behalf of the Borrower concerning the financial
condition and operations of the Borrower or any Subsidiary, including
the audited consolidated financial statements of the Borrower and its
Subsidiaries for the fiscal year ended December 31, 2001 (including,
separately stated, consolidating statements of income, retained earnings
and cash flows of the Borrower and its Subsidiaries), (A) have been
prepared in accordance with GAAP consistently applied, (B) are true,
accurate and complete in all material respects, (C) fairly present the
financial condition of the organizations covered thereby as of the dates
and for the periods covered thereby and (D) disclose all material
liabilities (contingent and otherwise) of the Borrower and the
Subsidiaries.
(b) Since December 31, 2001 there has been no event or condition resulting
in a Material Adverse Effect.
3.12 ACCURACY OF OTHER INFORMATION. All information contained in any
application, schedule, report, certificate, or any other document given to the
Agent or any Lender by the Borrower or any agent of the Borrower in connection
with the Loan Documents is in all material respects true, accurate and complete,
and no such Person has omitted to state therein (or failed to include in any
such document) any material fact or any fact necessary to make such information
not misleading. All projections given to the Agent, or any Lender by the
Borrower or any other Person have been prepared with a reasonable basis and in
good faith making use of such information as was available at the date such
projection was made. The projections and pro forma financial information
contained in such materials are based upon good faith estimates and assumptions
believed by the Borrower to be reasonable at the time made and as of the
Restatement Date, it being recognized that such projections as to future events
are not to be viewed as facts and that actual results during the period or
periods covered by any such projections may differ from the projected results.
3.13 COMPLIANCE WITH LAWS GENERALLY. The Borrower and each Subsidiary is in
compliance in all material respects with all Requirements of Law applicable to
it, its operations and its properties.
3.14 ERISA COMPLIANCE.
(a) The Borrower and each Subsidiary is in compliance in all material
respects with all applicable provisions of ERISA, and all rules,
regulations and orders implementing ERISA.
(b) Neither the Borrower nor any Subsidiary, or any ERISA Affiliate thereof,
maintains or contributes to (or has maintained or contributed to) any
Multiemployer Plan under which the Borrower, any Subsidiary or any ERISA
Affiliate thereof could have any withdrawal liability.
(c) Neither the Borrower nor any Subsidiary, or any ERISA Affiliate thereof,
sponsors or maintains any defined benefit pension plan under which there
is an accumulated funding deficiency within the meaning of Section 412
of the Code, whether or not waived.
(d) The liability for accrued benefits under each defined benefit pension
plan that will be sponsored or maintained by the Borrower, any
Subsidiary or any ERISA Affiliate thereof (determined on the basis of
the actuarial assumptions utilized by the PBGC) does not exceed the
aggregate fair market value of the assets under each such defined
benefit pension plan.
(e) The aggregate liability of the Borrower, each Subsidiary and each ERISA
Affiliate thereof arising out of or relating to a failure of any
employee benefit plan within the meaning of Section 3(2) of ERISA to
comply with provisions of ERISA or the Code will not have a Material
Adverse Effect.
(f) There does not exist any unfunded liability (determined on the basis of
actuarial assumptions utilized by the actuary for the plan in preparing
the most recent annual report) of the Borrower, any Subsidiary or any
ERISA Affiliate thereof under any plan, program or arrangement providing
post-retirement, life or health benefits.
(g) No Reportable Event and no Prohibited Transaction (as defined in ERISA)
has occurred or is occurring with respect to any plan with which the
Borrower or any Subsidiary is associated.
3.15 ENVIRONMENTAL COMPLIANCE.
(a) The Borrower and each Subsidiary has received all permits and filed all
notifications necessary under and is otherwise in compliance in all
material respects with all federal, state and local laws, rules and
regulations governing the control, removal, storage, transportation,
spill, release or discharge of Hazardous Materials, including, without
limitation, as provided in the provisions of and the regulations under
(i) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendment and Reauthorization
Act of 1986, (ii) the Solid Waste Disposal Act, (iii) the Clean Water
Act and the Clean Air Act, (iv) the Hazardous Materials Transportation
Act, (v) the Resource Conservation and Recovery Act of 1976 and (vi) the
Federal Water Pollution Control Act Amendments of 1972 (all of the
foregoing enumerated and nonenumerated statutes, including without
limitation any applicable state or local statutes, all as amended,
collectively, the "Environmental Control Statutes").
(b) Neither the Borrower nor any Subsidiary has given any written or oral
notice to the Environmental Protection Agency ("EPA") or any state or
local agency with regard to any actual or imminently threatened removal,
storage, transportation, spill, release or discharge of Hazardous Wastes
either (i) on properties owned or leased by the Borrower or such
Subsidiary or (ii) otherwise in connection with the conduct of its
business and operations.
(c) Neither the Borrower nor any Subsidiary has received notice that it is
potentially responsible for costs of clean-up of any actual or
imminently threatened spill, release or discharge of Hazardous Wastes
pursuant to any Environmental Control Statute.
(d) No judicial proceedings or governmental or administrative action is
pending, or, to the knowledge of the Borrower, threatened, under any
Environmental Control Statute to which the Borrower or any of its
Subsidiaries is named as a party with respect to the Properties or the
business conducted at the Properties, nor are there any consent decrees
or other decrees, consent orders, administrative orders or other orders,
or other administrative or judicial requirements outstanding under any
Environmental Control Statute with respect to the Properties or such
business.
3.16 FEDERAL REGULATIONS. No part of the proceeds of any Loans are intended to
be or will be used, directly or indirectly for any purpose which violates the
provisions of the Regulations of the Board of Governors of the Federal Reserve
System. If requested by any Lender or the Agent, and in any event upon
consummation of any acquisition involving the purchase of stock by the Borrower
or any Subsidiary, the Borrower will furnish to the Agent and each Lender a
statement to the foregoing effect in conformity with the requirements of Form
U-1 referred to in Regulation U.
3.17 FEES AND COMMISSIONS. Except for the fees referred to in Sections 2.11 and
4.1(e), neither the Borrower nor any Subsidiary owes or will owe any fees or
commissions of any kind in connection with this Agreement or the transactions
contemplated hereby or thereby, and the Borrower does not know of any claim (or
any basis for any claim) for any fees or commissions in connection with this
Agreement or the transactions contemplated hereby or thereby.
3.18 SOLVENCY. Immediately prior to and upon the execution of this Agreement,
the Borrower and each Guarantor was, is and will be Solvent.
3.19 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
(a) Neither the Borrower nor any Subsidiary is an "investment company", or a
company "controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended.
(b) Neither the Borrower nor any Subsidiary is a "holding company," or an
"affiliate" of a "holding company" or a "subsidiary company" of a
"holding company," within the meaning of the Public Utility Holding
Company Act of 1935, as amended.
3.20 NATURE OF BUSINESS. Neither the Borrower nor any of its Subsidiaries is
engaged in any material business other than as described in Section 6.11.
3.21 EVENT OF DEFAULT. No Event of Default exists.
3.22 RANKING OF LOANS. This Agreement and the other Loan Documents to which the
Borrower is party, when executed, and the Loans, are and will be the direct and
general obligations of the Borrower. The Borrower's obligations hereunder and
thereunder rank and will rank at least pari passu in priority of payment to all
other Indebtedness.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS TO RESTATEMENT DATE. The agreement of each Lender to execute this
Agreement, to waive the Events of Default referred to in Section 9.17, and to
amend and restate the Existing Agreement on the terms set forth herein, are
subject to the satisfaction of the following conditions precedent:
(a) CREDIT AGREEMENT. The Agent shall have received this Agreement, executed
and delivered by an officer of the Borrower as of the Restatement Date.
(b) OTHER LOAN DOCUMENTS. The Agent shall have received the Notes, the
Release Agreement, a Guarantee Amendment with respect to each Guarantee
existing on the Restatement Date, a Security Agreement Amendment with
respect to the Security Agreement, a Security Agreement Amendment with
respect to each Guarantor Security Agreement existing on the Restatement
Date, the fee sideletter executed between the Borrower and the Agent,
and all other agreements or instruments required to create or perfect a
security interest in the Collateral and the Guarantor Collateral,
including any Control Agreements requested by the Lenders, executed in
connection herewith, in each case executed and delivered by an officer
of the relevant Obligor.
(c) CORPORATE DOCUMENTS. The Agent shall have received certified copies of
the charter and by-laws of each Obligor and of all corporate authority
for each Obligor (including, without limitation, board of director
resolutions and evidence of the incumbency, including specimen
signatures, of officers) with respect to the execution, delivery and
performance of such of the Loan Documents to which such Obligor is
intended to be a party and each other document to be delivered by such
Obligor from time to time in connection herewith and the extensions of
credit hereunder (or, with respect any charter or by-laws delivered
under the Existing Agreement with respect to any Obligor, a certificate
of the Secretary or Assistant Secretary of such Obligor, certifying that
such document(s) delivered under the Existing Agreement remain true and
correct and in full force and effect or, if either has been amended or
replaced, attaching such amendment or replacement and certifying that
such documents are true and correct and in full force and effect). The
Agent shall have received (x) subject to Section 4.2, a copy of each
Material Contract and (y) whether or not such contracts constitute
Material Contracts, a copy of each employment agreement with a senior
officer of the Borrower or any Subsidiary, in each case certified by a
Responsible Officer of the Borrower to be true and correct and in full
force and effect (or, with respect any Material Contract delivered under
the Existing Agreement, a certificate of the Secretary or Assistant
Secretary of such Obligor, certifying that such Material Contract(s)
delivered under the Existing Agreement remain true and correct and in
full force and effect or, if any have been amended or replaced,
attaching such amendment or replacement and certifying that such
documents are true and correct and in full force and effect).
(d) PRINCIPAL REPAYMENT. The Agent shall have received, for the benefit of
the Lenders, in immediately available funds, the $2,000,000 Reduction
Installment required to be paid on the Restatement Date pursuant to
Section 2.1(c).
(e) FEES AND COSTS. The Agent shall have received payment of (i) all fees
owing to Ernst & Young in connection with their valuation of the
Borrower, (ii) the first installment of the amendment fee contemplated
by Section 2.9 and (iii) all other fees, costs and expenses, including
legal fees and any LIBOR breakage costs, of the Agent and the Lenders
incurred pursuant to the Existing Agreement or this Agreement, in each
case in immediately available funds.
(f) LIEN SEARCHES. The Agent shall have received such lien searches as it
shall request, none of which shall evidence Liens (except for Liens
permitted by Section 6.3) covering any of the Collateral or the
Guarantor Collateral.
(g) COVENANT COMPLIANCE CERTIFICATE. The Agent shall have received a
Covenant Compliance Certificate prepared on a pro forma basis as of the
Restatement Date (provided that EBITDA, Fixed Charges and Eligible
Accounts Receivable shall be as of March 31, 2002), and assuming
repayment of the Reduction Installment due on such date.
(h) GOOD STANDING CERTIFICATES. With respect to each Obligor, the Agent
shall have received a certificate, dated a recent date, of the Secretary
of State of the state of formation of such Obligor and each other
jurisdiction where such Obligor is required to be qualified to do
business under such jurisdiction's law (each as respectively set forth
on Schedule 3.1), certifying as to the existence and good standing of,
and the payment of taxes by, each such Obligor in such state.
(i) OFFICER'S CERTIFICATE. A certificate of a senior officer of the Borrower
substantially in the form of Exhibit D, dated the Restatement Date.
(j) INSURANCE POLICIES. The Agent shall have received evidence in form and
substance reasonably satisfactory to the Agent that the insurance
required by Section 5.6 is in full force and effect.
(k) EXISTING LETTER OF CREDIT. The Agent shall have received a cash
collateral deposit in the amount of $92,239.20 to cash secure the
Existing Letter of Credit, along with such account agreement or other
agreements, documents or instruments as the Agent may request to
establish a separate account for such deposit.
(l) FINANCIAL CONSULTANT. The Agent shall have received a copy of that
certain letter dated March 25, 2002, pursuant to which the Borrower
retained Kibel Green, Inc., which letter shall be in the form previously
delivered to the Agent, along with a certificate of the Borrower stating
that such copy is true, correct and complete and that such letter
remains in full force and effect.
(m) STOCK CERTIFICATES; ETC. The Agent shall have received original stock
certificates representing all outstanding shares of stock of each
Subsidiary, together with an undated stock power for each of such
certificates, duly executed in blank by an authorized officer of the
pledgor thereof.
(n) ADDITIONAL PROCEEDINGS. The Agent shall have received such other
approvals, opinions and documents as the Agent may reasonably request.
(o) LEGAL OPINIONS. The Agent shall have received, with a counterpart for
each Lender, the following executed legal opinions:
(i) the executed legal opinion of Troy & Gould Professional
Corporation, counsel to the Borrower and the Guarantors, in form and
substance satisfactory to the Agent; and
(ii) such other legal opinions as the Agent may reasonably request.
(p) ADDITIONAL CONDITIONS PRECEDENT. The following statements shall be true:
(A) The representations and warranties contained in this Agreement
and in each other Loan Document and certificate or other writing
delivered to the Lenders prior to, on or after the Restatement Date
pursuant hereto are correct on and as of such date in all material
respects as though made on and as of such date except to the extent
that such representations and warranties expressly relate to an
earlier date; and
(B) No Default has occurred and is continuing or would result from
the amendment and restatement of the Existing Agreement as set forth
herein;
(C) The amendment and restatement of the Existing Agreement as set
forth herein shall not contravene any law, rule or regulation
applicable to any Lender or any Obligor.
(q) CERTIFICATION RE PROJECTIONS. The Agent shall have received a copy of
the duly executed certification regarding the Borrower's projections, in
the exact form prepared by Ernst & Young in connection with their
valuation of the Borrower.
4.2 CONDITIONS SUBSEQUENT. The agreement of each Lender to execute this
Agreement, to waive the Events of Default referred to in Section 9.17, and to
amend and restate the Existing Agreement on the terms set forth herein, are
subject to the satisfaction of the following conditions subsequent:
(a) LEASES. The Borrower agrees to deliver to the Agent, on or before May
29, 2002, copies of each real property lease to which the Borrower or
any Subsidiary is party, all certified by a Responsible Officer of the
Borrower to be true and correct and in full force and effect.
(b) UCC TERMINATIONS. The Borrower agrees to deliver to the Agent, on or
before May 29, 2002, evidence of termination of the following UCC
financing statements against Multi-Media:
(A) Filing Number 211047 by Community Bank, N.A. in New York;
(B) Filing Number 231261 by Community Bank, N.A. in New York;
(C) Filing Number 240006 by Community Bank, N.A. in New York;
(D) Filing Number 137761 by Community Bank, N.A. in New York;
(E) Filing Number 204160 by Community Bank, N.A. in New York; and
(F) Filing Number 215449 by Community Bank National Association in
New York.
(c) TRADEMARK REGISTRATIONS. The Borrower agrees to deliver to the Agent, on
or before May 29, 2002, evidence of filing with the United States Patent
and Trademark Office of all necessary documentation to register each
trademark listed on Schedule A to the Security Agreement or any
Guarantor Security Agreement in the legal name of the Borrower or one of
its Subsidiaries.
(d) GOOD STANDING CERTIFICATES. The Borrower agrees to deliver to the Agent,
on or before May 29, 2002:
(i) certificates, dated a recent date, of the Secretary of State of
Texas and New York with respect to the Borrower in its legal name,
certifying as to the existence and good standing of, and the payment
of taxes by, the Borrower in such states; and
(ii) a certificate, dated a recent date, of the Secretary of State
of Illinois with respect to Multi-Media, certifying as to the
existence and good standing of, and the payment of taxes by,
Multi-Media in such state.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that from and after the Restatement Date, so
long as any Note remains outstanding and unpaid or any other amount is owing to
any Lender or the Agent hereunder:
5.1 FINANCIAL STATEMENTS.
(a) As soon as available and in any event within 45 days after the end of
the first three quarterly fiscal periods of each fiscal year of the
Borrower, the Borrower shall deliver to the Agent, with sufficient
copies for each Lender, (i) consolidated statements of income, retained
earnings and cash flows of the Borrower and its Subsidiaries for such
period, and the related consolidated balance sheets of the Borrower and
its Subsidiaries as at the end of such period, setting forth in each
case in comparative form (A) the corresponding consolidated figures for
the corresponding periods in the preceding fiscal year (except that, in
the case of the balance sheets, such comparison shall be to the last day
of the prior fiscal year) and (B) the consolidated figures for the
corresponding period in the Projections, accompanied by a certificate of
a senior financial officer of the Borrower, which certificate shall
state that said consolidated financial statements fairly present the
consolidated financial condition and results of operations of the
Borrower and its Subsidiaries, in each case in accordance with GAAP
consistently applied, as at the end of, and for, such period (subject to
normal year-end audit adjustments and the absence of footnotes) and (ii)
a schedule showing all equipment sales and purchases (including relevant
serial numbers) during such period, such schedule to be in form and
detail acceptable to the Majority Lenders.
(b) As soon as available and in any event within 90 days after the end of
each fiscal year of the Borrower, the Borrower shall deliver to the
Agent, with sufficient copies for each Lender, audited consolidated
statements of income, retained earnings and cash flows of the Borrower
and its Subsidiaries for such fiscal year and the related consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such
fiscal year, setting forth in comparative form the corresponding
consolidated figures for the preceding fiscal year, and accompanied by
(i) all management letters relating thereto and (ii) an opinion thereon
of the Accountants, which opinion shall state that said consolidated
financial statements fairly present the consolidated financial condition
and results of operations of the Borrower and its Subsidiaries as at the
end of, and for, such fiscal year in accordance with GAAP, and a
statement of the Accountants to the effect that, in making the
examination necessary for their opinion, nothing came to their attention
that caused them to believe that the Borrower was not in compliance with
Section 6.1, insofar as such Section relates to accounting matters.
(c) As soon as available and in any event within 60 days after the end of
each fiscal year of the Borrower, the Borrower shall deliver to the
Agent, with sufficient copies for each Lender, unaudited consolidated
and consolidating statements of income, consolidated statements of
retained earnings and cash flows of the Borrower and its Subsidiaries
for such fiscal year and the related consolidated balance sheet of the
Borrower and its Subsidiaries as at the end of such fiscal year, setting
forth in comparative form the corresponding consolidated figures for the
preceding fiscal year, and accompanied by a certificate of a senior
financial officer of the Borrower, which certificate shall state that
said consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Borrower and its
Subsidiaries, in each case in accordance with GAAP consistently applied,
as at the end of, and for, such period (subject to normal year-end audit
adjustments and the absence of footnotes).
(d) As soon as available and in any event within 30 days after the end of
each month, the Borrower shall deliver to the Agent, with sufficient
copies for each Lender, (i) consolidated and consolidating statements of
income, consolidated statements of retained earnings and cash flows of
the Borrower and its Subsidiaries for such month, and the related
consolidated balance sheets of the Borrower and its Subsidiaries as at
the end of such month, accompanied by a certificate of a senior
financial officer of the Borrower, which certificate shall state that
said consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Borrower and its
Subsidiaries, in each case in accordance with GAAP consistently applied,
as at the end of, and for, such period (subject to normal year-end audit
adjustments and the absence of footnotes), (ii) a comparison of such
results with the consolidated figures for the corresponding period in
the Projections and (iii) the corresponding consolidated and
consolidating figures for the corresponding periods in the preceding
fiscal year (except that, in the case of the balance sheets, such
comparison shall be to the last day of the prior fiscal year).
(e) The Borrower will promptly furnish to the Agent such other information
(including information pertaining to the Borrower's financial condition,
operations and otherwise) as the Agent may reasonably request.
5.2 CERTIFICATES; OTHER INFORMATION. The Borrower shall deliver to each Lender:
(a) within 45 days after the end of each month, a Covenant Compliance
Certificate as of the end of such month;
(b) within five Business Days after the same are filed, copies of all
financial statements and reports which the Borrower or any Subsidiary
may make to, or file with, the Securities and Exchange Commission or any
successor or analogous Governmental Authority;
(c) promptly but, in any event, within five Business Days after receipt
thereof, copies of all financial reports (including, without limitation,
management letters), if any, submitted to the Borrower or any Subsidiary
by the Accountants in connection with any annual or interim audit of the
books thereof;
(d) as soon as available and in any event within 30 days after December 31
of each fiscal year, a budget for the next following fiscal year setting
forth anticipated income, expense and capital expenditure items for each
month during such fiscal year;
(e) as soon as possible and in any event within five Business Days after the
occurrence of a Default or, in the good faith determination of a
Responsible Officer of the Borrower, a Material Adverse Effect, the
written statement by a Responsible Officer of the Borrower, setting
forth the details of such Default or Material Adverse Effect and the
action which the Borrower proposes to take with respect thereto;
(f) (A) as soon as possible and in any event within 30 days after the
Borrower knows or has reason to know that any Termination Event with
respect to any Plan has occurred, a statement of a Responsible Officer
of the Borrower describing such Termination Event and the action, if
any, which the Borrower proposes to take with respect thereto, (B)
promptly and in any event within ten days after receipt thereof by the
Borrower or any ERISA Affiliate of the Borrower from the PBGC, copies of
each notice received by the Borrower or such ERISA Affiliate of the
PBGC's intention to terminate any Plan or to have a trustee appointed to
administer any Plan, (C) promptly and in any event within 30 days after
the filing thereof with the Internal Revenue Service, copies of each
Schedule B (Actuarial Information) to the annual report (Form 5500
Series) with respect to each Single Employer Plan maintained for or
covering employees of the Borrower or any Subsidiary if the present
value of the accrued benefits under the Plan exceeds its assets by an
amount in excess of $500,000 and (D) promptly and in any event within
ten days after receipt thereof by the Borrower or any ERISA Affiliate of
the Borrower from a sponsor of a Multiemployer Plan or from the PBGC, a
copy of each notice received by the Borrower or such ERISA Affiliates
concerning the imposition or amount of withdrawal liability under
Section 4202 of ERISA or indicating that such Multiemployer Plan may
enter reorganization status under Section 4241 of ERISA;
(g) promptly after the commencement thereof, but in any event not later than
five Business Days after service of process with respect thereto on, or
the obtaining of knowledge by, the Borrower or any Subsidiary, notice of
each material action, suit or proceeding against the Borrower or any
Subsidiary before any Governmental Authority;
(h) within five days following receipt by the Borrower or any Subsidiary,
copies of all notices received by the Borrower or such Subsidiary from
the Internal Revenue Service or other taxing authority relating to any
material dispute regarding deductions, audits or any other material
matter; and
(i) promptly, such additional financial and other information as any Lender,
through the Agent, may from time to time reasonably request.
5.3 PAYMENT OF OBLIGATIONS. The Borrower shall, and shall cause each of its
Subsidiaries to, pay, discharge or otherwise satisfy at or before maturity or
before they become delinquent, as the case may be, all its obligations of
whatever nature (except for those referred to in Section 5.9), except where the
failure to so satisfy such obligations would not have a Material Adverse Effect
or except where the amount or validity thereof is currently being contested in
good faith by appropriate proceedings and reserves in conformity with GAAP with
respect thereto have been provided on the books of the Borrower or its
Subsidiaries, as the case may be.
5.4 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The Borrower shall, and
shall cause each of its Subsidiaries to, (i) continue to engage in the video
duplication business, the post-production business, the audio sweetening
business, the business of distributing national television spot advertising,
trailers and electronic press kits for the motion picture and television
industries, or engage in the business of owning (and renting) limited amounts of
niche programming and media buying, (ii) preserve, renew and keep in full force
and effect its corporate existence, (iii) take all reasonable action to maintain
all rights, registrations, licenses, privileges and franchises necessary or
desirable in the normal conduct of its business, and (iv) comply with all
Contractual Obligations and Requirements of Law except to the extent, in the
case of this clause (iv), that failure to comply therewith would not, in the
aggregate, have a Material Adverse Effect.
5.5 MAINTENANCE OF PROPERTY. The Borrower shall, and shall cause each of its
Subsidiaries to, keep all property useful or necessary in its business in good
working order and condition (ordinary wear and tear excepted).
5.6 INSURANCE. The Borrower will, and will cause each of its Subsidiaries to,
maintain insurance with financially sound and reputable insurance companies, and
with respect to Property and risks of a character usually maintained by Persons
engaged in the same or similar business similarly situated, against loss, damage
and liability of the kinds and in the amounts customarily maintained by such
Persons. The Borrower shall designate the Agent as loss payee or additional
insured, as appropriate with respect to such insurance and cause such insurance
to provide for 30 days' prior written notice to Agent of any modification or
cancellation of such insurance.
5.7 INSPECTION OF PROPERTY; BOOKS AND RECORDS; DISCUSSIONS. The Borrower shall,
and shall cause each of its Subsidiaries to, keep proper books of records and
account in which full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all material dealings and transactions in
relation to its business and activities; and upon reasonable notice and at such
reasonable times during usual business hours, permit representatives of any
Lender to visit and inspect any of its properties and (i) examine and make
abstracts from any of its books and records at any reasonable time and as often
as may reasonably be desired and to discuss the business, operations, properties
and financial and other condition of the Borrower and its Subsidiaries with
officers and employees of the Borrower and its Subsidiaries and with its
Accountants, and (ii) make such further inspections and examinations, including
appraisals and field audits, as deemed reasonably necessary by the Agent or any
Lender and at the sole cost and expense of the Borrower.
5.8 ENVIRONMENTAL LAWS. The Borrower shall, and shall cause each of its
Subsidiaries to:
(a) Comply in all material respects with, and ensure compliance by all
tenants and subtenants, if any, with, all applicable Environmental
Control Statutes and obtain and comply in all material respects with any
and all licenses, approvals, notifications, registrations or permits
required by applicable Environmental Control Statutes;
(b) Conduct and complete all investigations, studies, sampling and testing,
and all remedial, removal and other actions required under Environmental
Control Statutes and promptly comply in all material respects with all
lawful orders and directives of all Governmental Authorities regarding
Environmental Control Statutes except to the extent that the same are
being contested in good faith by appropriate proceedings; and
(c) Defend, indemnify and hold harmless the Agent and the Lenders, and their
respective employees, agents, officers and directors, from and against
any and all claims, demands, penalties, fines, liabilities, settlements,
damages, costs and expenses of whatever kind or nature known or unknown,
contingent or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under any Environmental
Control Statutes applicable to the operations of the Borrower or any of
its Subsidiaries, or the Borrower's or any of such Subsidiaries'
interest in Properties, or any orders, requirements or demands of
Governmental Authorities related thereto, including, without limitation,
attorneys' and consultants' fees, investigation and laboratory fees,
response costs, court costs and litigation expenses, except to the
extent that any of the foregoing arise out of the gross negligence or
willful misconduct of the party seeking indemnification therefor. This
indemnity shall continue in full force and effect regardless of the
termination of this Agreement.
5.9 COMPLIANCE WITH LAWS, ETC. The Borrower shall comply, and shall cause each
of its Subsidiaries to comply, in all material respects with all applicable
Requirements of Law, such compliance to include, without limitation (i) paying
before the same become delinquent all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or upon any of
its Properties and (ii) paying all lawful claims which if unpaid might become a
Lien upon any of its Properties; provided, however, that neither the Borrower
nor any of its Subsidiaries shall be required to pay and discharge or to cause
to be paid and discharged any such tax, assessment, charge, levy or claim so
long as (A) the validity or applicability thereof is being contested in good
faith by appropriate proceedings, (B) the Borrower or such Subsidiary shall, to
the extent required by GAAP, have set aside on its books adequate reserves with
respect thereto and (C) the failure to pay or discharge such tax, assessment,
charge, levy or claim would not have a Material Adverse Effect or.
5.10 CERTAIN OBLIGATIONS RESPECTING SUBSIDIARIES; PROHIBITIONS ON CERTAIN
AGREEMENTS.
(a) The Borrower will cause each of its Subsidiaries hereafter formed or
acquired to execute and deliver to the Agent promptly upon the formation
or acquisition thereof (i) a Guarantee in form and substance
satisfactory to the Agent, guaranteeing the Obligations, (ii) a
Guarantor Security Agreement, in form and substance satisfactory to the
Agent, granting to the Agent, for the benefit of the Lenders, a security
interest in the tangible and intangible personal property of such
Subsidiary, together with appropriate Lien searches requested by the
Agent indicating the Lenders' first priority Lien on such personal
property, (iii) such UCC-1 Financing Statements as the Agent shall
request and (iv) such charter and authorization documents as the Agent
shall request.
(b) The Borrower will not, and will not permit any of its Subsidiaries to,
without the prior written consent of the Majority Lenders, enter into
any indenture, agreement, instrument or other arrangement that, directly
or indirectly, prohibits or restrains, or has the effect of prohibiting
or restraining, or imposes materially adverse conditions upon, the
incurrence or payment of indebtedness, the granting of Liens, the
declaration or payment of dividends, the making of loans, advances or
investments or the sale, assignment, transfer or other disposition of
Property, or which imposes any financial covenants on the Borrower or
any of its Subsidiaries.
5.11 INTEREST RATE PROTECTION. The Borrower shall maintain in effect, until at
least November 28, 2003, one or more Interest Rate Protection Agreements
mutually agreeable to the Borrower and the Agent establishing a fixed or maximum
interest rate acceptable to the Agent for a notional principal amount equal to
not less than $15,000,000.
5.12 REVIEWS AND APPRAISALS. The Agent shall be entitled to conduct, with
respect to the Borrower and the Subsidiaries and at the Borrower's expense, (i)
quarterly reviews of the books and records of such entities (with each such
review expected to involve several Business Days, and provided that the cost to
the Borrower for such reviews shall not exceed $1,000 per day) and (ii) annually
(by June 30 of each year), with a semi-annual update (by December 31 of each
year), appraisals of their assets. Such reviews and appraisals shall be in
scope, and by a review firm or appraisal firm (as applicable) satisfactory to
the Majority Lenders. The Agent and the Lenders shall be entitled to conduct
more frequent reviews and appraisals, at the expense of the Borrower, if a
Default exists.
5.13 FINANCIAL CONSULTANT. At the time of the Restatement Date, the Borrower
shall have retained Kibel Green, Inc., or such other financial consultant
satisfactory to the Lenders, to assist the Borrower in implementing a turnaround
of its performance, such retention to be on terms and conditions, and with scope
of services, satisfactory to the Lenders.
5.14 BANK ACCOUNTS. The Borrower shall maintain, and shall cause each of its
Subsidiaries to maintain, its primary operating bank account(s) with Union Bank
of California.
5.15 LANDLORD CONSENTS. The Borrower agrees to use Best Efforts to deliver to
the Agent, in recordable form:
(a) within 30 days after the Restatement Date, Landlord Consents with
respect to each of the following properties at which the Borrower or any
Subsidiary maintains personal property having a value of $100,000 or
greater: 1) 1680 Vine Street, Los Angeles, CA 90028; 2) 1645 North Vine
Street, Los Angeles, CA 90028; 3) 430 West Erie Street, Suites 101 and
200, Chicago, IL 60610; 4) 114 West 26th Street, Suite 700, New York, NY
10001; 5) 1025 Sansome Street, San Francisco, CA 94111; and 6) 812
Mariposa Street, Burbank, CA 91505; and
(b) prior to any personal property of the Borrower or any Subsidiary having
a value of $100,000 or greater being moved to, or located at, any
premises not owned in fee by the Borrower or such Subsidiary, a Landlord
Consent with respect to such premises.
For purposes of this Section 5.15, "Best Efforts" shall mean that the
Borrower has (i) made written request to the relevant landlord for
execution of a Landlord Consent (with copies of such request to be
concurrently delivered to the Agent) and (ii) if requested by the Agent,
has afforded the Agent and/or its counsel an opportunity to speak with
representatives of such landlord regarding any objections to such
Landlord Consent.
(c) The Borrower represents and warrants to the Agent and the Lenders that,
as of the Restatement Date, the book value of the personal property of
the Borrower and the Subsidiaries located at the premises referred to in
Section 5.15(a) is respectively as set forth on Schedule 5.15 attached
hereto.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that from and after the Restatement Date, so
long as any Note remains outstanding and unpaid or any other amount is owing to
any Lender or the Agent hereunder:
6.1 FINANCIAL CONDITION COVENANTS. The Borrower shall not violate any of the
following covenants (compliance with which shall be measured for the Borrower on
a consolidated basis):
(a) Maximum Funded Debt to EBITDA. As of the last day of any month,
commencing with the month ending March 31, 2002, permit the ratio of
Funded Debt to EBITDA, calculated on a cumulative 12-month rolling basis
for such month and the eleven immediately preceding months, to exceed
the following levels for the months indicated:
Month Ending Ratio
------------ -----
March 31, April 30 and May 31, 2002 4.44
June 30, July 31 and August 31, 2002 3.40
September 30, October 31 and November 30, 2002 2.95
December 31, 2002, January 31, 2003
and February 28, 2003 2.73
March 31, April 30 and May 31, 2003 2.26
June 30, July 31 and August 31, 2003 1.98
September 30, October 31 and November 30, 2003 1.77
December 31, 2003, January 31, 2004
and February 28, 2004 1.51
March 31, April 30 and May 31, 2004 1.32
June 30, July 31 and August 31, 2004 1.16
September 30, 2004 and thereafter 1.01
(b) Fixed Charge Ratio. As of the last day of any month, commencing with the
month ending March 31, 2002, permit the Fixed Charge Ratio, calculated
on a cumulative 12-month rolling basis for such month and the eleven
immediately preceding months, to be less than the following levels for
the months indicated:
Month Ending Ratio
------------ -----
March 31, April 30 and May 31, 2002 1.07
June 30, July 31 and August 31, 2002 1.12
September 30, October 31 and November 30, 2002 1.05
December 31, 2002, January 31, 2003
and February 28, 2003 0.88
March 31, April 30 and May 31, 2003 0.90
June 30, July 31 and August 31, 2003 0.86
September 30, October 31 and November 30, 2003 0.85
December 31, 2003, January 31, 2004
and February 28, 2004 0.89
March 31, April 30 and May 31, 2004 0.92
June 30, July 31 and August 31, 2004 0.92
September 30, 2004 and thereafter 0.93
(c) Liquidity Ratio. As of the last day of any month, commencing with the
month ending March 31, 2002, permit the ratio of (i) the sum of (A) Cash
on such date plus (B) 80% of Eligible Accounts Receivable as of such
date to (ii) the outstanding Obligations on such date, to be less than:
(x) for the period from the Closing Date to and including July 31, 2002,
0.34:1.00 and (y) thereafter, 0.39:1.00.
6.2 LIMITATION ON INDEBTEDNESS. The Borrower shall not create, incur, assume or
suffer to exist any Indebtedness, and shall not permit any of its Subsidiaries
to create, incur, assume or suffer to exist any Indebtedness, except for:
(a) Indebtedness created hereunder and under the Notes and the other Loan
Documents;
(b) Indebtedness (i) evidenced by performance bonds issued in the ordinary
course of business or reimbursement obligations in respect thereof, (ii)
evidenced by a letter of credit facility related to insurance associated
with claims for work-related injuries or (iii) for bank overdrafts
incurred in the ordinary course of business that are promptly repaid, in
an aggregate amount (under clauses (i), (ii) and (iii)) not to exceed
$100,000 at any one time outstanding;
(c) Indebtedness secured by Liens permitted by Section 6.3(g);
(d) Capitalized Lease Obligations in an aggregate principal amount not
exceeding the following amounts for the periods indicated: (i) from the
Closing Date to and including December 31, 2002, not more than $844,000
outstanding, (ii) from January 1, 2003 to and including December 31,
2003, not more than $1,381,000 outstanding and (iii) thereafter, not
more than $1,696,000 outstanding;
(e) Indebtedness of Wholly Owned Subsidiaries of the Borrower to the
Borrower or to other Wholly Owned Subsidiaries of the Borrower; and
(f) Guarantee Obligations of the Borrower incurred in the ordinary course of
business in respect of Indebtedness of any Subsidiary; provided that
such Indebtedness is otherwise permitted by this Section 6.2.
6.3 LIMITATION ON LIENS. The Borrower shall not, and shall not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien upon any of
its property, assets or revenues, whether now owned or hereafter acquired,
except for:
(a) Liens created hereunder or under any of the other Loan Documents;
(b) Liens for taxes not yet due or which are being contested in good faith
by appropriate proceedings, provided that adequate reserves with respect
thereto are maintained on the books of the Borrower or its Subsidiaries,
as the case may be, in conformity with GAAP;
(c) Liens created by operation of law not securing the payment of
Indebtedness for money borrowed or guaranteed, including carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which are not overdue
for a period of more than 30 days or which are being contested in good
faith by appropriate proceedings;
(d) pledges or deposits in connection with workers' compensation,
unemployment insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade contracts (other than
for borrowed money), leases, statutory obligations, surety and appeal
bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business;
(f) easements, rights-of-way, restrictions and other similar encumbrances
incurred in the ordinary course of business which, in the aggregate,
would not cause a Material Adverse Effect;
(g) Liens securing Capitalized Lease Obligations with respect to equipment
used by the Borrower or its Subsidiaries in the ordinary course of its
business; provided that any such Lien attaches solely to the equipment
financed by such Capitalized Lease Obligation; and
(h) Liens existing on the date hereof and referred to in Schedule 6.3 (and
not referred to in any other clause of this Section 6.3).
6.4 LIMITATION ON FUNDAMENTAL CHANGES. The Borrower shall not, and shall not
permit any of its Subsidiaries to, (i) enter into any merger, consolidation or
amalgamation, or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution), or (ii) convey, sell, lease, assign, transfer or
otherwise dispose of all or substantially all of its property, business or
assets, or (iii) acquire any business or Property from, or capital stock of, or
be a party to any acquisition of, any Person except that, so long as no Default
has occurred and is continuing or would result therefrom:
(a) any Subsidiary of the Borrower may be merged or consolidated with or
into: (i) the Borrower, if the Borrower shall be the continuing or
surviving corporation or (ii) any other Subsidiary; provided that if any
such transaction shall be between a Subsidiary and a Wholly Owned
Subsidiary, the Wholly Owned Subsidiary shall be the continuing or
surviving corporation; and
(b) any Subsidiary may sell, lease, transfer or otherwise dispose of any or
all of its Property (upon voluntary liquidation or otherwise) to the
Borrower or a Wholly Owned Subsidiary of the Borrower.
6.5 LIMITATION ON SALE OF ASSETS. The Borrower will not, nor will it permit any
of its Subsidiaries to, make any Asset Disposition except Asset Dispositions of
obsolete or worn-out Property, tools or equipment no longer used or useful in
its business so long as the aggregate amount thereof sold in any single fiscal
year by the Borrower and its Subsidiaries shall not have a fair market value in
excess of $250,000; provided that in each case, no Default has occurred and is
continuing or would result from such Asset Disposition.
6.6 LIMITATION ON DIVIDENDS. The Borrower shall not, and shall not permit any of
its Subsidiaries to (a) if a corporation, declare or pay any dividend (other
than dividends payable solely in common stock of the Borrower or its
Subsidiaries) on, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, defeasance,
retirement or other acquisition of, any shares of any class of Capital Stock of
the Borrower or its Subsidiaries or any warrants or options to purchase any such
Capital Stock, whether now or hereafter outstanding, and (b) if a partnership or
a limited liability company, make any distribution with respect to the ownership
interests therein, or, in either case, make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in
obligations of the Borrower or any Subsidiary (such declarations, payments,
setting apart, purchases, redemptions, defeasance, retirements, acquisitions and
distributions being herein called "Restricted Payments"), except that any
Subsidiary may make Restricted Payments to the Borrower or to any other Wholly
Owned Subsidiary of the Borrower; provided that in each case no Default has
occurred and is continuing or would result from the making of such Restricted
Payment. Notwithstanding any provision herein to the contrary, neither the
Borrower nor any Subsidiary shall repurchase any of its Capital Stock without
the prior written approval of each Lender.
6.7 LIMITATION ON INVESTMENTS, LOANS AND ADVANCES. The Borrower will not, and
will not permit any of its Subsidiaries to, make any advance, loan, extension of
credit or capital contribution to, or purchase any stock, bonds, notes,
debentures or other securities of or any assets constituting a business unit of,
or make any other investment in (any of the foregoing, an "Investment"), any
Person, except for:
(a) investments in marketable securities, liquid investments and other
financial instruments that are acquired for investment purposes and may
be readily sold or otherwise liquidated, that have a value which may be
readily established and which are investment grade;
(b) operating deposit accounts with banks;
(c) investments by the Borrower and its Subsidiaries in the Borrower and its
Subsidiaries;
(d) extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the
ordinary course of business; and
(e) that certain loan to R. Luke Stefanko (the "Employee Loan") in the
principal amount outstanding on the Restatement Date of $900,000, as
such amount may be reduced (but not increased) from time to time.
6.8 TRANSACTIONS WITH AFFILIATES. The Borrower shall not, and shall not permit
any of its Subsidiaries to, enter into any transaction, including, without
limitation, any purchase, sale, lease or exchange of property, employee
compensation arrangements, or the rendering of any service, with any Affiliate
or any Subsidiary not a Wholly Owned Subsidiary unless such transaction is in
the ordinary course of the Borrower's or such Subsidiary's business and is upon
terms no less favorable to the Borrower or such Subsidiary, as the case may be,
than it would obtain in a comparable arm's length transaction with a Person not
an Affiliate; provided that, if any such transaction has a value in excess of
$100,000 the Majority Lenders shall have consented thereto; and provided,
further, that none of (i) the Employee Loan, (ii) the Borrower's employment
arrangements with its senior officers or (iii) the Borrower's arrangements with
Holthouse Carlin & Van Trigt (with which Greg Hutchins, a director of the
Borrower, is associated) regarding preparation of the Borrower's taxes shall be
prohibited by this Section 6.8.
6.9 FISCAL YEAR. Borrower shall not permit its fiscal year or the fiscal year of
any of its Subsidiaries to end on a day other than December 31.
6.10 SALE-LEASEBACK TRANSACTIONS. The Borrower shall not, and shall not permit
any of its Subsidiaries to, sell, assign or otherwise transfer any of its
Properties, rights or assets (whether now owned or hereafter acquired) to any
Person and thereafter directly or indirectly lease back the same or similar
property.
6.11 LINES OF BUSINESS. The Borrower will not, nor will it permit any of its
Subsidiaries to, engage to any substantial extent in any line or lines of
business activity other than the business of video duplication, post-production,
audio sweetening, the distribution of national television spot advertising,
trailers and electronic press kits for the motion picture and television
industries, and the ownership and rental of limited amounts of niche programming
and media buying.
6.12 CERTAIN ACCOUNTING CHANGES. The Borrower shall not change any accounting
methodology or policy with respect to the calculation of the value of its
Operating Machinery and Equipment without the prior written consent of the
Majority Lenders.
SECTION 7. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing:
(a) The Borrower shall default in the payment when due (whether at stated
maturity or upon mandatory or optional prepayment or otherwise) of any
principal of or interest on any Loan, any fee or any other amount
payable by it hereunder or under any other Loan Document; or
(b) Any representation or warranty made or deemed made by any Obligor herein
or in any other Loan Document or which is contained in any certificate,
document or financial or other statement furnished at any time under or
in connection with this Agreement or any other Loan Document shall prove
to have been incorrect in any material respect when made or deemed made;
or
(c) The Borrower shall default in the observance or performance of any
agreement contained in Section 4.2, 5.4(ii), 5.9, 5.10(a), 5.11, 5.12,
5.13, 5.14 or 5.15, or any provision of Section 6; or
(d) Any Obligor shall default in the observance or performance of any other
agreement or obligation contained in this Agreement or the other Loan
Documents (other than as provided in paragraphs (a) through (c) of this
Section), and such default shall continue unremedied for a period of 30
days after notice thereof from the Agent to the Borrower; or
(e) Any Guarantee shall cease, for any reason, to be in full force and
effect; or
(f) The Borrower or any other Obligor shall default in the payment when due
of principal of or interest on any Indebtedness (other than the Notes)
issued under the same indenture or other agreement, if the original
principal amount of Indebtedness covered by such indenture or agreement
is $100,000 or more; or any event specified in any note, agreement,
indenture or other document evidencing or relating to any such
Indebtedness shall occur if the effect of such event is to cause, or
(with the giving of any notice or the lapse of time or both) to permit
the holder or holders of such Indebtedness (or a trustee or agent on
behalf of such holder or holders) to cause, such Indebtedness to become
due, or to be prepaid in full (whether by redemption, purchase, offer to
purchase or otherwise), prior to its stated maturity; or
(g) (i) The Borrower or any other Obligor shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment,
winding-up, liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any other Obligor
shall make a general assignment for the benefit of its creditors; or
(ii) there shall be commenced against the Borrower or any other Obligor
any case, proceeding or other action of a nature referred to in clause
(i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed,
undischarged, unstayed or unbonded for a period of 60 days; or (iii)
there shall be commenced against the Borrower or any other Obligor any
case, proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of an order
for any such relief which shall not have been vacated, discharged,
stayed or bonded pending appeal within 60 days from the entry thereof;
or (iv) the Borrower or any other Obligor shall take any action in
furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clause (i), (ii), or (iii)
above; or (v) the Borrower or any other Obligor shall generally not, or
shall be unable to, or shall admit in writing its inability to, pay its
debts as they become due or there shall be a general assignment for the
benefit of creditors; or
(h) (i) The Borrower or any Commonly Controlled Entity shall engage in any
non-exempt "prohibited transaction" (as defined in Section 406 of ERISA
or Section 4975 of the Code) involving any Plan, (ii) any "accumulated
funding deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan, (iii) a Reportable Event
shall occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer or to
terminate any Single Employer Plan, which Reportable Event or
commencement of proceedings or appointment of a trustee would reasonably
be expected to result in the termination of such Plan for purposes of
Title IV of ERISA, (iv) any Single Employer Plan shall terminate for
purposes of Title IV of ERISA (other than a standard termination) or (v)
the Borrower or any Commonly Controlled Entity would reasonably be
expected to incur any liability in connection with a withdrawal from, or
the Insolvency or Reorganization of, a Multiemployer Plan; and in each
case regarding clauses (i) through (v) above, such event or condition,
together with all other such events or conditions, if any, would
reasonably be expected to result in a Material Adverse Effect; or
(i) One or more judgments or decrees shall be entered against the Borrower
or any Subsidiary involving in the aggregate a liability (not paid or
fully covered by insurance where the insurer has admitted liability in
respect of such judgment) of $250,000 or more, or involving in the
aggregate a liability (regardless of insurance coverage) of $500,000 or
more, and all such judgments or decrees shall not have been vacated,
discharged, stayed or bonded pending appeal within 30 days from the
entry thereof or in any event five days before the date of any sale
pursuant to such judgment or decree; or
(j) The Liens created by the Collateral Documents and/or the Guarantor
Collateral Documents shall at any time not constitute valid and
perfected Liens on the collateral intended to be covered thereby in
favor of the Agent, free and clear of all other Liens (other than Liens
permitted under Section 6.3), or, except for expiration in accordance
with its terms, any of the Collateral Documents and/or the Guarantor
Collateral Documents shall for whatever reason be terminated or cease to
be in full force and effect, or the enforceability thereof shall be
contested by any Obligor; or
(k) (i) R. Luke Stefanko, or another officer of the Borrower as of the
Restatement Date, shall cease to be the Chief Executive Officer of the
Borrower, (ii) R. Luke Stefanko shall cease to beneficially own Capital
Stock representing at least 14% of the votes that may be cast in an
election of directors of the Borrower, or (iii) individuals who
constituted the Borrower's Board of Directors as of the Restatement Date
shall cease for any reason to constitute a majority of the directors
then in office;
then, and in any such event, (A) if such event is an Event of Default specified
in paragraph (g) above, automatically the Loans made to the Borrower hereunder
(with accrued interest thereon) and all other Obligations shall immediately
become due and payable, and (B) if such event is any other Event of Default,
with the consent of the Majority Lenders, the Agent may, or upon the request of
the Majority Lenders, the Agent shall, by notice of default to the Borrower,
declare the Loans (with accrued interest thereon) and all other Obligations
under this Agreement and the Notes to be due and payable forthwith, whereupon
the same shall immediately become due and payable. In all cases, with the
consent of the Majority Lenders, the Agent may enforce any or all of the Liens
and security interests and other rights and remedies created pursuant to any
Loan Document or available at law or in equity. Except as expressly provided
above in this Section, presentment, demand, protest and all other notices of any
kind are hereby expressly waived by the Borrower.
SECTION 8. THE AGENT
8.1 APPOINTMENT. Each Lender hereby irrevocably designates and appoints Union
Bank of California, N.A., as Agent for such Lender under this Agreement and the
other Loan Documents, and each such Lender irrevocably authorizes Union Bank of
California, N.A., as the Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and the other Loan Documents and
to exercise such powers and perform such duties as are expressly delegated to
the Agent by the terms of this Agreement and the other Loan Documents, together
with such other powers as are reasonably incidental thereto. Notwithstanding any
provision to the contrary elsewhere in this Agreement, the Agent shall have no
duties or responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into this
Agreement or any other Loan Document or otherwise exist against the Agent.
8.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under this
Agreement and the other Loan Documents by or through agents or attorneys-in-fact
and shall be entitled to advice of counsel concerning all matters pertaining to
such duties. The Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care.
8.3 EXCULPATORY PROVISIONS. Neither the Agent, nor any of the Agent's officers,
directors, employees, agents, attorneys-in-fact or Affiliates shall be (i)
liable for any action lawfully taken or omitted to be taken by it or such Person
under or in connection with this Agreement or any other Loan Document (except
for its or such Person's own gross negligence or willful misconduct) or (ii)
responsible in any manner to any of the Lenders for any recitals, statements,
representations or warranties made by the Borrower, any Subsidiary or any other
Obligor or any officer thereof contained in this Agreement or any other Loan
Document or in any certificate, report, statement or other document referred to
or provided for in, or received by the Agent under or in connection with, this
Agreement or any other Loan Document or for the value, validity, effectiveness,
genuineness, enforceability or sufficiency of this Agreement or the Notes or any
other Loan Document or for any failure of the Borrower, any Subsidiary or any
other Obligor to perform its obligations hereunder or thereunder. The Agent
shall not be under any obligation to any Lender to ascertain or to inquire as to
the observance or performance of any of the agreements contained in, or
conditions of, this Agreement or any other Loan Document, or to inspect the
properties, books or records of the Borrower, any Subsidiary or any other
Obligor.
8.4 RELIANCE BY THE AGENT. The Agent shall be entitled to rely, and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Borrower), the Accountants and independent
accountants and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Agent. The Agent shall be fully justified in failing or refusing
to take any action under this Agreement or any other Loan Document unless it
shall first receive such advice or concurrence of the Majority Lenders or all
Lenders, as it deems appropriate, or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense (except
those incurred solely as a result of the Agent's gross negligence or willful
misconduct) which may be incurred by it by reason of taking or continuing to
take any such action. The Agent shall in all cases be fully protected in acting,
or in refraining from acting, under this Agreement and the Notes and the other
Loan Documents in accordance with a request of the Majority Lenders or all
Lenders, as may be required, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Lenders and all future
holders of the Notes.
8.5 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge or notice
of the occurrence of any Default hereunder unless the Agent has received notice
from a Lender or the Borrower referring to this Agreement, describing such
Default and stating that such notice is a "notice of default". In the event that
the Agent receives such a notice, the Agent shall give notice thereof to the
Lenders. The Agent shall take such action with respect to such Default as shall
be reasonably directed by the Majority Lenders or all Lenders as appropriate;
provided that unless and until the Agent shall have received such directions,
the Agent may (but shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default as it shall deem advisable in
the best interests of the Lenders or as the Agent shall believe necessary to
protect the Lenders' interests in the Collateral or the Guarantor Collateral.
8.6 NON-RELIANCE ON THE AGENT AND OTHER LENDERS. Each Lender expressly
acknowledges that neither the Agent, nor any of the Agent's officers, directors,
partners, employees, agents, attorneys-in-fact or Affiliates has made any
representations or warranties to it and that no act by the Agent hereafter
taken, including any review of the affairs of the Borrower, any Subsidiary or
any other Obligor, shall be deemed to constitute any representation or warranty
by the Agent to any Lender. Each Lender represents to the Agent that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
appraisal of and investigation into the business, operations, property,
financial and other condition and creditworthiness of the Borrower, any
Subsidiary and the other Obligors and made its own decision to make its Loans
hereunder and enter into this Agreement. Each Lender also represents that it
will, independently and without reliance upon the Agent or any other Lender, and
based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit analysis, appraisals and decisions in
taking or not taking action under this Agreement and the other Loan Documents,
and to make such investigation as it deems necessary to inform itself as to the
business, operations, property, financial and other condition and
creditworthiness of the Borrower, its Subsidiaries and the other Obligors.
Except for notices, reports and other documents expressly required to be
furnished to the Lenders by the Agent hereunder, the Agent shall have no duty or
responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, condition (financial or
otherwise), prospects or creditworthiness of the Borrower, any Subsidiary or any
other Obligor which may come into the possession of the Agent or any of its
officers, directors, employees, agents, attorneys-in-fact or Affiliates.
8.7 INDEMNIFICATION. The Lenders agree to indemnify the Agent in its capacity as
such (to the extent not reimbursed by the Borrower, its Subsidiaries or the
other Obligors and without limiting the obligation of such Persons to do so),
ratably according to the respective amounts of their Loan Percentages, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs (including, without limitation, the allocated
cost of internal counsel), expenses or disbursements of any kind whatsoever
which may at any time (including, without limitation, at any time following the
payment of the Notes) be imposed on, incurred by or asserted against the Agent,
in its capacity as Agent, but not as a Lender hereunder, in any way relating to
or arising out of this Agreement, any of the other Loan Documents or any
documents contemplated by or referred to herein or therein or the transactions
contemplated hereby or thereby or any action taken or omitted by the Agent under
or in connection with any of the foregoing; provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
to the extent they arise from the gross negligence or willful misconduct of the
party to be indemnified. The agreements in this Section shall survive the
payment of the Notes and all other amounts payable hereunder.
8.8 THE AGENT IN ITS INDIVIDUAL CAPACITY. The Agent and its Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
the Borrower, any Subsidiary and the other Obligors as though the Agent were not
the Agent hereunder and under the other Loan Documents. The Loans made or
renewed by the Agent, and any Note issued to the Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any
Lender and the Agent may exercise the same as though it were not the Agent, and
the terms "Lender" and "Lenders" shall include the Agent in its individual
capacity.
8.9 SUCCESSOR AGENT. The Agent may resign as Agent upon 30 days' notice to the
Lenders. If the Agent shall resign as Agent under this Agreement and the other
Loan Documents, then the Majority Lenders shall appoint from among the Lenders a
successor agent for the Lenders, which successor agent (so long as no Default
has occurred and is continuing) shall be approved by the Borrower (which consent
shall not be unreasonably withheld), whereupon such successor agent shall
succeed to the rights, powers and duties of the Agent and the term "Agent" shall
mean such successor agent, effective upon its appointment, and the former
Agent's rights, powers and duties as Agent shall be terminated, without any
other or further act or deed on the part of such former Agent or any of the
parties to this Agreement or any holders of the Notes. After any retiring
Agent's resignation as Agent, the provisions of this Section shall inure to its
benefit as to any actions taken or omitted to be taken by it while it was Agent
under this Agreement and the other Loan Documents. Further, if the Agent no
longer has any Loans hereunder, the Agent shall immediately resign and shall be
replaced, and have the benefits, as set forth in this Section 8.9.
8.10 COLLATERAL DOCUMENTS. Anything contained in any of the Loan Documents to
the contrary notwithstanding, the Borrower, the Agent and each Lender hereby
agree that (a) no Lender shall have any right individually to realize upon any
of the Collateral or Guarantor Collateral under any Loan Document or to enforce
any Guarantee, it being understood and agreed that all powers, rights and
remedies under the Collateral Documents and Guarantor Collateral Documents and
the Guarantees may be exercised solely by the Agent for the benefit of the
Lenders in accordance with the terms thereof, and (b) in the event of a
foreclosure by the Agent on any of the Collateral or Guarantor Collateral
pursuant to a public or private sale, the Agent or any Lender may be the
purchaser of any or all of such Collateral or Guarantor Collateral at any such
sale and the Agent, as agent for and representative of the Lenders (but not any
Lender or Lenders in its or their respective individual capacities unless the
Majority Lenders shall otherwise agree in writing) shall be entitled, for the
purpose of bidding and making settlement or payment of the purchase price for
all or any portion of the Collateral or Guarantor Collateral sold at any such
public sale, to use and apply any of the Obligations as a credit on account of
the purchase price for any such collateral payable by the Agent at such sale.
SECTION 9. MISCELLANEOUS
9.1 AMENDMENTS AND WAIVERS. Except as otherwise expressly provided in this
Agreement, any provision of the Loan Documents may be modified or supplemented
only by an instrument in writing signed by the Borrower, the Agent and the
Majority Lenders, or by the Borrower and the Agent acting with the consent of
the Majority Lenders, and any provision of any Loan Document may be waived by
the Majority Lenders or by the Agent acting with the consent of the Majority
Lenders; provided, however, that no such waiver and no such amendment,
supplement or modification shall (i) (a) reduce the amount or extend the
maturity of any Note or any installment due thereon, or reduce the rate or
extend the time of payment of interest thereon, or reduce the amount or extend
the time of payment of any fee, indemnity or reimbursement payable to any Lender
hereunder, or amend, modify or waive any provision of Section 2.5, without the
written consent of the Lender affected thereby; or (b) amend, modify or waive
any provision of this Section 9.1 or reduce the percentage specified in or
otherwise modify the definition of Majority Lenders, or consent to the
assignment or transfer by any Obligor of any of its rights and obligations under
this Agreement and the other Loan Documents (except as permitted under Section
6.4); or (c) release any Obligor from any liability under its respective Loan
Documents; or (d) release any material portion of the Collateral or any material
portion of the Guarantor Collateral, except for any Asset Disposition or release
of Lien permitted by this Agreement or any other Loan Document; or (e) amend,
modify or waive, directly or indirectly, any of the provisions of Section 2.6;
or (f) amend, modify or waive any provision of this Agreement requiring the
consent or approval of all Lenders, in each case set forth in clauses (i)(b)
through (i)(f) above without the written consent of all the Lenders; or (ii)
amend, modify or waive any provision of Section 8 without the written consent of
the Agent. Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Borrower, the other Obligors, the Lenders, the Agent and all future holders of
the Notes. In the case of any waiver, the Borrower, the other Obligors, the
Lenders, and the Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes and any other Loan Documents, and any
Default waived shall be deemed to be cured and not continuing; but no such
waiver shall extend to any subsequent or other Default, or impair any right
consequent thereon.
9.2 NOTICES. All notices, requests and demands or other communications to or
upon the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand, or 3 days
after being deposited in the United States mail, certified and postage prepaid
and return receipt requested, or, in the case of telecopy notice, when received,
in each case addressed as follows in the case of the Borrower and the Agent, and
as set forth on the signature pages hereto, or in the Assignment and Acceptance
pursuant to which a Person becomes a party hereto, in the case of the Lenders,
or to such other address as may be hereafter notified by the respective parties
hereto and any future holders of the Notes:
The Borrower: Point.360
7083 Hollywood Boulevard
Hollywood, California 90028
Attention: Alan Steel
Telecopy: (323) 957-2297
The Agent: Union Bank of California, N.A
445 South Figueroa Street, 4th Floor
Los Angeles, California 90071-1100
Attention: Christopher Zumberge
Telecopy: (213) 236-7406
provided that any notice, request or demand to or upon the Agent or the Lenders
pursuant to Section 2.3 or 2.4 shall not be effective until received.
9.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise and no delay in
exercising, on the part of the Agent or any Lender, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges herein provided
are cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
9.4 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement and the Notes.
9.5 PAYMENT OF EXPENSES AND TAXES. The Borrower agrees (a) to pay or reimburse
the Agent and each Lender for all its reasonable costs and out-of-pocket
expenses (including travel and other expenses incurred by it or its agents in
connection with performing due diligence with regard hereto) incurred in
connection with the development, preparation and execution of, and any
amendment, supplement or modification to, this Agreement and the other Loan
Documents and any other documents prepared in connection herewith or therewith,
and the consummation and administration of the transactions contemplated hereby
and thereby, including, without limitation, syndication efforts (whether
completed before or after the Restatement Date) in connection with this
Agreement and the reasonable fees and disbursements of counsel to the Agent, (b)
after the occurrence and during the continuance of a Default, to pay or
reimburse the Agent and each Lender for all its reasonable costs and
out-of-pocket expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Notes, the other Loan
Documents and any such other documents or in connection with any refinancing or
restructuring of the credit arrangements provided under this Agreement in the
nature of a "work-out" or of any insolvency or bankruptcy proceeding, including,
without limitation, reasonable legal fees and disbursements of counsel to the
Agent and each Lender (including the allocated costs of internal counsel to the
Agent and the Lenders which costs are not in duplication of any costs of outside
counsel to the Agent and each Lender), (c) to pay, and indemnify and hold
harmless each Lender and the Agent from any and all recording and filing fees
and any and all liabilities with respect to, or resulting from any delay in
paying, stamp, excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and delivery of, or
consummation or administration of any of the transactions contemplated by, or
any amendment, supplement or modification of, or any waiver or consent under or
in respect of, this Agreement, the Notes, the other Loan Documents and any such
other documents and (d) to pay, and indemnify and hold harmless each Lender and
the Agent and the officers, partners, directors, employees, agents and
affiliates of the Agent or any Lender (collectively "Indemnitees") from and
against, any and all Indemnified Liabilities, provided that the Borrower shall
have no obligation hereunder to the Agent or any Lender with respect to
Indemnified Liabilities arising from the gross negligence or willful misconduct
of the Agent or any Lender. As used herein, "Indemnified Liabilities" means,
collectively, any and all liabilities, obligations, losses, damages (including
natural resource damages), penalties, actions, judgments, suits, claims
(including environmental claims), costs (including the costs of any
investigation, study, sampling, testing, abatement, cleanup, removal,
remediation or other response action necessary to remove, remediate, clean up or
abate any activities relating to Hazardous Materials), expenses and
disbursements of any kind or nature whatsoever (including the reasonable fees
and disbursements of counsel for Indemnitees in connection with any
investigative, administrative or judicial proceeding commenced or threatened by
any Person, whether or not any such Indemnitee shall be designated as a party or
a potential party thereto, and any fees or expenses incurred by Indemnitees in
enforcing this indemnity), whether direct, indirect or consequential and whether
based on any federal, state or foreign laws, statutes, rules or regulations
(including securities and commercial laws, statutes, rules or regulations and
environmental laws), on common law or equitable cause or on contract or
otherwise, that may be imposed on, incurred by, or asserted against any such
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents or the transactions contemplated hereby or thereby
(including Lenders' making of the Loans under the Existing Credit Agreement,
agreement to maintain the Loans hereunder, or the use of the proceeds thereof,
or any enforcement of any of the Loan Documents (including any sale of,
collection from, or other realization upon any of the Collateral or the
Guarantor Collateral or the enforcement of the Guarantees)). (To the extent that
the undertakings to defend, indemnify, pay and hold harmless set forth in this
Section 9.5 may be unenforceable in whole or in part because they are violative
of any law or public policy, the Borrower shall contribute the maximum portion
that it is permitted to pay and satisfy under applicable law to the payment and
satisfaction of all Indemnified Liabilities incurred by Indemnitees or any of
them.) The agreements in this Section shall survive repayment of the Notes and
all other amounts payable hereunder.
9.6 SUCCESSORS AND ASSIGNS; PARTICIPATIONS; PURCHASING LENDERS.
(a) This Agreement shall be binding upon and inure to the benefit of the
Borrower, the Lenders, the Agent, all future holders of the Notes and
their respective successors and assigns, except that the Borrower may
not assign, transfer or delegate any of its rights or obligations under
this Agreement without the prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking or
finance business and in accordance with applicable law, at any time sell
to one or more banks or other entities ("Participants") participating
interests in any Loan owing to such Lender, any Note held by such
Lender, or any other interest of such Lender hereunder and under the
other Loan Documents; provided that the holder of any such
participation, other than an Affiliate of such Lender, shall not be
entitled to require such Lender to take or omit to take any action
hereunder except action directly affecting the extension of the maturity
of any portion of the principal amount of a Loan, or any portion of
interest or fees related thereto allocated to such participation or a
reduction of the principal amount or principal payment amount of or the
rate of interest payable on the Loans or any fees related thereto, or a
release of any Obligor or any substantial portion of the Collateral or
the Guarantor Collateral or any increase in participation amounts. In
the event of any such sale by a Lender of participating interests to a
Participant, such Lender's obligations under this Agreement to the other
parties to this Agreement shall remain unchanged, such Lender shall
remain solely responsible for the performance thereof, such Lender shall
remain the holder of any such Note for all purposes under this Agreement
and the other Loan Documents, and the Borrower and the Agent shall
continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement and the other
Loan Documents. The Borrower agrees that if amounts outstanding under
this Agreement and the Notes are due or unpaid, or shall have been
declared or shall have become due and payable upon the occurrence of an
Event of Default, each Participant shall be deemed to have the right of
setoff in respect of its participating interest in amounts owing under
this Agreement and any Note to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under this
Agreement or any Note, provided that such Participant shall only be
entitled to such right of setoff if it shall have agreed in the
agreement pursuant to which it shall have acquired its participating
interest to share with the Lenders the proceeds thereof as provided in
Section 9.7. The Borrower also agrees that each Participant shall be
entitled to the benefits of Sections 2.8 and 2.9 with respect to its
participation in the Loans outstanding from time to time; provided that
no Participant shall be entitled to receive any greater amount pursuant
to such Sections than the transferor Lender would have been entitled to
receive in respect of the amount of the participation transferred by
such transferor Lender to such Participant had no such transfer
occurred.
(c) Any Lender may, in the ordinary course of its commercial banking
business and in accordance with applicable law, at any time sell to any
of its Affiliates or to any Lender, any Affiliate thereof or to one or
more additional banks or other entities, which additional banks or other
entities shall be subject to the consent of the Agent (which consent
will not be unreasonably withheld) ("Purchasing Lenders") all or any
part of its rights and obligations under this Agreement, the Notes and
the other Loan Documents pursuant to an Assignment and Acceptance
executed by such Purchasing Lender and such transferor Lender and
delivered to the Agent for its acceptance and recording in the Register
(as defined in (d) below), provided that any such sale must result in
the Purchasing Lender having at least $5,000,000 in aggregate amount of
obligations under this Agreement, the Notes and the other Loan
Documents. Upon such execution, delivery, acceptance and recording, from
and after the transfer effective date determined pursuant to such
Assignment and Acceptance, (x) the Purchasing Lender thereunder shall be
a party hereto and, to the extent provided in such Assignment and
Acceptance, have the rights and obligations of a Lender hereunder having
outstanding Loans as set forth therein, and (y) the transferor Lender
thereunder shall, to the extent of such assigned portion and as provided
in such Assignment and Acceptance, be released from its obligations
under this Agreement and the other Loan Documents (and, in the case of
an Assignment and Acceptance covering all or the remaining portion of a
transferor Lender's rights and obligations under this Agreement, such
transferor Lender shall cease to be a party hereto). Such Assignment and
Acceptance shall be deemed to amend this Agreement to the extent, and
only to the extent, necessary to reflect the addition of such Purchasing
Lender and the resulting adjustment of Loan Percentages arising from the
purchase by such Purchasing Lender of all or a portion of the rights and
obligations of such transferor Lender under this Agreement, the Notes
and the other Loan Documents. On or prior to the transfer effective date
determined pursuant to such Assignment and Acceptance, the Borrower, at
its own expense, shall execute and deliver to the Agent in exchange for
the surrendered Note a new Note to the order of such Purchasing Lender
in an amount equal to the Loans assumed by it pursuant to such
Assignment and Acceptance, and if the transferor Lender has retained
Loans hereunder, a new Note to the order of the transferor Lender in an
amount equal to the Loans retained by it hereunder. Such new Notes shall
be dated the Restatement Date and shall otherwise be in the form of the
Notes replaced thereby. The Note surrendered by the transferor Lender
shall be returned by the Agent to the Borrower marked "canceled."
(d) The Agent shall maintain at its address referred to in Section 9.2 a
copy of each Assignment and Acceptance delivered to it and a register
(the "Register") for the recordation of the names and addresses of the
Lenders and the principal amount of the Loans owing to each Lender from
time to time. The entries in the Register shall be conclusive, in the
absence of manifest error, and the Borrower, the Agent and the Lenders
may treat each Person whose name is recorded in the Register as the
owner of the Loans recorded therein for all purposes of this Agreement.
The Register shall be available for inspection by the Borrower or any
Lender at any reasonable time and from time to time upon reasonable
prior notice.
(e) Upon its receipt of an Assignment and Acceptance executed in accordance
with the terms hereof, together with payment to the Agent by the
Purchasing Lender of a registration and processing fee of $3,500, the
Agent shall (i) promptly accept such Assignment and Acceptance and (ii)
on the effective date determined pursuant thereto record the information
contained therein in the Register.
(f) The Borrower authorizes each Lender to disclose to any Participant or
Purchasing Lender (each, a "Transferee") and any prospective Transferee
any and all information in such Lender's possession concerning the
Borrower, its Subsidiaries, and their Affiliates which has been
delivered to such Lender by or on behalf of the Borrower pursuant to
this Agreement or any other Loan Document or which has been delivered to
such Lender by or on behalf of the Borrower in connection with such
Lender's credit evaluation of the Borrower, its Subsidiaries, and their
Affiliates prior to becoming a party to this Agreement.
(g) Nothing herein shall prohibit any Lender from pledging or assigning any
of its rights under its Note to any Federal Reserve Bank in accordance
with applicable law.
9.7 ADJUSTMENTS; SET-OFF.
(a) If any Lender (a "Benefitted Lender") shall at any time receive any
payment of all or part of its Loans, or interest thereon, or fees, or
receive any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of the
nature referred to in Section 7(g), or otherwise), in a greater
proportion than any such payment to or collateral received by any other
Lender, if any, in respect of such other Lender's Loans, or interest
thereon, or fees, such Benefitted Lender shall purchase for cash from
the other Lenders such portion of each such other Lender's Loans, or
fees, or shall provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to cause such
Benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided,
however, that if all or any portion of such excess payment or benefits
is thereafter recovered from such Benefitted Lender, such purchase shall
be rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest. The Borrower agrees that
each Lender so purchasing a portion of another Lender's Loan may
exercise all rights of payment (including, without limitation, rights of
set-off) with respect to such portion as fully as if such Lender were
the direct holder of such portion.
(b) In addition to any rights and remedies of the Lenders provided by law,
with the prior consent of the Majority Lenders, each Lender shall have
the right, exercisable upon the occurrence and during the continuance of
an Event of Default and acceleration of the Obligations pursuant to
Section 7, without prior notice to the Borrower, any such notice being
expressly waived by the Borrower to the extent permitted by applicable
law, to set-off and appropriate and apply against any such Obligations
any and all deposits (general or special, time or demand, provisional or
final), in any currency, and any other credits, indebtedness or claims
in any currency, in each case whether direct or indirect, absolute or
contingent, matured or unmatured, at any time held or owing by such
Lender or any branch or agency thereof or bank controlling such Lender
to or for the credit or the account of the Borrower. Each Lender agrees
promptly to notify the Borrower after any such set-off and application
made by such Lender, provided that the failure to give such notice shall
not affect the validity of such set-off and application.
9.8 COUNTERPARTS. This Agreement may be executed by one or more of the parties
to this Agreement on any number of separate counterparts, and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument. Delivery by telecopier of an executed counterpart of a signature
page to this Agreement shall be effective as delivery of an originally executed
counterpart of this Agreement.
9.9 SEVERABILITY. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
9.10 INTEGRATION. This Agreement represents the entire agreement of the
Borrower, the Agent and the Lenders with respect to the subject matter hereof,
and there are no promises, undertakings, representations or warranties by the
Agent or any Lender relative to the subject matter hereof not expressly set
forth or referred to herein or in the other Loan Documents.
9.11 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.12 ACKNOWLEDGEMENTS. The Borrower hereby acknowledges that: (a) it has been
advised by counsel in the negotiation, execution and delivery of this Agreement
and the Notes and the other Loan Documents; (b) neither the Agent nor any Lender
has any fiduciary relationship to the Borrower solely by virtue of any of the
Loan Documents, and the relationship pursuant to the Loan Documents between the
Agent and the Lenders, on one hand, and the Borrower on the other hand, is
solely that of creditor and debtor; and (c) no joint venture exists among the
Lenders or among the Borrower, on one hand and the Lenders, on the other hand.
9.13 HEADINGS. Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
9.14 COPIES OF CERTIFICATES, ETC. Whenever the Borrower is required to deliver
notices, certificates, opinions, statements or other information hereunder to
the Agent for delivery to any Lender, it shall do so in such number of copies as
the Agent shall reasonably specify.
9.15 TREATMENT OF CERTAIN INFORMATION; CONFIDENTIALITY.
(a) The Borrower acknowledges that from time to time financial advisory,
investment banking and other services may be offered or provided to the
Borrower or one or more of its Subsidiaries (in connection with this
Agreement or otherwise) by any Lender, or by one or more Subsidiaries or
affiliates of such Lender and the Borrower hereby authorizes each Lender
to share any information delivered to such Lender by the Borrower and
its Subsidiaries pursuant to this Agreement, or in connection with the
decision of such Lender to enter into this Agreement, to any such
Subsidiary or affiliate, it being understood that any such Subsidiary or
affiliate receiving such information shall be bound by the provisions of
clause (b) below as if it were a Lender hereunder. Such authorization
shall survive the repayment of the Loans and the termination of this
Agreement.
(b) Each Lender and the Agent agrees (on behalf of itself and each of its
affiliates, directors, officers, employees and representatives) to use
reasonable precautions to keep confidential, in accordance with their
customary procedures for handling confidential information of the same
nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Borrower pursuant to this
Agreement that is identified by the Borrower as being confidential at
the time the same is delivered to the Lenders or the Agent, provided
that nothing herein shall limit the disclosure of any such information
(i) to the extent required by statute, rule, regulation or judicial
process, (ii) to counsel for any of the Lenders or the Agent, (iii) to
bank examiners or other regulatory authorities, auditors or accountants,
(iv) to the Agent or any other Lender, (v) in connection with any
litigation to which any one or more of the Lenders or the Agent is a
party, (vi) to a Subsidiary or affiliate of such Lender as provided in
clause (a) above or (vii) to any assignee or participant (or prospective
assignee or participant), and provided further that in no event shall
any Lender or the Agent be obligated or required to return any materials
furnished by the Borrower.
9.16 CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) Each party hereto hereby irrevocably and unconditionally
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement and the other Loan Documents
to which it is a party, or for recognition and enforcement of any
judgment in respect thereof, to the non-exclusive general
jurisdiction of the courts of the State of California, the courts of
the United States of America for the Central District of California,
and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court
or that such action or proceeding was brought in an inconvenient
forum and agrees not to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered
or certified mail (or any substantially similar form of mail),
postage prepaid, to any party at its address set forth in Section
9.2;
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(v) waives, to the maximum extent not prohibited by law, any right
it may have to claim or recover in any legal action or proceeding
referred to in this subsection any punitive damages.
(b) WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND THE LENDERS HEREBY
EXPRESSLY, INTENTIONALLY AND DELIBERATELY WAIVE TRIAL BY JURY IN ANY
LEGAL ACTION OR PROCEEDING, WHETHER BROUGHT IN STATE OR FEDERAL COURT,
RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT OR ANY OTHER
DOCUMENT EXECUTED IN CONNECTION HEREWITH AND FOR ANY COUNTERCLAIM
THEREIN SUCH WAIVER SHALL BE IRREVOCABLE AND UNCONDITIONAL.
9.17 WAIVERS. The Borrower acknowledges that the following Events of Default (as
defined in the Existing Agreement) have occurred and are continuing under the
Existing Agreement and, but for the waiver contemplated by this Section 9.17,
would constitute Events of Default hereunder:
(a) Section 2.1(a) of the Existing Agreement provides that the aggregate
principal amount of Loans outstanding shall not exceed the lesser of the
Aggregate Commitment or the Borrowing Base at any time (as such
capitalized terms are defined in the Existing Agreement). Section 2.5(d)
of the Credit Agreement provides that the Borrower shall prepay all
Loans that exceed the Aggregate Commitment or the Borrowing Base (as
such capitalized terms are defined in the Existing Agreement. At all
times from May 2001 through the Closing Date, the aggregate principal
amount of Loans (as defined in the Existing Agreement) outstanding
exceeded the Borrowing Base (as defined in the Existing Agreement), and
the Borrower failed to repay such overadvance in full. Such failure to
repay constituted an Event of Default under Section 7(a) of the Existing
Agreement.
(b) Section 6.1(c) of the Existing Agreement required the Borrower to
maintain a Net Worth (as defined in the Existing Agreement) of at least
$32,400,000 as of May 31, 2001. As of such date, the Borrower's Net
Worth (as defined therein) was $32,274,060. The Borrower's failure to
maintain the required Net Worth (as defined therein) as of May 31, 2001
is an Event of Default under Section 7(c) of the Existing Agreement.
At the Borrower's request, the Lenders agree to waive the foregoing Events of
Default (as defined in the Existing Agreement), as well as any other Default (as
defined in the Existing Agreement) which has occurred and is continuing under
the Existing Agreement, in each case through the Restatement Date and subject to
the terms and conditions set forth herein. The foregoing waivers are given in
this instance only. The foregoing waivers shall not be construed as waivers of
or consents to any violation of, or deviation from, any term or condition of
this Agreement or any other Loan Document, nor shall such waivers be construed
to evidence the willingness of the Agent or the Lenders to give any other or
additional waiver, whether in similar or different circumstances.
9.18 EFFECT OF AMENDMENT AND RESTATEMENT. This Agreement is intended to
completely amend, restate and replace the Existing Agreement, without novation.
The Borrower hereby acknowledges, certifies and agrees that the Borrower's
obligations to repay the Loans are not subject to any defense, counterclaim,
set-off, right of recoupment, abatement or other claim or determination.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BORROWER
POINT.360
By: /s/ Alan R. Steel
--------------------------------------
Name: Alan R. Steel
------------------------------------
Title: Executive Vice President
-----------------------------------
AGENT
UNION BANK OF CALIFORNIA, N.A.,
as Agent
By: /s/ Christopher D. Zumberge
--------------------------------------
Name: Christopher D. Zumberge
------------------------------------
Title: Vice President
-----------------------------------
LENDERS
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ Christopher D. Zumberge
---------------------------------------
Name: Christopher D. Zumberge
-------------------------------------
Title: Vice President
------------------------------------
Address for Notices
445 South Figueroa Street, 4th Floor
Los Angeles, California 90071-1100
Attention: Christopher Zumberge
Telephone: (213) 236-6406
Facsimile: (213) 236-6293
Applicable Lending Office
445 South Figueroa Street
Los Angeles, California 90071-1100
UNITED CALIFORNIA BANK,
as a Lender
By: /s/ D. Tom Herrman
---------------------------------------
Name: D. Tom Herrman
-------------------------------------
Title:
------------------------------------
Address for Notices
601 South Figueroa Street, W9-2
Los Angeles, California 90017
Attention: D. Tom Herrman
Telephone: (213) 896-7308
Facsimile: (213) 896-7387
Approved Lending Office
601 South Figueroa Street, W9-2
Los Angeles, California 90017
U.S. BANK NATIONAL ASSOCIATION,
as a Lender
By: /s/ David C. Larsen
---------------------------------------
Name: David C. Larsen
-------------------------------------
Title:
------------------------------------
Address for Notices
U.S. Bank Place -MPFP2516
601 Second Avenue South
Minneapolis, Minnesota 55402
Attention: David C. Larsen
Telephone: (612) 973-2129
Facsimile: (612) 973-2149
Approved Lending Office
601 Second Avenue South
Minneapolis, Minnesota 55402
SCHEDULE 2.1
PART 1
LOAN AMOUNTS
Lender Loan Amount
- ------ -----------
Union Bank of California, N.A. $16,110,824.44
United California Bank $ 6,444,329.78
U.S. Bank National Association $ 6,444,329.78
--------------
Total $28,999,484
PART 2
LENDERS' PRO RATA SHARES OF EXISTING LETTER OF CREDIT
Lender Pro Rata Share
- ------ --------------
Union Bank of California, N.A. $ 51,244.00
United California Bank $ 20,497.60
U.S. Bank National Association $ 20,497.60
-------------
Total $ 92,239.20