CONSENT AND AMENDMENT NO. 1
TO
CREDIT AGREEMENT
This Consent and Amendment No. 1 (this "Agreement"), made as of this
12th day of November 2004, to the Credit Agreement dated as of April 28, 2004
(as amended, supplemented, or otherwise modified from time to time, the "Credit
Agreement") by and among: MediaBay, Inc. ("MediaBay"), Xxxxx Xxxxxxx, Inc.
("RSI") and Audio Book Club, Inc. (collectively with MediaBay and RSI the
"Borrowers" and each individually, a "Borrower"); the Guarantors signatory
thereto; the lenders signatory thereto (the "Lenders"); and Zohar CDO 2003-1,
Limited, as agent for the Lenders (the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrowers are indebted to the Lenders pursuant to a Credit
Agreement;
WHEREAS, MediaBay has raised $900,000 of gross proceeds from the sale
of 1,800,000 shares of its common stock and warrants to purchase 400,000 shares
of common stock (the "Permitted Stock Sale");
WHEREAS, MediaBay desires to retain the entire proceeds of the
Permitted Stock Sale;
WHEREAS, Borrowers have requested that Lenders (i) consent to the
retention by Borrowers of the $900,000 of gross proceeds from the Permitted
Stock Sale and (ii) amend the Credit Agreement; and
WHEREAS, Lenders have agreed to consent to the retention by Borrowers
of the $900,000 of gross proceeds from the Permitted Stock Sale and amend the
Credit Agreement, but only to the extent, and on the terms set forth expressly
below.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms that are used herein without
definition, and which are defined in the Credit Agreement shall have
the respective meanings ascribed to therein.
2. One Time Consent to Retention of Net Equity Issuance Proceeds. Subject
to the terms and conditions set forth herein, and notwithstanding the
requirement under Section 2.8(d) of the Credit Agreement regarding the
application of Net Equity Issuance Proceeds, the Lenders hereby consent
to the retention by the Borrowers of all of the $900,000 of gross
proceeds MediaBay received from the Permitted Stock Sale.
3. Amendment to the Credit Agreement. The definition of "Adjusted EBITDA"
set forth in Section 1.1 of the Credit Agreement shall be deleted in
its entirety and replaced with the following:
"Adjusted EBITDA" means, for any period, an amount equal to
the sum, determined on a consolidated basis for Borrowers and
all their subsidiaries for such period, of (i) the
consolidated earnings (or loss) from the operations after all
expenses and other proper charges, but before payment or
provision for any income taxes or interest expense, plus (ii)
depreciation and amortization, plus (iii) extraordinary and
nonrecurring losses, minus (iv) extraordinary and nonrecurring
gains (in each case, as determined under GAAP), plus (v)
non-cash stock compensation, plus (vi) any expense required to
be recorded under GAAP in respect of the issuance of stock
options or stock awards; provided that as required by Section
1.2, the foregoing sum shall be adjusted for the effect of
advertising expenses and New Member Acquisition Costs as
expensed as such amounts are incurred; provided, further, that
solely for the purpose of determining the value of Adjusted
EBITDA for any period which includes the Fiscal Quarter period
ending September 30, 2004, the foregoing sum shall be further
adjusted by adding (y) an additional reserve for inventory
obsolescence in the amount of $1,000,000, which reserve was
taken in the quarter ended September 30, 2004, and (z) a
write-off of advances to publishers in the amount of
$1,100,000, which write-off was taken in the third quarter of
2004.
4. Effectiveness. This Agreement shall become effective as of the date of
receipt by the Agent of (a) counterparts of this Amendment duly
executed and delivered by each of the Borrowers, the Guarantors and the
Lenders and (b) payment of all fees and expenses (including attorneys'
fees) and out-of-pocket expenses of the Agent and Lenders that are due
and payable from the Borrowers to the Agent and Lenders, including but
not limited to all such amounts incurred in connection with this
Agreement.
5. Representations and Warranties. Each Credit Party hereby represents and
warrants to the Lenders and Agent that the representations and
warranties of such Credit Party contained in the Credit Agreement are
true and correct in all material respects on and as of the date hereof
as if made on and as of the date hereof other than as referred to
herein, except to the extent such representations and warranties
expressly relate to a different specific date in which case such
representations and warranties shall be true and correct in all
material respects as of such date. To induce the Lenders to enter into
this Agreement, each Credit Party further represents and warrants that:
a. Such Credit Party has taken all necessary action to
authorize the execution, delivery and performance of this Agreement.
b. This Agreement has been duly executed and delivered by such
Credit Party and constitutes such Credit Party's legal, valid and
binding obligations, enforceable in accordance with its terms, except
as such enforceability may be subject to (i) bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or
similar laws affecting creditors' rights generally and (ii) general
principles of equity (regardless of whether such enforceability is
considered in a proceeding at law or in equity).
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c. No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or governmental authority
or third party is required in connection with the execution, delivery
or performance by such Credit Party of this Agreement.
d. There exist no causes of action, offsets, claims,
counterclaims or defenses against Agent or Lenders with respect to the
Obligations under the Credit Agreement or any other Credit Document.
e. Except for Permitted Liens, Agent has valid, continuing and
duly perfected first and prior liens on and first priority security
interest in the Collateral.
6. No Other Amendment. This Agreement shall not constitute an amendment or
waiver of any provision of the Credit Agreement not expressly referred
to herein and shall not be construed as a waiver or consent to any
further or future action on the part of the Credit Parties that would
require a waiver or consent of the Lenders. Except as expressly waived
hereby, all the terms, provisions and conditions of the Credit
Agreement are and shall remain unchanged and shall continue in full
force and effect. All references in the Credit Documents to the Credit
Agreement shall be deemed to be references to the Credit Agreement as
amended hereby.
7. Release of Lenders and Agent. Each Credit Party hereby releases the
Lenders and the Agent and the Lenders' and Agent's respective
subsidiaries, affiliates, members, partners, officers, employees,
representatives, agents, managers, counsel, directors, successors and
assigns, both present and former, from any and all actions, causes of
action, claims, demands, damages and liabilities of whatever kind or
nature, in law or in equity, now known or unknown, suspected or
unsuspected to the extent that any of the foregoing arises from any
action or failure to act on or prior to the date hereof.
8. Acknowledgment. Each Credit Party acknowledges, ratifies and reaffirms
the validity and enforceability of the Credit Agreement and all liens
and security interests granted thereunder to Lenders as collateral
security for its Obligations and acknowledges that all such liens and
security interests and all collateral pledged as security for the
Obligations continue to be and remain collateral for the Obligations
from and after the date hereof.
9. Miscellaneous. The terms of this Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective
successors and assigns. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the
same Agreement. Delivery of an executed counterpart of this Agreement
by facsimile shall be equally as effective as delivery of an original
executed counterpart of this Agreement.
10. GOVERNING LAW. THIS AGREEMENT AND ALL CLAIMS, DISPUTES AND MATTERS
ARISING HEREUNDER OR THEREUNDER OR RELATED HERETO OR THERETO, WILL BE
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GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK APPLICABLE TO CONTRACTS EXECUTED IN AND TO BE PERFORMED
ENTIRELY WITHIN THAT STATE, WITHOUT REFERENCE TO CONFLICTS OF LAWS
PROVISIONS.
[Remainder of page intentionally left blank; signatures on following pages.]
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In witness whereof, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above.
BORROWERS:
MEDIABAY, INC.
By: /s/ Xxxx X. Xxxx
---------------------------------------------
Name: Xxxx X. Xxxx
Title: Vice Chairman and Chief Financial
Officer
XXXXX XXXXXXX, INC.
By: /s/ Xxxx X. Xxxx
---------------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
AUDIO BOOK CLUB, INC.
By: /s/ Xxxx X. Xxxx
---------------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
[Signatures continue on next page]
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AGENT:
ZOHAR CDO 2003-1, LIMITED
By: Patriarch Partners VIII, LLC
Its Collateral Manager
By: /s/ Xxxx Xxxxxx
-----------------------------------
Name: Xxxx Xxxxxx
Title: Manager
[Signatures continue on next page]
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LENDER:
ZOHAR CDO 2003-1, LIMITED
By: Patriarch Partners VIII, LLC
Its Collateral Manager
By: /s/ Xxxx Xxxxxx
--------------------------------------
Name: Xxxx Xxxxxx
Title: Manager
Address for Notices:
-------------------
c/o Patriarch Partners VIII, LLC
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
[Signatures continue on next page]
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GUARANTORS:
ABC INVESTMENT CORP.
By: /s/ Xxxx X. Xxxx
--------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
XXXXXXXX.XXX, INC.
By: /s/ Xxxx X. Xxxx
--------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
VIDEO YESTERYEAR, INC.
By: /s/ Xxxx X. Xxxx
--------------------------------------
Name: Xxxx X. Xxxx
Title: Executive Vice President
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