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AMENDED AND RESTATED CREDIT AGREEMENT
by and among
PLATINUM ENTERTAINMENT, INC.
and
BANK OF MONTREAL,
individually and as Agent
and
the Banks
which are or may become parties hereto
Dated as of January 31, 1997
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TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
SECTION 1. DEFINITIONS; INTERPRETATION OF AGREEMENT........................1
Section 1.1. Definitions...........................................1
Section 1.2. Accounting Terms.....................................11
SECTION 2. THE CREDIT FACILITIES..........................................12
Section 2.1. The Revolving Credit.................................12
Section 2.2. The Term Credit......................................12
Section 2.3. Manner of Borrowing..................................13
SECTION 3. INTEREST.......................................................14
Section 3.1. Options..............................................14
Section 3.2. Base Rate Portion....................................14
Section 3.3. LIBOR Portions.......................................14
Section 3.4. Late Charge..........................................15
Section 3.5. Computation..........................................15
Section 3.6. Minimum Amounts......................................15
Section 3.7. Manner of Rate Selection.............................15
Section 3.8. Funding Indemnity....................................15
Section 3.9. Change of Law........................................16
Section 3.10. Unavailability of Deposits or Inability to
Ascertain, or Inadequacy of, LIBOR Rate..............17
Section 3.11. Increased Cost and Reduced Return....................17
Section 3.12. Lending Offices......................................18
Section 3.13. Discretion of Banks as to Manner of Funding..........18
SECTION 4. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND NOTATIONS.........18
Section 4.1. Commitment Fee.......................................18
Section 4.2. Closing Fees.........................................18
Section 4.3. Voluntary Prepayments................................18
Section 4.4. Mandatory Prepayments................................19
Section 4.5. Terminations.........................................20
Section 4.6. Place and Application................................20
Section 4.7. Notations and Requests...............................21
Section 4.8. Capital Adequacy.....................................21
Section 4.9. Withholding Taxes....................................22
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SECTION 5. THE COLLATERAL AND GUARANTIES..................................23
Section 5.1. The Collateral.......................................23
Section 5.2. Further Assurances...................................24
Section 5.3. Subsidiary Guaranties................................25
Section 5.4. Xxxxxx Guaranty......................................25
Section 5.5. Collateral Assignment of Life Insurance..............25
Section 5.6. Polygram Collections.................................25
SECTION 6. REPRESENTATIONS AND WARRANTIES.................................25
Section 6.1. Organization and Power...............................25
Section 6.2. Capitalization of Company............................26
Section 6.3. Subsidiaries.........................................27
Section 6.4. Use of Proceeds; Regulation U........................27
Section 6.5. Financial Statements.................................27
Section 6.6. Litigation and Taxes.................................28
Section 6.7. Burdensome Contracts with Affiliates.................29
Section 6.8. ERISA................................................29
Section 6.9. Full Disclosure......................................29
Section 6.10. Compliance with Law..................................29
Section 6.11. Intersound Acquisition...............................30
Section 6.12. Necessary Assets and Contracts.......................30
Section 6.13. Solvency, etc........................................30
SECTION 7. CONDITIONS PRECEDENT...........................................31
Section 7.1. All Advances.........................................31
Section 7.2. Initial Advance......................................31
Section 7.3. Legal Matters........................................34
Section 7.4. Initial Borrowing....................................35
Section 7.5. Post Closing Requirements............................35
SECTION 8. COVENANTS......................................................36
Section 8.1. Maintenance of Business..............................36
Section 8.2. Maintenance..........................................36
Section 8.3. Taxes................................................36
Section 8.4. Insurance............................................36
Section 8.5. Financial Reports....................................36
Section 8.6. Compliance with Laws.................................37
Section 8.7. Nature of Business...................................38
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Section 8.8. Liens................................................38
Section 8.9. Indebtedness.........................................39
Section 8.10. Consolidated Net Tangible Worth......................40
Section 8.11. EBITDA...............................................40
Section 8.12. Expenditures.........................................40
Section 8.13. Acquisitions, Investments, Loans, Advances and
Subsidiary Guaranties................................40
Section 8.14. Dividends and Certain Other Restricted Payments......42
Section 8.15. Mergers..............................................42
Section 8.16. Sale of Assets.......................................42
Section 8.17. Sales and Leasebacks.................................42
Section 8.18. Operating Leases.....................................42
Section 8.19. Burdensome Contracts with Affiliates.................43
Section 8.20. No Change in Fiscal Year.............................43
Section 8.21. Formation of Subsidiaries............................43
Section 8.22. Maintenance of Subsidiaries..........................43
Section 8.23. Subordinated Debt....................................43
Section 8.24. No Restriction on Subsidiary Dividends...............44
Section 8.25. Double Negative Pledge...............................44
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.................................44
SECTION 10. THE AGENT......................................................47
Section 10.1. Appointment and Authorization........................47
Section 10.2. Rights as a Bank.....................................47
Section 10.3. Standard of Care.....................................47
Section 10.4. Costs and Expenses...................................48
Section 10.5. Indemnity............................................49
SECTION 11. THE SUBSIDIARY GUARANTEE.......................................49
Section 11.1. The Subsidiary Guarantee.............................49
Section 11.2. Subsidiary Guarantee Unconditional...................49
Section 11.3. Discharge Only Upon Payment in Full; Reinstatement
in Certain Circumstances.............................50
Section 11.4. Waivers..............................................50
Section 11.5. Limit on Recovery....................................51
Section 11.6. Stay of Acceleration.................................51
Section 11.7. Benefit to Subsidiary Guarantors.....................51
SECTION 12. MISCELLANEOUS..................................................51
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Section 12.1. Waiver of Rights.....................................51
Section 12.2. Non-Business Day.....................................51
Section 12.3. Documentary Taxes....................................52
Section 12.4. Survival of Representations..........................52
Section 12.5. Set-off Sharing......................................52
Section 12.6. Notices..............................................52
Section 12.7. Counterparts.........................................52
Section 12.8. Successors and Assigns...............................53
Section 12.9. Participants.........................................53
Section 12.10. Costs and Expenses...................................53
Section 12.11. Construction.........................................54
Section 12.12. Assignment Agreements................................54
Section 12.13. Waivers, Modifications and Amendments................55
Section 12.14. Entire Agreement.....................................55
Section 12.15. Headings.............................................56
Section 12.16. Confidentiality......................................56
Section 12.17. Exclusive Jurisdiction...............................56
Section 12.18. Waiver of Jury Trial.................................57
Section 12.19. Governing Law........................................57
Exhibit A -- Commitments
Exhibit B -- Revolving Credit Note
Exhibit C -- Term Credit Note
Exhibit D -- Approved Projections
Exhibit E -- Subsidiary Guarantee Agreement
Schedule 6.3 - Subsidiaries
Schedule 6.5 - Existing Bank Debt
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AMENDED AND RESTATED CREDIT AGREEMENT
To each of
the Banks which are or
may become parties to
this Agreement
Gentlemen:
The undersigned, Platinum Entertainment, Inc., a Delaware corporation (the
"Company"), applies to you for your several commitments, subject to all of the
terms and conditions hereof and on the basis of the representations and
warranties hereinafter set forth, to extend credit to the Company, all as more
fully hereinafter set forth.
Section 1.1. Definitions. The following terms when used herein
shall have the following meanings, such terms to be equally applicable to both
the singular and the plural of the terms defined:
"Adjusted LIBOR Rate" shall mean a rate per annum determined in accordance
with the following formula:
Adjusted LIBOR Rate = LIBOR
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100% - Eurodollar Reserve Percentage
"LIBOR" shall mean, with respect to an Interest Period, the rate of
interest per annum determined by the Agent (rounded upwards, if necessary,
to the nearest 1/100 of 1%) at which deposits of United States Dollars in
immediately available and freely transferable funds are offered to the
Agent at 10:00 a.m. (Chicago time) two Business Days prior to the
commencement of such Interest Period by major banks in the London interbank
market upon request by the Agent for a period equal to such Interest Period
and in an amount equal to the Agent's share of the LIBOR Portion scheduled
to be outstanding during such Interest Period.
"Eurodollar Reserve Percentage" shall mean, for any day during an
Interest Period, the rate at which reserves (including, without limitation,
any supplemental, marginal and emergency reserves) are imposed on such day
by the Board of Governors of the Federal Reserve System (or any successor)
on "Eurocurrency liabilities", as defined in such Board's Regulation D (or
in respect of any other category of liabilities that includes deposits by
reference to which the interest rate on LIBOR Portions is determined on any
category of extension of credit or other assets that includes loans by
non-United States offices of any bank to United States residents), subject
to any amendments of such reserve requirement by such Board or its
successor, taking into account any transitional adjustments thereto. For
purposes of this definition, the LIBOR Portions shall be deemed to be
eurocurrency liabilities as defined in Regulation D without benefit or
credit for any prorations, exemptions or offsets under Regulation D. The
Adjusted LIBOR Rate shall automatically be adjusted as of the date of any
change in the Eurodollar Reserve Percentage.
"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 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.
"Agent" shall mean Bank of Montreal and its successors as Agent hereunder.
"Agreement" shall mean this Credit Agreement, as the same may be amended,
modified or restated from time to time in accordance with the terms hereof.
"Approved Projections" means the financial projections for the Company
attached hereto as Exhibit D.
"Assignment Agreement" shall have the meaning set forth in Section 12.12
hereof.
"Authorized Representative" means those persons shown on the list of
officers provided by the Company pursuant to Section 7.2(a)(ii) hereof or on any
update of any such list provided by the Company to the 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 Agent.
"Banks" shall mean the parties signing this Agreement as Banks and all
other lenders becoming parties hereto pursuant to Section 12.12 hereof.
"Base Rate" shall mean for any day the greater of:
(i) the rate of interest publicly announced by Bank of Montreal
from time to time as its prime commercial rate for United States dollar
loans made in the United States (it being understood that such rate may not
be Bank of Montreal's best or lowest rate), with any change in the Base
Rate resulting from a change in said prime commercial rate to be effective
as of the date of the relevant change in said prime commercial rate; and
(ii) the sum of (x) the rates quoted to the Agent as the
prevailing rates per annum (rounded upward, if necessary, to the next
higher 1/100 of 1%) bid at approximately 10:00 a.m. (Chicago time) (or as
soon thereafter as is practicable) on such day by two or more New York
Federal funds dealers of recognized standing selected by the Agent for the
purchase at face value of Federal funds in the secondary market in an
amount comparable to the principal amount owed to the Agent for which such
rate is being determined, or, if such rates are not quoted to the Agent,
the rate for that day 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 plus (y) 3/8
of 1%, provided that this clause (ii) shall be inapplicable to any Loan
which is outstanding for 15 days or more (for the foregoing purpose
repayments of Loans shall be deemed applied to outstanding Loans in the
same order in which they were made).
"Base Rate Portion" is defined in Section 3.1 hereof.
"Borrowing" shall mean the total of Loans of a single type made by all the
Banks on a single date and, if such Loans are to be part of a LIBOR Portion, for
a single Interest Period.
"Business Day" shall mean any day other than a Saturday or Sunday on which
banks are open for business in Chicago, Illinois and, when used with reference
to LIBOR Portions, a day on which banks are also open for business and dealing
in United States Dollar deposits in London, England.
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"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.
"Capitalized Lease" shall mean any lease or other agreement in the use or
possession of real or personal property the obligation for Rentals with respect
to which is required to be capitalized on a balance sheet of the lessee in
accordance with GAAP.
"Capitalized Rentals" shall mean as of the date of any determination the
amount at which the aggregate Rentals due and to become due under Capitalized
Leases under which the Company or any Subsidiary is a lessee will be reflected
as a liability on a consolidated balance sheet of the Company and its
Subsidiaries prepared in accordance with GAAP.
"Change of Control/Management Event" means the occurrence of any of the
following circumstances:
(a) any Person or two or more Persons 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
the Company (or other Securities convertible into such Securities)
representing 25% or more of the combined voting power of all Securities of
the Company entitled to vote in the election of directors; 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 the Company 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; or
(c) at any time Xxxxxx or Xxxxxx Xxxxxxx ("Xxxxxxx") or Xxxxxxx X.
Xxxx ("Xxxx") shall no longer, by reason of death, resignation, removal,
failure to be elected, incapacity or for any other reason, be actively
connected with the Company (but River North instead of the Company in the
case of Xxxxxxx) as officers having substantially the same powers and
duties as those exercised by said Xxxxxx, Xxxxxxx and Xxxx, respectively,
as of the date of this Agreement (or some other capacity or position
approved by the Agent and Required Banks).
"Class of Notes" shall mean the Revolving Credit Notes (taken as a group)
and the Term Credit Notes (taken as a group).
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Collateral" shall mean all properties, rights, interests and privileges
from time to time subject to the liens and security interests granted to the
Agent for the benefit of the Banks by the Collateral Documents.
"Collateral Documents" shall mean all security agreements, pledge
agreements, financing statements and other documents as shall from time to time
secure the Notes and the other Obligations.
"Commitments" shall mean the Revolving Credit Commitments and the Term
Credit Commitments.
"Company" is defined in the introductory paragraph of this Agreement.
"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; provided,
however, that
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Consolidated Tangible Net Worth shall be determined without regard to any impact
on retained earnings under GAAP as a direct result of (i) the Company's issuance
of the Warrants and (ii) debt issuance costs incurred by the Company in
connection with the Loan Documents and the Warrants.
"Consolidated Tangible Net Worth" shall mean, as of any date,
(x) consolidated net worth as computed in accordance with GAAP for the Company
and its Subsidiaries on a consolidated basis less (y) all assets of the Company
and its Subsidiaries on a consolidated basis which would be classified as
intangible assets under GAAP.
"Default" shall mean any event or condition the occurrence of which would,
with the lapse 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.
"Xxxxxx Guaranty" the Guaranty dated as of even date herewith being
executed and delivered by Xxxxxx substantially concurrent with the execution
hereof.
"EBITDA" shall mean, with reference to any period, Consolidated Net Income
for such period plus all amounts deducted in arriving at such Consolidated Net
Income in respect of (i) Interest Expense, (ii) taxes imposed on or measured by
income or excess profits, (iii) all charges for depreciation of fixed assets and
amortization of intangibles and (iv) debt issuance costs in connection with the
Loan Documents and Warrants, all determined in accordance with GAAP.
"Event of Default" shall mean any of the events specified in Section 9.1
hereof.
"Existing Bank Debt" means the indebtedness described on Exhibit D hereto.
"Federal Funds Rate" means the fluctuating interest rate per annum
described in part (x) of clause (ii) of the definition of Base Rate.
"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.
"Guarantor" means (i) the Subsidiary Guarantors and (ii) until release of
the Xxxxxx Guaranty in accordance with its terms, Xxxxxx.
"Guaranty" means the Subsidiary Guarantees and the Xxxxxx Guaranty.
"Hedging Liability" shall mean liabilities of the Company to the Banks or
any of them or to any of their Affiliates arising in connection with any
interest rate swaps, caps or other interest rate hedging arrangements entered
into by the Company or any Subsidiary with any Bank or any Affiliate of any
Bank.
"House of Blues Venture" means that certain joint venture of the Company
with subsidiaries of HOB Entertainment, Inc. under two joint venture agreement,
dated April 28, 1994 and August 26, 1996, respectively.
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"Indebtedness" shall mean and include (but without duplication) all
obligations of the Person in question of the following types, determined in
accordance with GAAP: (i) obligations (whether recourse or nonrecourse) for
borrowed money or for the deferred purchase price of, or which have been
incurred in connection with the acquisition of, property or assets other than
current accounts payable, (ii) obligations secured by any lien or other charge
upon property or assets owned by the Person in question, even though such Person
has not assumed or become liable for the payment of such obligations,
(iii) obligations payable over a period in excess of one year to purchase any
property or to obtain the services of another Person if the contract requires
that payment for such property or services be made regardless of whether such
property is delivered or such services are performed, (iv) Long-term Rentals of
such Person, (v) Capitalized Rentals of such Person, (vi) obligations in respect
of letters of credit, (vii) all liabilities referred to in clauses (i), (ii),
(iii), (iv), (v), (vi) and (vii) above which are directly or indirectly
guaranteed by of such Person, or as to which it has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss.
"Initial Collateral Documents" means the Security Agreement, the Stock
Pledge Agreement and the Security Agreement Re: Intellectual Property.
"Interest Expense" shall mean, with reference to any period, all interest
charges (including amortization of debt discount and expense and imputed
interest on Capitalized Leases) accrued for such period, whether or not paid,
all as computed on a consolidated basis for the Company and its Subsidiaries in
accordance with GAAP.
"Interest Period" shall mean with respect to any LIBOR Portion:
(a) initially, the period commencing on, as the case may be, the
creation or conversion date with respect to such LIBOR Portion and ending
one, two or three months thereafter as selected by the Company in its
notice as provided for herein; and
(b) thereafter, each period commencing on the last day of the next
preceding Interest Period applicable to such LIBOR Portion and ending one,
two or three months thereafter as selected by the Company in its notice as
provided for herein;
provided, however, 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 the result of such extension would be to
carry such Interest Period into another calendar month in which event such
Interest Period shall end on the immediately preceding Business Day;
(ii) no Interest Period may extend beyond the final maturity date
of the applicable 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 the Company 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" means Intersound, Inc., a Minnesota corporation.
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"Intersound Acquisition" shall mean the acquisition by River North of
substantially all of the assets of Intersound and the consummation of all other
transactions contemplated by the Intersound Purchase Agreement (whether or not
such transactions are to be engaged in with Intersound or others).
"Intersound Purchase Agreement" shall mean the Asset Purchase Agreement
dated as of November 13, 1996 by and between River North and Intersound, as
amended by the First Amendment to Asset Purchase Agreement dated January 31,
1997, in the form heretofore delivered to the Agent and as the same may from
time to time be amended or modified as and to the extent permitted hereby. All
references herein to the Intersound Purchase Agreement shall be deemed to
include references to all exhibits and schedules thereto including all forms of
agreements attached thereto.
"Intersound Sub Debt" means the $5,000,000 in aggregate original principal
amount of Subordinated Debt of the Company to Intersound to be evidenced by a
convertible note in the form heretofore delivered to the Agent and representing
the deferred portion of the purchase price owing by the Company to Intersound
for the Intersound Acquisition.
"LIBOR Portion" is defined in Section 3.1 hereof.
"Life Insurance Assignment" is defined in Sections 5.5 hereof.
"Loan Documents" shall mean this Agreement, the Notes, the Guaranties, the
Collateral Documents, the Warrants and each of the other instruments and
documents to be delivered hereunder or thereunder or otherwise in connection
therewith.
"Loans" shall mean the Revolving Credit Loans and the Term Credit Loans.
"Long-Term Rentals" shall mean and include Rentals under a lease of real or
personal property having an initial term (exclusive of renewal terms which are
at the option of the lessee) in excess of twelve months.
"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 or 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
Agent or of the Banks thereunder.
"Notes" shall mean the Revolving Credit Notes and Term Credit Notes.
"Obligations" means all obligations of the Company to pay principal or
interest on Loans, all fees payable hereunder, and all other payment obligations
of the Company arising under or in relation to any Loan Document.
"Permitted Liens" is defined in Section 8.8 hereof.
-6-
"Person" shall mean any individual, trust, partnership, firm, corporation,
limited liability company, association, unincorporated organization or any other
entity or organization, including a government or agency or political
subdivision thereof.
"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.
"Polygram Lien" is defined in Section 5.1 hereof.
"Portion" is defined in Section 3.1 hereof.
"Proforma EBITDA" shall mean, with reference to any period, EBITDA for such
period determined on a proforma basis for the Company and its Subsidiaries as if
the Intersound Acquisition had occurred at the commencement of such period.
"Purchase Money Liens" is defined in Section 8.8(c) hereof.
"Rentals" shall mean and include all fixed rents (including as such all
payments which the lessee is obligated to make to the lessor on termination of
the lease or surrender of the property) payable by the Company or any
Subsidiary, as lessee or sublessee under a lease of real or personal property,
but shall be exclusive of any amounts required to be paid by the Company or any
Subsidiary (whether or not designated as rents or additional rents) on account
of maintenance, repairs, insurance, taxes and similar charges, all computed for
the Company and its Subsidiaries on a consolidated basis. For purposes of any
prospective calculations, fixed rents under any so-called "percentage leases"
shall be computed solely on the basis of the minimum rents, if any, required to
be paid by the lessee regardless of sales volume or gross revenues.
"Required Banks" shall mean Banks holding 66-2/3% or more of the
outstanding principal amount of the Loans, or, if no Loans are outstanding,
Banks holding 66-2/3% or more of the Revolving Credit Commitments.
"Revolving Credit Commitments" is defined in Section 2.1(a).
"Revolving Credit Loans" is defined in Section 2.1(b).
"Revolving Credit Notes" is defined in Section 2.1(b).
"Revolving Credit Termination Date" shall mean May 1, 1997, or such earlier
date on which the Commitments are terminated in whole pursuant to Section 4.5 or
Section 9 hereof.
"River North" means River North Studios, Inc., a Delaware corporation and a
Wholly-Owned Subsidiary of the Company.
"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.
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"SG&A Expenditures" means for any period, salary, general and
administrative expense during such period of the Company and its Subsidiaries on
a consolidated basis in accordance with GAAP.
"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 Debt" means any Indebtedness which is subordinated in right
of payment to the prior payment of the Obligations pursuant to subordination
provisions approved in writing by the Agent and Required Banks, pursuant to
documentation, containing definitions, 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 Agent and Required Banks in their discretion.
The term "subsidiary" shall mean, as to any particular parent corporation,
any other corporation at least 51% 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 the Company, a subsidiary of, respectively, the Company.
"Subsidiary Guarantor" means each Subsidiary of the Company that is a
signatory hereto or that executes and delivers to the Agent a Subsidiary
Guaranty in the form of Exhibit E hereto along with the accompanying closing
documents required by Section 8.21 hereof.
"Subsidiary Guaranty" means a letter to the Agent in the form of Exhibit E
hereto executed by a Subsidiary whereby it acknowledges it is party hereto as a
Subsidiary Guarantor under Section 11.1 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
Required Banks.
"Take-Out Securities" means the convertible debt securities that the
Company currently contemplates will be issued via a private placement, to
finance, among other things, the repayment of the Term Loans.
"Term Credit Commitments" is defined in Section 2.2.
"Term Credit Loans" is defined in Section 2.2.
"Term Credit Maturity Date" means the earlier of (i) May 1, 1997, (ii)
ninety days from and including the date on which the Term Credit Loans are made
or (iii) such earlier date on which the Commitments are terminated in whole
pursuant to Section 4.5 or Section 9 hereof.
"Term Credit Notes" as defined in Section 2.2.
"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).
"Warrants" means warrants to purchase the Voting Stock of the Company
issued to Bank of Montreal for its own account on or prior to the date of the
initial Borrowing hereunder.
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"Wholly-Owned Subsidiary" shall mean a Subsidiary of which all of the
issued and outstanding Voting Stock (other than directors' qualifying shares as
required by law) or other equity interests are owned by the Company and/or one
or more Wholly-Owned Subsidiaries within the meaning of this definition.
Capitalized terms defined in the provisions of this Agreement shall have
the meanings so ascribed to them in all provisions of this Agreement.
Section 1.2. 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 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 Agent and the Banks 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 Company, the Agent and the
Required Banks, (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; provided, however, that the use
of purchase accounting principles to account for the Intersound Acquisition
shall not constitute an Accounting Change.
SECTION 2. THE CREDIT FACILITIES.
Section 2.1. The Revolving Credit.
(a) General Terms. Subject to all of the terms and conditions hereof, the
Banks agree to extend a Revolving Credit to the Company which may be availed of
by the Company in the form of Revolving Credit Loans from time to time, be
repaid and used again, during the period from the date hereof to and including
the Revolving Credit Termination Date, all as more fully hereinafter set forth,
provided that the aggregate amount of Revolving Credit Loans outstanding at any
one time shall not exceed the Revolving Credit Commitments. The maximum amount
of the Revolving Credit which each Bank agrees to extend hereunder shall be as
set forth under the heading "Revolving Credit Commitment" opposite its name on
Exhibit A attached hereto and made a part hereof (as the same shall be deemed
amended after giving effect to the Assignment Agreements referred to in
Section 12.12 hereof and as the same is reduced from time to time pursuant
hereto (its "Revolving Credit Commitment"). The obligations of the Banks
hereunder are several and not joint and no Bank shall under any circumstance be
obligated to extend credit under the Revolving Credit in excess of its Revolving
Credit Commitment or its pro rata share of the credit outstanding thereunder.
(b) Revolving Credit Loans. Subject to all of the terms and conditions
hereof, the Revolving Credit may be availed of by the Company in the form of
loans (individually a "Revolving Credit Loan" and collectively the "Revolving
Credit Loans"). Each Borrowing of Revolving Credit Loans shall be in a minimum
amount of $100,000 and thereafter in integral multiples of $100,000 (with LIBOR
Portions being in a minimum amount of $1,000,000 and thereafter in integral
multiples of $100,000) and shall be made pro rata from the Banks in accordance
with the amounts of their Revolving Credit Commitments. All Revolving Credit
Loans made by each Bank shall be made against and evidenced by a Revolving
Credit Note (individually a "Revolving Credit Note" and collectively the
"Revolving Credit Notes") in the form (with appropriate insertions) annexed
hereto as Exhibit B. Each Revolving Credit Note shall be in the amount of the
Revolving Credit Commitment of the Bank to which it is payable and shall mature
on the Revolving Credit Termination Date.
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Section 2.2. The Term Credit. Subject to all of the terms and
conditions hereof each Bank agrees to make a loan to the Company (individually a
"Term Credit Loan" and collectively the "Term Credit Loans") in the amount set
forth opposite its name under the heading "Term Credit Commitment" on Exhibit A
attached hereto and made a part hereof (as the same shall be deemed amended
after giving effect to the assignment agreements referred to in Section 12.12
hereof) (its "Term Credit Commitment"). There shall be a single Borrowing of
the Term Credit Loans and the obligations of the Bank to make the Term Credit
Loans shall expire on February 15, 1997 unless sooner terminated as herein
provided. The obligations of the Banks hereunder are several and not joint and
no Bank shall under any circumstance be obligated to extend credit under the
Term Credit in excess of its Term Credit Commitment or its pro rata share of the
Borrowing under the Term Credit. The Term Credit Loan made by each Bank to the
Company shall be evidenced by a Term Credit Note (individually "Term Credit
Note" and collectively the "Term Credit Notes") in the form (with appropriate
insertions) annexed hereto as Exhibit C. Unless required to be sooner paid, the
Company promises to pay the Term Credit Loans in a single installment due on the
Term Credit Maturity Date. Each Bank shall be entitled to receive its pro rata
share (based on the relationship which its Term Credit Commitment bears to the
Term Credit Commitments of all Banks) of such installment payment.
Section 2.3. Manner of Borrowing. The Company shall give written or
telephonic notice to the 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) on the date the Company requests that any
Borrowing of Loans be made to it under the Commitments, and the Agent shall
promptly notify each Bank of the Agent's receipt of each such notice. Each such
notice shall specify the date of the Borrowing of Loans requested (which must be
a Business Day, and which date shall be at least three (3) Business Days
subsequent to the date of such notice in the case of any Borrowing of Loans
constituting a LIBOR Portion) and the amount of such Borrowing. Each Borrowing
of Loans shall initially constitute part of the applicable Base Rate Portion
except to the extent the Company has otherwise timely elected that such
Borrowing constitute part of a LIBOR Portion as provided in Section 3 hereof.
The Company agrees that the Agent may rely upon any written or telephonic notice
given by any person the Agent 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 Agent and the Banks have acted in reliance
thereon. Not later than 1:00 p.m. (Chicago time) on the date specified for any
Borrowing of Loans to be made hereunder, each Bank shall make the proceeds of
its Loan comprising part of such Borrowing available to the 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 Company at the
principal office of the Agent in Chicago, Illinois, in immediately available
funds, upon receipt by the Agent from each Bank of its pro rata share of such
Borrowing. Unless the Agent shall have been notified by a Bank prior to
1:00 (Chicago time) on the date a Borrowing is to be made hereunder that such
Bank does not intend to make its pro rata share of such Borrowing available to
the Agent, the Agent may assume that such Bank has made such share available to
the Agent on such date and the Agent may (but shall not be obligated to) in
reliance upon such assumption make available to the Company a corresponding
amount. If such corresponding amount is not in fact made available to the Agent
by such Bank and the Agent has made such amount available to the Company, the
Agent shall be entitled to receive such amount from such Bank forthwith upon its
demand, together with interest thereon in respect of each day during the period
commencing on the date such amount was made available to the Company and ending
on but excluding the date the Agent recovers such amount at a rate per annum
equal to (x) from the date the related payment was due to the Agent to the date
two (2) Business Days after the date such payment was due, the Federal Funds
Rate for such day (or in the case of a day which is not a Business Day, then for
the preceding day) and (y) thereafter until payment of such amount is received
by the Agent from such Bank, the Base Rate as from time to time in effect.
SECTION 3. INTEREST.
Section 3.1. Options. Subject to all of the terms and conditions of
this Section 3, portions of the principal indebtedness evidenced by each Class
of Notes (all of the indebtedness evidenced by each Class of Notes bearing
interest at the same rate for the same period of time being hereinafter referred
to as a "Portion") shall, at the option of the Company, bear interest with
reference to the Base Rate (the "Base Rate Portion") or with reference to the
Adjusted LIBOR Rate ("LIBOR Portions"), and Portions shall be convertible from
time to time from one basis to the other. All of the indebtedness evidenced by
each Class of Notes which is not part of a LIBOR Portion shall constitute a
single Base Rate Portion. All of the indebtedness evidenced by each Class of
Notes which bears interest with reference to a particular Adjusted LIBOR Rate
for a particular Interest Period shall constitute a single LIBOR Portion.
Anything contained herein to the contrary notwithstanding, there shall not be
more than five
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(5) LIBOR Portions outstanding at any one time and each Bank shall have a
ratable interest in each Portion based on its applicable Commitment. The
Company promises to pay interest on each Portion at the rates and times
specified in this Section 3.
Section 3.2. Base Rate Portion. Each Base Rate Portion shall bear
interest (which the Company promises to pay at the times herein provided) at the
rate per annum determined by adding 6% to the Base Rate as in effect from time
to time, provided that if a Base Rate Portion or any part thereof is not paid
when due (whether by lapse of time, acceleration or otherwise) such Portion
shall bear interest, whether before or after judgment, until payment in full
thereof at the rate per annum determined by adding 3% to the interest rate which
would otherwise be applicable thereto from time to time. Interest on the Base
Rate Portions shall be payable monthly in arrears on the first day of each month
(commencing on March 1, 1997) and at maturity of the applicable Notes, and
interest after maturity shall be due and payable upon demand.
Section 3.3. LIBOR Portions. Each LIBOR Portion shall bear interest
(which the Company promises to pay at the times herein provided) for each
Interest Period selected therefor at a rate per annum equal to the sum of 6%
plus the Adjusted LIBOR Rate for such Interest Period, provided that if a LIBOR
Portion or any part thereof is not paid when due (whether by lapse of time,
acceleration or otherwise) such Portion shall bear interest, whether before or
after judgment, until payment in full thereof at the rate per annum determined
by adding 3% to the greater of the (i) the sum of 6% plus the Base Rate as from
time to time in effect or (ii) the interest rate which would otherwise be
applicable to such LIBOR Portion. Interest on each LIBOR Portion shall be due
and payable on the last day of each Interest Period applicable thereto and, if
an Interest Period is longer than one (1) month, then at the same day of each
month following the commencement of such Interest Period and at the end of such
Interest Period, and interest after maturity shall be due and payable upon
demand. The Company shall give written or telephonic notice to the Agent (which
notice shall be irrevocable once given and, if given by telephone, shall be
promptly confirmed in writing) 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 Agent of the new Interest Period selected
therefor, and in the event the Company shall fail to so notify the Agent, such
LIBOR Portion shall automatically be converted into and added to the Base Rate
Portion as of and on the last day of such Interest Period. The Agent shall
promptly notify each Bank of each notice received from the Company pursuant to
the foregoing provisions. Anything contained herein to the contrary
notwithstanding, the obligation of the Banks to create or continue any LIBOR
Portion or to convert any part of the Base Rate Portion into a LIBOR Portion
shall be conditioned upon the fact that at the time no Default or Event of
Default shall have occurred and be continuing.
Section 3.4. Late Charge. Any principal not paid when due (without
giving effect to any grace period applicable thereto) shall bear late charges.
Such late charges shall be due and payable on demand. The initial late charge
shall be equal to 1% of such overdue principal as of the date such principal
became due. Such overdue principal shall bear an additional late charge each
month until paid equal to 1% of the overdue principal outstanding on the same
day of the first and second calendar months after the date of such default (if
any such principal is overdue on such date) and 2% of such overdue principal
outstanding (if any) on the same day of each and every month thereafter.
Section 3.5. Computation. Any interest on the Notes and all fees,
charges and commissions due hereunder shall be computed on the basis of a year
of 360 days for the actual number of days elapsed, except that interest on the
Base Rate Portions 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.
Section 3.6. Minimum Amounts. Each LIBOR Portion shall be in a
minimum amount of $1,000,000 and thereafter in integral multiples of $100,000.
Section 3.7. Manner of Rate Selection. The Company shall notify the
Agent by 11:00 a.m. (Chicago time) at least three (3) Business Days prior to the
date upon which it requests that any LIBOR Portion be created or that any part
of the Base Rate Portion be converted into a LIBOR Portion (such notice to
specify in each instance the amount thereof and the Interest Period selected
therefor) and the Agent shall promptly advise each Bank of each such notice. If
any request is made to convert a LIBOR Portion into the applicable Base 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 or conversion of Portions under this Agreement shall be
irrevocable. Such requests may be written or telephonic (provided that if such
notice is given by telephone, the Company shall promptly confirm such notice to
the Agent in writing), and the Agent is hereby authorized to honor telephonic
requests
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for creations, continuances and conversions received by it from any person the
Agent reasonably believes to be an Authorized Representative, the Company hereby
indemnifying the Agent and the Banks from any liability or loss ensuing from so
acting.
Section 3.8. Funding Indemnity. In the event any Bank shall incur
any loss, cost or expense (including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or re-employment of deposits or
other funds acquired by such Bank to fund or maintain any LIBOR Portion or the
relending or reinvesting of such deposits or amounts paid or prepaid to such
Lender, and any loss of profit) as a result of:
(a) any payment or prepayment of a LIBOR Portion on a date other than
the last day of its Interest Period for any reason, whether before or after
default, and whether or not such payment is required by any of the
provisions of this Agreement;
(b) any failure (because of a failure to meet the conditions of
Section 7 hereof or otherwise) by the Company to create, borrow, continue
or affect by conversion a LIBOR Portion on the date specified in a notice
given pursuant to this Agreement hereof; or
(c) any failure by the Company to make any payment of principal on
any LIBOR Portion when due (whether by acceleration, mandatory prepayment
or otherwise),
then, upon the demand of such Bank, the Company shall pay to such Bank such
amount as will reimburse such Bank for such loss, cost or expense. If any Bank
makes such a claim for compensation, it shall provide to the Company a
certificate executed by an officer of such Bank setting forth the amount of such
loss, cost or expense in reasonable detail (including an explanation of the
basis for and the computation of such loss, cost or expense) and such
certificate shall be deemed prima facie correct.
Section 3.9. Change of Law. Notwithstanding any other provisions of
this Agreement or any Note, if at any time any change in applicable law or
regulation or in the official interpretation thereof makes it unlawful for any
Bank to make or continue to maintain LIBOR Portions or to give effect to its
obligations to make LIBOR Portions available as contemplated hereby, such Bank
shall promptly give notice thereof to the Company and the Agent and such Bank's
obligations to make or maintain LIBOR Portions under this Agreement shall
terminate until it is no longer unlawful for such Bank to make or maintain LIBOR
Portions. To the extent required to comply with any such law as changed, the
Company shall prepay on demand the outstanding principal amount of any such
affected LIBOR Portions, together with all interest accrued thereon and all
other amounts then due and payable to such Bank under this Agreement; provided,
however, subject to all of the terms and conditions of this Agreement, the
Company may then elect to convert the principal amount of the affected LIBOR
Portion from such Bank into the Base Rate Portion from such Bank which shall not
be made ratably by the Banks but only from such affected Bank. During the
period when it is unlawful for any Bank to make LIBOR Portions, Loans shall
continue to be made in such a manner so that the percentage of each Bank's
Commitments in use is identical, but the Banks affected by such illegality shall
make their share of each Borrowing which has been requested in the form of a
LIBOR Portion available in the form of a Base Rate Portion. Each Bank agrees
(to the extent consistent with internal policies) to designate a different
lending office if such designation would avoid the illegality described in this
Section 3.9; provided, however, that such designation need not be made if it
would result in any additional costs, expenses or risks to such Bank that are
not reimbursed by the Company pursuant hereto or would, in the reasonable
judgment of such Bank, be otherwise disadvantageous to such Bank.
Section 3.10. Unavailability of Deposits or Inability to Ascertain,
or Inadequacy Of, LIBOR Rate. If on or prior to the first day of any Interest
Period for any LIBOR Portion the Agent determines that deposits in United States
Dollars (in the applicable amounts) are not being offered to it or to banks
generally in the offshore eurodollar market for such Interest Period, then the
Agent shall forthwith give notice thereof to the Company and the Banks,
whereupon until the Agent notifies the Company that the circumstances giving
rise to such suspension no longer exist, the obligations of the Banks to make
any further LIBOR Portions available shall be suspended.
Section 3.11. Increased Cost and Reduced Return. If, on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change therein, or any change in the official interpretation or administration
thereof by any governmental authority, central bank or comparable agency charged
with the interpretation
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or administration thereof, or compliance by any Bank (or its lending office)
with any request or directive (whether or not having the force of law) of any
such authority, central bank or comparable agency:
(a) shall subject any Bank (or its lending office) to any charges of
any kind (other than Withholding Taxes covered by Section 4.9 hereof) with
respect to its interest in the LIBOR Portions, its Note or its obligation
to make LIBOR Portions available, or shall change the basis of taxation of
payments to any Bank (or its lending office) of the principal of or
interest on LIBOR Portions or any other amounts due under this Agreement in
respect of its LIBOR Portions or its obligation to make LIBOR Portions; or
(b) shall impose, modify or deem applicable any reserve, special
deposit or similar requirements (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System, but excluding any such requirement included in an applicable
Eurodollar Reserve Percentage) against assets of, deposits with or for the
account of, or credit extended by, any Bank (or its lending office) or
shall impose on any Bank (or its lending office) or the offshore interbank
market any other condition affecting LIBOR Portions, its Note or its
obligation to make LIBOR Portions available;
and the result of any of the foregoing is to increase the cost to such Bank (or
its lending office) of making or maintaining any LIBOR Portion, or to reduce the
amount of any sum received or receivable by such Bank (or its lending office)
under this Agreement or under its Note with respect thereto, by an amount deemed
by such Bank to be material, then, within fifteen (15) days after demand by such
Bank (with a copy to the Agent), the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank for such increased
cost or reduction. A certificate of any Bank claiming compensation under this
Section 3.11 and setting forth the additional amount or amounts in reasonable
detail (including an explanation of the basis therefor and the computation of
such amount) to be paid to it hereunder shall be deemed prima facie correct. In
determining such amount, such Bank may use reasonable averaging and attribution
methods. A Bank shall not be entitled to compensation under this Section 3.11
with respect to any adoption or change for any period prior to the earlier of
(i) the date it notifies the Company 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 the Company is notified of the adoption or change prior to
the lapse of such 30-day period.
Section 3.12. Lending Offices. Each Bank may, at its option, elect
to make its Loans hereunder at the branch, office or affiliate specified on
the appropriate signature page hereof (each a "Lending Office") or at such other
of its branches, offices or affiliates as it may from time to time elect and
designate in a notice to the Company and the Agent (but such funds shall in any
event be made available to the Company at the office of the Agent as herein
provided for).
Section 3.13. Discretion of Banks as to Manner of Funding.
Notwithstanding any other provision of this Agreement, each Bank shall be
entitled to fund and maintain its funding of all or any part of its Loans in any
manner it sees fit, it being understood, however, that for the purposes of this
Agreement all determinations under this Agreement (including, without
limitation, calculations under Sections 3.8 and 3.11 hereof) shall be made as if
each Bank had actually funded and maintained its interest in each LIBOR Portion
through the purchase of deposits in the offshore interbank market having a
maturity corresponding to such LIBOR Portion's Interest Period and bearing an
interest rate equal to LIBOR for such Interest Period.
SECTION 4. FEES, PAYMENTS, REDUCTIONS, APPLICATIONS AND NOTATIONS.
Section 4.1. Commitment Fee. For the period from the date hereof to
and including the Revolving Credit Termination Date, the Company shall pay to
the Agent for the ratable account of the Banks a commitment fee at the rate of
1/2 of 1% per annum on the average daily unused amount of the Commitments
hereunder (except that no fee shall accrue on the Term Credit Commitments after
the Borrowing on the Term Credit), such fee to be payable monthly in arrears on
the first day of each calendar month (commencing on the first of such dates
after the date hereof) to and including, and on, the Revolving Credit
Termination Date.
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Section 4.2. Closing Fees. The Company shall pay to Bank of
Montreal for its own account the upfront fees, and issue to such Bank for its
own account the Warrants, in each case to in a letter or letters exchanged
between them.
Section 4.3. Voluntary Prepayments. The Company shall have the
privilege of prepaying without premium or penalty and in whole or in part (but,
if in part, then in an amount not less than $1,000,000 and thereafter in
integral multiples of $100,000) (or such lesser amount as will prepay the
relevant Class of Notes in full) a Class of Notes at any time upon one (in the
case of the Revolving Credit Notes) or three (in the case of the Term Credit
Notes) days' prior written notice to the Agent, each such prepayment to be made
by the payment of the principal amount to be prepaid, any amount due the Banks
under Section 3.8 hereof (any failure of the Agent or the Banks to require
payment of any amount due under Section 3.8 not to preclude a later demand that
the amount so due be paid) and, in the case of a prepayment which prepays a
Class of Notes in full (after which the Revolving Credit Commitments are no
longer outstanding in the case of a prepayment of the Revolving Credit Notes),
accrued interest thereon to the date fixed for prepayment.
Section 4.4. Mandatory Prepayments. (a) Fixed Asset Proceeds. An
amount equal to any and all net proceeds (i.e., gross proceeds net of
out-of-pocket expenses and property and transfer taxes incurred in effecting the
sale or other disposition) received by the Company and its Subsidiaries from the
sale or disposition (whether voluntary or involuntary) of real estate,
inventory, fixtures, equipment or other fixed assets shall be promptly paid over
to the Agent as and for a mandatory prepayment on the Term Credit Notes until
payment in full thereof; provided, however, that (i) the foregoing provisions
shall be inapplicable to sales of inventory in the ordinary course, (ii) the
foregoing provisions shall be inapplicable to funds received by the Agent under
the Collateral Documents if and so long as, pursuant to the terms of the
Collateral Documents, the same are to be held by the Agent and disbursed for the
restoration, repair or replacement of the property in respect of which such
proceeds were received and (iii) no prepayment shall be required with respect to
net proceeds received from the ordinary course of business sale or other
disposition of equipment which is worn out, obsolete or, in the good faith
judgment of the Company and its Subsidiaries no longer necessary to the
efficient conduct of their business as then conducted.
(b) Change of Control/Management Event. If, within sixty (60)
days after receiving notice under Section 8.5(c) of a Change of
Control/Management Event, the Required Banks 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 three (3) days after such notice is given),
Company shall pay in full all Obligations then outstanding, and the Commitments
shall terminate in full.
(c) Take-Out Securities. Any and all net proceeds received by
the Company or its Subsidiaries from their issuance or sale of the Take-Out
Securities, or any other debt or equity securities or membership or other equity
interests of any series or class or of options, warrants or rights therefor,
shall be promptly paid over to the Agent as and for a mandatory prepayment on
the Term Credit Notes until payment in full thereof, with any balance remaining
after such application to be applied in reduction of the Revolving Credit Notes
until payment in full thereof; provided, however, that no such prepayment need
be made out of the net proceeds of any such sale if and to the extent applied by
the Company to the funding of the Intersound Acquisition.
(d) Payment of Term Credit Loans. If, no later than sixty (60)
days after payment of the Term Credit Loans, any Bank holding any Revolving
Credit Loans notifies the Company that such Bank requires prepayment of the
Revolving Credit Notes, on the date set forth in such notice (which date shall
be no earlier than (x) two (2) days after such notice is given or (y) the day on
which the Company repays any other Indebtedness aggregating $100,000 or more
before its original scheduled due date, whichever day is earlier), the Company
shall pay in full all Obligations then outstanding, and the Commitments shall
terminate in full.
(e) Reduction of Revolving Credit. If, no later than sixty (60)
days after a date on which the outstanding principal amount of Revolving Credit
Loans is less than $2,500,000, any Bank holding any Term Credit Loans notifies
the Company that such Bank requires prepayment of the Term Credit Notes, on the
date set forth in such notice (which date shall be no earlier than (x) two (2)
days after such notice is given or (y) the day on which the Company repays any
other Indebtedness aggregating $100,000 or more before its original scheduled
due date, whichever day is earlier), the Company shall pay in full all
Obligations then outstanding, and the Commitments shall terminate in full.
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Section 4.5. Terminations
(a) Voluntary. The Company shall have the privilege at any time
and from time to time upon five Business Days' prior notice to the Agent
(which shall promptly notify the Banks) to ratably terminate the
Commitments in whole or in part (but, if in part, then in a minimum amount
of $1,000,000 and thereafter in integral multiples of $100,000), provided
that the Revolving Credit Commitments may not be reduced to an amount less
than the aggregate principal amount of Revolving Credit Loans then
outstanding. No termination of the Commitments may be reinstated unless
otherwise agreed to in writing by the Banks.
(b) Required. The Commitments shall terminate in whole as
provided in Sections 4.4(b), 4.4(d) and 4.4(e) hereof.
Section 4.6. Place and Application. All payments of principal,
interest and fees shall be made to the Agent at its office at 000 Xxxxx XxXxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxx (or at such other place as the Agent may specify) in
immediately available and freely transferable funds at the place of payment.
All payments due from the Company hereunder shall be made without set-off or
counterclaim and without reduction for, and free from, any and all present or
future taxes, levies, imposts, duties, fees, charges, deductions, withholdings,
restrictions or conditions of any nature imposed by any government or political
subdivision or taxing authority thereof. Payments received by the Agent after
1:00 p.m. (Chicago time) shall be deemed received as of the opening of business
on the next Business Day. Except as otherwise provided in this Agreement, all
payments shall be received by the Agent for the ratable account of the Banks,
and shall be promptly distributed by the Agent ratably to the Banks except that
payments which pursuant to the terms hereof are for the use and benefit of the
Agent shall be retained by the Agent for its own account and payments received
to reimburse a Bank for a fee or cost peculiar to that Bank, as the case may be,
shall be remitted to it. Unless the Company otherwise directs, principal
payments on the Notes shall be first applied to the applicable Base Rate Portion
and then to the applicable LIBOR Portions in the order in which their Interest
Periods expire. Prepayments on the Term Credit Notes shall be applied to the
scheduled installment maturities thereof in the inverse order of maturity. No
amount paid or prepaid on the Term Credit Notes may be reborrowed.
Anything contained herein to the contrary notwithstanding, all payments and
collections received in respect of the indebtedness evidenced by the Notes and
all proceeds of the Collateral received, in each instance, by the Agent or any
of the Banks after the occurrence of an Event of Default shall be distributed as
follows:
(a) first, to the payment of any outstanding costs and expenses
incurred by the Agent in monitoring, verifying, protecting, preserving or
enforcing the liens on the Collateral or in protecting, preserving or
enforcing rights under the Loan Documents and in any event including all
costs and expenses of a character which the Company has agreed to pay under
Section 12.10 hereof (such funds to be retained by the Agent for its own
account unless it has previously been reimbursed for such costs and
expenses by the Banks, in which event such amounts shall be remitted to the
Banks to reimburse them for payments theretofore made to the Agent);
(b) second, to the payment of any outstanding interest or other fees
or amounts due under the Loan Documents and all other Obligations other
than for principal of the Notes or in respect of the Hedging Liability,
ratably as among the Banks in accord with the amount of such interest and
other fees or amounts owing each;
(c) third, to the payment of the principal of the Notes, to be
applied ratably as among all of such;
(d) fourth, to the Hedging Liability, to be applied ratably as among
all of such; and
(e) fifth, to whoever may be lawfully entitled thereto.
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Section 4.7. Notations and Requests. All advances made against the
Notes shall be recorded by the Banks on their books or, at their option in any
instance, endorsed on the reverse side of the Notes and the unpaid principal
balances so recorded or endorsed by the Banks shall be prima facie evidence in
any court or other proceeding brought to enforce the Notes of the principal
amount remaining unpaid thereon. Prior to any negotiation of any Note, the Bank
holding such Note shall endorse thereon the principal amount remaining unpaid
thereon.
Section 4.8. Capital Adequacy. If any Bank shall determine that 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 Bank (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 Bank's capital as a consequence of its obligations hereunder or credit
extended by it hereunder to a level below that which such Bank could have
achieved but for such law, rule, regulation, change or compliance (taking into
consideration such Bank's policies with respect to capital adequacy) by an
amount deemed by such Bank to be material, then from time to time as specified
by such Bank the Company shall pay such additional amount or amounts as will
compensate such Bank for such reduction in rate of return. A certificate of any
Bank 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. In determining such amount, such Bank may use any
reasonable averaging and attribution methods. A Bank 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 the Company of the Change or (ii) the date which thirty (30) days
prior to the date such Bank obtains actual knowledge of the Change giving rise
to the request for compensation if the Company is notified of the Change prior
to the lapse of such 30-day period. Each Bank and the Agent shall use
reasonable efforts to minimize the cost imposed on the Company in respect of any
such increased capital requirement and shall compute the assessment of any such
cost related to such increased capital on a nondiscriminatory basis among the
Company, on the one hand, and other borrowers to which it applies, on the other
hand, and neither such Bank nor any corporation controlling such Bank nor the
Agent shall be entitled to demand compensation or be compensated for any
increased capital requirement from the Company hereunder in excess of the amount
so computed.
Section 4.9. Withholding Taxes. (a) Payments Free of Withholding.
Except as otherwise required by law and subject to Section 4.9(b) and (c)
hereof, each payment by the Company under this Agreement or the other Loan
Documents shall be made without withholding for or on account of any present or
future taxes (other than overall net income taxes on the recipient) imposed by
or within the jurisdiction in which the Company is domiciled, any jurisdiction
from which the Company makes any payment, or (in each case) any political
subdivision or taxing authority thereof or therein (herein, "Withholding
Taxes"). If any such Withholding Tax is so required, the Company 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 Bank and the Agent free and clear of such Withholding
Taxes (including such taxes on such additional amount) is equal to the amount
which that Bank or the Agent (as the case may be) would have received had such
withholding not been made. If the Agent or any Bank pays any amount in respect
of any such Withholding Taxes, penalties or interest, the Company shall
reimburse the Agent or such Bank for that payment on demand in the currency in
which such payment was made. If the Company pays any such taxes, penalties or
interest, it shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Bank or Agent on whose account such withholding
was made (with a copy to the Agent if not the recipient of the original) on or
before the thirtieth day after payment.
(b) U.S. Withholding Tax Exemptions. Each Bank that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Company and the Agent on or before the earlier of the date the
initial Borrowing is made hereunder and thirty (30) days after the date hereof,
two duly completed and signed copies of either Form 1001 (relating to such Bank
and entitling it to a complete exemption from withholding under the Code on all
amounts to be received by such Bank, including fees, pursuant to the Loan
Documents and the Loans) or Form 4224 (relating to all amounts to be received by
such Bank, including fees, pursuant to the Loan Documents and the Loans) of the
United States Internal Revenue Service. Thereafter and from time to time, each
Bank shall submit to the Company and the 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 Agent, to such Bank and (ii) required under then-current
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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 Bank,
including fees, pursuant to the Loan Documents or the Loans.
(c) Inability of Bank to Submit Forms. If any Bank 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 the Agent any form or certificate that such Bank is obligated to
submit pursuant to subsection (b) of this Section 4.9 or that such Bank 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 Bank shall promptly notify the Company and Agent of such fact and the Bank
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) Bank Replacement. If the Company is required to make any reduction or
withholding with respect to any payment due any Bank under this Section 4.9 (in
any such case a "Replaceable Bank"), the Company may, with the consent of the
Agent, propose that another bank (a "Replacement Bank"), which bank may be an
existing Bank, be substituted for and replace the Replaceable Bank for purposes
of this Agreement. If a Replacement Bank is so substituted for the Replaceable
Bank, the Replaceable Bank shall enter into an Assignment Agreement with the
Replacement Bank, the Company and the Agent to assign and transfer to the
Replacement Bank the Replaceable Bank's Commitment and Loans hereunder pursuant
to and in accordance with the provisions and requirements of Section 12.12
hereof and, as a condition to its execution thereof, the Replaceable Bank shall
concurrently receive the full amount of its Loans, interest thereon, and all
accrued fees and other amounts to which it is entitled under this Agreement.
SECTION 5. THE COLLATERAL AND GUARANTIES.
Section 5.1. The Collateral. The Notes and the other Obligations
shall be secured by (a) valid, perfected and enforceable liens in all right,
title and interest of the Company 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 the Company 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 a Default or an Event of Default has occurred and
is continuing and thereafter until otherwise required by the Required Banks or
the Agent, (i) liens need not be perfected on foreign copyrights, trademarks,
patents and licenses thereof having a fair market value of less than $5,000 in
any instance and $75,000 in the aggregate, (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 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 Agent for the ratable account of the Banks and shall be
valid and perfected first liens subject, however, to the proviso appearing at
the end of the immediately preceding sentence, and the rights of lessors under
permitted leases, Purchase Money Liens held by vendors providing purchase money
financing and the security interest (if any) granted under the Polygram
Distribution Agreement in favor of Polygram (the "Polygram Lien") on the
Company's inventory stored at Polygram's premises in Nashville, Tennessee to
secure amounts owed Polygram under the Polygram Distribution Agreement (the
Company representing that amounts owed to the Company from Polygram under the
Polygram Distribution Agreement generally exceed amounts owed to Polygram from
the Company under the Polygram Distribution Agreement). Notwithstanding
anything to the contrary contained herein, in no event will any of the
Collateral described above be deemed to include (aa) any interest in copyrights,
trademarks, patents or similar intangibles licensed to the Company or any
Subsidiary from any third party (other than the Company 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 the
Company or such 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, (ab) any interests in equipment owned by the Company or any Subsidiary
which is subject to a permitted Purchase Money Lien in favor of any third party
(other than the Company 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 (ac) any interests in any leases or licenses to use property under which the
Company or any Subsidiary is lessee or licensee and a Person other than the
Company or an Affiliate of the Company is
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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 5.2. Further Assurances. The Company 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 that the Company shall, and
shall cause each Subsidiary to, at any time and from time to time at the request
of the Agent or the Required Banks execute and deliver such instruments and
documents and do such acts and things as the Agent or the Required Banks may
reasonably request in order to provide for or protect or perfect the lien of the
Agent in the Collateral, subject to the terms of Section 5.1 above.
Section 5.3. Subsidiary Guaranties. Payment of the Notes and the
other Obligations shall at all times be jointly and severally guaranteed by each
Subsidiary pursuant hereto or pursuant to a Subsidiary Guaranty issued by such
Subsidiary. In the event any Subsidiary is hereafter acquired or formed, and
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 Borrowing
under this Agreement) as the Agent may then require granting the Agent for the
benefit of the Banks a security interest in and lien on the assets of such
Subsidiary as collateral security for the Notes and the other Obligations,
together with such other instruments, documents, certificates and opinions
required by the Agent in connection therewith.
Section 5.4. Xxxxxx Guaranty. Payment of the Term Credit Notes
shall at all times be guaranteed by Xxxxxx pursuant to the Xxxxxx Guaranty,
subject to limitations set forth in the Xxxxxx Guaranty on the right-of-recovery
against Xxxxxx thereunder.
Section 5.5. Collateral Assignment of Life Insurance. Within thirty
(30) days after the date hereof, payment of the Notes and the other Obligations
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 Agent (the "Life Insurance Assignment").
Section 5.6. Polygram Collections. Within fifteen (15) days after
the date hereof, the Company agrees to forthwith make such arrangements as shall
be necessary or appropriate to assure that all payments from time to time made
to the Company under the Polygram Distribution Agreement (or any like agreement
replacing the Polygram Distribution Agreement and under which a similarly
significant portion of collections on the Company's sales are handled) are
deposited (in the same form as received) in an account maintained with or under
the control of the Agent, each such account to constitute a special restricted
account, the Company acknowledging that the Agent has (and is hereby granted) a
lien for the benefit of the Banks on each such account and all funds contained
therein to secure the Obligations. The Banks agree, however, with the Company
that if and so long as no Default or Event of Default has occurred or is
continuing hereunder, amounts on deposit in each special account maintained with
the Agent will (subject to the rules and regulations of the Agent as from time
to time in effect applicable to demand deposit accounts) be made available to
the Company for use in the conduct of its business. Upon the occurrence of an
Event of Default, the Agent may apply the funds on deposit in each such account
to the Obligations, but the Agent shall notify the Company of any such
application (it being understood and agreed the Agent and Banks are not liable
for any failure to provide such notice).
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Company represents and warrants to the Banks as follows:
Section 6.1. Organization and Power. The Company is duly organized
and existing under the laws of the state of its organization, and after giving
effect to the Intersound Acquisition will be 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
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its contemplated business. The Company 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 issue the Warrants and 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, or upon acquisition or formation will have 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 constitutes 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 6.2. Capitalization of Company. (a) Upon the consummation
of (i) the issuance and sale of the Warrants, and giving effect to such issuance
and sale and (ii) the consummation of the Intersound acquisition and giving
effect to the issuance and sale of the Take-Out Securities: the Company (i) has
authorized 40,000,000 shares of Common Stock, par value $.001 per share, of
which 5,171,439 shares are issued and outstanding, and 2,328,724.95 shares
(subject to increase from time to time upon operation of anti-dilution
provisions) are reserved for issuance upon exercise of outstanding warrants and
option and the conversion of outstanding convertible securities, and of which
3,681,651 shares are reserved for issuance under the Company's stock option plan
as to which options have not yet been granted and (ii) has authorized 10,000,000
shares of Preferred Stock, par value $.001 per share, of which no shares are
issued and outstanding; the stockholders of the Company are not entitled to any
preemptive rights with respect to the issuance of shares of capital stock of the
Company; and there are no outstanding commitments or other obligations of the
Company to issue, and no options, warrants or other rights of any Person to
acquire, any equity interest in the Company (subject to adjustment subsequent to
the date hereof for the exercise of any such rights), except for (i) warrants
(including the Warrants) for the purchase of 258,571.95 shares of Common Stock
issued or to be issued on the date hereof, (ii) options heretofore granted to
officers, directors, employees and consultants for an aggregate of 1,559,949
shares of Common Stock, and (iii) 510,204 shares of Common Stock reserved for
conversion of the Intersound Sub Debt.
(b) Neither the Company nor any agent on its behalf, directly or
indirectly, has offered any of the Notes or Warrants for sale to, or solicited
any offers to buy any thereof from, or otherwise negotiated with respect thereto
with, any person or persons so as to bring the offering, issue or sale thereof
under the provisions of Section 5 of the Securities Act of 1933, as amended, and
the Company agrees that neither it nor any agent on its behalf will sell, or
offer any of the Notes or Warrants to, or solicit any offers to buy any thereof
from, or otherwise negotiate with respect thereto with, any person or persons so
as to bring the offering, issue or sale of the Notes or Warrants under the
provisions of the said Section 5 of the said Securities Act of 1933, as amended.
Section 6.3. Subsidiaries. Each Subsidiary is, or upon acquisition
or formation will be, 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 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, security interests, charges and
encumbrances, other than the lien of the 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.
. The Company shall use proceeds of the Loans and other extensions of credit
made available hereunder solely for the purpose of funding the Intersound
Acquisition and its 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
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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.
Section 6.5. Financial Statements. (a) Company. The consolidated
balance sheet of the Company and its Subsidiaries as at May 31, 1996 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 November 30, 1996 and
the related consolidated statements of income and cash flows of the Company and
its Subsidiaries for the six (6) months then ended, heretofore furnished to the
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 May 31, 1996, there has been no change in the
condition (financial or otherwise) or business prospects of the Company 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) Intersound. To the Company's knowledge, (i) the financial
statements accompanying the annual audit report for Intersound for its fiscal
year ended April 30, 1996 have been prepared in accordance with generally
accepted accounting principles applied on a basis consistent, except as
otherwise noted therein, with that of the previous fiscal year and (ii) such
annual financial statements, and the interim unaudited balance sheet of
Intersound as of November 30, 1996, and income statement of Intersound for the
seven (7) months then ended, in each case fairly present the financial condition
of Intersound as of the dates thereof and the results of operations for the
periods covered thereby.
(c) Proforma for Company and Intersound. The unaudited pro forma
consolidated balance sheet and consolidated statements of operations for the
Company and its Subsidiaries and Intersound heretofore delivered to the Agent
fairly present (subject to the qualifications and assumptions set forth in the
notes attached thereto) the combined financial condition of the Company and its
Subsidiaries as at the dates thereof and for the periods covered thereby after
giving effect to the Intersound Acquisition based upon the best information
currently available to the Company with respect to the Intersound Acquisition.
(d) Existing Bank Debt. Schedule 6.5 describes all but $100,000 of
the indebtedness for borrowed money of the Company and Intersound and their
respective subsidiaries on a consolidated basis outstanding as of the date
hereof.
Section 6.6. Litigation and Taxes. There is no litigation or
governmental proceeding pending, nor to the knowledge of the Company 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, 1995 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 or to the consummation of the Intersound
Acquisition, except for (a) filing of financing statements and other documents
evidencing the Agent's lien in the Collateral and (b) such consents, exemptions
and approvals with respect to the Intersound Acquisition which will have been
obtained and remain in full force and effect.
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Section 6.7. Burdensome Contracts with Affiliates. All material
contracts and agreements between the Company and/or 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 Approved Projections and the
other statements and information furnished to either Agent or the Banks in
connection with the negotiation of this Agreement and the commitments by the
Banks 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 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 Banks prior to the initial extension of credit
hereunder (the Banks acknowledging that as to any projections furnished to the
Banks, 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 Banks in writing which materially adversely affects nor, so far as the
Company 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 Company's 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 the Company, 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 substances (including, without limitation, petroleum, its by-products
or derivatives, or other hydrocarbons).
Section 6.11. Intersound Acquisition. The Company has heretofore
delivered to the Banks a true and correct copy of the Intersound Purchase
Agreement and all exhibits thereto and the same has not been amended or modified
in any material respect, except for such amendments and modifications for which
true and correct copies have been furnished to the Banks. The Company and River
North have all necessary corporate right, power and authority to consummate the
Intersound Acquisition and the other transactions contemplated by the Intersound
Purchase Agreement and to perform and observe all of their obligations (if any)
thereunder. Neither the Company nor River North nor to the best of the
Company's knowledge, Intersound is in default in any material respect in any of
their respective obligations under the Intersound Purchase Agreement and no
representation of the Company, River North or (to the best of the Company's
knowledge) Intersound contained in the Intersound Purchase Agreement is untrue
in any material respect. The Company's representation and warranties in this
Section 6 shall remain true and correct after giving effect to the Intersound
Acquisition.
Section 6.12. Necessary Assets and Contracts. Concurrently with
consummation of the Intersound Acquisition, the Company will have all assets and
contractual rights as are necessary to enable it to operate and generate the net
revenue contemplated by the Approved Projections on terms consistent with the
Approved Projections.
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Section 6.13. Solvency, etc. On the date of the initial Borrowing
hereunder, after giving effect to the Intersound Acquisition, (i) the assets of
the Company and of each Subsidiary, at a fair valuation, will exceed its
liabilities, including contingent liabilities, (ii) the remaining capital of the
Company and of each Subsidiary will not be unreasonably small to conduct or in
relation to its business or any transaction in which it intends to engage, and
(iii) the Company and each Subsidiary will not have incurred debts, and does not
intend to incur debts, beyond its ability to pay such debts as they mature. 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 Banks to make any
Borrowing available under the Revolving Credit or Term Credit (including the
first advance) shall be subject to the provisions of Sections 9.2 and 9.3 hereof
and shall also be subject to the satisfaction of the following conditions
precedent at the time of the making of each Borrowing under the Revolving
Credit:
(a) each of the representations and warranties set forth herein and
in the other Loan Documents shall be true and correct as of the date of
such advance or issuance (except 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 Banks pursuant to Section 8.5 hereof);
(b) no material adverse change shall have occurred in the condition
(financial or otherwise) or prospects of either the Company or the Company
and its Subsidiaries taken as a whole; and
(c) no Default or Event of Default shall have occurred and be
continuing.
Any request made by the Company to the Agent for a Borrowing hereunder shall be
deemed to constitute a representation and warranty that the foregoing statements
are true and correct. Upon the request of any Bank, the Company 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 advance under the Revolving Credit or Term Credit, the following
conditions precedent shall also have been satisfied:
(a) The Agent shall have received the following for the account of
the Banks (each to be properly executed and completed) and the same shall
have been approved as to form and substance by the Agent and Required
Banks:
(i) this Agreement and the Notes;
(ii) copies (executed or certified as may be appropriate)
for each Bank of the articles of incorporation, by-laws, operating
agreements and management agreements of the Company and each of its
Subsidiaries and of all legal documents or proceedings taken in
connection with the execution and delivery of the Loan Documents to
the extent the Agent or its counsel may reasonably request, including,
without limitation, certificates as to the incumbency and authority
of, and setting forth a specimen signature of, each officer who is to
sign any Loan Document;
(iii) a Subsidiary Guaranty from each Subsidiary not a party
hereto;
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(iv) the Xxxxxx Guaranty;
(v) 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 with all financing statements requested by the Agent in
connection with the Initial Collateral Documents) to the extent
required by Section 5.1 hereof;
(vi) evidence of the maintenance of insurance as required
hereby or by the Initial Collateral Documents;
(vii) a certificate from an authorized officer of the Company
stating whether the pro forma combined and consolidated balance sheet
of the Company and its Subsidiaries delivered to the Banks pursuant to
Section 6.5 hereof, the Approved Projections and Schedules 6.3 and 6.5
hereto are accurate in all material respects as of the date the other
conditions precedent to the initial Borrowing under this Section 7.2
are satisfied or, if not, setting forth the differences and that no
Default or Event of Default exists as of such date or will occur after
giving effect to the initial Borrowing hereunder;
(viii) a payoff letter from each holder of the Existing Bank
Debt (or a duly appointed trustee or agent for such holder) in which
each such party agrees to (i) cancel each loan or other agreement
governing such Existing Bank Debt (or stating that all such loan and
other agreements shall automatically be canceled), (ii) xxxx
"Canceled" or "Paid" and returned to the relevant borrower all
promissory notes and other evidences of such Existing Bank Debt and
(iii) release its liens securing such Existing Bank Debt, in each case
upon receipt of the payoff amount stated in such letter;
(ix) an employment and non-compete agreement between the
Company and Xxxxxx which (i) obligates Xxxxxx not to compete with the
Company for a period ending no earlier than repayment in full of the
Term Credit Loans or May 31, 1997, whichever is later and (ii)
provides for Xxxxxx'x provision of management services to the Company
for a period ending no earlier than repayment in full of the Term
Credit Loans or May 31, 1997, whichever is later;
(x) copies of all instruments evidencing or setting forth
terms and conditions applicable to the Intersound Sub Debt, such terms
and conditions to provide, among other things, that no payment of
principal, interest or premium (if any) shall be required on the
Intersound Sub Debt prior to May 31, 1997;
(xi) a written commitment from the insurer on the life
insurance policy to be assigned by the Life Insurance Assignment to
issue such policy and acknowledge the Life Insurance Assignment, in
each case within thirty (30) days after the date hereof, such
commitment to be subject to no condition other than payment of the
initial premium for such policy; and
(xii) a written acknowledgment from Intersound of the
collateral assignment to the Agent as security for the Obligations of
River North's indemnification rights under the Intersound Purchase
Agreement;
(b) All conditions precedent to the Intersound Acquisition shall have
been satisfied (without deviation from the Intersound Purchase Agreement
and without waiver by the Company of any of the conditions precedent to
closing set forth in the Intersound Purchase Agreement (except for waivers
approved by the Agent)) except for the Banks' funding of not more than
$23,900,000 of the cash purchase price therefor and the Agent shall have
received evidence satisfactory to it of the foregoing;
(c) Nothing shall have come to the attention of the Company or the
Agent or any Bank which indicates that the capital structure and condition
(financial and otherwise) and prospects of the Company or Intersound
(including without limitation their respective current assets and its
current liabilities) will be
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detrimentally at variance, in any material respect, from those presumed in
the Approved Projections and the other pro forma balance sheets and other
financial materials on the Company and Intersound heretofore most recently
submitted by the Company to the Agent;
(d) The Agent shall have received assurances reasonably satisfactory
to it that the Proforma EBITDA for the Company and Intersound for the
Company's monthly accounting period ending December 31, 1996 was higher
than the Proforma EBITDA of the Company and Intersound for the
corresponding monthly accounting period in the Company's immediately
preceding fiscal year;
(e) The liens and security interests granted to the Agent under the
Collateral Documents shall have been perfected to the extent required by
Section 5.1 hereof in a manner satisfactory to the Agent;
(f) The Agent shall be satisfied with insurance and environmental
matters;
(g) The Company and the Seller shall have received such approvals,
exemptions, consents or withholdings of objection from Governmental Bodies
as are necessary in order to lawfully consummate the Intersound Acquisition
and for the Company to operate and use the properties and rights to be
acquired in the Intersound Acquisition substantially as contemplated by the
Intersound Purchase Agreement and the other information furnished to the
Banks by or on behalf of the Company and same shall be true and correct in
all material respects;
(h) The Agent shall have received for its own account the fees and
Warrants to be received by it at such time by agreement with the Company;
and
(i) The Agent shall have received for the account of the Banks such
other agreements, instruments, documents, certificates and opinions as the
Agent may reasonably request.
Section 7.3. Legal Matters. Legal matters incident to the execution
and delivery of the Loan Documents and the other instruments and documents
contemplated hereby and the Intersound Acquisition shall be satisfactory to the
Agent and its counsel, and the Banks shall have received the favorable written
opinions of acceptable counsel for the Company and each Subsidiary party to the
Loan Documents, in form and substance satisfactory to the 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 the Company and each such
Subsidiary to consummate the Intersound Acquisition, to enter into the Loan
Documents and to perform and observe all the matters and things herein and
therein provided for and the fact that the execution and delivery of the
Loan Documents will not, nor will the consummation of the Intersound
Acquisition or the observance or performance of any of the matters or
things therein or herein provided for, contravene any provision of law 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;
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(d) the fact that no governmental authorization, consent,
exemption or withholding of objection is required with respect to the
consummation of the Intersound Acquisition or 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 Intersound, the
Company or any Subsidiary which seeks to prevent the consummation of the
Intersound Acquisition or the operation of the assets to be acquired
pursuant thereto or which, if adversely determined, would result in a
Material Adverse Effect after giving effect to the Intersound Acquisition;
(f) the fact that the Intersound Acquisition has been
consummated (in expressing such opinion counsel may assume disbursement of
the initial Borrowing and rely as to factual matters on certificates of
appropriate officers of the Company);
(g) the offering, issuance and delivery of the Warrants under
the circumstances contemplated by this Agreement constitute exempted
transactions under the Securities Act of 1933, as amended, and do not
require registration of the Notes or Warrants under said Securities Act of
1933; nor is registration under the Securities Act of 1933, as amended,
currently required of the Common Stock issuable upon the exercise of the
Warrants (counsel being permitted to state that a sale of the Warrant or of
the Common Stock issuable upon exercise thereof might require registration
of the Warrant and of said common stock if a public issue were involved);
(h) the fact that the authorized capital stock of the Company
consists of 40,000,000 shares of Common Stock, par value $.001 per share,
and that based upon such counsel's review of the Company's stock record
book, there are 5,171,439 shares of Common Stock of the Company issued and
outstanding, and that assuming compliance by the Company with the terms and
provisions of the Warrants, if and when issued upon exercise of the
Warrants in accordance with the provisions thereof, the shares of Common
Stock issuable upon such exercise will be validly issued, fully paid and
nonassessable shares; and
(i) such other matters as the Agent or its counsel may
reasonably require.
Section 7.4. Initial Borrowing. The Company shall use the proceeds
of the initial Borrowing as follows: (a) to pay not more than $23,900,000 of the
cash purchase price due at closing for the Intersound Acquisition; and (b) to
repay in full the Existing Bank Debt. The Company hereby irrevocably authorizes
and directs the Banks to so disburse such proceeds.
Section 7.5. Post Closing Requirements. No later than the date set
forth below, the Agent shall have received the following for the account of the
Banks (each to be properly executed and completed) and the same shall have been
approved as to form and substance by the Agent and Required Banks:
(a) as soon as available, but in any event within thirty (30)
days after the date hereof, a consent from each 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; and
(b) as soon as available, but in any event within thirty (30)
days after the date hereof, the Life Insurance Assignment.
The Company's failure to provide any of the above by such deadline shall
constitute an immediate Event of Default.
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SECTION 8. COVENANTS.
The Company agrees that, so long as any credit is available to or in use by
the Company hereunder, except to the extent compliance in any case or cases is
waived in writing by the Required Banks:
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, in 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) in good and responsible
insurance companies as and to the extent usually insured by companies similarly
situated and conducting similar businesses. The Company will upon request of the
Agent furnish a certificate setting forth in summary form the nature and extent
of the insurance maintained pursuant to this Section.
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, will not materially change its
accounting practices and will furnish to the Banks and their duly authorized
representatives such information respecting the business and financial condition
of the Company and its Subsidiaries as any Bank or the Agent may reasonably
request (including re-engagement of the Banks' consultant at the expense of the
Company if the Agent or the Required Banks so request); and without any request,
will furnish to the Banks:
(a) within 30 days after the close of each quarterly fiscal
period of the Company, a copy of the balance sheet, statement of earnings
and statement of cash flow of the Company and its Subsidiaries for such
period, prepared on a consolidated basis in accordance with GAAP, and the
notes thereto, all certified (subject to year end audit adjustments which
are not expected to be material) by the chief financial officer of the
Company;
(b) within the periods provided in paragraph (a) above, 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 requirements of Sections 8.10 and 8.11 hereof 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 Company is taking, has taken or proposes to take with respect
thereto; and
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(c) promptly after knowledge thereof shall have come to the
attention of any responsible officer of the Company, 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, (ii) any Default or
Event of Default and (iii) any pending or actual Change of
Control/Management Event.
The Company will, and will cause each Subsidiary to, permit
representatives of any Bank, upon reasonable notice and during normal business
hours, to examine and make extracts from the books and records of the Company
and its Subsidiaries and to examine their assets and access thereto shall be
permitted for such purpose. The Agent and each Bank agree to maintain in
confidence and not disclose to any Person any material non-public information
relating to the Company or its Subsidiaries made available to the Agent or
such Bank pursuant to this Section 8.5; provided that the Agent and each Bank
may make such disclosures as are permitted by Section 12.16 or as shall be
required by law or to the Agent's or such Bank's auditors or legal counsel who
the Agent or such Bank, as applicable, agrees will maintain the information so
disclosed in confidence.
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 or would result in any lien or charge upon any property of the
Company or any Subsidiary which is not a Permitted Lien.
Section 8.7. 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 general nature of the business which would then be engaged in by the Company
and its Subsidiaries taken as a whole would be substantially changed from the
business in which they are engaged after giving effect to the Intersound
Acquisition.
Section 8.8. 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 obligations or other similar charges, good faith
deposits in connection with tenders, contracts 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, producers' or
operator's liens 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 existing on such assets at the time of
acquisition thereof, 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 8.9(b) hereof (collectively, "PURCHASE MONEY LIENS");
(d) the liens created by the Collateral Documents;
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(e) attachment or judgment liens individually or in the
aggregate not in excess of $50,000 (exclusive of (i) any amounts that are
duly bonded to the reasonable satisfaction of the Agent or (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);
(f) 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;
(g) deposits or pledges to secure bids, tenders, contracts
(other than contracts for the payment of money), leases, statutory
obligations, surety and appeal bonds and other obligations of like nature
arising in the ordinary course of business;
(h) 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;
(i) 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; and
(j) the Polygram Lien.
Section 8.9. Indebtedness. The Company will not, nor will it permit
any Subsidiary to, issue, incur, assume, create, or have outstanding any
Indebtedness; provided, however, that the foregoing provisions shall not
restrict nor operate to prevent:
(a) Indebtedness owing to the Agent and the Banks under this
Agreement or any of the other Loan Documents;
(b) Capitalized Leases and purchase money indebtedness where the
related lien is permitted by Section 8.8(c) hereof not exceeding $75,000 at
any one time outstanding;
(c) Obligations on leases which are not Capitalized Leases;
(d) Subsidiary Guaranties permitted by Section 8.13 hereof;
(e) Indebtedness of any Subsidiary outstanding as of the date
hereof owing to the Company or any other Subsidiary arising in the ordinary
course of business;
(f) the Existing Bank Debt, all of which is being repaid in full
out of the proceeds of the initial Borrowing hereunder;
(g) the Intersound Sub Debt if and so long as the same
constitutes Subordinated Debt; and
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(h) Indebtedness not otherwise permitted by this Section 8.9
aggregating not more than $50,000 at any one time outstanding.
Section 8.10. Consolidated Net Tangible Worth. The Company will at
all times maintain Consolidated Tangible Net Worth of not less than a negative
$13,000,000.
Section 8.11. EBITDA. The Company will have EBITDA of not less than
$1,363,500 for the fiscal quarter of the Company ending on or about February 28,
1997 and will have EBITDA of not less than $921,600 for each monthly accounting
period of the Company following such fiscal quarter.
Section 8.12. Expenditures. (a) Capital Expenditures. The Company
shall not and shall not permit its Subsidiaries to expend or become obligated
for Capital Expenditures during the fiscal quarter of the Company ending on or
about February 28, 1997 in excess of $150,000 for the Company and its
Subsidiaries taken together. The Company shall not and shall not permit its
Subsidiaries to expend or become obligated for Capital Expenditures aggregating
for the Company and its Subsidiaries taken together in excess of $50,000 during
any monthly accounting period of the Company following such fiscal quarter.
(b) SG&A Expenditures. The Company shall not and shall not permit
its Subsidiaries to expend or become obligated for SG&A Expenditures during the
fiscal quarter of the Company ending on or about February 28, 1997 in excess of
$3,000,000 for the Company and its Subsidiaries taken together. The Company
shall not and shall not permit its Subsidiaries to expend or become obligated
for SG&A Expenditures aggregating for the Company and its Subsidiaries taken
together in excess of $1,200,000 during any monthly accounting period of the
Company following such fiscal quarter.
Section 8.13. Acquisitions, Investments, Loans, Advances and
Subsidiary Guaranties. The Company will not, nor will it permit any Subsidiary
to, directly or indirectly, make, retain 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 or
subordinate any claim or demand it may have to the claim or demand of any other
Person; 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 Bank, 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.;
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(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) the Intersound Acquisition;
(g) loans and advances by the Company or any Subsidiary
outstanding as of the date hereof to other Wholly Owned Subsidiaries to
fund their ordinary working capital needs;
(h) loans and royalty advances to recording artists in the
ordinary course of business provided that (i) the aggregate amount of such
loans and advances made during the fiscal quarter of the Company ending on
or about February 28, 1997 does not exceed $1,800,000 on a cumulative basis
for such quarter and (ii) the aggregate amount of such loans and advances
made during any monthly accounting period of the Company ending thereafter
does not exceed $783,333 on a cumulative basis for such monthly period;
(i) the Company's equity investment in the House of Blues
Venture as of the date hereof;
(j) the Subsidiary Guaranties; and
(k) investments in, loans and advances to, and guaranties of the
obligations of Persons not otherwise permitted by this Section at no time
aggregating more than $50,000.
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 8.14. Dividends and Certain Other Restricted Payments. The
Company will not during any calendar year (a) 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) or (b) 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).
Section 8.15. Mergers. The Company will not, nor will it permit any
Subsidiary to, consolidate or be a party to a merger 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 Wholly-Owned Subsidiary of the
Company may merge with and into the Company if the Company is the surviving
corporation.
Section 8.16. Sale of Assets. The Company will not, nor will it
permit any Subsidiary to, sell, lease or otherwise dispose of all or any part of
its property or assets; provided, however, that nothing contained therein shall
prohibit (i) sales of inventory in the ordinary course of business and
(ii) sales or dispositions of obsolete or worn out property disposed of in the
ordinary course of business.
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Section 8.17. 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 8.18. 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
$850,000 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 8.9(b) hereof.
Section 8.19. Burdensome Contracts with Affiliates. 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 8.20. 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 8.21. 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 Subsidiary Guaranty and execute such Collateral Documents to the
extent required by Section 5 hereof (on terms substantially similar to those
executed in connection with this Agreement) as the Agent may then require
granting the Agent for the benefit of the Banks 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 that described in Section 7.2(a)(ii) and 7.3 hereof relating
to the authorization for, execution and delivery of, and validity of such
Subsidiary's obligations as a Subsidiary Guarantor hereunder and under its
Subsidiary Guaranty in form and substance satisfactory to the Agent and such
other instruments, documents, certificates and opinions as are required by the
Agent in connection therewith.
Section 8.22. Maintenance of Subsidiaries. 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 that the
foregoing shall not operate to prevent:
(a) the transfer of shares of capital stock of any Subsidiary as
consideration to the transferor in the Intersound Acquisition; and
(b) 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.
The Company shall remain a joint venturer in the House of Blues Venture and
shall not reduce its equity interest in the House of Blues Venture below 50%.
Section 8.23. Subordinated Debt. The Company will not, and will not
permit any Subsidiary to, amend or modify the terms and conditions applicable to
any Subordinated 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 Agent and Required Banks. 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 Agent and Required Banks.
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Section 8.24. 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 8.25. 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;
provided, however, that nothing contained in this section shall operate to
prevent such agreement with the holder of any lien, security interest or charge
permitted by this Section above not to take any such action with respect to the
assets or property subject to such lien, security interest or charge.
SECTION 9. EVENTS OF DEFAULT AND REMEDIES.
Section 9.1. 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 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 Business Days, or default in the payment when due of any
fee, charge or other amount payable by the Company hereunder or under any
other Loan Document and the continuance of such default for five Business
Days after notice thereof to the Company from the Agent or any Bank; or
(b) default in the observance or performance of any covenant set
forth in Sections 4.4(b), 4.4(d), 4.4(e), 8.8, 8.9, 8.10, 8.11, 8.12, 8.13,
8.14, 8.15, 8.16, 8.17, 8.18, 8.21, 8.22, 8.23, 8.24 or 8.25 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 the Company in the observance or performance of any
covenant set forth in Section 8.5 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 30 days after written notice thereof to the Company by any Bank or
by the holder of any Note; or
(d) default shall occur in the payment when due (whether by
lapse of time, acceleration or otherwise) of any Indebtedness aggregating
in excess of $50,000 issued, assumed or guaranteed by the Company or any
Subsidiary or any other event of default shall occur with respect to any
such indebtedness beyond any period of grace provided therefor if the
effect thereof is to permit the maturity of such indebtedness to be
accelerated or to permit the holders thereof to elect a majority of the
Board of Directors of the Company; or
(e) 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 within 30 days after
notice thereof to the Company by any Bank or by the holder of any Note; or
(f) 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 $50,000 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 30 days; or
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(g) 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
(h) 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 the Company, any Subsidiary or (until
release of the Xxxxxx Guaranty in accordance with its terms) Xxxxxx takes
any action for the purpose of repudiating or rescinding any Loan Document
executed by it; or
(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 as prohibited
under the terms of any instrument subordinating such indebtedness to the
prior payment of the Loans or any of the other Obligations; or
(k) the currently issued and outstanding Common Stock of the
Company shall be diluted after the date hereof by more than 2% (without
giving effect to any dilution resulting solely from the Company's issuance
and sale of capital stock where the proceeds from such sale (net only of
reasonable underwriting discounts and commissions) are applied in reduction
of the Term Credit Loans until repayment in full thereof, with any balance
applied in reduction of the Revolving Credit Loans and such reduction of
the Revolving Credit Loans accompanied by a concurrent and like reduction,
ratably among the Banks, of the Revolving Credit Commitments); or
(l) liens, security interests or charges securing obligations
(excluding currently outstanding loans, whether or not constituting
consumer credit) aggregating in excess of $500,000 shall encumber assets of
Xxxxxx with a value aggregating in excess of $500,000; or
(m) the Company, any Subsidiary or (until release of the Xxxxxx
Guaranty in accordance with its terms) Xxxxxx becomes insolvent or bankrupt
or bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings or other proceedings for relief under any bankruptcy law or
laws for the relief of debtors are instituted against the Company, any
Subsidiary or (until release of the Xxxxxx Guaranty in accordance with its
terms) Xxxxxx and are not dismissed within 60 days after such institution
or a decree or order of a court having jurisdiction in the premises for the
appointment of a trustee or receiver or custodian for the Company, any
Subsidiary or (until release of the Xxxxxx Guaranty in accordance with its
terms) Xxxxxx or for the major part of any of their property is entered and
the trustee or receiver or custodian appointed pursuant to such decree or
order is not discharged within 60 days after such appointment; or
(n) the Company, any Subsidiary or (until release of the Xxxxxx
Guaranty in accordance with its terms) Xxxxxx shall institute bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings or other
proceedings for relief under any bankruptcy law or laws for the relief of
debtors or shall consent to the institution of such proceedings against it
by others or to the entry of any decree or order adjudging it bankrupt or
insolvent or approving as filed any petition seeking reorganization under
any bankruptcy or similar law or shall apply for or shall consent to the
appointment of a receiver or trustee or custodian for it or for the major
part of its property or shall make an assignment for the benefit of
creditors or shall admit in writing its inability to pay its debts as they
mature or shall take any corporate action in contemplation or in
furtherance of any of the foregoing purposes.
Section 9.2. When any Event of Default described in
subsections 9.1(a) to 9.1(l), both inclusive, has occurred and is continuing,
the Agent may (and shall, upon request of the Required Banks), by notice to the
Company, take any or all of the following actions:
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(a) terminate the obligation of the Banks 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
Agent hereby agreeing to provide written notification thereof to the
Company 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. 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 Banks to extend further credit
pursuant to any of the terms hereof shall immediately and automatically
terminate, and (c) the Agent may exercise all remedies available to it under the
Loan Documents or applicable law.
SECTION 10. THE AGENT.
Section 10.1. Appointment and Authorization. Each Bank hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers hereunder and under the Loan Documents as are designated
to the Agent by the terms hereof and thereof together with such powers as are
reasonably incidental thereto. The Agent may resign at any time by sending
twenty (20) days prior written notice to the Company and the Banks and may be
removed by the Required Banks upon twenty (20) days prior written notice to the
Company and the Banks. In the event of any such resignation or removal the
Required Banks may appoint a new agent, which shall succeed to all the rights,
powers and duties of the Agent hereunder and under the Loan Documents, such new
Agent to be subject to the reasonable consent of the Company unless a Default or
Event of Default has occurred and is continuing. Any resigning or removed 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 Agent shall in any
event be liable or responsible for any actions of its predecessor. If the Agent
resigns or is removed and no successor is appointed, the rights and obligations
of such Agent shall be automatically assumed by the Required Banks and (i) the
Company shall be directed to make all payments due each Bank hereunder directly
to such Bank and (ii) the Agent's rights in the Loan Documents shall be assigned
without representation, recourse or warranty to the Banks as their interests may
appear.
Section 10.2. Rights as a Bank. The Agent has and reserves all of
the rights, powers and duties hereunder and under the other Loan Documents as
any Bank may have and may exercise the same as though it were not the Agent and
the terms "Bank" or "Banks" as used herein and in all of such documents shall,
unless the context otherwise expressly indicates, include the Agent in its
individual capacity as a Bank. The Agent reserves the right to engage in other
business transactions with the Company, the Subsidiaries and their Affiliates.
Section 10.3. Standard of Care. The Banks 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 Agent makes no
representations or warranties of any kind or character to the Banks 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 Agent need not verify the worth or existence of the Collateral.
The Banks agree that neither the 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, 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 Agent shall incur no
liability
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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 the Company), unless it has actual knowledge of the untruthfulness of
same. The Agent agrees to use the same care in protecting the interests of the
Banks in the Loans as it uses for similar loans held by it solely for its own
account. The 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 Bank. The Agent shall in all events be fully protected in acting or
failing to act in accord with the instructions of the Required Banks. Upon the
occurrence of an Event of Default hereunder, the 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 Banks (and shall consult with the Banks as to actions to be taken) but
unless and until the Required Banks have given such direction the Agent shall
take or refrain from taking such actions as it deems appropriate and in the best
of interest of all Banks. The 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 Banks 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 Agent may treat the owner of any Note as the holder thereof until
written notice of transfer shall have been filed with it as provided in
Section 12.12 hereof signed by such owner in form satisfactory to the Agent.
Each Bank acknowledges that it has independently and without reliance on the
Agent or any other Bank and based upon such information, investigations and
inquiries as it deems appropriate made its own credit analysis and decision to
extend credit to the Company. It shall be the responsibility of each Bank to
keep itself informed as to the creditworthiness of the Company and each
Subsidiary and the Agent shall have no liability to any Bank with respect
thereto.
Section 10.4. Costs and Expenses. Each Bank agrees to reimburse the
Agent for all out-of-pocket costs and expenses suffered or incurred by the 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 Agent hereby or thereby, to the extent that the Agent is not promptly
reimbursed for same by the Company or out of the Collateral, all such costs and
expenses to be borne by the Banks ratably in accordance with the amounts of
their respective Commitments. If any Bank fails to reimburse the Agent for its
share of any such costs and expenses, such costs and expenses shall be paid pro
rata by the remaining Banks, but without in any manner releasing the defaulting
Bank from its liability hereunder.
Section 10.5. Indemnity. The Banks shall ratably indemnify and hold
the 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
Company 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. If any Bank defaults in its obligations
hereunder, its share of the obligations shall be paid pro rata by the remaining
Banks, but without in any manner releasing the defaulting Bank from its
liability hereunder.
SECTION 11. THE SUBSIDIARY GUARANTEE.
Section 11.1. The Subsidiary Guarantee. To induce the Banks to
provide the credits described herein and in consideration of benefits expected
to accrue to each Subsidiary Guarantor by reason of the Commitments and for
other good and valuable consideration, receipt of which is hereby acknowledged,
each Subsidiary Guarantor hereby unconditionally and irrevocably Subsidiary
Guarantees jointly and severally to the Agent, the Banks, and each other holder
of an Obligation, the due and punctual payment of all present and future
indebtedness of the Company 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 Company 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 Company punctually to pay any indebtedness or other Obligations Subsidiary
Guaranteed hereby, each Subsidiary 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
Company.
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Section 11.2. Subsidiary Guarantee Unconditional. The obligations of
each Subsidiary Guarantor as a Subsidiary Guarantor under 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 the Company or of any other
Subsidiary 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 Company, any other Subsidiary Guarantor,
or any of their respective assets, or any resulting release or discharge of
any obligation of the Company or of any other Subsidiary Guarantor
contained in any Loan Document;
(d) the existence of any claim, set-off or other rights which
the Subsidiary Guarantor may have at any time against the Agent, any Bank
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 the Company, any other Subsidiary Guarantor or any other Person or
Property;
(f) any application of any sums by whomsoever paid or howsoever
realized to any obligation of the Company, regardless of what obligations
of the Company remain unpaid;
(g) any invalidity or unenforceability relating to or against
the Company or any other Subsidiary 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 Company or any
other Subsidiary Guarantor of the principal of or interest on any Note or
any other amount payable by it under the Loan Documents; or
(h) any other act or omission to act or delay of any kind by the
Agent, any Bank 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 Subsidiary Guarantor under
this Section 11.
Section 11.3. Each Subsidiary 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 Company under this Agreement and all other Loan
Documents shall have been paid in full. If at any time any payment of the
principal of or interest on any Note or any other amount payable by the
Company under the Loan Documents is rescinded or must be otherwise restored or
returned upon the insolvency, bankruptcy or reorganization of the Company or
of a Subsidiary Guarantor, or otherwise, each Subsidiary 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 Subsidiary 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 Agent, any Bank or any other Person against the Company,
another Subsidiary Guarantor or any other Person.
(b) Subrogation and Contribution. Unless and until the Obligations have
been fully paid and satisfied and the Commitments have terminated, each
Subsidiary Guarantor hereby irrevocably waives any claim or other right it may
now or hereafter acquire against the Company or any other Subsidiary Guarantor
that arises from the existence, payment, performance or enforcement of such
Subsidiary Guarantor's obligations under this Section 11 or any other Loan
Document, including, without
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limitation, any right of subrogation, reimbursement, exoneration, contribution,
indemnification, or any right to participate in any claim or remedy of the
Agent, any Bank or any other holder of an Obligation against the Company or any
other Subsidiary Guarantor whether or not such claim, remedy or right arises in
equity or under contract, statute or common law, including, without limitation,
the right to take or receive from the Company or any other Subsidiary Guarantor
directly or indirectly, in cash or other property or by set-off or in any other
manner, payment or security on account of such claim or other right.
Section 11.5. Limit on Recovery. Notwithstanding any other provision
hereof, the right to recovery of the holders of the Obligations against each
Subsidiary Guarantor under this Section 11 shall not exceed $1.00 less than the
amount which would render such Subsidiary Guarantor's obligations under this
Section 11 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 Company under this Agreement or any other
Loan Document is stayed upon the insolvency, bankruptcy or reorganization of the
Company, 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 Subsidiary Guarantors hereunder forthwith on demand by the
Agent made at the request of the Required Banks.
Section 11.7. Benefit to Subsidiary Guarantors. The Company and all
of the Subsidiary Guarantors are engaged in related businesses and integrated to
such an extent that the financial strength and flexibility of the Company and
each Subsidiary Guarantor has a direct impact on the success of each other
Subsidiary Guarantor. Each Subsidiary Guarantor will derive substantial direct
and indirect benefit from the extension of credit hereunder.
SECTION 12. MISCELLANEOUS
Section 12.1. Waiver of Rights. No delay or failure on the part of
any Bank 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 Company, the Agent, the Banks
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 12.2. 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 12.3. Documentary Taxes. The Company agrees 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 12.4. Survival of Representations. 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.
Section 12.5. Set-off Sharing. Each Bank agrees with each other Bank
a party hereto that in the event such Bank shall receive and retain any payment,
whether by set-off or application of deposit balances or otherwise ("Set-off"),
on or in respect of any Note or other obligation outstanding under this
Agreement in excess of its ratable share of payments on all Notes and other
Obligations then outstanding to the Banks, then such Bank shall purchase for
cash at face value, but without recourse,
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ratably from each of the other Banks such amount of the Notes or other
Obligations held by each such other Bank (or interest therein) as shall be
necessary to cause such Bank to share such excess payment ratably with all the
other Banks; provided, however, that if any such purchase is made by any Bank,
and if such excess payment or part thereof is thereafter recovered from such
purchasing Bank, the related purchases from the other Banks shall be rescinded
ratably and the purchase price restored as to the portion of such excess payment
so recovered, but without interest.
Section 12.6. 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 the Company at:
Platinum Entertainment, Inc.
0000 Xxxxxxxxxxx Xxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxx 00000
Attention: Chief Financial Officer
Telecopy: 000-000-0000
Telephone: 000-000-0000
or if to the Agent or Banks 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 12.6. 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 Agent
or any Bank under Sections 2 and 3 hereof shall only be effective upon receipt.
Section 12.7. 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 12.8. Successors and Assigns. This Agreement shall be
binding upon the Company and its successors and assigns, and shall be binding
upon and inure to the benefit of the Agent and the Banks and their respective
successors and assigns permitted pursuant to Section 12.12, including any
subsequent holder of any Note. The Company may not assign its rights or
obligations hereunder without the prior written consent of the Banks.
Section 12.9. Participants. Each Bank shall have the right at its
own cost to grant participations (to be evidenced by one or more agreements or
certificates of participation) in the Loans made by such Bank at any time and
from time to time to one or more other financial institutions, provided that no
such participant shall have any rights under this Agreement or any other Loan
Document (the participant's rights against the Bank granting its participation
to be those set forth in the participation agreement between the participant and
such Bank); provided, further, that no Bank shall transfer or grant any
participation under which the participant shall have rights to approve any
amendment to or waiver of this Agreement or any other Loan Document except to
the extent such amendment or waiver would extend a scheduled maturity of any
Loan or Note, or reduce the rate or extend the time of payment of interest or
fees thereon (except in connection with a waiver of applicability of any
post-default increase in interest rates) or reduce the principal amount thereof,
or increase the amount of the participant's participation over the amount
thereof then in effect (it being understood that a waiver of any Default or
Event of Default or of a mandatory prepayment shall not constitute a change in
the terms of such participation, and that an increase in any Commitment or Loan
shall be permitted without the consent of any participant if the participant's
participation is not increased as a result thereof. Each such Bank selling a
participation shall be entitled to the benefits of Sections 2.1(c)(iv), 3 and
4.8 hereof to the extent such Bank would have been so entitled had no such
participation been sold.
Section 12.10. Costs and Expenses. The Company agrees to pay
within 10 days of demand therefor all reasonable out-of-pocket costs and
expenses of the Agent in connection with the negotiation, preparation,
execution, delivery, recording and/or filing and/or release of the Loan
Documents and the other instruments and
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documents to be delivered hereunder or thereunder or in connection with the
transactions contemplated hereby or thereby or in connection with any consents
hereunder or thereunder or waivers or amendments hereto or thereto, including
the reasonable fees and out-of-pocket expenses of counsel for and consultants to
the Agent with respect to all of the foregoing, and all recording, filing or
other fees, costs and taxes incident to perfecting a lien upon the collateral
security for the Notes and other Obligations, and all reasonable costs and
expenses (including reasonable attorneys' fees), incurred by the Agent, any
security trustee for the Banks, the Banks or any other holders of a Note in
connection with a default or the enforcement of any of the Loan Documents and
the other instruments and documents to be delivered hereunder or thereunder.
Notwithstanding anything in the foregoing to the contrary, the Company shall not
be liable, without its consent, to reimburse the Agent for more than $150,000 of
the costs and expenses of the Agent (including, but not limited to, the fees of
its counsel, Messrs. Xxxxxxx and Xxxxxx, but in any event excluding recording
charges, recording taxes and other disbursements of such counsel) 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, in each case as a condition precedent to the initial
Borrowing hereunder. The Company agrees to indemnify and save the Banks, the
Agent and any security trustee for the Banks harmless from any and all
liabilities, losses, costs and expenses incurred by the Banks, either Agent in
connection with any action, suit or proceeding brought against either Agent, a
security trustee or any Bank by any person which arises out of the transactions
contemplated or financed hereby or by the other Loan Documents or out of any
action or inaction by an Agent, any security trustee or any Bank hereunder or
thereunder, except for such thereof as is caused by the gross negligence or
willful misconduct of the party indemnified. The provisions of this
Section 12.10 and the protective provisions of Section 3 hereof shall survive
payment of the Notes and the other Obligations owing to the Banks hereunder.
Section 12.11. 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 12.12. Assignment Agreements. Each Bank may, from time to
time, with the consent of the Agent assign to other financial institutions part
of the indebtedness evidenced by the Notes then owned by it together with an
equivalent proportion of each of its Commitments to make Loans against such
Notes hereunder pursuant to written agreements executed by the assignor, the
assignees and the Agent, which agreements shall specify in each instance the
portion of the indebtedness evidenced by the Notes which is to be assigned to
each such assignee and the portion of the Commitments of the assignor to be
assumed by it (the "Assignment Agreements"); provided, however, that (i) each
such assignment of a Bank's Term Credit Notes shall be of a constant, and not a
varying, percentage of the assigning Bank's rights and obligations under the
Term Credit and the assignment shall cover the same percentage of each of such
Bank's Term Credit Commitment, Term Credit Loans and Term Credit Notes and each
such assignment of a Bank's Revolving Credit Notes shall be of a constant, and
not a varying, percentage of the assigning Bank's rights and obligations under
the Revolving Credit and the assignment shall cover the same percentage of such
Bank's Revolving Credit Commitment, Revolving Credit Loans and Revolving Credit
Notes; (ii) unless the Agent otherwise consents, the aggregate amount of the
Loans evidenced by a given Note (and including as Loan for such purposes,
unfunded Commitment to extend Loans against such Note) of the assigning Bank
being assigned pursuant to each such Assignment Agreement (determined as of the
effective date of the relevant Assignment Agreement) shall in no event be less
than $1,000,000 (unless such assignment is to another Bank party hereto), (iii)
unless the Agent otherwise consents or the assigning Bank shall have assigned
all of its Loans evidenced by a given Note (and all of any unfunded Commitment
to extend additional Loans against such Note), the aggregate amount of the Loans
evidenced by such Note (and including as Loan for such purposes, any unfunded
Commitment to extend Loans against such Note) retained by the assigning Lender
shall in no event be less than $1,000,000; (iv) unless the Company otherwise
consents, the Agent must after giving effect to any assignment by it retain a
Revolving Credit Commitment of at least 25% of the aggregate Revolving Credit
Commitments (or at least 25% of the aggregate Revolving Credit Loans if no
Revolving Credit Commitments are outstanding); and (v) the assigning Bank shall
pay to the Agent a processing and recordation fee of $3,500 and any
out-of-pocket attorney's fees and expenses incurred by the Agent in connection
with each such Assignment Agreement. Upon the execution of each Assignment
Agreement by the assignor, the assignee and the Company and satisfaction of the
foregoing conditions and any conditions set forth therein (i) such assignee
shall thereupon become a "Bank" for all purposes of this Agreement with
Commitments in the amounts set forth in such Assignment Agreement (and Exhibit A
hereto shall be deemed amended to reflect the aggregate Commitments of the Banks
after giving effect thereto) and with all the rights, powers and obligations
afforded a Bank hereunder, provided that the assigning Bank shall retain the
benefit of all indemnities of the Company with respect to matters arising prior
to the effective date of such Assignment Agreement, which shall survive and
inure to the benefit of the assigning Bank, (ii) such assigning Bank shall have
no further liability for funding the portion of its Commitments assumed by such
other Bank and (iii) the address for notices to such Bank shall be as specified
in the Assignment Agreement executed by it. Concurrently with the execution and
delivery of such Assignment
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Agreement by the assignor, the assignee, the Company and the Agent, the Company
shall execute and deliver Notes to the assignee Bank in the amount of its
Commitments and new Notes to such assigning Bank in the amount of its
Commitments after giving effect to the reduction occasioned by such assignment,
all such notes to constitute "Notes" for all purposes of this Agreement.
Section 12.13. Waivers, Modifications and Amendments. Any provision
hereof or of any of the other Loan Documents may be amended, modified, waived or
released and any Default or Event of Default and its consequences may be
rescinded and annulled upon the written consent of the Required Banks; provided,
however, that (a) without the consent of a Bank, no such amendment, modification
or waiver shall increase the amount or extend the terms of that Bank's
Commitment or reduce the interest rate applicable to or extend the express
maturity of any Loan, fee or other Obligation owed to such Bank or reduce the
amount of the fees to which such Bank is entitled hereunder and (b) without the
consent of all Banks, no such amendment, modification or waiver shall release
any Subsidiary or Xxxxxx from its obligations as a Subsidiary Guarantor or
release any substantial (in value) part of the collateral security afforded by
the Collateral Documents or change the definition of "Required Banks" or change
the number of Banks required to take any action hereunder or under any of the
other Loan Documents; it being understood (i) 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 Banks and shall not constitute an increase of a
Commitment of any Bank, and (ii) any waiver of applicability of any post-default
increase in interest rates may be made at the discretion of the Required Banks.
No amendment, modification or waiver of the Agent's protective provisions shall
be effective without the prior written consent of the Agent.
Section 12.14. 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 12.15. Headings. Section headings used in this Agreement
are for reference only and shall not affect the construction of this Agreement.
Section 12.16. Confidentiality. Any information disclosed by the
Company or any of its Subsidiaries to the Agent or any of the Banks 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 Agent or such Bank 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 Agent or any other Bank, (v) pursuant to any agreement heretofore or
hereafter made between such Bank 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 Bank or the Agent, as applicable, shall give the
Company 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 12.17. EXCLUSIVE JURISDICTION. (A) EXCEPT AS PROVIDED IN
SUBSECTION (B), THE COMPANY, THE BANKS AND THE 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 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 COMPANY, THE BANKS AND THE AGENT ACKNOWLEDGE
THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED
OUTSIDE OF XXXX COUNTY, ILLINOIS. THE COMPANY WAIVES IN ALL DISPUTES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE.
(B) OTHER JURISDICTIONS. THE COMPANY AGREES THAT THE AGENT AND THE
BANKS SHALL EACH HAVE THE RIGHT TO PROCEED AGAINST THE COMPANY OR ITS PROPERTY
IN A COURT IN ANY LOCATION TO ENABLE THE AGENT OR ANY BANK TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE
AGENT OR ANY BANK. THE COMPANY AGREES THAT IT SHALL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT IN
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ACCORDANCE WITH THIS PROVISION BY THE AGENT OR ANY BANK TO REALIZE ON SUCH
PROPERTY, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE AGENT OR
ANY BANK. THE COMPANY WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE COURT IN WHICH THE AGENT OR ANY BANK HAS COMMENCED A PROCEEDING DESCRIBED IN
THIS SUBSECTION.
SECTION 12.18. WAIVER OF JURY TRIAL. THE COMPANY, THE AGENT AND THE
BANKS 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 BANK AND THE COMPANY 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 COMPANY, THE
AGENT AND THE BANKS 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 12.19. 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 PAGE 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 31st day of January, 1997.
PLATINUM ENTERTAINMENT, INC.
By /s/ Xxxxxx Xxxxxx
--------------------------
Name: Xxxxxx Xxxxxx
Title: President
RIVER NORTH STUDIOS, 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.
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By /s/ Xxxxxx Xxxxxx
--------------------------
Name: Xxxxxx Xxxxxx
Title: President
LIGHT RECORDS, INC.
By /s/ Xxxxxx Xxxxxx
--------------------------
Name: Xxxxxx Xxxxxx
Title: President
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.
BANK OF MONTREAL,
individually and as Agent
By /s/ Xxxx Xxxxxxxxxxx
--------------------------
Name: Xxxx Xxxxxxxxxxx
Title: Director
Mailing Address:
Bank of Montreal
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxxx X. Sstephan
LENDING OFFICE:
Bank of Montreal
000 Xxxxx XxXxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Manager-Loan Operations
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