SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND FORBEARANCE
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THIS SECOND AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT AND
FORBEARANCE (this "Amendment"), dated as of June 11, 2001, is entered into among
(1) POINT.360, a California corporation (formerly known as VDI MultiMedia) (the
"Borrower"), (2) the Lenders party to the Credit Agreement referred to below and
(3) UNION BANK OF CALIFORNIA, N.A., as administrative agent for such Lenders (in
such capacity, the "Agent").
RECITALS
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A. The Borrower, the Lenders and the Agent previously entered into that
certain Second Amended and Restated Credit Agreement dated as of September 28,
2000, as amended by a First Amendment to Second Amended and Restated Credit
Agreement dated as of April 5, 2001 (as amended, the "Credit Agreement").
Capitalized terms used herein and not defined shall have the meanings assigned
to them in the Credit Agreement.
B. On or about May 29, 2001, the Borrower informed the Agent that the
aggregate principal amount of Loans outstanding exceeded the Borrowing Base
(such excess, the "Overadvance Amount") by $824,840, resulting in a default of
Sections 2.1(a) and 2.5(d) of the Credit Agreement, and an Event of Default
under Section 7(a) of the Credit Agreement. On or about June 5, 2001, the
Borrower made a principal payment of $250,000, which reduced the Overadvance
Amount to $574,840.
C. As of the date hereof, prior to the effectiveness of this Amendment, (i)
the Aggregate Commitment is $45,000,000 and (ii) the aggregate principal amount
of Loans outstanding under the Credit Agreement is $30,524,324.51. There are no
Letters of Credit outstanding.
D. The Borrower has requested that the Agent and the Lenders forbear from
exercising their rights and remedies under the Credit Agreement due to the
occurrence of the foregoing defaults. The Agent and the Lenders have agreed to
forbear from exercising such rights and remedies, subject to the terms and
conditions set forth below.
E. Finally, the Borrower has informed the Agent and the Lenders that,
effective June 4, 2001, it has changed its name to "Point.360".
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the parties hereto agree as follows:
SECTION 1. ACKNOWLEDGEMENT OF EXISTING EVENT OF DEFAULT AND APPLICATION OF
DEFAULT INTEREST RATE.
(a) The Borrower hereby acknowledges that, on or about May 29, 2001,
the outstanding principal amount of Loans equaled $30,096,325 ($31,024,325,
less $678,000 deducted per the last sentence of the definition of
"Borrowing Base" less a principal prepayment of $250,000 made on such date)
and the Borrowing Base equaled $29,271,485, resulting in an Overadvance
Amount of $824,840 in violation of Section 2.1(a) of the Credit Agreement.
Such Event of Default is continuing and has not been cured. On or about
June 5, 2001, the Borrower made a principal payment of $250,000, which
reduced the Overadvance Amount to $574,840. The Borrower failed to pay the
interest accrued and outstanding on such principal amount. Failure to make
the immediate repayment, with interest, required by Section 2.5(d) has
resulted in a payment Event of Default under Section 7(a) of the Credit
Agreement. Such Event of Default is continuing and has not been cured.
Nothing in this Amendment is intended to, or shall be construed to, waive
such Event of Default.
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(b) The Borrower acknowledges that, pursuant to Section 2.8(c) of the
Credit Agreement, all outstanding amounts under the Credit Agreement are
accruing interest at the default rate described therein (the "Default
Rate"), payable on demand. The parties hereto agree that the Default Rate
shall apply to all such outstanding amounts effective as of May 29, 2001.
SECTION 2. ACKNOWLEDGEMENT OF OUTSTANDING LOANS AND EXISTING LOAN
DOCUMENTS.
(a) The Borrower hereby acknowledges that, as of the date hereof, the
outstanding principal amount of Loans under the Credit Agreement is
$30,524,324.51. In addition, interest on amounts prepaid on or about May
29, 2001 and June 5, 2001 is due and unpaid. The parties hereto agree that
such interest shall be payable on the next Interest Payment Date.
(b) The Borrower acknowledges and agrees that each Loan Document
executed by any Obligor pursuant to the Credit Agreement remains in full
force and effect, including but not limited the following:
(i) those certain Revolving Notes executed by the Borrower, each
dated as of September 28, 2000, (A) in favor of Union Bank of
California, N.A., in the principal amount of $25,000,000, (B) in favor
of Sanwa Bank California, in the principal amount of $10,000,000 and
(C) in favor of U.S. Bank National Association, in the principal amount
of $10,000,000;
(ii) that certain Second Amended and Restated Guaranty, dated as of
September 28, 2000, executed by VDI Multimedia, Inc. in favor of the
Agent;
(iii) that certain Second Amended and Restated Guaranty, dated as of
September 28, 2000, executed by Multi-Media Services, Inc. in favor of
the Agent;
(iv) that certain Second Amended and Restated Security Agreement,
dated as of September 28, 2000, executed by VDI Multimedia, Inc. in
favor of the Agent, pursuant to which the Agent perfected its security
interest, pledge in and lien on the Collateral (as defined therein) by,
inter alia, filing and/or recording UCC-1 Financing Statements and
sending deposit account notices;
(v) that certain Second Amended and Restated Security Agreement,
dated as of September 28, 2000, executed by Multi-Media Services, Inc.
in favor of the Agent, pursuant to which the Agent perfected its
security interest, pledge in and lien on the Collateral (as defined
therein) by, INTER ALIA, filing and/or recording UCC-1 Financing
Statements and sending deposit account notices;
(vi) that certain Second Amended and Restated Security Agreement,
dated as of September 28, 2000, executed by the Borrower in favor of
the Agent, pursuant to which the Agent perfected its security interest,
pledge in and lien on the Collateral (as defined therein) by, inter
alia, filing and/or recording UCC-1 Financing Statements and sending
deposit account notices; and
(vii) that certain Alternative Dispute Resolution Agreement, dated
as of September 28, 2000, executed by the Obligors and the Agent.
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SECTION 3. FORBEARANCE. Subject to fulfillment of the conditions set forth
below, the Agent and the Lenders agree to forbear from exercising until June 18,
2001 (the "Forbearance Period"), their rights and remedies under the Credit
Agreement due to the Event of Default described in Section 1 hereof. The
Borrower agrees and acknowledges that in the event that it fails to cure such
Event of Default prior to such date in accordance with the terms of this
Agreement, (i) such failure shall constitute an immediate Event of Default under
Section 7(a) of the Credit Agreement having no grace period, and (ii) the Agent
and the Lenders may immediately exercise their rights and remedies under the
Credit Agreement and the other Loan Documents due to such Event of Default.
Furthermore, the Agent and the Lenders may exercise their rights and remedies
under the Credit Agreement and the other Loan Documents immediately upon the
occurrence of any Default other than that described in Section 1 hereof,
including any Default of the terms of this Agreement. Nothing contained in this
Agreement shall be interpreted as or be deemed a release or a waiver by the
Agent or the Lenders of any of the terms or conditions of the Loan Documents.
Unless specifically amended herein, all terms and provisions of the Loan
Documents shall remain in full force and effect in accordance with their
original terms. For the avoidance of doubt, the parties hereto agree that no
borrowings under the Credit Agreement, or issuance of Letters of Credit, shall
made during the Forbearance Period.
SECTION 4. ADDITIONAL COVENANTS OF THE BORROWER. In addition to the
covenants set forth in the Credit Agreement, the other Loan Documents and this
Agreement, the Borrower hereby agrees as follows:
(a) REPAYMENT OF OVERADVANCE AMOUNT. Notwithstanding any provision of
the Credit Agreement to the contrary, the Borrower shall repay the
Overadvance Amount as follows: (i) $250,000 in principal amount on June 11,
2001 and (ii) the remaining principal amount of the Overadvance Amount on
June 18, 2001, in each case such payment to be received by the Agent, at
the office of the Agent set forth in the Credit Agreement for repayments,
on or before 12:00 Noon, Los Angeles time. Interest accruing on such
amounts so repaid shall be due and payable on the next Interest Payment
Date.
(b) REPORTING. On or before June 20, 2001, the Borrower shall deliver
to the Agent, with sufficient copies for each Lender, (i) a current report
in form satisfactory to the Lenders providing information with respect to
the Borrower's and the Subsidiaries' accounts payable aging, (ii) revised
projections of the Borrower and its Subsidiaries, in form satisfactory to
the Lenders, covering the period from April 1, 2001 through December 31,
2001, with monthly detail, including an income statement, balance sheet,
cash flow statement, statement of sources and uses, borrowing base
calculations and covenant calculations and (iii) a schedule of annualized
cost savings initiatives with respect to the business of the Borrower and
the Subsidiaries for fiscal year 2001, in form satisfactory to the Lenders,
in each case certified by a Responsible Officer to be (in the case of (i)),
true and correct and (in the case of (ii) and (iii)), based on good faith
estimates and assumptions believed by such Officer to be reasonable.
(c) AUDIT. The Borrower shall cooperate fully in an audit of its and
its Subsidiaries' books, records and facilities, such audit to be (i)
conducted by such auditors and/or consultants as the Lenders shall select
and (ii) commenced on or prior to July 2, 2001. The Borrower agrees to pay
all fees, costs and expenses of such auditors and/or consultants upon
demand by the Agent.
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(d) NAME CHANGE DOCUMENTATION. The Borrower agrees to make all Name
Change Deliveries to the Agent on or before July 10, 2001. Any failure of
the Borrower to perform any of the covenants set forth in this Section 4 in
accordance with their terms shall constitute an immediately Event of
Default having no grace period.
SECTION 5. AMENDMENTS TO CREDIT AGREEMENT. Effective as of the date first
set forth above, the Credit Agreement is hereby amended as follows:
(a) Each reference to "VDI MultiMedia" in the Credit Agreement and the
other Loan Documents is amended to read "Point.360". The Borrower
acknowledges and agrees that it will cooperate fully in executing all UCC-1
Financing Statements, amendments to UCC-1 Financing Statements and other
agreement or instruments, and in taking such other actions, as the Agent
may request in connection therewith (collectively, the "Name Change
Deliveries").
(b) The Aggregate Commitment is reduced from $45,000,000 to
$35,000,000. In connection therewith, Schedule 2.1 to the Credit Agreement
is replaced with Schedule 2.1 hereto.
(c) The table in Section 2.1(e) is restated in its entirety to read as
follows:
REMAINING AGGREGATE
"EFFECTIVE DATE OF REDUCTION COMMITMENT
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December 31, 2004 $30,000,000
December 31, 2005 $0.00"
SECTION 6. CONDITIONS PRECEDENT. This Amendment shall become effective as
of the date first set forth above upon receipt by the Agent of the following:
(a) this Amendment, duly executed by the Borrower and each Lender;
(b) evidence of the Guarantors' consent to this Amendment, in form and
substance acceptable to the Agent;
(c) a release of claims, executed by the Borrower and the Guarantors,
in form and substance acceptable to the Agent;
(d) resolutions of the board of directors of the Borrower, authorizing
this Amendment, certified by an appropriate officer of the Borrower;
(e) all outstanding legal fees incurred by the Agent and/or the Lenders
in connection with the Credit Agreement, to the extent requested by the
Agent or the Lenders to be paid in connection herewith; and
(f) such other documents, agreements and opinions that the Agent or any
Lender may request.
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SECTION 7. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE OTHER
LOAN DOCUMENTS.
(a) Upon the effectiveness of this Amendment, each reference in the
Credit Agreement to "this Agreement," "hereunder," "hereof," or words of
like import referring to the Credit Agreement, and each reference in the
other Loan Documents to "the Credit Agreement," "thereunder," "thereof," or
words of like import referring to the Credit Agreement, shall mean and be a
reference to the Credit Agreement, as amended hereby.
(b) Except as specifically amended herein, the Credit Agreement and all
other Loan Documents are and shall continue to be in full force and effect
and are hereby in all respects ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall
not operate as a waiver of any right, power or remedy of the Agent or the
Lenders under the Credit Agreement or any other Loan Documents, nor
constitute a waiver of any provision of the Credit Agreement or any other
Loan Documents, except as specifically set forth herein.
SECTION 8. REPRESENTATIONS AND WARRANTIES. The Borrower hereby represents
and warrants, for the benefit of the Lenders and the Agent, as follows: (i) the
Borrower has all requisite power and authority under applicable law and under
its charter documents to execute, deliver and perform this Amendment, and to
perform the Credit Agreement as amended hereby; (ii) all actions, waivers and
consents (corporate, regulatory and otherwise) necessary or appropriate for the
Borrower to execute, deliver and perform this Amendment, and to perform the
Credit Agreement as amended hereby, have been taken and/or received; (iii) this
Amendment, and the Credit Agreement, as amended by this Amendment, constitute
the legal, valid and binding obligation of the Borrower enforceable against it
in accordance with the terms hereof; and (iv) each of the Borrower's
representations and warranties set forth in the Credit Agreement and the other
Loan Documents is true and correct as of the date hereof, except to the extent
that such representations and warranties expressly relate to an earlier date.
SECTION 9. EXECUTION IN COUNTERPARTS. This Amendment may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same agreement.
Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of
this Amendment.
SECTION 10. GOVERNING LAW. This Amendment shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
California (without reference to its choice of law rules).
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
POINT.360 (formerly known as VDI Multimedia)
By:
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Name:
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Title:
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UNION BANK OF CALIFORNIA, N.A.,
as Agent and a Lender
By:
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Name:
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Title:
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SANWA BANK CALIFORNIA, as a Lender
By:
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Name:
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Title:
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U.S. BANK NATIONAL ASSOCIATION, as a Lender
By:
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Name:
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Title:
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SCHEDULE 2.1
COMMITMENTS
Revolving Loan
Lender Commitment
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Union Bank of California, N.A. $19,444,444
Sanwa Bank California $ 7,777,778
U.S. Bank National Association $ 7,777,778
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Total $35,000,000