CREDIT AGREEMENT
DATED AS OF DECEMBER 12, 1997
AMONG
PLATINUM ENTERTAINMENT, INC.
INTERSOUND, INC.,
THE LENDERS
PARTY HERETO,
AND
BANK OF MONTREAL,
AS ADMINISTRATIVE AGENT
AND
BANK OF MONTREAL,
AS SYNDICATION AGENT
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
SECTION 1. THE CREDITS ......................................... 1
Section 1.1. Revolving Credit................................... 1
Section 1.2. Revolving Credit Loans............................. 2
Section 1.3. Letters of Credit ................................. 3
Section 1.4. Term Credit ....................................... 6
Section 1.5. Manner and Disbursement of Loans................... 7
Section 1.6. Late Payment By Lender............................. 8
Section 1.7. Appointment of Company as Agent for Borrowers;
Reliance by Administrative Agent................... 9
(a) Appointment........................................ 9
(b) Reliance........................................... 9
SECTION 2. INTEREST, FEES, PREPAYMENTS AND TERMINATIONS........... 9
Section 2.1. Interest Rate Options.............................. 9
Section 2.2. Commitment Fee..................................... 11
Section 2.3. Letter of Credit Fees.............................. 11
Section 2.4. Administrative Agent's Fees........................ 12
Section 2.5. Audit Fees......................................... 12
Section 2.6. Voluntary Prepayments.............................. 12
Section 2.7. Mandatory Prepayments.............................. 12
Section 2.8. Voluntary Terminations............................. 15
SECTION 3. PLACE AND APPLICATION OF PAYMENTS...................... 15
Section 3.1. Generally.......................................... 15
Section 3.2. Application of Collateral Proceeds Before Default.. 16
Section 3.3. Application After Default.......................... 17
Section 3.4. Overfunded Commitments............................. 18
Section 3.5. Borrower's Right to Direct Application............. 18
Section 3.6. Weekly Settlement.................................. 19
Section 3.7. Computation of Obligations Outstanding............. 21
Section 3.8. Notations.......................................... 22
SECTION 4. THE COLLATERAL AND GUARANTIES.......................... 22
Section 4.1. Collateral........................................ 22
Section 4.2. Collateral Proceeds............................... 23
Section 4.3. Further Assurances................................ 24
Section 4.4. Guaranties from Subsidiaries...................... 24
Section 4.5. Collateral Assignment of Life Insurance........... 24
SECTION 5. DEFINITIONS; INTERPRETATION............................ 24
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Section 5.1. Definitions....................................... 24
Section 5.2. Interpretation.................................... 43
Section 5.3. Accounting Terms.................................. 44
SECTION 6. REPRESENTATIONS AND WARRANTIES......................... 44
Section 6.1. Organization and Power............................ 44
Section 6.2. Corporate Authority and Validity of Obligations... 45
Section 6.3. Subsidiaries...................................... 45
Section 6.4. Use of Proceeds; Regulation U..................... 45
Section 6.5. Financial Statements.............................. 46
Section 6.6. Litigation, Taxes and Approvals................... 46
Section 6.7. Burdensome Contracts with Affiliates.............. 46
Section 6.8. ERISA............................................. 47
Section 6.9. Full Disclosure................................... 47
Section 6.10. Compliance with Law............................... 47
Section 6.11. Solvency, etc..................................... 48
SECTION 7. CONDITIONS PRECEDENT................................... 48
Section 7.1. All Advances...................................... 48
Section 7.2. Initial Advance................................... 49
Section 7.3. Legal Matters..................................... 51
SECTION 8. COVENANTS.............................................. 52
Section 8.1. Maintenance of Business........................... 52
Section 8.2. Maintenance....................................... 52
Section 8.3. Taxes............................................. 52
Section 8.4. Insurance......................................... 52
Section 8.5. Financial Reports................................. 53
Section 8.6. Compliance with Laws.............................. 55
Section 8.7. Liens............................................. 55
Section 8.8. Indebtedness...................................... 57
Section 8.9. Consolidated Net Worth............................ 58
Section 8.10. Leverage Ratio.................................... 59
Section 8.11. Consolidated Working Capital...................... 59
Section 8.12. Interest Coverage Ratio........................... 59
Section 8.13. Fixed Charge Coverage Ratio....................... 59
Section 8.14. Capital Expenditures.............................. 60
Section 8.15. Acquisitions, Investments, Loans, Advances and
Guaranties........................................ 60
Section 8.16. Dividends and Certain Other Restricted Payments... 63
Section 8.17. Mergers........................................... 64
Section 8.18. Sale of Assets.................................... 64
Section 8.19. Sales and Leasebacks.............................. 66
Section 8.20. Operating Leases.................................. 66
Section 8.21. Burdensome Contracts with Affiliates.............. 66
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Section 8.22. No Change in Fiscal Year........................... 66
Section 8.23. Formation of Subsidiaries.......................... 66
Section 8.24. Maintenance of Subsidiaries........................ 67
Section 8.25. Nature of Business................................. 67
Section 8.26. Subordinated Debt.................................. 67
Section 8.27. Double Negative Pledge............................. 68
Section 8.28. Intersound......................................... 68
Section 8.29. Interest Rate Protection........................... 69
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.......................... 69
Section 9.1. Events of Default.................................. 69
Section 9.2. Remedies Generally................................. 72
Section 9.3. Remedies Upon Insolvency........................... 72
SECTION 10. THE ADMINISTRATIVE AGENT................................ 72
Section 10.1. Appointment and Authorization...................... 72
Section 10.2. Rights as a Lender................................. 73
Section 10.3. Standard of Care................................... 73
Section 10.4. Costs and Expenses................................. 74
Section 10.5. Indemnity.......................................... 74
Section 10.6. Syndication Agent.................................. 75
SECTION 11. JOINT AND SEVERAL LIABILITY AND GUARANTEES.............. 75
Section 11.1. Joint and Several Liability and Guarantees......... 75
Section 11.2. Guarantee Unconditional............................ 75
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement
in Certain Circumstances........................... 76
Section 11.4. Waivers............................................ 76
Section 11.5. Limit on Recovery.................................. 77
Section 11.6. Stay of Acceleration............................... 77
Section 11.7. Benefit to Guarantors.............................. 77
Section 11.8. Guarantor Covenants................................ 77
SECTION 12. CHANGE IN CIRCUMSTANCE.................................. 77
Section 12.1. Change of Law...................................... 77
Section 12.2. Unavailability of Deposits or Inability to
Ascertain Adjusted LIBOR........................... 78
Section 12.3. Taxes and Increased Costs.......................... 78
Section 12.4. Capital Adequacy................................... 79
Section 12.5. Funding Indemnity.................................. 80
Section 12.6. Lending Branch..................................... 80
Section 12.7. Discretion of Lenders as to Manner of Funding...... 81
Section 12.8. Replacement of Lender.............................. 81
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SECTION 13. MISCELLANEOUS........................................... 82
Section 13.1. Withholding Taxes.................................. 82
Section 13.2. Documentary Taxes.................................. 84
Section 13.3. Waivers, Modifications and Amendments.............. 84
Section 13.4. Costs and Expenses................................. 84
Section 13.5. Survival of Representations and Indemnities........ 85
Section 13.6. Waiver of Rights................................... 85
Section 13.7 Non-Business Day................................... 85
Section 13.8. Notices............................................ 85
Section 13.9. Counterparts....................................... 86
Section 13.10. Successors and Assigns............................. 86
Section 13.11. Participations..................................... 87
Section 13.12. Assignment Agreements.............................. 87
Section 13.13. Construction....................................... 88
Section 13.14. Entire Agreement................................... 88
Section 13.15. Headings........................................... 88
Section 13.16. Confidentiality.................................... 88
Section 13.17. Exclusive Jurisdiction............................. 88
Section 13.18. Waiver of Jury Trial............................... 89
Section 13.19. Governing Law...................................... 89
Exhibit A - Revolving Credit Note
Exhibit B - Term Credit Note
Exhibit C - Borrowing Base Certificate
Exhibit D - Compliance Certificate
Exhibit E - Approved Collateral Locations
Exhibit F - Guaranty Agreement
Exhibit G - Assignment and Acceptance
Schedule 6.3 - Subsidiaries
Schedule 6.6 - Litigation
Schedule 6.7 - Affiliate Transactions
Schedule 8.7 - Permitted Liens
Schedule 8.8 - Existing Indebtedness
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CREDIT AGREEMENT
To:
Bank of Montreal
Chicago, Illinois
and its from time to time assigns
Ladies and Gentlemen:
The undersigned, Platinum Entertainment, Inc., a Delaware corporation (the
"COMPANY"), and Intersound, Inc., a Delaware corporation ("INTERSOUND"), (the
Company and Intersound being hereinafter referred to collectively as the
"BORROWERS" and individually as a "BORROWER"), each applies to you for your
several commitments, subject to the terms and conditions hereof and on the basis
of the representations and warranties hereinafter set forth, to extend credit to
the Borrowers, all as more fully hereinafter set forth. Each of you is
hereinafter referred to as a "LENDER", all of you are hereinafter referred to
collectively as the "LENDERS" and Bank of Montreal ("BMO") in its capacity as
Administrative Agent hereunder is hereinafter referred to as the "ADMINISTRATIVE
AGENT", and Bank of Montreal in its capacity as syndication agent hereunder is
hereinafter referred to as the "SYNDICATION AGENT".
SECTION 1. THE CREDITS.
SECTION 1.1. REVOLVING CREDIT. Subject to the terms and conditions
hereof, each Lender severally agrees to extend a revolving credit (the
"REVOLVING CREDIT") to the Borrowers which may be availed of by each Borrower
from time to time during the period from and including the date hereof to but
not including the Revolving Credit Termination Date, at which time the
commitments of the Lenders to extend credit under the Revolving Credit shall
expire. The maximum amount of the Revolving Credit which each Lender agrees to
extend to the Borrowers taken together, shall be such Lender's Revolving Credit
Commitment. The Revolving Credit may be utilized by each Borrower in the form
of Revolving Loans and Letters of Credit, all as more fully hereinafter set
forth; PROVIDED, HOWEVER, that:
(i) the aggregate principal amount of Revolving Loans and Letters of
Credit outstanding at any one time from the Borrowers, taken together,
shall not exceed the lesser of (x) the aggregate of the Revolving Credit
Commitments and (y) the Borrowing Base, in each case as then determined and
computed for all the Borrowers, taken together; and
(ii) notwithstanding anything in this Agreement to the contrary,
Intersound shall not be entitled to any additional credit under the
Revolving Credit after the merger as required by Section 8.17(b) hereof.
During the period from and including the date hereof to but not including the
Revolving Credit Termination Date, each Borrower may use the Revolving Credit
Commitments by borrowing, repaying and reborrowing Revolving Loans in whole or
in part and/or by having the Administrative Agent issue Letters of Credit,
having such Letters of Credit expire or otherwise terminate without having been
drawn upon or, if drawn upon, reimbursing the Administrative Agent for each such
drawing, and having the Administrative Agent issue new Letters of Credit, all in
accordance with the terms and conditions of this Agreement. For purposes of
this Agreement, where a determination of the unused or available amount of the
Revolving Credit Commitments is necessary, the Revolving Loans and Letters of
Credit shall be deemed to utilize the Revolving Credit Commitments. The
obligations of the Lenders hereunder are several and not joint, and no Lender
shall under any circumstances be obligated to extend credit under the Revolving
Credit in excess of its Revolving Credit Commitment. Notwithstanding any other
provision of this Agreement to the contrary, the Administrative Agent (x) is
imposing the Initial Reserves and (y) may, in its reasonable discretion (based
on its analysis of material changes in the relevant Borrower's credit and
collection policies or practices arising after the Closing Date that cause
dilution of the value of Eligible Accounts, or on any other factors that change
in any material respect the credit risk of lending to the Borrowers on the
security of the Accounts and the inventory), from time to time establish
additional reserves against the amount of availability under the Revolving
Credit which the Borrowers may otherwise request hereunder in such amounts as
the Administrative Agent shall deem necessary or appropriate in its reasonable
judgment. The amount of such Initial Reserves and additional reserves shall be
subtracted from what would otherwise be the Borrowing Base when calculating the
amount of availability under the Revolving Credit Commitments. The
Administrative Agent agrees to give the Company ten (10) Business Days' prior
notice of the establishment of any such additional reserve. Without limiting
the Administrative Agent's discretion with respect to eligibility of the
Collateral, the Administrative Agent intends to review on a periodic basis the
standards for advances against accounts and inventory and impose reserves
against such collateral pursuant to the foregoing provisions.
SECTION 1.2. REVOLVING CREDIT LOANS. Subject to the terms and conditions
hereof, the Revolving Credit may be availed of by any Borrower in the form of
loans (individually a "REVOLVING LOAN" and collectively the "REVOLVING LOANS").
Each Revolving Loan to a Borrower shall be in a minimum amount of $100,000
(except to the extent Section 2 hereof shall require a larger amount for LIBOR
Portions). Each Revolving Loan shall be made pro rata by the Lenders in
accordance with the amounts of their Revolving Credit Commitments. Each
Revolving Loan shall initially constitute part of the Domestic Rate Portion
except to the extent the Company has timely elected at any time after the LIBOR
Condition has been satisfied that such Revolving Loan, or any part thereof,
constitutes part of a LIBOR Portion as provided in Section 2.1 hereof. Each and
every advance made by a Lender of its pro rata share of a Revolving Loan shall
be made against and evidenced by a single Revolving Credit Note of the Borrowers
(individually a "REVOLVING CREDIT NOTE" and collectively the "REVOLVING CREDIT
NOTES"), jointly and severally, payable to the order of such Lender in the
amount of its Revolving Credit Commitment, with each Revolving Credit Note to be
in the form (with appropriate insertions) attached hereto as Exhibit A. Each
Revolving Credit Note shall be dated the date of issuance thereof, be expressed
to bear interest as set forth in
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Section 2.1 hereof, and be expressed to mature on the Revolving Credit
Termination Date. Without regard to the principal amount of each Revolving
Credit Note stated on its face, the actual principal amount at any time
outstanding and owing by the Borrowers on account thereof shall be the sum of
all advances then or theretofore made thereon less all payments of principal
actually received.
SECTION 1.3. LETTERS OF CREDIT.
(a) GENERAL TERMS. Subject to the terms and conditions hereof, the
Revolving Credit may be availed of by any Borrower in the form of commercial or
standby letters of credit issued by the Administrative Agent for the account of
any one or more of the Borrowers (individually a "LETTER OF CREDIT" and
collectively the "LETTERS OF CREDIT"), provided that the aggregate amount of
Letters of Credit issued and outstanding hereunder shall not at any time exceed
$1,000,000 (such amount, as the same may be reduced pursuant to Section 2.8
hereof, being hereinafter referred to as the "L/C COMMITMENT"). For purposes of
this Agreement, a Letter of Credit shall be deemed outstanding as of any time in
an amount equal to the maximum amount which could be drawn thereunder under any
circumstances and over any period of time plus any unreimbursed drawings then
outstanding with respect thereto. If and to the extent any Letter of Credit
expires or otherwise terminates without having been drawn upon, the availability
under the Revolving Credit Commitments shall to such extent be reinstated. The
Letters of Credit shall be issued by the Administrative Agent, but each Lender
shall be obligated to reimburse the Administrative Agent for such Lender's pro
rata share of the amount of each draft drawn under a Letter of Credit in
accordance with this Section 1.3 and, accordingly, each Letter of Credit shall
be deemed to utilize the Revolving Credit Commitments of all Lenders pro rata in
accordance with the amounts of their Revolving Credit Commitments.
(b) TERM. Each Letter of Credit issued hereunder shall expire not later
than the earlier of (i) twelve (12) months from the date of issuance (or be
cancelable not later than twelve (12) months from the date of issuance and each
renewal) or (ii) the Revolving Credit Termination Date. In the event the
Administrative Agent issues any Letter of Credit with an expiration date that is
automatically extended unless the Administrative Agent gives notice that the
expiration date will not so extend beyond its then scheduled expiration date,
the Administrative Agent will give such notice of non-renewal before the time
necessary to prevent such automatic extension if before such required notice
date (i) the expiration date of such Letter of Credit if so extended would be
after the Revolving Credit Termination Date, (ii) the Revolving Credit
Commitments have terminated or (iii) an Event of Default exists and the Required
Lenders have given the Administrative Agent instructions not to so permit the
extension of the expiration date of such Letter of Credit.
(c) GENERAL CHARACTERISTICS. Each Letter of Credit issued hereunder shall
be payable in U.S. Dollars, conform to the general requirements of the
Administrative Agent for the issuance of commercial or standby letters of
credit, as the case may be, as to form and substance, and be a letter of credit
which the Administrative Agent may lawfully issue. The Administrative Agent
agrees to issue amendments to the Letter(s) of Credit increasing the amount, or
extending the expiration date thereof at the request of the Company (which is
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acting on behalf of the Borrowers pursuant to Section 1.7 hereof), subject to
the conditions of Section 7 and the other terms of this Section 1.3. Without
limiting the generality of the foregoing, the Administrative Agent's obligation
to issue, amend or extend the expiration date of a Letter of Credit is subject
to the conditions of Section 7 and the other terms of this Section 1.3 and the
Administrative Agent will not issue, amend or extend the expiration date of any
Letter of Credit if any Lender notifies the Administrative Agent of any failure
to satisfy or otherwise comply with such conditions and terms and directs the
Administrative Agent not to take such action.
(d) APPLICATIONS. At the time the Company (which is acting on behalf of
the Borrowers pursuant to Section 1.7 hereof) requests each Letter of Credit to
be issued (or prior to the first issuance of a Letter of Credit in the case of a
continuing application), the Borrower for whose account such Letter of Credit is
to be issued shall execute and deliver to the Administrative Agent an
application for such Letter of Credit in the form then customarily prescribed by
the Administrative Agent (individually an "APPLICATION" and collectively the
"APPLICATIONS"). Subject to the other provisions of this subsection, the
obligation of a Borrower to reimburse the Administrative Agent for drawings
under a Letter of Credit issued for such Borrower's account shall be governed by
the Application for such Letter of Credit. Anything contained in the
Applications to the contrary notwithstanding, (i) in the event the
Administrative Agent is not reimbursed by a Borrower for the amount the
Administrative Agent pays on any draft drawn under a Letter of Credit issued
hereunder issued for such Borrower's account by 11:00 a.m. (Chicago time) on the
date when such drawing is paid, the obligation of such Borrower to reimburse the
Administrative Agent for the amount of such draft paid shall bear interest
(which such Borrower hereby promises to pay on demand) from and after the date
the draft is paid until payment in full thereof at a fluctuating rate per annum
determined by adding 2% to the Domestic Rate as from time to time in effect,
(ii) the Borrowers shall pay fees in connection with each Letter of Credit as
set forth in Section 2.3 hereof, (iii) except as otherwise provided in Section
2.7 hereof, prior to the occurrence of a Default or an Event of Default the
Administrative Agent will not call for additional collateral security for the
obligations of the Borrowers under the Applications other than the collateral
security contemplated by this Agreement and the Collateral Documents and
collateral security consisting of rights in goods (or documents of title
covering the same) financed under such Applications, and (iv) except as
otherwise provided in Section 2.7 hereof, prior to the occurrence of a Default
or an Event of Default the Administrative Agent will not call for the funding of
a Letter of Credit by any Borrower prior to being presented with a draft drawn
thereunder (or, in the event the draft is a time draft, prior to its due date).
Each Borrower hereby irrevocably authorizes the Administrative Agent to charge
any of such Borrowers' deposit accounts maintained with the Administrative Agent
for the amount necessary to reimburse the Administrative Agent for any drafts
drawn under Letters of Credit issued hereunder.
(e) CHANGE IN LAWS. If the Administrative Agent or any Lender shall
reasonably determine that any change after the Closing Date in any applicable
law, regulation or guideline (including, without limitation, Regulation D of the
Board of Governors of the Federal Reserve System) or the adoption after the
Closing Date of any new law, regulation or guideline, or any interpretation of
any of the foregoing by any governmental authority
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charged with the administration thereof or any central bank or other fiscal,
monetary or other authority having jurisdiction over the Administrative Agent
or such Lender (whether or not having the force of law), shall:
(i) impose, modify or deem applicable any reserve, special deposit or
similar requirement against the Letters of Credit, or the Administrative
Agent's or such Lender's or any Borrower's liability with respect thereto;
or
(ii) impose on the Administrative Agent or such Lender any penalty
with respect to the foregoing or any other condition regarding the
Applications or the Letters of Credit;
and the Administrative Agent or such Lender shall determine in good faith that
the result of any of the foregoing is to increase the cost (whether by incurring
a cost or adding to a cost) to the Administrative Agent or such Lender of
issuing, maintaining or participating in the Letters of Credit hereunder
(without benefit of, or credit for, any prorations, exemptions, credits or other
offsets available under any such laws, regulations, guidelines or
interpretations thereof), then the relevant Borrower shall within fifteen (15)
days after demand by the Administrative Agent or such Lender pay the
Administrative Agent or such Lender such additional amounts as the
Administrative Agent or such Lender shall reasonably determine are sufficient to
compensate and indemnify it for such increased cost. If the Administrative
Agent or any Lender makes such a claim for compensation, it shall provide the
Company (with a copy to the Administrative Agent in the case of any Lender) a
certificate setting forth the computation of the increased cost as a result of
any event mentioned herein in reasonable detail and such certificate shall be
deemed PRIMA FACIE correct. In determining such amount, such Lender may use
reasonable averaging and attribution methods. A Lender shall not be entitled to
compensation under this Section 1.3(e) with respect to any adoption or change
for any period prior to the earlier of (i) the date it notifies any Borrower of
the adoption or change giving rise to the request for compensation or (ii) the
date which is thirty (30) days prior to the date it becomes aware of the
adoption or change giving rise to the request for compensation if any Borrower
is notified of the adoption or change prior to the lapse of such 30-day period.
(f) PARTICIPATIONS IN LETTERS OF CREDIT. Each Lender shall participate on
a pro rata basis in the Letters of Credit issued by the Administrative Agent,
which participation shall automatically arise upon the issuance of each Letter
of Credit. Each Lender unconditionally agrees that in the event the
Administrative Agent is not immediately reimbursed by a Borrower for the amount
paid by the Administrative Agent on any draft presented under a Letter of Credit
issued for such Borrower's account, then in that event such Lender shall pay to
the Administrative Agent such Lender's pro rata share of the amount of each
draft so paid based on the percentage which its Revolving Credit Commitment
bears to the aggregate of the Revolving Credit Commitments and in return such
Lender shall automatically receive an equivalent percentage participation in the
rights of the Administrative Agent to obtain reimbursement from such Borrower
for the amount of such draft, together with interest thereon as provided for
herein. The obligations of the Lenders to the Administrative Agent under this
subsection shall be absolute, irrevocable and unconditional under any and all
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circumstances whatsoever and shall not be subject to any set-off,
counterclaim or defense to payment which any Lender may have or have had
against any Loan Party, the Administrative Agent, any other Lender or any
other party whatsoever. In the event that any Lender fails to honor its
obligation to reimburse the Administrative Agent for its pro rata share of
the amount of any such draft, then in that event (i) each other Lender shall
pay to the Administrative Agent its pro rata share of the payment due the
Administrative Agent from the defaulting Lender, (ii) the defaulting Lender
shall have no right to participate in any recoveries from the Loan Parties in
respect of such draft and (iii) all amounts to which the defaulting Lender
would otherwise be entitled under the terms of this Agreement or any of the
other Loan Documents shall first be applied to reimbursing the Lenders for
their respective pro rata shares of the defaulting Lender's portion of the
draft, together with interest thereon as provided for herein. Upon
reimbursement to the other Lenders (pursuant to clause (iii) above or
otherwise) of the amount advanced by them to the Administrative Agent in
respect of the defaulting Lender's share of the draft together with interest
thereon, the defaulting Lender shall thereupon be entitled to its
participation in the Administrative Agent's right of recovery against the
Loan Parties in respect of the draft paid by the Administrative Agent.
(g) MANNER OF OBTAINING LETTERS OF CREDIT. The Company (which is
acting on behalf of the Borrowers pursuant to Section 1.7 hereof) shall
provide at least three (3) Business Days' advance written notice to the
Administrative Agent of each Borrower's request for the issuance for such
Borrower's account of a Letter of Credit which is a standby Letter of Credit
and shall provide the Administrative Agent notice of each Borrower's request
for the issuance for such Borrower's account of a Letter of Credit which is a
commercial Letter of Credit not later than 11:00 a.m. (Chicago time) on the
first Business Day preceding the Business Day on which such Letter of Credit
is to be issued, such notice in each case to be accompanied by an Application
for such Letter of Credit properly completed and executed by the Company or
such Borrower together with the fees called for by this Agreement. In the
case of an extension or an increase in the amount of a Letter of Credit, the
Company (which is acting on behalf of the Borrowers pursuant to Section 1.7
hereof) shall provide the Administrative Agent a written request therefor, in
a form acceptable to the Administrative Agent, in each case together with the
fees called for by this Agreement at least three (3) Business Days in advance
of such extension of or increase in a Letter of Credit which is a standby
Letter of Credit and in the case of a request for such an extension of or
increase in a Letter of Credit which is a commercial Letter of Credit, not
later than 11:00 a.m. (Chicago time) on the first Business Day preceding the
effective date of such extension or increase. The Administrative Agent shall
promptly notify each Lender of the Administrative Agent's receipt of each
notice for such an issuance, extension or increase and the Administrative
Agent's issuance, extension or increase of the Letter of Credit so requested.
SECTION 1.4. TERM CREDIT. Subject to all of the terms and conditions
hereof, each Lender agrees to make a loan to the Company in the amount of its
Term Credit Commitment (the credit facility under which such loans are made
being hereinafter referred to as the "TERM CREDIT") (the loans from all the
Lenders under the Term Credit being hereinafter referred to collectively as the
"TERM LOAN"). The Term Loan shall be
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made pro rata by the Lenders in accordance with the amount of their Term
Credit Commitments. The Term Loan shall initially constitute part of the
Domestic Rate Portion except to the extent the Company has timely elected at
any time after the LIBOR Condition has been satisfied that the Term Loan, or
any part thereof, constitutes part of a LIBOR Portion as provided in Section
2.1 hereof. The Lenders' advances of the Term Loan shall be made
concurrently and the Term Loan shall be disbursed in a single advance made,
if at all, on or before December 15, 1997, at which time the commitments of
the Lenders to make the Term Loan shall expire. Each Lender's pro rata share
of the Term Loan shall be evidenced by a Term Credit Note of the Company
(individually a "TERM CREDIT NOTE" and collectively the "TERM CREDIT NOTES")
payable to the order of such Lender in the amount of its Term Credit
Commitment, each Term Credit Note to be in the form (with appropriate
insertions) attached hereto as Exhibit B. Each Term Credit Note shall be
expressed to mature in eleven (11) consecutive quarterly installments
(commencing on June 1, 1998 and continuing on the first day of each
September, December, March and June occurring thereafter to and including
December 1, 2000, with all such installments (except the last such
installment) on all Term Credit Notes to aggregate $1,000,000 per installment
and the last such installment on all Term Credit Notes to aggregate
$10,000,000 for such last installment and with the amount of each installment
due on the Term Credit Note held by each Lender to be a pro rata part (based
on the relationship which its Term Credit Commitment bears to the total Term
Credit Commitments) of each such aggregate amount. No amount repaid on the
Term Credit Notes may be reborrowed.
SECTION 1.5. MANNER AND DISBURSEMENT OF LOANS. (a) The Company (which is
acting on behalf of the Borrowers pursuant to Section 1.7 hereof) shall give
written or telephonic notice to the Administrative Agent (which notice shall be
irrevocable once given and, if given by telephone, shall be promptly confirmed
in writing) by no later than 11:00 a.m. (Chicago time) of the date any Borrower
requests that any Revolving Loan be made to it under the Revolving Credit
Commitments and of the date it requests the Term Loan to be made to it under the
Term Credit, and the Administrative Agent shall promptly notify each Lender of
the Administrative Agent's receipt of each such notice. Each such notice shall
specify the name of the Borrower to whom the Loan requested is to be made (in
the case of a Revolving Loan), the date of the Loan requested (which must be a
Business Day), whether such Loan is a Revolving Loan or Term Loan and the amount
of such Loan. The Borrowers agree that the Administrative Agent may rely upon
any written or telephonic notice given by any person the Administrative Agent
reasonably and in good faith believes is an Authorized Representative without
the necessity of independent investigation and, in the event any telephonic
notice conflicts with the written confirmation, such telephonic notice shall
govern if the Administrative Agent and the Lenders have acted in reliance
thereon.
(b) The Borrowers hereby irrevocably authorize the Lenders to make
Revolving Loans from time to time hereunder for reimbursement of a drawing paid
by the Administrative Agent on a Letter of Credit, any such Revolving Loan may
be made without regard to the provisions of Section 7 hereof. The Borrowers
acknowledge and agree, however, that the Lenders shall not be under any
obligation to make a Revolving Loan under
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this Section 1.5(b), and the Lenders shall incur no liability to any Borrower
or any other Person for refusing to make a Revolving Loan under this
Section 1.5(b).
(c) Not later than 1:00 p.m. (Chicago time) on the date specified for any
Loan to be made by a Lender hereunder, such Lender shall make the proceeds of
its pro rata share of such Loan available to the Administrative Agent in
Chicago, Illinois in immediately available funds. Subject to the provisions of
Section 7 hereof, the proceeds of each Loan shall be made available to the
relevant Borrower at the principal office of the Administrative Agent in
Chicago, Illinois, in immediately available funds, upon receipt by the
Administrative Agent from each Lender of its pro rata share of such Loan.
Unless the Administrative Agent shall have been notified by a Lender prior to
12:30 p.m. (Chicago time) on the date a Loan is to be made hereunder that such
Lender does not intend to make its pro rata share of such Loan available to the
Administrative Agent, the Administrative Agent may assume that such Lender has
made such share available to the Administrative Agent on such date and the
Administrative Agent may in reliance upon such assumption make available to the
relevant Borrower a corresponding amount.
SECTION 1.6. LATE PAYMENT BY LENDER. If an amount due the Administrative
Agent from a Lender (x) to fund such Lender's pro rata share of a Loan as
required by Section 1.5, or (y) to effect the Settlement (as hereinafter
defined) of any Loan as required of Section 3.6 hereof, in the case of each of
clause (x) and (y), is not in fact made available to the Administrative Agent by
such Lender and the Administrative Agent has made the corresponding amount
available to such Borrower, the Administrative Agent shall be entitled to
receive such amount from such Lender forthwith upon the Administrative Agent's
demand, together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to such Borrower and
ending on but excluding the date the Administrative Agent recovers such amount
at a rate per annum equal to the effective rate charged to the Administrative
Agent for overnight federal funds transactions with member banks of the federal
reserve system for each day as determined by the Administrative Agent (or in the
case of a day which is not a Business Day, then for the preceding day). If such
amount is not received from such Lender by the Administrative Agent within five
(5) days after demand, the relevant Borrower will, on demand, repay to the
Administrative Agent the proceeds of the Loan attributable to such defaulting
Lender with interest thereon at a rate per annum equal to the interest rate
applicable to the relevant Loan, but (i) without such payment being considered a
payment or prepayment of a LIBOR Portion (so that the Company will have no
liability under Section 12.5 hereof with respect to such payment) and (ii)
without such payment impairing or otherwise prejudicing the relevant Borrower's
claims and other rights against such defaulting Lender. The failure of any
Lender to make its share of a Loan to be made by it as required by Section 1.5
shall not relieve any other Lender of its obligations, if any, hereunder to make
its share of a Loan, or relieve the Lender who failed to make such amount
available to subsequently fund such amount, or relieve any Lender (including the
Lender that failed to make such amount available) of its obligation hereunder to
fund its ratable portion of any subsequent Revolving Loans.
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SECTION 1.7. APPOINTMENT OF COMPANY AS AGENT FOR BORROWERS; RELIANCE BY
ADMINISTRATIVE AGENT.
(a) APPOINTMENT. Each Borrower irrevocably appoints the Company as its
agent hereunder to make requests on such Borrower's behalf under Section 1
hereof for Loans to be made by such Borrower or Letters of Credit to be issued
for such Borrower's account, to select (after the LIBOR Condition has been
satisfied) the interest rate to be applicable to the Loans, to terminate the
Revolving Credit Commitments and to take any other action contemplated by the
Loan Documents with respect to credit extended hereunder to such Borrower. The
Administrative Agent and the Lenders shall be entitled to conclusively presume
that any action by the Company under the Loan Documents is taken on behalf of
any one or more of the Borrowers whether or not the Company so indicates.
(b) RELIANCE. All requests for Loans and Letters of Credit may be written
or oral, including by telephone or telecopy. The Borrowers agree that the
Administrative Agent may rely on any such notice given by any person the
Administrative Agent reasonably and in good faith believes is an Authorized
Representative without the necessity of independent investigation (the Borrowers
hereby indemnifying the Administrative Agent and Lenders from any liability or
loss ensuing from such reliance), and in the event any such telephonic or other
oral notice conflicts with any written confirmation, such oral or telephonic
notice shall govern if the Administrative Agent has acted in reliance thereon.
SECTION 2. INTEREST, FEES, PREPAYMENTS AND TERMINATIONS
SECTION 2.1. INTEREST RATE OPTIONS.
(a) PORTIONS. Subject to the terms and conditions of this Section 2,
portions of the principal indebtedness evidenced by the Notes (all of the
indebtedness evidenced by the Notes bearing interest at the same rate for the
same period of time being hereinafter referred to as a "PORTION") may, at the
option of the Company (which is acting on behalf of the Borrowers pursuant to
Section 1.7 hereof), bear interest with reference to the Domestic Rate
("DOMESTIC RATE PORTIONS") or with reference to the Adjusted LIBOR ("LIBOR
PORTIONS"), and Portions may be converted from time to time from one basis to
another. All of the indebtedness evidenced by the Notes which is not part of a
LIBOR Portion shall constitute a single Domestic Rate Portion. Prior to
satisfaction of the LIBOR Condition, all of the indebtedness evidenced by the
Notes shall constitute a single Domestic Rate Portion. All of the indebtedness
evidenced by the Notes which bears interest with reference to a particular
Adjusted LIBOR for a particular Interest Period shall constitute a single LIBOR
Portion. There shall not be more than ten (10) LIBOR Portions applicable to the
Notes outstanding at any one time, and each Lender shall have a ratable interest
in each Portion. Anything contained herein to the contrary notwithstanding, (i)
no LIBOR Portion shall be created prior to satisfaction of the LIBOR Condition
and (ii) the obligation of the Lenders to create, continue or effect by
conversion any LIBOR Portion shall be conditioned upon the fact that at the time
of each such creation, continuance or conversion into a LIBOR Portion, as the
case may be, no Default or Event of Default shall have occurred and be
continuing. The
-9-
Company hereby promises to pay interest on each Portion at the rates and
times specified in this Section 2.1.
(b) DOMESTIC RATE PORTION. Each Domestic Rate Portion shall bear
interest at the rate per annum determined by adding the Applicable Domestic
Rate Margin to the Domestic Rate as in effect from time to time, provided
that if and so long as any Default or Event of Default under Section 9.1(a)
hereof (a "PAYMENT DEFAULT") shall have occurred and be continuing such
Portion shall bear interest until payment in full thereof at the rate per
annum determined by adding 2% to the interest rate which would otherwise be
applicable thereto from time to time. Interest on each Domestic Rate Portion
shall be payable monthly in arrears on the first Business Day of each month
(commencing on January 1, 1998) and at maturity of the Notes, and interest
after maturity (whether by lapse of time, acceleration or otherwise) shall be
due and payable upon demand. Any change in the interest rate on the Domestic
Rate Portions resulting from a change in the Domestic Rate shall be effective
on the date of the relevant change in the Domestic Rate.
(c) LIBOR PORTIONS. Each LIBOR Portion shall bear interest for each
Interest Period selected therefor at a rate per annum determined by adding the
Applicable LIBOR Margin to the Adjusted LIBOR for such Interest Period, provided
that if and so long as any Payment Default shall have occurred and be continuing
such LIBOR Portion shall bear interest until such Payment Default no longer
exists (or, if earlier, the end of the Interest Period then applicable to such
LIBOR Portion) at the rate per annum determined by adding 2% to the interest
rate which would otherwise be applicable thereto, and effective at the end of
such Interest Period, if such Payment Default is then continuing, such LIBOR
Portion shall automatically be converted into and added to the applicable
Domestic Rate Portion and shall thereafter bear interest until such Payment
Default no longer exists at the interest rate applicable to such Domestic Rate
Portion during the continuance of a Payment Default. Interest on each LIBOR
Portion shall be due and payable on the last day of each Interest Period
applicable thereto and, with respect to any Interest Period applicable to a
LIBOR Portion in excess of three (3) months, on the Business Day three (3)
calendar months following the date such Interest Period commenced and at the end
of such Interest Period, and interest after maturity (whether by lapse of time,
acceleration or otherwise) shall be due and payable upon demand. The Company
(which is acting on behalf of the Borrowers pursuant to Section 1.7 hereof)
shall notify the Administrative Agent on or before 11:00 a.m. (Chicago time) on
the third Business Day preceding the end of an Interest Period applicable to a
LIBOR Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in
which event the Company shall notify the Administrative Agent of the new
Interest Period selected therefor, and in the event the Company shall fail to so
notify the Administrative Agent, such LIBOR Portion shall automatically be
converted into and added to the applicable Domestic Rate Portion as of and on
the last day of such Interest Period. The Administrative Agent shall promptly
notify each Lender of each notice received from the Company pursuant to the
foregoing provision.
(d) MINIMUM LIBOR PORTION AMOUNTS. Each LIBOR Portion shall be in an
amount equal to $1,000,000 or such greater amount which is an integral multiple
of $100,000.
-10-
(e) COMPUTATION OF INTEREST. All interest on the Domestic Rate Portion of
the Notes shall be computed on the basis of a year of 365 or 366 days, as the
case may be, for the actual number of days elapsed. All interest on LIBOR
Portions of the Notes shall be computed on the basis of a year of 360 days for
the actual number of days elapsed.
(f) MANNER OF RATE SELECTION. The Company (which is acting on behalf of
the Borrowers pursuant to Section 1.7 hereof) shall notify the Administrative
Agent by 11:00 a.m. (Chicago time) at least three (3) Business Days prior to the
date upon which the Company requests that any LIBOR Portion be created or that
any part of the applicable Domestic Rate Portion be converted into a LIBOR
Portion (each such notice to specify in each instance the amount thereof and the
Interest Period selected therefor). The Administrative Agent shall promptly
notify each Lender of each notice received from the Company pursuant to the
foregoing provision. If any request is made to convert a LIBOR Portion into the
Domestic Rate Portion, such conversion shall only be made so as to become
effective as of the last day of the Interest Period applicable thereto. All
requests for the creation, continuance and conversion of Portions under this
Agreement shall be irrevocable. Such requests may be written or oral and the
Administrative Agent is hereby authorized to honor telephonic requests for
creations, continuances and conversions received by it from any person the
Administrative Agent in good faith believes to be an Authorized Representative
without the necessity of independent investigation, the Borrowers hereby
indemnifying the Administrative Agent and the Lenders from any liability or loss
ensuing from so acting.
SECTION 2.2. COMMITMENT FEE. For the period from and including the date
hereof to but not including the Revolving Credit Termination Date, the Borrowers
shall pay to the Administrative Agent for the account of the Lenders a
commitment fee at the rate of 1/2 of 1% per annum (computed on the basis of a
year of 360 days for the actual number of days elapsed) on the average daily
unused portion of the Revolving Credit Commitments (whether or not available by
reason of, among other things, the Borrowing Base requirements hereof). Such
commitment fee shall be payable monthly in arrears on the first Business Day of
each calendar month in each year (commencing January 1, 1998) and on the
Revolving Credit Termination Date.
SECTION 2.3. LETTER OF CREDIT FEES. (i) SHARED FEES. On the first
Business Day of each calendar quarter (commencing on January 1, 1998) to and
including, and on, the Revolving Credit Termination Date, the Borrowers shall
pay to the Administrative Agent for the ratable account of the Lenders a fee at
the rate of 1/2 of 1% per annum (computed on the basis of a year of 360 days for
the actual number of days elapsed) on the average daily outstanding amounts
during the preceding quarter (or such shorter period) of the Letters of Credit.
(ii) GENERALLY. In addition to the letter of credit fees called for
above, the Borrowers further agree to pay to the Administrative Agent for its
own account such processing and transaction fees and charges as the
Administrative Agent from time to time customarily imposes in connection with
any amendment, cancellation, negotiation and/or payment of letters of credit and
drafts drawn thereunder.
-11-
SECTION 2.4. ADMINISTRATIVE AGENT'S FEES. The Company shall
pay to the Administrative Agent the fees agreed to in a letter exchanged
between them.
SECTION 2.5. AUDIT FEES. The Borrowers shall pay to the
Administrative Agent for its own use and benefit charges for audits of the
Collateral performed by the Administrative Agent or its agents or
representatives in such amounts as the Administrative Agent may from time to
time reasonably request (the Administrative Agent acknowledging and agreeing
that such charges shall be computed in the same manner as the Administrative
Agent at the time customarily uses for the assessment of charges for similar
collateral audits); PROVIDED, HOWEVER, that in the absence of any Event of
Default, (i) the Borrowers shall not be required to reimburse the
Administrative Agent for its costs of conducting more than two (2) audits in
any one (1) calendar year and (ii) the Borrowers shall not be liable during
any one calendar year for more than $12,500 in charges for such audits plus
reasonable out-of-pocket costs and expenses.
SECTION 2.6. VOLUNTARY PREPAYMENTS. In addition to such
other prepayments of the Notes as result from the application of proceeds of
the Collateral required by Section 4.2 hereof after the Loan Mechanization
Date, each Borrower shall have the privilege of making additional prepayments
of the Notes on which such Borrower is directly obligated, in whole or in
part (but if in part, then in a minimum amount of $10,000), at any time upon
one (1) Business Day's prior notice from the Company to the Administrative
Agent (such notice if received subsequent to 11:00 a.m. (Chicago time) on a
given day to be treated as though received at the opening of business on the
next Business Day), which shall promptly so notify the Lenders, by paying to
the Administrative Agent for the account of the Lenders (i) the principal
amount to be prepaid, (ii) if such a prepayment prepays a Class of Notes in
full, accrued interest on such Class of Notes to the date of prepayment plus
(in the case such a prepayment in full of the Revolving Credit Notes is
accompanied by the termination in whole of the Revolving Credit Commitments)
any commitment fee which has accrued and is unpaid and (iii) any amounts due
to the Lenders under Section 12.5 hereof.
SECTION 2.7. MANDATORY PREPAYMENTS.
(a) REVOLVING CREDIT COMMITMENT OR BORROWING BASE DEFICIENCY.
The Borrowers covenant and agree that if at any time the then unpaid
principal balance of the Revolving Loans and outstanding Letters of Credit
for all the Borrowers, taken together, shall be in excess of the lesser of
(i) the Revolving Credit Commitments as then in effect or (ii) the Borrowing
Base of all the Borrowers, taken together, as then determined and computed,
the Borrowers shall immediately and without notice or demand pay the amount
of the excess to the Administrative Agent for the account of the Lenders as
and for a mandatory prepayment on such Obligations, with each such prepayment
first to be applied to the Revolving Loans until payment in full thereof and
any remaining balance of the payment so made to be applied against or held by
the Administrative Agent as collateral security for the Obligations owing
under the Applications.
(b) PREPAYMENTS DUE TO EXCESS CASH FLOW. Within forty-five
(45) days after the close of each semi-annual accounting period of the
Company ending in February and August
-12-
of each year (commencing with the accounting period ending on or about
February 28, 1998), the Borrowers shall pay over to the Administrative Agent
for the account of the Lenders as and for a mandatory prepayment on the Term
Loan an amount equal to 66-2/3% of Consolidated Excess Cash Flow for such
six-month accounting period; PROVIDED, HOWEVER, that no such prepayment is
required if the Consolidated Excess Cash Flow for such six-month period is
less than or equal to $150,000. Each such prepayment shall be applied to the
several installments due on the outstanding principal balance of the Term
Loan in the inverse order of their maturity.
(c) CHANGE OF CONTROL MANAGEMENT EVENT. If, no later than
sixty (60) days after receiving notice under Section 8.5(i) of a Change of
Control/Management Event, the Required Lenders notify the Company that they
require prepayment of the Notes, on the date set forth in such notice (which
date shall be no earlier than (i) three (3) days after such notice is given
or (ii) the day on which any Borrower repays any other Indebtedness for
Borrowed Money aggregating $200,000 or more before its original scheduled due
date, whichever day is earlier), the Borrowers shall pay in full all
Obligations then outstanding, and the Commitments shall terminate in full.
(d) DISPOSITION PROCEEDS. Any and all net proceeds (net
proceeds for purposes of this Section and Section 8.18 hereof to mean gross
proceeds net only of customary out-of-pocket fees, costs and expenses
incurred in effecting the relevant sale or other disposition and taxes (other
than income taxes) incurred and payable as a result of such disposition)
derived from (x) the sale or disposition (whether voluntary or involuntary),
or on account of the damage or destruction, of the real estate, furniture,
fixtures, equipment or other fixed or capital assets of any Loan Party
(collectively, "FIXED ASSETS") or (y) the sale or other disposition of any
intellectual property (such as Music Rights) or other Property (other than
fixed assets) permitted by Section 8.18 hereof to the extent such Section
requires a prepayment under this Section shall, promptly but in any event
within three (3) Business Days after receipt by any Loan Party or the
Administrative Agent, be paid over to the Administrative Agent for the
account of the Lenders as and for a mandatory prepayment on the Term Credit
Notes (each such prepayment to be applied to the several installments due on
the outstanding principal balance of the Term Loan in the inverse order of
their maturity); PROVIDED, HOWEVER, that:
(i) No prepayment shall be required with respect to proceeds received
from the sale, damage or destruction of any fixed assets subject to liens
permitted by Sections 8.7(c) and 8.7(d) hereof which are prior to the liens
of the Collateral Documents to the extent such proceeds are applied in
reduction of the indebtedness permitted by Section 8.8(b) hereof;
(ii) So long as no Default or Event of Default has occurred or is
continuing, the relevant Loan Party may retain the proceeds (including any
insurance proceeds) derived from the sale, damage or destruction of fixed
assets (collectively, "RETAINED PROCEEDS") if and to the extent that the
fixed assets sold, damaged or destroyed have been (or, within 180 days of
such sale, damage or destruction, will be) replaced (or repaired in the
case of damaged property) with new fixed assets or other assets useful
-13-
in the business of such Loan Party of similar value and utility which are
subject to a first lien in favor of the Administrative Agent to secure the
Obligations;
(iii) So long as no Default or Event of Default has occurred or is
continuing, the relevant Loan Party may retain the proceeds of any sale or
other disposition of any Music Rights or other intellectual property
(collectively, "LICENSE PROCEEDS") if and to the extent that (x) the
intellectual property sold or otherwise disposed of is replaced within 270
days of such sale or other disposition or (y) if a binding contract to
replace such intellectual property has been entered into within 270 days of
such sale or disposition, such intellectual property is replaced within 360
days of such sale or disposition, in each case with similar intellectual
property useful in the business of such Loan Party which is subject to a
first lien in favor of the Administrative Agent to secure the Obligations;
(iv) So long as no Default or Event of Default has occurred or is
continuing, the relevant Loan Party may retain the proceeds of any sale or
other disposition of any interest in the House of Blues Venture
(collectively, "HOB PROCEEDS") if and to the extent that (x) the net
proceeds of the interest sold or otherwise disposed of are reinvested
within 270 days of such sale or other disposition or (z) if a binding
contract to reinvest such net proceeds has been entered into within 270
days of such sale or disposition, such net proceeds are reinvested within
360 days of such sale or disposition, in each case in the business of such
Loan Party in a form which is subject to a first lien in favor of the
Administrative Agent to secure the Obligations;
(v) no prepayment shall be required with respect to up to $100,000 of
net proceeds received in any calendar year from the sale or other
disposition of fixed assets which are worn out, obsolete or, in the
reasonable judgment of the Company, no longer necessary to the conduct of
the business of the Company and its Subsidiaries as then conducted; and
(vi) no prepayment shall be required with respect to any sales,
transfers or other dispositions permitted pursuant to clauses (i), (ii),
(iv) and (x) of Section 8.18 hereof.
Any retained proceeds, license proceeds or HOB proceeds not used for such
replacement, repair or reinvestment must be prepaid on the Term Loan as
provided above in this Section. Pending application of such retained
proceeds to such replacement or repair or application of such license
proceeds to such replacement or reinvestment of such HOB proceeds, as the
case may be, the Company shall not later than the time at which prepayment
would have been (in the absence of its election to make such repair,
replacement or reinvestment) required above, deposit (or cause the relevant
Loan Party to deposit) such retained proceeds or license proceeds or HOB
proceeds in an account of the Company maintained with the Administrative
Agent pursuant to agreements in form, scope and substance reasonably
satisfactory to the Administrative Agent. The amount so held on deposit (the
"SPECIAL DEPOSIT"), together with all earnings on the Special Deposit, shall
be available to the Company (for its disbursement to the relevant Loan Party)
solely for the applicable
-14-
replacement or repair. The Company hereby grants, and each other relevant
Loan Party (by its execution of this Agreement or a Guaranty) thereby grants,
a lien on the Special Deposit and such earnings as collateral security for
the Obligations, it being understood and agreed that at such time as any
Default or Event of Default shall occur, the balance of the Special Deposit
and earnings thereon may be applied by the Administrative Agent to the
Obligations as provided in Section 3 below. The Administrative Agent shall
be entitled to require reasonable assurances, as a condition to the making of
any withdrawal from the Special Deposit, that the proceeds of such withdrawal
are being used for the purposes permitted hereunder (it being understood and
agreed that a certificate from the chief executive officer, chief operating
officer or chief financial officer of the Company to the effect that such
proceeds will be so used shall be sufficient for such purposes).
SECTION 2.8. VOLUNTARY TERMINATIONS. The Company (which is
acting on behalf of the Borrowers pursuant to Section 1.7 hereof) shall have
the privilege upon two (2) Business Days' prior notice from the Company
(which need not be joined in by any other Borrower) to the Administrative
Agent (which shall promptly notify the Lenders) to ratably terminate the
Revolving Credit Commitments in whole or in part (but if in part then in the
amount of $1,000,000 or such greater amount which is an integral multiple of
$100,000); PROVIDED that the Revolving Credit Commitments may not be reduced
to an amount less then the sum of the Revolving Loans and Letters of Credit
then outstanding. All partial terminations of the Revolving Credit
Commitments hereunder shall automatically reduce the L/C Commitment hereof in
each case as from time to time in effect hereunder, by the same percentage as
the percentage termination in the Revolving Credit Commitments. Not later
than the termination date stated in such notice, there shall be made such
payments to the Administrative Agent as may be necessary to reduce the sum of
the aggregate outstanding Revolving Loans and Letters of Credit to the amount
to which the Revolving Credit Commitments have been reduced, together with in
the case of a termination in whole, all interest, fees and other amounts due
on the Obligations. The foregoing to the contrary notwithstanding, (i) no
termination of the Revolving Credit may be effected hereunder if as a result
thereof the outstanding aggregate amount of Letters of Credit would exceed
the L/C Commitment as reduced by such termination and (ii) the Revolving
Credit Commitments may not be terminated below $100,000 except concurrently
with their termination in whole. No termination of the Revolving Credit
Commitments may be reinstated.
SECTION 3. PLACE AND APPLICATION OF PAYMENTS.
SECTION 3.1. GENERALLY. All payments of principal,
interest, fees and all other Obligations payable hereunder and under the
other Loan Documents shall be made to the Administrative Agent at its office
at 000 Xxxxx XxXxxxx Xxxxxx, Xxxxxxx, Xxxxxxxx (or at such other place as the
Administrative Agent may specify) on the date any such payment is due and
payable. Payments received by the Administrative Agent after 12:00 noon
(Chicago time) shall be deemed received as of the opening of business on the
next Business Day. All such payments shall be made in lawful money of the
United States of America, in immediately available funds at the place of
payment, without set-off or counterclaim. Except as herein provided, all
payments shall be received by the Administrative Agent for the ratable
account of the Lenders and shall be promptly distributed by the
Administrative
-15-
Agent ratably to the Lenders. Unless the Company otherwise directs, and
subject in any event to the other provisions of this Section 3, principal
payments on any Class of Notes shall be first applied in reduction of Loans
against such Class of Notes of the Borrower making the payment and in
reduction of borrowings in the direct order in which such Loans were
disbursed. Any amount paid or prepaid on the Revolving Credit Notes may,
subject to all of the terms and conditions hereof, be borrowed, repaid and
borrowed again. No amount paid or prepaid on the Term Credit Notes may be
reborrowed; and except to the extent otherwise provided in this Agreement,
partial prepayments of the Term Credit Notes shall be applied to the several
installments thereof in the direct order of their maturities. Unless the
Company directs otherwise or this Agreement provides otherwise, principal
payments on a given Class of Notes (including payments made by virtue of the
application of proceeds of Collateral under Section 3.2 hereof) shall be
first applied to the Domestic Rate Portion of such Notes until payment in
full thereof, with any balance applied to the LIBOR Portions of the same
Class of Notes in the order in which their Interest Periods expire. All
payments (whether voluntary or required) shall be accompanied by any amount
due the Lenders under Section 12.5 hereof, but no acceptance of such a
payment without requiring payment of amounts due under Section 12.5 shall
preclude a later demand by the Lenders for any amount due them under Section
12.5 in respect of such payment. Notwithstanding the foregoing, if and so
long as no Default or Event of Default has occurred and is continuing, if and
to the extent a mandatory prepayment required by Sections 2.7(b) or 2.7(d)
hereof would otherwise be applied against any LIBOR Portion of the relevant
Notes, the Company may direct that such prepayment be held in a cash
collateral account maintained by the Company with the Administrative Agent
pursuant to agreements in form, scope and substance reasonably satisfactory
to the Administrative Agent (the "CASH COLLATERAL ACCOUNT") and not applied
to any LIBOR Portion of such Notes until the earlier of (i) the last day of
the Interest Period then applicable to such LIBOR Portion or (ii) the
occurrence of any Default or Event of Default. The Company hereby grants,
and each other relevant Loan Party (by its execution of this Agreement or a
Guaranty) thereby grants, a lien on the Cash Collateral Account and all
earnings thereon as collateral security for the Obligations, it being
understood and agreed that at such time as any Default or Event of Default
shall occur, the balance of the Cash Collateral Account and earnings thereon
may be applied by the Administrative Agent to the Obligations as provided in
this Agreement.
SECTION 3.2. APPLICATION OF COLLATERAL PROCEEDS BEFORE
DEFAULT. Except upon the occurrence and during the continuation of an Event
of Default, all proceeds of Collateral received in a Restricted Account (as
hereinafter defined) on and after the Loan Mechanization Date shall (subject
to the other terms of this Agreement) be applied by the Administrative Agent
against the outstanding Obligations as follows:
(i) first, to outstanding interest charges then due and payable in
respect of the Obligations;
(ii) second, to the outstanding principal balance of the Revolving
Loans and any liabilities in respect of unpaid drawings under Letters of
Credit; and
-16-
(iii) finally, to be applied to, or held as collateral security
for, any remaining unpaid or unsatisfied Obligations to the extent then due
and payable.
SECTION 3.3. APPLICATION AFTER DEFAULT. Anything contained
herein to the contrary notwithstanding, but in any event subject to Section
3.4 hereof, all payments and collections received in respect of the
Obligations and all proceeds of the Collateral received, in each instance, by
the Administrative Agent or any of the Lenders upon the occurrence and during
the continuation of an Event of Default shall be remitted to the
Administrative Agent and distributed as follows:
(i) first, to the payment of any outstanding and reasonable
out-of-pocket costs and expenses incurred by the Administrative Agent in
monitoring, verifying, protecting, preserving or enforcing the Liens on the
Collateral, and in protecting, preserving or enforcing rights under this
Agreement or any of the other Loan Documents, and in any event including
all costs and expenses of a character which the Borrowers have agreed to
pay under Section 13.4 hereof (such funds to be retained by the
Administrative Agent for its own account unless it has previously been
reimbursed for such costs and expenses by the Lenders, in which event such
amounts shall be remitted to the Lenders to reimburse them for payments
theretofore made to the Administrative Agent);
(ii) second, to the payment of any outstanding interest or other fees
or amounts due under this Agreement or any of the other Loan Documents
other than for principal, pro rata as among the Administrative Agent and
the Lenders in accord with the amount of such interest and other fees or
amounts owing each;
(iii) third, to the payment of the principal of the Notes and any
liabilities in respect of unpaid drawings under the outstanding Letters of
Credit, pro rata as among the Lenders in accord with the then respective
unpaid principal balances of the Notes and the then unpaid liabilities in
respect of unpaid drawings under the Letters of Credit;
(iv) fourth, to the Administrative Agent for the cash
collateralization of the entire amount undrawn on the outstanding Letters
of Credit, with amounts to be so remitted on account of such undrawn
Letters of Credit until the Administrative Agent is holding an amount of
cash equal to the then outstanding undrawn amount of all such Letters of
Credit;
(v) fifth, to the Administrative Agent and the Lenders pro rata in
accord with the amounts of any other indebtedness, obligations or
liabilities of the Borrowers owing to them (other than the Hedging
Liability) which bear interest and are secured by the Collateral Documents
unless and until all such indebtedness, obligations and liabilities have
been fully paid and satisfied;
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(vi) sixth, to the Administrative Agent and the Lenders pro rata in
accord with the amounts of any Hedging Liability owing to them unless and
until all such Hedging Liability has been fully paid and satisfied; and
(vii) seventh, to the Company on behalf of the Borrowers (each
Borrower hereby agreeing that its recourse for its share of such payment
shall be to the Company and not the Administrative Agent or any Lender) or
to whoever the Administrative Agent reasonably determines to be lawfully
entitled thereto.
In the event that such payments and collections are insufficient to pay the
entire amount of Obligations described in any one clause above, then such
payments and collections shall be applied to the payment of the Obligations
so described in such order of application as between the different items of
such Obligations as the Lenders shall elect, pro rata as among the Lenders in
accord with the amounts of such items owing to them. In the event that the
amount of any Hedging Liability is not fixed and determined at the time
proceeds of Collateral are received which are to be allocated thereto, the
proceeds of Collateral so allocated shall be held by the Administrative Agent
as collateral security until such Hedging Liability is fixed and determined
and then the same shall (if and when, and to the extent that, payment of such
Hedging Liability is required by the terms of the relevant Hedging
Arrangements) be applied to the Hedging Liability, with any surplus applied
to the Notes and Letter of Credit liabilities and with other Collateral
applications to be reallocated among the Lenders to cover any deficiency
which would not have existed had the exact amount of the Hedging Liability
been known at the time Collateral proceeds were originally distributed.
SECTION 3.4. OVERFUNDED COMMITMENTS. The foregoing Section
3.3 hereof to the contrary notwithstanding, if upon the occurrence of an
Event of Default the percentages of the Revolving Credit Commitments and Term
Credit Commitments in use from all the Lenders are not identical (whichever
of such Commitments has the highest utilization being herein referred to as
the "OVERFUNDED COMMITMENT" and each such Commitment which has a lower
utilization being hereinafter referred to as an "UNDERFUNDED COMMITMENT") (i)
payments which pursuant to the foregoing paragraph are to be allocated to the
principal of the Notes shall first be applied to the Notes issued under the
Overfunded Commitments until the utilization percentages of the Revolving
Credit Commitments and Term Credit Commitments are identical and (ii) at the
request of either the Administrative Agent or the Required Lenders (with the
Required Lenders computed solely for this purpose as though the
Administrative Agent had no Revolving Credit Commitment hereunder) the Lender
or Lenders holding the Underfunded Commitment shall purchase from the Lender
or Lenders holding the Overfunded Commitment participations in the overfunded
Lenders' Loans (and reimbursement obligations under the Applications, if
applicable) in an amount such that after giving effect thereto, the
percentages of the Revolving Credit Commitments and Term Credit Commitments
in use from all the Lenders are identical. All of the foregoing principles
shall be applied as though the Revolving Credit Commitments and Term Credit
Commitments had not terminated, whether or not such is in fact the case.
SECTION 3.5. BORROWER'S RIGHT TO DIRECT APPLICATION. Except
as otherwise specifically provided for in this Agreement (including without
limitation Section 3.1
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hereof), the Borrowers hereby irrevocably waive the right to direct the
application of payments and collections at any time received by the
Administrative Agent or any of the Lenders from or on behalf of the
Borrowers, and the Borrowers hereby irrevocably agree that the Administrative
Agent shall have the continuing exclusive right to apply and reapply any and
all such payments and collections received at any time by the Administrative
Agent or any of the Lenders against the Obligations in the manner described
above.
SECTION 3.6. WEEKLY SETTLEMENT. (a) If and to the extent
the Administrative Agent so elects and provides the Company and Lenders at
least five (5) Business Days' prior written notice, (i) advances and
repayments of Revolving Loans (not the Term Loan) will then begin to be
settled according to the procedures described in this Section 3.6 (the date
on which such settlement shall so begin being hereinafter referred to as the
"LOAN MECHANIZATION DATE"), and (ii) the Lenders' obligations hereunder with
respect to unreimbursed drawings on Letters of Credit will also be settled
according to such procedures by deeming (x) an unreimbursed drawing paid by
the Administrative Agent to constitute an advance by the Administrative Agent
of a Revolving Loan of like principal amount and (y) each payment or other
collection in reimbursement of such drawing (other than from the Lenders) to
be a repayment on such deemed Revolving Loan (with all references in this
Section to Revolving Loans to include each such deemed Revolving Loan). This
Section shall not be applicable until the Loan Mechanization Date. The
Administrative Agent shall, once every seven (7) days, or sooner, if so
elected by the Administrative Agent in its discretion, but in each case on a
Business Day, (each such day being a "SETTLEMENT DATE"), distribute to each
Lender a statement (the "ADMINISTRATIVE AGENT'S REPORT") disclosing as of the
immediately preceding Business Day, the aggregate unpaid principal balance of
Revolving Loans outstanding as of such date (including Revolving Loans made
by the Administrative Agent under Section 3.6(e) hereof), repayments and
prepayments of principal received from the Borrowers with respect to the
Revolving Loans since the immediately preceding Administrative Agent's
Report, additional Revolving Loans made to the Borrowers since the date of
the immediately preceding Administrative Agent's Report and each Borrower's
Borrowing Base as of the most recent determination thereof. Each
Administrative Agent's Report shall disclose the net amount (the "SETTLEMENT
AMOUNT") due to or due from the Lenders to effect a Settlement of any
Revolving Loan. The Administrative Agent's Report submitted to a Lender
shall be prima facie evidence of the amount due to or from such Lender to
effect a Settlement of any Revolving Loan. If the Administrative Agent's
Report discloses a net amount due from the Administrative Agent to any Lender
to effect the Settlement of a Revolving Loan, the Administrative Agent,
concurrently with the delivery of the Administrative Agent's Report to the
Lenders, shall transfer, by wire transfer or otherwise, such amount to such
Lender in funds immediately available to such Lender, in accordance with such
Lender's instructions. If the Administrative Agent's Report discloses a net
amount due to the Administrative Agent from any Lender to affect the
Settlement of any Revolving Loan, then such Lender shall wire transfer such
amount, in funds immediately available to the Administrative Agent, as
instructed by the Administrative Agent. Such net amount due from a Lender to
the Administrative Agent shall be due on the Settlement Date if such
Administrative Agent's Report is received before 12:00 noon (Chicago time)
and such net amount shall be due on the first Business Day following the
Settlement Date if such Administrative Agent's Report is received after 12:00
noon (Chicago time).
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Notwithstanding the foregoing, payments actually received by the
Administrative Agent with respect to the following items shall be distributed
by the Administrative Agent to each Lender as follows:
(i) any principal payment of a LIBOR Portion that is not converted or
continued will be paid to the Lenders by the Administrative Agent on the
same day as received;
(ii) as soon as possible, but in any event, within one Business Day
after receipt thereof by the Administrative Agent, payments applicable to
interest on the Revolving Loans shall be paid to each Lender in proportion
to its pro rata share of such Revolving Loans, subject to any adjustments
for any Revolving Loans made by the Administrative Agent under Section 1.6
hereof so that the Administrative Agent alone shall receive interest on the
Revolving Loans so made until Settlement with such Lender on such Revolving
Loans and each Lender shall only receive interest on the amount of funds
actually advanced by such Lender. Each Lender's share of interest accruing
each day on the Revolving Loans shall be based on such Lender's Daily Loan
Balance. For purposes hereof, the term "DAILY LOAN BALANCE" shall mean as
of any day for any Lender, an amount calculated as of the end of that day
by subtracting (a) the cumulative principal amount paid by the
Administrative Agent to such Lender on account of Revolving Loans from the
date of the initial extension of credit under this Agreement (the "CLOSING
DATE") through and including the date as of which the Daily Loan Balance is
being determined from (b) the cumulative principal amount advanced by such
Lender to the Administrative Agent for the benefit of a Borrower to fund
Revolving Loans made on and after the Closing Date through and including
such date of determination; and
(iii) as soon as possible, but in any event, within one Business
Day after receipt thereof by the Administrative Agent, payments applicable
to principal of and interest on the Term Loan, the fees set forth in
Sections 2.2, 2.3 and 2.4 hereof and expenses payable under this Agreement,
shall in each case be paid to each Lender as set forth in the applicable
Section hereof.
(b) All funds advanced to a Borrower by the Administrative
Agent or a Lender pursuant to this Section 3.6 shall for all purposes be
treated as a Revolving Loan or Term Loan, as appropriate, made by such Lender
against the appropriate Note of such Lender and all funds received by any
Lender pursuant to this Section 3.6 for all purposes be treated as a
repayment of amounts owed with respect to Loans made by such Lender against
the appropriate Note of such Lender.
(c) In the event that any bankruptcy, reorganization,
liquidation, receivership or similar cases or proceedings in which any
Borrower is a debtor, prevent the Administrative Agent or any Lender from
making any Loan to effect a Settlement contemplated hereby, the
Administrative Agent or such Lender, as the case may be, will make such
dispositions and arrangements with the other Lenders with respect to such
Loans, either by way of purchase of participations, distribution, PRO TANTO
assignment of claims, subrogation or otherwise, as
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shall result in each Lender's share of the outstanding Loans being equal, as
nearly as may be, to the percentage which such Lender's Revolving Credit
Commitment and Term Credit Commitment bears to the Revolving Credit
Commitments and Term Credit Commitments of all the Lenders.
(d) Payments to effect a Settlement shall be made without
set-off, counterclaim or reduction of any kind. The failure or refusal of
any Lender to make available to the Administrative Agent at the aforesaid
time and place the amount of the Settlement Amount due from such Lender (i)
shall not relieve any other Lender from its several obligation hereunder to
make available to the Administrative Agent the amount of such other Lender's
Settlement Amount and (ii) shall not impose upon such other Lender any
liability with respect to such failure or refusal or otherwise increase the
Revolving Credit Commitment or Term Credit Commitment of such other Lender.
(e) Notwithstanding the notice requirements set forth in
Section 1.5 above, but otherwise in accordance with the terms and conditions
of this Agreement, the Administrative Agent may, in its sole discretion
without conferring with the Lenders but on their behalf, make Loans to each
Borrower in an amount requested by the Company. Any such Loans so funded by
the Administrative Agent shall be deemed Loans made by the Administrative
Agent under its Revolving Credit Commitment, except for purposes of Section
2.2 hereof. Each Lender's obligation to fund its portion of any such Loan
made by the Administrative Agent will commence on the date such Loan is
actually so made by the Administrative Agent. However, until the date on
which the Settlement of such Loan is required in accordance with this Section
3.6 above, such obligation of the Lender shall be satisfied by the
Administrative Agent's making of such Loan. The Borrowers acknowledge and
agree that the making of such Loans by the Administrative Agent under this
Section 3.6(e) shall, in each case, be subject in all respects to the
provisions of this Agreement as if each such Loan were made in response to a
notice requesting such Loan made in accordance with Section 1.5 hereof,
including without limitation the limitations set forth in Section 1.1 hereof
and the requirements of Section 2.7 hereof. All actions taken by the
Administrative Agent pursuant to the provisions of this Section 3.6(e) shall
be conclusive and binding on the Borrowers in the absence of manifest error.
Notwithstanding anything herein to the contrary, prior to the Settlement with
any Lender of any Loan funded by the Administrative Agent under this Section,
interest payable on such Loan otherwise allocable to such Lender shall be for
the sole account of the Administrative Agent and payment of principal on such
Loan otherwise allocable to such Lender shall be for the sole account of the
Administrative Agent.
SECTION 3.7. COMPUTATION OF OBLIGATIONS OUTSTANDING. For
the purpose of calculating the aggregate principal balance of Obligations
outstanding hereunder, Obligations shall be deemed to be paid on the date
payments or collections, as the case may be, are deemed received under
Section 3.1 hereof; PROVIDED, HOWEVER, for purposes of calculating interest
accruing on the Obligations on and after the Loan Mechanization Date, any
payment of the Obligations by virtue of the application of proceeds of
Collateral pursuant to Section 3.2 hereof shall be deemed to be applied to
the Obligations on the first Business Day following the date of the
Administrative Agent's receipt (in the relevant lockbox established for a
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Restricted Account pursuant to Section 4.2 hereof) of the item representing
such payment (any additional amount payable by the Borrowers solely by virtue
of this deemed application to be paid to and retained by the Administrative
Agent for its sole account as an administrative fee, with the Lenders to have
no right to any share thereof); FURTHER PROVIDED, HOWEVER, that each payment
or collection received by wire or ACH transfer directly to the Restricted
Account maintained with the Administrative Agent as contemplated by Section
4.2 hereof shall be deemed applied on the date of the Administrative Agent's
receipt of such transfer. Notwithstanding the foregoing, if any item
presented for collection by the Administrative Agent is not honored, the
Administrative Agent may reverse any provisional credit which has been given
for the item and make appropriate adjustments to the amount of interest and
principal otherwise due hereunder.
SECTION 3.8. NOTATIONS. All Loans made against a Note, the
Borrower to which each Loan was disbursed, the status of all amounts
evidenced by a Note as constituting part of the Domestic Rate Portion or a
LIBOR Portion, and, in the case of any LIBOR Portion, the rates of interest
and Interest Periods applicable to such Portions shall be recorded by each
Lender on its books and records or, at its option in any instance, endorsed
on a schedule to its Note and the unpaid principal balance and status,
Borrower, rates and Interest Periods so recorded or endorsed by such Lender
shall be prima facie evidence in any court or other proceeding brought to
enforce such Note of the principal amount remaining unpaid thereon, the
status of the Loans evidenced thereby, the Borrower to which each Loan was
disbursed and the interest rates and Interest Periods applicable thereto;
PROVIDED that the failure of a Lender to record any of the foregoing shall
not limit or otherwise affect the obligation of the Company to repay the
outstanding principal amount of each Note together with accrued interest
thereon. Prior to any negotiation of a Note, a Lender shall record on a
schedule thereto the status of all amounts evidenced thereby as constituting
part of the applicable Domestic Rate Portion or a LIBOR Portion and, in the
case of any LIBOR Portion, the rates of interest and the Interest Periods
applicable thereto.
SECTION 4. THE COLLATERAL AND GUARANTIES.
SECTION 4.1. COLLATERAL. The Notes and the other
Obligations, as well as any Hedging Liability, shall be secured by (a) valid,
perfected and enforceable liens in all right, title and interest of each
Borrower and of each Subsidiary in all capital stock or other equity interest
in each Subsidiary, in each instance whether now owned or hereafter acquired,
and all proceeds thereof and (b) valid, perfected (subject to the proviso
appearing at the end of this sentence) and enforceable liens in all right,
title and interest of each Borrower and of each Subsidiary in all accounts,
chattel paper, general intangibles, instruments, investment property,
documents, contract rights, inventory and equipment of every kind and
description, whether now owned or hereafter acquired, and all proceeds
thereof; PROVIDED, HOWEVER, that until an Event of Default has occurred and
is continuing and thereafter until otherwise required by the Required Lenders
or the Administrative Agent, (i) liens need not be perfected on copyrights,
trademarks, patents and licenses thereof that arise subsequent to the most
recent date on which the relevant Collateral Document requires a lien to be
granted on Collateral of such type, (ii) liens need not be perfected on notes
receivable having a fair market value of less than $10,000 in any instance
and $50,000 in the aggregate, (iii) fixture
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financing statements need not be filed, and (iv) liens on vehicles which are
subject to a certificate of title law need not be noted on the certificate of
title. The liens in the Collateral shall be granted to the Administrative
Agent for the ratable account of the Lenders and shall be valid and perfected
first liens subject, however, to the proviso appearing at the end of the
immediately preceding sentence, Permitted Liens and the rights of lessors
under permitted leases and Purchase Money Liens held by vendors providing
purchase money financing. Notwithstanding anything to the contrary contained
herein, in no event will any of the Collateral described above be deemed to
include (a) any interest in copyrights, trademarks, patents or similar
intangibles licensed to any Borrower or any Subsidiary from any third party
(other than any Borrower or any of its Affiliates) to the extent that the
granting of a security interest or lien therein is prohibited by the license
or other agreement(s) pursuant to which such Borrower or Subsidiary holds
such interest and such prohibition has not been or is not waived or the
consent of the applicable party has not been or is not obtained, (b) any
interest in contracts and contracts rights thereunder (other than Accounts
arising therefrom) to the extent that the granting of a security interest or
lien therein is prohibited by such contract and such prohibition has not been
or is not waived or the consent of the applicable party has not been or is
not obtained, (c) any interests in equipment owned by any Borrower or any
Subsidiary which is subject to a Purchase Money Lien in favor of any third
party (other than any Borrower or any of its Affiliates) to the extent the
granting of a security interest or lien therein is prohibited by the
agreement(s) pursuant to which such equipment is financed and such
prohibition has not been or is not waived or the consent of the applicable
party has not been or is not obtained and (d) any interests in any leases or
licenses to use property under which any Borrower or any Subsidiary is lessee
or licensee and a Person other than any Borrower or an Affiliate of such
Borrower is lessor or licensor to the extent the granting of a security
interest or lien therein is prohibited by the agreement(s) pursuant to which
such property is leased and such prohibition has not been or is not waived or
the consent of the applicable party has not been or is not obtained.
SECTION 4.2. COLLATERAL PROCEEDS. Each Borrower agrees to
make such arrangements as shall be necessary or appropriate to assure
(through the use of a lockbox under the sole control of the Administrative
Agent) that all proceeds of the Collateral provided by such Borrower, subject
to Sections 2.7(d) and 8.18 of this Agreement, are deposited (in the same
form as received) in a separate remittance account maintained by such
Borrower with and under the control of the Administrative Agent, each such
account to constitute a special restricted account (each, a "RESTRICTED
ACCOUNT"); PROVIDED, HOWEVER, that the Company and Intersound may use the
same lockbox and same Restricted Account for such purposes. Any proceeds of
Collateral received by any Borrower shall be held by such Borrower in trust
for the Administrative Agent and the Lenders in the same form in which
received, shall not be commingled with any assets of such Borrower, and shall
be delivered promptly to the Administrative Agent (together with any
necessary endorsements thereto) for deposit into the Restricted Account of
such Borrower. The Borrowers acknowledge that the Administrative Agent has
(and is hereby granted to the extent it does not already have) a lien on each
Restricted Account and all funds contained therein for the ratable benefit of
the Lenders to secure the Obligations. Prior to the Loan Mechanization Date,
the Lenders agree with the Borrowers that if and so long as no Event of
Default has occurred and is continuing hereunder, amounts on deposit in each
Restricted Account will (subject to the rules and
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regulations of the relevant depository as from time to time in effect
applicable to demand deposit accounts) be made available to the Borrowers for
use in conduct of their respective businesses; PROVIDED, HOWEVER, upon the
occurrence and during the continuation of any Event of Default hereunder, the
Administrative Agent may apply the funds on deposit in any one or more of the
Restricted Accounts as set forth in Section 3.3 hereof, and the
Administrative Agent shall notify the Company of any such application. On and
after the Loan Mechanization Date, no amounts deposited in the Restricted
Accounts shall be released to the Borrowers, but shall instead be applied to,
or otherwise held as collateral security for, the outstanding Obligations as
set forth in Section 3 hereof, it being understood and agreed that
notwithstanding such application, the Borrowers shall have the right to
obtain additional Loans and Letters of Credit under this Agreement subject to
the terms and conditions hereof.
SECTION 4.3. FURTHER ASSURANCES. Each Borrower covenants
and agrees that it shall, and shall cause each Subsidiary to, comply with all
terms and conditions of each of the Collateral Documents and at any time and
from time to time at the request of the Administrative Agent or the Required
Lenders execute and deliver such instruments and documents and do such acts
and things as the Administrative Agent or the Required Lenders may reasonably
request in order to provide for or protect or perfect the lien of the
Administrative Agent in the Collateral, subject to the terms of Section 4.1
above.
SECTION 4.4. GUARANTIES FROM SUBSIDIARIES. Payment of the
Notes and the other Obligations, as well as any Hedging Liability, shall at
all times be jointly and severally guaranteed by each Subsidiary pursuant
hereto or pursuant to a Guaranty issued by such Subsidiary. In the event any
Subsidiary is hereafter acquired or formed, the Company shall also cause such
Subsidiary to execute such Collateral Documents (having terms and conditions
substantially similar to those executed by the Company and its Subsidiaries
in connection with the initial Loans under this Agreement) as the
Administrative Agent may then require granting the Administrative Agent for
the benefit of the Lenders a security interest in and lien on the assets of
such Subsidiary as collateral security for the Notes and the other
Obligations and any Hedging Liability, together with such other instruments,
documents, certificates and opinions required by the Administrative Agent in
connection therewith.
SECTION 4.5. COLLATERAL ASSIGNMENT OF LIFE INSURANCE.
Payment of the Notes and the other Obligations, as well as any Hedging
Liability, shall also be secured by a collateral assignment of a life
insurance policy owned and maintained by the Company on the life of Xxxxxx in
an amount of at least $10,000,000 pursuant to a written assignment in form
and substance satisfactory to the Administrative Agent (the "LIFE INSURANCE
ASSIGNMENT").
SECTION 5. DEFINITIONS; INTERPRETATION.
SECTION 5.1. DEFINITIONS. The following terms when used
herein shall have the following meanings:
"ACCOUNTS" shall mean, with respect to any Person, all present
and future accounts, contract rights and other rights to payment (i) for
goods such Person has sold or leased
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(whether or not delivered), (ii) for services such Person has rendered,
whether or not they have been earned by performance or (iii) for such
Person's license of master recordings and compositions to third parties.
"ADJUSTED LIBOR" means a rate per annum determined by the
Administrative Agent in accordance with the following formula:
Adjusted LIBOR = LIBOR
-----------------------
100%-Reserve Percentage
"RESERVE PERCENTAGE" means, for the purpose of computing Adjusted LIBOR, the
maximum rate of all reserve requirements (including, without limitation, any
marginal, emergency, supplemental or other special reserves) imposed by the
Board of Governors of the Federal Reserve System (or any successor) under
Regulation D on Eurocurrency liabilities (as such term is defined in
Regulation D) for the applicable Interest Period as of the first day of such
Interest Period, but subject to any amendments to such reserve requirement by
such Board or its successor, and taking into account any transitional
adjustments thereto becoming effective during such Interest Period. For
purposes of this definition, LIBOR Portions shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or
credit for prorations, exemptions or offsets under Regulation D. "LIBOR"
means, for each Interest Period, (a) the LIBOR Index Rate for such Interest
Period, if such rate is available, and (b) if the LIBOR Index Rate cannot be
determined, the arithmetic average of the rates of interest per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) at which
deposits in U.S. Dollars in immediately available funds are offered to the
Administrative Agent at 11:00 a.m. (London, England time) two Business Days
before the beginning of such Interest Period by three (3) or more major banks
in the interbank eurodollar market selected by the Administrative Agent for a
period equal to such Interest Period and in an amount equal or comparable to
the applicable LIBOR Portion scheduled to be outstanding from the
Administrative Agent during such Interest Period. "LIBOR INDEX RATE" means,
for any Interest Period, the rate per annum (rounded upwards, if necessary,
to the next higher one hundred-thousandth of a percentage point) for deposits
in U.S. Dollars for a period equal to such Interest Period which appears on
the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the date
two Business Days before the commencement of such Interest Period. "TELERATE
PAGE 3750" means the display designated as "Page 3750" on the Telerate
Service (or such other page as may replace Page 3750 on that service or such
other service as may be nominated by the British Bankers' Association as the
information vendor for the purpose of displaying British Banker's Association
Interest Settlement Rates for U.S. Dollar deposits). Each determination of
LIBOR made by the Administrative Agent shall be conclusive and binding on the
Borrowers and the Lenders absent manifest error.
"ADMINISTRATIVE AGENT" means Bank of Montreal and any
successor thereto appointed pursuant to Section 10.1 hereof.
"AFFILIATE" shall mean any Person (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, another Person, (ii) which beneficially owns
or holds 10% or more of any class of the Voting Stock
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of another Person, or (iii) more than 10% of the Voting Stock (or in the case
of a Person which is not a corporation, 10% or more of the equity interest)
of which is beneficially owned or held by another Person. The term "CONTROL"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of Voting Stock, by contract or otherwise. Notwithstanding the
foregoing, (i) no individual shall be deemed to be an Affiliate of the
Company or any of its Subsidiaries solely by reason of his or her being a
director, officer or employee of the Company or any of its Subsidiaries, (ii)
the Company shall not be deemed an Affiliate of any of its Wholly-Owned
Subsidiaries, (iii) no Wholly-Owned Subsidiary shall be deemed an Affiliate
of any other Wholly-Owned Subsidiary or the Company and (iv) for purposes of
computing the eligibility of Accounts, no limited partners, members,
employees or Affiliates of the Purchasers or their respective portfolio
companies shall be deemed Affiliates of the Company or any Subsidiary.
"AFFILIATE PREFERRED STOCK" means an aggregate of 2,500 shares
of Series C Convertible Preferred Stock of the Company, par value $.001 per
share, to be purchased by certain officers and directors of the Company and
their Affiliates, on the closing of the Investment Agreement and any and all
dividends thereon.
"AFFILIATE WARRANTS" means the warrants to purchase an
aggregate of 450,000 shares of common stock of the Company, par value $.001
per share, to be purchased by certain officers and directors of the Company
and their Affiliates on the closing of the Investment Agreement.
"AGREEMENT" means this Credit Agreement, as the same may be
amended, modified or restated from time to time in accordance with the terms
hereof.
"APPLICABLE DOMESTIC RATE MARGIN" means 1/2 of 1% for the
Revolving Loans and 1.0% for the Term Loan.
"APPLICABLE LIBOR MARGIN" means 2-1/4% for the Revolving Loans
and 2-3/4% for the Term Loan.
"APPLICATION" is defined in Section 1.3(d) hereof.
"ASSIGNMENT AGREEMENT" means an Assignment and Acceptance
entered into by a Lender and an assignee in accordance with Section 13.12
hereof substantially in the form of Exhibit G hereto.
"AUTHORIZED REPRESENTATIVE" means those persons shown on the
list of officers provided by the Company pursuant to Section 7.2(a) hereof or
on any update of any such list provided by the Company to the Administrative
Agent, or any further or different officer of the Company so named by any
Authorized Representative of the Company in a written notice to the
Administrative Agent.
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"AVAILABILITY" shall mean, as of any time, the amount (if any)
by which (x) the Borrowing Base as then determined and computed exceeds (y)
the aggregate principal amount of Revolving Loans and Letters of Credit then
outstanding from the Borrowers, taken together.
"BMO BRIDGE LOANS" means the credit extended of Bank of
Montreal to the Company under its January 31, 1997 Credit Agreement with such
Bank as heretofore amended from time to time.
"BORROWERS" is defined in the introductory paragraph hereof,
with (i) the term "BORROWERS" to mean the Borrowers, collectively, and, also,
each individually, and (ii) all promises and covenants (including promises to
pay) and representations and warranties of and by the Borrowers made in the
Loan Documents or any instruments or documents delivered pursuant thereto to
be and constitute the joint and several promises, covenants, representations
and warranties of and by each and all of such corporations. The term
"BORROWER" appearing in such singular form shall be deemed a reference to any
of the Borrowers unless the context in which such term is used shall
otherwise require.
"BORROWING BASE" means, as of any time for which the same is
to be determined, the amount (if any) by which (x) the sum of the Initial
Reserves and any additional reserves imposed on availability under the
Revolving Credit pursuant to Section 1.1 hereof is exceeded by (y) the sum of:
(i) 85% of the then outstanding unpaid amount of Eligible Accounts;
plus
(ii) 50% of the value (computed at the lower of market or cost using
the first-in/first-out method of inventory valuation applied by the Company
in accordance with GAAP) of Eligible Inventory;
PROVIDED that the Borrowing Base shall be computed only as against and on so
much of the Collateral as is included on the certificates to be furnished
from time to time by each Borrower pursuant to Section 8.5(a) hereof and, if
required by the Administrative Agent or the Required Lenders pursuant to any
of the terms hereof or any Collateral Document, as verified by such other
evidence required to be furnished to the Administrative Agent pursuant hereto
or pursuant to any such Collateral Document.
"BUSINESS DAY" means any day other than a Saturday or Sunday
on which the Administrative Agent is not authorized or required to close in
Chicago, Illinois and, when used with respect to LIBOR Portions, a day on
which the Administrative Agent is also dealing in United States Dollar
deposits in London, England and Nassau, Bahamas.
"CAPITAL EXPENDITURES" means for any period capital
expenditures (as defined and classified in accordance with GAAP) during such
period by the Company and its Subsidiaries on a consolidated basis, but in
any event excluding (i) advances to artists, reimbursement of costs incurred
by artists and any costs incurred by the Company on behalf of artists, in
each case in the ordinary course of business pursuant to contractual
obligations, (ii) expenditures
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for normal replacement and maintenance programs properly charged to current
operations in accordance with GAAP and (iii) expenditures to restore, repair
or replace real estate, furniture, fixtures, equipment or other fixed assets
lost, damaged or destroyed as a result of a casualty loss.
"CAPITAL LEASE" means any lease of Property which in
accordance with GAAP is required to be capitalized on the balance sheet of
the lessee.
"CAPITALIZED LEASE OBLIGATION" means the amount of the
liability shown on the balance sheet of any Person in respect of a Capital
Lease determined in accordance with GAAP.
"CASH EQUIVALENTS" means all investments of the type permitted
by Sections 8.15(a) through 8.15(g) hereof, inclusive.
"CASH INTEREST EXPENSE" shall mean, with respect to any Person
for any period, the Interest Expense of such Person for such period less all
non-cash items constituting Interest Expense during such period (including
without limitation, amortization of debt discounts and payments of interest
on indebtedness by issuance of indebtedness, and in any event excluding
accruals of interest during such period subsequently payable in cash).
"CHANGE OF CONTROL/MANAGEMENT EVENT" means the occurrence of
any of the following circumstances:
(a) any Person or two or more Persons (other than each of the
Purchasers or their respective Affiliates, employees, partners or members
[the Purchasers and such other parties being hereinafter referred to as the
"PURCHASER GROUP"]) acting in concert acquire beneficial ownership (within
the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of
1934), directly or indirectly, of Securities of any Borrower (or other
Securities convertible into such Securities) representing 25% or more of
the combined voting power of all securities of any Borrower entitled to
vote in the election of directors (except to the extent such acquisition
results from any Person's conversion of preferred stock acquired by such
Person prior to the Closing Date in such stock's initial public offering,
to common stock of the Company having such voting power; or
(b) during any period of up to 12 consecutive months, whether
commencing before or after the date hereof, the membership of the Board of
Directors of any Borrower changes for any reason (other than by reason of
death, disability, or scheduled retirement) so that the majority of the
Board of Directors is made up of Persons who were not directors at the
beginning of such 12 month period (except to the extent that such change in
the membership of the Board of Directors is the result of (i) the exercise
by any of the Purchaser Group of their voting rights pursuant to Section 5
of the Certificate of the Powers, Designations, Preferences and Rights
governing the Series B Preferred Stock, (ii) the exercise by any of the
Purchaser Group of their rights and privileges pursuant to Section 6.2.5 of
the Investment
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Agreement and (iii) the election or designation by any of the Purchaser
Group of any director to the Board of Directors of the Company).
"CLASS OF NOTES" shall mean the Revolving Credit Notes (taken
as a group) and the Term Credit Notes (taken as a group).
"CLOSING DATE" means December 12, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended,
and any successor statute thereto.
"COLLATERAL" means all properties, rights, interests and
privileges from time to time subject to the Liens granted to the
Administrative Agent for the benefit of the Lenders by the Collateral
Documents.
"COLLATERAL DOCUMENTS" means the Initial Collateral Documents
and all other mortgages, deeds of trust, security agreements, assignments,
financing statements and other documents as shall from time to time secure
the Obligations.
"COMMITMENTS" shall mean the Revolving Credit Commitments and
the Term Credit Commitments.
"COMPANY" is defined in the introductory paragraph hereof.
"CONSOLIDATED EBITDA" shall mean, with reference to any
period, (a) Consolidated Net Income for such period PLUS (b) all amounts
(without duplication) deducted in arriving at such Consolidated Net Income in
respect of (i) Cash Interest Expense, (ii) taxes imposed on or measured by
income or excess profits (including reserves for deferred taxes not payable
currently), (iii) charges for depreciation expense and amortization expense
(including, but not limited to, amortization of intangibles and goodwill),
(iv) debt issuance costs in connection with the Loan Documents, (v)
extraordinary losses, (vi) reserves or charges aggregating not more than
$1,750,000 taken prior to May 31, 1998 in connection with the dispute
regarding the funds escrowed by the Company pursuant to the purchase and sale
agreement between K-tel International, Inc. and River North Studios, Inc.
(which has since changed its name to Intersound, Inc.) referenced in
paragraph 10 of Schedule 6.6 hereto and (vii) all other non-recurring,
non-cash charges LESS (c) all extraordinary gains included in arriving at
such Consolidated Net Income, all determined in accordance with GAAP.
"CONSOLIDATED EXCESS CASH FLOW" for any period shall mean the
amount (if any) by which (x) Consolidated Operating Cash Flow for such period
exceeds (y) the sum (without duplication) of (i) Debt Service during such
period plus (ii) Cash Interest Expense during such period plus (iii) accrued
taxes on or measured by income or excess profits (including reserves for
deferred taxes not payable currently) of the Company or any Subsidiary
payable (or, in the case of a reserve, established) by the Company or any
Subsidiary within twelve months of the close of such period plus (iv) Capital
Expenditures during such period plus
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(v) artist advances made during such period by the Company and its
Subsidiaries in the ordinary course of business to the extent so deducted as
an expense or capitalized by such Persons in accordance with GAAP.
"CONSOLIDATED FUNDED DEBT" means, at any time the same is to
be determined, the aggregate of all Indebtedness for Borrowed Money which
would be listed as a liability on a balance sheet of the Company and its
Subsidiaries determined on a consolidated basis in accordance with GAAP.
"CONSOLIDATED NET INCOME" for any period shall mean the gross
revenues from any source of the Company and its Subsidiaries for such period
less all expenses and other proper charges (including taxes on income),
determined for the Company and its Subsidiaries on a consolidated basis in
accordance with GAAP.
"CONSOLIDATED NET WORTH" shall mean, as of any date,
consolidated net worth as computed in accordance with GAAP for the Company
and its Subsidiaries on a consolidated basis.
"CONSOLIDATED OPERATING CASH FLOW" for any period shall mean
the amount (if any) by which (x) the sum (without duplication) of (i)
Consolidated Net Income for such period plus (ii) all amounts deducted in
arriving at such Consolidated Net Income in respect of (1) charges during
such period for depreciation expense and amortization expense (including but
not limited to amortization of intangibles and goodwill), (2) Cash Interest
Expense during such period, (3) taxes during such period on or measured by
income or excess profits (including reserves for deferred taxes not payable
currently), (4) artist advances made during such period by the Company and
its Subsidiaries in the ordinary course of business to the extent so deducted
as an expense, (5) debt issuance costs in connection with the Loan Documents
to the extent such costs were capitalized by such Persons in accordance with
GAAP and amortized during such period, (6) losses during such period on the
sale or other disposition of fixed or capital assets and (7) all other
non-cash charges during such period exceeds (y) all amounts included in
arriving at such Consolidated Net Income in respect of (i) profits during
such period upon the sale of fixed or capital assets or liquidation of
investments, (ii) proceeds during such period from casualty losses, (iii) any
other extraordinary gains during such period and (iv) interest income during
such period.
"CONSOLIDATED WORKING CAPITAL" means, at any time the same is
to be determined, the excess, if any, of current assets of the Company and
its Subsidiaries minus current liabilities of the Company and its
Subsidiaries, all as determined on a consolidated basis in accordance with
GAAP, except that there should be excluded from current liabilities Current
Maturities on the Notes.
"CONTROLLED GROUP" means all members of a controlled group of
corporations, partnerships, and all trades or businesses (whether or not
incorporated) under common control which, together with any Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Code.
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"CURRENT ACCOUNT" means an account receivable of a Borrower
with terms requiring payment within thirty (30) days of the original invoice
date (which shall not be more than five (5) days subsequent to the shipment
date or the date services were fully performed by such Borrower) or the
shipment of the goods or rendition of the services giving rise thereto.
"CURRENT MATURITIES" means, as at any date of determination,
all payments of principal due under terms of any Indebtedness for Borrowed
Money within three calendar months after that date.
"DATED ACCOUNT" means an account receivable of a Borrower with
terms requiring payment in more than thirty (30), but not more than ninety
(90), days from the original invoice date (which shall not be more than five
(5) days subsequent to the shipment date or the date services were fully
performed by such Borrower).
"DEBT SERVICE" means, with reference to any period, the sum of
the aggregate amount of payments required to be made by the Company and its
Subsidiaries during such period in respect of principal on all Indebtedness
for Borrowed Money (whether at maturity, as a result of mandatory sinking
fund redemption, mandatory prepayment, acceleration or otherwise).
"DEFAULT" means any event or condition the occurrence of which
would, with the passage of time or the giving of notice, or both, constitute
an Event of Default.
"XXXXXX" means Xxxxxx Xxxxxx, an individual who is as of the
date hereof the chairman of the Board of Directors and Chief Executive
Officer of the Company.
"DOMESTIC RATE" means a fluctuating interest rate per annum
equal at all times to the greater of:
(a) the rate of interest announced by the Administrative Agent from
time to time as its prime commercial rate as in effect on such day, with
any change in such rate resulting from a change in said prime commercial
rate to be effective as to the Borrowers as of the date of the relevant
change in said prime commercial rate; or
(b) the sum of (x) the rate per annum (rounded upward, if necessary,
to the nearest 1/100th of 1%) equal to the weighted average of the rates on
overnight Federal funds transactions with member banks of the Federal
Reserve System arranged by Federal funds brokers on such day, as set forth
opposite the caption "FEDERAL FUND (EFFECTIVE)" in the daily statistical
release designated as "COMPOSITE 3:30 P.M. QUOTATIONS FOR U.S. GOVERNMENT
SECURITIES", or any successor publication, published by the Federal Reserve
Bank of New York on the Business Day next succeeding such day, PROVIDED
THAT (i) if such day is not a Business Day, the rate for such day shall be
such rate on such transactions on the immediately preceding Business Day as
so published on the next succeeding Business Day, and (ii) if no such rate
is so published on any such next succeeding Business Day, the rate for such
day shall be the average of the rates quoted to the Administrative Agent by
three or more Xxx Xxxx xx
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Xxxxxxx Xxxxxxx funds brokers on such day for such transactions as
determined by the Administrative Agent, and (y) 1/2 of 1% (0.50%).
"DOMESTIC RATE PORTION" is defined in Section 2.1(a) hereof.
"ELIGIBLE ACCOUNTS" means the aggregate of all Accounts of
each Borrower if and so long as:
(a) all representations and warranties set forth in the Collateral
Documents with respect to such Account are true and correct in all material
respects;
(b) (i) such Account arises out of the sale by such Borrower of
inventory which has been delivered to or accepted by the account debtor on
such Account or out of the rendition of services fully performed by such
Borrower and accepted by such account debtor, and in each case such Account
otherwise represents a final sale (subject to a right of return granted the
account debtor in accordance with the then current prevailing industry
practice) or (ii) such Account (a "LICENSE RECEIVABLE") represents the
Borrower's claim to royalties earned by virtue of its license in the
ordinary course of its business of master recordings or compositions to a
third party pursuant to a binding written contract requiring at least
semiannual cash royalty payments and such Account represents an amount due
from such account debtor for a completed semiannual (or shorter) license
period subject to no future performance from the Borrower and in excess of
any advance royalty such account debtor may have paid;
(c) the account debtor on such Account is (i) located within the
United States of America or Canada (excluding Quebec) or (ii) located in
Quebec or otherwise outside of the United States and Canada so long as (x)
the account debtor with respect to such Account is either EMI, Sony, WEA,
BMG, UNI, Polygram or another distributor reasonably approved by the
Administrative Agent (provided that not more than 10% of the Borrowing Base
is at any time attributable to the Accounts described in this clause (x))
or (y) the Account is supported by insurance acceptable in form and
substance to the Administrative Agent, or the account debtor thereon has
supplied the Company with an irrevocable letter of credit in form and
substance satisfactory to the Administrative Agent, issued by an insurance
company or financial institution, as the case may be, satisfactory to the
Administrative Agent and which has been duly pledged to the Administrative
Agent;
(d) such Account is the valid, binding and legally enforceable
obligation of the account debtor obligated thereon and such account debtor
is not (i) a Subsidiary or an Affiliate of such Borrower, (ii) a
shareholder, director, officer or employee of such Borrower or its
Subsidiary, (iii) the United States of America, or any state or political
subdivision thereof, or any department, agency or instrumentality of any of
the foregoing unless such Borrower has complied with the Assignment of
Claims Act of 1940, as amended, or any similar state or local statute, as
the case may be, to the satisfaction of the Administrative Agent, (iv) a
debtor under any proceeding under the
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Xxxxxx Xxxxxx Bankruptcy Code, as amended, or any other comparable
bankruptcy or insolvency law, or (v) an assignor for the benefit of
creditors;
(e) such Account is not evidenced by an instrument or chattel paper
unless the same has been endorsed and delivered to the Administrative
Agent;
(f) such Account is owned by such Borrower is freely assignable, is
subject to a perfected, first priority Lien in favor of the Administrative
Agent for the benefit of the Lenders, and is free and clear of any other
Lien other than Liens permitted by Section 8.7(a) hereof;
(g) such Account is not owing from an account debtor who is also a
creditor (other than Polygram) or supplier of such Borrower, is not subject
to any offset, counterclaim or other defense with respect thereto and, with
respect to said account receivable or the contract or purchase order out of
which the same arose, no surety bond was required or given in connection
therewith;
(h) such Account is either a Current Account or a Dated Account or a
License Receivable;
(i) if such Account is a Current Account, such Account is not unpaid
more than ninety (90) days after the original invoice date (which must be
not more than five (5) days subsequent to the shipment date or the date
services were fully performed by such Borrower), or, if a Dated Account,
such Account is not more than thirty (30) days past due from the original
due date of the relevant invoice, or, if such Account is a License
Receivable, such Account is not unpaid more than ninety (90) days past the
close of the relevant semiannual (or shorter) license period;
(j) such Account is not owed by an account debtor who is obligated on
Accounts owed to the Borrowers (taken together) more than 25% of the
aggregate unpaid balance of which has been past due for longer than the
relevant period specified in subsection (i) above unless the Administrative
Agent has approved the continued eligibility thereof;
(k) such Account would not cause the total Accounts owing from any
one account debtor and its Affiliate to exceed any credit limit established
for purposes of determining eligibility hereunder by the Administrative
Agent in its reasonable judgment for such account debtor and for which the
Administrative Agent has given the Company at least ten (10) Business Day's
prior notice of the establishment of any such credit limit;
(l) such Account does not arise from a sale to an account debtor on
(i) a xxxx-and-hold basis or (ii) on a consignment basis (except for such
inventory as is on consignment to Polygram under the terms of its
distribution arrangements with the Company) or (iii) (except to the extent
consistent with the then current prevailing
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industry practice) on a guaranteed sale, sale-or-return, sale-on-approval
or any other repurchase or return basis; and
(m) the Administrative Agent, in the reasonable exercise of its
discretion (including consideration in good faith of any relevant
information provided by the Company), does not believe that the prospect
for payment or performance by the account debtor on such Account, or the
collateral value of such Account, or the Administrative Agent's ability to
realize on such value, is or will be impaired in any material respect
(provided that no Account shall be ineligible solely by virtue of this
clause (m) unless the Administrative Agent shall have first provided the
Company at least thirty (30) Business Days' prior notice of its intent to
classify such Account as ineligible under this clause).
"ELIGIBLE INVENTORY" means all inventory of the Company and
its Subsidiaries (other than packaging, crating and supplies inventory)
constituting finished goods consisting of recorded and packaged CD's, videos,
DVD's, tapes and blank jewel cases or any other recognized commercially
available and distributable music media format or configuration (which, in
the case of such other music media format or configuration, the
Administrative Agent, in its reasonable judgment, deems to be Eligible
Inventory) in each case if and so long as:
(a) all representations and warranties set forth in the Collateral
Documents with respect to such inventory are true and correct in all
material respects;
(b) such inventory is an asset of such Borrower which is freely
assignable, is subject to a perfected, first priority Lien in favor of the
Administrative Agent for the benefit of the Lenders, and is free and clear
of any other Liens other than Liens permitted by Section 8.7(a) and (b)
hereof;
(c) such inventory is located at a Permitted Collateral Location for
such Borrower;
(d) such inventory is not obsolete or slow moving, and is of good and
merchantable quality free from any defects which might adversely affect the
market value thereof; and
(e) the Administrative Agent, in the reasonable exercise of its
discretion (including consideration in good faith of any relevant
information provided by the Company), does not believe that the collateral
value of such inventory, or the Administrative Agent's ability to realize
on such value, is or will be impaired in any material respect (provided
that no inventory shall be ineligible solely by virtue of this clause (e)
unless the Administrative Agent shall have first provided the Company at
least thirty (30) Business Days' prior notice of its intent to classify
such inventory as ineligible under this clause).
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"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute thereto.
"EVENT OF DEFAULT" means any event or condition identified as
such in Section 9.1 hereof.
"EXCLUDED TAXES" means, with respect to the Administrative
Agent and any Lender, (a) income or franchise taxes imposed on (or measured
by) its net income, assets or net worth by the United States, by the
jurisdiction under the laws of which such Lender or Administrative Agent is
organized or in which its principal office is located or in which its
applicable lending office is located, or by any political subdivision of any
of the foregoing, (b) any branch profits tax imposed on such Lender or
Administrative Agent by the United States or any similar tax imposed on such
Lender or Administrative Agent by any other jurisdiction in which any of the
Loan Parties is located and (c) in the case of a Foreign Lender, any
withholding tax that is imposed on amounts payable to such Foreign Lender at
the time such Foreign Lender becomes a party to this Agreement (or designates
a new lending office) or is attributable to such Foreign Lender's failure to
comply with Sections 13.1(b) and (c), except to the extent that such Foreign
Lender (or its assignor, if any) was entitled, at the time of designation of
a new lending office (or assignment), to receive additional amounts from any
Borrower with respect to such withholding tax pursuant to Section 13.1(a)
hereof.
"FINANCIAL COVENANTS means Sections 8.9 through 8.14 hereof,
inclusive, as any of the foregoing may from time to time be modified or
amended, and each replacement to any of such Sections.
"FIXED CHARGE COVERAGE RATIO" is defined in Section 8.13 hereof.
"FOREIGN LENDER" means any Lender that is not a United States
person (as such term is defined in Section 7701(a)(30) of the Code).
"GAAP" means generally accepted accounting principles set
forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board that are
applicable to the circumstances as of the date of determination and
consistently applied.
"GOVERNMENTAL BODY" shall mean the United States of America or
any state or political subdivision thereof, and any other nation or political
subdivision thereof or any agency, department, commission, board, bureau or
instrumentality of any of the foregoing which exercises jurisdiction over the
Company or any of its Subsidiaries or any of their assets or the conduct of
the business of the Company or any of its Subsidiaries or any of their assets
in any such jurisdiction.
"GOVERNMENTAL REQUIREMENTS" shall mean any law, ordinance,
order, rule or regulation of a Governmental Body.
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"GUARANTOR" means each Subsidiary of the Company (other than
Intersound) that is a signatory hereto or that executes and delivers to the
Administrative Agent a Guaranty along with the accompanying closing documents
required by Section 8.23 hereof.
"GUARANTY" means a letter to the Administrative Agent in the
form of Exhibit F hereto executed by a Subsidiary (other than Intersound)
whereby it acknowledges it is party hereto as a Guarantor under Section 11
hereof and also in the case of any Subsidiary not organized under the laws of
the United States or any State thereof, such other form of guaranty as shall
be reasonably acceptable to the Administrative Agent and the Required Lenders.
"HARNICK WARRANT" means the warrant to purchase 50,000 shares
of common stock of the Company, par value $.001 per share, to be issued to
Xxxx X. Xxxxxxx at the closing of the Investment Agreement.
"HEDGING ARRANGEMENTS" is defined in Section 8.29 hereof.
"HEDGING LIABILITY" shall mean liabilities of the Company to
the Lenders or any of them or to any of their Affiliates arising in
connection with any Hedging Arrangements entered into by the Company or any
Subsidiary with any Lender or any Affiliate of any Lender. Unless and until
the amount of the Hedging Liability is fixed and determined, the Hedging
Liability shall be deemed to be 4% per annum of the notional amount of the
hedge from the date of computation to the date the hedge expires.
"HOUSE OF BLUES VENTURE" means that certain joint venture of
the Company with subsidiaries of HOB Entertainment, Inc. under a joint
venture agreement, dated August 26, 1996.
"IMPERMISSIBLE QUALIFICATION" means, relative to the opinion
or certification of any independent public accountant as to any financial
statement of the Company, any qualification or exception to such opinion or
certification:
(a) which is of a "GOING CONCERN" nature; or
(b) which relates to the limited scope of examination of matters
relevant to such financial statement.
"INDEBTEDNESS FOR BORROWED MONEY" means for any Person
(without duplication) (i) all indebtedness created, assumed or incurred in
any manner by such Person representing money borrowed (including by the
issuance of debt securities), (ii) all indebtedness for the deferred purchase
price of property or services (other than trade accounts payable arising in
the ordinary course of business), (iii) all indebtedness secured by any Lien
upon Property of such Person, whether or not such Person has assumed or
become liable for the payment of such indebtedness, (iv) all Capitalized
Lease Obligations of such Person, (v) all obligations of such Person on or
with respect to letters of credit, bankers' acceptances and other extensions
of credit whether or not representing obligations for borrowed money and (vi)
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Hedging Liability to the extent the same is then due and payable pursuant to
the terms of the relevant Hedging Arrangements. The parties to the Agreement
acknowledge and agree that the following shall not be considered Indebtedness
for Borrowed Money: (i) any or all shares of outstanding Series B Preferred
Stock or Affiliate Preferred Stock, (ii) any dividends (whether or not
declared) payable on Series B Preferred Stock and Affiliate Preferred Stock,
(iii) any interest payable by the Company to the holders of Series B
Preferred Stock or Affiliate Preferred Stock due to the Company's failure to
pay the repurchase price for such preferred stock when such stock is properly
tendered for redemption, (iv) any interest payable by the Company to the
holders of the Purchaser Warrants, the Affiliate Warrants or the Harnick
Warrant due to the Company's failure to pay the put price for such warrant
when such warrant is properly put to the Company for mandatory purchase
pursuant to its terms by virtue of such holder's exercise of such put and (v)
any Hedging Liability to the extent the same is not then due and payable
pursuant to the terms of the relevant Hedging Arrangements.
"INDEMNIFIED TAXES" means any and all present or future taxes
(including, without limitation, any United States interest equalization tax
or similar tax however named applicable to the acquisition or holding of debt
obligations and any interest or penalties with respect thereto), levies,
imposts, duties, fees, charges, stamp taxes, deductions, withholdings,
restrictions and conditions of any nature imposed by any government or any
political subdivision or taxing authority thereof (but excluding any Excluded
Taxes).
"INITIAL COLLATERAL DOCUMENTS" means the Security Agreement,
the Stock Pledge Agreement, the Security Agreement Re: Intellectual Property
and the Life Insurance Assignment.
"INITIAL RESERVES" means, as of any time, the reserves
commencing on the Closing Date imposed for returns, discounts and similar
allowances and aggregating not in excess of 20% of the then unpaid amount of
the Eligible Accounts.
"INTEREST COVERAGE RATIO" is defined in Section 8.12 hereof.
"INTEREST EXPENSE" means the sum of all interest charges
(including accruals of interest during such period subsequently payable in
cash and including imputed interest charges with respect to Capitalized Lease
Obligations and all amortization of debt discount and expense) of the Company
and its Subsidiaries for such period determined in accordance with GAAP.
"INTEREST PERIOD" means, with respect to any LIBOR Portion,
the period commencing on, as the case may be, the creation, continuation or
conversion date with respect to such LIBOR Portion and ending one (1), two
(2), three (3) or six (6) months thereafter as selected by the Company in its
notice as provided herein; provided that all of the foregoing provisions
relating to Interest Periods are subject to the following:
(i) if any Interest Period would otherwise end on a day which is not
a Business Day, that Interest Period shall be extended to the next
succeeding Business Day, unless in the case of an Interest Period the
result of such extension would be to
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carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date of
the relevant Notes;
(iii) the interest rate to be applicable to each Portion for each
Interest Period shall apply from and including the first day of such
Interest Period to but excluding the last day thereof; and
(iv) no Interest Period may be selected if after giving effect thereto
any Borrower will be unable to make a principal payment scheduled to be
made during such Interest Period without paying part of a LIBOR Portion on
a date other than the last day of the Interest Period applicable thereto.
For purposes of determining an Interest Period, a month means a period
starting on one day in a calendar month and ending on a numerically
corresponding day in the next calendar month, PROVIDED, HOWEVER, if an
Interest Period begins on the last day of a month or if there is no
numerically corresponding day in the month in which an Interest Period is to
end, then such Interest Period shall end on the last Business Day of such
month.
"INTERSOUND" is defined in the introductory paragraph hereof.
"INTERSOUND SUB DEBT" means the $5,000,000 in aggregate
principal amount of Subordinated Debt evidenced by those two certain
Convertible Promissory Notes of the Company dated as of January 31, 1997
payable to the order of Intersound, Inc. in the face principal amounts of
$3,125,000 and $1,875,000, respectively, and accrued interest thereon.
"INVESTMENT AGREEMENT" means that certain Investment Agreement
dated as of October 12, 1997 by and among the Company and the Purchasers, as
amended by amendments thereto dated October 28, 1997, October 30, 1997 and
November 25, 1997 and as the same may from time to time be further modified
or otherwise amended in each case without any adverse effect on the ability
of the Company or any Subsidiary to perform its obligations under the Loan
Documents or the rights and benefits of the Administrative Agent or of the
Lenders under the Loan Documents.
"LENDER" means Bank of Montreal, the other signatories hereto
(other than the Loan Parties) and all other lenders becoming parties hereto
pursuant to Section 13.12 hereof.
"LEVERAGE RATIO" means, as of any time the same is to be
determined, the ratio of Consolidated Funded Debt at such time to
Consolidated EBITDA for the then four most recently completed fiscal quarters
of the Company; PROVIDED, HOWEVER, that:
(a) the Leverage Ratio as of the Closing Date shall mean the ratio of
(x) Consolidated Funded Debt at such time to (y) the quotient which results
by dividing (i)
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Consolidated EBITDA for the two fiscal quarters of the Company ended on
or about November 30, 1997 by (ii) 0.50;
(b) the Leverage Ratio as of the close of the fiscal quarter of the
Company ending on or about February 28, 1998 shall mean the ratio of (x)
Consolidated Funded Debt at such time to (y) the quotient which results by
dividing (i) Consolidated EBITDA for the three fiscal quarters of the
Company ended on or about such date by (ii) 0.75.
"LETTERS OF CREDIT" is defined in Section 1.3 hereof.
"LIBOR CONDITION" shall mean the satisfaction on or at any
time after the close of the Company's quarterly accounting period ending on
or about August 31, 1998 of all of the following conditions:
(a) the Leverage Ratio for the two most recently completed
consecutive fiscal quarters of the Company shall be less than 3.00 to 1;
(b) the Interest Coverage Ratio shall have been at least 3.00 to 1 as
of the close of the same two fiscal quarters;
(c) no Default or Event of Default shall exist as of the date on
which the other conditions have been satisfied; and
(d) the Administrative Agent and the Lenders shall have received such
assurances as they may reasonably require to confirm the satisfaction of
the above conditions (it being understood and agreed that a certificate of
the chief financial officer of the Company to the effect that the foregoing
conditions have been satisfied, together with the computations confirming
such satisfaction, shall be sufficient for the foregoing purposes).
The LIBOR Condition shall be deemed satisfied permanently once the above
conditions have been met.
"LIEN" means any mortgage, lien, security interest, pledge,
charge or encumbrance of any kind in respect of any Property, including the
interests of a vendor or lessor under any conditional sale, Capital Lease or
other title retention arrangement.
"LIFE INSURANCE ASSIGNMENT" is defined in Section 4.5 hereof.
"LOAN DOCUMENTS" means this Agreement, the Notes, the
Applications, the Guaranties and the Collateral Documents and each
contractual agreement purporting to amend or modify any of the foregoing.
"LOAN PARTIES" means the Borrowers and the Guarantors, unless
the context in which such term is used shall otherwise require.
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"LOANS" means and includes Revolving Loans and the Term Loan,
unless the context in which such term is used shall otherwise require.
"MAC MUSIC" means MAC Music LLC, a Delaware limited liability
company.
"MATERIAL ADVERSE EFFECT" shall mean a material adverse effect
on (i) the business, property, condition (financial or otherwise), or results
of operations, or prospects, of the Company and its Subsidiaries taken as a
whole, (ii) the ability of the Company or any Subsidiary to perform its
obligations under the Loan Documents, or (iii) the validity or enforceability
of any of the Loan Documents or the rights or remedies of the Administrative
Agent or of the Lenders thereunder.
"MUSIC RIGHTS" is defined in Section 8.18 hereof.
"NOTES" means and includes the Revolving Credit Notes and the
Term Credit Notes, unless the context in which such term is used shall
otherwise require.
"OBLIGATIONS" means all obligations of each Borrower to pay
principal and interest on the Loans, all reimbursement obligations owing
under the Applications, all fees and charges payable hereunder, and all other
payment obligations of each Borrower arising under or in relation to any Loan
Document, in each case whether now existing or hereafter arising, due or to
become due, direct or indirect, absolute or contingent, and howsoever
evidenced, held or acquired.
"PBGC" means the Pension Benefit Guaranty Corporation or any
Person succeeding to any or all of its functions under ERISA.
"PERMITTED COLLATERAL LOCATION" shall mean for each Borrower,
(i) the locations set forth for such Borrower on Exhibit E hereto, (ii)
locations in the continental United States and Canada (other than Quebec)
which the Company notifies the Administrative Agent in writing are locations
of Collateral and (iii) such other locations as are approved for such
Borrower by the Administrative Agent and the Required Lenders in their
discretion; PROVIDED, HOWEVER, that unless and to the extent the
Administrative Agent and the Required Lenders agree otherwise, such a
location which is not owned by a Borrower (each, a "LEASED LOCATION"), and
such a location which is owned by a Borrower but subject to a mortgage or
similar lien in favor of a third party (each a "MORTGAGED LOCATION"), shall
in no event constitute a Permitted Collateral Location unless each Person
owning or controlling such leased location or holding a lien on such
mortgaged location shall have waived all of its right, title and interest in
and to any inventory located thereon in writing in form and substance
reasonably satisfactory to the Administrative Agent and the Required Lenders;
FURTHER PROVIDED, HOWEVER, that if and so long as no Event of Default has
occurred and is continuing, no such agreement need be obtained for (i)
locations owned or leased by Polygram or (ii) leased locations where
inventory for all the Borrowers aggregating at all such locations (all such
locations taken together) of not more than $500,000 in value is located in
the ordinary course of a Borrower's business for delivery to purchasers
thereof.
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"PERMITTED LIENS" is defined in Section 8.7 hereof.
"PERSON" means an individual, partnership, corporation,
association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision
thereof.
"PLAN" means any employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code that either (i) is maintained by a member of the Controlled
Group for employees of a member of the Controlled Group, or (ii) is
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
"POLYGRAM" means Polygram Group Distribution, Inc., a
corporation.
"POLYGRAM DISTRIBUTION AGREEMENT" means that certain
Distribution Agreement dated as of May 14, 1993 by and between Polygram and
the Company as amended prior to the Closing Date by amendments thereto dated
November 1, 1995, December 18, 1996 and July 25, 1997 and as the same may
from time to time be further amended after the Closing Date.
"PROPERTY" means any interest in any kind of property or
asset, whether real, personal or mixed, or tangible or intangible.
"PURCHASE MONEY LIENS" is defined in Section 8.7(c) hereof.
"PURCHASERS" means SK-Palladin Partners and MAC Music.
"PURCHASER WARRANTS" means the warrants to purchase an
aggregate of 3,600,000 shares of common stock of the Company, par value $.001
per share, to be purchased by the Purchasers on the closing of the Investment
Agreement.
"REQUIRED LENDERS" means, as of the date of determination
thereof, those Lenders (which may include the Lender then acting as the
Administrative Agent) holding at least 66-2/3% of the Commitments or, in the
event that no Commitments are outstanding hereunder, the Administrative Agent
and those Lenders (which may include the Lender then acting as the
Administrative Agent) holding at least 66-2/3% in aggregate unpaid principal
amount of the Loans and credit risk on the Letters of Credit outstanding
hereunder.
"RESTRICTED ACCOUNT" is defined in Section 4.2 hereof.
"RESTRICTED PAYMENTS" is defined in Section 8.16(a) hereof.
"REVOLVING CREDIT" is defined in Section 1.1 hereof.
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"REVOLVING CREDIT COMMITMENTS" means the commitments of the
Lenders to extend credit under the Revolving Credit in the amounts set forth
opposite their signatures hereto under the heading "REVOLVING CREDIT
COMMITMENT" and opposite their signatures on Assignment Agreements delivered
pursuant to Section 13.12 hereof under the heading "REVOLVING CREDIT
COMMITMENT", as such amounts may be reduced pursuant hereto. As of the date
hereof, the aggregate amount of Revolving Credit Commitments is $10,000,000.
"REVOLVING LOANS" is defined in Section 1.2 hereof.
"REVOLVING CREDIT TERMINATION DATE" means December 1, 2000, or
such earlier date on which the Revolving Credit Commitments are terminated in
whole pursuant to Section 2.9, 9.2 or 9.3 hereof.
"SEC" means the federal Securities and Exchange Commission,
and any successor thereto.
"SECURITIES ACT" means the federal Securities Act of 1933, as
amended.
"SECURITY AGREEMENT" means the Security Agreement dated as of
even date herewith being executed and delivered by the Company and its
current Subsidiaries substantially concurrent with the execution hereof.
"SECURITY AGREEMENT RE: INTELLECTUAL PROPERTY" means the
Security Agreement Re: Intellectual Property dated as of even date herewith
being executed by the Company and its Subsidiaries substantially concurrent
with the execution hereof.
"SERIES B PREFERRED STOCK" means an aggregate of 20,000 shares
of Series B Convertible Preferred Stock of the Company, par value $.001 per
share, to be purchased by SK-Palladin Partners and MAC Music pursuant to the
Investment Agreement and any and all dividends thereon.
"X-X XXXXXXXX PARTNERS" means X-X Xxxxxxxx Partners LP, a
Delaware limited partnership.
"STOCK PLEDGE AGREEMENT" means the Pledge Agreement dated as
of even date herewith to be executed by the Company and its current
Subsidiaries substantially concurrent with the execution hereof.
"SUBORDINATED INDEBTEDNESS" means any Indebtedness for
Borrowed Money which is subordinated in right of payment to the prior payment
of the Obligations pursuant to subordination provisions approved in writing
by the Administrative Agent and Required Lenders, pursuant to documentation,
containing interest rates, payment terms, maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other material
terms in each case in form and substance satisfactory to the Administrative
Agent and Required Lenders in their reasonable discretion.
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The term "SUBSIDIARY" shall mean, as to any particular parent
corporation, any other corporation more than 50% of the outstanding Voting
Stock of which is at the time directly or indirectly owned by such parent
corporation or by any one or more other corporations or other entities which
are themselves subsidiaries of such parent corporation. The term
"SUBSIDIARY" shall mean, when used with reference to a Borrower, a subsidiary
of, respectively, the Company or Intersound.
"SYNDICATION AGENT" is defined in the introductory paragraph
hereof.
"TERM CREDIT" is defined in Section 1.4 hereof.
"TERM CREDIT COMMITMENTS" means the commitments of the Lenders
to make loans under the Term Credit in the amounts set forth opposite their
signatures hereto under the heading "TERM CREDIT COMMITMENT" and opposite
their signatures on Assignment Agreements delivered pursuant to Section 13.12
hereof under the heading "TERM CREDIT COMMITMENT", as such amounts may be
reduced pursuant hereto. As of the date hereof, the aggregate amount of Term
Credit Commitments is $20,000,000.
"TERM LOANS" is defined in Section 1.4 hereof.
"TERM CREDIT NOTES" is defined in Section 1.4 hereof.
"TRANSACTION SECURITIES" means the Series B Preferred Stock,
the Affiliate Preferred Stock, the Purchaser Warrants, the Affiliate Warrants
and the Harnick Warrant.
"UNFUNDED VESTED LIABILITIES" means, for any Plan at any time,
the amount (if any) by which the present value of all vested nonforfeitable
accrued benefits under such Plan exceeds the fair market value of all Plan
assets allocable to such benefits, all determined as of the then most recent
valuation date for such Plan, but only to the extent that such excess
represents a potential liability of a member of the Controlled Group to the
PBGC or the Plan under Title IV of ERISA.
"VOTING STOCK" shall mean securities of any class or classes
membership interests or other ownership rights of or in a Person, the holders
of which are ordinarily, in the absence of contingencies, entitled to elect a
majority of the board of directors or managers of such Person (or Persons
performing similar functions).
"WELFARE PLAN" means a "welfare plan" as defined in Section
3(1) of ERISA.
"WHOLLY-OWNED SUBSIDIARY" means a Subsidiary of which all of
the issued and outstanding shares of capital stock (other than directors'
qualifying shares as required by law) or other equity interests are owned by
any Borrower and/or one or more Wholly-Owned Subsidiaries within the meaning
of this definition.
SECTION 5.2. INTERPRETATION. The foregoing definitions are
equally applicable to both the singular and plural forms of the terms
defined. The words "HEREOF", "HEREIN", and "
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XXXXXXXXX" and words of like import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement. All references to time of day herein are references to Chicago,
Illinois time unless otherwise specifically provided. Where the character or
amount of any asset or liability or item of income or expense is required to
be determined or any consolidation or other accounting computation is
required to be made for the purposes of this Agreement, it shall be done in
accordance with GAAP except where such principles are inconsistent with the
specific provisions of this Agreement.
SECTION 5.3. ACCOUNTING TERMS. For purposes of this Agreement, all
accounting terms not otherwise defined herein shall have the meanings
assigned to such terms in conformity with GAAP. Financial statements and
other information furnished to the Administrative Agent pursuant to Section
8.5 shall be prepared in accordance with GAAP (as in effect at the time of
such preparation) on a consistent basis. In the event any "Accounting
Changes" (as defined below) shall occur and such changes affect financial
covenants, standards or terms in this Agreement, then the Company, the
Administrative Agent and the Lenders agree to enter into negotiations in
order to amend such provisions of this Agreement so as to equitably reflect
such Accounting Changes with the desired result that the criteria for
evaluating the financial condition of the Company and its Subsidiaries shall
be the same after such Accounting Changes as if such Accounting Changes had
not been made, and until such time as such an amendment shall have been
executed and delivered by the Borrowers, the Administrative Agent and the
Required Lenders, (A) all financial covenants, standards and terms in this
Agreement shall be calculated and/or construed as if such Accounting Changes
had not been made, and (B) the Company shall prepare footnotes to each
compliance certificate and the financial statements required to be delivered
hereunder that show the differences between the financial statements
delivered (which reflect such Accounting Changes) and the basis for
calculating financial covenant compliance (without reflecting such Accounting
Changes). "ACCOUNTING CHANGES" means: (a) changes in accounting principles
required by GAAP and implemented by the Company and any of its Subsidiaries;
(b) changes in accounting principles recommended by certified public
accountants of the Company or any of its Subsidiaries; or (c) changes in
carrying value of the Company's (or any of its Subsidiaries') assets,
liabilities or equity accounts resulting from the application of purchase
accounting principles.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants to the Administrative Agent and
the Lenders as follows:
SECTION 6.1. ORGANIZATION AND POWER. Each Borrower is duly organized
and existing under the laws of the state of its organization, and is duly
licensed or qualified to do business in each state where the nature of the
assets owned or leased by it or business conducted by it requires such
licensing or qualification and in which the failure to be so licensed or
qualified would have a Material Adverse Effect and has all necessary power to
carry on its contemplated business.
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SECTION 6.2. CORPORATE AUTHORITY AND VALIDITY OF OBLIGATIONS. Each
Borrower has full right, power and authority to enter into this Agreement, to
make the borrowings herein provided for, to issue the Notes in evidence
thereof, to execute and deliver the other Loan Documents executed and
delivered or to be executed and delivered by it, and to perform each and all
of the matters and things herein and therein provided for. Each Subsidiary
has full right, power and authority to enter into the Loan Documents executed
by it and to perform each and all of the matters and things therein provided
for. The Loan Documents do not, nor will the performance or observance by
the Company or any Subsidiary of any of the matters and things herein or
therein provided for, contravene any provision of law or any charter, by-law,
operating agreement or similar agreement of the Company or any such
Subsidiary or constitute a breach or default under any covenant, indenture or
agreement of or affecting the Company or any such Subsidiary where such
breach or default would have a Material Adverse Effect.
SECTION 6.3. SUBSIDIARIES. Each Subsidiary is duly organized and
existing under the laws of the jurisdiction of its organization, and duly
licensed or qualified to do business in each state or other jurisdiction
where the nature of the assets owned or leased by it or business conducted by
it requires such licensing or qualification and in which the failure to be so
licensed or qualified would have a Material Adverse Effect and has all
necessary corporate power to carry on its present business. Schedule 6.3
hereto identifies each Subsidiary, the jurisdiction of its organization, the
percentage of issued and outstanding shares of each class of its capital
stock or other equity interest owned by the Company and the Subsidiaries and,
if such percentage is not 100% (excluding directors' qualifying shares as
required by law), a description of each class of its authorized capital stock
or other equity interest and the number of shares of each class issued and
outstanding. All of the outstanding shares of capital stock of or other
equity interest in each Subsidiary are validly issued and outstanding and
fully paid and nonassessable, and all shares or other equity interests in
each Subsidiary indicated on Schedule 6.3 as owned by the Company or a
Subsidiary are owned, beneficially and of record, by the Company or such
Subsidiary free and clear of all Liens other than the Lien of the
Administrative Agent on the shares and other equity interests of each
Subsidiary. There are no outstanding commitments or other obligations of any
Subsidiary to issue, and no options, warrants or other rights of any Person
to acquire, any shares of any class of capital stock of or other equity
interest in any Subsidiary.
SECTION 6.4. USE OF PROCEEDS; REGULATION U. The Borrowers shall use
proceeds of the Loans and other extensions of credit made available hereunder
solely for the purpose of refinancing the BOM Bridge Loans and repaying
(prior to May 31, 1998) all or a portion of the Intersound Sub Debt and
funding their working capital needs. Neither the Company nor any Subsidiary
is engaged in the business of extending credit for the purpose of purchasing
or carrying margin stocks (within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System), and no part of the proceeds of any
loan or extension of credit hereunder will be used to purchase or carry any
margin stock or extend credit to others for the purpose of purchasing or
carrying any margin stock if as a result thereof such loan or other extension
of credit would violate Regulation U or any interpretation thereof.
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SECTION 6.5. FINANCIAL STATEMENTS. (a) COMPANY. The consolidated
balance sheet of the Company and its Subsidiaries as at May 31, 1997 and the
related consolidated statements of income and cash flows of the Company and its
Subsidiaries for the fiscal year then ended, and accompanying notes thereto,
which financial statements are accompanied by the audit report of Ernst & Young
LLP, independent public accountants, and the unaudited interim consolidated
balance sheet of the Company and its Subsidiaries as at July 31, 1997 and the
related consolidated statements of income and cash flows of the Company and its
Subsidiaries for the two (2) months then ended, heretofore furnished to the
Administrative Agent, fairly present the consolidated financial condition of the
Company and its Subsidiaries as at said dates and the consolidated results of
their operations and cash flows for the periods then ended in conformity with
generally accepted accounting principles applied on a consistent basis (subject
in the case of such interim statements, to normal year-end audit adjustments).
Neither the Company nor any Subsidiary has contingent liabilities which are
material to it other than as indicated on such financial statements or, with
respect to future periods, on the financial statements furnished pursuant to
Section 8.5 hereof. Since July 31, 1997, there has been no change in the
condition (financial or otherwise) or business prospects of any Borrower or the
Company and its Subsidiaries taken as a whole except those occurring in the
ordinary course of business, none of which individually or in the aggregate have
been materially adverse.
(b) GOOD TITLE. The Company and its Subsidiaries have good and
defensible title to their assets as reflected on the most recent consolidated
balance sheet of the Company and its Subsidiaries furnished to the Lenders
(except for sales of assets by the Company and its Subsidiaries in the
ordinary course of business), subject to no Liens other than such thereof as
are permitted by Section 8.7 hereof.
SECTION 6.6. LITIGATION, TAXES AND APPROVALS. Except as set forth in
Schedule 6.6 hereto, there is no litigation or governmental proceeding
pending, nor to the knowledge of any Borrower threatened, against the Company
or any Subsidiary or for which any of them are liable which if adversely
determined would result in a Material Adverse Effect. The United States
federal income tax returns of the Company and its Subsidiaries for the
taxable year ended May 31, 1996 and for all taxable years ended prior to said
date have been filed with the Internal Revenue Service, and any additional
assessments in connection with any such years have been paid or the
applicable statute of limitations therefor has expired. No objections to or
controversies in respect of the United States federal income tax returns of
the Company or any Subsidiary are pending or threatened which, if adversely
determined, would have a Material Adverse Effect. No authorization, consent,
license, or exemption from, or filing or registration with, any court or
governmental department, agency or instrumentality, is or will be necessary
to the valid execution, delivery or performance by the Company or any
Subsidiary of any Loan Document to be executed and delivered by it, except
for filing of financing statements and other documents evidencing the
Administrative Agent's lien in the Collateral.
SECTION 6.7. BURDENSOME CONTRACTS WITH AFFILIATES. Except as
disclosed on Schedule 6.7 hereto, as the same may be updated from time to
time with the consent of the Agent and Required Lenders, all material
contracts and agreements between the Company or
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any of its Subsidiaries and their Affiliates are on terms and conditions
which are no less favorable to the Company or such Subsidiary than would be
usual and customary in similar contracts or agreements between Persons not
affiliated with each other.
SECTION 6.8. ERISA. The Company and each Subsidiary are each in
compliance in all material respects with the Employee Retirement Income
Security Act of 1974 ("ERISA") to the extent applicable to it and has
received no notice to the contrary from the Pension Benefit Guaranty
Corporation ("PBGC"), and, in the event of the Company's or any Subsidiary's
partial or total withdrawal from any pension plans, multi-employer pension
plans or non-payment by other employer participants therein, the liability of
the Company and its Subsidiaries for any unfunded vested benefits thereunder
would not result in a Material Adverse Effect.
SECTION 6.9. FULL DISCLOSURE. The statements and information
furnished in writing by the Borrowers to either the Administrative Agent or
the Lenders in connection with the negotiation of this Agreement and the
commitments by the Lenders to provide all or part of the financing
contemplated hereby do not, taken as a whole, contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
material statements contained therein or herein not misleading, except for
such thereof as were corrected in subsequent written statements furnished the
Lenders prior to the initial extension of credit hereunder (the Lenders
acknowledging that as to any projections furnished to the Lenders, the
Company only represents that the same were prepared on the basis of
information and estimates it believes to be reasonable). There is no fact
peculiar to the Company or any Subsidiary which the Company has not disclosed
to the Lenders in writing which materially adversely affects nor, so far as
the Borrowers now can reasonably foresee, is reasonably likely to have a
Material Adverse Effect.
SECTION 6.10. COMPLIANCE WITH LAW. (a) Neither the Company nor any
Subsidiary is (i) in default with respect to any order, writ, injunction or
decree or (ii) in default in any material respect under any Governmental
Requirement (including ERISA, the Occupational Safety and Health Act of 1970
and laws and regulations establishing quality criteria and standards for air,
water, land and toxic waste) of any Governmental Body default with respect to
or under which is reasonably likely to result in a Material Adverse Effect;
and (b) without limiting the generality of the foregoing, the Company and
each Subsidiary are each in compliance with all applicable state and federal
environmental, health and safety statutes and regulations, including, without
limitation, regulations promulgated under the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. Sections 6901 ET SEQ., except where failure
to be in compliance is reasonably likely not to have a Material Adverse
Effect, and, to the Borrowers' knowledge, neither the Company nor any
Subsidiary will have acquired, incurred or assumed, directly or indirectly,
any contingent liability in connection with the release of any toxic or
hazardous waste or substance into the environment which is reasonably likely
to have a Material Adverse Effect. Insofar as known to the responsible
officers of each Borrower, neither the Company nor any Subsidiary is liable,
in whole or in part, for, nor are any of the assets or property of the
Company or any Subsidiary subject to a lien in favor of any Governmental Body
for any material liability arising from or in any way relating to, the costs
of cleaning up, remediating or responding to a release of hazardous
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substances (including, without limitation, petroleum, its by-products or
derivatives, or other hydrocarbons).
SECTION 6.11. SOLVENCY, ETC. (a) On the date of the initial Loan
hereunder, after giving effect to the credit extended hereunder on such date,
(i) the assets of each Borrower, at a fair valuation, will exceed its
liabilities, including contingent liabilities, (ii) the remaining capital of
the each Borrower will not be unreasonably small to conduct or in relation to
its business or any transaction in which it intends to engage, and (iii) each
Borrower will not have incurred debts, and does not intend to incur debts,
beyond its ability to pay such debts as they mature.
(b) On the date of the initial Loan hereunder, after giving effect to
the credit extended hereunder on such date, (i) the assets of the Company and
its Subsidiaries, taken as a whole, at a fair valuation, will exceed their
liabilities, including contingent liabilities, (ii) the remaining capital of
the Company and its Subsidiaries, taken as a whole, will not be unreasonably
small to conduct or in relation to its business or any transaction in which
they intend to engage, and (iii) the Company and its Subsidiaries, taken as a
whole, will not have incurred debts, and do not intend to incur debts, beyond
their ability to pay such debts as they mature.
(c) For purposes of this Section, "DEBT" means any liability on a
claim, and "CLAIM" means (i) right to payment, whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured, or unsecured, or
(ii) right to an equitable remedy for breach of performance if such breach
gives rise to a payment, whether or not such right to an equitable remedy is
reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured.
SECTION 7. CONDITIONS PRECEDENT.
SECTION 7.1. ALL ADVANCES. The obligation of the Lenders to make any
Revolving Loan or issue any Letter of Credit under the Revolving Credit or
make the Term Loan under the Term Credit (including the first such extension
of credit) shall be subject to the satisfaction of the following conditions
precedent at the time of the extension of such credit:
(a) each of the representations and warranties set forth herein
and in the other Loan Documents shall be true and correct in all
material respects as of the date of such advance or issuance (except
(i) in the case of the initial credit extension, the representations
and warranties made in Section 6.5 hereof shall be deemed to refer to
the most recent financial statements delivered to the Lenders pursuant
to Section 8.5 hereof and (ii) to the extent that such representations
and warranties expressly relate to an earlier date (in which case such
representations and warranties shall have been true and accurate on and
as of such earlier date));
(b) no material adverse change shall have occurred in the
condition (financial or otherwise) of the Company and its Subsidiaries
taken as a whole since the date of
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the most recent monthly financial statements furnished to the Lenders
pursuant to Sections 8.5(b) hereof;
(c) no Default or Event of Default shall have occurred and be
continuing;
(d) in the case of each request for a Revolving Loan or Letter of
Credit, after giving effect to such extension of credit, the aggregate
principal amount of all Revolving Loans and Letters of Credit
outstanding under this Agreement shall not exceed the lesser of (1) the
Revolving Credit Commitments or (2) the Borrowing Base; and
(e) in the case of the issuance of each Letter of Credit, the
Administrative Agent shall have received a properly completed
Application therefor and, in the case of an extension or increase in
the amount of the Letter of Credit, the Administrative Agent shall have
received a written request therefor, in a form acceptable to the
Administrative Agent, with such Application or written request, in each
case to be accompanied by the fees called for hereby.
Any request made by any Borrower to the Administrative Agent for a Loan or
Letter of Credit hereunder shall be deemed to constitute a representation and
warranty that the applicable conditions specified above exist as of such date.
Upon the request of the Administrative Agent, each Borrower so requested shall
furnish a certificate executed by its chief financial officer to confirm the
foregoing.
SECTION 7.2. INITIAL ADVANCE. At or prior to the time of the initial
Loan under the Revolving Credit or Term Credit, the following conditions
precedent shall also have been satisfied:
(a) The Administrative Agent shall have received the following for
the account of the Lenders (each to be properly executed and completed)
and the same shall have been approved as to form and substance by the
Administrative Agent:
(i) this Agreement and the Notes;
(ii) a Guaranty from each Subsidiary not a party hereto;
(iii) the Initial Collateral Documents and any documentation
necessary to perfect the liens thereby created (including, without
limitation, all certificates of capital stock of the Subsidiaries
which are corporations together with executed blank stock powers
therefor, and all financing statements requested by the
Administrative Agent in connection with the Initial Collateral
Documents) to the extent required by Section 4.1 hereof;
(iv) (x) certified copies of resolutions of the board of
directors of each Borrower authorizing the execution, delivery and
performance of this Agreement and such Borrower's Notes,
indicating the authorized signers of this
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Agreement and the Borrower's Notes and all other documents
relating thereto and the specimen signatures of such signers and
(y) copies of such Borrower's certificate or articles of
incorporation and by-laws certified by the secretary or other
appropriate officer of such Borrower together with a certificate
of good standing certified by the appropriate governmental officer
in the jurisdiction of such Borrower's incorporation;
(v) (x) certified copies of resolutions of the board of
directors of each Guarantor authorizing the execution, delivery
and performance of this Agreement, indicating the authorized
signers of this Agreement and all other documents relating thereto
and the specimen signatures of such signers and (y) copies of such
Guarantor's certificate or articles of incorporation and by-laws
certified by the Secretary or other appropriate officer of such
Guarantor together with a certificate of good standing certified
by the appropriate governmental officer in the jurisdiction of
such Guarantor's incorporation;
(vi) evidence of the maintenance of insurance as required
hereby or by the Initial Collateral Documents;
(vii) copies of all instruments evidencing or setting
forth terms and conditions applicable to the Intersound Sub Debt;
and
(viii) a written consent from the venture partner of the
Company in the House of Blues Venture to the collateral assignment
of the Company's equity interest in the House of Blues Venture
pursuant to the Stock Pledge Agreement as security for the
Obligations;
(b) The Administrative Agent shall have received evidence
reasonably satisfactory to it that the Company shall have received on
at any time after November 20, 1997 net cash proceeds of at least
$20,700,000 as a result of (i) capital contributions from existing
shareholders in the Company or (ii) from the Company's issuance and
sale, whether by public offering or private placement, of equity
securities (in the case of any such public offering or private
placement, net only of reasonable underwriting discounts and
commissions and other ordinary out-of-pocket expenses incurred by the
Company directly incurred and payable as a result of such issuance) or
(iii) a combination of the foregoing;
(c) All reasonable legal fees charged, and reasonable costs and
expenses incurred, by counsel to the Administrative Agent prior to the
Closing Date in connection with the preparation of the Loan Documents
shall have been paid;
(d) The Administrative Agent shall have received for its own
account the fees to be received by it at such time by agreement with
the Company; and
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(e) The Administrative Agent shall have received for the account
of the Lenders such other agreements, instruments, documents and
certificates as the Administrative Agent may reasonably request.
SECTION 7.3. LEGAL MATTERS. The Lenders shall have received the
written opinions of acceptable counsel for the Company and each Subsidiary
party to the Loan Documents, in form and substance satisfactory to the
Administrative Agent and its counsel, with respect to:
(a) the due organization and existence of the Company and each
such Subsidiary and the due licensing or qualification of the Company
and each such Subsidiary in all jurisdictions where the nature of the
assets owned or leased by them or business conducted by them requires
such licensing or qualification and in which the failure to be so
licensed or qualified would materially and adversely affect the
business, properties or operations of the Company and its Subsidiaries
taken as a whole;
(b) the power and authority of each Loan Party, to enter into the
Loan Documents and to perform and observe all the matters and things
therein provided for and the fact that the execution and delivery of
the Loan Documents will not, nor will the observance or performance of
any of the matters or things therein or herein provided for, contravene
any provision of law (including federal securities laws) or of the
charter or by-laws, operating agreement or management agreement of the
Company or any such Subsidiary or constitute a material breach of or
default under any provision of any material covenant, indenture or
agreement binding upon the Company or any such Subsidiary or affecting
any of their properties or assets;
(c) the due authorization for and the validity and enforceability
of the Loan Documents;
(d) the fact that no governmental authorization, consent,
exemption or withholding of objection is required with respect to the
lawful execution, delivery and performance of the Loan Documents other
than such thereof as have been obtained and are in full force and
effect;
(e) the lack, to the knowledge of such counsel, of any legal or
administrative proceedings pending or threatened against the Company or
any Subsidiary which, if adversely determined, would result in a
Material Adverse Effect; and
(f) such other matters as the Administrative Agent or its counsel
may reasonably require.
SECTION 7.4. INITIAL LOANS; AMENDMENT AND RESTATEMENT. The
Term Loan, together with the proceeds received by the Company on the Closing
Date upon the closing of the Investment Agreement, shall be in an amount
sufficient to, and the Borrowers shall (on the Closing Date) apply such Loans
to, repay the BMO Bridge Loans, all of which will then be held by BMO.
Simultaneously with and effective immediately upon the disbursement of such
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initial Loans, (i) the loan agreement under which the BMO Bridge Loans were
originally extended (the "PRIOR LOAN AGREEMENT") shall terminate and be
superseded by this Agreement, (ii) this Agreement shall be deemed to amend
and restate the Prior Loan Agreement in its entirety, with the Notes issued
hereunder to be issued in substitution and replacement for the notes
previously evidencing the BMO Bridge Loans and (iii) the security agreements
entered into in connection with the Prior Loan Agreement to secure the BMO
Bridge Loans shall terminate and be superseded by the Initial Collateral
Documents.
SECTION 8. COVENANTS.
Each Borrower agrees that, so long as any credit is available to or in
use by any Borrower hereunder, except to the extent compliance in any case or
cases is waived in writing by the Required Lenders (except that each Borrower
other than the Company is making such agreements only as to itself and its
subsidiaries):
SECTION 8.1. MAINTENANCE OF BUSINESS. The Company will, and will
cause each Subsidiary to, preserve and keep in force and effect all licenses
and permits necessary to the proper conduct of their respective businesses
except where the failure to do so would not result in a Material Adverse
Effect.
SECTION 8.2. MAINTENANCE. The Company will, and will cause each
Subsidiary to, maintain, preserve and keep their plant, properties and
equipment (other than obsolete or worn out equipment held for sale or
disposition) in good repair, working order and condition (ordinary wear and
tear excepted) and the Company will, and will cause each Subsidiary to, from
time to time make all needful and proper repairs, renewals, replacements,
additions and betterments thereto so that at all times the efficiency thereof
shall be substantially preserved and maintained, in each case where the
failure to do so is reasonably likely to have a Material Adverse Effect.
SECTION 8.3. TAXES. The Company will, and will cause each Subsidiary
to, duly pay and discharge all taxes, rates, assessments, fees and
governmental charges upon or against any of them or against their respective
properties, in each case before the same become delinquent and before
penalties accrue thereon, unless and to the extent that the same are being
contested in good faith and by appropriate proceedings, in each case where
the failure to do so is reasonably likely to have a Material Adverse Effect.
SECTION 8.4. INSURANCE. The Company will, and will cause each
Subsidiary to, insure and keep insured, with good and responsible insurance
companies, all insurable property owned by them which is of a character
usually insured by companies similarly situated and operating like
properties; and the Company will, and will cause each Subsidiary to, insure
such other hazards and risks (including employers' and public liability
risks) with good and responsible insurance companies as and to the extent
usually insured by companies similarly situated and conducting similar
businesses. The Company shall in any event maintain insurance on the
Collateral to the extent required by the Collateral Documents. The Company
will upon request of the Administrative Agent furnish a certificate setting
forth in summary form the nature and extent of the insurance maintained
pursuant to this Section.
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SECTION 8.5. FINANCIAL REPORTS. The Company will, and will cause each
Subsidiary to, maintain a standard and modern system of accounting in
accordance with sound accounting practice and will furnish to the Lenders and
their duly authorized representatives such information respecting the
business and financial condition of the Company and its Subsidiaries as any
Lender or the Administrative Agent may reasonably request; and without any
request, will furnish to the Lenders:
(a) as soon as available, and in any event no later than thirty
(30) days after the close of each monthly accounting period of the
Company, a Borrowing Base certificate for the Borrowers in the form
attached hereto as Exhibit C showing a separate computation of each
Borrower's Borrowing Base in reasonable detail as of the close of
business on the last day of the immediately preceding month, together
with such other information as is therein required, each prepared by
the Company and certified to by the President or chief financial
officer of the Company (it being understood and agreed that absent any
Event of Default, the information on such certificate regarding
inventory need only be updated for the certificate most closely
corresponding to the close of a monthly accounting period of such
Borrower);
(b) as soon as available, and in any event within thirty (30)
days after the close of each monthly accounting period of the Company,
a copy of the consolidated balance sheet of the Company and its
Subsidiaries as of the last day of such period and the consolidated
statements of income, retained earnings and cash flows of the Company
and its Subsidiaries for the month and for the fiscal year-to-date
period then ended, each in reasonable detail showing in comparative
form the figures for the corresponding date and period in the previous
fiscal year, prepared by the Company in accordance with GAAP (subject
to year end audit adjustments, none of which are material) and
certified to by the President or chief financial officer of the Company;
(c) as soon as available, and in any event within thirty (30)
days after the close of each monthly accounting period of the Company,
an accounts receivable and accounts payable aging, an accounts
receivable concentration and reconciliation report and an inventory
report (broken down by category), one for each Borrower separately and
each as of the close of such period and in reasonable detail prepared
by the Company and certified to by the President or chief financial
officer of the Company;
(d) as soon as available, and in any event within ninety (90)
days after the close of each annual accounting period of the Company, a
copy of the consolidated balance sheet of the Company and its
Subsidiaries as of the last day of the period then ended and the
consolidated statements of income, retained earnings and cash flows of
the Company and its Subsidiaries for the period then ended, and
accompanying notes thereto, each in reasonable detail showing in
comparative form the figures for the previous fiscal year, accompanied
by an opinion without any Impermissible Qualifications thereon of Ernst
& Young LLP or another firm of independent public accountants of
recognized national standing, selected by the Company and satisfactory
to the Required Lenders, to the effect that the financial statements
have been prepared
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in accordance with GAAP and present fairly in accordance with GAAP the
consolidated financial condition of the Company and its Subsidiaries as
of the close of such fiscal year and the results of their operations
and cash flows for the fiscal year then ended and that an examination
of such accounts in connection with such financial statements has been
made in accordance with generally accepted auditing standards;
(e) within the period provided in subsection (d) above, the
written statement of the accountants who certified the audit report
thereby required that in the course of their audit they have obtained
no knowledge of any Default or Event of Default with respect to any of
the Financial Covenants, or, if such accountants have obtained
knowledge of any such Default or Event of Default, they shall disclose
in such statement the nature and period of the existence thereof;
(f) as soon as available, and in any event within forty-five (45)
days after the close of each quarterly accounting period of the
Company, a certificate of an authorized financial officer of the
Company stating that such officer has reviewed the provisions of this
Agreement and setting forth: (aa) the information and computations (in
sufficient detail) required in order to establish whether the Company
was in compliance with the Financial Covenants at the end of the period
covered by the financial statements then being furnished, and (ab) to
the best such officer's knowledge, whether there exists on the date of
the certificate or existed at any time during the period covered by
such financial statement any Default or Event of Default and, if any
such condition or event exists on the date of the certificate or
existed during such period, specifying the nature and period of
existence thereof and the action the Borrowers are taking, have taken
or propose to take with respect thereto;
(g) promptly after the sending or filing thereof, copies of all
proxy statements, financial statements and reports any Borrower sends
generally to its shareholders, and copies of all other regular,
periodic and special reports and all registration statements any
Borrower files with the SEC or any successor thereto (including without
limitation Forms 10-Q and 10-K), or with any national securities
exchanges;
(h) as soon as available, and in any event within sixty (60) days
after the close of each fiscal year of the Company, a copy of each
Borrower's and its subsidiaries' consolidated business plan for the
following fiscal year, such business plan to show each Borrower's and
its subsidiaries' projected consolidated revenues, expenses, and
balance sheet on month-by-month basis, such business plan to be in
reasonable detail prepared by the Company and in form reasonably
satisfactory to Administrative Agent and the Required Lenders; and
(i) promptly after knowledge thereof shall have come to the
attention of any responsible officer of any Borrower, written notice of
(i) any threatened or pending litigation or governmental proceeding or
assessment against the Company or any Subsidiary which if adversely
determined would result in a Material Adverse Effect,
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(ii) any Default or Event of Default and (iii) any pending or actual
Change of Control/Management Event.
The Company shall, and shall cause each Subsidiary to, permit the
Administrative Agent and (if accompanying the Administrative Agent) each
Lender and each of their duly authorized representatives and agents, upon
reasonable prior notice, to visit and inspect any of the Properties,
corporate books and financial records of the Company and its Subsidiaries, to
examine and make copies of the books of accounts and other financial records
of the Company and its Subsidiaries, and to discuss the affairs, finances and
accounts of the Company and its Subsidiaries, with, and to be advised as to
the same by, its officers, employees and (if and so long as a representative
of the Company is present) independent public accountants (and by this
provision each Borrower hereby authorizes such accountants to discuss with
the Administrative Agent and such Lenders the finances and affairs of such
Borrower and its Subsidiaries if and so long as such a representative is
present) at such reasonable times and reasonable intervals as the
Administrative Agent may designate; PROVIDED, HOWEVER, that so long as no
Event of Default has occurred and is continuing, the Borrowers shall only be
liable for the expenses of the Administrative Agent (and any Lenders
accompanying it) of two (2) such visits each calendar year. Unless any
Default or Event of Default has occurred and is continuing or the
Administrative Agent or the Required Lenders in good faith believe such is
the case, then neither the Administrative Agent nor any Lender may exercise
its rights under this Section to gain access to a Borrower's premises outside
of normal business hours or to gain such access or to engage in such
discussion without first giving any Borrower at least three (3) days' advance
notice (which may be written or oral) of its intent to take such action.
The Administrative Agent and each Lender agree to maintain in confidence
and not disclose to any Person any non-public information relating to the
Company or its Subsidiaries made available to the Administrative Agent or
such Lender pursuant to this Section 8.5; PROVIDED, HOWEVER, that the
Administrative Agent and each Lender may make such disclosures as are
permitted by Section 13.16 hereof.
SECTION 8.6. COMPLIANCE WITH LAWS. The Company will, and will cause
each Subsidiary to, comply with all Governmental Requirements to which they
are subject, including, without limitation, the Occupational Safety and
Health Act of 1970, as amended, ERISA, and all laws, ordinances, governmental
rules and regulations relating to environmental protection in all applicable
jurisdictions, the violation of which is reasonably likely to have a Material
Adverse Effect.
SECTION 8.7. LIENS. The Company will not, nor will it permit any
Subsidiary to, pledge, mortgage or otherwise encumber or subject to, or
permit to exist upon or be subjected to, any lien, security interest or
charge upon, any assets or any Subsidiary; PROVIDED, HOWEVER, that nothing in
this Section contained shall operate to prevent any of the following
(collectively, "PERMITTED LIENS"):
(a) liens, pledges or deposits in connection with workmen's
compensation, unemployment insurance, social security obligations,
taxes, assessments, statutory
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obligations or other similar charges, good faith deposits in connection
with tenders, bids, contracts (other than contracts for the payment of
money) or leases to which the Company or any of its Subsidiaries is a
party or other deposits required to be made in the ordinary course of
business and not in connection with borrowing money or obtaining
advances or credit, provided in each case that the obligation or
liability arises in the ordinary course of business and is not overdue,
or if overdue, is being contested in good faith by appropriate
proceedings which prevent enforcement of the matter under contest and
adequate reserves have been established therefor to the extent required
by GAAP;
(b) inchoate statutory, construction, common carrier's,
materialmen's, landlord's, warehousemen's, mechanics' or other similar
liens in each case arising in the ordinary course of business and
securing obligations not overdue, or if overdue, being contested in
good faith by appropriate proceedings which prevent enforcement of the
matter under contest and adequate reserves have been established
therefor to the extent required by GAAP;
(c) liens given to secure the payment of the purchase price or
the financing thereof incurred in connection with the acquisition of
equipment, including liens of such type existing on such assets at the
time of acquisition thereof by the Company or any Subsidiary, provided
that (i) the lien shall attach solely to the property acquired or
purchased (ii) the indebtedness secured by such lien does not exceed
100% of the lesser of the cost or fair value of the property financed
and (iii) the indebtedness secured thereby is permitted by Section
8.8(b) hereof (collectively, "PURCHASE MONEY LIENS");
(d) Liens arising from Capital Leases permitted by Section
8.8(b) hereof;
(e) the liens created by the Collateral Documents;
(f) attachment or judgment liens individually or in the aggregate
not in excess of $500,000 (exclusive of (i) any amounts that are duly
bonded to the reasonable satisfaction of the Administrative Agent, (ii)
any amount adequately covered by insurance as to which the insurance
company has not disclaimed or disputed in writing its obligations for
coverage or has not otherwise failed to pay when due, and (iii) the
judgment rendered on April 23, 1997 in favor of Xxx Xxxxxx and Xxxx Xxx
against River North Records, Inc. and Entertainment Artists, Inc. by
the United States District Court, Western District of Arkansas,
Fayetteville Division, in the amount of $95,182);
(g) liens for taxes, assessments or other governmental charges
not yet due and payable or which are being diligently contested in good
faith by the Company or its applicable Subsidiary by appropriate
proceedings, provided that in any such case an adequate reserve is
being maintained by the Company or such Subsidiary for the payment of
same;
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(h) the pledge of assets for the purpose of securing an appeal,
stay or discharge in the course of any legal proceeding, provided that
the aggregate amount of liabilities of the Company and its Subsidiaries
secured by a pledge of assets permitted under this subsection,
including interest and penalties thereon, if any, shall not be in
excess of $500,000 at any one time outstanding;
(i) easements, licenses, permits, rights-of-way, rights of entry
or passage, rights of lessees, restrictions and other similar
encumbrances incurred in the ordinary course of business of the type
generally applicable to leased property which do not secure debt for
money borrowed or its equivalent, and which do not materially detract
from the value of the property subject thereto or materially interfere
with the ordinary conduct of the business of the Company or any
Subsidiary or use of the assets in question for purposes producing and
distributing recorded music;
(j) the lien granted in favor of Polygram prior to the Closing
Date on inventory from time to time in Polygram's possession to secure
amounts due and to become due from the Company to Polygram under the
distribution arrangements between the Company and Polygram, provided
such arrangements are not modified after the Closing Date to encumber
any other inventory or secure any other obligations;
(k) liens in existence on the date hereof and set forth on
Schedule 8.7 hereto;
(l) liens existing on specific assets at the time acquired by the
Company or any Subsidiary or on assets of a Person at the time such
Person first becomes a Subsidiary or was merged into the Company or any
Subsidiary provided that (i) any such liens were not created at the
time of or in contemplation of the acquisition of such assets or Person
by the Company or such Subsidiary, (ii) in the case of any such
acquisition of a Person, any such lien attaches only to specific assets
of such Person and not assets of such Person generally and (iii) such
lien is not (x) a lien on shares of stock in any Subsidiary, (y) a
blanket lien on receivables, inventory or similar working capital
assets or (z) a blanket lien on patents, trademarks or similar
intangibles;
(m) liens securing any Hedging Arrangements with the Lenders or
their Affiliates; and
(n) extensions and renewals of the foregoing Permitted Liens,
provided that the aggregate amount of such liabilities secured by such
extended or renewed lien is not increased and such extended or renewed
liabilities secured by such lien are on terms and conditions no more
restrictive than the terms and conditions of the same being extended or
renewed.
SECTION 8.8. INDEBTEDNESS. The Company will not, nor will it permit
any Subsidiary to, issue, incur, assume, create, or have outstanding any
Indebtedness for Borrowed Money; PROVIDED, HOWEVER, that the foregoing
provisions shall not restrict nor operate to prevent:
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(a) the Obligations;
(b) Capitalized Leases and purchase money indebtedness secured by
Purchase Money Liens permitted by Sections 8.7(c) and (d) hereof and
aggregating not more than $1,000,000 at any one time outstanding;
(c) obligations on leases which are not Capitalized Leases;
(d) guaranties permitted by Section 8.15 hereof;
(e) indebtedness of (x) any Wholly-Owned Subsidiary owing to the
Company or any other Wholly-Owned Subsidiary as a result of loans and
advances by the Company or such Wholly-Owned Subsidiary to such
Subsidiary permitted by Section 8.15 hereof and (y) the Company owing
to any Wholly-Owned Subsidiary as a result of loans and advances made
by such Wholly-Owned Subsidiary to the Company permitted by Section
8.15 hereof;
(f) Indebtedness existing on the date hereof and set forth on
Schedule 8.8 hereto;
(g) unsecured Subordinated Indebtedness incurred and used to (i)
purchase, redeem or otherwise acquire any outstanding Series B
Preferred Stock or Affiliate Preferred Stock or (ii) purchase any
Purchaser Warrants, Affiliate Warrants or the Harnick Warrant to the
extent such warrant has been properly put to the issuer for mandatory
purchase pursuant to its terms by virtue of the holder's exercise of
such put, provided in each case that the Company can demonstrate that
on a PRO FORMA basis after giving effect to the incurrence of such
Subordinated Indebtedness, the Company will be in compliance with all
the Financial Covenants as of (and after giving effect to) the
incurrence in question (compliance to be determined on a PRO FORMA
basis as if the incurrence in question took place on the first day of
any accounting period with reference to which compliance is being
determined);
(h) the Intersound Sub Debt if and so long as the same
constitutes Subordinated Indebtedness;
(i) liabilities in respect of Hedging Arrangements; and
(j) indebtedness not otherwise permitted by this Section 8.8
aggregating not more than $1,000,000 at any one time outstanding.
SECTION 8.9. CONSOLIDATED NET WORTH. The Company will, as of the
close of each semiannual accounting period of the Company ending in May and
November of each year, maintain Consolidated Net Worth of not less than the
Minimum Required Amount. For purposes thereof, the term "MINIMUM REQUIRED
AMOUNT" shall mean (a) $22,000,000 through the close of the monthly
accounting period of the Company ending on or about January 31, 1998, and (b)
shall increase (but never decrease) as of the close of the monthly
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accounting period of the Company ending on or about February 28, 1998 and as
of the close of each monthly accounting period of the Company occurring
thereafter, in each case by an amount equal to 50% of Net Income (if
positive) for the monthly accounting period then ended.
SECTION 8.10. LEVERAGE RATIO. The Company shall, as of the Closing
Date and the close of each subsequent fiscal quarter of the Company specified
below, maintain the Leverage Ratio so as not to be more than the amount set
forth below:
FROM AND INCLUDING: TO AND INCLUDING: LEVERAGE
RATIO SHALL NOT BE
MORE THAN:
Closing Date and 3rd fiscal 4th fiscal quarter of fiscal 4.50 to 1
quarter of fiscal year ending year ending in 1998
in 1998
1st fiscal quarter of fiscal 4th fiscal quarter of fiscal 3.50 to 1
year ending in 1999 year ending in 1999
1st fiscal quarter of fiscal Each fiscal quarter thereafter 2.75 to 1
year ending in 2000
SECTION 8.11. CONSOLIDATED WORKING CAPITAL. The Company shall not at
any time permit Consolidated Working Capital to be less than $1,000,000.
SECTION 8.12. INTEREST COVERAGE RATIO. The Company shall, as of the
close of each fiscal quarter of the Company specified below, maintain the
ratio of Consolidated EBITDA for the fiscal quarter of the Company then ended
to Cash Interest Expense for the same fiscal quarter then ended (the
"INTEREST COVERAGE RATIO") so as not to be less than the amount set forth
below:
FROM AND TO AND INTEREST COVERAGE
INCLUDING INCLUDING RATIO SHALL NOT BE
LESS THAN:
2nd fiscal quarter of fiscal 4th fiscal quarter of fiscal 2.00 to 1.00
year ending in 1998 year ending in 1998
1st fiscal quarter of fiscal 4th fiscal quarter of fiscal 2.25 to 1
year ending in 1999 year ending in 1999
1st fiscal quarter of fiscal Each fiscal quarter thereafter 2.50 to 1.00
year ending in 2000
SECTION 8.13. FIXED CHARGE COVERAGE RATIO. The Company shall, as of
the close of each fiscal quarter of the Company specified below, maintain the
ratio (the "FIXED CHARGE
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COVERAGE RATIO") of (x) Consolidated EBITDA for the fiscal quarter ended such
date to (y) the sum of (i) Cash Interest Expense for such fiscal quarter,
(ii) Current Maturities as of the close of such fiscal quarter but excluding,
however, to the extent otherwise included, the final installment on the Term
Notes, (iii) Capital Expenditures during the same such fiscal quarter and
(iv) taxes on or measured by income or excess profits payable in cash during
the same fiscal quarter by the Company and its Subsidiaries so as not to be
less than the amount set forth below:
FIXED CHARGE COVERAGE
FROM AND TO AND RATIO SHALL NOT BE
INCLUDING INCLUDING LESS THAN:
2nd fiscal quarter of fiscal 2nd fiscal quarter of fiscal 1.05 to 1.00
year ending in 1998 year ending in 1999
3rd fiscal quarter of fiscal Each fiscal quarter thereafter 1.25 to 1.00
year ending in 1999
SECTION 8.14. CAPITAL EXPENDITURES. The Company shall not and
shall not permit its Subsidiaries to expend or become obligated for Capital
Expenditures during any fiscal year of the Company for the Company and its
Subsidiaries taken together in excess of the amount set forth for such fiscal
year below:
DURING FISCAL YEAR CAPITAL EXPENDITURES SHALL NOT
EXCEED:
Ending on or about May 31, 1998 $1,250,000
Each fiscal year thereafter Maximum Permitted Amount
For purposes thereof, the term "MAXIMUM PERMITTED AMOUNT" shall mean (i) for
the fiscal year of the Company ending on or about May 31, 1999, the sum of
(x) $500,000 plus (y) the amount (if any) by which the actual Capital
Expenditures for the immediately preceding fiscal year of the Company were
less than $1,250,000; (ii) for the fiscal year of the Company ending on or
about May 31, 2000, the sum of (x) $500,000 plus (y) the amount (if any) by
which the actual Capital Expenditures for the immediately preceding two
fiscal years of the Company, taken together, were less than $1,750,000; (iii)
for the fiscal year of the Company ending on or about May 31, 2001, the sum
of (x) $500,000 plus (y) the lesser of $500,000 or the amount (if any) by
which the actual Capital Expenditures for the fiscal year of the Company
ending on or about May 31, 2000 were less than the Maximum Permitted Amount
for such fiscal year ending in 2000; and (iv) for each fiscal year
thereafter, the sum of (x) $500,000 plus (y) the amount (if any) by which the
actual Capital Expenditures for the immediately preceding fiscal year of the
Company were less than $500,000.
SECTION 8.15. ACQUISITIONS, INVESTMENTS, LOANS, ADVANCES AND
GUARANTIES. The Company will not, nor will it permit any Subsidiary to,
directly or indirectly, make, retain
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or have outstanding any interest or investments (whether through purchase of
stock or obligations or otherwise) in, or loans or advances to, any other
Person, or acquire all or any substantial part of the assets or business of
any other Person, or guarantee any indebtedness, obligation or liability of
any other Person or otherwise enter into any arrangement designed to assure
another Person against loss; PROVIDED, HOWEVER, that the foregoing provisions
shall not apply to nor operate to prevent:
(a) investments by the Company or any Subsidiary in direct
obligations of the United States of America or of any agency or
instrumentality thereof whose obligations constitute full faith and
credit obligations of the United States of America, provided that any
such obligations shall mature within fifteen months from the date the
same are acquired by the Company or such Subsidiary;
(b) investments by the Company or any Subsidiary in certificates of
deposit or time deposits issued by any Lender, or by any United States
commercial bank having capital and surplus of not less than $100,000,000
and having a maturity of fifteen months or less;
(c) investments by the Company or any Subsidiary in commercial
paper maturing 270 days or less from the date of issuance which at the
time of acquisition is rated A-2 or better by Standard & Poor's Ratings
Services Group, a division of the XxXxxx-Xxxx Companies and P-2 or
better by Xxxxx'x Investors Service, Inc.;
(d) investments by the Company or any Subsidiary in debt
securities issued by U.S. corporations or states of the United States
maturing within fifteen months from the date of acquisition thereof if
at the time of acquisition the investment in question has a rating of
not less than BBB from Standard & Poor's Ratings Services Group, a
division of The XxXxxx-Xxxx Companies, Inc. and/or Baa2 from Xxxxx'x
Investors Services, Inc.;
(e) investments by the Company or any Subsidiary in preferred
stock of any corporation organized under the laws of any state of the
United States which is subject to a remarketing undertaking at intervals
not exceeding fifteen months issued by any substantial broker and which
is rated BBB or better by Standard & Poor's Ratings Services Group, a
division of The XxXxxx-Xxxx Companies, Inc. and/or Baa2 or better by
Xxxxx'x Investors Services, Inc.;
(f) investments in repurchase agreements with respect to, and
which are fully secured by a perfected security interest in, government
obligations of a type described in clause (a) or (c) above and are with
any commercial bank described in clause (b) above;
(g) investments in any mutual fund that has its assets invested
continuously in the types of investments referred to in clauses (a)-(f)
above and has net assets of not less than $500,000,000;
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(h) loans, advances and capital contributions by the Company to
Wholly-Owned Subsidiaries, and by Wholly-Owned Subsidiaries to the
Company, in each case to fund their ordinary working capital needs
arising in the ordinary course of business;
(i) loans and royalty advances to recording artists in the
ordinary course of business provided that the aggregate amount of such
loans and advances made during each quarterly accounting period of the
Company ending does not exceed $3,000,000 on a cumulative basis for such
quarterly period;
(j) the Company's equity investment in the House of Blues Venture;
(k) the Guaranties;
(l) loans and advances to employees, officers and directors in the
ordinary course of business and in aggregate principal amount not to
exceed $500,000 at any time outstanding;
(m) investments, loans, advances and guaranties existing on the
Closing Date and listed on Schedule 8.15 hereto without giving effect to
any additions thereto or replacements thereof;
(n) acquisitions of all or any substantial part of the assets or
business of any other Person or division thereof engaged in the music or
related entertainment business, or of a majority of the voting stock of
such a Person, or of equity interests in any Person which does not
become a Subsidiary as a result of such acquisition but is engaged (or
promptly after such acquisition will be engaged) in the music or related
entertainment business, provided that (i) no Default or Event of Default
exists or would exist after giving effect to such acquisition, (ii) the
board of directors or other governing body of such Person whose
Property, or voting stock or other interests in which, are being so
acquired has approved the terms of such acquisition, (iii) the Borrower
shall have delivered to the Lenders an updated Schedule 6.3 hereof to
reflect any new Subsidiary resulting from such acquisition, (iv) the sum
of (1) the aggregate amount expended by the Borrower and its
Subsidiaries as consideration for such acquisition (and in any event (x)
including as such consideration, any Indebtedness for Borrowed Money
assumed or incurred as a result of such acquisition, and (y) excluding
as such consideration, any equity securities issued by the Company as
consideration for such acquisition) and (2) the aggregate amount
expended as consideration (including Indebtedness for Borrowed Money and
excluding equity securities as aforesaid) for all other acquisitions
permitted under this Section 8.15(n) after the Closing Date on a
cumulative basis does not exceed $10,000,000, (v) the sum of (1) the
aggregate amount expended by the Borrower and its Subsidiaries as
consideration for such acquisition (and in any event including
Indebtedness for Borrowed Money and excluding equity securities as
aforesaid) and (2) the aggregate amount expended as consideration
(including Indebtedness for Borrowed Money and excluding equity
securities as aforesaid) for all acquisitions permitted under this
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Section 8.15(n) within the immediately preceding twelve calendar months
does not exceed $5,000,000 and (vi) the Company can demonstrate that on
a PRO FORMA basis after giving effect to the subject acquisition, the
Company will be in compliance with all the Financial Covenants as of
(and after giving effect to) the acquisition in question (compliance to
be determined on a PRO FORMA basis as if the acquisition in question
took place on the first day of any accounting period with reference to
which such compliance is being determined);
(o) investments (including debt obligations) received by the
Borrower or any Subsidiary in connection with the bankruptcy or
reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and
suppliers arising in the ordinary course of business; and
(p) investments in, loans and advances to, and guaranties of the
obligations of Persons, in each case not otherwise permitted by this
Section, provided (1) the aggregate amount of such investments, loans,
advances and guaranties on a cumulative basis during each period of
twelve (12) consecutive calendar months, when taken together with the
aggregate amount of investments, loans and advances permitted by
subsections (h), (i) and (l) above on a cumulative basis during the same
such period, does not exceed $5,000,000 and (2) no such investment,
loan, advance or guaranty is made if at the time thereof or immediately
after giving effect thereto, any Default or Event of Default would occur
or be continuing.
In determining the amount of investments, loans and advances permitted under
this Section, investments shall always be taken at the original cost thereof,
regardless of any subsequent appreciation (including retained earnings) or
depreciation therein, loans and advances shall be taken at the principal
amount thereof then remaining unpaid and guaranties shall be taken at the
amount of the obligation guaranteed.
SECTION 8.16. DIVIDENDS AND CERTAIN OTHER RESTRICTED
PAYMENTS. (a) BY THE COMPANY. The Company will not (i) declare or pay any
dividends on or make any other distributions in respect of any class of its
capital stock or any warrant to acquire any such capital stock (other than
dividends payable solely in its capital stock and other than dividends paid
directly out of the proceeds of a substantially concurrent issue and sale of
its capital stock) or (ii) directly or indirectly or through any Subsidiary
purchase, redeem or otherwise acquire or retire any of its capital stock or
any warrant to acquire any such capital stock (except out of the proceeds of,
or in exchange for, a substantially concurrent issue and sale of its capital
stock) (such non-excepted dividends, distributions, purchases, redemptions,
acquisitions or retirements being herein collectively called "RESTRICTED
PAYMENTS"); PROVIDED, HOWEVER, this Section shall not prevent the Company
from:
(1) repurchasing common capital stock of the Company from officers
and employees of the Company if, at the time of and immediately after
giving effect to each such repurchase, (i) the aggregate amount expended
for such repurchases does not exceed $100,000 in any given fiscal year
of the Company and (ii) no Default or Event of Default shall occur or be
continuing; or
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(2) repurchasing any or all outstanding Transaction Securities out
of the proceeds of unsecured Subordinated Indebtedness of the Company
incurred in compliance with Section 8.8(g) hereof and the Financial
Covenants if, at the time of and immediately after giving effect to each
such repurchase, no Default or Event of Default shall occur or be
continuing; or
(3) repurchasing any Transaction Securities properly tendered by
the holders thereof to the Company for mandatory purchase pursuant to
the terms of such securities if, at the time of and immediately after
giving effect to each such purchase, no Default or Event of Default
shall occur or be continuing.
(b) NO RESTRICTION ON SUBSIDIARY DIVIDENDS. Neither the
Company nor any Subsidiary is a party to, nor will the Company or any
Subsidiary become a party to, any agreement prohibiting or otherwise
restricting the declaration or payment of any dividends or equity
distributions by any such Subsidiary.
SECTION 8.17. MERGERS. (a) GENERALLY. The Company will not,
nor will it permit any Subsidiary to, consolidate or be a party to a merger
or consolidation with any other Person, except that so long as no Default or
Event of Default has occurred and is continuing or would arise as a result
thereof any Subsidiary of the Company may merge with and into the Company or
any Wholly-Owned Subsidiary if the Company or such Wholly-Owned Subsidiary is
the surviving corporation.
(b) INTERSOUND. No later than February 28, 1998, Intersound
shall merge with and into the Company, with the Company being the corporation
surviving such merger.
SECTION 8.18. SALE OF ASSETS. The Company will not, nor will
it permit any Subsidiary to, sell, lease or otherwise dispose of all or any
Collateral or any substantial part of its other Property, or in any event
sell or discount (with or without recourse) any of its notes or accounts
receivable; PROVIDED, HOWEVER, that nothing contained herein or any
Collateral Document shall prohibit:
(i) sales, leases and other dispositions of inventory in the
ordinary course of business;
(ii) licenses (or similar arrangements) of inventory and
intellectual property (including without limitation, master recordings and
compositions) in the ordinary course of business;
(iii) sales or other dispositions for fair value, or abandonment,
of obsolete, excess or worn out Property consisting of fixed or capital
assets or inventory in the ordinary course of business;
(iv) leases, sales transfers or other disposition of all or any
part of the business or Property of any Subsidiary to the Borrower or any
Wholly-Owned Subsidiary, whether effected by merger or otherwise;
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(v) the abandonment or disposition for fair value of Property
that is, in the reasonable judgment of the Company, no longer economically
practicable to maintain or no longer useful in the conduct of the business
of the Company;
(vi) the loss or destruction of Property as a result of a
casualty loss (whether or not insured);
(vii) the bona fide sale by the Company or any Subsidiary at fair
value of any part of the Company's (or any Subsidiary's) master catalogs of
music rights consisting of, without limitation, master recordings,
compositions, recording agreements, publishing agreements and underlying
copyrights and trademarks (collectively, "MUSIC RIGHTS") of the Company or
such Subsidiary if, in the reasonable judgment of the Company, the
exploitation of such Music Rights so sold is no longer profitable to the
Company or any Subsidiary in the ordinary course of its business and such
sale is advantageous to the Company;
(viii) sales, subleases or other dispositions for fair value of
rights of the Company or any Subsidiary as lessee under operating leases
of Property in the ordinary course of business;
(ix) the sale or return of tangible assets which the Company and
its Subsidiaries customarily replace periodically with substitute
tangible assets of at least equal value (including, without limitation,
vehicles) in the ordinary course of business;
(x) the sale or other transfer of the capital stock of any
Subsidiary of the Borrowers as permitted by Section 8.17 hereof;
(xi) the sale or other disposition of the Company's interest, in
whole or in part, as a joint venturer in the House of Blues Venture to
the extent permitted by Section 8.24(b) hereof; and
(xii) the sale or other disposition for fair value of any
Property (other than Music Rights), whether now owned or hereafter
acquired, provided that the aggregate value of all such Property so sold
or disposed of shall not exceed $1,000,000 on a cumulative basis after
the Closing Date.
Any sale, lease or other disposition of Property (other than Music Rights and
other intellectual property) constituting five percent (5%) or more of the
total assets of the Company and its Subsidiaries on a consolidated basis
shall be deemed "SUBSTANTIAL" for the foregoing purposes. Any sale, lease or
other disposition of Music Rights and other intellectual property to which is
attributable five percent (5%) or more of the total annual gross revenues of
the Company and its Subsidiaries on a consolidated basis for the then most
recently completed fiscal year of the Company shall be deemed "SUBSTANTIAL"
for the foregoing purposes. Notwithstanding anything herein or in the
Collateral Documents to the contrary, the lien of the Administrative Agent
pursuant to the Collateral Documents on any Property sold or otherwise
disposed of in accordance with this Section 8.18 (other than
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clauses (ii), (iv), (vi) and (x) above) shall be automatically released;
PROVIDED, HOWEVER, that: (A) at the time of such sale or other disposition
and immediately after giving effect thereto, no Default or Event of Default
shall occur or be continuing and (B) in the case of each sale or other
disposition permitted exclusively by any of clauses (iii), (v), (vi) through
(ix) inclusive, (xi) or (xii) above, the net proceeds of such sale or other
disposition are paid to the Administrative Agent for application in reduction
of the Obligations if and to the extent required by Section 2.7(d) hereof.
The Administrative Agent shall, at the Company's expense, execute and deliver
such instruments (including UCC termination statements) as the Company may
from time to time reasonably request to confirm such release made pursuant to
the immediately preceding sentence.
SECTION 8.19. SALES AND LEASEBACKS. The Company will not,
nor will it permit any Subsidiary to, enter into any arrangement with any
bank, insurance company or other lender or investor providing for the leasing
by the Company or any Subsidiary of any real or personal property theretofore
owned by it and which has been or is to be sold or transferred by such owner
to such lender or investor.
SECTION 8.20. OPERATING LEASES. The Company shall not, nor
shall it permit any Subsidiary to, acquire the use or possession of any real
or personal property under a lease or similar arrangement, whether or not the
Company or any Subsidiary has the express or implied right to acquire title
to or purchase such property, at any time if, after giving effect thereto,
the aggregate amount of fixed rentals and other consideration payable by the
Company and its Subsidiaries under all such leases and similar arrangements
would exceed $1,250,000 during any fiscal year of the Company. Capital
Leases shall not be included in computing compliance with this Section to the
extent the Company's and its Subsidiaries' liability in respect of the same
is permitted by Section 8.8(b) hereof.
SECTION 8.21. BURDENSOME CONTRACTS WITH AFFILIATES. Except
as set forth on Schedule 6.7, as the same may from time to time be updated
with the consent of the Agent and Required Lenders, the Company will not, nor
will it permit any Subsidiary to, enter into or be a party to any contract or
agreement with an Affiliate on terms and conditions materially less favorable
to the Company or such Subsidiary than would be usual and customary in
similar contracts or agreements between Persons not affiliated with each
other.
SECTION 8.22. NO CHANGE IN FISCAL YEAR. The Company will
not, nor will it permit any Subsidiary to, change its fiscal year from a year
ended May 31.
SECTION 8.23. FORMATION OF SUBSIDIARIES. In the event any
Subsidiary is formed or acquired after the date hereof, the Company shall
within thirty (30) Business Days thereof (x) furnish an update to Schedule
6.3 hereof to reflect such new Subsidiary and (y) cause such newly-form or
acquired Subsidiary to execute a Guaranty and execute such Collateral
Documents to the extent required by Section 4 hereof (on terms substantially
similar to those executed in connection with this Agreement) as the
Administrative Agent may then require granting the Administrative Agent for
the benefit of the Lenders a security interest in and lien on the personal
property of such Subsidiary as collateral security for the Notes and the
other Obligations, together with documentation (including a legal opinion)
similar to
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that described in Section 7.3 hereof relating to the authorization for,
execution and delivery of, and validity of such Subsidiary's obligations as a
Guarantor hereunder and under its Guaranty in form and substance satisfactory
to the Administrative Agent and such other instruments, documents,
certificates and opinions as are reasonably required by the Administrative
Agent in connection therewith.
SECTION 8.24. MAINTENANCE OF SUBSIDIARIES. (A) GENERALLY.
The Company shall not assign, sell or transfer, or permit any Subsidiary to
issue, assign, sell or transfer, any shares of capital stock of a Subsidiary;
PROVIDED, HOWEVER, that the foregoing shall not operate to prevent:
(i) the merger of any Subsidiary into the Company or another
Wholly-Owned Subsidiary in each case as permitted by Section 8.17
hereof; and
(ii) the issuance, sale and transfer to any Person of any shares of
capital stock of a Subsidiary solely for the purpose of qualifying, and
to the extent legally necessary to qualify, such Person as a director of
such Subsidiary.
(b) HOUSE OF BLUES. The Company shall not consent to any
termination of its interest as a joint venturer in the House of Blues Venture
and shall not reduce its equity interest in the House of Blues Venture below
50%; PROVIDED, HOWEVER, that nothing herein nor in any Collateral Document
shall operate to prevent:
(i) termination of the Company's interest as a joint venturer in
the House of Blues Venture as the result of the exercise by the
Company's joint venture partner of such partner's purchase option in
accordance with the terms of the agreement governing the House of Blues
Venture; or
(ii) reduction or termination of the Company's interest as a joint
venturer in the House of Blues Venture if and to the extent that such
reduction or termination will not have any Material Adverse Effect and,
in the reasonable judgment of the Company, is advantageous to the
Company; or
(iii) reduction of the Company's interest as a joint venturer
in the House of Blues Venture as the result of the admission of a new
joint venturer to the House of Blues Joint Venture who succeeds to the
Company's former interest as a joint venturer therein if and to the
extent that such reduction will not have any Material Adverse Effect
and, in the reasonable judgment of the Company, the admission of such
new venturer will be advantageous to the Company.
SECTION 8.25. NATURE OF BUSINESS. The Company will not, nor
will it permit any Subsidiary to, engage in any business or activity if, as a
result, the business which would then be engaged in by the Company and its
Subsidiaries taken as a whole would be materially different from the business
in which they are engaged as of the date hereof.
SECTION 8.26. SUBORDINATED DEBT. The Company will not, and
will not permit any Subsidiary to, amend or modify the terms and conditions
applicable to any Subordinated
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Debt, except that the Company may agree to a decrease in the interest rate or
premium applicable thereto or to a deferral of repayment of any of principal
of or interest or premium on any Subordinated Debt beyond the due date
applicable thereto as of the date such indebtedness is initially approved by
the Administrative Agent and Required Lenders. The Company will not, and
will not permit any Subsidiary to, make any payment of principal, interest or
premium, if any, on or in respect of any Subordinated Debt or otherwise
acquire, prepay or retire any such Subordinated Debt prior to the maturities
thereof or prior to any other times required for payment thereof as are in
force and effect as of the date such indebtedness is initially approved by
the Administrative Agent and Required Lenders; PROVIDED, HOWEVER, that (i)
the Company may prepay the Intersound Sub Debt in whole or part at any time
prior to May 31, 1998 if at the time of each such prepayment and immediately
after giving effect thereto, no Default or Event of Default shall occur or be
continuing and (ii) the Company may make such payment as will settle (with
prejudice) litigation by the holder of the Intersound Sub Debt to enforce its
collection if at the time of each such payment and immediately after giving
effect thereto, (1) no Default or Event of Default shall occur or be
continuing and (2) the Company can demonstrate that on a PRO FORMA basis
after giving effect to the subject payment, (x) the Company will be in
compliance with all the Financial Covenants as of (and after giving effect
to) the payment in question (compliance to be determined on a PRO FORMA basis
as if the payment in question took place on the first day of any accounting
period with reference to which such compliance is being determined) and (y)
Availability will be positive at all times during the twelve (12) calendar
months following such payment.
SECTION 8.27. DOUBLE NEGATIVE PLEDGE. The Company will not,
and will not permit any Subsidiary to, agree (other than in the Loan
Documents) with another party not to pledge, mortgage or otherwise encumber
or subject to, or not to permit to exist upon or be subjected to, any lien,
security interest or charge upon, any assets or property of any kind or
character at any time owned by the Company (including its stock in the
Subsidiaries) or any Subsidiary, other than (i) customary provisions
restricting subletting or assignment of any lease governing a leasehold
interest of the Borrower or any of its Subsidiaries, (ii) customary
provisions in contracts (including without limitation the licenses, leases
and agreements described in the last sentence of Section 4.1 hereof)
restricting the assignment of, or granting of a lien or security interest in,
such contracts, the rights therein or in the interest or Property conveyed
thereby, (iii) restrictions on a Subsidiary's Property imposed under
agreements relating to indebtedness incurred by such Subsidiary prior to the
date on which such Subsidiary was acquired by a Borrower and outstanding on
such acquisition date but not incurred in contemplation of such acquisition,
(iv) restrictions in the agreement creating the House of Blues Venture
restricting the Company's disposition of its equity interest therein and (v)
agreements governing purchase money indebtedness and Capitalized Lease
Obligations permitted by Section 8.8 hereof not to take any such action with
respect to the Property to such purchase money lien or Capitalized Lease.
SECTION 8.28. INTERSOUND. Intersound shall take such action
as the Company is required by this Agreement to cause Intersound to take, and
shall refrain from taking such action as the Company is required by this
Agreement to prohibit Intersound from taking.
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SECTION 8.29. INTEREST RATE PROTECTION. On or before
February 28, 1998, the Borrowers will hedge their interest rate risk on at
least $10,000,000 in principal amount of the Term Loan, or if less, the
principal amount outstanding on the Term Loan, through the use of one or more
interest rate swaps, interest rate caps, interest rate collars or other
recognized interest rate hedging arrangements (collectively, "HEDGING
ARRANGEMENTS"), with all of the foregoing to effectively limit the amount of
interest that the Borrowers must pay on notional amounts of not less than
such portion of the Term Loan to not more than the rate of 11% per annum for
a period ending no earlier than June 30, 1999 and to be with the Lenders,
their respective Affiliates or with other parties reasonably acceptable to
the Required Lenders. If the Company enters into any Hedging Arrangements
with any Lender, the Company's obligations to such Lender in connection with
such Hedging Arrangements do not constitute usage of the Commitments of such
Lender.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
SECTION 9.1. EVENTS OF DEFAULT. Any one or more of the
following shall constitute an "EVENT OF DEFAULT" hereunder:
(a) default in the payment of any amount of the principal of or
interest on any Note or any reimbursement obligation owing under any
Application in each case when due, whether at the stated maturity
thereof or at any other time provided for in this Agreement and the
continuance of such default for two (2) Business Days in the case of
principal and five (5) Business Days in the case of interest, or default
in the payment when due of any fee, charge or other amount payable by
any Borrower hereunder or under any other Loan Document and the
continuance of such default for five (5) Business Days, in each case,
after notice thereof to any Borrower from the Administrative Agent or
any Lender; or
(b) default in the observance or performance of any covenant set
forth in Sections 2.7, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13, 8.14,
8.15, 8.16, 8.17, 8.18, 8.19, 8.20, 8.23, 8.24, 8.26 or 8.27 hereof or
of any Collateral Document dealing with the use, disposition or
remittance of the proceeds of Collateral or the maintenance of insurance
thereon or default after notice to any Borrower in the observance or
performance of any covenant set forth in Section 8.5(i) hereof; or
(c) default in the observance or performance of any other
provision hereof or any of the other Loan Documents which is not
remedied within thirty (30) days after written notice thereof to any
Borrower by any Lender or by the holder of any Note; or
(d) any representation or warranty made herein or in any of the
other Loan Documents or in any statement or certificate furnished
pursuant hereto or thereto, or in connection with any advance or
issuance made hereunder or by any person in connection with the
transactions contemplated hereby, proves untrue in any material respect
as of the date of the issuance or making thereof, and shall not be made
good
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within thirty (30) days after notice thereof to any Borrower by any
Lender or by the holder of any Note; or
(e) any event occurs or condition exists (other than those
described in subsections (a) through (d) above) which is specified as an
event of default under any of the other Loan Documents (with any grace
period applicable to such event having expired), or any of the Loan
Documents shall for any reason not be or shall cease to be in full force
and effect, or any of the Loan Documents is declared to be null and
void, or any of the Collateral Documents shall for any reason fail to
create a valid and perfected first priority Lien in favor of the
Administrative Agent in any Collateral purported to be covered thereby
aggregating in excess of $250,000 except as expressly permitted by the
terms thereof, or any Borrower or Guarantor takes any action for the
purpose of repudiating or rescinding any Loan Document executed by it;
or
(f) default shall occur in the payment when due (whether by lapse
of time, acceleration or otherwise) of any Indebtedness for Borrowed
Money aggregating in excess of $500,000 issued, assumed or guaranteed by
the Company or any Subsidiary or any other event of default shall occur
with respect to any such Indebtedness for Borrowed Money beyond any
period of grace provided therefor if the effect thereof (in each case)
is to permit the maturity of such Indebtedness for Borrowed Money to be
accelerated or to permit the holders thereof to elect a majority of the
Board of Directors of the Company (provided that any such default in
respect of the Intersound Sub Debt shall not constitute an Event of
Default under this subsection (f) if and so long as (i) no judgment has
been rendered against the Company or any Subsidiary for an amount more
than $1,000,000 in excess of the principal of and accrued interest owing
on the Intersound Sub Debt, (ii) no action has been taken by the
judgment creditor to execute upon or similarly enforce such judgment and
within ten (10) calendar days after its entry, action to enforce such
judgment has been lawfully stayed and (iii) at all times after the tenth
calendar day following the entry of such judgment, the sum of (A)
Availability under the Revolving Credit and (B) the cash and Cash
Equivalents of the Company and its Subsidiaries taken as a whole exceeds
the amount of such judgment, both for principal and interest thereon by
at least $50,000); or
(g) any judgment or judgments, writ or writs or warrant or
warrants or attachment, or any similar process or processes in an
aggregate amount in excess of $500,000 more than the amount, if any,
covered by insurance (as to which the insurer has not disclaimed or
disputed in writing its obligations for coverage or otherwise failed to
pay when due) shall be entered or filed against the Company or any
Subsidiary or against any of the property or assets of any of them and
remains undischarged, unvacated, unbonded or unstayed for a period of
sixty (60) days; or
(h) any event occurs or condition exists which is specified as an
event of default under any of the other Loan Documents after the
expiration of any applicable notice or grace periods; or
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(i) any agreement purporting to subordinate payment of any
Subordinated Debt to the prior payment of any Loan or any other
Obligations shall purport to be terminated or shall cease to have any
force or effect; or
(j) the Company or any Subsidiary makes any payment or other
distribution on account of the principal of or interest on any
Subordinated Debt or any other indebtedness, which payment or
distribution is prohibited under the terms of any instrument
subordinating such indebtedness to the prior payment of the Loans or any
of the other Obligations (provided that the payment permitted by this
Agreement of the Intersound Sub Debt shall not constitute an Event of
Default under this subsection (j)); or
(k) Intersound shall cease at any time and for any reason to be a
Wholly-Owned Subsidiary of the Company (except as the result of its
merger into the Company as permitted or required by Section 8.17
hereof); or
(l) the Polygram Distribution Agreement shall be terminated prior
to December 31, 2002 and shall have not been replaced by a binding
written contract with Polygram or any other similarly situated
distribution company (it being understood and agreed that EMI, Sony,
WEA, BMG and UNI are each such a company as of the Closing Date) on
substantially similar terms and conditions for substantially similar
services (except that such replacement contract shall not prohibit
blanket liens on assets to secure credit extended to the Company and its
Subsidiaries for general corporate purposes); or
(m) any Borrower or any Subsidiary shall (i) have entered
involuntarily against it an order for relief under the United States
Bankruptcy Code, as amended, (ii) not pay, or admit in writing its
inability to pay, its debts generally as they become due, (iii) make an
assignment for the benefit of creditors, (iv) apply for, seek, consent
to, or acquiesce in, the appointment of a receiver, custodian, trustee,
examiner, liquidator or similar official for it or any substantial part
of its Property, (v) institute any proceeding seeking to have entered
against it an order for relief under the United States Bankruptcy Code,
as amended, to adjudicate it insolvent, or seeking dissolution, winding
up, liquidation, reorganization, arrangement, adjustment or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed
against it, (vi) take any corporate action in furtherance of any matter
described in parts (i) through (v) above, or (vii) fail to contest in
good faith any appointment or proceeding described in Section 9.1(n)
hereof; or
(n) a custodian, receiver, trustee, examiner, liquidator or
similar official shall be appointed for any Borrower or any Subsidiary
or any substantial part of any of their Property, or a proceeding
described in Section 9.1(m)(v) shall be instituted against any Borrower
or any Subsidiary, and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of sixty (60)
days.
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SECTION 9.2. REMEDIES GENERALLY. When any Event of Default
described in subsections 9.1(a) to 9.1(l), both inclusive, has occurred and
is continuing, the Administrative Agent may (and shall, upon request of the
Required Lenders), by notice to any Borrower, take any or all of the
following actions:
(a) terminate the obligation of the Lenders to extend any further
credit hereunder on the date (which may be the date thereof) stated in
such notice (such termination shall be effective upon verbal
notification, the Administrative Agent hereby agreeing to provide
written notification thereof to any Borrower as soon as practical
thereafter);
(b) declare the principal of and the accrued interest on the Notes
to be forthwith due and payable and thereupon the Notes, including both
principal and interest, and all fees, charges and commissions payable
hereunder, shall be and become immediately due and payable without
further demand, presentment, protest or notice of any kind; and
(c) enforce any and all rights and remedies available under the
Loan Documents or applicable law.
SECTION 9.3. REMEDIES UPON INSOLVENCY. When any Event of
Default described in subsections 9.1(m) or (n) has occurred and is
continuing, then (a) the then unpaid balance of the Notes, including both
principal and interest, and all fees, charges and commissions and other
Obligations payable hereunder, shall immediately become due and payable
without presentment, demand, protest or notice of any kind, (b) the
obligation of the Lenders to extend further credit pursuant to any of the
terms hereof shall immediately and automatically terminate, and (c) the
Administrative Agent may exercise all remedies available to it under the Loan
Documents or applicable law.
SECTION 9.4. COLLATERAL FOR UNDRAWN LETTERS OF CREDIT. When
any Event of Default, other than an Event of Default described in subsection
(m) or (n) of Section 9.1, has occurred and is continuing, the Borrowers
shall, upon demand of the Administrative Agent (which demand shall be made
upon the request of the Required Lenders), and when any Event of Default
described in subsection (m) or (n) of Section 9.1 has occurred the Borrowers
shall, without notice or demand from the Administrative Agent, immediately
pay to the Administrative Agent the full amount of each Letter of Credit then
outstanding, the Borrowers agreeing to immediately make such payment and
acknowledging and agreeing that the Administrative Agent and the Lenders
would not have an adequate remedy at law for failure of the Borrowers to
honor any such demand and that the Administrative Agent and the Lenders shall
have the right to require the Borrowers to specifically perform such
undertaking whether or not any draws have been made under any such Letters of
Credit.
SECTION 10. THE ADMINISTRATIVE AGENT.
SECTION 10.1. APPOINTMENT AND AUTHORIZATION. Each Lender
hereby appoints and authorizes the Administrative Agent to take such action
as Administrative Agent on its behalf
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and to exercise such powers hereunder and under the Loan Documents as are
designated to the Administrative Agent by the terms hereof and thereof
together with such powers as are reasonably incidental thereto. The Lenders
acknowledge and agree that the Administrative Agent is not a trustee or other
fiduciary for them. The Administrative Agent may resign at any time by
sending twenty (20) days' prior written notice to the Company and the Lenders
and may be removed by the Required Lenders upon twenty (20) days' prior
written notice to the Company and the Lenders. In the event of any such
resignation or removal the Required Lenders may, with written consent by the
Company (which consent shall not be unreasonably withheld), appoint a new
agent, which shall succeed to all the rights, powers and duties of the
Administrative Agent hereunder and under the Loan Documents; PROVIDED,
HOWEVER, that no such consent from the Company shall be required for any such
resignation or removal made during the continuance of any Event of Default.
Any resigning or removed Administrative Agent shall be entitled to the
benefit of all the protective provisions hereof with respect to its acts as
an agent hereunder, but no successor Administrative Agent shall in any event
be liable or responsible for any actions of its predecessor. If the
Administrative Agent resigns or is removed and no successor is appointed, the
rights and obligations of such Administrative Agent shall be automatically
assumed by the Required Lenders and (i) the Borrowers shall be directed to
make all payments due each Lender hereunder directly to such Lender and (ii)
the Administrative Agent's rights in the Loan Documents shall be assigned
without representation, recourse or warranty to the Lenders as their
interests may appear.
SECTION 10.2. RIGHTS AS A LENDER. The Administrative Agent
has and reserves all of the rights, powers and duties hereunder and under the
other Loan Documents as any Lender may have and may exercise the same as
though it were not the Administrative Agent and the terms "LENDER" or
"LENDERS" as used herein and in all of such documents shall, unless the
context otherwise expressly indicates, include the Administrative Agent in
its individual capacity as a Lender. The Administrative Agent reserves the
right to engage in other business transactions with the Borrowers, the
Subsidiaries and their Affiliates.
SECTION 10.3. STANDARD OF CARE. The Lenders acknowledge that
they have received and approved copies of the Loan Documents, and such other
information and documents concerning the transactions contemplated and
financed hereby as they have requested to receive and/or review. The
Administrative Agent makes no representations or warranties of any kind or
character to the Lenders with respect to the validity, enforceability,
genuineness, perfection, value, worth or collectibility hereof or of the
other Loan Documents or of the liens provided for thereby or of any other
documents called for hereby or thereby or of the Collateral. The
Administrative Agent need not verify the worth or existence of the Collateral
and may rely exclusively on reports of any Borrower in computing the
Borrowing Base, provided that the Administrative Agent agrees to furnish the
Lenders with copies of any field audit reports made in connection with
inspections which it may make pursuant to Sections 2.5 or 8.5 hereof but the
Administrative Agent makes no representations or warranties of any kind in
connection therewith nor shall the Administrative Agent have any liability in
connection therewith except for its own gross negligence or willful
misconduct. The Lenders agree that neither the Administrative Agent nor any
director, officer employee, agent or representative thereof (including any
security trustee therefor) shall in any event be liable for any clerical
errors or errors in judgment,
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inadvertence or oversight, or for action taken or omitted to be taken by it
or them hereunder or under the Loan Documents or in connection herewith or
therewith except for its or their own gross negligence or willful misconduct.
The Administrative Agent shall incur no liability under or in respect of
this Agreement or the other Loan Documents by acting upon any notice,
certificate, warranty, instruction or statement (oral or written) of anyone
(including anyone in good faith believed by it to be authorized to act on
behalf of any Borrower), unless it has actual knowledge of the untruthfulness
of same. The Administrative Agent shall be entitled to assume that no Default
or Event of Default exists, absent actual knowledge thereof, unless notified
to the contrary by a Lender. The Administrative Agent shall in all events be
fully protected in acting or failing to act in accord with the instructions
of the Required Lenders. Upon the occurrence of an Event of Default
hereunder, the Administrative Agent shall take such action with respect to
the enforcement of its liens on the Collateral and the preservation and
protection thereof as it shall be directed to take by the Required Lenders
but unless and until the Required Lenders have given such direction the
Administrative Agent shall take or refrain from taking such actions as it
deems appropriate and in the best of interest of all Lenders. The
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder unless it shall be indemnified to its reasonable
satisfaction by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent may treat the owner of any Note as the
holder thereof until written notice of transfer shall have been furnished to
it as contemplated by Section 13.12 hereof. Each Lender acknowledges that it
has independently and without reliance on the Administrative Agent or any
other Lender and based upon such information, investigations and inquiries as
it deems appropriate made its own credit analysis and decision to extend
credit to the Borrowers. It shall be the responsibility of each Lender to
keep itself informed as to the creditworthiness of the Borrowers and each
Subsidiary and the Administrative Agent shall have no liability to any Lender
with respect thereto.
SECTION 10.4. COSTS AND EXPENSES. Each Lender agrees to
reimburse the Administrative Agent for all out-of-pocket costs and expenses
suffered or incurred by the Administrative Agent or any security trustee in
performing its duties hereunder and under the other Loan Documents or in the
exercise of any right or power imposed or conferred upon the Administrative
Agent hereby or thereby, to the extent that the Administrative Agent is not
promptly reimbursed for same by the Borrowers or out of the Collateral, all
such costs and expenses to be borne by the Lenders ratably in accordance with
the amounts of their respective Commitments.
SECTION 10.5. INDEMNITY. The Lenders shall ratably indemnify
and hold the Administrative Agent, and its directors, officers, employees,
agents or representatives (including as such any security trustee therefor)
harmless from and against any liabilities, losses, costs or expenses suffered
or incurred by them under this Agreement or any of the other Loan Documents
or in connection with the transactions contemplated hereby or thereby,
regardless of when asserted or arising, except to the extent they are
promptly reimbursed for the same by the Borrowers or out of the Collateral
and except to the extent that any event giving rise to a claim was caused by
the gross negligence or willful misconduct of the party seeking to be
indemnified.
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SECTION 10.6. SYNDICATION AGENT. Nothing in this Agreement
shall impose any obligation on Bank of Montreal in its capacity as
Syndication Agent. The Administrative Agent hereby irrevocably appoints Bank
of Montreal as the Syndication Agent for the Lenders under the Loan Documents
and hereby authorizes the Syndication Agent to take such action as the
Syndication Agent on its behalf and to exercise such powers under the Loan
Documents as are delegated to the Syndication Agent by the terms thereof,
together with such powers as are reasonably incidental thereto.
SECTION 11. JOINT AND SEVERAL LIABILITY AND GUARANTEES.
SECTION 11.1. JOINT AND SEVERAL LIABILITY AND GUARANTEES. To
induce the Lenders to provide the credits described herein and in
consideration of benefits expected to accrue to each Guarantor by reason of
the Commitments and for other good and valuable consideration, receipt of
which is hereby acknowledged, each Subsidiary party hereto or to a Guaranty
(together with the Borrowers, individually a "GUARANTOR" and collectively the
"GUARANTORS") hereby unconditionally and irrevocably guarantees jointly and
severally to the Administrative Agent, the Lenders and each other holder of
any of the Obligations, and each Borrower hereby unconditionally and
irrevocably agrees to be jointly and severally liable to the Administrative
Agent, the Lenders and such holders for, the due and punctual payment of all
present and future indebtedness of the Borrowers evidenced by or arising out
of the Loan Documents, including, but not limited to, the due and punctual
payment of principal of and interest on the Notes and the due and punctual
payment of all other Obligations now or hereafter owed by the Borrowers under
the Loan Documents as and when the same shall become due and payable, whether
at stated maturity, by acceleration or otherwise, according to the terms
hereof and thereof. In case of failure by the Borrowers punctually to pay
any indebtedness or other Obligations guaranteed hereby or for which the
Borrowers agree hereby to be jointly and severally liable, each Guarantor
hereby unconditionally agrees jointly and severally to make such payment or
to cause such payment to be made punctually as and when the same shall become
due and payable, whether at stated maturity, by acceleration or otherwise,
and as if such payment were made by the Borrowers.
SECTION 11.2. GUARANTEE UNCONDITIONAL. The obligations of
each Guarantor as a guarantor or joint and several obligor under the Loan
Documents, including this Section 11, shall be unconditional and absolute
and, without limiting the generality of the foregoing, shall not be released,
discharged or otherwise affected by:
(a) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of any Borrower or of any other
Guarantor under this Agreement or any other Loan Document or by
operation of law or otherwise;
(b) any modification or amendment of or supplement to this
Agreement or any other Loan Document;
(c) any change in the corporate existence, structure or ownership
of, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting, the Borrowers, any other Guarantor, or any of
their respective assets, or any resulting
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release or discharge of any obligation of any Borrower or of any other
Guarantor contained in any Loan Document;
(d) the existence of any claim, set-off or other rights which the
Guarantor may have at any time against the Administrative Agent, any Lender
or any other Person, whether or not arising in connection herewith;
(e) any failure to assert, or any assertion of, any claim or demand
or any exercise of, or failure to exercise, any rights or remedies against
any Borrower, any other Guarantor or any other Person or Property;
(f) any application of any sums by whomsoever paid or howsoever
realized to any obligation of any Borrower, regardless of what obligations
of the Borrowers remain unpaid;
(g) any invalidity or unenforceability relating to or against any
Borrower or any other Guarantor for any reason of this Agreement or of any
other Loan Document or any provision of applicable law or regulation
purporting to prohibit the payment by the Borrowers or any other Guarantor
of the principal of or interest on any Note or any other amount payable by
them under the Loan Documents; or
(h) any other act or omission to act or delay of any kind by the
Administrative Agent, any Lender or any other Person or any other
circumstance whatsoever that might, but for the provisions of this
paragraph, constitute a legal or equitable discharge of the obligations of
the Guarantors under the Loan Documents.
SECTION 11.3. DISCHARGE ONLY UPON PAYMENT IN FULL;
REINSTATEMENT IN CERTAIN CIRCUMSTANCES. Each Guarantor's obligations under
this Section 11 shall remain in full force and effect until the Commitments
are terminated and the principal of and interest on the Notes and all other
amounts payable by the Borrowers under this Agreement and all other Loan
Documents shall have been paid in full at which time the Guarantors'
obligations hereunder shall, subject to the following sentence, terminate.
If at any time any payment of the principal of or interest on any Note or any
other amount payable by the Borrowers under the Loan Documents is rescinded
or must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of any Borrower or of any Guarantor, or otherwise, each
Guarantor's obligations under this Section 11 with respect to such payment
shall be reinstated at such time as though such payment had become due but
had not been made at such time.
SECTION 11.4. WAIVERS. (a) GENERAL. Each Guarantor
irrevocably waives acceptance hereof, presentment, demand, protest and any
notice not provided for herein, as well as any requirement that at any time
any action be taken by the Administrative Agent, any Lender or any other
Person against the Borrowers, another Guarantor or any other Person.
(b) SUBROGATION AND CONTRIBUTION. Each Guarantor hereby
agrees not to exercise or enforce any right of exoneration, contribution,
reimbursement, recourse or subrogation
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available to such Guarantor against any Person liable for payment of the
Obligations, or as to any security therefor, unless and until the full amount
owing on the Obligations has been paid and the Commitments have terminated;
and the payment by such Guarantor of any amount pursuant to any of the Loan
Documents on account of credit extended to any other Borrower shall not in
any way entitle such Guarantor to any right, title or interest (whether by
way of subrogation or otherwise) in and to any of the Obligations or any
proceeds thereof or any security therefor unless and until the full amount
owing on the Obligations has been paid and the Commitments have terminated.
SECTION 11.5. LIMIT ON RECOVERY. Notwithstanding any other
provision hereof or of the Notes, the right of recovery against each
Guarantor under this Section 11 or against a Borrower on the Notes issued by
it shall not (to the extent required by or as may be necessary or desirable
to ensure the enforceability against such Guarantor of its obligations
hereunder or thereunder in accordance with the laws of the jurisdiction of
its incorporation or where it carries on business) exceed $1.00 less than the
amount which would render such Guarantor's obligations under this Section 11
and the Notes void or voidable under applicable law, including without
limitation fraudulent conveyance law.
SECTION 11.6. STAY OF ACCELERATION. If acceleration of the
time for payment of any amount payable by the Borrowers under this Agreement
or any other Loan Document is stayed upon the insolvency, bankruptcy or
reorganization of any of the Borrowers, all such amounts otherwise subject to
acceleration under the terms of this Agreement or the other Loan Documents
shall nonetheless be payable jointly and severally by the Guarantors
hereunder forthwith on demand by the Administrative Agent made at the request
of the Required Lenders.
SECTION 11.7. BENEFIT TO GUARANTORS. All of the Guarantors
are engaged in related businesses and integrated to such an extent that the
financial strength and flexibility of each Guarantor has a direct impact on
the success of each other Guarantor. Each Guarantor will derive substantial
direct and indirect benefit from the extension of credit hereunder.
SECTION 11.8. GUARANTOR COVENANTS. Each Guarantor shall take
such action as the Company is required by this Agreement to cause such
Guarantor to take, and shall refrain from taking such action as the Company
is required by this Agreement to prohibit such Guarantor from taking.
SECTION 12. CHANGE IN CIRCUMSTANCE.
SECTION 12.1. CHANGE OF LAW. Notwithstanding any other
provisions of this Agreement or any Note, if at any time any Lender shall
determine in good faith that any change in applicable laws, treaties or
regulations or in the interpretation thereof makes it unlawful for such
Lender to create or continue to maintain any LIBOR Portion, it shall promptly
so notify the Administrative Agent (which shall in turn promptly notify the
Company and the other Lenders) and the obligation of such Lender to create,
continue or maintain any such LIBOR Portion under this Agreement shall
terminate until it is no longer unlawful for such Lender to create, continue
or maintain such LIBOR Portion. The
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Borrowers, on demand, shall, if the continued maintenance of any such LIBOR
Portion is unlawful, thereupon prepay the outstanding principal amount of the
affected LIBOR Portion, together with all interest accrued thereon and all
other amounts payable to such affected Lender with respect thereto under this
Agreement; PROVIDED, HOWEVER, that the Company (which is acting on behalf of
the Borrowers pursuant to Section 1.7 hereof) may elect to convert the
principal amount of the affected Portion into the Domestic Rate Portion,
subject to the terms and conditions of this Agreement. Such payment or
conversion of a LIBOR Portion shall be effective, if lawful, on the last day
of the Interest Period then applicable thereto; otherwise, such payment or
conversion must be made on the date of such demand.
SECTION 12.2. UNAVAILABILITY OF DEPOSITS OR INABILITY TO
ASCERTAIN ADJUSTED LIBOR. Notwithstanding any other provision of this
Agreement or any Note, if prior to the commencement of any Interest Period,
the Required Lenders shall determine in good faith that deposits in the
amount of any LIBOR Portion of a Loan requested to be made, continued or
effected by conversion for such Interest Period are not readily available to
such Lenders in the relevant market or, by reason of circumstances affecting
the relevant market, adequate and reasonable means do not exist for
ascertaining Adjusted LIBOR, then such Lenders shall promptly give notice
thereof to the Administrative Agent (which shall in turn promptly notify the
Company and the other Lenders) and the obligations of the Lenders to create,
continue or effect by conversion any such LIBOR Portion in such amount and
for such Interest Period shall terminate until deposits in such amount and
for the Interest Period selected by the Company (which is acting on behalf of
the Borrowers pursuant to Section 1.7 hereof) shall again be readily
available in the relevant market and adequate and reasonable means exist for
ascertaining Adjusted LIBOR.
SECTION 12.3. TAXES AND INCREASED COSTS. With respect to any
LIBOR Portion, if any Lender shall reasonably determine that any change after
the Closing Date in any applicable law, treaty, regulation or guideline
(including, without limitation, Regulation D of the Board of Governors of the
Federal Reserve System) or any new law, treaty, regulation or guideline
adopted after the Closing Date, or any interpretation of any of the foregoing
by any governmental authority charged with the administration thereof or any
central bank or other fiscal, monetary or other authority having jurisdiction
over such Lender or its lending branch or the LIBOR Portions contemplated by
this Agreement (whether or not having the force of law), shall:
(i) impose, increase, or deem applicable any reserve, special deposit
or similar requirement against assets held by, or deposits in or for the
account of, or loans by, or any other acquisition of funds or disbursements
by, such Lender which is not in any instance already accounted for in
computing the interest rate applicable to such LIBOR Portion;
(ii) subject such Lender, any LIBOR Portion or a Note to the extent it
evidences such a Portion to any Indemnified Taxes;
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(iii) change the basis of taxation of payments of principal and
interest due from any Borrower to such Lender hereunder or under a Note to
the extent it evidences any LIBOR Portion (other than by a change in
Excluded Taxes); or
(iv) impose on such Lender any penalty with respect to the foregoing
or any other condition regarding this Agreement, any LIBOR Portion, or its
disbursement, or a Note to the extent it evidences any LIBOR Portion;
and such Lender shall determine in good faith that the result of any of the
foregoing is to increase in any material respect the cost (whether by
incurring a cost or adding to a cost) to such Lender of creating or
maintaining any LIBOR Portion hereunder or to reduce the amount of principal
or interest received or receivable by such Lender (without benefit of, or
credit for, any prorations, exemption, credits or other offsets available
under any such laws, treaties, regulations, guidelines or interpretations
thereof), then within fifteen (15) days of demand by such Lender the
Borrowers shall pay to the Administrative Agent for the account of such
Lender such additional amounts as such Lender shall reasonably determine are
sufficient to compensate and indemnify it for such increased cost or reduced
amount. If a Lender makes such a claim for compensation, it shall provide to
the Company (with a copy to the Administrative Agent) a certificate setting
forth the computation of the increased cost or reduced amount as a result of
any event mentioned herein in reasonable detail and such certificate shall be
deemed prima facie correct if reasonably determined.
SECTION 12.4. CAPITAL ADEQUACY. If any Lender shall
reasonably determine that the adoption, after the Closing Date, of any
applicable law, rule or regulation regarding capital adequacy, or any change
therein, or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof or compliance by such Lender (or its
lending office) with any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank
or comparable agency, has or would have the effect of reducing the rate of
return on such Lender's capital as a consequence of its obligations hereunder
or credit extended by it hereunder to a level below that which such Lender
could have achieved but for such law, rule, regulation, change or compliance
(taking into consideration such Lender's policies with respect to capital
adequacy) by an amount deemed by such Lender to be material, then, within 15
days after demand by such Lender, the Borrowers shall pay such additional
amount or amounts as will compensate such Lender for such reduction in rate
of return. A certificate of any Lender claiming compensation under this
Section and setting forth the additional amount or amounts to be paid to it
hereunder in reasonable detail shall be deemed PRIMA FACIE correct if
reasonably determined. In determining such amount, such Lender may use any
reasonable averaging and attribution methods. A Lender shall not be entitled
to compensation under this Section with respect to any change, adoption or
interpretation (a "CHANGE") for any period prior to the earlier of (i) the
date it notifies any Borrower of the Change or (ii) the date which is thirty
(30) days prior to the date such Lender obtains actual knowledge of the
Change giving rise to the request for compensation if any Borrower is
notified of the Change prior to the lapse of such 30-day period. Each Lender
and the Administrative Agent shall use reasonable efforts to minimize the
cost imposed on any Borrower in respect of any such
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increased capital requirement and shall compute the assessment of any such
cost related to such increased capital on a nondiscriminatory basis among the
Borrowers, on the one hand, and other borrowers to which it applies, on the
other hand, and neither such Lender nor any corporation controlling such
Lender nor the Administrative Agent shall be entitled to demand compensation
or be compensated for any increased capital requirement from the Borrowers
hereunder in excess of the amount so computed.
SECTION 12.5. FUNDING INDEMNITY. In the event any Lender
shall incur any loss, cost or expense (including, without limitation, any
loss (including loss of profit), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired or contracted
to be acquired by such Lender to fund or maintain its part of any LIBOR
Portion or the relending or reinvesting of such deposits or other funds or
amounts paid or prepaid to such Lender) as a result of:
(i) any payment of a LIBOR Portion on a date other than the last day
of the then applicable Interest Period for any reason, whether before or
after default, and whether or not such payment is required by any
provisions of this Agreement; or
(ii) any failure by any Borrower to create, borrow, continue or effect
by conversion a LIBOR Portion on the date specified in a notice given
pursuant to this Agreement;
then, upon the demand of such Lender, the Borrowers shall pay to the
Administrative Agent for the account of such Lender such amount as will
reimburse such Lender for such loss, cost or expense. If a Lender requests
such a reimbursement, it shall provide to any of the Borrowers (with a copy
to the Administrative Agent) a certificate setting forth the computation of
the loss, cost or expense giving rise to the request for reimbursement in
reasonable detail and such certificate shall be deemed prima facie correct if
reasonably determined.
SECTION 12.6. LENDING BRANCH. Each Lender may, at its
option, elect to make, fund or maintain its pro rata share of the Loans
hereunder at the branches or offices specified on the signature pages hereof
or on any Assignment Agreement executed and delivered pursuant to Section
13.12 hereof or at such of its branches or offices as such Lender may from
time to time elect. To the extent reasonably possible, a Lender shall
designate an alternate branch or funding office with respect to its pro rata
share of the LIBOR Portions to reduce any liability of any of the Borrowers
to such Lender under Section 12.3 hereof or to avoid the unavailability of an
interest rate option under Section 12.2 hereof, so long as such designation
is not otherwise disadvantageous to the Lender. To the event reasonably
possible, a Lender shall designate an alternate branch or funding office with
respect to its pro rata share of any Revolving Loans or Letters of Credit
affected by the occurrence of any event giving rise to the operations of
Sections 1.3(e) or 12.4 hereof, provided that such designation is made on
such terms that such Lender and its lending office suffer no economic, legal
or regulatory disadvantage, with the object of avoiding the consequence of
the event giving rise to the operation of such Sections.
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SECTION 12.7. DISCRETION OF LENDERS AS TO MANNER OF FUNDING.
Notwithstanding any provision of this Agreement to the contrary, each Lender
shall be entitled to fund and maintain its funding of all or any part of its
Note in any manner it sees fit, it being understood, however, that for the
purposes of this Agreement all determinations hereunder (including, without
limitation, determinations under Sections 12.3, 12.4 and 12.5 hereof) shall
be made as if each Lender had actually funded and maintained each LIBOR
Portion during each Interest Period applicable thereto through the purchase
of deposits in the relevant market in the amount of its pro rata share of
such LIBOR Portion, having a maturity corresponding to such Interest Period,
and bearing an interest rate equal to the LIBOR for such Interest Period.
SECTION 12.8. REPLACEMENT OF LENDER. (a) In the event that
the Company receives from a Lender a certificate requesting an amount be paid
to such Lender under Section 12.3, 12.4 or 12.5 hereof and the Required
Lenders have not similarly made requests for payment arising out of the same
circumstances, then the Company may request other Lenders hereunder to assume
in full the Revolving Credit Commitment and Term Credit Commitment then in
effect of the Lender requesting such amount be paid (such Lender in each case
being herein referred to as the "REPLACEABLE LENDER"), and to purchase the
Notes issued to the Replaceable Lender and its participation in the L/C
Obligations at a price equal to the outstanding principal amount of such
Notes and such participation and the Replaceable Lender's share of any
accrued and unpaid interest on such Notes and participation plus accrued and
unpaid commitment fees owed to the Replaceable Lender, and if any Lender or
Lenders in their sole discretion agree so to assume in full the Revolving
Credit Commitment and Term Credit Commitment of the Replaceable Lender (each
an "ASSUMING LENDER"), and after payment by the Borrowers to the Replaceable
Lender of all amounts due under this Agreement to such Lender (including any
amount specified as due in a certificate submitted under Section 12.3, 12.4
or 12.5 hereof) not so paid by the Assuming Lender, then such assumption
shall take place in the manner set forth in subsection (b) below. In the
event no Lender or Lenders agrees to assume in full the Revolving Credit
Commitment and Term Credit Commitment of the Replaceable Lender, then the
Company (which is acting on behalf of the Borrowers pursuant to Section 1.7
hereof) may nominate one or more banks or other financial institutions not
then party to this Agreement so to assume in full the Revolving Credit
Commitment and Term Credit Commitment of the Replaceable Lender, and if such
nominated banks or other financial institutions are acceptable to the
Administrative Agent and the Required Lenders in their sole discretion
(excluding the Replaceable Lender), such assumption shall take place in the
manner set forth in subsection (b) below and each such bank or other
financial institution shall become a Lender hereunder (each a "NEW LENDER")
and the Replaceable Lender shall no longer be a party hereto or have any
rights hereunder.
(b) In the event a Replaceable Lender's Revolving Credit
Commitment is to be assumed in full by an Assuming Lender or a New Lender,
then such assumption shall take place on a date acceptable to the Company
(which is acting on behalf of the Borrowers pursuant to Section 1.7 hereof),
the Replaceable Lender and the Assuming Lender or New Lender, as the case may
be, and such assumption shall take place through the payment of all amounts
due under this Agreement to the Replaceable Lender and the execution of such
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instruments and documents as shall, in the reasonable opinion of the
Administrative Agent, be reasonably necessary or appropriate for the Assuming
Lender or New Lender to assume in full the Revolving Credit Commitment and
Term Credit Commitment of the Replaceable Lender (including, without
limitation, the issuance of a new Note and the execution of an appropriate
Assignment Agreement making any New Lender a party hereto) and for the
Borrower's obligations to such Assuming or New Lender to be secured with the
Collateral. In the event no Assuming Lender or New Lender agrees to assume
in full the Revolving Credit Commitment of the Replaceable Lender, then such
Replaceable Lender shall remain a Lender party hereto and its Revolving
Credit Commitment and Term Credit Commitment shall remain in effect.
SECTION 13. MISCELLANEOUS.
SECTION 13.1. WITHHOLDING TAXES. (a) PAYMENTS FREE OF
WITHHOLDING. Except as otherwise required by law and subject to Section
13.1(b) hereof, each payment by each Borrower and each Guarantor under this
Agreement or the other Loan Documents shall be made without withholding for
or on account of any present or future Indemnified Taxes. If any such
withholding is so required, the relevant Borrower or Guarantor shall make
the withholding, pay the amount withheld to the appropriate governmental
authority before penalties attach thereto or interest accrues thereon and
forthwith pay such additional amount as may be necessary to ensure that the
net amount actually received by each Lender and the Administrative Agent free
and clear of such Indemnified Taxes (including any Indemnified Taxes on such
additional amount) is equal to the amount which that Lender or the
Administrative Agent (as the case may be) would have received had such
withholding not been made. If the Administrative Agent or any Lender pays
any amount in respect of any such Indemnified Taxes, penalties or interest,
the Borrowers shall reimburse the Administrative Agent or that Lender for
that payment on demand in the currency in which such payment was made. If
any Borrower or any Guarantor pays any such Indemnified Taxes, penalties or
interest, it shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Lender or Administrative Agent on whose
account such withholding was made (with a copy to the Administrative Agent if
not the recipient of the original) on or before the thirtieth day after
payment. If any Lender or the Administrative Agent determines it has
received or been granted a credit against or relief or remission for, or
repayment of, any Indemnified Taxes paid or payable by it because of any
Indemnified Taxes, penalties or interest paid by any Borrower or any
Guarantor and evidenced by such a tax receipt, such Lender or Administrative
Agent shall, to the extent it can do so without prejudice to the retention of
the amount of such credit, relief, remission or repayment, pay to such
Borrower or Guarantor, as applicable, such amount as such Lender or
Administrative Agent determines is attributable to such deduction or
withholding and which will leave such Lender or Administrative Agent (after
such payment) in no better or worse position than it would have been in if
the Borrower or Guarantor had not been required to make such deduction or
withholding. Nothing in this Agreement shall interfere with the right of
each Lender and the Administrative Agent to arrange its tax affairs in
whatever manner it thinks fit nor oblige any Lender or the Administrative
Agent to disclose any information relating to its tax affairs or any
computations in connection with such taxes.
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(b) U.S. WITHHOLDING TAX EXEMPTIONS. Each Foreign Lender
shall submit to the Company and the Administrative Agent on or before the
earlier of the date the initial Loan is made hereunder and thirty (30) days
after the date hereof, two duly completed and signed copies of either Form
1001 (relating to such Lender and entitling it to a complete exemption from
withholding under the Code on all amounts to be received by such Lender,
including fees, pursuant to the Loan Documents and the Loans) or Form 4224
(relating to all amounts to be received by such Lender, including fees,
pursuant to the Loan Documents and the Loans) of the United States Internal
Revenue Service. Thereafter and from time to time, each Lender shall submit
to the Company and the Administrative Agent such additional duly completed
and signed copies of one or the other of such Forms (or such successor forms
as shall be adopted from time to time by the relevant United States taxing
authorities) as may be (i) requested by the Company in a written notice,
directly or through the Administrative Agent, to such Lender and (ii)
required under then-current United States law or regulations to avoid or
reduce United States withholding taxes on payments in respect of all amounts
to be received by such Lender, including fees, pursuant to the Loan Documents
or the Loans.
(c) INABILITY OF LENDER TO SUBMIT FORMS. If any Lender
determines, as a result of any change in applicable law, regulation or
treaty, or in any official application or interpretation thereof, that it is
unable to submit to the Company or Administrative Agent any form or
certificate that such Lender is obligated to submit pursuant to subsection
(b) of this Section 13.1, or that such Lender is required to withdraw or
cancel any such form or certificate previously submitted or any such form or
certificate otherwise becomes ineffective or inaccurate, such Lender shall
promptly notify the Company and the Administrative Agent of such fact and the
Lender shall to that extent not be obligated to provide any such form or
certificate and will be entitled to withdraw or cancel any affected form or
certificate, as applicable.
(d) LENDER REPLACEMENT. (i) If any Borrower or Guarantor is
required to make any reduction or withholding with respect to any payment due
any Lender under this Section 13.1, then such Lender shall use reasonable
efforts to designate a different lending office for funding or booking its
Loans hereunder or to assign its rights and obligations hereunder to another
of its offices, branches or affiliates, if, in the judgment of such Lender,
such designation or assignment (x) would eliminate or reduce amounts payable
pursuant to Section 13.1(a) in the future and (y) would not subject such
Lender to any unreimbursed cost or expense and would not otherwise be
disadvantageous to such Lender.
(ii) If any Borrower or Guarantor is required to make any
reduction or withholding with respect to any payment due any Lender under
this Section 13.1 (in any such case a "REPLACEABLE LENDER"), the Company may
require that another bank (a "REPLACEMENT LENDER"), which bank may be an
existing Lender, be substituted for and replace the Replaceable Lender for
purposes of this Agreement. If a Replacement Lender is so substituted for
the Replaceable Lender, the Replaceable Lender shall enter into an Assignment
Agreement with the Replacement Lender, the Borrowers and the Administrative
Agent to assign and transfer to the Replacement Lender the Replaceable
Lender's Commitments, Loans and participations in the credit risk with
respect to the Letters of Credit hereunder pursuant to and in accordance with
the provisions and requirements of
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Section 13.12 hereof and, as a condition to its execution thereof, the
Replaceable Lender shall concurrently receive the full amount of its Loans,
interest thereon, and all accrued fees and other amounts to which it is
entitled under the Loan Documents.
SECTION 13.2. DOCUMENTARY TAXES. The Borrowers agree to pay
any documentary, stamp or similar taxes payable in respect to this Agreement
or any other Loan Document, including interest and penalties, in the event
any such taxes are assessed irrespective of when such assessment is made and
whether or not any credit is then in use or available hereunder.
SECTION 13.3. WAIVERS, MODIFICATIONS AND AMENDMENTS. Any
provision hereof or of any of the other Loan Documents may be amended,
modified, waived or released upon the written consent of the Borrower and the
Required Lenders and any Default or Event of Default and its consequences may
be rescinded and annulled upon the written consent of the Required Lenders;
PROVIDED, HOWEVER, that without the consent of each Lender no such amendment,
modification or waiver shall increase the amount or extend the term of any
Commitment of such Lender or increase the dollar limit on Letters of Credit
available hereunder or reduce the interest rate applicable to or extend the
maturity (including any scheduled installment of a specified amount) of any
principal, interest or fees owed to such Lender or reduce the amount of any
principal, interest or fees to which such Lender is entitled hereunder or
advance rate used in determining the Borrowing Base or release any
substantial (in value) part of the collateral security afforded by the
Collateral Documents (except in connection with a sale or other disposition
required or permitted to be effected by the provisions hereof or of the
Collateral Documents) or release any Guarantor or change this Section 13.3 or
change the definition of "REQUIRED LENDERS" or change the number of Lenders
required to take any action hereunder or under any of the other Loan
Documents, it being understood that waivers or modifications of covenants,
Defaults or Events of Default (other than those set forth in Section 9.1(m)
and (n) hereof) or of a mandatory prepayment may be made at the discretion of
the Required Lenders and shall not constitute an increase of a Commitment of
any Lender. No amendment, modification or waiver of the Administrative
Agent's protective provisions shall be effective without the prior written
consent of the Administrative Agent.
SECTION 13.4. COSTS AND EXPENSES. The Borrowers agree to pay
within ten (10) days of demand therefor the reasonable costs and expenses of
the Administrative Agent in connection with the negotiation, preparation,
execution and delivery of this Agreement, the other Loan Documents and the
other instruments and documents to be delivered hereunder or thereunder, and
the reasonable costs and expenses of the Administrative Agent and the Lenders
in connection with the recording or filing of any of the foregoing, and in
connection with the transactions contemplated hereby or thereby, and the
reasonable costs and expenses of the Administrative Agent and the Lenders in
connection with any consents hereunder or waivers or amendments hereto or
thereto, including in each case the reasonable fees and expenses of Xxxxxxx
and Xxxxxx, counsel for the Administrative Agent, with respect to all of the
foregoing (whether or not the transactions contemplated hereby are
consummated). The Borrowers further agree to pay to Administrative Agent and
the Lenders and any other holders of the Obligations all reasonable costs and
expenses (including court costs and reasonable attorneys' fees, but excluding
the allocated costs of inhouse
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counsel), if any, incurred or paid by the Administrative Agent, the Lenders
or any other holders of the Obligations in connection with any Default or
Event of Default or in connection with the enforcement of this Agreement or
any of the other Loan Documents or any other instrument or document delivered
hereunder or thereunder. The Borrowers further agree to indemnify and save
the Lenders, the Administrative Agent and any security trustee for the
Lenders harmless from any and all liabilities, losses, costs and expenses
incurred by the Lenders or the Administrative Agent in connection with any
action, suit or proceeding brought against the Administrative Agent, or any
security trustee or any Lender by any Person (but excluding attorneys' fees
for litigation solely between the Lenders to which no Borrower is a party)
which arises out of the transactions contemplated or financed hereby or by
any of the other Loan Documents or out of any action or inaction by the
Administrative Agent, any security trustee or any Lender hereunder or
thereunder or in connection with the Collateral, except for such thereof as
is caused by the negligence or willful misconduct of the party seeking to be
indemnified. The provisions of this Section 13.4 and the protective
provisions of Section 2 and Section 12 hereof shall survive payment of the
Obligations.
SECTION 13.5. SURVIVAL OF REPRESENTATIONS AND INDEMNITIES.
All representations and warranties made in the Loan Documents or pursuant
thereto or in certificates given pursuant hereto or thereto shall survive the
execution and delivery of this Agreement and of the other Loan Documents, and
shall continue in full force and effect with respect to the date as of which
they were made as long as any credit is in use or available hereunder. All
indemnities and other provisions relative to reimbursement to any Lender of
amounts sufficient to protect the yield of such Lender with respect to the
Loans, including, but not limited to, Sections 12.3 and 12.4 hereof, shall
survive the termination of this Agreement and the payment of the Notes.
SECTION 13.6. WAIVER OF RIGHTS. No delay or failure on the
part of any Lender or the holder or holders of any Note in the exercise of
any power or right shall operate as a waiver thereof or as an acquiescence in
any default, nor shall any single or partial exercise thereof, or the
exercise of any other power or right, preclude any other right or the further
exercise of any other rights. The rights and remedies hereunder of the
Borrowers, the Administrative Agent, the Lenders and of the holder or holders
of any Note are cumulative to, and not exclusive of, any rights or remedies
which any of them would otherwise have.
SECTION 13.7 NON-BUSINESS DAY. If any payment of principal
shall fall due on a day which is not a Business Day, interest at the rate
such principal bears for the period prior to maturity shall continue to
accrue on such principal from the stated due date thereof to and including
the next succeeding Business Day on which the same is payable.
SECTION 13.8. NOTICES. All communications provided for
herein shall be in writing or by telex or by telegraph, except as otherwise
specifically provided for hereinabove, addressed, if to any Borrower at:
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Platinum Entertainment, Inc.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telecopy: 000-000-0000
Telephone: 000-000-0000
with a copy (in case of notices of default) to:
SK-Palladin Partners, LP
c/o Alpine Capital Group
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
and
MAC Music LLC
c/o Alpine Capital Group
1285 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx Xxxxxxx
or if to the Administrative Agent or Lenders at their respective addresses
set forth opposite their respective signatures hereto, or at such other
address as shall be designated by any party hereto in a written notice to
each other party pursuant to this Section 13.8. Any notice in writing shall
be deemed to have been given or made when served personally or when received
if sent by United States mail, and any notice given by telex, or telegraphic
or means shall be deemed given when transmitted (answer back confirmed);
provided that any notice to the Administrative Agent or any Lender under
Section 1 or Section 2 hereof shall only be effective upon receipt.
SECTION 13.9. COUNTERPARTS. This Agreement may be executed
in any number of counterparts, and by the different parties on different
counterparts, each of which when executed shall be deemed an original, but
all such counterparts taken together shall constitute one and the same
instrument.
SECTION 13.10. SUCCESSORS AND ASSIGNS. This Agreement shall
be binding upon the Borrowers and their successors and assigns, and shall be
binding upon and inure to the benefit of the Administrative Agent and the
Lenders and their successors and assigns, including any subsequent holder of
any Note. No Borrower may assign its rights or obligations hereunder without
the prior written consent of the Lenders.
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SECTION 13.11. PARTICIPATIONS. Any Lender may grant
participations in its extensions of credit hereunder to any other Lender or
other lending institution (a "PARTICIPANT"), provided that (i) no Participant
shall thereby acquire any direct rights under this Agreement, (ii) the
Administrative Agent must consent, which consent shall not be unreasonably
withheld, to a Participant which is neither an original signatory of this
Agreement nor an Affiliate of such a signatory, (iii) no Lender shall agree
with a Participant that such Lender will not exercise any of its rights
hereunder without the consent of such Participant except for rights which
under the terms hereof may only be exercised by all Lenders, (iv) no sale of
a participation in extensions of credit shall in any manner relieve the
selling Lender of its obligations hereunder and such Lender shall remain a
"LENDER" for all purposes of this Agreement and (v) no Participant may be a
competitor or customer of the Company or any of its Affiliates unless the
Company consents in writing to such participation.
SECTION 13.12. ASSIGNMENT AGREEMENTS. Each Lender may, from
time to time upon at least five (5) Business Days' prior written notice to
the Administrative Agent and the Company, assign to other commercial lenders
all or part of its rights and obligations under this Agreement (including
without limitation the indebtedness evidenced by the Notes then owned by such
assigning Lender, together with an equivalent proportion of its Commitments
to make Loans or participate in the credit risk on Letters of Credit
hereunder) pursuant to an Assignment Agreement; PROVIDED, HOWEVER, that (i)
each such assignment shall be of a constant, and not a varying, percentage of
the assigning Lender's rights and obligations under this Agreement and the
assignment shall cover the same percentage of such Lender's Commitments,
Loans, Notes and credit risk with respect to Letters of Credit; (ii) unless
the Administrative Agent otherwise consents, the aggregate amount of the
Revolving Credit Commitment Term Loan of the assigning Lender being assigned
pursuant to each such assignment (determined as of the effective date of the
relevant Assignment Agreement) (x) in the case of assignments to Lender or an
Affiliate of a Lender, shall in no event be less than $1,000,000 and shall be
an integral multiple of $1,000,000 and (y) in the case of an assignment to
any other Person, shall in no event be less than $5,000,000 and shall be an
integral multiple of $1,000,000; (iii) the Administrative Agent and (except
if made during the continuance of any Event of Default hereunder) the Company
must each consent, which consent shall not be unreasonably withheld, to each
such assignment to a party which was neither an original signatory of this
Agreement nor an Affiliate of such a signatory (it being understood and
agreed that the Company's decision to withhold its consent to an assignee
which is a customer or competitor of a Borrower or an Affiliate thereof is
reasonable); and (iv) the assigning Lender must pay to the Administrative
Agent a processing and recordation fee of $3,500 and any out-of-pocket
attorneys' fees and expenses incurred by the Administrative Agent in
connection with such Assignment Agreement. Upon the execution of each
Assignment Agreement by the assigning Lender thereunder, the assignee lender
thereunder, the Company and the Administrative Agent and payment to such
assigning Lender by such assignee lender of the purchase price for the
portion of the indebtedness of the Borrowers being acquired by it, (i) such
assignee lender shall thereupon become a "LENDER" for all purposes of this
Agreement with Commitments in the amounts set forth in such Assignment
Agreement and with all the rights, powers and obligations afforded a Lender
hereunder, (ii) such assigning Lender shall have no further liability for
funding the portion of its Commitments assumed by such other Lender and (iii)
the address for notices to
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such assignee Lender shall be as specified in the Assignment Agreement
executed by it. Concurrently with the execution and delivery of such
Assignment Agreement, the Borrowers shall execute and deliver new Notes to
the assignee Lender in the respective amounts of its Revolving Credit
Commitment and its share of the Term Loan and new Notes to the assigning
Lender in the respective amount of its Revolving Credit Commitment and its
share of the Term Loan after giving effect to the reduction occasioned by
such assignment, all such Notes to constitute "NOTES" for all purposes of
this Agreement and of the other Loan Documents. Upon its receipt of such new
Notes, the assigning Lender shall return to the Company the old Notes so
replaced.
SECTION 13.13. CONSTRUCTION. The parties hereto acknowledge
and agree that this Agreement shall not be construed more favorably in favor
of one than the other based upon which party drafted the same, it being
acknowledged that all parties hereto contributed substantially to the
negotiation of this Agreement.
SECTION 13.14. ENTIRE AGREEMENT. This Agreement and the Loan
Documents and any separate agreement concerning fees constitutes the entire
understanding of the parties with respect to the subject matter hereof and
any prior agreements, whether written or oral, with respect thereto are
superseded hereby.
SECTION 13.15. HEADINGS. Section headings used in this
Agreement are for reference only and shall not affect the construction of
this Agreement.
SECTION 13.16. CONFIDENTIALITY. Any information disclosed by
the Company or any of its Subsidiaries to the Administrative Agent or any of
the Lenders shall be used solely for purposes of this Agreement and for the
purpose of determining whether or not to extend other credit or financial
accommodations to the Company or its Subsidiaries and, if such information is
not otherwise in the public domain, shall not be disclosed by the
Administrative Agent or such Lender to any other Person except (i) to its
independent accountants and legal counsel (it being understood that the
Persons to whom such disclosure is made will be informed of the confidential
nature of such information and instructed to keep such information
confidential), (ii) pursuant to statutory and regulatory requirements, (iii)
pursuant to any mandatory court order, subpoena or other legal process, (iv)
to the Administrative Agent or any other Lender, (v) pursuant to any
agreement heretofore or hereafter made between such Lender and the Company
which permits such disclosure, (vi) in connection with the exercise of any
right or remedy under the Loan Documents, provided that such Lender or the
Administrative Agent, as applicable, shall give a Borrower prior written
notice of any such disclosure if lawful or (vii) subject to an agreement
containing provisions substantially the same as those of this Section, to any
participant in or assignee of, or prospective participant in or assignee of,
any obligation or Commitment.
SECTION 13.17. EXCLUSIVE JURISDICTION. (A) EXCEPT AS
PROVIDED IN SUBSECTION (B), THE LOAN PARTIES, THE LENDERS AND THE
ADMINISTRATIVE AGENT AGREE THAT ALL DISPUTES BETWEEN OR AMONG THEM ARISING
OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP
ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, AND WHETHER
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ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY
STATE OR FEDERAL COURTS LOCATED IN XXXX COUNTY, ILLINOIS, BUT EACH OF THE
LOAN PARTIES, THE LENDERS AND THE ADMINISTRATIVE AGENT ACKNOWLEDGE THAT ANY
APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
XXXX COUNTY, ILLINOIS. EACH LOAN PARTY WAIVES IN ALL DISPUTES ANY OBJECTION
THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. EACH LOAN PARTY AGREES THAT THE
ADMINISTRATIVE AGENT AND THE LENDERS SHALL EACH HAVE THE RIGHT TO PROCEED
AGAINST ANY LOAN PARTY OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE
THE ADMINISTRATIVE AGENT OR ANY LENDER TO REALIZE ON SUCH PROPERTY, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE
ADMINISTRATIVE AGENT OR ANY LENDER. EACH LOAN PARTY WAIVES ANY OBJECTION THAT
IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE ADMINISTRATIVE AGENT OR
ANY LENDER HAS COMMENCED A PROCEEDING DESCRIBED IN THIS SUBSECTION.
SECTION 13.18. WAIVER OF JURY TRIAL. THE LOAN PARTIES, THE
ADMINISTRATIVE AGENT AND THE LENDERS EACH WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR
OTHERWISE, BETWEEN THE AGENTS OR EITHER OF THEM OR ANY LENDER AND ANY LOAN
PARTY ARISING OUT OF, CONNECTED WITH, RELATED TO OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY
OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION
THEREWITH OR THE TRANSACTIONS RELATED THERETO. THE LOAN PARTIES, THE
ADMINISTRATIVE AGENT AND THE LENDERS EACH HEREBY AGREE AND CONSENT THAT ANY
SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL
WITHOUT A JURY AND THAT ANY OF THEM MAY FILE AN ORIGINAL COUNTERPART OR A
COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
SECTION 13.19. GOVERNING LAW. This Agreement and the Notes,
and the rights and duties of the parties hereto, shall be construed and
determined in accordance with the laws of the State of Illinois.
[SIGNATURE PAGES TO FOLLOW]
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Upon your acceptance hereof in the manner hereinafter set
forth, this Agreement shall be a contract between us for the purposes
hereinabove set forth.
Executed and delivered as of this 12th day of December, 1997.
PLATINUM ENTERTAINMENT, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
INTERSOUND, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
RIVER NORTH RECORDS, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
CGI RECORDS, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
LEXICON MUSIC, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
LIGHT RECORDS, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
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THE RECORDING EXPERIENCE, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
JUSTMIKE MUSIC, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
PEG PUBLISHING, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
ROYCE PUBLISHING, INC.
By: /s/ Xxxxxx Xxxxxx
--------------------------------
Name: Xxxxxx Xxxxxx
Title: President
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Accepted and agreed to in Chicago, Illinois as of the day and
year last above written.
Each of the Lenders hereby agrees with each other Lender that
if it should receive or obtain any payment (whether by voluntary payment, by
realization upon collateral, by the exercise of rights of set-off or banker's
lien, by counterclaim or cross action, or by the enforcement of any rights
under this Agreement, any of the other Loan Documents or otherwise) in
respect of the Obligations in a greater amount than such Lender would have
received had such payment been made to the Administrative Agent and been
distributed among the Lenders as contemplated by Section 3.2 or 3.3 hereof,
as applicable, then in that event the Lender receiving such disproportionate
payment shall purchase for cash without recourse from the other Lenders an
interest in the Obligations of the Borrowers to such Lenders in such amount
as shall result in a distribution of such payment as contemplated by Section
3.2 or 3.3 hereof, as applicable. In the event any payment made to a Lender
and shared with the other Lenders pursuant to the provisions hereof is ever
recovered from such Lender, the Lenders receiving a portion of such payment
hereunder shall restore the same to the payor Lender, but without interest.
Amount and Percentage of Commitments:
Revolving Credit Commitment:
$10,000,000 (100.0%)
Term Credit Commitment:
$20,000000 (100.0%)
BANK OF MONTREAL, individually and as
Administrative Agent
By: /s/ Xxxxxxx Xxxxx
--------------------------------
Name: Xxxxxxx Xxxxx
---------------------------
Title: Director
-------------------------
Mailing Address:
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Global Distribution
Telephone: 000-000-0000
Telecopy: 000-000-0000
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EXHIBIT A
PLATINUM ENTERTAINMENT, INC.
REVOLVING CREDIT NOTE
$______________ ______________, 1997
For value received on the Revolving Credit Termination Date,
the undersigned, Platinum Entertainment, Inc., a Delaware corporation (the
"COMPANY"), and Intersound, Inc., a Delaware corporation ("INTERSOUND") (the
Company and Intersound being hereinafter referred to collectively as the
"BORROWERS"), hereby jointly and severally promise to pay to the order of
____________________________ (the "LENDER"), at the principal office of Bank
of Montreal in Chicago, Illinois (i) the principal sum of
____________________________ Dollars ($_________), or (ii) such lesser amount
as may at the time of the maturity hereof, whether by acceleration or
otherwise, be the aggregate unpaid principal amount of all Revolving Loans
owing from the Borrowers to the Lender under the Revolving Credit provided
for in the Credit Agreement hereinafter mentioned.
This Note evidences indebtedness constituting the "DOMESTIC
RATE PORTION" and "LIBOR PORTIONS" as such terms are defined in that certain
Credit Agreement dated as of December 12, 1997, by and among the Borrowers,
certain Subsidiaries of the Company, Bank of Montreal individually and as
Administrative Agent and certain lenders which are or may from time to time
become parties thereto (the "CREDIT AGREEMENT") made and to be made to the
Borrowers by the Lender under the Revolving Credit provided for under the
Credit Agreement and the Borrowers hereby jointly and severally promise to
pay interest at the office specified above on each loan evidenced hereby at
the rates and times specified therefor in the Credit Agreement. Capitalized
terms used herein without definition shall have the meanings ascribed to them
in the Credit Agreement, and this Note is subject to the terms of the Credit
Agreement.
Each loan made under the Revolving Credit provided for in the
Credit Agreement by the Lender to a Borrower against this Note, any repayment
of principal hereon, the status of each such loan from time to time as part
of the Domestic Rate Portion or a LIBOR Portion and the interest rates and
interest periods applicable thereto shall be endorsed by the holder hereof on
the reverse side of this Note or recorded on the books and records of the
holder hereof (provided that such entries shall be endorsed on the reverse
side hereof prior to any negotiation hereof) and the Borrowers agree that in
any action or proceeding instituted to collect or enforce collection of this
Note, the entries so endorsed on the reverse side hereof or recorded on the
books and records of the Lender shall be PRIMA FACIE evidence of the unpaid
balance of this Note and the status of each such loan from time to time as
part of the Domestic Rate Portion or a LIBOR Portion and the interest rates
and interest periods applicable thereto.
This Note is issued by the Borrowers under the terms and
provisions of the Credit Agreement and is secured, inter alia, by certain
security agreements and other instruments and documents from the Company and
certain of its Subsidiaries, and this Note and the holder hereof are entitled
to all of the benefits and security provided for thereby or referred to
therein, equally and ratably with all other indebtedness thereby secured, to
which reference is hereby made for a statement thereof. This Note may be
declared to be, or be and become, due prior to its expressed maturity upon
the occurrence of an Event of Default specified in the Credit Agreement,
voluntary prepayments may be made hereon, and certain prepayments are
required to be made hereon, all in the events, on the terms and with the
effects provided in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAW.
The Borrowers hereby waive presentment for payment.
PLATINUM ENTERTAINMENT, INC.
By
___________________________
Name: Xxxxxx Xxxxxx
Title: President
INTERSOUND, INC.
By
___________________________
Name: Xxxxxx Xxxxxx
Title: President
-2-
EXHIBIT B
PLATINUM ENTERTAINMENT, INC.
TERM CREDIT NOTE
$______________ _____________, 1997
For value received, the undersigned, Platinum Entertainment,
Inc., a Delaware corporation (the "COMPANY") and Intersound, Inc., a Delaware
corporation ("INTERSOUND"; the Company and Intersound being hereinafter
referred to collectively as the "BORROWERS"), hereby jointly and severally
promise to pay to the order of __________________________ (the "LENDER"), at
the principal office of Bank of Montreal in Chicago, Illinois the principal
sum of _______________________________ Dollars ($_________), in installments
as follows: eleven (11) consecutive quarterly installments (commencing on
June 1, 1998 and continuing on the first day of each September, December,
March and June occurring thereafter to and including December 1, 2000) with
all such installments (except the last such installment) to be in an amount
equal to $_____________ per installment and the last such installment to be
in an amount equal to $______________ which shall be the full amount of the
then unpaid principal balance of this Note.
This Note evidences indebtedness constituting the "DOMESTIC
RATE PORTION" and "LIBOR PORTIONS" as such terms are defined in that certain
Credit Agreement dated as of December 12, 1997, by and among the Borrowers,
certain Subsidiaries of the Company, Bank of Montreal individually and as
Administrative Agent and certain lenders which are or may from time to time
become parties thereto (the "CREDIT AGREEMENT") made or to be made to the
Borrowers by the Lender under the Term Credit provided for under the Credit
Agreement and the Borrowers hereby jointly and severally promise to pay
interest at the office specified above on the loan evidenced hereby at the
rates and times specified therefor in the Credit Agreement. Capitalized
terms used herein without definition shall have the meanings ascribed to them
in the Credit Agreement, and this Note is subject to the terms of the Credit
Agreement.
Any repayment of principal hereon, the status of indebtedness
evidenced hereby from time to time as part of the Domestic Rate Portion or a
LIBOR Portion and the interest rates and interest periods applicable thereto
shall be endorsed by the holder hereof on the reverse side of this Note or
recorded on the books and records of the holder hereof (provided that such
entries shall be endorsed on the reverse side hereof prior to any negotiation
hereof) and the Borrowers agree that in any action or proceeding instituted
to collect or enforce collection of this Note, the entries so endorsed on the
reverse side hereof or recorded on the books and records of the Lender shall
be PRIMA FACIE evidence of the unpaid balance of this Note and the status of
indebtedness evidenced hereby from time to time as part of the
Domestic Rate Portion or a LIBOR Portion and the interest rates and interest
periods applicable thereto.
This Note is issued by the Borrowers under the terms and
provisions of the Credit Agreement and is secured, inter alia, by certain
security agreements and other instruments and documents from the Company and
certain of its Subsidiaries, and this Note and the holder hereof are entitled
to all of the benefits and security provided for thereby or referred to
therein, equally and ratably with all other indebtedness thereby secured, to
which reference is hereby made for a statement thereof. This Note may be
declared to be, or be and become, due prior to its expressed maturity upon
the occurrence of an Event of Default specified in the Credit Agreement,
voluntary prepayments may be made hereon, and certain prepayments are
required to be made hereon, all in the events, on the terms and with the
effects provided in the Credit Agreement.
THIS NOTE SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED
BY, THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES
OF CONFLICT OF LAW.
The Borrowers hereby waive presentment for payment.
PLATINUM ENTERTAINMENT, INC.
By
---------------------------------
Name: Xxxxxx Xxxxxx
Title: President
INTERSOUND, INC.
By
---------------------------------
Name: Xxxxxx Xxxxxx
Title: President
-2-
EXHIBIT C
BORROWING BASE CERTIFICATE
TO: Bank of Montreal as Administrative Agent under, and the Lenders
party to, the Credit Agreement described below
Pursuant to the terms of the Credit Agreement dated as of
December 12, 1997 among the undersigned and you (the "CREDIT AGREEMENT"), we
submit this Borrowing Base Certificate to you and certify that the
information set forth below and on any attachments to this Certificate is
true, correct and complete as of the date of this Certificate. Any
capitalized terms used herein without definition shall have the same meanings
as such terms have in the Credit Agreement.
I. BORROWING BASE CALCULATIONS FOR PLATINUM ENTERTAINMENT, INC.
(THE "COMPANY")
A. ACCOUNTS OF COMPANY IN BORROWING BASE
1. Gross Accounts of Company _____________
IA1
2. Less:
(a) Ineligible sales _____________
(I.E., foreign
accounts unless exempted)
(b) Owed by an account _____________
debtor who is an Affiliate or Subsidiary
(c) Owed by an account _____________
debtor who is in an
insolvency or reorganization
proceeding
(d) Unpaid more than _____________
(i) 90 days past invoice date
for a Current Account or
(ii) 30 days past due date for
a Dated Account or (iii) 90 days
past relevant period for a
License Receivable
(e) Ineligible because of _____________
25% taint factor
(f) Otherwise ineligible _____________
Total Deductions _____________
(sum of lines IA2a - IA2f) IA2
3. Eligible Accounts _____________
(line A1 minus line IA2) IA3
4. Accounts in Borrowing Base _____________
(line IA3 x .85) _____________
IA4
B. FINISHED GOODS INVENTORY OF COMPANY IN
BORROWING BASE
1. Gross inventory of Finished Goods _____________
of Company IB1
2. Less:
(a) Finished goods of _____________
Company not located
at approved locations
(b) Obsolete, slow moving, _____________
not merchantable
(c) Subject to Polygram
lien _____________
(d) Otherwise ineligible _____________
Total Deductions (sum of lines IB2a - IB2d)____________
IB2
3. Eligible Inventory of Finished _____________
Goods (line IB1 minus line IB2) IB3
4. Eligible Inventory of Finished Goods _____________
included in Borrowing Base determination _____________
(line IB3 x .50) IB4
-2-
C. RAW MATERIALS INVENTORY OF COMPANY IN
BORROWING BASE
1. Gross inventory of raw materials of Company____________
IC1
2. Less:
(a) Raw materials of _____________
Company not located
at approved locations
(b) Obsolete, not _____________
merchantable
(c) Subject to Polygram
lien _____________
(d) Otherwise ineligible _____________
Total Deductions (sum of lines ____________
IC2a - IC2d) IC2
3. Eligible Inventory of raw materials ____________
(line IC1 minus line IC2) IC3
4. Eligible Inventory of raw materials ____________
included in Borrowing Base determination ____________
(line IC3 x .50) IC4
D. INVENTORY OF COMPANY IN BORROWING BASE
1. Eligible Inventory of Company in Borrowing ____________
Base (sum of Lines IB4 and IC4) ID1
II. BORROWING BASE CALCULATIONS FOR INTERSOUND, INC.
("INTERSOUND")
A. ACCOUNTS OF INTERSOUND IN BORROWING BASE
1. Gross Accounts of Intersound ____________
IIA1
2. Less:
(a) Ineligible sales _____________
(I.E., foreign accounts
unless exempted)
-3-
(b) Owed by an account _____________
debtor who is an Affiliate or Subsidiary
(c) Owed by an account _____________
debtor who is in an
insolvency or reorganization
proceeding
(d) Unpaid more than _____________
(i) 90 days past invoice date
for a Current Account or (ii) 30
days past due date for a Dated
Account or (iii) 90 days past relevant
period for a License Receivable
(e) Ineligible because of _____________
25% taint factor
(f) Otherwise ineligible _____________
Total Deductions _____________
(sum of lines IIA2a - IIA2f) IIA2
3. Eligible Accounts of Intersound _____________
(line IIA1 minus line IIA2) IIA3
4. Accounts in Borrowing Base _____________
(line IIA3 x .85) _____________
IIA4
B. FINISHED GOODS INVENTORY OF INTERSOUND IN
BORROWING BASE
1. Gross inventory of finished goods _____________
of Intersound IIB1
2. Less:
(a) Finished goods of _____________
Intersound not located
at approved locations
(b) Obsolete, slow moving, _____________
not merchantable
-4-
(c) Subject to Polygram
lien _____________
(d) Otherwise ineligible _____________
Total Deductions (sum of lines _____________
IIB2a - IIB2d) IIB2
3. Eligible Inventory of finished _____________
goods of Intersound (line II B1 IIB3
minus line II B2)
4. Eligible Inventory of finished goods of _____________
Intersound included in Borrowing Base _____________
determination (line IIB3 x .50) IIB4
C. RAW MATERIALS INVENTORY OF INTERSOUND IN
BORROWING BASE
1. Gross inventory of raw materials _____________
of Intersound IIC1
2. Less:
(a) Raw materials of _____________
Intersound not located
at approved locations
(b) Obsolete, not _____________
merchantable
(c) Otherwise ineligible _____________
(d) Subject to Polygram
lien _____________
Total Deductions (sum of lines _____________
IIC2a - IIC2d) IIC2
3. Eligible Inventory of Raw Materials of _____________
Intersound (line IIC1 minus line IIC2) IIC3
4. Eligible Inventory of raw materials of _____________
Intersound included in Borrowing Base _____________
determination (line IIC3 x .50) IIC4
-5-
D. INVENTORY OF INTERSOUND IN BORROWING BASE
1. Eligible Inventory of Intersound in _____________
Borrowing Base (sum of Lines IIB4 and IIC4) IID1
III. BORROWING BASE
1. Gross Borrowing Base
(the sum of lines IA4, ID1, IIA4 _____________
and IID1) _____________
III
2. Initial Reserves _____________
3. Additional Reserves _____________
4. Total Reserves (line III2 plus line III3) _____________
III4
5. Borrowing Base (line III1 less line III4) _____________
_____________
III
IV. REVOLVING CREDIT OUTSTANDING TO THE COMPANY AND INTERSOUND
A. Loans to the Company _____________
and Intersound
B. Letters of Credit for benefit
of the Company and Intersound _____________
Total Revolving Credit Outstanding _____________
(line IV A plus IV B) _____________
IV
V. UNUSED AVAILABILITY _____________
_____________
(line III minus line IV)
-6-
Dated as of this ___________ day of __________________, 19____.
PLATINUM ENTERTAINMENT, INC.
By________________________________
Its_______________________________
-7-
EXHIBIT D
COMPLIANCE CERTIFICATE
This Compliance Certificate is furnished to Bank of Montreal,
as Administrative Agent (the "ADMINISTRATIVE AGENT") pursuant to that certain
Credit Agreement dated as of December 12, 1997, by and between Platinum
Entertainment, Inc. (the "BORROWER"), certain of its Subsidiaries, the
Administrative Agent and the Lenders party thereto (the "CREDIT AGREEMENT").
Unless otherwise defined herein, the terms used in this Compliance
Certificate have the meanings ascribed thereto in the Credit Agreement.
THE UNDERSIGNED ON BEHALF OF THE COMPANY HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________________________ of
the Company;
2. I have reviewed the terms of the Credit Agreement and I have
made, or have caused to be made under my supervision, a detailed review of
the transactions and conditions of the Company and its Subsidiaries during
the accounting period covered by the attached financial statements;
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or the occurrence of
any event which constitutes a Default or Event of Default during or at the
end of the accounting period covered by the attached financial statements
or as of the date of this Certificate, except as set forth below;
4. The financial statements required by Section 8.5 of the Credit
Agreement and being furnished to you concurrently with this certificate
are, to the best of my knowledge, true, correct and complete as of the
dates and for the periods covered thereby; and
5. The Attachment hereto sets forth financial data and computations
evidencing the Borrower's compliance with certain covenants of the Credit
Agreement, all of which data and computations are, to the best of my
knowledge, true, complete and correct and have been made in accordance with
the relevant Sections of the Credit Agreement.
Described below are the exceptions, if any, to paragraph 3 by
listing, in detail, the nature of the condition or event, the period during
which it has existed and the action which the Borrowers have taken, are
taking, or propose to take with respect to each such condition or event:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
The foregoing certifications, together with the computations
set forth in the Attachment hereto and the financial statements delivered
with this Certificate in support hereof, are made and delivered this
_________ day of __________________ 19___.
PLATINUM ENTERTAINMENT, INC.
By
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-2-
ATTACHMENT TO COMPLIANCE CERTIFICATE
PLATINUM ENTERTAINMENT, INC.
INTERSOUND, INC.
Compliance Calculations for Credit Agreement
Dated as of December 12, 1997
Calculations as of _____________, 19___
___________________________________________________________________________
A. CONSOLIDATED NET WORTH (SECTION 8.9)
1. Consolidated Net Worth (as defined) for __________
Company and Subsidiaries
2. As listed in Section 8.9, Consolidated Net
Worth must be in an amount not less than $_________
3. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
B. LEVERAGE RATIO (SECTION 8.10)
1. Total Debt, as defined __________
2. Consolidated Net Income, as defined,
for relevant period __________
3. Amounts deducted in arriving at
Consolidated Net Income from
Line B2 in respect of
(a) Cash Interest Expense,
as defined __________
(b) Taxes imposed on or
measured by income on
excess profits __________
(c) Depreciation of fixed assets __________
(d) Amortization of intangibles __________
(e) Debt issuance costs __________
(f) K-tel reserve __________
(g) Other non-cash charges __________
4. Sum of Xxxxx 0, 0(x), (x), (x), (x),
(x), (x) and (g) ("CONSOLIDATED
EBITDA") __________
5. Ratio of Total Debt (Line 1)
to Consolidated EBITDA (Line 4)
("LEVERAGE RATIO") :1
__________
__________
6. As listed in Section 8.10 as of the
date of this Certificate, the Leverage
Ratio shall not be greater than :1
__________
__________
7. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
C. CONSOLIDATED WORKING CAPITAL (SECTION 8.11)
1. Consolidated current assets ("CURRENT ASSETS") __________
2. Consolidated current liabilities
("CURRENT LIABILITIES") __________
3. Current Maturities, as defined,
on the Notes __________
4. Current Assets (Line 1) minus
Current Liabilities (Line 2)
plus Line 3 ("CONSOLIDATED WORKING
CAPITAL") $
__________
5. As listed in Section 8.11, Consolidated
Working Capital must not be less than $1,000,000
__________
__________
6. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
D. INTEREST COVERAGE (SECTION 8.12)
1. Consolidated EBITDA for most
recent quarter (from
Line B4 above) __________
2. Cash Interest Expense for
same quarter (from Line B3a) __________
-2-
3. Ratio of Consolidated EBITDA (Line 1)
to Cash Interest Expense (Line 2)
("INTEREST COVERAGE RATIO") :1
__________
__________
4. As listed in Section 8.12, for
the date of this Certificate,
the Interest Coverage Ratio must
be in an amount not less than :1
__________
__________
5. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
E. FIXED CHARGE RATIO (SECTION 8.13)
1. Consolidated EBIDTA (from
Line D1 above) __________
2. Cash Interest Expense (from
Line D2 above __________
3. Current Maturities, (from
Line C3 above) __________
4. Capital Expenditures, as defined __________
5. Taxes on or measured by income
payable in cash __________
6. Restricted Payments, as defined __________
7. Sum of Lines 2, 3, 4, 5 and 6
("FIXED CHARGES") __________
8. Ratio of Consolidated EBITDA
(Line 1) to Fixed Charges
(Line 7) ("FIXED CHARGE
COVERAGE RATIO") :1
__________
__________
9. As of the date of this Certificate,
as listed in Section 8.13, Fixed
Charge Coverage Ratio must not
be less than :1
__________
__________
10. Company is in compliance?
(Circle yes or no) Yes/No
__________
__________
-3-
EXHIBIT E
APPROVED COLLATERAL LOCATIONS
FOR COMPANY
1. 0000 Xxxxxxxxxxx Xxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
2. 0000 Xxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
3. 0000 00xx Xxxxxx Xxxxx
Xxxxxxxxx, XX 00000
4. Federal Xxxxxx Moving & Storage
000 Xxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxx 00000
FOR INTERSOUND
(For Company as well after merger of Intersound into Company)
1. 0000 Xxxxxxxxxxx Xxxx
Xxxxxxx Xxxxx, Xxxxxxxx 00000
2. 00000 Xxxxx Xxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
3. 0000 Xxxxxx Xxxxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
4. 00 Xxxxxxxx Xxxx.
Xxxxx 000
Xxxxxxxx, XX 00000
5. 000 Xxxxxxxxxx Xxx. Xx.
Xxxxx 000 & 000
Xxxxxxxxxxx, XX 00000
6. Polygram Group Distribution, Inc.
0000 X. 000xx Xxxxxx
Xxxxxxx, XX 00000
EXHIBIT F
GUARANTY AGREEMENT
_____________, 19___
Bank of Montreal,
as Administrative Agent for the Lenders party
to the Credit Agreement referred to below
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Dear Sirs:
Reference is made to the Credit Agreement, dated as of
December 12, 1997 (the "CREDIT AGREEMENT") among Platinum Entertainment,
Inc., certain of its Subsidiaries, the Lenders named therein, Bank of
Montreal as Administrative Agent for the Lenders. Capitalized terms used and
not defined herein have the meanings assigned to them in the Credit Agreement.
The undersigned, [name of Guarantor], a [jurisdiction of
incorporation] corporation, hereby elects to be a "GUARANTOR" for all purposes
of the Credit Agreement, effective from the date hereof and the undersigned
hereby agrees to perform all the obligations of a Guarantor under, and to be
bound in all respects by the terms of, the Credit Agreement, including without
limitation Sections 2.7, 11, 13.17 and 13.18 thereof, as if the undersigned
were a direct signatory party thereto.
The undersigned confirms that (i) it is a Subsidiary of the
Company, (ii) the execution, delivery and performance by it of this Guaranty
is within its corporate powers, have been duly authorized by all necessary
corporate action, requires no action by or in respect of, or filing with, any
governmental body, agency or official and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of its
charter or by-laws or of any agreement or instrument to which the Company or
the undersigned is a party or is subject, or by which the Company or the
undersigned, or the Company's or the undersigned's property, is bound, or of
any judgment, injunction, order, decree or other instrument binding upon it
or result in the creation or imposition of any lien on any asset of the
Company or any of its Subsidiaries and (iii) the representations and
warranties set forth in Section 6 of the Credit Agreement are true and
correct as to the undersigned and its subsidiaries as of the date hereof.
This Agreement shall be construed in accordance with and
governed by the internal laws of the State of Illinois.
Very truly yours,
[NAME OF GUARANTOR]
By
-------------------------------------
Name:
----------------------------------
Title:
---------------------------------
-2-
EXHIBIT G
ASSIGNMENT AND ACCEPTANCE
Dated _____________, 19_____
Reference is made to the Credit Agreement dated as of December
12, 1997 (the "CREDIT AGREEMENT") among Platinum Entertainment, Inc.
("PLATINUM") and Intersound, Inc.("INTERSOUND"; Platinum and Intersound
collectively referred to herein as the "BORROWERS" and individually as a
"BORROWER") the Lenders (as defined in the Credit Agreement) and Bank of
Montreal, as Administrative and Syndication Agent for the Lenders (the
"AGENT"). Terms defined in the Credit Agreement are used herein with the
same meaning.
_____________________________________________________ (the
"ASSIGNOR") and _________________________ (the "ASSIGNEE") agree as follows:
1. The Assignor hereby sells and assigns to the Assignee,
and the Assignee hereby purchases and assumes from the Assignor, a _______%
interest in and to all of the Assignor's rights and obligations under the
Credit Agreement as of the Effective Date (as defined below), including,
without limitation, such percentage interest in the Assignor's Revolving
Credit Commitment as in effect on the Effective Date and the Revolving and
Term Loans, if any, owing to the Assignor on the Effective Date and the
Assignor's Percentage of any outstanding L/C Commitments, if any.
2. The Assignor (i) represents and warrants that as of the
date hereof (A) its Revolving Credit Commitment is $____________, (B) the
aggregate outstanding principal amount of Assignor's Revolving Loans under
the Credit Agreement that have not been repaid is $____________ and a
description of the interest rates and interest periods for such Revolving
Loans is attached as Schedule 1 hereto, (C) the aggregate principal amount of
Assignor's outstanding L/C Commitment is $___________, and (D) the
outstanding principal amount of Assignor's Term Loan is $__________; (ii)
represents and warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder and that such interest is free and
clear of any adverse claim, lien, or encumbrance of any kind; (iii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; and (iv) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Borrower, or any Guarantor or the performance or
observance by any Borrower, or any Guarantor of any of their respective
obligations under the Credit Agreement or any other instrument or document
furnished pursuant thereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the most recent financial
statements delivered to the Lenders
pursuant to in Sections 8.5(b) and 8.5(c) thereof and such other documents
and information as it has deemed appropriate to make its own credit analysis
and decision to enter into this Assignment and Acceptance; (ii) agrees that
it will, independently and without reliance upon the Administrative Agent,
the Assignor 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
decisions in taking or not taking action under the Credit Agreement; (iii)
appoints and authorizes the Administrative Agent to take such action as
Administrative Agent on its behalf and to exercise such powers under the
Credit Agreement as are delegated to the Administrative Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; (iv)
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender; and (v) specifies as its lending offices (and
address for notices) the offices set forth beneath its name on the signature
pages hereof.
4. As consideration for the assignment and sale contemplated
in Section 1 hereof, the Assignee shall pay to the Assignor on the date
hereof in Federal funds an amount equal to $________________*. It is
understood that commitment and/or Letter of Credit fees accrued to the date
hereof with respect to the interest assigned hereby are for the account of
the Assignor and such fees accruing from and including the date hereof are
for the account of the Assignee. Each of the Assignor and the Assignee hereby
agrees that if it receives any amount under the Credit Agreement which is for
the account of the other party hereto, it shall receive the same for the
account of such other party to the extent of such other party's interest
therein and shall promptly pay the same to such other party.
5. The effective date for this Assignment and Acceptance
shall be _____________, ______ (the "EFFECTIVE DATE"). Following the
execution of this Assignment and Acceptance, it will be delivered to the
Company for its acceptance and to the Administrative Agent for acceptance and
recording by the Administrative Agent.
6. Upon such acceptance and recording, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
7. Upon such acceptance and recording, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement
in respect of the interest assigned hereby (including, without limitation,
all payments of principal, interest and commitment fees with respect thereto)
to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement for periods prior to the
Effective Date directly between themselves.
-------------------
* Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable
in an appropriate case to specify these amounts generically or by formula
rather than as a fixed sum.
-2-
8. In accordance with Section 13.12 of the Credit Agreement,
the Assignor and the Assignee request and direct that the Administrative
Agent prepare and cause the Borrowers to execute and deliver to the Assignee
a Revolving Credit Note payable to the Assignee in the amount of its
Revolving Credit Commitment and a Term Credit Note in the amount of its share
of the Term Loan and to the Assignor a new Revolving Credit Note payable to
the Assignor in the amount of its Commitment after giving effect to the
assignment hereunder, a new Term Credit Note in the amount of its share of
the Term Loan.
9. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of Illinois.
-3-
[ASSIGNOR LENDER]
By:
-------------------------------------
Title:
[ASSIGNEE LENDER]
By:
-------------------------------------
Title:
Lending Office (and
address for notices):
LIBOR Funding Office:
Accepted and consented this
____ day of ___________, 19__
PLATINUM ENTERTAINMENT, INC.
By:
-------------------------------------
Title:
----------------------------------
Accepted and consented to by the Agent this
_______ day of ___________, 19__
[AGENT]
By
-------------------------------------
Title:
---------------------------------
-4-
SCHEDULE 6.3
SUBSIDIARIES
JURISDICTION OF INCORPORATION
OR ORGANIZATION PERCENTAGE
NAME OWNERSHIP
River North Records, Inc. Delaware 100%
CGI Records, Inc. Delaware 100%
Lexicon Music, Inc. Delaware 100%
Light Records, Inc. Delaware 100%
The Recording Experience, Inc. Delaware 100%
JustMike Music, Inc. Delaware 100%
Peg Publishing, Inc. Delaware 100%
Royce Publishing, Inc. Delaware 100%
Intersound, Inc. Delaware 100%
SCHEDULE 6.6
LITIGATION
1. XXXXXX -V- ENTERTAINMENT ARTISTS, INC. AND RIVER NORTH RECORDS, INC., Civil
Action No. 95-5258 (United States District Court, Western District of
Arkansas, Fayetteville Division).
On April 23, 1997 judgment was entered against River North Records, Inc. in
the amount of $95,182.00 in this matter. Enforcement of this judgment was
stayed by order of the court entered July 9, 1997, upon approval of River
North's appeal bond. The judgment is on appeal to the United States Court
of Appeals for the Eighth Circuit, Case No. 97-298WAF. The plaintiff's
original claims sought recovery for damages sustained on account of alleged
misrepresentations concerning the appearance of Xxxxxxx Xxxxxxx at a Xxxxx
Xxxxxx concert in Fayetteville, Arkansas. The Company believes it will be
successful on appeal or, if unsuccessful, that the matter can be
successfully compromised, with some recovery obtained from the Company's
co-defendant in a contribution action. The Company is being defended in
the appeal by Xxxxxxx Xxxxxx of Xxxxxxxx & Xxxxxx, Fayetteville, Arkansas.
2. GLAD, INC. XXX XXXXX, AND XX XXXXX -V- LIGHT RECORDS, INC. CGI RECORDS,
INC., RIVER NORTH RECORDS, INC., PLATINUM ENTERTAINMENT, INC., JUSTMIKE
MUSIC, INC., AND JOSTE PUBLISHING, Civil Action Xx. 00 X 0000 (Xxxxxxxx
Xxxxxxxx of Illinois, Eastern Division).
The plaintiffs allege breach of contract, unjust enrichment, breach of
implied covenant of good faith and fair dealing, conversion, and for
declaratory relief and an accounting. The claims essentially arise out of
recording and producing agreements with the group Glad, which the Company
has sought to terminate on the grounds that recordings by the group lack
commercial potential. The company believes most of the claims made in the
complaint are without merit and believes its overall exposure in this
matter lies in the range of $0 to $200,000. The company further believes a
successful settlement may be obtained in this matter that does not involve
significant cash payment. The Company is being defended in this action by
Katten, Muchin & Zavis, Chicago, Illinois.
3. CRT CUSTOM PRODUCTS, INC. -V- X.X.X. MUSIC, INC. AND PLATINUM
ENTERTAINMENT, INC. (Chancery Court, Xxxxxxxxxx County, Tennessee, Case
No. 24035).
The claims made by the plaintiff seek recovery from the Company of an
indebtedness incurred by X.X.X. Music, Inc. on the grounds that the Company
caused X.X.X. to fail as a business for the purpose of acquiring its assets
at foreclosure. X.X.X. has filed a cross-complaint against the Company
asserting essentially the same claims. The Company has filed a counter-
claim against CRT seeking recovery of certain artwork and film materials,
together with damages for the loss of such materials. The
Company believes the claims of CRT and X.X.X. are without merit and that
the matter will be successfully resolved without exposure. The Company is
being defended in this action by Xxxxx Xxxxxxxxx.
4. PLATINUM ENTERTAINMENT, INC. -V- XXXX XXXXXX XXXXX, XXXX XXXXXX XXXXX, AND
EMI CHRISTIAN MUSIC GROUP, INC. (Chancery Court, Davidson County,
Tennessee, Case No. 97-602-I).
The claims made by the Company seek enforcement of a distribution agreement
entered with Messrs. Xxxxx and damages for the breach of that agreement
arising out of the distribution of recordings by EMI. EMI has filed a
counter-claim against the Company seeking damages for the Company's
distribution of a recording by Messrs. Xxxxx that EMI claims it now
controls. The Company believes the matter will be settled with a cash
payment made to the Company. The Company is being represented in this
matter by Xxxxx Xxxxxxxxx.
5. XXXXX -V- XXXXX ENTERTAINMENT, INC. (Chancery Court, Davidson County,
Tennessee, Case No. 96-1326-I).
The plaintiff is seeking a recision of a songwriting agreement between him
and Xxxxx Entertainment, Inc. and for the return of his interests in all
songs previously conveyed to Xxxxx Entertainment, Inc. under the agreement,
including the song "Check Yes Or No." The assets of Xxxxx Entertainment,
Inc. were acquired in 1996 by the Company. The plaintiff has sought to
join the Company as a defendant in the lawsuit but to date has been
unsuccessful. The Company is indemnified by Xxxxx Entertainment, Inc.
under the terms of the asset purchase agreement against all costs incurred
in this matter. The Company does not believe there is any risk of recision
of the songwriting agreement. The Company is being defended by Xxxxx
Xxxxxxxxx.
6. POINT CLASSICS -V- DISKY.
Intersound has received notice of, and assisted in the defense of, a claim
in Germany against Intersound's European distributor, Disky, that three of
its classical titles do not have clear title. The claim is the result of a
breakup of the partnership which created the original masters. Management
does not believe there is any significant liability.
7. XXXXX SHUKUR -V- INTERSOUND.
Intersound has received several demand letters from the estate of Xxxxx
Xxxxxx disputing Intersound's right to market and promote the album "Stop
the Gunfight" by Xxxxx featuring Xxxxx Xxxxxx and Notorious B.I.G.
Intersound believes the claim will be settled by paying a pro rata share of
royalties to the estate of Mr. Shakur. Additionally, Intersound is fully
indemnified by Xxxx Xxxxxx aka "Xxxxx." Intersound is being represented in
this matter by Katten, Muchin & Zavis, Chicago, Illinois.
-2-
8. XXXXXXXXXXX XXXXXXX AKA "NOTORIOUS B.I.G." -V- INTERSOUND.
Intersound has received several demand letters from the estate of
Xxxxxxxxxxx Xxxxxxx aka "Notorious B.I.G." Intersound believes the claim
will be settled by paying a pro rata share of royalties to the estate of
Xx. Xxxxxxx. Additionally, Intersound is fully indemnified by Xxxx Xxxxxx
aka "Xxxxx." Intersound is being represented in this matter by Katten,
Muchin & Zavis, Chicago, Illinois.
9. XXX XXXXXXXX PACKAGING.
The Company has received correspondence from counsel for Xxxxxx Records,
Inc. d/b/a Diadem Records complaining of the use of a photograph of a
butterfly on the packaging used in connection with a recent album featuring
performances of the artist Xxx Xxxxxxxx as a member of the group The Allies
that was released and distributed by the Company through the Intersound
distribution system. The Company has replied to the effect that the
packaging is proper, but that we will change the packaging of the album in
various ways to meet their concerns. The Company has not received a
response from Diadem to date.
10. K-TEL LITIGATION.
On October 3, 1997, the Company filed suit against K-tel International,
Inc. ("K-TEL") in the United States District Court for the Northern
District of Illinois, alleging that K-tel (a) materially failed to comply
with its covenant to conduct business in the ordinary course when it
deviated from the release schedule provided to the company; (b) neglected
its business, shifted its focus to its successor business and failed to
maintain the assets of its subsidiaries; and (c) breached its
representation and warranty that there was no material adverse change in
the business and operations of its subsidiaries. In addition to the
escrowed funds, the Company is seeking a buyer's reimbursement under the
purchase and sale agreement between K-tel International, Inc. and River
North Studios, Inc. (which has since changed its name to Intersound, Inc.)
dated as of March 3, 1997 of $1,750,000. On September 12, 1997, K-tel
filed suit against the Company in the United States District Court for the
District of Minnesota, claiming that it is entitled to the escrowed funds
because it terminated the K-tel Agreement when the transaction was not
consummated within the agreed time limits, asserting that the Company
committed fraud when it represented to K-tel it had the financial ability
to complete the transaction. K-tel has also asserted a claim for
promissory estoppel on the grounds that it incurred expenses in connection
with the transaction in reliance on the Company's assurances it had the
financial ability to close the transaction. Further, K-tel seeks damages
for defamation and alleges that the Company breached a confidentiality and
non-solicitation agreement between the parties. The outcome of such claims
is uncertain. The Company intends to prosecute vigorously its action
against K-tel and defend vigorously K-tel's action.
-3-
11. INTERSOUND LITIGATION.
On November 7, 1997, JCSHO, Inc., a Minnesota corporation, formerly known
as Intersound, Inc. ("JCSHO") whose assets were purchased by the Company,
filed a complaint against the Company in the District Court of Minnesota,
Fourth Division. The case is captioned JCSHO, INC. F/K/A INTERSOUND, INC.
-V- PLATINUM ENTERTAINMENT, INC., Case No. 97-2479 MJD/AJB. JCSHO alleges
breach of contract by the Company with regard to the convertible
subordinated debentures in the aggregate principal amount of $5,000,000
(the "CONVERTIBLE SUBORDINATED DEBENTURES") issued to JCSHO under the
purchase and sale agreement. JCSHO alleges that the Company is in default
on its obligations under the Convertible Subordinated Debentures due to
failure to make certain payments under such debentures at a defined default
interest rate. JCSHO is seeking damages in the amount of $5,000,000 and
costs, disbursements and attorneys' fees. The Company believes that
JCSHO's allegations are without merit and intends to vigorously defend this
litigation.
12. On November 12, 1997, Xxxxxx Xxxxxxx, the former president of Intersound,
Inc., sued Intersound, Inc. in the Superior Court of Xxxxxx County, State
of Georgia. The case is captioned XXXXXX X. XXXXXXX -V- INTERSOUND, INC.,
Case No. E-64885. Xxxxxxx alleges that he was wrongfully terminated from
his employment as president of Intersound, Inc. and seeks damages and
attorneys' fees. The Company intends to defend this suit on the grounds
that Xxxxxxx was terminated for cause and that no additional compensation
is owed to him.
-4-
SCHEDULE 6.7
AFFILIATE TRANSACTIONS
1. The transactions contemplated by the Investment Agreement,
including, without limitation, (i) the issuance and sale by the Company of
the Series B Preferred Stock, the Affiliate Preferred Stock, the Purchaser
Warrants and the Affiliate Warrants, (ii) the rights and privileges granted
to the Purchasers pursuant to the Investment Agreement in connection with
their purchase of Series B Preferred Stock and Purchaser Warrants, (iii) the
rights and privileges granted to the holders of the Series B Preferred Stock,
the Affiliate Preferred Stock, the Purchaser Warrants and the Affiliate
Warrants in accordance with the terms of such securities, (iv) the Consulting
Agreements to be entered into between SK-Palladin Partners, LP and the
Company and between MAC Music LLC and the Company (substantially in the form
of Exhibit D to the Investment Agreement) and any fees payable thereunder to
the Purchasers and their respective Affiliates, (v) the side letter agreement
between MAC Music LLC and the Company relating to certain foreign licensing
rights (substantially in the form of Exhibit E to the Investment Agreement)
and (vi) the transaction fees and expenses to be paid to the Purchasers and
their respective Affiliates by the Company pursuant to Section 2.3 of the
Investment Agreement.
2. The employment agreement between Xxxxxx Xxxxxx and the Company,
dated as of June 1, 1997, as amended.
3. The employment agreement between Xxxxxxx Xxxx and the Company,
dated as of June 1, 1997, as amended.
4. The employment agreement between Xxxxxx Xxxxxxx and the Company,
dated as of June 1, 1997, as amended.
5. Outstanding stock options, whether or not vested, granted to any
current or former officers or directors of the Company, including, without
limitation, stock options granted to Xxxxxx Xxxxxx, Xxxxxxx Xxxx or Xxxxxx
Xxxxxxx.
6. The House of Blues Venture.
SCHEDULE 8.7
PERMITTED LIENS
None
SCHEDULE 8.8
EXISTING INDEBTEDNESS
1. $910,000 plus accrued interest payable to Xxxxxx Xxxxxx pursuant to a loan
made by Xx. Xxxxxx to Platinum Entertainment, Inc.
2. $900,000 plus accrued interest payable to Xxxxxxx Xxxxx pursuant to a loan
made by Xx. Xxxxx to Platinum Entertainment, Inc.
3. Capitalized Leases:
Harmony/Counterpoint Systems (royalty software) $ 3,050.66
Xxxx Commercial Credit (computer hardware) $ 2,258.54
Steelcase Financial $ 1,202.42
Bellsouth $ 7,311.68
GE Capital $ 55.63
----------
$13,878.93
