EXHIBIT 10.2
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CREDIT AGREEMENT
among
POINT.360
as Borrower
THE LENDERS PARTIES HERETO,
and
UNION BANK OF CALIFORNIA, N.A.
as Agent
Dated as of March 12, 2004
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TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS.................................................1
1.1 Defined Terms...............................................1
1.2 Other Definitional Provisions..............................19
SECTION 2. AMOUNT AND TERMS OF LOANS AND LETTERS OF CREDIT;
COMMITMENT AMOUNTS.........................................20
2.1 Revolving Loans and Letters of Credit;
Loan Commitment Amounts....................................20
2.2 Term Loans; Term Loan Commitment Amounts...................23
2.3 Letters of Credit..........................................25
2.4 Optional Prepayments.......................................28
2.5 Mandatory Prepayments......................................29
2.6 Conversion and Continuation Options........................30
2.7 Minimum Amounts of Tranches; Minimum Borrowings............31
2.8 Interest Rates and Payment Dates...........................31
2.9 Computation of Interest and Fees...........................31
2.10 Inability to Determine Interest Rate.......................32
2.11 Pro Rata Treatment and Payments............................32
2.12 Illegality.................................................32
2.13 Increased Costs............................................33
2.14 Taxes......................................................34
2.15 Indemnity..................................................35
2.16 Mitigation of Costs........................................35
2.17 Unused Commitment Fee......................................35
SECTION 3. REPRESENTATIONS AND WARRANTIES.............................36
3.1 Organization and Good Standing.............................36
3.2 Power and Authority........................................36
3.3 Validity and Legal Effect..................................36
3.4 No Violation of Laws or Agreements.........................36
3.5 Title to Assets; Existing Encumbrances; Legal Names........36
3.6 Capital Structure; Equity Ownership........................37
3.7 Subsidiaries and Affiliates................................37
3.8 Material Contracts.........................................37
3.9 Taxes and Assessments......................................37
3.10 Litigation and Legal Proceedings...........................38
3.11 Accuracy of Financial Information..........................38
3.12 Accuracy of Other Information..............................38
3.13 Compliance with Laws Generally.............................39
3.14 ERISA Compliance...........................................39
3.15 Environmental Compliance...................................39
3.16 Federal Regulations........................................40
3.17 Fees and Commissions.......................................40
3.18 Solvency...................................................40
3.19 Investment Company Act; Public Utility Holding Company Act.40
3.20 Nature of Business.........................................41
3.21 Use of Proceeds............................................41
3.22 Ranking of Loans...........................................41
SECTION 4. CONDITIONS PRECEDENT.......................................41
4.1 Conditions to Closing Date.................................41
4.2 Conditions to Each Loan or Letter of Credit................43
SECTION 5. AFFIRMATIVE COVENANTS......................................44
5.1 Financial Statements.......................................44
5.2 Certificates; Other Information............................45
5.3 Payment of Obligations.....................................46
5.4 Conduct of Business and Maintenance of Existence...........46
5.5 Maintenance of Property....................................47
5.6 Insurance..................................................47
5.7 Inspection of Property; Books and Records; Discussions.....47
5.8 Environmental Laws.........................................47
5.9 Use of Proceeds............................................48
5.10 Compliance With Laws, Etc..................................48
5.11 Certain Obligations Respecting Subsidiaries;
Prohibitions on Certain Agreements.........................48
5.12 Reviews and Appraisals.....................................48
5.13 Bank Accounts..............................................49
5.14 Landlord Consents..........................................49
SECTION 6. NEGATIVE COVENANTS.........................................49
6.1 Financial Condition Covenants..............................49
6.2 Limitation on Indebtedness.................................50
6.3 Limitation on Liens........................................51
6.4 Limitation on Fundamental Changes..........................52
6.5 Limitation on Sale of Assets...............................52
6.6 Limitation on Dividends....................................52
6.7 Limitation on Investments, Loans and Advances..............52
6.8 Transactions with Affiliates...............................53
6.9 Fiscal Year................................................53
6.10 Sale-Leaseback Transactions................................53
6.11 Lines of Business..........................................53
SECTION 7. EVENTS OF DEFAULT..........................................54
SECTION 8. THE AGENT..................................................56
8.1 Appointment................................................56
8.2 Delegation of Duties.......................................56
8.3 Exculpatory Provisions.....................................57
8.4 Reliance by the Agent......................................57
8.5 Notice of Default..........................................57
8.6 Non-Reliance on the Agent and Other Lenders................58
8.7 Indemnification............................................58
8.8 The Agent in Its Individual Capacity.......................58
8.9 Successor Agent............................................59
8.10 Collateral Documents.......................................59
SECTION 9. MISCELLANEOUS..............................................59
9.1 Amendments and Waivers.....................................59
9.2 Notices....................................................60
9.3 No Waiver; Cumulative Remedies.............................60
9.4 Survival of Representations and Warranties.................61
9.5 Payment of Expenses and Taxes..............................61
9.6 Successors and Assigns; Participations;
Purchasing Lenders.........................................62
9.7 Adjustments; Set-Off.......................................64
9.8 Counterparts...............................................65
9.9 Severability...............................................65
9.10 Integration................................................65
9.11 GOVERNING LAW..............................................65
9.12 Acknowledgements...........................................65
9.13 Headings...................................................65
9.14 Copies of Certificates, Etc................................65
9.15 Treatment of Certain Information; Confidentiality..........65
9.16 Consent to Jurisdiction; Waiver of Jury Trial..............66
9.17 Release....................................................67
9.18 Effect of Agreement on Financing Statements and
Landlord Consents..........................................71
Exhibits
A-1 Form of Revolving Note
A-2 Form of Term Note
B Form of Assignment and Acceptance
C Form of Borrowing Base Certificate
D Form of Borrowing Notice
E Form of Continuation Notice
F Form of Officer's Certificate
G Form of Covenant Compliance Certificate
H-1 Form of Letter of Credit Request
(Standby Letters of Credit)
H-2 Form of Letter of Credit Request
(Commercial Letters of Credit)
Schedules
3.1 Business Qualification Jurisdictions
3.5 Legal and Trade Names
3.6 Capital Structure; Equity Ownership
3.7 Subsidiaries and Affiliates
3.8 Material Contracts
3.9 Certain Tax Matters
3.10 Litigation
5.14 Certain Leased Properties
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of March 12, 2004, 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
The Borrower has requested that the Lenders make available to it a
revolving facility and a term loan facility for its use in refinancing certain
existing debt, financing equipment purchases and other uses as more fully set
forth below. The Lenders are willing to make available such facilities on the
terms and subject to the 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.
"Accounts Receivable Value": at the date of determination thereof, the
aggregate face amount of Eligible Accounts Receivable less discounts, credits,
allowances and retainages.
"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).
"Acquisition": the acquisition by the Borrower or any Subsidiary of any
equity interest in (including any warrants, options and other rights to acquire
such interests), or any or all of the assets of, any other Person.
"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 Available Term Loan Commitment": the sum of the Available
Term Loan Commitments of each Term Loan Lender.
"Aggregate Revolving Loan Commitment": the sum of the Revolving Loan
Commitments set forth on the signature pages hereof.
"Aggregate Term Loan Commitment": the sum of the Term Loan Commitments
set forth on the signature pages hereof.
"Aggregate Total Commitment": the sum of the Aggregate Revolving Loan
Commitment and the Aggregate Term Loan Commitment.
"Aggregate Total Commitment Percentage": with respect to each Lender,
the percentage equivalent of the ratio which such Lender's Commitments bears to
the Aggregate Total Commitment.
"Agreement": this Credit Agreement, as amended, waived, supplemented or
otherwise modified from time to time.
"Alliance Atlantis Warrant": that certain Warrant dated July 2002
providing for the purchase of 500,000 shares of the Borrower's common stock at
$2.00 per share.
"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, 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; provided that
Asset Disposition shall not include the sale of inventory in the ordinary course
of business.
"Assignment and Acceptance": an Assignment and Acceptance substantially
in the form of Exhibit B to this Agreement.
"Available Revolving Loan Commitment": with respect to each Revolving
Loan Lender on the date of determination thereof, the amount by which (a) the
Revolving Loan Commitment of such Lender on such date exceeds (b) the principal
sum of such Lender's (i) Revolving Loans outstanding, (ii) Revolving Loan
Commitment Percentage of the aggregate Letter of Credit Amount of all Letters of
Credit outstanding and (iii) Revolving Loan Commitment Percentage of the
aggregate amount of unreimbursed drawings under all Letters of Credit on such
date.
"Available Term Loan Commitment": with respect to each Term Loan Lender
on the date of determination thereof, the amount by which the Term Loan
Commitment of such Lender on such date exceeds the principal sum of such
Lender's Term Loans outstanding on such date.
"Benefitted Lender": as defined in Section 9.7.
"Borrower": as defined in the preamble hereto.
"Borrowing Base": 80% of the Accounts Receivable Value.
"Borrowing Base Review": a review, performed by the Agent or a designee
of the Agent reasonably acceptable to the Borrower, which evaluates the
Borrower's compliance with the reporting requirements under this Agreement
applicable to the Borrowing Base, including, but not limited to, an examination
of the Borrower's books and records relating to the Borrower's Accounts
Receivable Value.
"Borrowing Base Certificate": a certificate, duly executed by a
Responsible Officer, substantially in the form of Exhibit C.
"Borrowing Notice": a notice from the Borrower to the Agent requesting a
borrowing of Loans, substantially in the form of Exhibit D.
"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 and which, in the case of a LIBOR Loan, is a Eurodollar Business
Day.
"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 Collateral Deposit": cash deposits made by the Borrower to the
Agent, to be held by the Agent as Collateral pursuant to the Security Agreement,
for the reimbursement of drawings under Letters of Credit.
"Cash Income Taxes": for any period, cash income taxes paid by the
Borrower and its Subsidiaries.
"Closing Date": the date on which the conditions precedent set forth in
Section 4.1 have been satisfied.
"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.
"Commitment": a Revolving Loan Commitment or a Term Loan Commitment, as
applicable.
"Commitment Percentage": a Revolving Loan Commitment Percentage or a
Term Loan Commitment Percentage, as applicable.
"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.
"Continuation Notice": a request for continuation or conversion of a
Loan as set forth in Section 2.6, substantially in the form of Exhibit E.
"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 G 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; provided that, (i) with respect to
the four quarter periods ending December 31, 2003 and March 31, 2004, such
amount shall be deemed to be $1,600,000, (ii) with respect to the four quarter
period ending June 30, 2004, such amount shall be deemed to be sum of (x) all
such regularly scheduled payments or prepayments for the quarter ending June 30,
2004 plus (y) $1,200,000, (iii) with respect to the four quarter period ending
September 30, 2004, such amount shall be deemed to be sum of (x) all such
regularly scheduled payments or prepayments for the two-quarter period ending
September 30, 2004 plus (y) $800,000 and (iv) with respect to the four quarter
period ending December 31, 2004, such amount shall be deemed to be sum of (x)
all such regularly scheduled payments or prepayments for the three-quarter
period ending December 31, 2004 plus (y) $400,000, plus (b) all Interest Expense
for such period; provided that, (i) with respect to the four quarter period
ending December 31, 2003, Interest Expense shall be deemed to be $603,000, (ii)
with respect to the four quarter period ending March 31, 2004, such amount shall
be deemed to be $460,000, (iii) with respect to the four quarter period ending
June 30, 2004, such amount shall be deemed to be (x) Interest Expense for the
quarter ending June 30, 2004 plus (y) $ 293,000, (iv) with respect to the four
quarter period ending September 30, 2004, such amount shall be deemed to be sum
of (x) Interest Expense for the two-quarter period ending September 30, 2004
plus (y) $173,000 and (v) with respect to the four quarter period ending
December 31, 2004, such amount shall be deemed to be sum of (x) Interest Expense
for the three-quarter period ending December 31, 2004 plus (y) $79,000.
"Default": any of the events specified in Section 7, whether or not any
requirement for the giving of notice, the lapse of time, or both, or any other
condition, has been satisfied.
"Dollars" and "$": dollars in lawful currency of the United States.
"Domestic Subsidiary": each Subsidiary organized under the laws of the
United States or any state thereof.
"Earn-out Payments": cash payments required to be made by the Borrower
pursuant to earn-out provisions of any acquisition agreement entered into by the
Borrower subsequent to the Closing Date for the purpose of acquiring a business.
"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) any non-cash charge taken by the
Borrower in connection with FASB Rule 142, provided that such charges shall not
exceed $5,000,000 during the term of this Agreement, (v) up to $100,000 of fees
and expenses paid by the Borrower in connection with the execution of this
Agreement and (vi) up to $620,000 for any charge resulting from the repurchase
and cancellation of the Alliance Atlantis Warrant. "Eligible Accounts
Receivable": an Account Receivable which is reasonably 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 or the rendition
of services 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 or Canada;
(g) that is not paid within 90 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 or Canadian
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, except for Sony Corporation of America and its
subsidiaries, 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;
(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;
(r) that is an obligation of an account debtor with respect to which
more than 25% of all Accounts Receivable due to the Borrower from such
account debtor are either overdue or not paid within 90 days from the
date of the invoice, unless the Majority Lenders have given their
written consent thereto; or
(s) that, when added together with all other Accounts Receivable due to
the Borrower from the applicable account debtor, exceeds 15% (or, with
respect to Sony Pictures Entertainment, Metro Goldwyn Mayer Studios,
Inc. and Zenith Media Services, 20%) of all Accounts Receivable of the
Borrower.
"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, other than as the result of the exercise of an option or other right
to purchase beneficial or equity interests in the Borrower pursuant to the
Borrower's 1996 Stock Incentive Plan or 2000 Non-Qualified Stock Option Plan.
"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.
"Eurodollar Business Day": any day on which commercial banks are open
for dealings in Dollar deposits in the London Interbank Market.
"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 2.14(b).
"Existing Letter of Credit": that certain letter of credit issued by
UBOC 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.
"Federal Funds Effective Rate": for any day, the weighted average of the
rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day which is a Business Day, the average of the
quotations for the day of such transactions received by the Agent from three
federal funds brokers of recognized standing selected by it.
"Final Term Loan Maturity Date": March 12, 2011, or such earlier date as
the Term Notes shall become due and payable in full in accordance with the terms
hereof (whether by acceleration or otherwise).
"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 (excluding up to
$8,571,500 for the purchase of the New Premises) 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, (ii)
Cash Income Taxes for such period and (iii) Earn-out Payments 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, excluding the outstanding principal balance of the Mortgage
Debt provided such amount does not exceed $6,428,625, as reduced from time to
time by the repayment thereof.
"GAAP": generally accepted accounting principles in the United States in
effect from time to time.
"General Account": as defined in Section 2.1(h).
"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 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": collectively, guarantees executed by any Subsidiary of the
Borrower pursuant to Section 5.11, as the same may be amended, modified or
restated 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": collectively, security agreements made
by any Subsidiary of the Borrower pursuant to Section 5.11, as the same may be
amended, modified or restated 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, (g) all obligations of
such Person under agreements for interest rate or currency hedging, (h) all
mandatory redemption, repurchase or dividend obligations of such Person with
respect to Capital Stock, and (i) 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 (h) 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) as to any Reference Rate Loan, the first day of
each month, (b) as to any LIBOR Loan having an Interest Period of three months
or less, the last day of such Interest Period, (c) as to any LIBOR Loan having
an Interest Period longer than three months, each day which is at the end of
each three month-period within such Interest Period after the first day of such
Interest Period and the last day of such Interest Period and (d) for each of
(a), (b) and (c) above, on the day on which the Term Loans and the Revolving
Loans become due and payable in full and are paid or prepaid in full.
"Interest Period": with respect to any LIBOR Loan:
(a) initially, the period commencing on the borrowing or conversion
date, as the case may be, with respect to such LIBOR Loan and ending
one, three or six months thereafter, as selected by the Borrower in its
Borrowing Notice or Continuation Notice, as the case may be, given with
respect thereto; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Loan and ending one,
three or six months thereafter, as selected by the Borrower by
irrevocable notice to the Agent not less than three Eurodollar Business
Days prior to the last day of the then current Interest Period with
respect thereto;
provided that, all of the foregoing provisions relating to Interest
Periods are subject to the following:
(i) if any Interest Period pertaining to a LIBOR Loan would
otherwise end on a day that is not a Business Day, such Interest
Period shall be extended to the next succeeding Business Day unless
the result of such extension would be to carry such Interest Period
into another calendar month in which event such Interest Period
shall end on the immediately preceding Business Day;
(ii) any Interest Period that would otherwise extend beyond the
date final payment is due on the Revolving Loans, as applicable,
shall end on the date of such final payment; and
(iii) any Interest Period pertaining to a LIBOR Loan that begins on
the last Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day
of a calendar month.
"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": as defined in Section 2.1(a).
"Letter of Credit Amount": the stated maximum amount available to be
drawn under a particular Letter of Credit, as such amount may be reduced or
reinstated from time to time in accordance with the terms of such Letter of
Credit.
"Letter of Credit Request": a request by the Borrower for the issuance
of a standby or commercial Letter of Credit, on the Agent's standard form of
standby letter of credit application and agreement or commercial letter of
credit application and agreement, as applicable, the current forms of which are
attached hereto as Exhibits H-1 and H-2, respectively.
"Letter of Credit Sublimit": as defined in Section 2.1(a).
"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.
"LIBOR": with respect to each day during each Interest Period pertaining
to a LIBOR Loan, the rate of interest determined by the Agent to be the rate per
annum at which deposits in dollars would be offered to the Agent by leading
banks in the London Interbank Market at or about 9:00 a.m., Los Angeles time,
two Eurodollar Business Days prior to the beginning of such Interest Period, for
delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its LIBOR Loan to
be outstanding during such Interest Period.
"LIBOR Adjusted Rate": with respect to each day during each Interest
Period pertaining to a LIBOR Loan, a rate per annum determined for such day in
accordance with the following formula (rounded upward to the nearest 1/100th of
1%):
LIBOR
1.00 - LIBOR Reserve Requirements
"LIBOR Loans": Loans the rate of interest applicable to which is based
upon LIBOR.
"LIBOR Reserve Requirements": for any day as applied to a LIBOR Loan,
the aggregate (without duplication) of the maximum rates (expressed as a decimal
fraction) of reserve requirements in effect on such day (including, without
limitation, basic, supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve System or other
Governmental Authority having jurisdiction with respect thereto) dealing with
reserve requirements prescribed for eurocurrency funding (currently referred to
as "Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such Federal Reserve System.
"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": a Revolving Loan or a Term Loan, as applicable; and "Loans"
means the aggregate of all Revolving Loans and all Term Loans, as applicable,
outstanding at any given time.
"Loan Documents": this Agreement, the Notes, the Collateral Documents,
the Landlord Consents, the Guarantor Collateral Documents, any Loan Sweep
Agreement and the Guarantees and any other agreement executed by an Obligor in
connection therewith and herewith including, but not limited to, the fee
sideletter executed on the Closing Date, UCC-1 Financing Statements and
amendments thereto, and each Letter of Credit Request, as such agreements and
documents may be amended, supplemented and otherwise modified from time to time
in accordance with the terms hereof.
"Loan Sweep Agreement": any future account sweep or similar agreement
entered into between UBOC and the Borrower with respect to the Borrower's cash
management.
"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 the 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.
"Mortgage Debt": mortgage Indebtedness in a principal amount not
exceeding $8,571,500, as reduced from time to time in accordance with the terms
thereof, incurred by the Borrower to a mortgage lender for the purchase of the
New Premises.
"Multiemployer Plan": a plan which is a multiemployer plan as defined in
Section 4001(a)(3) of ERISA.
"Net Income": net income as determined in accordance with GAAP.
"Net Proceeds": (A) with respect to any Asset Disposition, 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 Asset Disposition minus the sum of (a) the
reasonable fees, commissions and other out-of-pocket expenses incurred by the
Borrower or any of its Subsidiaries in connection with such Asset Disposition
(other than amounts payable to Affiliates of the Person making such
disposition), (b) Indebtedness, other than the Loans, required to be paid as a
result of such Asset Disposition and (c) federal, state and local taxes incurred
and to be paid in connection with such Asset Disposition; and (B) 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).
"Net Worth": net worth as determined in accordance with GAAP.
"Net Worth Requirement": $31,100,000 as of the Closing Date, as shall
subsequently be automatically increased (i) as of the end of each fiscal year of
the Borrower, commencing with the fiscal year ending December 31, 2004, by an
amount equal to 50% of the Borrower's positive annual net profit for such year
and (ii) upon the issuance thereof, by an amount equal to 90% of the Net
Proceeds of any Equity Offering made on or after the Closing Date.
"New Premises": that certain building located at 2701 Media Center
Drive, Los Angeles, California, which building is, as of the Closing Date,
leased by the Borrower but with respect to which the Borrower is in negotiations
to purchase.
"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": a Revolving Note or a Term Note; and "Notes" means the aggregate
of all Revolving Notes and all Term Notes.
"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.
"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).
"Original Reduction Date": as defined in Section 2.2(d).
"Original Term Loan Amortization Schedule": as defined in Section
2.2(d).
"Overadvance Borrowings": as defined in Section 2.1(a).
"Overadvance Notice": as defined in Section 2.1(a).
"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.
"Permitted Acquisition": an Acquisition where (a) the Person whose
assets or equity interest is being acquired has positive pro forma EBITDA during
the twelve month period immediately prior to the closing of such Acquisition,
(b) the Borrower and each Subsidiary shall be in full compliance with each
financial covenant contained in this Agreement immediately prior to and upon the
closing of the Acquisition, (c) the Agent and the Lenders shall have received at
least 30 Business Days' prior written notice of such Acquisition, accompanied by
a Covenant Compliance Certificate showing the Borrower's compliance with
covenants both prior to such Acquisition and on a pro forma basis assuming
consummation of such Acquisition, neither of which shall indicate a Default, (d)
with respect to an Acquisition involving a public company, such Acquisition
shall not have been opposed by the board of directors of the target entity or
otherwise be deemed by the Agent, in the exercise of the Agent's reasonable
discretion, to be a hostile Acquisition and (e) the consideration for such
Acquisition, together with the consideration for all Acquisitions consummated on
or after the Closing Date, shall not exceed $9,000,000 less the sum of all
Earn-out Payments actually made on and after the Closing Date.
"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).
"Prior Agreement": that certain Third Amended and Restated Credit
Agreement dated as of May 2, 2002 among the Borrower, the lenders referred to
therein, and UBOC, as administrative agent for such lenders, as amended.
"Prohibited Transaction": with respect to any Plan, a prohibited
transaction (as defined in Section 406 of ERISA) with respect to such Plan.
"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.
"Reference Rate Loans": Loans the rate of interest applicable to which
is based upon the Reference Rate.
"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.
"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.
"Restricted Payments": as defined in Section 6.6.
"Revolving Loan": as defined in Section 2.1(a).
"Revolving Loan Commitment": the commitment of a Lender listed on the
signature pages hereof to make Revolving Loans and participate in Letters of
Credit hereunder through its Applicable Lending Office as set forth on the
signature pages hereof, as the same may be adjusted pursuant to the provisions
hereof.
"Revolving Loan Commitment Expiration Date": March 12, 2006, or such
earlier date as the Revolving Loan Commitments shall expire in accordance with
the terms hereof (whether by acceleration or otherwise).
"Revolving Loan Commitment Percentage": with respect to each Revolving
Loan Lender, the percentage equivalent of the ratio which such Lender's
Revolving Loan Commitment bears to the Aggregate Revolving Loan Commitment.
"Revolving Loan Lender": each Lender having a Revolving Loan Commitment
and/or which shall have (i) Revolving Loans outstanding and/or (ii)
participations in Letters of Credit which are outstanding.
"Revolving Note": as defined in Section 2.1(c).
"Security Agreement": the Security Agreement made by the Borrower in
favor of the Agent, for the benefit of the Lenders, in form and substance
satisfactory to the Agent, in respect of the tangible and intangible personal
property of the Borrower described therein, as the same may be amended, modified
or restated from time to time in accordance with the terms hereof.
"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:
(iv) 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;
(v) such Person is able to pay its debts as they become due;
(vi) 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
(vii) 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.
"Subsequent Borrowing Date": as defined in Section 2.2(d).
"Subsequent Reduction Date": as defined in Section 2.2(d).
"Subsequent Term Loan Amortization Schedule": as defined in Section
2.2(d).
"Subsequent Term Loans": as defined in Section 2.2(a).
"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.
"Sweep Service": a cash management service which UBOC may provide to the
Borrower, at the election of UBOC and the Borrower, pursuant to which UBOC will
automatically credit Revolving Loans to the General Account and automatically
debit repayment of Revolving Loans to such General Account in accordance with
the provision of a Loan Sweep Agreement.
"Taxes": as defined in Section 2.14.
"Term Loan": as defined in Section 2.2(a).
"Term Loan Commitment": the commitment of a Term Loan Lender to make a
Term Loan hereunder through its Applicable Lending Office as set forth on the
signature pages hereof, as the same may be adjusted pursuant to the provisions
hereof.
"Term Loan Commitment Expiration Date": March 12, 2006, or such earlier
date as the Term Loan Commitments shall expire in accordance with the terms
hereof (whether by acceleration or otherwise).
"Term Loan Commitment Percentage": with respect to each Term Loan
Lender, the percentage equivalent of the ratio which such Lender's Term Loan
Commitment bears to the Aggregate Term Loan Commitment.
"Term Loan Lender": each Lender having a Term Loan Commitment or Term
Loans outstanding.
"Term Note": as defined in Section 2.2(c).
"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.
"Tranche": the collective reference to LIBOR Loans the Interest Periods
with respect to all of which begin on the same date and end on the same later
date (whether or not such LIBOR Loans shall originally have been made on the
same day).
"Transferee": as defined in Section 9.6(f).
"Type": as to any Loan, its nature as a Reference Rate Loan or a LIBOR
Loan.
"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.
"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 AND LETTERS OF CREDIT; COMMITMENT AMOUNTS
2.1 REVOLVING LOANS AND LETTERS OF CREDIT; LOAN COMMITMENT AMOUNTS.
(a) Subject to the terms and conditions hereof, each Lender having a
Revolving Loan Commitment severally agrees to (i) make loans on a
revolving credit basis through its Applicable Lending Office to the
Borrower from time to time from and including the Closing Date to but
excluding the Revolving Loan Commitment Expiration Date (each a
"Revolving Loan", and collectively, the "Revolving Loans") in accordance
with the provisions of this Agreement and (ii) participate through its
Applicable Lending Office in letters of credit issued for the account of
the Borrower pursuant to Section 2.3 from time to time from and
including the Closing Date to but excluding the Revolving Loan
Commitment Expiration Date (each a "Letter of Credit", and collectively,
the "Letters of Credit"); provided, however, that the sum of (A) the
aggregate principal amount of all Revolving Loans outstanding, (B) the
aggregate Letter of Credit Amount of all Letters of Credit outstanding
and (C) the aggregate amount of unreimbursed drawings under all Letters
of Credit shall not exceed the lesser of the Aggregate Revolving Loan
Commitment and the Borrowing Base at any time; and provided further,
that the sum of (x) the aggregate Letter of Credit Amount of all Letters
of Credit outstanding and (y) the aggregate amount of unreimbursed
drawings under all Letters of Credit shall not exceed $500,000 (the
"Letter of Credit Sublimit") at any time; and provided further, that the
Borrower may from time to time borrow up to an aggregate $2,000,000 in
excess of the Borrowing Base as then in effect ("Overadvance
Borrowings") so long as (i) the Agent has received at least 10 Business
Days prior written notice (an "Overadvance Notice") of the Borrower's
intention to request Overadvance Borrowings, (ii) the ratio of Funded
Debt to EBITDA during the period any Overadvance Borrowings are to be
outstanding is less than or equal to 1.50:1.00 (in each case as of the
most recently ended fiscal quarter), and no Default shall have occurred
and be continuing or would result therefrom, and the Agent shall have
received a Covenant Compliance Certificate to such effect, (iii) no
Overadvance Borrowing shall cause the Aggregate Revolving Loan
Commitment to be exceeded, (iv) within 180 days following the making of
the first Overadvance Borrowing requested in any Overadvance Notice, the
Borrower shall repay all Overadvance Borrowings such that the Borrowing
Base shall not be exceeded and (v) the Borrower may not send a new
Overadvance Notice until it has complied with the preceding clause (iv).
Within the limits of each Revolving Loan Lender's Revolving Loan
Commitment, the Borrower may borrow, have Letters of Credit issued for
the Borrower's account, prepay Revolving Loans, reborrow Revolving
Loans, and have additional Letters of Credit issued for the Borrower's
account after the expiration of previously issued Letters of Credit.
Notwithstanding any provision in this Agreement to the contrary, the
Borrower may not request Revolving Loans or Letters of Credit which
would cause the sum of (i) Revolving Loans outstanding and (ii) the
aggregate Letter of Credit Amount of outstanding Letters of Credit
(including the Existing Letter of Credit) to exceed the lesser of (x)
the Borrowing Base and (y) $3,000,000 on the Closing Date.
The principal amount of each Revolving Loan Lender's (A) Revolving Loan
and (B) participation in a Letter of Credit shall be in an amount equal to the
product of (i) such Revolving Loan Lender's Revolving Loan Commitment Percentage
and (ii) the total amount of the Revolving Loan or Revolving Loans, or the
Letter of Credit or Letters of Credit, requested; provided that in no event
shall any Revolving Loan Lender be obligated to make a Revolving Loan or
participate in a Letter of Credit if after giving effect to such Revolving Loan
or such participation the sum of such Revolving Loan Lender's (x) Revolving
Loans outstanding, (y) Revolving Loan Commitment Percentage of the aggregate
Letter of Credit Amount of all Letters of Credit outstanding and (z) Revolving
Loan Commitment Percentage of the aggregate amount of unreimbursed drawings
under all Letters of Credit would exceed its Revolving Loan Commitment or if the
amount of such requested Revolving Loan or such Revolving Loan Lender's
Revolving Loan Commitment Percentage of such Letter of Credit is in excess of
such Revolving Loan Lender's Available Revolving Loan Commitment.
(b) Subject to Sections 2.10 and 2.12, the Revolving Loans may from time
to time be (i) LIBOR Loans, (ii) Reference Rate Loans or (iii) a
combination thereof, as determined by the Borrower and notified to the
Agent in accordance with either Section 2.1(e) or 2.6. Each Revolving
Loan Lender may make or maintain its Revolving Loans or participate in
Letters of Credit to or for the account of the Borrower by or through
any Applicable Lending Office.
(c) The Revolving Loans made by each Revolving Loan Lender to the
Borrower shall be evidenced by a promissory note of the Borrower,
substantially in the form of Exhibit A-1 (a "Revolving Note"), with
appropriate insertions therein as to payee, date and principal amount,
payable to the order of such Revolving Loan Lender and representing the
obligations of the Borrower to pay the aggregate unpaid principal amount
of all Revolving Loans made by such Revolving Loan Lender to the
Borrower pursuant to Section 2.1(a) or 2.3(c), with interest thereon as
prescribed herein. Each Revolving Loan Lender is hereby authorized (but
not required) to record the date and amount of each payment or
prepayment of principal of its Revolving Loans made to the Borrower,
each continuation thereof, each conversion of all or a portion thereof
to another Type and, in the case of LIBOR Loans, the length of each
Interest Period with respect thereto, in the books and records of such
Revolving Loan Lender, and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded. The
failure of any Revolving Loan Lender to make any such recordation or
notation in the books and records of the Revolving Loan 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 Closing Date, (ii) provide for the payment of interest in
accordance with this Agreement and (iii) be stated to be payable in full
on the Revolving Loan Commitment Expiration Date.
(d) All outstanding Revolving Loans shall be due and payable, to the
extent not previously paid in accordance with the terms hereof, on the
Revolving Loan Commitment Expiration Date.
(e) The Borrower shall give the Agent irrevocable written notice,
substantially in the form of a Borrowing Notice (which Borrowing Notice
must be received by the Agent prior to 10:00 A.M., Los Angeles time, one
Business Day prior to each proposed borrowing date or, if all or any
part of the Revolving Loans are requested to be made as LIBOR Loans,
three Eurodollar Business Days prior to each proposed borrowing date)
requesting that the Revolving Loan Lenders make the Revolving Loans on
the proposed borrowing date and specifying (i) the aggregate amount of
Revolving Loans requested to be made, (ii) whether the Revolving Loans
are to be LIBOR Loans, Reference Rate Loans or a combination thereof and
(iii) if the Revolving Loans are to be entirely or partly LIBOR Loans,
the respective amounts of each such Type of Revolving Loan and the
respective lengths of the initial Interest Periods therefor. The Agent
shall promptly notify each Revolving Loan Lender (i) of such Borrowing
Notice received by it and (ii) of each borrowing made in connection with
the Sweep Service. On the proposed borrowing date, or on the date such
Lender is advised by the Agent that a borrowing occurred in connection
with the Sweep Service, not later than 10:00 A.M., Los Angeles time,
each Revolving Loan Lender shall make available to the Agent at its
office specified in Section 9.2 the amount of such Revolving Loan
Lender's Revolving Loan Commitment Percentage of the aggregate borrowing
amount (as determined in accordance with the second paragraph of Section
2.1(a)) in immediately available funds, it being agreed by the Lenders
that no Revolving Loan made for the purpose of reimbursing the Agent for
a Sweep Service borrowing shall be subject to Section 4.2. The Agent
may, in the absence of notification from any Revolving Loan Lender that
such Revolving Loan Lender has not made its Revolving Loan Commitment
Percentage available to the Agent on such date, credit the account of
the Borrower on the books of such office of the Agent (or, in the case
of a borrowing made in connection with the Sweep Service, reimburse the
Agent for such advance made by it) with the aggregate amount of
Revolving Loans. If and to the extent any Lender shall not have made
available to the Agent on such date such Lender's Revolving Loan
Commitment Percentage of such borrowing, such Lender and the Borrower
severally agree to repay to the Agent forthwith, on demand, such
corresponding amount, together with interest thereon for each day from
the date such amount is made available to the Borrower until the date
such amount is repaid to the Agent, at an interest rate equal to, in the
case of the Borrower, the applicable interest rate set forth in Section
2.8 and, in the case of a Lender, the Federal Funds Effective Rate. If
such Lender shall repay to the Agent such corresponding amount, such
amount so repaid shall constitute such Lender's Revolving Loan with
respect to such borrowing for purposes of this Agreement.
(f) Neither the Agent nor any Revolving Loan Lender shall be responsible
for the obligations or Available Revolving Loan Commitment of any other
Revolving Loan Lender hereunder, nor will the failure of any Revolving
Loan Lender to comply with the terms of this Agreement relieve any other
Revolving Loan Lender or the Borrower of their obligations under this
Agreement and the Notes. Nothing herein shall be deemed to relieve any
Revolving Loan Lender from its obligation to fulfill its Commitments
hereunder or to prejudice any rights which the Borrower may have against
any Revolving Loan Lender as a result of any default by such Revolving
Loan Lender hereunder.
(g) The Revolving Loan Commitment of each Revolving Loan Lender and the
Aggregate Commitment shall terminate on the Revolving Loan Commitment
Expiration Date.
(h) Notwithstanding the foregoing and subject to the provisions of
Section 2.1(a), the Borrower authorizes and directs the Agent from time
to time to make Revolving Loans into the Borrower's general operating
account (the "General Account") with the Agent at such times as are
contemplated by, and otherwise in accordance with, the provisions of the
Loan Sweep Agreement. Notwithstanding any other provision of this
Agreement to the contrary, each Revolving Loan made as part of the Sweep
Service shall be a Reference Rate Loan so long as it is held by the
Agent. With respect to borrowings made in connection with the Sweep
Service, no Borrowing Notice shall be required, and the minimum amounts
set forth in Section 2.7 shall be inapplicable. All fees collected by
the Agent pursuant to the Loan Sweep Agreement shall be for its own
account. In the event of a conflict between the provisions of this
Agreement and the Loan Sweep Agreement, the provisions of this Agreement
shall control. The Agent and the Borrower are authorized from time to
time to supplement or otherwise modify any Loan Sweep Agreement and the
Sweep Service as such parties in their sole discretion deem appropriate.
2.2 TERM LOANS; TERM LOAN COMMITMENT AMOUNTS.
(a) Subject to the terms and conditions hereof, each Lender having a
Term Loan Commitment severally agrees (i) on the Closing Date, to make a
term loan through its Applicable Lending Office to the Borrower in an
amount equal to its Term Loan Commitment and (ii) thereafter, from time
to time prior to the Term Loan Commitment Expiration Date, to the extent
of any Aggregate Available Term Loan Commitment, to make term loans
through its Applicable Lending Office to the Borrower for its use in
financing up to 80% of the purchase price of capital equipment for its
use and the use of its Subsidiaries, in each case in accordance with the
provisions of this Agreement (each of loans referred to in clauses (i)
and (ii), a "Term Loan", and collectively, the "Term Loans"); provided,
however, that the aggregate principal amount of all Term Loans
outstanding shall not exceed the Aggregate Term Loan Commitment at any
time. The aggregate principal amount of Term Loans borrowed pursuant to
clause (ii) above on a given date shall be considered a single term loan
borrowed on such date (a "Subsequent Term Loan"), having a separate
amortization schedule as set forth in Section 2.2(d). Prior to the Term
Loan Commitment Expiration Date, within the limits of each Term Loan
Lender's Term Loan Commitment, the Borrower may prepay Term Loans
(including Subsequent Term Loans, if any shall be outstanding) and
reborrow such amounts (including amounts repaid pursuant to Section
2.2(d)) in the form of Subsequent Term Loans. Prior to the Term Loan
Commitment Expiration Date, no such prepayments or repayments shall
reduce the Aggregate Term Loan Commitment. On the Term Loan Commitment
Expiration Date each Term Loan Commitment shall expire. Thereafter, no
further borrowing of Subsequent Term Loans shall be permitted, and no
prepayments or repayments of Term Loans (including Subsequent Term
Loans) shall be available for borrowing.
The principal amount of each Term Loan made by a Term Loan Lender shall
be in an amount equal to the product of (i) such Lender's Term Loan
Commitment Percentage and (ii) the total amount of Term Loans requested;
provided that in no event shall any Term Loan Lender be obligated to
make a Term Loan if after giving effect to such Loan the aggregate
amount of such Lender's Term Loans outstanding would exceed its Term
Loan Commitment or if the amount of such requested Term Loan is in
excess of such Lender's Available Term Loan Commitment.
(b) Subject to Sections 2.10 and 2.12, the Term Loans may from time to
time be (i) LIBOR Loans, (ii) Reference Rate Loans or (iii) a
combination thereof, as determined by the Borrower and notified to the
Agent in accordance with either Section 2.2(e) or 2.6. Each Term Loan
Lender may make or maintain its Term Loans or participate in Letters of
Credit to or for the account of the Borrower by or through any
Applicable Lending Office.
(c) The Term Loans made by each Term Loan Lender to the Borrower shall
be evidenced by a promissory note of the Borrower, substantially in the
form of Exhibit A-2 (a "Term Note"), with appropriate insertions therein
as to payee, date and principal amount, payable to the order of such
Term Loan Lender and representing the obligations of the Borrower to pay
the aggregate unpaid principal amount of all Term Loans made by such
Term Loan Lender to the Borrower pursuant to Section 2.2(d), with
interest thereon as prescribed herein. Each Term Loan Lender is hereby
authorized (but not required) to record the date and amount of each
payment or prepayment of principal of its Term Loans made to the
Borrower, each continuation thereof, each conversion of all or a portion
thereof to another Type and, in the case of LIBOR Loans, the length of
each Interest Period with respect thereto, in the books and records of
such Term Loan Lender, and any such recordation shall constitute prima
facie evidence of the accuracy of the information so recorded. The
failure of any Term Loan Lender to make any such recordation or notation
in the books and records of the Term Loan 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
Closing Date, (ii) provide for the payment of interest in accordance
with this Agreement and (iii) be stated to be payable in full in
accordance with Section 2.2(d) on or prior to the Final Term Loan
Maturity Date.
(d) (i) With respect to the Term Loans borrowed on the Closing Date, the
Borrower shall repay the principal of such Term Loans in equal monthly
installments on the last day of each month (each such date, an "Original
Reduction Date"), commencing with the month after the month in which the
Closing Date occurs, each such installment to be equal to the amount
necessary to cause such Term Loans to fully amortize on March 12, 2009.
The foregoing amortization schedule (the "Original Term Loan
Amortization Schedule") shall be deemed established on the Closing Date,
and no prepayment of Term Loans pursuant to Section 2.4 or 2.5, and no
borrowing of Subsequent Terms Loans, shall alter such schedule, provided
that prepayments of Term Loans shall be applied to the Original
Reduction Dates in inverse order of maturity, as contemplated by Section
2.4 or 2.5, as applicable.
(ii) With respect each Subsequent Term Loan borrowed on any date (a
"Subsequent Borrowing Date"), the Borrower shall repay the
principal of such Subsequent Term Loan in equal monthly
installments on the last day of each month (each such date, a
"Subsequent Reduction Date"), commencing with the month after the
month in which the Subsequent Borrowing Date occurs, each such
installment to be equal to the amount necessary to cause such
Subsequent Term Loan to fully amortize on the fifth anniversary of
the Subsequent Borrowing Date. The foregoing amortization schedule
(a "Subsequent Term Loan Amortization Schedule") shall be deemed
established for each Subsequent Term Loan on its respective
Subsequent Borrowing Date, and no prepayment of Term Loans pursuant
to Section 2.4 or 2.5, and no borrowing of other Subsequent Terms
Loans, shall alter such schedule, provided that prepayments of Term
Loans (including Subsequent Term Loans) shall be applied to
Subsequent Reduction Dates for each Subsequent Term Loan in inverse
order of maturity, as contemplated by Section 2.4 or 2.5, as
applicable.
The aggregate amount payable to each Term Lender on each Original
Reduction Date or Subsequent Reduction Date shall be determined in
accordance with the provisions of Section 2.11.
(e) The Borrower shall give the Agent irrevocable written notice,
substantially in the form of a Borrowing Notice (which Borrowing Notice
must be received by the Agent prior to 10:00 A.M., Los Angeles time, one
Business Day prior to each proposed borrowing date or, if all or any
part of the Term Loans are requested to be made as LIBOR Loans, three
Eurodollar Business Days prior to each proposed borrowing date)
requesting that the Term Loan Lenders make the Term Loans on the
proposed borrowing date and specifying (i) the aggregate amount of Term
Loans requested to be made (which, with regard to the borrowing made on
the Closing Date, shall be equal to the full amount of the Aggregate
Term Loan Commitment), (ii) whether the Term Loans are to be LIBOR
Loans, Reference Rate Loans or a combination thereof, (iii) if the Term
Loans are to be entirely or partly LIBOR Loans, the respective amounts
of each such Type of Term Loan and the respective lengths of the initial
Interest Periods therefor and (iv) with respect to each borrowing of
Subsequent Term Loans, a schedule describing the equipment to be
purchased with such borrowing (which must be capital equipment, and not
software), including the type and age of the equipment (which shall be
not more than twelve months old) and the purchase price therefor
(including calculations showing that not more than 80% of such purchase
price will be funded with Loans), all in form and detail satisfactory to
the Agent, and including such attachments (including copies of invoices
for such equipment), as the Agent shall request. On receipt of such
Borrowing Notice, the Agent shall promptly notify each Term Loan Lender
thereof. On the proposed borrowing date, not later than 10:00 A.M., Los
Angeles time, each Term Loan Lender shall make available to the Agent at
its office specified in Section 9.2 the amount of such Term Loan
Lender's Term Loan Commitment Percentage of the aggregate borrowing
amount (as determined in accordance with the second paragraph of Section
2.2(a)) in immediately available funds. The Agent may, in the absence of
notification from any Term Loan Lender that such Term Loan Lender has
not made its Term Loan Commitment Percentage available to the Agent on
such date, credit the account of the Borrower on the books of such
office of the Agent with the aggregate amount of Term Loans.
(f) Neither the Agent nor any Term Loan Lender shall be responsible for
the obligations or Available Term Loan Commitment of any other Term Loan
Lender hereunder, nor will the failure of any Term Loan Lender to comply
with the terms of this Agreement relieve any other Term Loan Lender or
the Borrower of their obligations under this Agreement and the Notes.
Nothing herein shall be deemed to relieve any Term Loan Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any
rights which the Borrower may have against any Term Loan Lender as a
result of any default by such Term Loan Lender hereunder.
2.3 LETTERS OF CREDIT(a) .
(a) The Borrower shall be entitled to request the issuance of Letters of
Credit from time to time from and including the Closing Date to but
excluding the date which is two Business Days prior to the Revolving
Loan Commitment Expiration Date, by giving the Agent a Letter of Credit
Request at least three Business Days before the requested date of
issuance of such Letter of Credit (which shall be a Business Day). Any
Letter of Credit Request received by the Agent later than 10:00 a.m.,
Los Angeles time, shall be deemed to have been received on the next
Business Day. Each Letter of Credit Request shall be made in writing,
shall be signed by a Responsible Officer, shall be irrevocable and shall
be effective upon receipt by the Agent. Provided that a valid Letter of
Credit Request has been received by the Agent and upon fulfillment of
the other applicable conditions set forth in Section 4.2, the Agent will
issue the requested Letter of Credit from its office specified in
Section 9.2. No Letter of Credit shall have an expiration date later
than two Business Days prior to the Revolving Loan Commitment Expiration
Date.
On and following the Closing Date, the Existing Letter of Credit shall
be deemed to be a Letter of Credit issued by the Agent hereunder. In
furtherance and not in limitation thereof, effective as of the Closing
Date, (i) each Revolving Loan Lender shall be deemed to have acquired
from the Agent an undivided interest and participation in such Letter of
Credit, each drawing thereunder and the obligations of the Borrower
under this Agreement in respect thereof in accordance with Section
2.3(b) and (ii) the Letter of Credit Sublimit shall be deemed reduced by
an amount equal to the Letter of Credit Amount of such Letter of Credit
existing from time to time.
(b) Immediately upon the issuance of each Letter of Credit, the Agent
shall be deemed to have sold and transferred to each Revolving Loan
Lender, and each Revolving Loan Lender shall be deemed to have purchased
and received from the Agent, in each case irrevocably and without any
further action by any party, an undivided interest and participation in
such 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 Revolving Loan Lender's Revolving Loan
Commitment Percentage and (ii) the maximum amount available to be drawn
under such Letter of Credit (assuming compliance with all conditions to
drawing). The Agent shall promptly advise each Revolving Loan Lender of
the issuance of each Letter of Credit, the Letter of Credit Amount of
such Letter of Credit, any change in the face amount or expiration date
of such Letter of Credit, the cancellation or other termination of such
Letter of Credit and any drawing under such Letter of Credit.
(c) The payment by the Agent of a draft drawn under any Letter of Credit
shall first be made from any Cash Collateral Deposit held by the Agent
with respect to such Letter of Credit. After any such Cash Collateral
Deposit has been applied, the payment by the Agent of a draft drawn
under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Agent in its individual capacity as a Lender
hereunder (in such capacity, the "Drawing Lender") of a Reference Rate
Loan in the amount of such payment (but without any requirement of
compliance with the conditions set forth in Section 4.2). In the event
that any such Loan by the Drawing Lender resulting from a drawing under
any Letter of Credit is not repaid by the Borrower by 12:00 noon, Los
Angeles time, on the day of payment of such drawing, the Agent shall
promptly notify each other Revolving Loan Lender. Each Revolving Loan
Lender shall, on the day of such notification (or if such notification
is not given by 2:00 p.m., Los Angeles time, on such day, then on the
next succeeding Business Day), make a Reference Rate Loan, which shall
be used to repay the applicable portion of the Reference Rate Loan of
the Drawing Lender with respect to such Letter of Credit drawing, in an
amount equal to the amount of such Revolving Loan Lender's participation
in such drawing for application to repay the Drawing Lender (but without
any requirement of compliance with the applicable conditions set forth
in Section 4.2) and shall deliver to the Agent for the account of the
Drawing Lender, on the day of such notification (or if such notification
is not given by 2:00 p.m., Los Angeles time, on such day, then on the
next succeeding Business Day) and in immediately available funds, the
amount of such Reference Rate Loan. In the event that any Revolving Loan
Lender fails to make available to the Agent for the account of the
Drawing Lender the amount of such Reference Rate Loan, the Drawing
Lender shall be entitled to recover such amount on demand from such
Revolving Loan Lender together with interest thereon at the Federal
Funds Effective Rate for each day such amount remains outstanding.
(d) The obligations of the Borrower with respect to any 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.
(e) The Borrower shall pay to the Agent for the account of the Revolving
Loan Lenders with respect to each Letter of Credit issued hereunder, for
the period from and including the day such Letter of Credit is issued to
but excluding the day such Letter of Credit expires, a letter of credit
fee equal to the product of (i) 2.25% per annum and (ii) the Letter of
Credit Amount of such Letter of Credit from time to time, such letter of
credit fee to be payable quarterly in arrears on the last day of each
March, June, September and December and on the expiration date of such
Letter of Credit.
(f) The Borrower shall pay to the Agent for its own account, with
respect to each Letter of Credit issued hereunder, (i) for the period
from and including the day such Letter of Credit is issued to but
excluding the day such Letter of Credit expires, a fronting fee in
respect of each Letter of Credit in an amount equal to 1/4 of 1% per
annum of the Letter of Credit Amount of such Letter of Credit from time
to time, such fronting fee to be payable quarterly in arrears on the
last day of each March, June, September and December and on the
expiration date of such Letter of Credit and (ii) 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.
(g) 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.
(h) 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 the foregoing clause (ii), 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, it being
agreed, however, that 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.
(i) 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
2.3 is intended to limit the other obligations of the Borrower, any
Lender, or the Agent under this Agreement.
2.4 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 three Business Days'
irrevocable written notice, in the case of LIBOR Loans, and upon at least one
Business Day's irrevocable written notice, in the case of Reference Rate Loans,
from the Borrower to the Agent, specifying the date and amount of prepayment and
whether the prepayment is of LIBOR Loans, Reference Rate Loans or a combination
thereof, and, if of a combination thereof, the amount allocable to each. 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 and any
amounts payable pursuant to Section 2.15. Partial prepayments of the Revolving
Loans shall be in an aggregate principal amount of $250,000 and integral
multiples of $100,000 in excess thereof. Partial prepayments of the Term Loans
shall be in an aggregate principal amount of $500,000 and integral multiples of
$100,000 in excess thereof. Each prepayment of Term Loans shall be applied to
the Original Term Loan Amortization Schedule and each Subsequent Term Loan
Amortization Schedule on a pro rata basis, in each case in inverse order of
maturity. The provisions of this Section 2.4 shall not be applicable to
prepayments of Revolving Loans made pursuant to the Loan Sweep Agreement;
provided that any such prepayments shall be subject to Section 2.15.
2.5 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 and/or make a Cash Collateral
Deposit (as set forth in Section 2.5(e)) 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 and/or
make a Cash Collateral Deposit (as set forth in Section 2.5(e)) in an
amount equal to 100% of the Net Proceeds of such Equity Offering;
provided that, so long as no Default has occurred and is continuing or
would result therefrom, no prepayment shall be required with respect to
an Equity Offering (i) to the extent that such Net Proceeds are applied
to the purchase price of a Permitted Acquisition within ten Business
Days after receipt thereof or (ii) resulting from the exercise of the
Alliance Atlantis Warrant. 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) On the day of receipt by the Borrower or any of its Subsidiaries of
any Net Proceeds with respect to an Asset Disposition, the Borrower
shall prepay the Loans and/or make a Cash Collateral Deposit (as set
forth in Section 2.5(e)) in an amount equal to 100% of such Net
Proceeds; provided that, so long as no Default has occurred and is
continuing or would result therefrom, no prepayment shall be required
with respect to an Asset Disposition to the extent that the Net Proceeds
of such Asset Disposition, together with the Net Proceeds of all other
Asset Dispositions consummated during such fiscal year, do not exceed
$250,000 in the aggregate. On or prior to the date of any Asset
Disposition, the Borrower agrees to provide the Agent with calculations
used by the Borrower in determining the amount of any such prepayment
(or in determining that a prepayment is not required) under this Section
2.5(c).
(d) If at any time the aggregate principal amount of all Revolving Loans
and Letters of Credit outstanding exceeds (i) the Borrowing Base (plus
any Overadvance Borrowings permitted at such time pursuant to Section
2.1(a)) or (ii) the Aggregate Revolving Loan Commitment, the Borrower
shall immediately, without notice or request by the Agent, prepay the
Revolving Loans (together with accrued interest to the date of
prepayment on the principal amount prepaid and any payments required
pursuant to Section 2.15) in an aggregate amount equal to such excess.
If at any time prior to the Term Loan Commitment Expiration Date the
aggregate principal amount of all Term Loans outstanding exceeds the
Aggregate Term Loan Commitment, the Borrower shall immediately, without
notice or request by the Agent, prepay the Term Loans (together with
accrued interest to the date of prepayment on the principal amount
prepaid and any payments required pursuant to Section 2.15) in an
aggregate amount equal to such excess.
(e) Each prepayment of the Loans pursuant to this Section 2.5 shall be
applied first, to the outstanding principal balance of the Term Loans,
by applying such amount to the Original Term Loan Amortization Schedule
and each Subsequent Term Loan Amortization Schedule on a pro rata basis,
in each case in inverse order of maturity, second, to the outstanding
principal balance of Revolving Loans (with no reduction in the Aggregate
Revolving Loan Commitment) and third, to make a Cash Collateral Deposit
with respect to outstanding Letters of Credit. Each prepayment of the
Loans pursuant to this Section 2.5 shall be accompanied by payment in
full of all accrued interest thereon to and including the date of such
prepayment and any amount required by Section 2.15. The Borrower agrees
to give the Agent at least five Business Days' irrevocable written
notice of any prepayment under this Section 2.5.
2.6 CONVERSION AND CONTINUATION OPTIONS.
(a) The Borrower may elect from time to time to convert LIBOR Loans to
Reference Rate Loans, by the Borrower giving the Agent at least two
Business Days' prior irrevocable written notice of such election
pursuant to a Continuation Notice. The Borrower may elect from time to
time to convert Reference Rate Loans to LIBOR Loans by the Borrower
giving the Agent at least three Eurodollar Business Days' prior
irrevocable written notice of such election pursuant to a Continuation
Notice. Any such notice of conversion to LIBOR Loans shall specify the
length of the initial Interest Period or Interest Periods therefor. Upon
receipt of any such notice the Agent shall promptly notify each Lender
thereof. All or any part of outstanding LIBOR Loans and Reference Rate
Loans may be converted as provided herein, provided that (i) any such
conversion may only be made if, after giving effect thereto, Section 2.7
shall not have been contravened, (ii) no Reference Rate Loan may be
converted into a LIBOR Loan after the date that is one month prior to
the Revolving Loan Commitment Expiration Date or the Final Term Loan
Maturity Date, as applicable, and (iii) the Borrower shall not have the
right to elect to continue at the end of the applicable Interest Period,
or to convert to, a LIBOR Loan if a Default shall have occurred and be
continuing.
(b) Any LIBOR Loan may be continued as such upon the expiration of the
then current Interest Period with respect thereto by the Borrower giving
notice to the Agent, in accordance with the applicable provisions of the
term "Interest Period" set forth in Section 1.1, of the length of the
next Interest Period to be applicable to such LIBOR Loan, provided that
no LIBOR Loan may be continued as such (i) if, after giving effect
thereto, Section 2.7 would be contravened, or (ii) if a Default shall
have occurred and be continuing and provided, further, that if the
Borrower shall fail to give any required notice as described above in
this Section or if such continuation is not permitted pursuant to the
preceding proviso, such Loans shall be automatically converted to
Reference Rate Loans on the last day of such then-expiring Interest
Period.
2.7 MINIMUM AMOUNTS OF TRANCHES; MINIMUM BORROWINGS.
All borrowings, conversions and continuations of Loans hereunder and all
selections of Interest Periods hereunder shall be in such amounts and be made
pursuant to such elections so that, after giving effect thereto, the aggregate
principal amount of the Loans comprising each Tranche (except Loans made
pursuant to Section 2.3(c)) shall be equal to (a) $250,000 or a whole multiple
of $100,000 in excess thereof with respect to Reference Rate Loans, and (b)
$500,000 or a whole multiple of $100,000 in excess thereof with respect to LIBOR
Loans; provided that, in any case, there shall not be more than 8 Tranches.
Except as set forth in Section 2.3(c), all borrowings of Reference Rate Loans
shall be in a minimum amount of $250,000 or a whole multiple of $100,000 in
excess thereof. Notwithstanding the foregoing, all borrowings of Term Loans
shall be in a minimum amount of $1,000,000.
2.8 INTEREST RATES AND PAYMENT DATES.
(a) Each Revolving Loan shall (i) if a LIBOR Loan, bear interest for
each day during each Interest Period with respect thereto at a rate per
annum equal to the LIBOR Adjusted Rate plus 2.25% and (ii) if a
Reference Rate Loan, bear interest at a rate per annum equal to the
Reference Rate.
(b) Each Term Loan shall (i) if a LIBOR Loan, bear interest for each day
during each Interest Period with respect thereto at a rate per annum
equal to the LIBOR Adjusted Rate plus 2.50% and (ii) if a Reference Rate
Loan, bear interest at a rate per annum equal to the Reference Rate plus
0.25%.
(c) If any Default shall have occurred and be continuing, all amounts
outstanding shall bear interest at a rate per annum which is the rate
described in paragraphs (a) and (b) of this Section plus 2% from the
date of the occurrence of such Default until such Default is no longer
continuing (after as well as before judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date,
provided that interest accruing pursuant to paragraph (c) of this
Section shall be payable on demand.
2.9 COMPUTATION OF INTEREST AND FEES.
(a) Interest on the Reference Rate 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 or the LIBOR Reserve Requirements shall
become effective as of the opening of business on the day on which such
change in the Reference Rate is announced or such change in the LIBOR
Reserve Requirements becomes effective, as the case may be. 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.
2.10 INABILITY TO DETERMINE INTEREST RATE.
In the event that prior to the first day of any Interest Period:
(a) the Agent shall have determined (which determination shall be
conclusive and binding upon the Borrower absent manifest error) that, by
reason of circumstances affecting the relevant market, adequate and
reasonable means do not exist for ascertaining the LIBOR Adjusted Rate
for such Interest Period, or
(b) the Agent shall have received notice from the Majority Lenders
acting in good faith that the LIBOR Adjusted Rate determined or to be
determined for such Interest Period will not adequately and fairly
reflect the cost to such Lenders (as conclusively certified by such
Lenders) of making or maintaining their affected Loans during such
Interest Period, the Agent shall give telecopy or telephonic notice
thereof to the Borrower and the Lenders as soon as practicable
thereafter. If such notice is given (x) any LIBOR Loans requested to be
made on the first day of such Interest Period shall accrue interest at
the Reference Rate, (y) Loans that were to have been converted on the
first day of such Interest Period to LIBOR Loans shall be continued as
Reference Rate Loans and (z) any outstanding LIBOR Loans shall be
converted, on the first day of such Interest Period, to Reference Rate
Loans. Until such notice has been withdrawn by the Agent, no further
LIBOR Loans shall be made or continued as such, nor shall the Borrower
have the right to convert Reference Rate Loans to LIBOR Loans.
2.11 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. If any payment on
a LIBOR Loan becomes due and payable on a day other than a Eurodollar Business
Day, the maturity thereof shall be extended to the next succeeding Eurodollar
Business Day (and interest shall continue to accrue thereon at the applicable
rate) unless the result of such extension would be to extend such payment into
another calendar month, in which event such payment shall be made on the
immediately preceding Eurodollar Business Day.
2.12 ILLEGALITY.
Notwithstanding any other provision herein, if any change after the
Closing Date in any Requirement of Law or in the interpretation or application
thereof shall make it unlawful for any Lender or Applicable Lending Office to
make or maintain LIBOR Loans as contemplated by this Agreement, (a) the
commitment of such Lender hereunder to make LIBOR Loans, continue LIBOR Loans as
such and convert Reference Rate Loans to LIBOR Loans shall forthwith be
suspended during such period of illegality and (b) the Loans of such Lender or
Applicable Lending Office then outstanding as LIBOR Loans, if any, shall be
converted automatically to Reference Rate Loans on the respective last days of
the then current Interest Periods with respect to such Loans or within such
earlier period as required by law. If any such conversion of a LIBOR Loan occurs
on a day which is not the last day of the then current Interest Period with
respect thereto, the Borrower shall pay to such Lender such amounts, if any, as
may be required pursuant to Section 2.15. To the extent that a Lender's LIBOR
Loans have been converted to Reference Rate Loans pursuant to this Section, all
payments and prepayments of principal that otherwise would be applied to such
Lender's LIBOR Loans shall be applied instead to its Reference Rate Loans. 2.13
Increased Costs.
(a) In the event that any change after the Closing Date in any
Requirement of Law or in the interpretation or application thereof or
compliance by any Lender with any request or directive (whether or not
having the force of law but, if not having the force of law, generally
applicable to and complied with by banks and financial institutions of
the same general type as such Lender in the relevant jurisdiction) from
any central bank or other Governmental Authority made subsequent to the
date hereof:
(i) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirements against assets
held by, letters of credit or guarantees issued by, deposits or
other liabilities in or for the account of, advances, loans or
other extensions of credit by, or any other acquisition of funds
by, any office of such Lender or Applicable Lending Office which is
not otherwise included in the determination of the LIBOR Adjusted
Rate hereunder; or
(ii) shall impose on such Lender or Applicable Lending Office any
other condition;
and the result of any of the foregoing is to increase the cost to the
Agent of issuing or maintaining any Letter of Credit by an amount which
the Agent deems to be material, or to such Lender or Applicable Lending
Office, by an amount which such Lender deems to be material, of making,
converting into, continuing or maintaining LIBOR Loans, or purchasing or
maintaining any participation in a Letter of Credit, or to reduce any
amount receivable hereunder in respect thereof then, in any such case,
the Borrower shall immediately pay to the Agent, for its own account or
on behalf of such Lender or Applicable Lending Office, as applicable,
upon the demand of the Agent for itself or at the request of such
Lender, as applicable, any additional amounts necessary to compensate
such Lender or the Agent, as applicable, for such increased cost or
reduced amount receivable. If the Agent, any Lender or any Applicable
Lending Office becomes entitled to claim any additional amounts pursuant
to this Section, it shall promptly notify the Borrower, through the
Agent, of the event by reason of which it has become so entitled. A
certificate as to any additional amounts payable pursuant to this
Section submitted by the Agent or such Lender or Applicable Lending
Office, through the Agent, to the Borrower shall be in such detail as
provided by such Lender to borrowers subject to payment of the same or
similar type of amounts, and shall be conclusive evidence of the
accuracy of the information so recorded, absent manifest error. This
covenant shall survive the termination of this Agreement, expiration of
the Commitments and the Letters of Credit and the payment of the Notes
and all other amounts payable hereunder.
(b) If, after the Closing Date, 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, the Letters of Credit, the Commitments 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, expiration of the
Commitments and the Letters of Credit and the payment of the Notes and
all other amounts payable hereunder.
2.14 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, expiration of the Commitments and the Letters of Credit
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.
2.15 INDEMNITY.
The Borrower agrees to indemnify each Lender and to hold each Lender
harmless from and to pay each Lender within 5 Business Days of such Lender's
demand the amount of any liability, loss or expense arising from the
reemployment of funds obtained by it or from fees payable to terminate the
deposits from which such funds were obtained (including reasonable fees and
expenses of counsel) which such Lender may sustain or incur as a consequence of
(a) default by the Borrower in payment when due of the principal amount of or
interest on any LIBOR Loan, (b) default by the Borrower in making a borrowing
of, conversion into or continuation of LIBOR Loans after the Borrower has given
a notice requesting the same in accordance with the provisions of this
Agreement, (c) default by the Borrower in making any prepayment after the
Borrower has given a notice thereof in accordance with the provisions of this
Agreement or (d) the making by the Borrower of a prepayment or conversion of
LIBOR Loans on a day which is not the last day of an Interest Period with
respect thereto (including any prepayment required as a result of acceleration
of the Loans under Article 7). A Lender's certificate as to such liability, loss
or expense shall set forth in reasonable detail the calculation thereof and
shall be deemed conclusive, absent manifest error. This covenant shall survive
the termination of this Agreement, expiration of the Commitments and the Letters
of Credit and the payment of the Notes and all other amounts payable hereunder.
2.16 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 2.13 or
2.14, such Lender shall take such action.
2.17 UNUSED COMMITMENT FEE.
The Borrower agrees to pay to the Agent, for the account of the
Revolving Loan Lenders, an unused commitment fee to be shared pro rata among the
Revolving Loan Lenders for the period from and including the Closing Date to but
excluding the Revolving Loan Commitment Expiration Date, based on the average
aggregate amount, for each day during such period, of the Available Revolving
Loan Commitments, and computed at a rate equal to 0.25% per annum. Such unused
commitment fee shall be payable in installments quarterly in arrears on the last
Business Day of each March, June, September and December and on the Revolving
Loan Commitment Expiration Date.
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, 9,155,748 shares of which
were issued and outstanding as of February 29, 2004, 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 Closing 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. Except as set forth on Schedule
3.9, 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) 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 or (ii) with respect to any Loan Document or the transactions
contemplated thereby.
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 (i) the audited consolidated financial statements of the
Borrower and its Subsidiaries for the fiscal year ended December 31,
2002 and (ii) the unaudited consolidated financial statements of the
Borrower and its Subsidiaries for the fiscal quarter ended September 30,
2003 (including, separately stated, statements of income, retained
earnings and cash flows for each division of the Borrower), (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 Borrower and its Subsidiaries 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, 2002 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 Closing 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 Loan, no Letter of Credit, and no part of the proceeds thereof are
intended to be or will be used, directly or indirectly, for "purchasing" or
"carrying" any Margin Stock within the respective meanings of each of the quoted
terms under Regulation U or for any purpose which violates the provisions of the
Regulations of the Board of Governors of the Federal Reserve System. If
requested by the Agent, the Borrower will furnish to the Agent 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 2.17 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 USE OF PROCEEDS(a).
(a) All proceeds of the Revolving Loans shall be used by the Borrower
for the purposes of (i) repaying unpaid principal and interest
outstanding under the Prior Agreement, (ii) funding working capital and
capital expenditures, (iii) funding general corporate purposes and (iv)
funding Permitted Acquisitions.
(b) All proceeds of the Term Loans shall be used by the Borrower for the
purposes of (i) repaying unpaid principal and interest outstanding under
the Prior Agreement and (ii) funding equipment purchases subject to
Section 2.2(e)(iv).
(c) The Letters of Credit shall be used for general corporate purposes
of the Borrower.
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 CLOSING DATE.
The agreement of each Lender to make the Loans requested to be made by
it on the Closing Date and participate in any Letters of Credit issued on the
Closing Date and the agreement of the Agent to issue any Letters of Credit
requested to be issued on the Closing Date are subject to the satisfaction,
immediately prior to or concurrently with the making of such Loans and/or the
issuance of and participation in such Letters of Credit on the Closing Date, of
the following conditions precedent:
(a) Credit Agreement. The Agent shall have received this Agreement,
executed and delivered by an officer of the Borrower and each Lender as
of the Closing Date.
(b) Other Loan Documents. The Agent shall have received the Notes, the
Security Agreement, 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, in each case certified by a Responsible Officer of
such Obligor to be true and correct and in full force and effect.
(d) Material Contracts, Etc. The Agent shall have received (i) each
Material Contract for which a copy has been requested by the Agent or
any Lender and (ii) whether or not such contracts constitute Material
Contracts, a copy of each employment agreement with a senior officer of
the Borrower, in each case certified by a Responsible Officer of the
Borrower to be true and correct and in full force and effect.
(e) Fees and Costs. The Agent shall have received payment of (i) fees,
costs and expenses, including legal fees and reimbursement of due
diligence expenses, owing pursuant to Section 9.5 and (ii) those fees
referred to in the fee letter executed in connection herewith due and
owing on the Closing Date.
(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
Closing Date assuming the funding of any Loans to be made, and the
issuance of any Letters of Credit to be issued, on the Closing Date, and
repayment of all outstanding amounts under the Prior Agreement.
(h) Borrowing Base. The Agent shall have received a Borrowing Base
Certificate with respect to any borrowings of Revolving Loans to be made
on the Closing Date.
(i) 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, if generally available in such state, the payment of taxes by, each
such Obligor in such state.
(j) Officer's Certificate. A certificate of a senior officer of the
Borrower substantially in the form of Exhibit F, dated the Closing Date.
(k) Repayment and Termination of Prior Agreement. The Agent shall have
received evidence satisfactory to it that all principal, interest and
other amounts owning under the Prior Agreement have been repaid in full,
and that such agreement has been terminated.
(l) Financial Statements. The Agent shall have received the Borrower's
(i) financial statements referred to in Section 3.11 and (ii) operating
and balance sheet projections, in each case in form and substance
satisfactory to the Agent.
(m) Due Diligence. The Agent shall have completed a due diligence review
of the Borrower, which review shall include, but shall not be limited
to, an updated third party valuation of the Borrower's fixed assets and
a field examination of the Borrower's Accounts Receivable, inventory,
payables, controls and systems.
(n) 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.
(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, in form and substance
satisfactory to the Agent; and
(ii) such other legal opinions as the Agent may reasonably request.
(p) Additional Proceedings. The Agent shall have received such other
approvals, opinions and documents as the Agent may reasonably request.
4.2 CONDITIONS TO EACH LOAN OR LETTER OF CREDIT.
The agreement of each Lender to make each Loan and to participate in
each Letter of Credit, and the agreement of the Agent to issue each Letter of
Credit, requested to be made, issued or participated in by it is subject to the
satisfaction, immediately prior to or concurrently with the making of such Loan
or the issuance or participation in such Letter of Credit, of the following
conditions precedent:
(a) Representations and Warranties; No Default. The following statements
shall be true and the Borrower's acceptance of the proceeds of such Loan
or its delivery of an executed Letter of Credit Request shall be deemed
to be a representation and warranty of the Borrower on the date of such
Loan or as of the date of issuance of such Letter of Credit, as
applicable, that:
(i) 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 Closing Date
pursuant hereto and on or prior to the date for such Loan or the
issuance of such Letter of Credit 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
(ii) No Default has occurred and is continuing or would result from
the making of the Loan to be made on such date or the issuance of
such Letter of Credit as of such date.
(b) Legality. The making of such Loan or the issuance of such Letter of
Credit, as applicable, shall not contravene any law, rule or regulation
applicable to any Lender or any Obligor.
(c) Borrowing Notice/Letter of Credit Request. The Agent shall have
received a Borrowing Notice or Letter of Credit Request, as applicable,
pursuant to the provisions of this Agreement from the Borrower.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that from and after the Closing Date, so
long as any Commitment remains in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Lender or the Agent hereunder, or any
Letter of Credit remains outstanding:
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, 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 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 budget referred to in Section 5.2(e),
accompanied by a certificate of a senior financial officer of the
Borrower, which certificate shall state that such 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).
(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, reported on without qualification or exception by the
Accountants and 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 (and
setting forth separately stated statements of income, retained earnings
and cash flows for each division of the Borrower), 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 of the first eleven months of each fiscal year of the Borrower,
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 budget referred to in Section 5.2(e) and (iii) the 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 THE AGENT:
(a) within 45 days after the end of each fiscal quarter, a Covenant
Compliance Certificate as of the end of such quarter;
(b) within 30 days after the end of each month (i) an Accounts
Receivable agings report as of the end of such month, in form
satisfactory to the Agent and (ii) a Borrowing Base Certificate as of
the end of such month;
(c) 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;
(d) 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;
(e) 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;
(f) 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;
(g) (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;
(h) 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;
(i) 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
(j) 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, subject
to Section 5.10, 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 business of the type referred to in Section 6.11, (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 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.
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 USE OF PROCEEDS.
The Borrower will use the proceeds of the Loans, and any Letters of
Credit issued hereunder, as set forth in Section 3.21, and not for the
purchasing or carrying of any Margin Stock.
5.10 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.
5.11 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, 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.
5.12 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) semi-annual field audits,
including reviews of the books and records of, such entities and (ii) annual
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 BANK ACCOUNTS.
The Borrower shall maintain, and shall cause each of its Subsidiaries to
maintain, its primary operating bank account(s) with UBOC.
5.14 LANDLORD CONSENTS.
With respect to each Property leased by the Borrower or any Subsidiary,
the Borrower shall cause a Landlord Consent to be executed and notarized by the
landlord thereof, and delivered to the Agent and, if requested by the Agent,
recorded against such Property in the relevant real property records; provided
that, with respect to those leased Properties in existence as of the Closing
Date for which the Borrower was unable to obtain Landlord Consents in connection
with the Prior Agreement, each of which is set forth on Schedule 5.14 attached
hereto, the Borrower shall be obligated to use best efforts to obtain such
Landlord Consents.
SECTION 6. NEGATIVE COVENANTS
The Borrower hereby agrees that from and after the Closing Date, so
long as any Commitments remain in effect, any Note remains outstanding and
unpaid or any other amount is owing to any Lender or the Agent hereunder, or any
Letter of Credit remains outstanding:
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 quarter,
permit the ratio of Funded Debt to EBITDA, calculated on a cumulative
four quarter rolling basis for such fiscal quarter and the three
immediately preceding fiscal quarters, to exceed the following levels
for the periods indicated:
QUARTER ENDING RATIO
October 1, 2003 to and including 1.75:1
December 31, 2005
January 1, 2006 and thereafter 1.50:1
(b) Fixed Charge Ratio. As of the last day of any quarter, permit the
Fixed Charge Ratio, calculated on a cumulative four quarter rolling
basis for such fiscal quarter and the three immediately preceding fiscal
quarters, to be less than 1.20:1.00.
(c) Minimum Net Worth. Permit Net Worth at any time to be less than the
Net Worth Requirement.
(d) Minimum Quarterly EBITDA. Permit EBITDA, for the fiscal quarter most
recently ended, to be less than $2,000,000; provided that, with respect
to not more than one fiscal quarter during any fiscal year of the
Borrower, EBITDA for such quarter may be less than $2,000,000, but not
less than $1,000,000.
(e) Capital Expenditures. Permit Capital Expenditures (excluding (i) in
the fiscal year of such purchase, up to $8,571,500 for the purchase of
the New Premises and (ii) any Permitted Acquisition, to the extent the
consummation thereof would result in a Capital Expenditure) to exceed
$5,000,000 in any fiscal year of the Borrower.
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, (iii) for
bank overdrafts incurred in the ordinary course of business that are
promptly repaid or (iv) for obligations under agreements entered into to
hedge interest rate or foreign currency risk in the ordinary course of
business, in an aggregate amount (under clauses (i), (ii), (iii) and
(iv)) 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, when added together with the principal amount of Indebtedness
outstanding pursuant to Section 6.2(i), the following amounts for the
periods indicated: (i) from the Closing Date to and including March 31,
2006, not more than $1,000,000 outstanding and (ii) thereafter, not more
than $1,500,000 outstanding;
(e) Indebtedness of Wholly Owned Subsidiaries of the Borrower to the
Borrower or to other Wholly Owned Subsidiaries of the Borrower;
(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;
(g) the Mortgage Debt, provided that (i) the terms of such debt are no
less favorable to the Borrower than those outlined in the current lease
of the New Premises, (ii) the Borrower has provided to the Agent, at
least 10 Business Days prior to the incurrence thereof, copies of final
drafts of the loan documents that will evidence such debt and (iii) such
debt shall be secured solely by the real property purchased with the
proceeds thereof, and in no event shall the Collateral or Guarantor
Collateral be encumbered thereby;
(h) Earn-out Payments; and
(i) Indebtedness for borrowed money assumed by the Borrower or any
Subsidiary as a result of a Permitted Acquisition; provided that (i)
such Indebtedness was not created in contemplation of such Acquisition,
(ii) such Indebtedness is unsecured, (iii) the Borrower delivers to the
Agent, at least 20 days prior to such Acquisition, copies of all
documents governing such Indebtedness and (iv) the principal amount of
such Indebtedness, when added together with the principal amount of
Capitalized Lease Obligations outstanding under Section 6.2(d), will not
exceed $1,000,000 or $1,500,000 (as applicable under Section 6.2(d)).
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 securing the Mortgage Debt, subject to the limitations set
forth in Section 6.2(g).
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;
(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; and
(c) the Borrower may consummate Permitted Acquisitions.
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, or rights to acquire
preferred stock of the Borrower issued to shareholders in connection with a
shareholder rights plan) 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.
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) Permitted Acquisitions.
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 Borrower's employment arrangements with its senior officers or (ii) 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.
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, or any fee payable by it
hereunder or under any Loan Document; or the Borrower shall fail to pay
any other amount payable hereunder or under any Loan Document within
three Business Days after any such other amount becomes due; 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 5.4(ii), 5.9, 5.11(a), 5.12, 5.13 or
5.14, 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 the earlier of (i) notice thereof from the Agent to the
Borrower and (ii) actual knowledge thereof by a Responsible Officer of
such Obligor; 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) Haig S. Bagerdjian shall cease to be the Chief Executive Officer
of the Borrower and 60 days shall have elapsed without a successor
thereto satisfactory to the Majority Lenders having been appointed, (ii)
Haig S. Bagerdjian shall cease to beneficially own Capital Stock
representing at least 15% of the votes that may be cast in an election
of directors of the Borrower (provided that such amount may be less than
15% (but not less than 7.5%) if such reduction is due to the issuance of
stock of the Borrower as consideration for a Permitted Acquisition), or
(iii) individuals who constituted the Borrower's Board of Directors as
of the Closing Date (the "Closing Date Directors") shall cease for any
reason to constitute a majority of the directors then in office
(provided that the Closing Date Directors may constitute less than a
majority if such reduction is due to the appointment of additional
directors in connection with a Permitted Acquisition);
then, and in any such event, (A) if such event is an Event of Default
specified in paragraph (g) above, automatically the Commitments to the
Borrower and the commitment to issue Letters of Credit shall immediately
terminate and 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, take any or all of the
following actions: (i) by notice to the Borrower declare the Commitments
to the Borrower and the commitment to issue Letters of Credit to be
terminated forthwith, whereupon such Commitments and the commitment to
issue Letters of Credit shall immediately terminate; and (ii) 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 (x) the same shall immediately
become due and payable and (y) to the extent any Letters of Credit are
then outstanding, the Borrower shall make a Cash Collateral Deposit in
an amount equal to the aggregate Letter of Credit Amount. 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 Aggregate Total Commitment 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, and the expiration
of the Commitments and the Letters of Credit.
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, without the written consent of
the Lender affected thereby; or (b) increase the Aggregate Revolving Loan
Commitment or the Aggregate Term Loan Commitment; or (c) 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 (d) release any Obligor from any liability under its respective Loan
Documents; or (e) 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 (f) amend,
modify or waive, directly or indirectly, the first sentence of Section 2.11; or
(g) 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)(g) 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 as set forth on the
signature pages hereto, or in the Assignment and Acceptance pursuant to which a
Person becomes a party hereto, as applicable, in the case of Agent and 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
provided that any notice, request or demand to or upon the Agent or the Lenders
pursuant to Section 2.1, 2.2, 2.3, 2.4, 2.5 or 2.6 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 Closing 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, and expiration of the Commitments and
Letters of Credit.
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 2.13 and 2.15 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 Commitment 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(s) a new Note or Notes, as
applicable, 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 or
Notes, as applicable, to the order of the transferor Lender in an amount
equal to the Loans retained by it hereunder. Such new Note(s) shall be
dated the Closing Date and shall otherwise be in the form of the Notes
replaced thereby. The Note(s) 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 Notes 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, the termination of this
Agreement, and the expiration of the Commitments and the Letters of
Credit.
(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 RELEASE.
For the avoidance of doubt, the Borrower, for itself, its heirs,
executors, administrators, general partners, limited partners, employees,
representatives, shareholders, predecessors, subsidiaries and/or affiliates,
parents, successors-in-interest, transferees, assigns, officers, directors,
managers, servants, insurers, trustors, trustees, underwriters, successors,
attorneys, and agents, now and in the future, and all persons acting by,
through, under or in concert with them, and each of them, hereby releases and
discharges the Lenders and the Agent (each of which capitalized terms shall be,
for the purposes of this Section 9.17, as defined in this Agreement and as
defined in the Prior Agreement), and each of their past, present and future
administrators, affiliates, agents, assigns, attorneys, consultants and other
professionals, directors, employees, executors, heirs, officers, parents,
partners, predecessors, representatives, shareholders, subsidiaries and
successors, and each of them; and each of their respective administrators,
affiliates, agents, assigns, attorneys, directors, employees, executors, heirs,
officers, parents, partners, predecessors, representatives, shareholders,
subsidiaries and successors, and each of them; and all persons acting by,
through, under or in concert with one or more of them, from any liabilities or
claims arising out of, related to or in any way connected with all claims,
causes of action or other disputes that the Borrower may have against any Lender
or the Agent arising out of, related to or in any way connected with the Prior
Agreement and any document, instrument or agreement executed in connection
therewith, and the Borrower's business relationships with any Lender or the
Agent from the beginning of time through and including the Closing Date (the
foregoing are hereinafter referred to collectively as the "Released Matters").
The Borrower understands and has been advised by its legal counsel of
the provisions of Section 1542 of the California Civil Code, which provides as
follows:
"A general release does not extend to claims which the creditor does not
know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
The Borrower understands and hereby waives the provisions of Civil Code
Section 1542 and declares that it realizes that it may have damages it presently
knows nothing about and that, as to them, they have been released pursuant to
this Section 9.17. The Borrower understands that the Lenders and the Agent would
not agree to enter into this Agreement if this Section 9.17 were not included.
The Borrower represents and warrants that it alone is the owner of the claims
hereby compromised and that it has not heretofore assigned or transferred, nor
purported to assign or transfer, to any Person any of the Released Matters. The
Borrower further agrees to indemnify and hold harmless the Lenders and the Agent
from all liabilities, claims, demands, damages, costs, expenses, and attorneys'
fees incurred by any Lender or the Agent as the result of any Person asserting
any such assignment or transfer of any rights or claims. The Borrower represents
and warrants that none of the Released Matters is subject to any purported or
actual lien, security interest, encumbrance or contractual or other right of any
third party, and the Borrower agrees to indemnify and hold harmless the Lenders
and the Agent from all liabilities, claims, demands, damages, costs, expenses
and attorneys' fees incurred by any Lender or the Agent as the result of any
Person asserting the existence of any of the foregoing.
S-3
Credit Agreement
S-1
Credit Agreement
9.18 EFFECT OF AGREEMENT ON FINANCING STATEMENTS AND LANDLORD CONSENTS.
In connection with the Prior Agreement, and with the credit agreements
and loan agreements theretofore executed by the Borrower that were, in turn,
amended and restated by the Prior Agreement, the Borrower and/or its
Subsidiaries (including the Borrower, as formerly known as VDI Multimedia),
executed and delivered to UBOC, and/or, in the case of UCC Financing Statements,
authorized the filing of, certain UCC Financing Statements and Landlord Consents
in favor of UBOC. The Borrower hereby acknowledges such UCC Financing Statements
and Landlord Consents, agrees that they are intended to be and shall secure,
support and relate to this Agreement and the Obligations, and shall be
considered Loan Documents hereunder, and that, for such purposes, this Agreement
shall be deemed to be an amendment and restatement of the Prior Agreement.
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: Chief Financial Officer
----------------------------------------------------
AGENT
UNION BANK OF CALIFORNIA, N.A.,
as Agent
By: /s/ Gina West
----------------------------------------------------
Name: Gina West
----------------------------------------------------
Title: Vice President
----------------------------------------------------
LENDERS
UNION BANK OF CALIFORNIA, N.A.,
as a Lender
By: /s/ Gina West
-----------------------------------------------------
Name: Gina West
-----------------------------------------------------
Title: Vice President
-----------------------------------------------------
Revolving Loan Commitment: $5,555,555.56
Term Loan Commitment: $4,444,444.44
Address for Notices
(i) for credit matters:
445 South Figueroa Street, 10th Floor
Los Angeles, California 90071
Attention: Gina West
Telephone: (213) 236-6530
Facsimile: (213) 236-7637
(ii) for operational matters:
601 Potrero Grande Drive
Monterey Park, California 91754
Mail Code: 4-957-161
Attention: Theodora Smith
Commercial Loan Agency Services
Telephone: (323) 720-2644
Facsimile: (323) 720-2780
Applicable Lending Office
445 South Figueroa Street
Los Angeles, California 90071
U.S. BANK NATIONAL ASSOCIATION, as a Lender
By: /s/ Sam Kunianski
------------------------------------------------------
Name: Sam Kunianski
------------------------------------------------------
Title: Senior Vice President
------------------------------------------------------
Revolving Loan Commitment: $4,444,444.44
Term Loan Commitment: $3,555,555.56
Address for Notices
(i) for credit matters
15910 Ventura Boulevard
Suite 1712
Mail Sort LM-CA-CL17
Encino, California 91436
Attention: Richard J. Hernandez
Telephone: (818) 817-7257
Facsimile: (818) 789-3041
(ii) for operational matters:
555 SW Oak Street, PL-7
Portland, Oregon 97204
Attention: Marcy Marlow
Telephone: (503) 275-5005
Facsimile: (503) 275-8181
Applicable Lending Office
15910 Ventura Boulevard
Suite 1712
Encino, California 91436