LOAN AND SECURITY AGREEMENT
DATED AS OF JULY 31, 2000
AMONG
GENERAL ELECTRIC CAPITAL CORPORATION
AS LENDER
AND
CURIOUS PICTURES CORPORATION
AND
CHELSEA PICTURES, INC.
AND
THE END, INC.
AS BORROWERS
INDEX OF EXHIBITS AND SCHEDULES
Schedule A - Definitions
Schedule B - Lender's and Borrowers' Addresses for Notices
Schedule C - Letters of Credit
Schedule D - Cash Management System
Schedule E - Fees and Expenses
Schedule F - Schedule of Documents
Schedule G - Financial Covenants
Disclosure Schedule (3.2) - Places of Business; Corporate Names
Disclosure Schedule (3.6) - Real Estate
Disclosure Schedule (3.7) - Stock; Affiliates
Disclosure Schedule (3.9) - Taxes
Disclosure Schedule (3.11) - ERISA
Disclosure Schedule (3.12) - Litigation
Disclosure Schedule (3.13) - Intellectual Property
Disclosure Schedule (3.15) - Environmental Matters
Disclosure Schedule (3.16) - Insurance
Disclosure Schedule (3.18) - Contracts (Offset Risk)
Disclosure Schedule (5(b)) - Indebtedness
Disclosure Schedule (5(e)) - Liens
Disclosure Schedule (6.1) - Actions to Perfect Liens
Exhibit A - Form of Notice of Revolving Credit Advance
Exhibit B - Other Reports and Information
Exhibit C - Form of Borrowing Base Certificate
Exhibit C-1 - Inventory Rollforward and Reconciliation
Exhibit D - Form of Accounts Payable Analysis
Exhibit E - Form of Accounts Receivable Rollforward Analysis
Exhibit F - Form of Revolving Credit Note
Exhibit G - Intentionally Omitted
Exhibit H - Form of Secretarial Certificate
Exhibit I - Form of Power of Attorney
Exhibit J - Form of Certificate of Compliance
Exhibit K - Form of Blocked Account Agreement
Exhibit L - Form of Landlord's Waiver and Consent
Exhibit M - Intentionally Omitted
Exhibit N - Form of Guarantee
Exhibit O - Form of Opinion of Counsel to Borrower
Exhibit P - Form of Intercreditor Agreement
Exhibit Q - Intentionally Omitted
Exhibit R - Form of U.C.C. Schedule
Exhibit S - Form of Payment of Proceeds Letter
Exhibit T - Form of Pledge Agreement
Exhibit U - Form of Intellectual Property Security Agreement
GE CAPITAL
TRANSACTION SUMMARY AS OF THE DATE OF THIS AGREEMENT
--------------------------------------------------------------------------------
REVOLVING CREDIT LOAN
Maximum Amount: $7,000,000
--------------
Term: 3 years
----
Revolving Credit Rate: Index Rate plus 3.75%
---------------------
Letter of Credit Subfacility: $500,000
----------------------------
Borrowing Base: 85% of the value (as determined by Lender)
-------------- of each Borrower's Eligible Accounts;
provided, that Lender shall reduce the
foregoing percentage by one percentage point
for each percentage point that the dilution
of such Borrower's Accounts (calculated by
Lender as the average dilution over the most
recent three months) exceeds 5 % plus 100%
of the value (as determined by Lender) of
each Borrower's Eligible Cash Collateral.
FEES
Closing Fee: $35,000
-----------
Unused Line Fee: .50%
---------------
Letter of Credit Fee: 2%
--------------------
Prepayment Fee: 2% in year one; 1% in year two; and 1% in
-------------- year three.
THE LOANS DESCRIBED GENERALLY HERE ARE ESTABLISHED AND GOVERNED BY THE TERMS AND
CONDITIONS SET FORTH BELOW IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AND
IF THERE IS ANY CONFLICT BETWEEN THIS GENERAL DESCRIPTION AND THE EXPRESS TERMS
AND CONDITIONS BELOW OR ELSEWHERE IN THE LOAN DOCUMENTS, SUCH OTHER EXPRESS
TERMS AN CONDITIONS SHALL CONTROL.
This LOAN AND SECURITY AGREEMENT is dated as of July 31, 2000, and agreed to by
and among CURIOUS PICTURES CORPORATION, a New York corporation, CHELSEA
PICTURES, INC., a Massachusetts corporation, and THE END, INC., a California
corporation (being collectively referred to as "Borrowers" and each a
"Borrower"), any other Credit Party executing this Agreement, and GENERAL
ELECTRIC CAPITAL CORPORATION, a New York corporation ("Lender").
RECITALS
A. Borrowers desire to obtain the Loans and other financial accommodations
from Lender and Lender is willing to provide the Loans and accommodations all in
accordance with the terms of this Agreement.
B. Capitalized terms used herein shall have the meanings assigned to them in
Schedule A and, for purposes of this Agreement and the other Loan Documents, the
rules of construction set forth in Schedule A shall govern. All Schedules,
attachments, addenda and exhibits hereto, or expressly identified to this
Agreement, are incorporated herein by reference, and taken together with this
Agreement, constitute but a single agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. AMOUNT AND TERMS OF CREDIT
1.1 Loans. (a) Subject to the terms and conditions of this Agreement, from the
Closing Date and until the Commitment Termination Date (i) Lender agrees (A) to
make available advances (each, a "Revolving Credit Advance") and (B) to incur
Letter of Credit Obligations, in an aggregate outstanding amount for any
Borrower not to exceed the Borrowing Availability of such Borrower, and (ii) any
Borrower may from time to time borrow, repay and reborrow, and may cause Lender
to incur Letter of Credit Obligations, under this Section 1.1.
(b) Borrower shall request each Revolving Credit Advance by written
notice to Lender substantially in the form of Exhibit A (each a "Notice of
Revolving Credit Advance") given no later than 11:00 A.M. (Los Angeles time) on
the Business Day of the proposed advance. Lender shall be fully protected under
this Agreement in relying upon, and shall be entitled to rely upon, (i) any
Notice of Revolving Credit Advance believed by Lender to be genuine, and (ii)
the assumption that the Persons making electronic requests or executing and
delivering a Notice of Revolving Credit Advance were duly authorized, unless the
responsible individual acting thereon for Lender shall have actual knowledge to
the contrary. As an accommodation to Borrowers, Lender may permit telephonic,
electronic, or facsimile requests for a Revolving Credit Advance and electronic
or facsimile transmittal of instructions, authorizations, agreements or reports
to Lender by any Borrower. Unless each Borrower specifically directs Lender in
writing not to accept or act upon telephonic, facsimile or electronic
communications from any Borrower, Lender shall have no liability to any Borrower
for any loss or damage suffered by any Borrower as a result of Lender's honoring
of any requests, execution of any instructions, authorizations or agreements or
reliance on any reports communicated to it telephonically, by facsimile or
electronically and purporting to have been sent to Lender by any Borrower and
Lender shall have no duty to verify the origin of any such communication or the
identity or authority of the Person sending it. The Revolving Credit Loan shall
be evidenced by, and be repayable in accordance with the terms of, the Revolving
Credit Note and this Agreement.
(c) In making any Loan hereunder Lender shall be entitled to rely upon
the most recent Borrowing Base Certificate delivered to Lender by such Borrower
and other information available to Lender. Lender shall be under no obligation
to make any further Revolving Credit Advance to any Borrower or incur any other
Obligation if any Borrower shall have failed to deliver a Borrowing Base
Certificate to Lender by the time specified in Section 4.1(b).
(d) Letters of Credit. Subject to the terms and conditions of this
Agreement, including Schedule C, each Borrower shall have the right to request,
and Lender agrees to incur, the Letter of Credit Obligations for the account of
such Borrower in accordance with Schedule C.
1.2 Term and Prepayment. (a) Upon the Commitment Termination Date the obligation
of Lender to make Revolving Credit Advances and extend other credit hereunder
shall immediately terminate and Borrowers shall pay to Lender in full, in cash:
(i) all outstanding Revolving Credit Advances and all accrued but unpaid
interest thereon, including Additional Interest referred to in Section 1.5(e);
(ii) an amount sufficient to enable Lender to hold cash collateral as specified
in Schedule C; and (iii) all other non-contingent Obligations due to or incurred
by Lender.
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(b) If the Revolving Credit Loan attributable to any Borrower shall at
any time exceed such Borrower's Borrowing Availability, then such Borrower shall
immediately repay the Revolving Credit Loan in the amount of such excess.
(c) Each Borrower shall have the right, at any time upon 30 days prior
written notice to Lender to (i) terminate voluntarily Borrowers' right to
receive or benefit from, and Lender's obligation to make and to incur, Revolving
Credit Advances and Letter of Credit Obligations and (ii) prepay all of the
Obligations. The effective date of termination of the Revolving Credit Loan
specified in such notice shall be the Commitment Termination Date. If any
Borrower exercises the right of termination and prepayment, or if Lender's
obligation to make Loans is terminated for any reason prior to the Stated Expiry
Date then in effect (including as a result of the occurrence of a Default),
Borrowers shall pay to Lender the applicable Prepayment Fee.
1.3 Use of Proceeds. Borrowers shall use the proceeds of the Loans for working
capital and other general corporate purposes.
1.4 Single Loan. The Loans and all of the other Obligations of any Borrower to
Lender shall constitute one general obligation of such Borrower secured by all
of the Collateral.
1.5 Interest (a) Each Borrower shall pay interest to Lender on the aggregate
outstanding Revolving Credit Advances attributable to such Borrower at a
floating rate equal to the Index Rate plus three and seventy five hundredths
percent (3.75 %) per annum (the "Revolving Credit Rate"). All computations of
interest, and all calculations of the Letter of Credit Fee, shall be made by
Lender on the basis of a three hundred sixty (360) day year, in each case for
the actual number of days occurring in the period for which such interest or fee
is payable. Each determination by Lender of an interest rate hereunder shall be
conclusive and binding for all purposes, absent manifest error. In no event will
Lender charge interest at a rate that exceeds the highest rate of interest
permissible under any law that a court of competent jurisdiction shall, in a
final determination, deem applicable.
(b) Interest shall be payable on the outstanding Revolving Credit
Advances (i) in arrears for the preceding calendar month on the first day of
each calendar month, (ii) on the Commitment Termination Date, and (iii) if any
interest accrues or remains payable after the Commitment Termination Date, upon
demand by Lender.
(c) Effective upon the occurrence of any Event of Default and for so long
as any Event of Default shall be continuing, the Revolving Credit Rate and the
Letter of Credit Fee shall automatically be increased by two percentage points
(2%) per annum (such increased rate, the "Default Rate"), and all outstanding
Obligations, including unpaid interest and Letter of Credit Fees, shall continue
to accrue interest from the date of such Event of Default at the Default Rate
applicable to such Obligations.
(d) If any interest or any other payment (including Unused Line Fees) to
Lender under this Agreement becomes due and payable on a day other than a
Business Day, such payment date shall be extended to the next succeeding
Business Day and interest thereon shall be payable at the then applicable rate
during such extension.
(e) On any day on which interest is payable by any Borrower to Lender,
each Borrower shall make a payment to Lender of its "Pro Rata Share" of any
"Additional Interest" due for such period. "Additional Interest" shall be due if
the aggregate average balance of the outstanding Revolving Credit Advances
during any period (the "Aggregate Average Balance") is less than the "Minimum
Balance Amount" for such period. As used in this Section 1.5(e), the Minimum
Balance Amount shall be (i) $2,000,000 from the Closing Date until the first
anniversary date of this Agreement, (ii) $2,500,000 from the first anniversary
date of this Agreement to the second anniversary date of this Agreement, and
(iii) $3,000,000 at all times after the second anniversary date of this
Agreement. If the Minimum Balance Amount exceeds the Aggregate Average Balance
for any such period, then the amount of Additional Interest that is due to
Lender shall be an amount derived by multiplying such excess by the blended
Revolving Credit Rate for such period (as determined by Lender). Each Borrower's
"Pro Rata Share" of any Additional Interest shall be determined by Lender based
on the average relative borrowings of each Borrower.
1.6 Cash Management System. On or prior to the Closing Date and until the
Termination Date, each Borrower will establish and maintain the cash management
system described in Schedule D. All payments in respect of the Collateral shall
be made to or deposited in the blocked accounts described in Schedule D in
accordance with the terms thereof.
1.7 Fees. Each Borrower agrees to pay to Lender the Fees set forth in
Schedule E.
1.8 Receipt of Payments. Each Borrower shall make each payment under this
Agreement (not otherwise made pursuant to Section 1.9) without set-off,
counterclaim or deduction and free and clear of all Taxes not later than 11:00
A.M. (Los Angeles time) on the day when due in lawful money of the United States
of America in immediately available funds to the Collection Account. If any
Borrower shall be required by law to deduct any Taxes from any payment to Lender
under any Loan
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Document, then the amount payable to Lender shall be increased so that, after
making all required deductions, Lender receives an amount equal to that which it
would have received had no such deductions been made. For purposes of computing
interest and Fees, all payments shall be deemed received by Lender 2 Business
Days following receipt of immediately available funds in the Collection Account.
For purposes of determining the Borrowing Availability, payments shall be deemed
received by Lender upon receipt of immediately available funds in the Collection
Account.
1.9 Application and Allocation of Payments. Each Borrower irrevocably agrees
that Lender shall have the continuing and exclusive right to apply any and all
payments against the then due and payable Obligations in such order as Lender
may deem advisable. Lender is authorized to, and at its option may (without
prior notice or precondition and at any time or times), but shall not be
obligated to, make or cause to be made Revolving Credit Advances on behalf of
any Borrower for: (a) payment of all Fees, expenses, indemnities, charges,
costs, principal, interest, or other Obligations owing by such Borrower under
this Agreement or any of the other Loan Documents, (b) the payment, performance
or satisfaction of any of such Borrower's obligations with respect to
preservation of the Collateral, or (c) any premium in whole or in part required
in respect of any of the policies of insurance required by this Agreement, even
if the making of any such Revolving Credit Advance causes the outstanding
balance of the Revolving Credit Loan attributable to any Borrower to exceed such
Borrower's Borrowing Availability, and each Borrower agrees to repay
immediately, in cash, any amount by which the Revolving Credit Loan attributable
to such Borrower exceeds its Borrowing Availability.
1.10 Accounting. Lender is authorized to record on its books and records the
date and amount of each Loan and each payment of principal thereof and such
recordation shall constitute prima facie evidence of the accuracy of the
information so recorded. Lender shall provide Borrowers on a monthly basis a
statement and accounting of such recordations but any failure on the part of the
Lender to keep any such recordation (or any errors therein) or to send a
statement thereof to any Borrower shall not in any manner affect the obligation
of any Borrower to repay any of the Obligations. Except to the extent that any
Borrower shall, within 30 days after such statement and accounting is sent,
notify Lender in writing of any objection such Borrower may have thereto
(stating with particularity the basis for such objection), such statement and
accounting shall be deemed final, binding and conclusive upon such Borrower,
absent manifest error.
1.11 Indemnity. Each Borrower and each other Credit Party executing this
Agreement jointly and severally agree to indemnify and hold Lender and its
Affiliates, and their respective employees, attorneys and agents (each, an
"Indemnified Person"), harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses of any kind or
nature whatsoever (including attorneys' fees and disbursements and other costs
of investigation or defense, including those incurred upon any appeal) which may
be instituted or asserted against or incurred by any such Indemnified Person as
the result of credit having been extended, suspended or terminated under this
Agreement and the other Loan Documents or with respect to the execution,
delivery, enforcement, performance and administration of, or in any other way
arising out of or relating to, this Agreement and the other Loan Documents or
any other documents or transactions contemplated by or referred to herein or
therein and any actions or failures to act with respect to any of the foregoing,
including any and all product liabilities, Environmental Liabilities, Taxes and
legal costs and expenses arising out of or incurred in connection with disputes
between or among any parties to any of the Loan Documents (collectively,
"Indemnified Liabilities"), except to the extent that any such Indemnified
Liability is finally determined by a court of competent jurisdiction to have
resulted solely from such Indemnified Person's gross negligence or willful
misconduct. NO INDEMNIFIED PERSON SHALL BE RESPONSIBLE OR LIABLE TO ANY CREDIT
PARTY, ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON
ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR ANY ACT OR FAILURE TO ACT
UNDER ANY POWER OF ATTORNEY OR FOR INDIRECT, PUNITIVE, EXEMPLARY OR
CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT HAVING BEEN
EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER LOAN
DOCUMENT OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR
THEREUNDER.
1.12 Borrowing Base; Reserves. The Borrowing Base of each Borrower shall be
determined by Lender (including the eligibility of Accounts and Eligible Cash
Collateral) based on the most recent Borrowing Base Certificate delivered to
Lender in accordance with Section 4.1(b) and such other information available to
Lender. The Revolving Credit Loan shall be subject to Lender's continuing right
to withhold from any Borrower's Borrowing Availability reserves, and to increase
and decrease such reserves from time to time, if and to the extent that in
Lender's good faith credit judgment such reserves are necessary, including to
protect Lender's interest in the Collateral or to protect Lender against
possible non-payment of Accounts for any reason by Account Debtors or possible
diminution of the value of any Collateral or possible non-payment of any of the
Obligations or for any Taxes or in respect of any state of facts which could
constitute a Default. Lender may, at its option, implement reserves by
designating as ineligible a sufficient amount of Accounts or cash which would
otherwise be Eligible Accounts or Eligible Cash Collateral, as the case may be,
so as to reduce any Borrower's Borrowing Base by the amount of the intended
reserves.
2. CONDITIONS PRECEDENT
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2.1 Conditions to the Initial Loans. Lender shall not be obligated to make any
of the Loans or to perform any other action hereunder, until the following
conditions have been satisfied in a manner satisfactory to Lender in its sole
discretion, or waived in writing by Lender:
(a) the Loan Documents to be delivered on or before the Closing Date
shall have been duly executed and delivered by the appropriate parties, all as
set forth in the Schedule of Documents (Schedule F);
(b) the insurance policies provided for in Section 3.16 are in full force
and effect and acceptable to Lender, together with appropriate evidence showing
loss payable or additional insured clauses or endorsements in favor of Lender as
required under such Section;
(c) as of the Closing Date, Net Borrowing Availability for all Borrowers
combined shall be not less than $1,200,000 after giving effect to the initial
Revolving Credit Advance and Letter of Credit Obligations (on a pro forma basis,
with trade payables being paid currently, and expenses and liabilities being
paid in the ordinary course of business and without acceleration of sales);
(d) Lender shall have received an opinion of counsel to the Borrowers
with respect to the Loan Documents in form and substance satisfactory to Lender;
(e) All intercompany loans and advances due from Borrowers to Parent or
any Affiliate will be subordinated to the Obligations on terms satisfactory to
Lender;
(f) On a consolidated basis, Borrowers, Parent and all Affiliates shall
have a minimum of $6,000,000 of cash on hand or available at closing;
(g) Implementation of a satisfactory coding system for all invoices
generated by Borrowers;
(h) The corporate structure, capital structure, other debt instruments,
material contracts and governing documents of Borrowers and their Affiliates
must be acceptable to Lender;
(i) Lender shall have obtained satisfactory background and reference
checks on Borrowers, any guarantors and all other Credit Parties; and
(j) Any necessary or appropriate waivers and consents of governmental
entities or third parties shall have been obtained.
2.2 Further Conditions to the Loans. Lender shall not be obligated to fund any
Loan (including the initial Loans), if, as of the date thereof:
(a) any representation or warranty by any Credit Party contained herein
or in any of the other Loan Documents shall be untrue or incorrect as of such
date, except to the extent that any such representation or warranty is expressly
stated to relate to a specific earlier date, in which case, such representation
and warranty shall be true and correct as of such earlier date; or
(b) any event or circumstance which has had or reasonably could be
expected to have a Material Adverse Effect shall have occurred since the Closing
Date; or
(c) any Default shall have occurred and be continuing or would result
after giving effect to such Loan; or
(d) after giving effect to such Loan, the Revolving Credit Loan
attributable to any Borrower would exceed the Borrowing Availability of such
Borrower.
2.3 Agent. If Lender shall, in its sole discretion, permit Parent or any
Borrower to request and/or accept the proceeds of any Loan or the incurrence by
Lender of any Letter of Credit Obligations on behalf of or for the benefit of
another Borrower, then such request and acceptance shall be considered made by
such Borrower as the agent for such other Borrower and such request shall be
deemed to constitute, as of the date of such request and the date of such
acceptance, (i) a representation and warranty by each Borrower that the
conditions in Section 2.2 have been satisfied and (ii) a restatement by each
Borrower of each of the representations and warranties made by such Borrower in
any Loan Document and a reaffirmation by each Borrower of the granting and
continuance of Lender's Liens pursuant to the Loan Documents.
3. REPRESENTATIONS, WARRANTIES AND AFFIRMATIVE COVENANTS
To induce Lender to enter into this Agreement and to make the Loans, each
Borrower and each other Credit Party executing this Agreement represent and
warrant to Lender (each of which representations and warranties shall survive
the execution and delivery of this Agreement), and promise to and agree with
Lender until the Termination Date as follows:
3.1 Corporate Existence; Compliance with Law. Each Corporate Credit Party: (a)
is, as of the Closing Date, and will continue to be (i) a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, (ii) duly qualified to do
business and in good standing in each other jurisdiction where its ownership or
lease of property or the conduct of its business requires such qualification,
except where the failure to be so qualified could not reasonably be expected to
have a Material Adverse Effect, and (iii) in compliance with all Requirements of
Law and Contractual Obligations, except to the extent failure to comply
therewith could not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; and (b) has and will continue to have (i) the
requisite corporate power and
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authority and the legal right to execute, deliver and perform its obligations
under the Loan Documents, and to own, pledge, mortgage or otherwise encumber and
operate its properties, to lease the property it operates under lease, and to
conduct its business as now, heretofore or proposed to be conducted, and (ii)
all licenses, permits, franchises, rights, powers, consents or approvals from or
by all Persons or Governmental Authorities having jurisdiction over such
Corporate Credit Party which are necessary or appropriate for the conduct of its
business.
3.2 Executive Offices; Corporate or Other Names. The location of each Corporate
Credit Party's chief executive office, corporate offices, warehouses, other
locations of Collateral and locations where records with respect to Collateral
are kept (including in each case the county of such locations) are as set forth
in Disclosure Schedule (3.2) and, except as set forth in such Disclosure
Schedule, such locations have not changed during the preceding twelve months. As
of the Closing Date, during the prior five years, except as set forth in
Disclosure Schedule (3.2), no Corporate Credit Party has been known as or
conducted business in any other name (including trade names).
3.3 Corporate Power; Authorization; Enforceable Obligations. The execution,
delivery and performance by each Credit Party of the Loan Documents to which it
is a party, and the creation of all Liens provided for herein and therein: (a)
are and will continue to be within such Credit Party's power and authority; (b)
have been and will continue to be duly authorized by all necessary or proper
action; (c) are not and will not be in violation of any Requirement of Law or
Contractual Obligation of such Credit Party; (d) do not and will not result in
the creation or imposition of any Lien (other than Permitted Encumbrances) upon
any of the Collateral; and (e) do not and will not require the consent or
approval of any Governmental Authority or any other Person. As of the Closing
Date, each Loan Document shall have been duly executed and delivered on behalf
of each Credit Party thereto, and each such Loan Document upon such execution
and delivery shall be and will continue to be a legal, valid and binding
obligation of such Credit Party, enforceable against it in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency and
other similar laws affecting creditors' rights generally.
3.4 Financial Statements and Projections; Books and Records. (a) The Financial
Statements delivered by each Borrower and any other Credit Party to Lender for
its most recently ended Fiscal Year and Fiscal Month, are true, correct and
complete and reflect fairly and accurately the financial condition of such
Borrower as of the date of each such Financial Statement in accordance with
GAAP. The Projections most recently delivered by any Borrower or any other
Credit Party to Lender have been prepared in good faith, with care and diligence
and use assumptions that are reasonable under the circumstances at the time such
Projections were prepared and as of the date delivered to Lender and all such
assumptions are disclosed in the Projections.
(b) Each Borrower and each other Corporate Credit Party shall keep
adequate Books and Records with respect to the Collateral and its business
activities in which proper entries, reflecting all consolidated and
consolidating financial transactions, and payments and credits received on, and
all other dealings with, the Collateral, will be made in accordance with GAAP
and all Requirements of Law and on a basis consistent with the Financial
Statements.
3.5 Material Adverse Change. Between the date of each Borrower's most recently
audited Financial Statements delivered to Lender and the Closing Date: (a) no
Corporate Credit Party has incurred any obligations, contingent or
non-contingent liabilities, or liabilities for Charges, long-term leases or
unusual forward or long-term commitments which are not reflected in the
Projections delivered on the Closing Date and which could, alone or in the
aggregate, reasonably be expected to have a Material Adverse Effect; (b) there
has been no material deviation from such Projections; and (c) no events have
occurred which alone or in the aggregate has had or could reasonably be expected
to have a Material Adverse Effect. No Requirement of Law or Contractual
Obligation of any Credit Party has or have had or could reasonably be expected
to have a Material Adverse Effect. No Credit Party is in default, and to such
Credit Party's knowledge no third party is in default, under or with respect to
any of its Contractual Obligations, which alone or in the aggregate has had or
could reasonably be expected to have a Material Adverse Effect.
3.6 Real Estate; Property. The real estate listed in Disclosure Schedule (3.6)
constitutes all of the real property owned, leased, or used by each Corporate
Credit Party in its business, and such Credit Party will not execute any
material agreement or contract in respect of such real estate after the date of
this Agreement without giving Lender prompt prior written notice thereof. Each
Corporate Credit Party holds and will continue to hold good and marketable fee
simple title to all of its owned real estate, and good and marketable title to
all of its other properties and assets, and valid and insurable leasehold
interests in all of its leases (both as lessor and lessee, sublessee or
assignee), and none of the properties and assets of any Corporate Credit Party
are or will be subject to any Liens, except Permitted Encumbrances. With respect
to each of the premises identified in Disclosure Schedule (3.2) on or prior to
the Closing Date a bailee, landlord or mortgagee agreement acceptable to Lender
has been obtained.
3.7 Ventures, Subsidiaries and Affiliates; Outstanding Stock and Indebtedness.
Except as set forth in Disclosure Schedule (3.7), as of the Closing Date no
Corporate Credit Party has any Subsidiaries, is engaged in any joint venture or
partnership with
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any other Person, or is an Affiliate of any other Person. Populuxe Pictures,
Inc. is a subsidiary that has no assets whatsoever and will not, prior to the
Commitment Termination Date, obtain any assets. All of the issued and
outstanding Stock of each Corporate Credit Party (including all rights to
purchase, options, warrants or similar rights or agreements pursuant to which
any Corporate Credit Party may be required to issue, sell, repurchase or redeem
any of its Stock) as of the Closing Date is owned by each of the Stockholders
(and in the amounts) set forth on Disclosure Schedule (3.7). All outstanding
Indebtedness of each Corporate Credit Party as of the Closing Date is described
in Disclosure Schedule (5(b)).
3.8 Government Regulation; Margin Regulations. No Corporate Credit Party is
subject to or regulated under any Federal or state statute, rule or regulation
that restricts or limits such Person's ability to incur Indebtedness, pledge its
assets, or to perform its obligations under the Loan Documents. The making of
the Loans, the application of the proceeds and repayment thereof, and the
consummation of the transactions contemplated by the Loan Documents do not and
will not violate any requirement of Law. No Corporate Credit Party is engaged,
nor will it engage in the business of extending credit for the purpose of
"purchasing" or "carrying" any "margin security" as such terms are defined in
Regulation U the Federal Reserve Board as now and hereafter in effect (such
securities being referred to herein as "Margin Stock"). No Corporate Credit
Party owns any Margin Stock, and none of the proceeds of the Loans or other
extensions of credit under this Agreement will be used, directly or indirectly,
for the purpose of purchasing or carrying any Margin Stock or reducing or
retiring any Indebtedness which was originally incurred to purchase or carry any
Margin Stock. No Corporate Credit Party will take or permit to be taken any
action which might cause any Loan Document to violate any regulation of the
Federal Reserve Board.
3.9 Taxes; Charges. Except as disclosed on Disclosure Schedule (3.9) all tax
returns, reports and statements required by any Governmental Authority to be
filed by Borrower or any other Credit Party have, as of the Closing Date, been
filed and will, until the Termination Date, be filed with the appropriate
Governmental Authority and no tax Lien has been filed against any Credit Party
or any Credit Party's property. Proper and accurate amounts have been and will
be withheld by Borrower and each other Credit Party from their respective
employees for all periods in complete compliance with all Requirements of Law
and such withholdings have and will be timely paid to the appropriate
Governmental Authorities. Disclosure Schedule (3.9) sets forth as of the Closing
Date those taxable years for which any Credit Party's tax returns are currently
being audited by the IRS or any other applicable Governmental Authority and any
assessments or threatened assessments in connection with such audit, or
otherwise currently outstanding. Except as described on Disclosure Schedule
(3.9), none of the Credit Parties and their respective predecessors are liable
for any Charges: (a) under any agreement (including any tax sharing agreements
or agreement extending the period of assessment of any Charges) or (b) to each
Credit Party's knowledge, as a transferee. As of the Closing Date, no Credit
Party has agreed or been requested to make any adjustment under IRC Section
481(a), by reason of a change in accounting method or otherwise, which could
reasonably be expected to have a Material Adverse Effect.
3.10 Payment of Obligations. Each Credit Party will pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent, as the case may
be, all of its Charges and other obligations of whatever nature, except where
the amount or validity thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP with respect
thereto have been provided on the books of such Credit Party and none of the
Collateral is or could reasonably be expected to become subject to any Lien or
forfeiture or loss as a result of such contest.
3.11 ERISA. No ERISA Event has occurred or is reasonably expected to occur that,
when taken together with all other existing ERISA Events, could reasonably be
expected to result in a liability of any Credit Party of more than the Minimum
Actionable Amount. The present value of all accumulated benefit obligations of
the Credit Parties under each Plan (based on the assumptions used for purposes
of Statement of Financial Accounting Standards No. 87) did not, as of the date
of the most recent Financial Statements reflecting such amounts, exceed the fair
market value of the assets of such Plan by more than the Minimum Actionable
Amount, and the present value of all accumulated benefit obligations of all
underfunded Plans (based on the assumptions used for purposes of Statement of
Financial Account Standards No. 87) did not, as of the date of the most recent
Financial Statements reflecting such amounts, exceed the fair market value of
the assets of such underfunded Plans by more than the Minimum Actionable Amount.
No Credit Party or ERISA Affiliate has incurred or reasonably expects to incur
any Withdrawal Liability in excess of the Minimum Actionable Amount.
3.12 Litigation. No Litigation is pending or, to the knowledge of any Credit
Party, threatened by or against any Credit Party or against any Credit Party's
properties or revenues (a) with respect to any of the Loan Documents or any of
the transactions contemplated hereby or thereby, or (b) which could reasonably
be expected to have a Material Adverse Effect. Except as set forth on Disclosure
Schedule (3.12), as of the Closing Date there is no Litigation pending or
threatened against any Credit Party which seeks damages in excess of $50,000 or
injunctive relief or alleges criminal misconduct of any Credit Party. Each
Credit Party shall notify Lender promptly in writing upon learning of the
existence, threat or commencement of any Litigation against any Credit Party,
ERISA Affiliate or any Plan or any allegation of criminal misconduct against any
Credit Party.
3.13 Intellectual Property. As of the Closing Date, all material Intellectual
Property owned or used by any Corporate Credit Party is listed, together with
application or registration numbers, where applicable, in Disclosure Schedule
(3.13). Each
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Corporate Credit Party owns, or is licensed to use, all Intellectual Property
necessary to conduct its business as currently conducted except for such
Intellectual Property the failure of which to own or license could not
reasonably be expected to have a Material Adverse Effect. Each Corporate Credit
Party will maintain the patenting and registration of all Intellectual Property
with the United States Patent and Trademark Office, the United States Copyright
Office, or other appropriate Governmental Authority and each Corporate Credit
Party will promptly patent or register, as the case may be, all new Intellectual
Property and notify Lender in writing five (5) Business Days prior to filing any
such new patent or registration.
3.14 Full Disclosure. No information contained in any Loan Document, the
Financial Statements or any written statement furnished by or on behalf of any
Credit Party under any Loan Document, or to induce Lender to execute the Loan
Documents, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made.
3.15 Hazardous Materials. Except as set forth on Disclosure Schedule (3.15), as
of the Closing Date, (a) each real property location owned, leased or occupied
by each Corporate Credit Party (the "Real Property") is maintained free of
contamination from any Hazardous Material, (b) no Corporate Credit Party is
subject to any Environmental Liabilities or, to any Credit Party's knowledge,
potential Environmental Liabilities, in excess of $50,000 in the aggregate, (c)
no notice has been received by any Corporate Credit Party identifying it as a
"potentially responsible party" or requesting information under CERCLA or
analogous state statutes, and to the knowledge of any Credit Party, there are no
facts, circumstances or conditions that may result in any Corporate Credit Party
being identified as a "potentially responsible party" under CERCLA or analogous
state statutes; and (d) each Corporate Credit Party has provided to Lender
copies of all existing environmental reports, reviews and audits and all written
information pertaining to actual or potential Environmental Liabilities, in each
case relating to any Corporate Credit Party. Each Corporate Credit Party: (i)
shall comply in all material respects with all applicable Environmental Laws and
environmental permits; (ii) shall notify Lender in writing within seven days if
and when it becomes aware of any Release, on, at, in, under, above, to, from or
about any of its Real Property; and (iii) shall promptly forward to Lender a
copy of any order, notice, permit, application, or any communication or report
received by it or any other Credit Party in connection with any such Release.
3.16 Insurance. As of the Closing Date, Disclosure Schedule (3.16) lists all
insurance of any nature maintained for current occurrences by Borrowers and each
other Corporate Credit Party, as well as a summary of the terms of such
insurance. Each Corporate Credit Party shall deliver to Lender certified copies
and endorsements to all of its and those of its Subsidiaries (a) "All Risk" and
business interruption insurance policies naming Lender loss payee, and (b)
general liability and other liability policies naming Lender as an additional
insured. All policies of insurance on real and personal property will contain an
endorsement, in form and substance acceptable to Lender, showing loss payable to
Lender (Form 438 BFU or equivalent) and extra expense and business interruption
endorsements. Such endorsement, or an independent instrument furnished to
Lender, will provide that the insurance companies will give Lender at least 30
days prior written notice before any such policy or policies of insurance shall
be altered or canceled and that no act or default of any Borrower or any other
Person shall affect the right of Lender to recover under such policy or policies
of insurance in case of loss or damage. Each Corporate Credit Party shall direct
all present and future insurers under its "All Risk" policies of insurance to
pay all proceeds payable thereunder directly to Lender. If any insurance
proceeds are paid by check, draft or other instrument payable to any Credit
Party and Lender jointly, Lender may endorse such Credit Party's name thereon
and do such other things as Lender may deem advisable to reduce the same to
cash. Lender reserves the right at any time, upon review of each Credit Party's
risk profile, to require additional forms and limits of insurance. Each
Corporate Credit Party shall, on each anniversary of the Closing Date and from
time to time at Lender's request, deliver to Lender a report by a reputable
insurance broker, satisfactory to Lender, with respect to such Person's
insurance policies.
3.17 Deposit and Disbursement Accounts. Attachment I to Schedule D lists all
banks and other financial institutions at which any Borrower or any other
Corporate Credit Party, maintains deposits and/or other accounts, including the
Disbursement Accounts, and such Attachment correctly identifies the name,
address and telephone number of each such depository, the name in which the
account is held, a description of the purpose of the account, and the complete
account number.
3.18 Accounts and Cash Collateral. As of the date of each Borrowing Base
Certificate delivered to Lender, each Account listed thereon as an Eligible
Account shall be an Eligible Account and all cash collateral listed thereon as
Eligible cash collateral shall be Eligible Cash Collateral. No Borrower has
made, nor will any Borrower make, any agreement with any Account Debtor for any
extension of time for the payment of any Account, any compromise or settlement
for less than the full amount thereof, any release of any Account Debtor from
liability therefor, or any deduction therefrom except a discount or allowance
for prompt or early payment allowed by any Borrower in the ordinary course of
its business consistent with historical practice and as previously disclosed to
Lender in writing. Disclosure Schedule (3.18) sets forth each Contract of any
Borrower with any Account Debtor which gives such Account Debtor the right
(under such Contract, under common law or otherwise) to offset any Accounts for
such Borrower's failure to perform under such Contract and each Borrower has
obtained an offset waiver for each such contract in form and substance
satisfactory to Lender. With respect to the Accounts pledged as collateral
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pursuant to any Loan Document (a) the amounts shown on all invoices, statements
and reports which may be delivered to the Lender with respect thereto are
actually and absolutely owing to the relevant Credit Party as indicated thereon
and are not in any way contingent; (b) no payments have been or shall be made
thereon except payments immediately delivered to the applicable accounts
described in paragraph 1 to Schedule D or the Lender as required hereunder; and
(c) to each Borrower's knowledge all Account Debtors have the capacity to
contract. Each Borrower shall notify Lender promptly of any event or
circumstance which to such Borrower's knowledge would cause Lender to consider
any then existing Account as no longer constituting an Eligible Account or any
cash collateral no longer constituting Eligible Cash Collateral, as the case may
be.
3.19 Conduct of Business. Each Corporate Credit Party (a) shall conduct its
business substantially as now conducted or as otherwise permitted hereunder, and
(b) shall at all times maintain, preserve and protect all of the Collateral and
such Credit Party's other property, used or useful in the conduct of its
business and keep the same in good repair, working order and condition and make,
or cause to be made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices.
3.20 Further Assurances. At any time and from time to time, upon the written
request of Lender and at the sole expense of Borrowers, Borrowers and each other
Credit Party shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Lender may
reasonably deem desirable (a) to obtain the full benefits of this Agreement and
the other Loan Documents, (b) to protect, preserve and maintain Lender's rights
in any Collateral, or (c) to enable Lender to exercise all or any of the rights
and powers herein granted.
4. FINANCIAL MATTERS; REPORTS
4.1 Reports and Notices. Each From the Closing Date until the Termination Date,
each Borrower shall deliver to Lender:
(a) within 15 days following the end of each Fiscal Month, an aged trial
balance by Account Debtor and an Inventory Perpetual or Physical (as requested
by Lender) and as soon as available but in no event later than 30 days following
the end of each Fiscal Month, a reconciliation of the aged trial balance and the
Inventory Perpetual or Physical (as the case may be) to such Borrower's general
ledger and from the general ledger to the Financial Statements for such Fiscal
Month accompanied by supporting detail and documentation as Lender may
reasonably request;
(b) as frequently as Lender may request and in any event no later than 3
days following the end of each week, a Borrowing Base Certificate in the form of
Exhibit C as of the last day of the previous Fiscal Month detailing ineligible
Accounts and cash collateral for adjustment to the Borrowing Base, certified as
true and correct by the Chief Financial Officer of such Borrower or such other
officer as is acceptable to Lender;
(c) within 15 days following the end of each Fiscal Month, an Accounts
Payable Analysis in the Form of Exhibit D (together with an accounts payable
aging) and an Accounts Receivable Roll Forward Analysis in the Form of Exhibit
E, each certified as true and correct by the Chief Financial Officer of such
Borrower or such other officer as is acceptable to Lender;
(d) within 30 days following the end of each Fiscal Month, the Financial
Statements for such Fiscal Month, which shall provide comparisons to budget and
actual results for the corresponding period during the prior Fiscal Year, both
on a monthly and year-to-date basis, and accompanied by a certification in the
form of Exhibit J by the Chief Executive Officer or Chief Financial Officer of
such Borrower that such Financial Statements are complete and correct, that
there was no Default (or specifying those Defaults of which he or she was
aware), and showing in reasonable detail the calculations used in determining
compliance with the financial covenants hereunder;
(e) within 90 days following the close of each Fiscal Year, the Financial
Statements for such Fiscal Year certified without qualification by an
independent certified accounting firm reasonably acceptable to Lender, which
shall provide comparisons to the prior Fiscal Year, and shall be accompanied by
(i) a statement in reasonable detail showing the calculations used in
determining compliance with the financial covenants hereunder, (ii) a report
from such Borrower's accountants to the effect that in connection with their
audit examination nothing has come to their attention to cause them to believe
that a Default has occurred or specifying those Defaults of which they are
aware, and (iii) any management letter that may be issued;
(f) not less than 30 days prior to the close of each Fiscal Year, the
Projections, which will be prepared by such Borrower in good faith, with care
and diligence, and using assumptions which are reasonable under the
circumstances at the time such Projections are delivered to Lender and disclosed
therein when delivered; and
(g) all the reports and other information set forth on Exhibit B in the
time frames set forth therein.
8
4.2 Financial Covenants. Neither any Borrower nor any other Credit Party shall
breach any of the financial covenants set forth in Schedule G.
4.3 Other Reports and Information. Each Borrower shall advise Lender promptly,
in reasonable detail, of: (a) any Lien, other than Permitted Encumbrances,
attaching to or asserted against any of the Collateral or any occurrence causing
a material loss or decline in value of any Collateral and the estimated (or
actual, if available) amount of such loss or decline; (b) any material change in
the composition of the Collateral; and (c) the occurrence of any Default or
other event which has had or could reasonably be expected to have a Material
Adverse Effect. Each Borrower shall, upon request of Lender, furnish to Lender
such other reports and information in connection with the affairs, business,
financial condition, operations, prospects or management of such Borrower or any
other Credit Party or the Collateral as Lender may reasonably request, all in
reasonable detail.
5. NEGATIVE COVENANTS
Each Borrower and each Credit Party executing this Agreement covenants and
agrees (for itself and each other Credit Party) that, without Lender's prior
written consent, from the Closing Date until the Termination Date, neither any
Borrower nor any other Corporate Credit Party shall, directly or indirectly, by
operation of law or otherwise:
(a) form any Subsidiary or merge with, consolidate with, acquire all or
substantially all of the assets or capital stock of, or otherwise combine with
or make any investment in or, except as provided in clause 5(c) below, loan or
advance to, any Person, except: (i) Parent may, at its discretion purchase
additional Stock in, or merge with, Harmony; and (ii) the senior management team
of Curious may receive additional Stock in Curious pursuant to that certain
Purchase Agreement dated as of July 27, 1999 (the "Purchase Agreement"),
provided such senior management team does not own or control more than 20% of
such Stock;
(b) cancel any debt owing to it or create, incur, assume or permit to
exist any Indebtedness, except: (i) the Obligations, (ii) Indebtedness existing
as of the Closing Date set forth on Disclosure Schedule 5(b), (iii) deferred
taxes, (iv) by endorsement of instruments or items of payment for deposit to the
general account of such Credit Party, (v) for Guaranteed Indebtedness incurred
for the benefit of Borrower if the primary obligation is permitted by this
Agreement; (vi) the conversion by Parent of all or any portion of the
obligations, in the approximate amount of $3,200,000, of Harmony to Parent, into
additional Stock of Harmony, provided such conversion is on terms acceptable to
Lender; (vii) Indebtedness consisting of Capital Lease Obligations and Purchase
Money Indebtedness for Capital Expenditures permitted under Schedule G; and
(viii) additional Indebtedness (including Purchase Money Indebtedness) incurred
after the Closing Date in an aggregate outstanding amount for all such Corporate
Credit Parties combined not exceeding $100,000;
(c) enter into any lending, borrowing or other commercial transaction
with any of its employees, directors, Affiliates or any other Credit Party
(including upstreaming and downstreaming of cash and intercompany advances and
payments by a Credit Party on behalf of another Credit Party which are not
otherwise permitted hereunder), except: (i) loans or advances to employees in
the ordinary course of business in an aggregate outstanding amount not exceeding
$50,000; (ii) loans by Parent to any Borrower, provided such loans are either
(1) used by such Borrower for funding payroll, trade payables or other ordinary
course expenses and are repaid in the ordinary course, or (2) not repaid; (iii)
a loan or loans by Parent to xxxXXXX.xxx, Inc. in the aggregate amount of
$1,500,000, provided that (x) prior to and after giving effect to such loan or
loans no Default or Event of Default has occurred and is continuing, (y) such
loan or loans is advanced by Parent on or before July 31, 2001 and is evidenced
by a promissory note that is pledged and delivered to Lender, and (z)
immediately upon the advance of such loan or loans, the total cash on hand for
Parent and all Borrowers is not less than the Revolving Credit Loan; and (iv)
commercial transactions on an arm's length basis between or among any Credit
Party and (A) Xxxxxxxxxxx X. Xxxx, Xxxx Xxxxxxxxxx,, or any Person controlled by
such individuals, or (B) xxxXXXX.xxx, Inc. for internet services;
(d) make any changes in any of its business objectives, purposes, or
operations which could reasonably be expected to adversely affect repayment of
the Obligations or could reasonably be expected to have a Material Adverse
Effect or engage in any business other than that presently engaged in or
proposed to be engaged in the Projections delivered to Lender on the Closing
Date or amend its charter or by-laws or other organizational documents;
(e) create or permit any Lien on any of its properties or assets, except
for Permitted Encumbrances;
9
(f) sell, transfer, issue, convey, assign or otherwise dispose of any of
its assets or properties, including its Accounts or any shares of its Stock or
engage in any sale-leaseback, synthetic lease or similar transaction, except:
(i) the sale of Inventory or obsolete or unnecessary Equipment in the ordinary
course of its business; (ii) the issuance by Parent or Harmony of Stock; and
(iii) the transfer of Stock of Curious to the senior management team of Curious
pursuant to the Purchase Agreement.
(g) change its name, chief executive office, corporate offices,
warehouses or other Collateral locations, or location of its records concerning
the Collateral, or acquire, lease or use any real estate after the Closing Date
without such Person, in each instance, giving fifteen (15) days prior written
notice thereof to Lender and taking all actions deemed necessary or appropriate
by Lender to continuously protect and perfect Lender's Liens upon the
Collateral;
(h) establish any depository or other bank account of any kind with any
financial institution (other than the accounts set forth on Attachment 1 to
Schedule D) without Lender's prior written consent; or
(i) make or permit any Restricted Payment.
6. SECURITY INTEREST
6.1 Grant of Security Interest. (a) As collateral security for the prompt and
complete payment and performance of the Obligations, each of the Borrowers and
each other Credit Party executing this Agreement hereby grants to the Lender a
security interest in and Lien upon all of its personal property and assets,
whether tangible or intangible, and whether now owned or hereafter acquired, or
in which it now has or at any time in the future may acquire any right, title,
or interest, including all of the following property in which it now has or at
any time in the future may acquire any right, title or interest: all Accounts;
all bank and deposit accounts and all funds on deposit therein; all cash and
cash equivalents; all commodity contracts; all investments, Stock and Investment
Property; all Inventory and Equipment; all Goods; all Chattel Paper, Documents
and Instruments; all Books and Records; all General Intangibles; and to the
extent not otherwise included, all Proceeds and products of all and any of the
foregoing and all collateral security and guarantees given by any Person with
respect to any of the foregoing, but excluding in all events Hazardous Waste
(all of the foregoing, together with any other collateral pledged to the Lender
pursuant to any other Loan Document, collectively, the "Collateral").
(b) Each Borrower, Lender and each other Credit Party executing this
Agreement agree that this Agreement creates, and is intended to create, valid
and continuing Liens upon the Collateral in favor of Lender. Each Borrower and
each other Credit Party executing this Agreement represents, warrants and
promises to Lender that: (i) each Borrower and each other Credit Party granting
a Lien in Collateral is the sole owner of each item of the Collateral upon which
it purports to xxxxx x Xxxx pursuant to the Loan Documents, and has good and
marketable title thereto free and clear of any and all Liens or claims of
others, other than Permitted Encumbrances; (ii) the security interests granted
pursuant to this Agreement, upon completion of the filings and other actions
listed on Disclosure Schedule 6.1 (which, in the case of all filings and other
documents referred to in said Schedule, have been delivered to the Lender in
duly executed form) will constitute valid perfected security interests in all of
the Collateral in favor of the Lender as security for the prompt and complete
payment and performance of the Obligations, enforceable in accordance with the
terms hereof against any and all creditors of and purchasers from any Credit
Party (other than purchasers of Inventory in the ordinary course of business)
and such security interests are prior to all other Liens on the Collateral in
existence on the date hereof except for Permitted Encumbrances which have
priority by operation of law; and (iii) no effective security agreement,
financing statement, equivalent security or Lien instrument or continuation
statement covering all or any part of the Collateral is or will be on file or of
record in any public office, except those relating to Permitted Encumbrances.
Each Borrower and each other Credit Party executing this Agreement promise to
defend the right, title and interest of Lender in and to the Collateral against
the claims and demands of all Persons whomsoever, and each shall take such
actions, including (x) the prompt delivery of all original Instruments, Chattel
Paper and certificated Stock owned by such Borrower and each other Credit Party
granting a Lien on Collateral to Lender, (y) notification of Lender's interest
in Collateral at Lender's request, and (z) the institution of litigation against
third parties as shall be prudent in order to protect and preserve each Credit
Party's and Lender's respective and several interests in the Collateral. Each
Borrower (and any other Credit Party granting a Lien in Collateral) shall xxxx
its Books and Records pertaining to the Collateral to evidence the Loan
Documents and the Liens granted under the Loan Documents. All Chattel Paper
shall be marked with the following legend: "This writing and the obligations
evidenced or secured hereby are subject to the security interest of General
Electric Capital Corporation."
6.2 Lender's Rights. (a) Lender may, (i) at any time in Lender's own name or in
the name of any Borrower or any other Credit Party, communicate with Account
Debtors, parties to Contracts, and obligors in respect of Instruments, Chattel
Paper or other Collateral to verify to Lender's satisfaction, the existence,
amount and terms of any such Accounts, Contracts, Instruments or Chattel Paper
or other Collateral, and (ii) at any time and without prior notice to any
Borrower or any other Credit Party, notify Account Debtors, parties to
Contracts, and obligors in respect of Chattel Paper, Instruments, or other
Collateral that the Collateral has been assigned to Lender and that payments
shall be made directly to Lender. Upon the request of Lender, each Borrower and
any other Credit Party shall so notify such Account Debtors, parties to
Contracts, and obligors in respect of
10
Instruments, Chattel Paper or other Collateral. Each Borrower and each other
Credit Party hereby constitutes Lender or Lender's designee as its attorney with
power to endorse its name upon any notes, acceptance drafts, money orders or
other evidences of payment or Collateral.
(b) Borrower and each other Credit Party shall remain liable under each
Contract, Instrument and License to observe and perform all the conditions and
obligations to be observed and performed by it thereunder, and Lender shall have
no obligation or liability whatsoever to any Person under any Contract,
Instrument or License (between any Borrower or any other Credit Party and any
Person other than Lender) by reason of or arising out of the execution, delivery
or performance of this Agreement, and Lender shall not be required or obligated
in any manner (i) to perform or fulfill any of the obligations of any Borrower
or any other Credit Party, (ii) to make any payment or inquiry, or (iii) to take
any action of any kind to collect, compromise or enforce any performance or the
payment of any amounts which may have been assigned to it or to which it may be
entitled at any time or times under or pursuant to any Contract, Instrument or
License.
(c) Each Borrower and each other Credit Party shall, with respect to each
owned, leased, or controlled property, during normal business hours and upon
reasonable advance notice (unless a Default shall have occurred and be
continuing, in which event no notice shall be required and Lender shall have
access at any and all times): (i) provide access to such property to Lender and
any of its officers, employees and agents, as frequently as Lender determines to
be appropriate; (ii) permit Lender and any of its officers, employees and agents
to inspect, audit and make extracts and copies (or take originals if reasonably
necessary) from all of such Borrower's and such Credit Party's Books and
Records; and (iii) permit Lender to inspect, review, evaluate and make physical
verifications and appraisals of the Inventory and other Collateral in any manner
and through any medium that Lender considers advisable, and each Borrower and
such Credit Party agree to render to Lender, at such Borrower's and such Credit
Party's cost and expense, such clerical and other assistance as may be
reasonably requested with regard thereto.
(d) After the occurrence and during the continuance of a Default, each
Borrower at its own expense, shall cause the certified public accountant then
engaged by such Borrower to prepare and deliver to Lender at any time and from
time to time, promptly upon Lender's request, the following reports: (i) a
reconciliation of all Accounts; (ii) an aging of all Accounts; (iii) trial
balances; and (iv) test verifications of such Accounts as Lender may request.
Each Borrower, at its own expense, shall cause its certified independent public
accountants to deliver to Lender the results of any physical verifications of
all or any portion of the Inventory made or observed by such accountants when
and if such verification is conducted. Lender shall be permitted to observe and
consult with each Borrower's accountants in the performance of these tasks.
6.3 Lender's Appointment as Attorney-in-fact. On the Closing Date, each Borrower
and each other Credit Party executing this Agreement shall execute and deliver a
Power of Attorney in the form attached as Exhibit I. The power of attorney
granted pursuant to the Power of Attorney and all powers granted under any Loan
Document are powers coupled with an interest and shall be irrevocable until the
Termination Date. The powers conferred on Lender under the Power of Attorney are
solely to protect Lender's interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. Lender agrees not to exercise any
power or authority granted under the Power of Attorney unless an Event of
Default has occurred and is continuing. Each Borrower and each other Credit
Party executing this Agreement authorizes Lender to file any financing or
continuation statement without the signature of such Borrower or such Credit
Party to the extent permitted by applicable law.
6.4 Grant of License to Use Intellectual Property Collateral. Each Borrower and
each other Credit Party executing this Agreement hereby grants to Lender an
irrevocable, non-exclusive license (exercisable upon the occurrence and during
the continuance of an Event of Default without payment of royalty or other
compensation to any Borrower or such Credit Party) to use, transfer, license or
sublicense any Intellectual Property now owned, licensed to, or hereafter
acquired by such Borrower or such Credit Party, and wherever the same may be
located, and including in such license access to all media in which any of the
licensed items may be recorded or stored and to all computer and automatic
machinery software and programs used for the compilation or printout thereof,
and represents, promises and agrees that any such license or sublicense is not
and will not be in conflict with the contractual or commercial rights of any
third Person; provided, that such license will terminate on the Termination
Date.
7. EVENTS OF DEFAULT: RIGHTS AND REMEDIES
7.1 Events of Default. The occurrence of any one or more of the following events
(regardless of the reason therefor) shall constitute an "Event of Default"
hereunder which shall be deemed to be continuing until waived in writing by
Lender in accordance with Section 10.3:
(a) any Borrower shall fail to make any payment in respect of any
Obligations when due and payable or declared due and payable; or
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(b) (i) Borrower or any other Credit Party shall fail or neglect to
perform, keep or observe any of the covenants, promises, agreements,
requirements, conditions or other terms or provisions contained in Section 1,
Sections 3.1, 3.2, 3.17, 3.18, 3.19, 3.20, 4.2 or Section 5 of this Agreement;
or (ii) Borrower or any other Credit Party shall fail or neglect to perform,
keep or observe any of the other covenants, promises, agreements, requirements,
conditions or other terms or provisions contained in this Agreement (other than
those set forth in the Sections referred to in clause (i) immediately above) or
any of the other Loan Documents, regardless of whether such breach involves a
covenant, promise, agreement, condition, requirement, term or provision with
respect to a Credit Party that has not signed this Agreement, and such breach is
not remediable or, if remediable, continues unremedied for a period of five (5)
Business Days after the earlier to occur of (x) the date on which such breach is
known or reasonably should have become known to any officer of the Borrower or
such Credit Party and (y) the date on which Lender shall have notified the
Borrower or such other Credit Party of such breach; or
(c) an event of default shall occur under any Contractual Obligation of
any Borrower or any other Credit Party (other than this Agreement and the other
Loan Documents), and such event of default (i) involves the failure to make any
payment (whether or not such payment is blocked pursuant to the terms of an
intercreditor agreement or otherwise), whether of principal, interest or
otherwise, and whether due by scheduled maturity, required prepayment,
acceleration, demand or otherwise, in respect of any Indebtedness (other than
the Obligations) of such Person in an aggregate amount exceeding the Minimum
Actionable Amount, or (ii) causes (or permits any holder of such Indebtedness or
a trustee to cause) such Indebtedness, or a portion thereof, in an aggregate
amount exceeding the Minimum Actionable Amount to become due prior to its stated
maturity or prior to its regularly scheduled date of payment; or
(d) any information contained in any Borrowing Base Certificate is untrue
or incorrect in any respect, or any representation or warranty in this Agreement
or any other Loan Document, or in any written statement pursuant hereto or
thereto, or in any report, financial statement or certificate made or delivered
to Lender by any Borrower or any other Credit Party shall be untrue or incorrect
in any material respect as of the date when made or deemed made; or
(e) there shall be commenced against any Borrower or any other Credit
Party any Litigation seeking issuance of a warrant of attachment, execution,
distraint or similar process against all or any substantial part of its assets
which results in the entry of an order for any such relief which remains
unstayed or undismissed for thirty (30) consecutive days; or any Borrower or any
other Credit Party shall have concealed, removed or permitted to be concealed or
removed, any part of its property with intent to hinder, delay or defraud any of
its creditors or made or suffered a transfer of any of its property or the
incurring of an obligation which may be fraudulent under any bankruptcy,
fraudulent transfer or other similar law; or
(f) a case or proceeding shall have been commenced involuntarily against
any Borrower or any other Credit Party in a court having competent jurisdiction
seeking a decree or order: (i) under the United States Bankruptcy Code or any
other applicable Federal, state or foreign bankruptcy or other similar law, and
seeking either (x) the appointment of a custodian, receiver, liquidator,
assignee, trustee or sequestrator (or similar official) for such Person or of
any substantial part of its properties, or (y) the reorganization or winding up
or liquidation of the affairs of any such Person, and such case or proceeding
shall remain undismissed or unstayed for sixty (60) consecutive days or such
court shall enter a decree or order granting the relief sought in such case or
proceeding; or (ii) invalidating or denying any Person's right, power, or
competence to enter into or perform any of its obligations under any Loan
Document or invalidating or denying the validity or enforceability of this
Agreement or any other Loan Document or any action taken hereunder or
thereunder; or
(g) any Borrower or any other Credit Party shall (i) commence any case,
proceeding or other action under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship or relief of debtors, seeking to have an order for relief
entered with respect to it or seeking appointment of a custodian, receiver,
liquidator, assignee, trustee or sequestrator (or similar official) for it or
any substantial part of its properties, (ii) make a general assignment for the
benefit of creditors, (iii) consent to or take any action in furtherance of, or,
indicating its consent to, approval of, or acquiescence in, any of the acts set
forth in paragraphs (e) or (f) of this Section 7.1 or clauses (i) and (ii) of
this paragraph (g), or (iv) shall admit in writing its inability to, or shall be
generally unable to, pay its debts as such debts become due; or
(h) a final judgment or judgments for the payment of money in excess of
the Minimum Actionable Amount in the aggregate shall be rendered against any
Borrower or any other Credit Party, unless the same shall be (i) fully covered
by insurance and the issuer(s) of the applicable policies shall have
acknowledged full coverage in writing within fifteen (15) days of judgment, or
(ii) vacated, stayed, bonded, paid or discharged within a period of fifteen (15)
days from the date of such judgment; or
(i) any other event shall have occurred which has had or could reasonably
be expected to have a Material Adverse Effect; or
(j) any provision of any Loan Document shall for any reason cease to be
valid, binding and enforceable in accordance with its terms, or any Lien
granted, or intended by the Loan Documents to be granted, to Lender shall cease
to be a valid and perfected Lien having the first priority (or a lesser priority
if expressly permitted in the Loan Documents) in any of the Collateral (or any
Credit Party shall so assert any of the foregoing); or
(k) a Change of Control shall have occurred with respect to any Corporate
Credit Party; or
(l) an ERISA Event shall have occurred that, in the opinion of the
Lender, when taken together with all other ERISA Events that have occurred and
are then continuing, could reasonably be expected to result in liability of any
Credit Party in an aggregate amount exceeding the Minimum Actionable Amount.
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7.2 Remedies. (a) If any Default shall have occurred and be continuing, then
Lender may terminate or suspend its obligation to make further Revolving Credit
Advances and to incur additional Letter of Credit Obligations. In addition, if
any Event of Default shall have occurred and be continuing, Lender may, without
notice, take any one or more of the following actions: (i) declare all or any
portion of the Obligations to be forthwith due and payable, including contingent
liabilities with respect to Letter of Credit Obligations, whereupon such
Obligations shall become and be due and payable; (ii) require that all Letter of
Credit Obligations be fully cash collateralized pursuant to Schedule C; or (iii)
exercise any rights and remedies provided to Lender under the Loan Documents or
at law or equity, including all remedies provided under the Code; provided, that
upon the occurrence of any Event of Default specified in Sections 7.1 (e), (f)
or (g), the Obligations shall become immediately due and payable (and any
obligation of Lender to make further Loans, if not previously terminated, shall
immediately be terminated) without declaration, notice or demand by Lender.
(b) Without limiting the generality of the foregoing, each Borrower and
each other Credit Party executing this Agreement expressly agrees that upon the
occurrence and during the continuance of any Event of Default, Lender may
collect, receive, assemble, process, appropriate and realize upon the
Collateral, or any part thereof, and may forthwith sell, lease, assign, give an
option or options to purchase or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or more parcels
at public or private sale or sales, at any exchange at such prices as it may
deem best, for cash or on credit or for future delivery without assumption of
any credit risk. Lender shall have the right upon any such public sale, to the
extent permitted by law, to purchase for the benefit of Lender the whole or any
part of said Collateral so sold, free of any right of equity of redemption,
which right each Borrower and each other Credit Party executing this Agreement
hereby releases. Such sales may be adjourned or continued from time to time with
or without notice. Lender shall have the right to conduct such sales on any
Credit Party's premises or elsewhere and shall have the right to use any Credit
Party's premises without rent or other charge for such sales or other action
with respect to the Collateral for such time as Lender deems necessary or
advisable.
(c) Upon the occurrence and during the continuance of an Event of Default
and at Lender's request, each Borrower and each other Credit Party executing
this Agreement further agrees to assemble the Collateral and make it available
to Lender at places which Lender shall reasonably select, whether at its
premises or elsewhere. Until Lender is able to effect a sale, lease, or other
disposition of the Collateral, Lender shall have the right to complete,
assemble, use or operate the Collateral or any part thereof, to the extent that
Lender deems appropriate, for the purpose of preserving such Collateral or its
value or for any other purpose. Lender shall have no obligation to any Credit
Party to maintain or preserve the rights of such Credit Party as against third
parties with respect to any Collateral while such Collateral is in the
possession of Lender. Lender may, if it so elects, seek the appointment of a
receiver or keeper to take possession of any Collateral and to enforce any of
Lender's remedies with respect thereto without prior notice or hearing. To the
maximum extent permitted by applicable law, each Borrower and each other Credit
Party executing this Agreement waives all claims, damages, and demands against
Lender, its Affiliates, agents, and the officers and employees of any of them
arising out of the repossession, retention or sale of any Collateral except such
as are determined in a final judgment by a court of competent jurisdiction to
have arisen solely out of the gross negligence or willful misconduct of such
Person. Each Borrower and each other Credit Party executing this Agreement
agrees that ten (10) days prior notice by Lender to such Credit Party of the
time and place of any public sale or of the time after which a private sale may
take place is reasonable notification of such matters. Each Borrower and each
other Credit Party shall remain liable for any deficiency if the proceeds of any
sale or disposition of the Collateral are insufficient to pay all amounts to
which Lender is entitled.
(d) Lender's rights and remedies under this Agreement shall be cumulative
and nonexclusive of any other rights and remedies which Lender may have under
any Loan Document or at law or in equity. Recourse to the Collateral shall not
be required. All provisions of this Agreement are intended to be subject to all
applicable mandatory provisions of law that may be controlling and to be
limited, to the extent necessary, so that they do not render this Agreement
invalid or unenforceable, in whole or in part.
7.3 Waivers by Credit Parties. Except as otherwise provided for in this
Agreement and to the fullest extent permitted by applicable law, each Borrower
and each other Credit Party executing this Agreement waives: (a) presentment,
demand and protest, and notice of presentment, dishonor, intent to accelerate,
acceleration, protest, default, nonpayment, maturity, release, compromise,
settlement, extension or renewal of any or all Loan Documents, the Notes or any
other notes, commercial paper, Accounts, Contracts, Documents, Instruments,
Chattel Paper and guaranties at any time held by Lender on which such Credit
Party may in any way be liable, and hereby ratifies and confirms whatever Lender
may do in this regard; (b) all rights to notice and a hearing prior to Lender's
taking possession or control of, or to Lender's replevy, attachment or levy
upon, any Collateral or any bond or security which might be required by any
court prior to allowing Lender to exercise any of its remedies; and (c) the
benefit of all valuation, appraisal and exemption laws. Each Borrower and each
other Credit Party executing this Agreement acknowledges that it has been
advised by counsel of its choices and decisions with respect to this Agreement,
the other Loan Documents and the transactions evidenced hereby and thereby.
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7.4 Proceeds. The Proceeds of any sale, disposition or other realization upon
any Collateral shall be applied by Lender upon receipt to the Obligations in
such order as Lender may deem advisable in its sole discretion (including the
cash collateralization of any Letter of Credit Obligations), and after the
indefeasible payment and satisfaction in full in cash of all of the Obligations,
and after the payment by Lender of any other amount required by any provision of
law, including Section 9-504(1)(c) of the Code (but only after Lender has
received what Lender considers reasonable proof of a subordinate party's
security interest), the surplus, if any, shall be paid to Borrowers or their
representatives or to whomsoever may be lawfully entitled to receive the same,
or as a court of competent jurisdiction may direct.
8. SUCCESSORS AND ASSIGNS
Each Loan Document shall be binding on and shall inure to the benefit of each
Borrower and each other Credit Party executing such Loan Document, Lender, and
their respective successors and assigns, except as otherwise provided herein or
therein. Neither any Borrower nor any other Credit Party may assign, transfer,
hypothecate, delegate or otherwise convey its rights, benefits, obligations or
duties under any Loan Document without the prior express written consent of
Lender. Any such purported conveyance by such Borrower or such Credit Party
without the prior express written consent of Lender shall be void. There shall
be no third party beneficiaries of any of the terms and provisions of any of the
Loan Documents. Lender reserves the right at any time to create and sell
participations in the Loans and the Loan Documents and to sell, transfer or
assign any or all of its rights in the Loans and under the Loan Documents.
9. GUARANTOR WAIVERS BY BORROWERS
IF AND TO THE EXTENT THAT ANY OBLIGATION OF ANY BORROWER TO LENDER SHALL BE
CONSIDERED AN OBLIGATION OF GUARANTY OR SURETYSHIP, THEN THE FOLLOWING
PROVISIONS OF THIS SECTION 9 SHALL APPLY WITH RESPECT TO EACH SUCH BORROWER
SOLELY TO THE EXTENT THAT SUCH BORROWER IS DEEMED TO ACT IN THE CAPACITY OF A
GUARANTOR AND SHALL NOT EFFECT A WAIVER OF RIGHTS IN SUCH PERSON'S CAPACITY AS A
BORROWER:
(A) SUCH BORROWER EXPRESSLY WAIVES THE RIGHT TO REQUIRE LENDER FIRST TO
PURSUE ANY OTHER PERSON, THE COLLATERAL, OR ANY OTHER SECURITY OR GUARANTY THAT
MAY BE HELD FOR THE OBLIGATIONS, OR TO APPLY ANY SUCH SECURITY OR GUARANTY TO
THE OBLIGATIONS BEFORE SEEKING FROM SUCH BORROWER PAYMENT IN FULL OF ITS
LIABILITIES TO LENDER OR PROCEEDING AGAINST SUCH BORROWER FOR SAME.
(B) SUCH BORROWER ACKNOWLEDGES THAT IF LENDER MAY, UNDER APPLICABLE LAW,
PROCEED TO REALIZE ITS BENEFITS UNDER ANY OF THE LOAN DOCUMENTS GIVING LENDER A
LIEN UPON ANY COLLATERAL, WHETHER OWNED BY ANY BORROWER OR BY ANY OTHER PERSON,
EITHER BY JUDICIAL FORECLOSURE OR BY NON-JUDICIAL SALE OR ENFORCEMENT, LENDER
MAY, AT ITS SOLE OPTION, DETERMINE WHICH OF ITS REMEDIES OR RIGHTS IT MAY PURSUE
WITHOUT AFFECTING ANY OF ITS RIGHTS AND REMEDIES. IF, IN THE EXERCISE OF ANY OF
ITS RIGHTS AND REMEDIES, LENDER SHALL FORFEIT ANY OF ITS RIGHTS OR REMEDIES,
INCLUDING ITS RIGHT TO ENTER A DEFICIENCY JUDGMENT AGAINST ANY BORROWER OR ANY
OTHER PERSON, WHETHER BECAUSE OF ANY APPLICABLE LAWS PERTAINING TO "ELECTION OF
REMEDIES" OR THE LIKE, SUCH BORROWER HEREBY CONSENTS TO SUCH ACTION BY LENDER
AND WAIVES ANY CLAIM BASED UPON SUCH ACTION, EVEN IF SUCH ACTION BY LENDER SHALL
RESULT IN A FULL OR PARTIAL LOSS OF ANY RIGHTS OF SUBROGATION WHICH SUCH
BORROWER MIGHT OTHERWISE HAVE HAD BUT FOR SUCH ACTION BY LENDER. ANY ELECTION OF
REMEDIES WHICH RESULTS IN THE DENIAL OR IMPAIRMENT OF THE RIGHT OF LENDER TO
SEEK A DEFICIENCY JUDGMENT AGAINST ANY BORROWER SHALL NOT IMPAIR ANY OTHER
BORROWER'S OBLIGATION TO PAY THE FULL AMOUNT OF THE OBLIGATIONS. IN THE EVENT
LENDER SHALL BID AT ANY FORECLOSURE OR TRUSTEE'S SALE OR AT ANY PRIVATE SALE
PERMITTED BY LAW OR THE LOAN DOCUMENTS, LENDER MAY BID ALL OR LESS THAN THE
AMOUNT OF THE OBLIGATIONS AND THE AMOUNT OF SUCH BID NEED NOT BE PAID BY LENDER
BUT SHALL BE CREDITED AGAINST THE OBLIGATIONS. THE AMOUNT OF THE SUCCESSFUL BID
AT ANY SUCH SALE, WHETHER LENDER OR ANY OTHER PARTY IS THE SUCCESSFUL BIDDER,
SHALL BE CONCLUSIVELY DEEMED TO BE THE FAIR MARKET VALUE OF THE COLLATERAL AND
THE DIFFERENCE BETWEEN SUCH BID AMOUNT AND THE REMAINING BALANCE OF THE
OBLIGATIONS SHALL BE CONCLUSIVELY DEEMED TO BE THE AMOUNT OF THE OBLIGATIONS
GUARANTEED BY SUCH BORROWER, NOTWITHSTANDING THAT ANY PRESENT OR FUTURE LAW OR
COURT DECISION OR RULING MAY HAVE THE EFFECT OF REDUCING THE AMOUNT OF ANY
DEFICIENCY CLAIM TO WHICH LENDER MIGHT OTHERWISE BE ENTITLED BUT FOR SUCH
BIDDING AT ANY SUCH SALE.
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(C) SUCH BORROWER AGREES THAT LENDER SHALL BE UNDER NO OBLIGATION TO (I)
MARSHAL ANY ASSETS IN FAVOR OF SUCH BORROWER, (II) PROCEED FIRST AGAINST ANY
OTHER BORROWER OR PERSON OR ANY PROPERTY OF ANY OTHER BORROWER OR PERSON OR
AGAINST ANY COLLATERAL, (III) ENFORCE FIRST ANY OTHER GUARANTY OBLIGATIONS WITH
RESPECT TO, OR SECURITY FOR, THE OBLIGATIONS, OR (IV) PURSUE ANY OTHER REMEDY IN
LENDER'S POWER THAT SUCH BORROWER MAY NOT BE ABLE TO PURSUE ITSELF AND THAT MAY
LIGHTEN SUCH BORROWER'S BURDEN, ANY RIGHT TO WHICH SUCH BORROWER HEREBY
EXPRESSLY WAIVES.
(D) EACH BORROWER ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S ENTERING INTO THIS AGREEMENT AND THAT LENDER IS RELYING
UPON THE FOREGOING WAIVERS IN ITS FUTURE DEALINGS WITH SUCH BORROWER. EACH
BORROWER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE FOREGOING WAIVERS WITH
ITS LEGAL COUNSEL AND HAS KNOWINGLY AND VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
10. MISCELLANEOUS
10.1 Complete Agreement; Modification of Agreement. This Agreement and the other
Loan Documents constitute the complete agreement between the parties with
respect to the subject matter hereof and thereof, supersede all prior
agreements, commitments, understandings or inducements (oral or written,
expressed or implied). No Loan Document may be modified, altered or amended
except by a written agreement signed by Lender, and each other Credit Party a
party to such Loan Document. Each Borrower and each other Credit Party executing
this Agreement or any other Loan Document shall have all duties and obligations
under this Agreement and such other Loan Document from the date of its execution
and delivery, regardless of whether the initial Loan has been funded at that
time.
10.2 Expenses. Each Borrower agrees to pay or reimburse Lender for all costs and
expenses (including the fees and expenses of all counsel, advisors, consultants
(including environmental and management consultants) and auditors retained in
connection therewith), incurred in connection with: (a) the preparation,
negotiation, execution, delivery, performance and enforcement of the Loan
Documents and the preservation of any rights thereunder; (b) collection,
including deficiency collections; (c) the forwarding to Borrower or any other
Person on behalf of Borrower by Lender of the proceeds of any Loan (including a
wire transfer fee of $25 per wire transfer); (d) any amendment, waiver or other
modification with respect to any Loan Document or advice in connection with the
administration of the Loans or the rights thereunder; (e) any litigation,
dispute, suit, proceeding or action (whether instituted by or between any
combination of Lender, Borrower or any other Person), and an appeal or review
thereof, in any way relating to the Collateral, any Loan Document, or any action
taken or any other agreements to be executed or delivered in connection
therewith, whether as a party, witness or otherwise; and (f) any effort (i) to
monitor the Loans, (ii) to evaluate, observe or assess Borrower or any other
Credit Party or the affairs of such Person, and (iii) to verify, protect,
evaluate, assess, appraise, collect, sell, liquidate or otherwise dispose of the
Collateral.
10.3 No Waiver. Neither Lender's failure, at any time, to require strict
performance by any Borrower or any other Credit Party of any provision of any
Loan Document, nor Lender's failure to exercise, nor any delay in exercising,
any right, power or privilege hereunder, shall operate as a waiver thereof or
waive, affect or diminish any right of Lender thereafter to demand strict
compliance and performance therewith. No single or partial exercise of any
right, power or privilege hereunder shall preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. Any suspension
or waiver of a Default or other provision under the Loan Documents shall not
suspend, waive or affect any other Default or other provision under any Loan
Document, and shall not be construed as a bar to any right or remedy which
Lender would otherwise have had on any future occasion. None of the
undertakings, indemnities, agreements, warranties, covenants and representations
of any Borrower or any other Credit Party to Lender contained in any Loan
Document and no Default by any Borrower or any other Credit Party under any Loan
Document shall be deemed to have been suspended or waived by Lender, unless such
waiver or suspension is by an instrument in writing signed by an officer or
other authorized employee of Lender and directed to such Borrower specifying
such suspension or waiver (and then such waiver shall be effective only to the
extent therein expressly set forth), and Lender shall not, by any act (other
than execution of a formal written waiver), delay, omission or otherwise, be
deemed to have waived any of its rights or remedies hereunder.
10.4 Severability; Section Titles. Wherever possible, each provision of the Loan
Documents shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of any Loan Document shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of such Loan Document. Except as
otherwise expressly provided for in the Loan Documents, no termination or
cancellation (regardless of cause or procedure) of any financing arrangement
under the Loan Documents shall in any way affect or impair the Obligations,
duties, covenants, representations and warranties, indemnities, and liabilities
of any Borrower or any other Credit Party or the rights of Lender
15
relating to any unpaid Obligation (due or not due, liquidated, contingent or
unliquidated), or any transaction or event occurring prior to such termination,
or any transaction or event, the performance of which is not required until
after the Commitment Termination Date, all of which shall not terminate or
expire, but rather shall survive such termination or cancellation and shall
continue in full force and effect until the Termination Date; provided, that all
indemnity obligations of the Credit Parties under the Loan Documents shall
survive the Termination Date. The Section titles contained in any Loan Document
are and shall be without substantive meaning or content of any kind whatsoever
and are not a part of the agreement between the parties hereto.
10.5 Authorized Signature. Until Lender shall be notified in writing by any
Borrower or any other Credit Party to the contrary, the signature upon any
document or instrument delivered pursuant hereto and believed by Lender or any
of Lender's officers, agents, or employees to be that of an officer of such
Borrower or such other Credit Party shall bind such Borrower and such other
Credit Party and be deemed to be the act of such Borrower or such other Credit
Party affixed pursuant to and in accordance with resolutions duly adopted by
such Borrower's or such other Credit Party's Board of Directors, and Lender
shall be entitled to assume the authority of each signature and authority of the
person whose signature it is or appears to be unless the person acting in
reliance thereon shall have actual knowledge to the contrary.
10.6 Notices. Except as otherwise provided herein, whenever any notice, demand,
request or other communication shall or may be given to or served upon any party
by any other party, or whenever any party desires to give or serve upon any
other party any communication with respect to this Agreement, each such
communication shall be in writing and shall be deemed to have been validly
served, given or delivered (a) upon the earlier of (i) actual receipt or (ii)
three (3) days after deposit in the United States Mail, registered or certified
mail, return receipt requested, with proper postage prepaid, (b) upon
transmission, when sent by telecopy or other similar facsimile transmission upon
receipt of confirmation that such transmission has been received (with such
telecopy or facsimile promptly confirmed by delivery of a copy by personal
delivery or United States Mail as otherwise provided in this Section 10.6), (c)
one (1) Business Day after deposit with a reputable overnight courier with all
charges prepaid or (d) when hand-delivered, all of which shall be addressed to
the party to be notified and sent to the address or facsimile number indicated
in Schedule B or to such other address (or facsimile number) as may be
substituted by notice given as herein provided. Failure or delay in delivering
copies of such communication to any Person (other than any Borrower or Lender)
designated in Schedule B to receive copies shall in no way adversely affect the
effectiveness of such communication.
10.7 Counterparts. Any Loan Document may be executed in any number of separate
counterparts by one or more of the parties thereto, and all of said counterparts
taken together shall constitute one and the same instrument.
10.8 Time of the Essence. Time is of the essence for performance of the
Obligations under the Loan Documents.
10.9 GOVERNING LAW. THE LOAN DOCUMENTS AND THE OBLIGATIONS ARISING UNDER THE
LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF CALIFORNIA APPLICABLE TO CONTRACTS MADE AND
PERFORMED IN SUCH STATE, WITHOUT REGARD TO THE PRINCIPLES THEREOF REGARDING
CONFLICTS OF LAWS.
10.10 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL. (A) EACH BORROWER AND
EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT HEREBY CONSENT AND AGREE THAT
THE STATE OR FEDERAL COURTS LOCATED IN CALIFORNIA SHALL HAVE EXCLUSIVE
JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN SUCH BORROWER
AND SUCH CREDIT PARTY AND LENDER PERTAINING TO THIS AGREEMENT OR ANY OF THE
OTHER LOAN DOCUMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; PROVIDED, THAT LENDER, SUCH
BORROWER AND SUCH CREDIT PARTY ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS
MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CALIFORNIA; AND FURTHER
PROVIDED, THAT NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE
LENDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
LENDER. SUCH BORROWER AND EACH OTHER CREDIT PARTY EXECUTING THIS AGREEMENT
EXPRESSLY SUBMIT AND CONSENT IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR
SUIT COMMENCED IN ANY SUCH COURT, AND SUCH BORROWER AND SUCH CREDIT PARTY HEREBY
WAIVE ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL JURISDICTION,
IMPROPER VENUE OR FORUM NON CONVENIENS. Each BORROWER AND EACH OTHER CREDIT
PARTY EXECUTING THIS AGREEMENT HEREBY WAIVE PERSONAL SERVICE OF THE SUMMONS,
COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH ACTION OR SUIT AND AGREE THAT
SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL ADDRESSED TO SUCH BORROWER OR SUCH CREDIT PARTY AT THE ADDRESS
SET FORTH IN SCHEDULE B OF THIS AGREEMENT AND THAT SERVICE SO MADE SHALL BE
DEEMED COMPLETED UPON THE EARLIER OF SUCH BORROWER'S OR SUCH CREDIT PARTY'S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER
POSTAGE PREPAID.
16
(B) THE PARTIES HERETO WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT,
TORT, OR OTHERWISE BETWEEN LENDER, any BORROWER AND ANY CREDIT PARTY ARISING OUT
OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED
BETWEEN THEM IN CONNECTION WITH THE LOAN DOCUMENTS OR THE TRANSACTIONS RELATED
THERETO.
10.11 Press Releases. Neither any Credit Party nor any of its Affiliates will in
the future issue any press release or other public disclosure using the name of
General Electric Capital Corporation or its affiliates or referring to this
Agreement or the other Loan Documents without at least two (2) Business Days'
prior notice to Lender and without the prior written consent of Lender unless
(and only to the extent that) such Credit Party or Affiliate is required to do
so under law and then, in any event, such Credit Party or Affiliate will consult
with Lender before issuing such press release or other public disclosure, other
than required SEC filings.
10.12 Reinstatement. This Agreement shall continue to be effective, or be
reinstated, as the case may be, if at any time payment of all or any part of the
Obligations is rescinded or must otherwise be returned or restored by Lender
upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of
any Borrower or any other Credit Party, or otherwise, all as though such
payments had not been made.
11. CROSS-GUARANTY
11.1 Cross-Guaranty. Each Borrower hereby absolutely and unconditionally
guarantees to Lender and its successors and assigns the full and prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of
all Obligations owed or hereafter owing to Lender by each other Borrower,
including that portion of the Revolving Credit Loan attributable to each other
Borrower. Each Borrower agrees that its guaranty obligation hereunder is a
continuing guaranty of payment and performance and not of collection, and that
its obligations under this Section 11 shall be absolute and unconditional,
irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, this Agreement, any other Loan Document or any other
agreement, document or instrument to which any Borrower is or may become a
party;
(b) the absence of any action to enforce this Agreement (including this
Section 11) or any other Loan Document or the waiver or consent by Lender with
respect to any of the provisions hereof or thereof;
(c) the existence, value or condition of, or failure to perfect its Lien
against, any security for the Obligations or any action, or the absence of any
action, by Lender in respect thereof (including the release of any such
security);
(d) the insolvency of any Credit Party; or
(e) any other action or circumstances which might otherwise constitute a
legal or equitable discharge or defense of a surety or guarantor,
it being agreed by each Borrower that its obligations under this Section 11
shall not be discharged until the payment and performance, in full, of the
Obligations has occurred. Each Borrower shall be regarded, and shall be in the
same position, as principal debtor with respect to the Obligations guaranteed
hereunder.
11.2 Waivers by Borrowers. Each Borrower expressly waives all rights it may have
now or in the future under any statute, or at common law, or at law or in
equity, or otherwise, to compel Lender to xxxxxxxx assets or to proceed in
respect of the Obligations guaranteed hereunder against any other Credit Party,
any other party or against any security for the payment and performance of the
Obligations before proceeding against, or as a condition to proceeding against,
such Borrower. It is agreed among each Borrower and Lender that the foregoing
waivers are of the essence of the transactions contemplated by this Agreement
and the other Loan Documents and that, but for the provisions of this Section 11
and such waivers, Lender would decline to enter into this Agreement.
11.3 Benefit of Guaranty. Each Borrower agrees that the provisions of this
Section 11 are for the benefit of Lender and its successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between any
other Borrower and Lender, the obligations of such other Borrower under the Loan
Documents.
11.4 Subordination of Subrogation. Notwithstanding anything to the contrary in
this Agreement or in any other Loan Document, and except as set forth in Section
11.7, each Borrower hereby expressly and irrevocably subordinates to payment of
the Obligations any and all rights at law or in equity to subrogation,
reimbursement, exoneration, contribution, indemnification or set off and any and
all defenses available to a surety, guarantor or accommodation co-obligor until
the Obligations are indefeasibly paid in full in cash. Each Borrower
acknowledges and agrees that this waiver is intended to benefit Lender and
17
shall not limit or otherwise affect such Borrower's liability hereunder or the
enforceability of this Section 11, and that Lender and its successors and
assigns are intended third party beneficiaries of the waivers and agreements set
forth in this Section 11.4.
11.5 Election of Remedies. (a) If Lender may, under applicable law, proceed to
realize its benefits under any of the Loan Documents giving Lender a Lien upon
any Collateral, whether owned by any Borrower or by any other Person, either by
judicial foreclosure or by non-judicial sale or enforcement, Lender may, at its
sole option, determine which of its remedies or rights it may pursue without
affecting any of its rights and remedies under this Section 11. If, in the
exercise of any of its rights and remedies, Lender shall forfeit any of its
rights or remedies, including its right to enter a deficiency judgment against
any Borrower or any other Person, whether because of any applicable laws
pertaining to "election of remedies" or the like, each Borrower hereby consents
to such action by Lender and waives any claim based upon such action, even if
such action by Lender shall result in a full or partial loss of any rights of
subrogation which such Borrower might otherwise have had but for such action by
Lender. Any election of remedies which results in the denial or impairment of
the right of Lender to seek a deficiency judgment against any Borrower shall not
impair any other Borrower's obligation to pay the full amount of the
Obligations. In the event Lender shall bid at any foreclosure or trustee's sale
or at any private sale permitted by law or the Loan Documents, Lender may bid
all or less than the amount of the Obligations and the amount of such bid need
not be paid by Lender but may be credited against the Obligations. The amount of
the successful bid at any such sale, whether Lender or any other party is the
successful bidder, shall be conclusively deemed to be the fair market value of
the Collateral and the difference between such bid amount and the remaining
balance of the Obligations shall be conclusively deemed to be the amount of the
Obligations guaranteed under this Section 11, notwithstanding that any present
or future law or court decision or ruling may have the effect of reducing the
amount of any deficiency claim to which Lender might otherwise be entitled but
for such bidding at any such sale. In addition, each Borrower waives all rights
and defenses arising out of an election of remedies by Lender, even though the
election of remedies, such as a non-judicial foreclosure with respect to
security for the Obligations, has destroyed any Borrower's rights of subrogation
and reimbursement against the principal by the operation of Section 580d of the
California Code of Civil Procedure or otherwise. Without limiting the generality
of the foregoing, each Borrower waives any defenses or rights under or of the
kind described in California Civil Code sections 2795, 2808, 2809, 2810, 2815,
2819 through 2825 (inclusive), 2832, 2839, and 2845 through 2850 (inclusive) and
similar laws in other jurisdictions.
(b) Each Borrower waives all rights and defenses that it may have if the
Obligations are secured by real property. This means, among other things: (i)
Lender may collect from such Borrower without first foreclosing on any real or
personal property collateral pledged by any other Credit Party; and (ii) if
Lender forecloses on any real property collateral pledged by any Credit Party
(A) the amount of the Obligations may be reduced only by the price for which
that collateral is sold at the foreclosure sale, even if the collateral is worth
more than the sale price, and (B) Lender may collect from such Borrower even if
Lender, by foreclosing on the real property collateral, has destroyed any right
such Borrower may have to collect from any other Credit Party. This is an
unconditional and irrevocable waiver of any rights and defenses each Borrower
may have because the Obligations are secured by real property. These rights and
defenses include, but are not limited to, any rights or defenses based upon
Section 580a, 580b, 580d, or 726 of the California Code of Civil Procedure.
11.6 Limitation. Notwithstanding any provision herein contained to the contrary,
each Borrower's liability under this Section 11 (which liability is in any event
in addition to amounts for which such Borrower is primarily liable under Section
1) shall be limited to an amount not to exceed as of any date of determination
the greater of:
(a) the net amount of all Loans advanced to any other Borrower under this
Agreement and then re-loaned or otherwise transferred to, or for the benefit of,
such Borrower; and
(b) the amount which could be claimed by Lender from such Borrower under
this Section 11 without rendering such claim voidable or avoidable under Section
548 of Chapter 11 of the United States Bankruptcy Code or under any applicable
state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or
similar statute or common law after taking into account, among other things,
such Borrower's right of contribution and indemnification from each other
Borrower under Section 11.7.
11.7 Contribution with Respect to Guaranty Obligations. (a) To the extent that
any Borrower shall make a payment under this Section 11 of all or any of the
Obligations (other than Loans made to that Borrower for which it is primarily
liable) (a "Guarantor Payment") which, taking into account all other Guarantor
Payments then previously or concurrently made by any other Borrower, exceeds the
amount which such Borrower would otherwise have paid if each Borrower had paid
the aggregate Obligations satisfied by such Guarantor Payment in the same
proportion that such Borrower's "Allocable Amount" (as defined below) (as
determined immediately prior to such Guarantor Payment) bore to the aggregate
Allocable Amounts of each of the Borrowers as determined immediately prior to
the making of such Guarantor Payment, then, following indefeasible payment in
full in cash of the Obligations and termination of the Commitments, such
Borrower shall be entitled to receive contribution and indemnification payments
from, and be reimbursed by, each other Borrower for the amount of such excess,
pro rata based upon their respective Allocable Amounts in effect immediately
prior to such Guarantor Payment.
18
(b) As of any date of determination, the "Allocable Amount" of any
Borrower shall be equal to the maximum amount of the claim which could then be
recovered from such Borrower under this Section 11 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the United States
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law.
(c) This Section 11.7 is intended only to define the relative rights of
Borrowers and nothing set forth in this Section 11.7 is intended to or shall
impair the obligations of each Borrower to pay any amounts as and when the same
shall become due and payable in accordance with the terms of this Agreement,
including Section 11.1. Nothing contained in this Section 11.7 shall limit the
liability of any Borrower to pay the Loans made directly or indirectly to that
Borrower and accrued interest, Fees and expenses with respect thereto for which
such Borrower shall be primarily liable.
(d) The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of Borrower to which such
contribution and indemnification is owing.
(e) The rights of the indemnifying Borrowers against other Credit Parties
under this Section 11.7 shall be exercisable upon the full and indefeasible
payment of the Obligations and the termination of Lender's obligation to extend
any credit under this Agreement.
11.8 Liability Cumulative. The liability of Borrowers under this Section 11 is
in addition to and shall be cumulative with all liabilities of each Borrower to
Lender under this Agreement and the other Loan Documents to which such Borrower
is a party or in respect of any Obligations or obligation of the other Borrower,
without any limitation as to amount, unless the instrument or agreement
evidencing or creating such other liability specifically provides to the
contrary.
19
IN WITNESS WHEREOF, this Loan and Security Agreement has been duly executed as
of the date first written above.
LENDER: GENERAL ELECTRIC CAPITAL CORPORATION
By_____/s/ Xxxxx Klages_____________
Name: Xxxxx Xxxxxx
Title: Duly Authorized Signatory
BORROWERS: CURIOUS PICTURES CORPORATION
--------- CHELSEA PICTURES, INC.
THE END, INC.
By:____/s/ Xxxxx X. Gilbertson___________
Name: Xxxxx X. Xxxxxxxxxx
Title: Chief Operating Officer of Curious Pictures, Inc.
Chief Operating Officer of Chelsea Pictures, Inc.
Chief Operating Officer of The End, Inc.
OTHER CREDIT PARTIES: INTELEFILM CORPORATION
-------------------- DCODE, INC.
HARMONY HOLDINGS, INC.,
FURIOUS PICTURES CORPORATION
DELIRIOUS PICTURES CORPORATION
THE BEGINNING ENTERTAINMENT, INC.
UNSCENTED, INC.
GIGANTIC ENTERTAINMENT, INC.,
THE MOMENT FILMS, INC.
By: /s/ Xxxxx X. Xxxxxxxxxx
Name: Xxxxx X. Xxxxxxxxxx
Title: Chief Operating Officer of iNTELEFILM Corporation
Chief Operating Officer of DCODE, Inc.
Chief Operating Officer of Harmony Holdings, Inc.
Chief Operating Officer of Furious Pictures
Corporation
Chief Operating Officer of Delirious Pictures
Corporation
Chief Operating Officer of The Beginning
Entertainment, Inc.
Chief Operating Officer of Unscented, Inc.
Chief Opertating Officer of Gigantic
Entertainment, Inc.
Chief Operating Officer of The Moment Films, Inc.
20
SCHEDULE A
DEFINITIONS
Capitalized terms used in this Agreement and the other Loan Documents shall have
(unless otherwise provided elsewhere in this Agreement or in the other Loan
Documents) the following respective meanings:
"Account Debtor" shall mean any Person who is or may become obligated with
respect to, or on account of, an Account.
"Accounts" shall mean all "accounts," as such term is defined in the Code, now
owned or hereafter acquired by any Person, including: (i) all accounts
receivable, other receivables, book debts and other forms of obligations (other
than forms of obligations evidenced by Chattel Paper, Documents or Instruments),
whether arising out of goods sold or services rendered or from any other
transaction (including any such obligations which may be characterized as an
account or contract right under the Code); (ii) all of such Person's rights in,
to and under all purchase orders or receipts for goods or services; (iii) all of
such Person's rights to any goods represented by any of the foregoing (including
unpaid sellers' rights of rescission, replevin, reclamation and stoppage in
transit and rights to returned, reclaimed or repossessed goods); (iv) all moneys
due or to become due to such Person under all purchase orders and contracts for
the sale of goods or the performance of services or both by such Person or in
connection with any other transaction (whether or not yet earned by performance
on the part of such Person), including the right to receive the proceeds of said
purchase orders and contracts; and (v) all collateral security and guarantees of
any kind given by any other Person with respect to any of the foregoing.
"Accounts Payable Analysis" shall mean a certificate in the form of Exhibit D
"Accounts Receivable Roll Forward Analysis" shall mean a certificate in the form
of Exhibit E.
"Affiliate" shall mean, with respect to any Person: (i) each other Person that,
directly or indirectly, owns or controls, whether beneficially, or as a trustee,
guardian or other fiduciary, ten percent (10%) or more of the Stock having
ordinary voting power for the election of directors of such Person; (ii) each
other Person that controls, is controlled by or is under common control with
such Person or any Affiliate of such Person; or (iii) each of such Person's
officers, directors, joint venturers and partners. For the purpose of this
definition, "control" of a Person shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of its management or
policies, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" shall mean this Agreement including all appendices, exhibits or
schedules attached or otherwise identified thereto, restatements and
modifications and supplements thereto, and any appendices, exhibits or schedules
to any of the foregoing, each as in effect at the time such reference becomes
operative; provided, that except as specifically set forth in this Agreement,
any reference to the Disclosure Schedules to this Agreement shall be deemed a
reference to the Disclosure Schedules as in effect on the Closing Date or in a
written amendment thereto executed by Borrower and Lender.
"Blocked Account" and "Blocked Account Agreement" shall have the meanings
assigned to such terms in Schedule D.
"Books and Records" shall mean all books, records, board minutes, contracts,
licenses, insurance policies, environmental audits, business plans, files,
computer files, computer discs and other data and software storage and media
devices, accounting books and records, financial statements (actual and pro
forma), filings with Governmental Authorities and any and all records and
instruments relating to the Collateral or any Borrower's business.
"Borrower" and "Borrowers" shall have the meanings assigned to them in the
preamble of this Agreement.
"Borrowing Availability" shall mean, at any time with respect to any Borrower,
the lesser of (i) the Maximum Amount less the sum of the aggregate Revolving
Credit Loans attributable to the other Borrowers or (ii) such Borrower's
Borrowing Base, in each case less reserves established by Lender from time to
time.
"Borrowing Base" shall mean at any time with respect to any Borrower, an amount
equal to the sum at such time of: (a) eighty five percent (85%) of the value (as
determined by Lender) of such Borrower's Eligible Accounts; provided that Lender
shall reduce the foregoing percentage by one percentage point for each
percentage point that the dilution of such Borrower's Accounts (calculated by
Lender as the average dilution over the most recent 3 months) exceeds 5%; plus
(b) one hundred percent (100%) of the value of such Borrower's Eligible Cash
Collateral.
"Borrowing Base Certificate" shall mean a certificate in the form of Exhibit C.
1
"Business Day" shall mean any day that is not a Saturday, a Sunday or a day on
which banks are required or permitted to be closed in the State of New York.
"Capital Expenditures" shall mean all payments or accruals (including Capital
Lease Obligations) for any fixed assets or improvements or for replacements,
substitutions or additions thereto, that have a useful life of more than one
year and that are required to be capitalized under GAAP.
"Capital Lease" shall mean, with respect to any Person, any lease of any
property (whether real, personal or mixed) by such Person as lessee that, in
accordance with GAAP, either would be required to be classified and accounted
for as a capital lease on a balance sheet of such Person or otherwise would be
disclosed as such in a note to such balance sheet, other than, in the case of
any Borrower, any such lease under which such Borrower is the lessor.
"Capital Lease Obligation" shall mean, with respect to any Capital Lease, the
amount of the obligation of the lessee thereunder that, in accordance with GAAP,
would appear on a balance sheet of such lessee in respect of such Capital Lease
or otherwise be disclosed in a note to such balance sheet.
"Cash Collateral Account" shall have the meaning assigned to it in Schedule C.
"Change of Control" shall mean, with respect to any Person on or after the
Closing Date, that any change in the composition of such Person's stockholders
as of the Closing Date shall occur which would result in any stockholder or
group acquiring 49.9% or more of any class of Stock of such Person, or that any
Person (or group of Persons acting in concert) shall otherwise acquire, directly
or indirectly (including through Affiliates), the power to elect a majority of
the Board of Directors of such Person or otherwise direct the management or
affairs of such Person by obtaining proxies, entering into voting agreements or
trusts, acquiring securities or otherwise.
"Charges" shall mean all Federal, state, county, city, municipal, local, foreign
or other governmental taxes (including taxes owed to PBGC at the time due and
payable), levies, customs or other duties, assessments, charges, liens, and all
additional charges, interest, penalties, expenses, claims or encumbrances upon
or relating to (i) the Collateral, (ii) the Obligations, (iii) the employees,
payroll, income or gross receipts of any Credit Party, (iv) the ownership or use
of any assets by any Credit Party, or (v) any other aspect of any Credit Party's
business.
"Chattel Paper" shall mean all "chattel paper," as such term is defined in the
Code, now owned or hereafter acquired by any Person, wherever located.
"Closing Date" shall mean the Business Day on which the conditions precedent set
forth in Section 2 have been satisfied or specifically waived in writing by
Lender, and the initial Loan has been made.
"Closing Fee" shall have the meaning assigned to it in Schedule E.
"Code" shall mean the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of California; provided, that in the event that,
by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of Lender's security interest in any Collateral is
governed by the Uniform Commercial Code as in effect in a jurisdiction other
than the State of California, the term "Code" shall mean the Uniform Commercial
Code as in effect in such other jurisdiction for purposes of the provisions of
this Agreement relating to such attachment, perfection or priority and for
purposes of definitions related to such provisions.
"Collateral" shall have the meaning assigned to it in Section 6.1.
"Collection Account" shall mean that certain account of Lender, account number
00-000-000 (reference number CFB 7005), in the name of GECC CAF Depository at
Bankers Trust Company, 0 Xxxxxxx Xxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx, XXX number
000-000-000.
"Commitment Termination Date" shall mean the earliest of (i) the Stated Expiry
Date, (ii) the date Lender's obligation to advance funds is terminated pursuant
to Section 7.2, or (iii) the date of indefeasible prepayment in full by
Borrowers of the Obligations in accordance with the provisions of Section
1.2(c).
"Contracts" shall mean all the contracts, undertakings, or agreements (other
than rights evidenced by Chattel Paper, Documents or Instruments) in or under
which any Person may now or hereafter have any right, title or interest,
including any agreement relating to the terms of payment or the terms of
performance of any Account.
2
"Contractual Obligation" shall mean as to any Person, any provision of any
security issued by such Person or of any agreement, instrument, or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"Copyright License" shall mean rights under any written agreement now owned or
hereafter acquired by any Person granting the right to use any Copyright or
Copyright registration.
"Copyrights" shall mean all of the following now owned or hereafter acquired by
any Person: (i) all copyrights in any original work of authorship fixed in any
tangible medium of expression, now known or later developed, all registrations
and applications for registration of any such copyrights in the United States or
any other country, including registrations, recordings and applications, and
supplemental registrations, recordings, and applications in the United States
Copyright Office; and (ii) all Proceeds of the foregoing, including license
royalties and proceeds of infringement suits, the right to xxx for past, present
and future infringements, all rights corresponding thereto throughout the world
and all renewals and extensions thereof.
"Corporate Credit Party" shall mean any Credit Party that is a corporation,
partnership or limited liability company.
"Credit Party" shall mean each Borrower, and each other Person (other than
Lender) that is or may become a party to this Agreement or any other Loan
Document.
"Curious" shall mean Curious Pictures Corporation, a New York corporation and a
Borrower.
"Default" shall mean any Event of Default or any event which, with the passage
of time or notice or both, would, unless cured or waived, become an Event of
Default.
"Default Rate" shall have the meaning assigned to it in Section 1.5(c).
"Documents" shall mean all "documents," as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including all bills
of lading, dock warrants, dock receipts, warehouse receipts, and other documents
of title, whether negotiable or non-negotiable.
"Eligible Accounts" shall mean as at the date of determination with respect to
any Borrower, all Accounts of such Borrower except any Account:
(a) that does not arise from the sale of goods or the performance of
services by such Borrower in the ordinary course of such Borrower's business;
(b) upon which (i) such Borrower's right to receive payment is not
absolute or is contingent upon the fulfillment of any condition whatsoever or
(ii) such Borrower is not able to bring suit or otherwise enforce its remedies
against the Account Debtor through judicial process;
(c) against which any defense, counterclaim or setoff, whether
well-founded or otherwise, is asserted or which is a "contra" Account;
(d) that is not a true and correct statement of a bona fide indebtedness
incurred in the amount of the Account for merchandise sold or services performed
and accepted by the Account Debtor obligated upon such Account;
(e) with respect to which an invoice, acceptable to Lender in form and
substance, has not been sent;
(f) that is not owned by such Borrower or is subject to any right, claim,
or interest of another Person, other than the Lien in favor of Lender;
(g) that arises from a sale to or performance of services for an
employee, Affiliate, Subsidiary or Stockholder of any Borrower or any other
Credit Party, or an entity which has common officers or directors with any
Borrower or any other Credit Party;
(h) that is the obligation of an Account Debtor that is the Federal (or
local) government or a political subdivision thereof, unless Lender has agreed
to the contrary in writing and such Borrower has complied with the Federal
Assignment of Claims Act of 1940 (or the state equivalent thereof, if any) with
respect to such obligation;
(i) that is the obligation of an Account Debtor located in a foreign
country unless such Account is supported by a letter of credit in which Lender
has a first priority perfected security interest by possession or credit
insurance acceptable to Lender (and naming Lender as loss payee);
(j) that is the obligation of an Account Debtor to whom any Borrower is
or may become liable for goods sold or services rendered by the Account Debtor
to any Borrower, to the extent of any Borrower's liability to such Account
Debtor;
(k) that arises with respect to goods which are delivered on a
cash-on-delivery basis or placed on consignment, guaranteed sale or other terms
by reason of which the payment by the Account Debtor may be conditional;
(l) that is an obligation for which the total unpaid Accounts of the
Account Debtor exceed 25% of the aggregate of all Accounts, to the extent of
such excess;
(m) that is not paid within 60 days from its due date or 90 days from its
invoice date or that are Accounts of an Account Debtor if 50% or more of the
Accounts owing from such Account Debtor remain unpaid within such time periods;
3
(n) is an obligation of an Account Debtor that has suspended business,
made a general assignment for the benefit of creditors, is unable to pay its
debts as they become due or as to which a petition has been filed (voluntary or
involuntary) under any law relating to bankruptcy, insolvency, reorganization or
relief of debtors;
(o) that arises from any xxxx-and-hold or other sale of goods which
remain in any Borrower's possession or under any Borrower's control;
(p) as to which Lender's interest therein is not a first priority
perfected security interest;
(q) to the extent that such Account exceeds any credit limit established
by Lender in Lender's good faith credit judgement;
(r) as to which any of such Borrower's representations or warranties
pertaining to Accounts are untrue;
(s) that represents interest payments, late or finance charges, or
service charges owing to such Borrower;
(t) that is not represented by an invoice for "final" delivered product
or "overage" invoices that has, in each case, been approved by the Account
Debtor; or
(u) that is not otherwise acceptable in the good faith discretion of
Lender, provided, that Lender shall have the right to create and adjust
eligibility standards and related reserves from time to time in its good faith
credit judgment.
"Eligible Cash Collateral" shall mean as at the date of determination with
respect to any Borrower, any cash or cash equivalents that Lender shall
determine is eligible for advances, but only if such cash or cash or cash
equivalents are subject to a first priority security interest in favor of Lender
and under the dominion and control of Lender or in the name of Lender pursuant
to such control agreements with third parties as Lender shall consider
appropriate.
"Environmental Laws" shall mean all Federal, state and local laws, statutes,
ordinances and regulations, now or hereafter in effect, and in each case as
amended or supplemented from time to time, and any applicable judicial or
administrative interpretation thereof relating to the regulation and protection
of human health, safety, the environment and natural resources (including
ambient air, surface water, groundwater, wetlands, land surface or subsurface
strata, wildlife, aquatic species and vegetation).
"Environmental Liabilities" shall mean all liabilities, obligations,
responsibilities, remedial actions, removal costs, losses, damages of whatever
nature, costs and expenses (including all reasonable fees, disbursements and
expenses of counsel, experts and consultants and costs of investigation and
feasibility studies), fines, penalties, sanctions and interest incurred as a
result of any claim, suit, action or demand of whatever nature by any Person,
and which relate to any health or safety condition regulated under any
Environmental Law, environmental permits or in connection with any Release,
threatened Release, or the presence of a Hazardous Material.
"Equipment" shall mean all "equipment" as such term is defined in the Code, now
owned or hereafter acquired by any Person, wherever located, including any and
all machinery, apparatus, equipment, fittings, furniture, fixtures, motor
vehicles and other tangible personal property (other than Inventory) of every
kind and description which may be now or hereafter used in such Person's
operations or which are owned by such Person or in which such Person may have an
interest, and all parts, accessories and accessions thereto and substitutions
and replacements therefor.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974 (or any
successor legislation thereto), as amended from time to time, and any
regulations promulgated thereunder.
"ERISA Affiliate" shall mean any trade or business (whether or not incorporated)
that, together with any Credit Party, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the IRC, or, solely for the purposes of
Section 302 of ERISA and Section 412 of the IRC, is treated as a single employer
under Section 414 of the IRC.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section 4043
of ERISA or the regulations issued thereunder with respect to a Plan (other than
an event for which the 30-day notice period is waived); (b) the existence with
respect to any Plan of an "accumulated funding deficiency" (as defined in
Section 412 of the IRC or Section 302 of ERISA), whether or not waived; (c) the
filing pursuant to Section 412(b) of the IRC or Section 303(d) of ERISA of an
application for a waiver of the minimum funding standard with respect to any
Plan; (d) the incurrence by any Credit Party or any ERISA Affiliate of any
liability under Title IV of ERISA with respect to the termination of any Plan;
(e) the receipt by any Credit Party or any ERISA Affiliate from the PBGC or a
plan administrator of any notice relating to an intention to terminate any Plan
or to appoint a trustee to administer any Plan; (f) the incurrence by any Credit
Party or any ERISA Affiliate of any liability with respect to any withdrawal or
partial withdrawal from any Plan or Multiemployer Plan; or (g) the receipt by
any Credit Party or any ERISA Affiliate of any notice, or the receipt by any
Multiemployer Plan from any Credit Party or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"Event of Default" shall have the meaning assigned to it in Section 7.1.
4
"Fees" shall mean the fees due to Lender as set forth in Schedule E.
"Financial Statements" shall mean the consolidated and consolidating income
statement, balance sheet and statement of cash flows of Parent, each Borrower,
and each of their Subsidiaries, internally prepared for each Fiscal Month, and
audited for each Fiscal Year, prepared in accordance with GAAP.
"Fiscal Month" shall mean any of the monthly accounting periods of Borrowers.
"Fiscal Quarter" shall mean any of the quarterly accounting periods of
Borrowers.
"Fiscal Year" shall mean the 12 month period of Borrowers ending December 31 of
each year. Subsequent changes of the fiscal year of Borrowers shall not change
the term "Fiscal Year" unless Lender shall consent in writing to such change.
"GAAP" shall mean generally accepted accounting principles in the United States
of America as in effect from time to time, consistently applied.
"General Intangibles" shall mean all "general intangibles," as such term is
defined in the Code, now owned or hereafter acquired by any Person, including
all right, title and interest which such Person may now or hereafter have in or
under any Contract, Intellectual Property, interests in partnerships, joint
ventures and other business associations, permits, proprietary or confidential
information, inventions (whether or not patented or patentable), technical
information, procedures, designs, knowledge, know-how, software, data bases,
data, skill, expertise, experience, processes, models, drawings, materials,
Books and Records, Goodwill (including the Goodwill associated with any
Intellectual Property), all rights and claims in or under insurance policies
(including insurance for fire, damage, loss, and casualty, whether covering
personal property, real property, tangible rights or intangible rights, all
liability, life, key-person, and business interruption insurance, and all
unearned premiums), uncertificated securities, choses in action, deposit
accounts, rights to receive tax refunds and other payments and rights of
indemnification.
"Goods" shall mean all "goods," as such term is defined in the Code, now owned
or hereafter acquired by any Person, wherever located, including movables,
fixtures, equipment, inventory, or other tangible personal property.
"Goodwill" shall mean all goodwill, trade secrets, proprietary or confidential
information, technical information, procedures, formulae, quality control
standards, designs, operating and training manuals, customer lists, and
distribution agreements now owned or hereafter acquired by any Person.
"Governmental Authority" shall mean any nation or government, any state or other
political subdivision thereof, and any agency, department or other entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government.
"Guaranteed Indebtedness" shall mean, as to any Person, any obligation of such
Person guaranteeing any indebtedness, lease, dividend, or other obligation
("primary obligations") of any other Person (the "primary obligor") in any
manner, including any obligation or arrangement of such guaranteeing Person
(whether or not contingent): (i) to purchase or repurchase any such primary
obligation; (ii) to advance or supply funds (a) for the purchase or payment of
any such primary obligation or (b) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor; (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation; or (iv) to indemnify the owner of such primary
obligation against loss in respect thereof.
"Guarantor" shall mean each Person which executes a guaranty or a support, put
or other similar agreement in favor of Lender in connection with the
transactions contemplated by this Agreement.
"Guaranty" shall mean any agreement to perform all or any portion of the
Obligations on behalf of Borrower or any other Credit Party, in favor of, and in
form and substance satisfactory to, Lender, together with all amendments,
modifications and supplements thereto, and shall refer to such Guaranty as the
same may be in effect at the time such reference becomes operative.
"Harmony" shall mean Harmony Holdings, Inc., a Delaware corporation, and an
Affiliate of Borrowers.
"Hazardous Material" shall mean any substance, material or waste which is
regulated by or forms the basis of liability now or hereafter under, any
Environmental Laws, including any material or substance which is (a) defined as
a "solid waste," "hazardous waste," "hazardous material," "hazardous substance,"
"extremely hazardous waste," "restricted hazardous waste,"
5
"pollutant," "contaminant," "hazardous constituent," "special waste," "toxic
substance" or other similar term or phrase under any Environmental Laws, (b)
petroleum or any fraction or by-product thereof, asbestos, polychlorinated
biphenyls (PCB's), or any radioactive substance.
"Hazardous Waste" shall have the meaning ascribed to such term in the Resource
Conservation and Recovery Act (42 U.S.C. xx.xx. 6901 et. seq.).
"Indebtedness" of any Person shall mean: (i) all indebtedness of such Person for
borrowed money or for the deferred purchase price of property or services
(including reimbursement and all other obligations with respect to surety bonds,
letters of credit and bankers' acceptances, whether or not matured, but not
including obligations to trade creditors incurred in the ordinary course of
business and not more than 45 days past due); (ii) all obligations evidenced by
notes, bonds, debentures or similar instruments; (iii) all indebtedness created
or arising under any conditional sale or other title retention agreements with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are limited
to repossession or sale of such property); (iv) all Capital Lease Obligations;
(v) all Guaranteed Indebtedness; (vi) all Indebtedness referred to in clauses
(i), (ii), (iii), (iv) or (v) above secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien upon or in property (including accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable for the
payment of such Indebtedness; (vii) the Obligations; and (viii) all liabilities
under Title IV of ERISA.
"Indemnified Liabilities" and "Indemnified Person" shall have the meaning
assigned to such terms in Section 1.11.
"Index Rate" shall mean the latest rate for 30-day dealer placed commercial
paper (which for purposes hereof shall mean high grade unsecured notes sold
through dealers by major corporations in multiples of $1,000), which normally is
published in the "Money Rates" section of The Wall Street Journal (or if such
rate ceases to be so published, as quoted from such other generally available
and recognizable source as Lender may select). The Index Rate shall be
determined (i) on the first Business Day immediately prior to the Closing Date
and (ii) thereafter, on the last Business Day of each calendar month for
calculation of interest for the following month.
"Instruments" shall mean all "instruments," as such term is defined in the Code,
now owned or hereafter acquired by any Person, wherever located, including all
certificated securities and all notes and other evidences of indebtedness, other
than instruments that constitute, or are a part of a group of writings that
constitute, Chattel Paper.
"Intellectual Property" shall mean any and all Licenses, Patents, Copyrights,
Trademarks, trade secrets and customer lists.
"Inventory" shall mean all "inventory," as such term is defined in the Code, now
or hereafter owned or acquired by any Person, wherever located, including all
inventory, merchandise, goods and other personal property which are held by or
on behalf of such Person for sale or lease or are furnished or are to be
furnished under a contract of service or which constitute raw materials, work in
process or materials used or consumed or to be used or consumed in such Person's
business or in the processing, production, packaging, promotion, delivery or
shipping of the same, including other supplies.
"Investment Property" shall mean all "investment property," as such term is
defined in the Code, now or hereafter acquired by any Person, wherever located.
"IRC" and "IRS" shall mean respectively, the Internal Revenue Code of 1986 and
the Internal Revenue Service, and any successors thereto.
"Lender" shall mean General Electric Capital Corporation and, if at any time
Lender shall decide to assign or syndicate all or any of the Obligations, such
term shall include such assignee or such other members of the syndicate.
"Letters of Credit" shall mean any and all commercial or standby letters of
credit issued at the request and for the account of any Borrower for which
Lender has incurred Letter of Credit Obligations.
"Letter of Credit Fee" shall have the meaning assigned to it in Schedule E.
"Letter of Credit Obligations" shall mean all outstanding obligations (including
all duty, freight, taxes, costs, insurance and any other charges and expenses)
incurred by Lender, whether direct or indirect, contingent or otherwise, due or
not due, in connection with the issuance or guarantee, by Lender or another, of
Letters of Credit, all as further set forth in Schedule C.
"License" shall mean any Copyright License, Patent License, Trademark License or
other license of rights or interests now held or hereafter acquired by any
Person.
6
"Lien" shall mean any mortgage, security deed or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, security title, easement or encumbrance, or preference, priority or
other security agreement or preferential arrangement of any kind or nature
whatsoever (including any lease or title retention agreement, any financing
lease having substantially the same economic effect as any of the foregoing, and
the filing of, or agreement to give, any financing statement perfecting a
security interest under the Code or comparable law of any jurisdiction).
"Litigation" shall mean any claim, lawsuit, litigation, investigation or
proceeding of or before any arbitrator or Governmental Authority.
"Loan Documents" shall mean this Agreement, the Notes, the Financial Statements,
each Guaranty, the Power of Attorney, any lockbox or blocked account agreements,
and the other documents and instruments listed in Schedule F, and all security
agreements, mortgages and all other documents, instruments, certificates, and
notices at any time delivered by any Person (other than Lender) in connection
with any of the foregoing.
"Loans" shall mean the Revolving Credit Loan including the Letter of Credit
Obligations.
"Material Adverse Effect" shall mean: (i) a material adverse effect on (a) the
business, assets, operations, prospects or financial or other condition of any
Borrower or any other Credit Party or the industry within which such Borrower or
any other Credit Party operates, (b) any Borrower's or any other Credit Party's
ability to pay or perform the Obligations under the Loan Documents to which such
Credit Party is a party in accordance with the terms thereof, (c) the Collateral
or Lender's Liens on the Collateral or the priority of any such Lien, or (d)
Lender's rights and remedies under this Agreement and the other Loan Documents.
"Maximum Amount" shall mean $ 7,000,000.
"Minimum Actionable Amount" shall mean $100,000.
"Multiemployer Plan" shall mean a "multiemployer plan," as defined in Section
4001(a) (3) of ERISA, to which Borrower, any other Credit Party or any ERISA
Affiliate is making, is obligated to make, has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Borrowing Availability" shall mean at any time with respect to any
Borrower, such Borrower's Borrowing Availability less the Revolving Credit Loan
attributable to such Borrower.
"Notes" shall mean the Revolving Credit Note and any other note delivered by any
Borrower to Lender to evidence the Obligations.
"Notice of Revolving Credit Advance" shall have the meaning assigned to it in
Section 1.1(b).
"Obligations" shall mean all loans, advances, debts, expense reimbursement,
fees, liabilities, and obligations for the performance of covenants, tasks or
duties or for payment of monetary amounts (whether or not such performance is
then required or contingent, or amounts are liquidated or determinable) owing by
any Borrower and any other Credit Party to Lender, of any kind or nature,
present or future, whether or not evidenced by any note, agreement or other
instrument, whether arising under any of the Loan Documents or under any other
agreement between such Borrower, such Credit Party and Lender, and all covenants
and duties regarding such amounts. This term includes all principal, interest
(including interest accruing at the then applicable rate provided in this
Agreement after the maturity of the Loans and interest accruing at the then
applicable rate provided in this Agreement after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, whether or not a claim for post-filing or post-petition interest is
allowed in such proceeding), Fees, Charges, expenses, attorneys' fees and any
other sum chargeable to any Borrower under any of the Loan Documents, and all
principal and interest due in respect of the Loans and all obligations and
liabilities of any Guarantor under any Guaranty.
"Parent" shall mean iNTELEFILM Corporation, a Minnesota corporation.
"Patent License" shall mean rights under any written agreement now owned or
hereafter acquired by any Person granting any right with respect to any
invention on which a Patent is in existence.
"Patents" shall mean all of the following in which any Person now holds or
hereafter acquires any interest: (i) all letters patent of the United States or
any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including registrations, recordings and applications in the United States Patent
and
7
Trademark Office or in any similar office or agency of the United States, any
State or Territory thereof, or any other country; and (ii) all reissues,
continuations, continuations-in-part or extensions thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Permitted Encumbrances" shall mean the following encumbrances: (i) Liens for
taxes or assessments or other governmental Charges or levies, either not yet due
and payable or to the extent that nonpayment thereof is permitted by the terms
of Section 3.10; (ii) pledges or deposits securing obligations under worker's
compensation, unemployment insurance, social security or public liability laws
or similar legislation; (iii) pledges or deposits securing bids, tenders,
contracts (other than contracts for the payment of money) or leases to which any
Credit Party is a party as lessee made in the ordinary course of business; (iv)
deposits securing public or statutory obligations of any Credit Party; (v)
inchoate and unperfected workers', mechanics', or similar liens arising in the
ordinary course of business so long as such Liens attach only to Equipment,
fixtures or real estate; (vi) carriers', warehousemen's, suppliers' or other
similar possessory liens arising in the ordinary course of business and securing
indebtedness not yet due and payable in an outstanding aggregate amount not in
excess of $25,000 at any time so long as such Liens attach only to Inventory;
(vii) deposits of money securing, or in lieu of, surety, appeal or customs bonds
in proceedings to which any Credit Party is a party; (viii) zoning restrictions,
easements, licenses, or other restrictions on the use of real property or other
minor irregularities in title (including leasehold title) thereto, so long as
the same do not materially impair the use, value, or marketability of such real
estate; (ix) Purchase Money Liens securing Purchase Money Indebtedness (or rent)
to the extent permitted under Section 5(b)(vi); (x) Liens in existence on the
Closing Date as disclosed on Disclosure Schedule 5(e) provided that no such Lien
is spread to cover additional property after the Closing Date and the amount of
Indebtedness secured thereby is not increased.; and (xi) Liens in favor of
Lender securing the Obligations.
"Person" shall mean any individual, sole proprietorship, partnership, limited
liability partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution, public benefit
corporation, entity or government (whether Federal, state, county, city,
municipal or otherwise, including any instrumentality, division, agency, body or
department thereof), and shall include such Person's successors and assigns.
"Plan" shall mean any employee pension benefit plan (other than a Multiemployer
Plan) subject to the provisions of Title IV of ERISA or Section 412 of the IRC
or Section 302 of ERISA, and in respect of which any Credit Party or any ERISA
Affiliate is (or, if such plan were terminated, would under Section 4069 of
ERISA be deemed to be) an "employer" as defined in Section 3(5) of ERISA.
"Prepayment Fee" shall mean the prepayment fee specified in Schedule E.
"Proceeds" shall mean "proceeds," as such term is defined in the Code and, in
any event, shall include: (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to any Borrower or any other Credit Party from time
to time with respect to any Collateral; (ii) any and all payments (in any form
whatsoever) made or due and payable to any Borrower or any other Credit Party
from time to time in connection with any requisition, confiscation,
condemnation, seizure or forfeiture of any Collateral by any governmental body,
authority, bureau or agency (or any person acting under color of governmental
authority); (iii) any claim of any Borrower or any other Credit Party against
third parties (a) for past, present or future infringement of any Intellectual
Property or (b) for past, present or future infringement or dilution of any
Trademark or Trademark License or for injury to the goodwill associated with any
Trademark, Trademark registration or Trademark licensed under any Trademark
License; (iv) any recoveries by any Borrower or any other Credit Party against
third parties with respect to any litigation or dispute concerning any
Collateral; and (v) any and all other amounts from time to time paid or payable
under or in connection with any Collateral, upon disposition or otherwise.
"Projections" shall mean as of any date the consolidated and consolidating
balance sheet, statements of income and cash flow for each Borrower and its
Subsidiaries (including forecasted Capital Expenditures and Net Borrowing
Availability) (i) by month for the next Fiscal Year, and (ii) by year for the
following three Fiscal Years, in each case prepared in a manner consistent with
GAAP and accompanied by senior management's discussion and analysis of such
plan.
"Purchase Money Indebtedness" shall mean (i) any Indebtedness incurred for the
payment of all or any part of the purchase price of any fixed asset, (ii) any
Indebtedness incurred for the sole purpose of financing or refinancing all or
any part of the purchase price of any fixed asset, and (iii) any renewals,
extensions or refinancings thereof (but not any increases in the principal
amounts thereof outstanding at that time).
"Purchase Money Lien" shall mean any Lien upon any fixed assets which secures
the Purchase Money Indebtedness related thereto but only if such Lien shall at
all times be confined solely to the asset the purchase price of which was
financed or refinanced through the incurrence of the Purchase Money Indebtedness
secured by such Lien and only if such Lien secures only such Purchase Money
Indebtedness.
8
"Real Property" shall have the meaning assigned to it in Section 3.15.
"Release" shall mean, as to any Person, any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials in the indoor or outdoor environment by such
Person, including the movement of Hazardous Materials through or in the air,
soil, surface water, ground water or property.
"Requirement of Law" shall mean as to any Person, the Certificate or Articles of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case binding upon
such Person or any of its property or to which such Person or any of its
property is subject.
"Restricted Payment" shall mean: (i) the declaration or payment of any dividend
or the incurrence of any liability to make any other payment or distribution of
cash or other property or assets on or in respect of any Borrower's or any other
Credit Party's Stock; (ii) any payment or distribution made in respect of any
subordinated Indebtedness of any Borrower or any other Credit Party in violation
of any subordination or other agreement made in favor of Lender; (iii) any
payment on account of the purchase, redemption, defeasance or other retirement
of any Borrower's or any other Credit Party's Stock or Indebtedness or any other
payment or distribution made in respect of any thereof, either directly or
indirectly; other than (a) that arising under this Agreement or (b) interest and
principal, when due without acceleration or modification of the amortization as
in effect on the Closing Date, under Indebtedness (not including subordinated
Indebtedness, payments of which shall be permitted only in accordance with the
terms of the relevant subordination agreement made in favor of Lender) described
in Disclosure Schedule (5(b)) or otherwise permitted under Section 5(b)(vi); or
(iv) any payment, loan, contribution, or other transfer of funds or other
property to any other Borrower or to any Stockholder or Affiliate of such
Person, which is not expressly and specifically permitted in this Agreement;
provided, that no payment to Lender shall constitute a Restricted Payment.
"Revolving Credit Advance" shall have the meaning assigned to it in Section
1.1(a).
"Revolving Credit Loan" shall mean at any time the sum of (i) the aggregate
amount of Revolving Credit Advances then outstanding, plus (ii) the total Letter
of Credit Obligations incurred by Lender and outstanding at such time, plus
(iii) the amount of accrued but unpaid interest thereon and Letter of Credit
Fees with respect thereto.
"Revolving Credit Note" shall mean each promissory note dated the Closing Date,
executed by a Borrower substantially in the form of Exhibit F.
"Revolving Credit Rate" shall have the meaning assigned to it in Section 1.5(a).
"Stated Expiry Date" shall mean July, 2003; provided that the Stated Expiry
Date shall automatically be extended for two (2) consecutive one (1) year
periods, the first of which shall commence on the third (3rd) anniversary of the
date of this Agreement and, if so extended for such first one year period, the
second of which shall commence on the fourth (4th) anniversary of the date of
this Agreement, unless, in each case, prior to the then-current Stated Expiry
Date (a) Borrowers provide written notice to Lender not less than ninety (90)
days prior to the then current Stated Expiry Date that Borrowers have elected
not to extend the then current Stated Expiry Date, or (b) Lender provides
written notice to any Borrower not less than ninety (90) days prior to the then
current Stated Expiry Date that Lender has elected not to extend the then
current Stated Expiry Date. The foregoing notwithstanding, the Sated Expiry Date
shall not be extended if, as of the then current Stated Expiry Date, a Default
shall have occurred and is continuing. Nothing contained herein shall be deemed
to be a commitment by Lender to extend the Stated Expiry Date at any time in
effect. The Stated Expiry Date shall in no event be later than the fifth (5th)
anniversary of the date of this Agreement.
"Stock" shall mean all certificated and uncertificated shares, options,
warrants, membership interests, general or limited partnership interests,
participation or other equivalents (regardless of how designated) of or in a
corporation, partnership, limited liability company or equivalent entity whether
voting or nonvoting, including common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under the
Securities Exchange Act of 1934).
"Stockholder" shall mean each holder of Stock of any Borrower or any other
Credit Party.
"Subsidiary" shall mean, with respect to any Person, (i) any corporation of
which an aggregate of more than 50% of the outstanding Stock having ordinary
voting power to elect a majority of the board of directors of such corporation
(irrespective of whether, at the time, Stock of any other class or classes of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly, owned
legally or beneficially by such Person and/or one
9
or more Subsidiaries of such Person, or with respect to which any such Person
has the right to vote or designate the vote of 50% or more of such Stock whether
by proxy, agreement, operation of law or otherwise, and (ii) any partnership or
limited liability company in which such Person or one or more Subsidiaries of
such Person has an equity interest (whether in the form of voting or
participation in profits or capital contribution) of more than 50% or of which
any such Person is a general partner or manager or may exercise the powers of a
general partner or manager.
"Taxes" shall mean taxes, levies, imposts, deductions, Charges or withholdings,
and all liabilities with respect thereto, excluding taxes imposed on or measured
by the net income of Lender.
"Termination Date" shall mean the date on which all Obligations under this
Agreement are indefeasibly paid in full, in cash (other than amounts in respect
of Letter of Credit Obligations if any, then outstanding, provided that
Borrowers shall have funded such amounts in cash in full into the Cash
Collateral Account), and Borrowers shall have no further right to borrow any
moneys or obtain other credit extensions or financial accommodations under this
Agreement.
"Trademark License" shall mean rights under any written agreement now owned or
hereafter acquired by any Person granting any right to use any Trademark or
Trademark registration.
"Trademarks" shall mean all of the following now owned or hereafter acquired by
any Person: (i) all trademarks, trade names, corporate names, business names,
trade styles, service marks, logos, other source or business identifiers, prints
and labels on which any of the foregoing have appeared or appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including all registrations, recordings and applications
in the United States Patent and Trademark Office or in any similar office or
agency of the United States, any State or Territory thereof, or any other
country or any political subdivision thereof, and (ii) all reissues, extensions
or renewals thereof.
"Unused Line Fee" shall have the meaning assigned to it in Schedule E.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result
of a complete or partial withdrawal from such Multiemployer Plan, as such terms
are defined in Part I of Subtitle E of Title IV of ERISA.
Any accounting term used in this Agreement or the other Loan Documents shall
have, unless otherwise specifically provided therein, the meaning customarily
given such term in accordance with GAAP, and all financial computations
thereunder shall be computed, unless otherwise specifically provided therein, in
accordance with GAAP consistently applied; provided, that all financial
covenants and calculations in the Loan Documents shall be made in accordance
with GAAP as in effect on the Closing Date unless Borrower and Lender shall
otherwise specifically agree in writing. That certain items or computations are
explicitly modified by the phrase "in accordance with GAAP" shall in no way be
construed to limit the foregoing. All other undefined terms contained in this
Agreement or the other Loan Documents shall, unless the context indicates
otherwise, have the meanings provided for by the Code. The words "herein,"
"hereof" and "hereunder" or other words of similar import refer to this
Agreement as a whole, including the exhibits and schedules thereto, as the same
may from time to time be amended, modified or supplemented, and not to any
particular section, subsection or clause contained in this Agreement.
For purposes of this Agreement and the other Loan Documents, the following
additional rules of construction shall apply, unless specifically indicated to
the contrary: (a) wherever from the context it appears appropriate, each term
stated in either the singular or plural shall include the singular and the
plural,; (d) all references to statutes and related regulations shall include
any amendments of same and any successor statutes and regulations; and (e) all
references to any instruments or agreements, including references to any of the
Loan Documents, shall include any and all modifications or amendments thereto
and any and all extensions or renewals thereof.
10
SCHEDULE B
ADDRESSES FOR NOTICES
Lender's Address:
----------------
Name: General Electric Capital Corporation
Address: 0000 Xxxxxx Xxxxx Xxxx, Xxxxx 000
Xxx Xxxxxxx, XX 00000
Att'n: iNTELEFILM Corporation - Account Manager
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Borrowers' Address:
------------------
Name: Curious Pictures Corporation
Chelsea Pictures, Inc.
The End, Inc.
Address: 0000 Xxxxxxxxx Xxxx.
Xxxxxxxxxxx, XX 00000
Att'n: Xxxxxxxxxxx X. Xxxx, Chief Executive Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
Other Credit Parties' Address:
-----------------------------
Name: iNTELEFILM Corporation
DCODE, Inc.
Harmony Holdings, Inc.
Furious Pictures Corporation
Delirious Pictures Corporation
The Beginning Entertainment, Inc.
Unscented, Inc.
Gigantic Entertainment, Inc.
The Moment Films, Inc.
Address: 0000 Xxxxxxxxx Xxxx.
Xxxxxxxxxxx, XX 00000
Att'n: Xxxxxxxxxxx X. Xxxx, Chief Executive Officer
Telephone: 000-000-0000
Facsimile: 000-000-0000
1
SCHEDULE C
LETTERS OF CREDIT
1. Lender agrees, subject to the terms and conditions hereinafter set forth, to
incur Letter of Credit Obligations in respect of the issuance of Letters of
Credit issued on terms acceptable to Lender and supporting obligations of each
Borrower incurred in the ordinary course of such Borrower's business, in order
to support the payment of such Borrower's inventory purchase obligations,
insurance premiums, or utility or other operating expenses and obligations, as
requested by such Borrower by written notice to Lender that is received by
Lender not less than five Business Days prior to the requested date of issuance
of any such Letter of Credit; provided, that: (a) that the aggregate amount of
all Letter of Credit Obligations in favor of the Borrowers at any one time
outstanding (whether or not then due and payable) shall not exceed $500,000; (b)
no Letter of Credit shall have an expiry date which is later than the Stated
Expiry Date or one year following the date of issuance thereof; and (c) Lender
shall be under no obligation to incur any Letter of Credit Obligation for the
account of any Borrower if after giving effect to the incurrence of such Letter
of Credit Obligation, the Net Borrowing Availability of such Borrower would be
less than zero. The maximum amount payable in respect of each Letter of Credit
requested by any Borrower will be guaranteed by Lender in favor of the issuing
bank under terms of a separate agreement between Lender and the issuing bank.
Each Borrower will enter into an application and agreement for such Letter of
Credit with the issuing bank selected by Lender (which may be an Affiliate of
Lender). The bank that issues any Letter of Credit pursuant to this Agreement
shall be determined by Lender in its sole discretion.
2. The notice to be provided to Lender requesting that Lender incur Letter of
Credit Obligations shall be in the form of a Letter of Credit application in the
form customarily employed by the issuing bank, together with a written request
by the applicable Borrower and the bank that Lender approve such Borrower's
application. Upon receipt of such notice Lender shall establish a reserve
against such Borrower's Borrowing Availability in the amount of 100% of the face
amount of the Letter of Credit Obligation to be incurred. Approval by Lender in
the written form agreed upon between Lender and the issuing bank (a) will
authorize the bank to issue the requested Letter of Credit, and (b) will
conclusively establish the existence of the Letter of Credit Obligation as of
the date of such approval.
3. In the event that Lender shall make any payment on or pursuant to any Letter
of Credit Obligation, Borrowers shall be unconditionally obligated to reimburse
Lender therefor, and such payment shall then be deemed to constitute a Revolving
Credit Advance in favor of such Borrower. For purposes of computing interest
under Section 1.5, a Revolving Credit Advance made in satisfaction of a Letter
of Credit Obligation shall be deemed to have been made as of the date on which
the issuer or endorser makes the related payment under the underlying Letter of
Credit.
4. In the event that any Letter of Credit Obligations, whether or not then due
or payable, shall for any reason be outstanding on the Commitment Termination
Date, the applicable Borrower will either (a) cause the underlying Letter of
Credit to be returned and canceled and each corresponding Letter of Credit
Obligation to be terminated, or (b) pay to Lender, in immediately available
funds, an amount equal to 105% of the maximum amount then available to be drawn
under all Letters of Credit in favor of such Borrower not so returned and
canceled to be held by Lender as cash collateral in an account under the
exclusive dominion and control of Lender (the "Cash Collateral Account").
5. In the event that Lender shall incur any Letter of Credit Obligations in
favor of any Borrower, such Borrower agrees to pay the Letter of Credit Fee to
Lender as compensation to Lender for incurring such Letter of Credit
Obligations. In addition, such Borrower shall reimburse Lender for all fees and
charges paid by Lender on account of any such Letters of Credit or Letter of
Credit Obligations to the issuing bank.
6. Each Borrower's Obligations to lender with respect to any Letter of Credit or
Letter of Credit Obligation shall be evidenced by Lender's records and shall be
absolute, unconditional and irrevocable and shall not be affected, modified or
impaired by (a) any lack of validity or enforceability of the transactions
contemplated by or related to such Letter of Credit or Letter of Credit
Obligation; (b) any amendment or waiver of or consent to depart from all or any
of the terms of the transactions contemplated by or related to such Letter of
Credit or Letter of Credit Obligation; (c) the existence of any claim, set-off,
defense or other right which any Borrower or any other Credit Party may have
against Lender, the issuer or beneficiary of such Letter of Credit, or any other
Person, whether in connection with this Agreement, any other Loan Document or
such Letter of Credit or the transactions contemplated thereby or any unrelated
transactions; or (d) the fact that any draft, affidavit, letter, certificate,
invoice, xxxx of lading or other document presented under or delivered in
connection with such Letter of Credit or any other Letter of Credit proves to
have been forged, fraudulent, invalid or insufficient in any respect or any
statement therein proves to have been untrue or incorrect in any respect.
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7. In addition to any other indemnity obligations which any Borrower may have to
Lender under this Agreement and without limiting such other indemnification
provisions, Each Borrower hereby agrees to indemnify Lender from and to hold
Lender harmless against any and all claims, liabilities, losses, costs and
expenses (including, attorneys' fees and expenses) which Lender may (other than
as a result of its own gross negligence or willful misconduct) incur or be
subject to as a consequence, directly or indirectly, of (a) the issuance of or
payment of or failure to pay under any Letter of Credit or Letter of Credit
Obligation or (b) any suit, investigation or proceeding as to which Lender is or
may become a party as a consequence, directly or indirectly, of the issuance of
any Letter of Credit, the incurring of any Letter of Credit Obligation or any
payment of or failure to pay under any Letter of Credit or Letter of Credit
Obligation. The obligations of each Borrower under this paragraph shall survive
any termination of this Agreement and the payment in full of the Obligations.
8. Each Borrower hereby assumes all risks of the acts, omissions or misuse of
each Letter of Credit by the beneficiary or issuer thereof and, in connection
therewith, Lender shall not be responsible (a) for the validity, sufficiency,
genuineness or legal effect of any document submitted in connection with any
drawing under any Letter of Credit even if it should in fact prove in any
respect to be invalid, insufficient, inaccurate, untrue, fraudulent or forged;
(b) for the validity or sufficiency of any instrument transferring or assigning
or purporting to transfer or assign any Letter of Credit or any rights or
benefits thereunder or any proceeds thereof, in whole or in part, even if it
should prove to be invalid or ineffective for any reason; (c) for the failure of
any issuer or beneficiary of any Letter of Credit to comply fully with the terms
thereof, including the conditions required in order to effect or pay a drawing
thereunder; (d) for any errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, telecopy, telex or otherwise;
(e) for any loss or delay in the transmission or otherwise of any document or
draft required in order to make a drawing under any Letter of Credit; or (f) for
any consequences arising from causes beyond the direct control of Lender.
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SCHEDULE D
CASH MANAGEMENT
Borrowers agree to establish, and to maintain, until the Termination Date, the
cash management system described below:
1. No Corporate Credit Party: (i) shall (nor shall it permit any of its
Subsidiaries, other than webADTV and its Subsidiaries, to) open or maintain any
deposit, checking, operating or other bank account, or similar money handling
account, with any bank or other financial institution except for those accounts
identified in Attachment I hereto (to include a xxxxx cash account not to exceed
$100,000 during any Fiscal Month, and a payroll account not to exceed an amount
equal to one regular payroll at any time); and (ii) shall close or permit to be
closed any of the accounts listed in Attachment I hereto, in each case without
Lender's prior written consent, and then only after such Credit Party has
implemented agreements with such bank or financial institution and Lender
acceptable to Lender.
2. Commencing on the Closing Date and until the Termination Date, each Corporate
Credit Party shall cause to be deposited directly all cash, checks, notes,
drafts or other similar items relating to or constituting proceeds of or
payments made in respect of any and all Collateral into the blocked account in
such Credit Party's name (collectively, the "Blocked Accounts") set forth in
paragraph 1 of Attachment I hereto.
3. On or before the Closing Date, each bank at which the Blocked Accounts are
held shall have entered into tri-party blocked account agreements (the "Blocked
Account Agreements") with Lender and the applicable Credit Party, in form and
substance acceptable to Lender. Each such Blocked Account Agreement shall
provide, among other things, that (a) such bank executing such agreement has no
rights of setoff or recoupment or any other claim against such Blocked Account,
other than for payment of its service fees and other charges directly related to
the administration of such account, and (b) such bank agrees to sweep on a daily
basis all amounts in the Blocked Account to the Collection Account.
4. On the Closing Date, (a) the blocked account arrangements shall immediately
become operative at the banks at which the Blocked Accounts are maintained, and
(b) amounts outstanding under the Revolving Credit Loan (for purposes of the
Borrowing Availability) shall be reduced through daily sweeps, by wire transfer,
of the Blocked Accounts into the Collection Account. Borrowers acknowledge that
they shall have no right to gain access to any of the moneys in the Blocked
Accounts until after the Termination Date.
5. Each Borrower may maintain, in its name, accounts (the "Disbursement
Accounts") at a bank or banks acceptable to Lender into which Lender shall, from
time to time, deposit proceeds of Revolving Credit Advances made pursuant to
Section 1.1 for use solely in accordance with the provisions of Section 1.3. All
of the Disbursement Accounts as of the Closing Date are listed in paragraph 2 of
Attachment I hereto.
6. Upon the request of Lender, each Corporate Credit Party shall forward to
Lender, on a daily basis, evidence of the deposit of all items of payment
received by such Credit Party into the Blocked Accounts and copies of all such
checks and other items, together with a statement showing the application of
those items relating to payments on Accounts to outstanding Accounts and a
collection report with regard thereto in form and substance satisfactory to
Lender.
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ATTACHMENT TO SCHEDULE D
LIST OF BANK ACCOUNTS
(Note: The name of the Borrower holding the particular account must be listed.)
1. Blocked Accounts.
----------------
See attached.
2. Disbursement Accounts.
----------------------
See attached.
3. Xxxxx Cash Account. (not to exceed $100,000).
-------------------
See attached.
4. Payroll Account (not to exceed one regular payroll).
---------------
See attached.
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SCHEDULE E
FEES
1. UNUSED LINE FEE: For each day from the Closing Date, and through and
including the Termination Date, an amount equal to the Maximum Amount less the
Revolving Credit Loan for such day multiplied by .50%, the product of which is
then divided by 360. The Unused Line Fee for each month (except for the month in
which the Termination Date occurs) is payable on the first day of each calendar
month following the Closing Date; the final monthly installment of the Unused
Line Fee is payable on the Termination Date. Notwithstanding the foregoing, any
unpaid Unused Line Fee is immediately due and payable on the Commitment
Termination Date.
2. LETTER OF CREDIT FEE: For each day for which Lender maintains Letter of
Credit Obligations outstanding, an amount equal to the amount of the Letter of
Credit Obligations outstanding on such day, multiplied by 2%, the product of
which is then divided by 360. The Letter of Credit Fee incurred for each month
is payable at the same time each payment of the Unused Line Fee is due.
Notwithstanding the foregoing, any unpaid Letter of Credit Fee is immediately
due and payable on the Commitment Termination Date.
3. CLOSING FEE: A non-refundable closing fee of $35,000, payable and fully
earned at closing (the "Closing Fee").
4. PREPAYMENT FEE:
For the Revolving Credit Loan, an amount equal to the each Borrower's Maximum
Amount multiplied by:
2% if Lender's obligation to make further Revolving Credit Advances or
incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrowers, upon Default or otherwise) on or after the Closing Date and on or
before the first anniversary of the Closing Date, payable on the Commitment
Termination Date;
1% if Lender's obligation to make further Revolving Credit Advances or
incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrowers, upon Default or otherwise) after the first anniversary of the Closing
Date and on or before the second anniversary of the Closing Date, payable on the
Commitment Termination Date; or
1% if Lender's obligation to make further Revolving Credit Advances or
incur additional Letter of Credit Obligations is terminated (voluntarily by
Borrowers, upon Default or otherwise) after the second anniversary of the
Closing Date and on or before the Stated Expiry Date then in effect, payable on
the Commitment Termination Date.
Each Borrower acknowledges and agrees that (i) it would be difficult or
impractical to calculate Lender's actual damages from early termination of
Lender's obligation to make further Revolving Credit Advances and incur
additional Letter of Credit Obligations for any reason pursuant to Section
1.2(c) or Section 7.2, (ii) the Prepayment Fees provided above are intended to
be fair and reasonable approximations of such damages, and (iii) the Prepayment
Fees are not intended to be penalties.
5. AUDIT FEES: Borrowers jointly and severally agree to reimburse Lender at the
rate of $750 per person per day, plus out of pocket expenses, for the audit
reviews, field examinations and collateral examinations conducted by Lender.
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SCHEDULE F
SCHEDULE OF DOCUMENTS
The obligation of Lender to make the initial Revolving Credit Advances and
extended other credit is subject to satisfaction of the condition precedent that
Lender shall have received the following, each, unless otherwise specified below
or the context otherwise requires, dated the Closing Date, in form and substance
satisfactory to Lender and its counsel:
A. PRINCIPAL LOAN DOCUMENTS
1. Agreement. The Loan and Security Agreement duly executed by each Credit
Party.
2. Revolving Credit Note. Duly executed Revolving Credit Note to the order
of Lender evidencing the Loan duly executed by each Borrower.
3. Borrowing Base Certificates. Original Borrowing Base Certificates for
each Borrower duly executed by a responsible officer of such Borrower.
4. Notice of Revolving Credit Advance. An original Notice of Revolving
Credit Advance for each Borrower duly executed by a responsible officer
of such Borrower.
B. COLLATERAL DOCUMENTS.
1. Acknowledgment Copies of Financing Statements. Acknowledgment copies of
proper Financing Statements (Form UCC-l) (the "Financing Statements")
duly filed under the Code in all jurisdictions as may be necessary or, in
the opinion of Lender, desirable to perfect Lender's Lien on the
Collateral.
2. UCC Searches. Certified copies of UCC Searches, or other evidence
satisfactory to Lender, listing all effective financing statements which
name any Credit Party (under present name, any previous name or any trade
or doing business name) as debtor and covering all jurisdictions referred
to in paragraph (1) immediately above, together with copies of such other
financing statements.
3. Intellectual Property Documents if Required by Lender. Intellectual
Property Security Agreement executed by each Credit Party, in the form
attached hereto as Exhibit U, or in a form suitable for filing with the
appropriate Federal filing office.
4. Other Recordings and Filings. Evidence of the completion of all other
recordings and filings (including UCC-3 termination statements and other
Lien release documentation) as may be necessary or, in the opinion of and
at the request of Lender, desirable to perfect Lender's Lien on the
Collateral and ensure such Collateral is free and clear of other Liens.
5. Power of Attorney. Powers of Attorney duly executed by each Credit Party
executing the Agreement
C. THIRD PARTY AGREEMENTS.
1. Landlord Consents. Unless otherwise agreed to in writing by Lender, duly
executed landlord waivers and consents from the landlords of each Credit
Party's leased locations where Collateral is held, in each case, in the
form attached here to as Exhibit L or in a form and substance
satisfactory to Lender.
2. Cash Management System. Duly executed Blocked Account Agreements and
Pledged Account Agreements for each Credit Party.
3. Guarantees. Guarantee executed by each non-Borrower Credit Party in the
form attached hereto as Exhibit N.
4 Intercreditor Agreements. Intercreditor and Subordination Agreements in
the form attached hereto as Exhibit P executed by such Persons as may be
required by Lender.
5. Opinion Letter. Opinion letter of counsel to Borrowers and each other
Credit Party.
6. Stock Pledge Agreement. Stock Pledge Agreement, in the form attached
hereto as Exhibit T, together with the original stock certificates
endorsed in blank or by separate stock power for each Credit Party other
than Parent. [to be added after review of corporate chart]
D. OTHER DOCUMENTS.
1. Secretary Certificate. A Secretary Certificate in the form of Exhibit H
to the Agreement duly completed and executed by the Secretary of each
Credit Party, together with all attachments thereto.
2. Environmental Audit. Copies of all existing environmental reviews and
audits and other information pertaining to actual or potential
environmental claims relating to the Collateral and Borrowers or other
Credit Parties, as Lender may require.
3. Financial Statements and Projections. Copies of the Financial Statements
and Projections, which Projections shall include a capital expenditures
budget for Parent and its Subsidiaries and for each Borrower, in form and
substance satisfactory to Lender.
4. Insurance Policies. Certified copies of insurance policies described in
Section 3.16, together with evidence showing loss payable or additional
insured clauses or endorsements in favor of Lender.
5. Existing Lease Agreements. Copies of any existing real property leases
and equipment leases to which any Borrower is a party and any other
document or instrument evidencing or relating to existing Indebtedness of
any Borrower, together with
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all certificates, opinions, instruments, security documents and other
documents relating thereto, all of which shall be satisfactory in form
and substance to Lender, certified by an authorized officer of each
Borrower as true, correct and complete copies thereof.
6. Consent Letter. A Consent Letter between Lender and Credit Parties.
7. Payment of Proceeds Letter. Payment of Proceeds letter in the form
attached hereto as Exhibit O.
8. Open Items Agreement. An Open Items Agreement regarding any matters left
for resolution after the Closing Date.
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SCHEDULE G
FINANCIAL COVENANTS
1. Minimum EBITDA. The aggregate cumulative negative EBITDA of Parent and its
Subsidiaries, commencing with the period beginning January 1, 2000 and ending on
December 31, 2000, December 31, 2001, December 31, 2002, December 31, 2003, or
December 31, 2004 shall not exceed six million dollars ($6,000,000).
For purposes of this covenant in this Schedule G, the following terms shall have
the following meanings:
"EBITDA" shall mean, for any period, the Net Income (Loss) of Borrowers and
their Subsidiaries, excluding xxxXXXX.xxx, Inc. and its Subsidiaries, on a
consolidated basis for such period, plus interest expense, income tax expense,
amortization expense, depreciation expense, non-cash stock option compensation,
and extraordinary losses, and minus extraordinary gains, in each case, of
Borrowers and their Subsidiaries on a consolidated basis for such period
determined in accordance with GAAP to the extent included in the determination
of such Net Income (Loss).
"Net Income (Loss)" shall mean with respect to any Person and for any period,
the aggregate net income (or loss) after taxes of such Person for such period,
determined in accordance with GAAP.
2. Minimum Tangible Net Worth. Parent shall maintain, as at the end of each
Fiscal Quarter, Tangible Net Worth of Parent and its Subsidiaries on a
consolidated basis for such Fiscal Quarter of not less than $4,000,000.
For purpose of this covenant in this Schedule G the following terms shall have
the meanings set forth below:
"Tangible Net Worth" shall mean, with respect to any Person, at any date, the
total assets (excluding any assets attributable to any issuances by such Person
of any Stock after the Closing Date and excluding any intangible assets) minus
the total liabilities, in each case, of such Person at such date determined in
accordance with GAAP.
3. Capital Expenditures. Parent and its Subsidiaries on a consolidated basis (a)
shall not make aggregate Capital Expenditures for the period from August 1, 2000
through December 31, 2000 in excess of $ 1,750,000, (b) shall not make aggregate
Capital Expenditures in any Fiscal Year in excess of $ 1,750,000 and (c) from
and after the Closing Date, shall finance not less than 70% of their aggregate
Capital Expenditures in any Fiscal Year through the incurrence of Indebtedness
(other than the Revolving Credit Loan); provided, that, for purposes of this
covenant in this Schedule G, "Subsidiaries" shall not include xxxXXXX.xxx, Inc.
and its Subsidiaries.
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