Exhibit 10.16
EXHIBIT A
THE PRINCIPAL AMOUNT OF THE INDEBTEDNESS EVIDENCED OR SECURED BY THIS INSTRUMENT
IS SUBORDINATED TO OTHER INDEBTEDNESS PURSUANT TO, AND TO THE EXTENT PROVIDED
IN, AND IS OTHERWISE SUBJECT TO THE TERMS OF, THE SUBORDINATION AGREEMENT DATED
AS OF JANUARY 17, 2002 BY AND AMONG ARTISAN ENTERTAINMENT, INC., ARTISAN
PICTURES, INC., ARTISAN HOME ENTERTAINMENT, INC., THE OTHER GUARANTORS LISTED ON
THE SIGNATURE PAGE THEREOF, VIALTA, INC., AND JPMORGAN CHASE BANK, AS AGENT.
SUBORDINATED PROMISSORY NOTE
$10,000,000 Date of Issuance: January 17, 2002
Artisan Entertainment Inc., a Delaware corporation (the "Company"), hereby
promises to pay to the order of Vialta, Inc., a Delaware corporation ("
Lender"), the principal amount of $10,000,000 (or $5,000,000, if the second
sentence of Paragraph 1 below is applicable) together with interest thereon, in
accordance with the provisions of this Subordinated Promissory Note (this
"Note").
1. Loan. Lender agrees, upon the terms and conditions hereof, to loan to
Company the principal amount available hereunder upon the request of
Company. Notwithstanding the foregoing, in the event that Lender delivers
to Company an Exploitation Notice for Programming Package 1 under the
License Agreement prior to Lender's making the loan under this Note
(including if such Exploitation Notice is delivered during the five
business day period after Company has provided a Borrowing Certificate to
Lender and prior to Lender having made the Loan under this Note), the
maximum principal amount that may be borrowed under this Note shall be
limited to $5,000,000. Company shall provide to Lender a Borrowing
Certificate in the form of Exhibit A attached hereto at least five
business days' prior to the date upon which the Loan under this Note is to
be made. Only one Loan shall be made hereunder. Company must provide the
Borrowing Certificate to Lender on or prior to July 15, 2002 in order to
borrow under this Note. Except as otherwise expressly provided in
paragraph 4(b) hereof, interest shall accrue at the rate of seven and
one-half percent (7.5%) per annum (computed on the basis of the actual
number of days elapsed over a year of 360 days), compounded quarterly on
the last day of each March, June, September and December (each, an
"Interest Payment Date"), beginning on the date upon which the Loan under
this Note is made, on the unpaid principal amount of this Note (plus any
accrued but unpaid interest that has been compounded) outstanding from
time to time. Unless this Note has been previously repaid, Company shall
make an initial cash interest payment to the holder of this Note equal to
accrued interest under the Note on the last business day of September,
2004, (unless earlier payment of cash interest is permitted under Senior
Debt Agreements, in which case such cash payments shall commence on such
earlier Interest Payment Date)
and shall make quarterly cash payments to the holder of this Note
thereafter on each Interest Payment Date.
2. Payment of Principal on Note.
(a) Scheduled Payments. The Company shall pay the principal amount of
$10,000,000 (or such lesser principal amount then outstanding) to
the holder of this Note on the third anniversary of the date upon
which the Loan under this Note is made, together with all accrued
and unpaid interest on the principal amount being repaid (and any
accrued but unpaid interest that has been compounded).
(b) Voluntary Prepayments. The Company shall have the right to prepay
principal of this Note on the following terms and conditions:
(i) Subject to subparagraph (b)(ii) below, the Company may, at any
time and from time to time without premium or penalty, prepay
all or any portion of the outstanding principal amount of this
Note.
(ii) The Company shall send written notice (the "Prepayment
Notice") of its election to make a prepayment on this Note
(and the amount to be prepaid) to the holder of this Note by
registered or certified mail, return receipt requested, or by
reputable overnight courier, at least 10 days prior to the
date of prepayment.
(iii) The Company may, at any time and from time to time, without
premium or penalty, prepay all or any portion of any accrued
but unpaid interest on this Note (and any accrued but unpaid
interest that has been compounded).
(c) Prepayments By Way of Offset. To the extent permitted under Senior
Debt Agreements, so long as any amounts are outstanding under this
Note, any "License Fees" payable by the holder hereof under the
License Agreement shall, when due, automatically be offset (i)
first, against payment of any costs and expenses due the holder
hereof under paragraph 21 hereof, (ii) second, against any interest
payment due to the holder hereof under paragraph 1 hereof, (iii)
third, against prepayment of this Note pursuant to paragraph 2
hereof, and/or (iv) finally, against payment of any other amounts
due the holder hereof under or with respect to this Note. For the
technical purposes of effecting such offsets, any such obligations
of the holder hereof to Artisan shall be offset against Artisan's
obligations as a Guarantor of the obligations of the Company to the
holder hereof. The Company shall notify the holder hereof in writing
of any offset effected pursuant to the foregoing provisions,
provided that such notices shall be for informational purposes only
and shall not be binding if in error. Nothing herein shall limit any
otherwise validly existing right of the Company to offset any bona
fide debts due and owing from the holder of this Note against any
amounts due
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and owing to such person or entity and its affiliates including but
not limited to any amounts owed under the License Agreement.
3. Subordination. All amounts (including all principal, interest, premiums
and other payments) payable by the Company with respect to the Note, or
payable by the Guarantors with respect to the Guaranty, and the priority
of all liens on Collateral in favor of the holder of this Note, and all
rights and remedies thereunder or with respect thereto, are and shall be
subordinate and junior in right of payment and priority to the prior
payment in full of the Senior Debt, and to the priority of the liens in
favor of the holders of Senior Debt or their representatives, to the
extent and in the manner set forth in one or more subordination agreements
between the holders of the Senior Debt and the holder of this Note. Lender
agrees to negotiate in good faith and execute subordination agreements
reasonably acceptable to the holders of Senior Debt consistent with the
first sentence of this paragraph 3 (it being understood that Lender will
approve and agree to execute any subordination agreement with terms that
are no less favorable to it than those set forth on Exhibit B attached
hereto). The holder of this Note hereby agrees to execute any and all
agreements, documents and instruments reasonably requested by the Company
or the holders of the Senior Debt in furtherance of, and consistent with,
this paragraph 3.
4. Events of Default.
(a) Definition. For purposes of this Note, an Event of Default shall be
deemed to have occurred if:
(i) any Credit Party fails to pay when due and payable (whether at
maturity or otherwise) any amount payable under any
Transaction Document and such failure to pay is not cured
within ten (10) business days after the occurrence thereof;
(ii) any Credit Party fails to duly observe or perform any
covenant, condition or agreement contained in this Note or any
other covenant, condition or agreement contained in any other
Transaction Document and such failure is not cured within
thirty (30) days after notice thereof has been given to the
Company by the holder of this Note; or;
(iii) any Credit Party makes an assignment for the benefit of
creditors or admits in writing its inability to pay its debts
generally as they become due; or an order, judgment or decree
is entered adjudicating any Credit Party bankrupt or
insolvent; or any order for relief with respect to any Credit
Party is entered under the Federal Bankruptcy Code; or any
Credit Party petitions or applies to any tribunal for the
appointment of a custodian, trustee, receiver or liquidator of
such Credit Party, or of any substantial part of the assets of
such Credit Party, or commences any proceeding relating to
such Credit Party under any bankruptcy reorganization,
arrangement, insolvency, readjustment of debt, dissolution
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or liquidation law of any jurisdiction; or any such petition
or application is filed, or any such proceeding is commenced,
against any Credit Party and either (A) such Credit Party by
any act indicates its approval thereof, consent thereto or
acquiescence therein or (B) such petition, application or
proceeding is not dismissed within 60 days;
(iv) any representation or warranty made by any Credit Party in any
Transaction Document or in connection with any financial
statement, certificate or other document required to be
furnished by or on behalf of any Credit Party to the holder of
this Note in connection with any Transaction Document shall
prove to have been false and misleading in any material
respect when made, deemed to be made or delivered.
(v) default shall be made with respect to any payment of any
monetary obligation of any Credit Party in excess of
$2,500,000 when due, or the performance of any other
obligation incurred in connection with any such monetary
obligation, if the effect of such default is to accelerate the
maturity of such monetary obligation or to permit the holder
thereof to cause such monetary obligation to become due prior
to its stated maturity, or if such monetary obligation has
become due at its stated maturity, and if such default shall
not have been remedied, cured, waived or consented to by the
holder of such monetary obligation within the period of grace
with respect thereto;
(vi) final judgment(s) for the payment of money in excess of
$500,000 shall be rendered against any Credit Party which
within thirty (30) days from the entry of such judgment shall
not have been discharged or stayed pending appeal or which
shall not have been discharged or bonded in full within thirty
(30) days from the entry of a final order of affirmance on
appeal; or
The foregoing shall constitute Events of Default whatever the reason or cause
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.
(b) Consequences of Events of Default.
(i) If any Event of Default has occurred and continued for ten
(10) business days, without limiting any other remedies
hereunder or at law, the interest rate on this Note shall
increase immediately by an increment of one (1) percentage
point, to the extent permitted by law. Thereafter, until such
time as all Events of Default have been cured or waived, the
interest rate shall increase automatically at the end of each
succeeding ninety-day period by an additional increment of one
(1) percentage point, to the extent
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permitted by law (but in no event shall the interest rate
exceed 12.0% and, accordingly, the last such permitted
incremental increase in the interest rate shall be one half of
one percentage point from 11.5% to 12.0%). Any increase of the
interest rate resulting from the operation of this
subparagraph shall terminate as of the close of business on
the date on which all Events of Default have been cured or
waived (subject to subsequent increases pursuant to this
subparagraph).
(ii) If an Event of Default of the type described in subparagraph
4(a)(iii) has occurred with respect to the Company only, the
aggregate principal amount of this Note (together with all
accrued interest thereon and all other amounts due and payable
with respect thereto) shall become immediately due and payable
without any action on the part of the holder of this Note.
(iii) If any Event of Default (other than under subparagraph
4(a)(iii) with respect to the Company) has occurred and is
continuing, subject to the provisions of paragraph 3 hereof,
the holder of this Note may declare all or any portion of the
outstanding principal amount of this Note (together with all
accrued interest thereon and all other amounts due and payable
with respect thereto) to be immediately due and payable and
may demand immediate payment of all or any portion of the
outstanding principal amount of this Note (together with all
such other amounts then due and payable).
5. Security. At such time that either (i) the Canyon Note is repaid in full
or (ii) a lien in favor of the holder hereof is permitted under the Senior
Debt Agreements, Guarantor shall execute and deliver to the holder hereof
such documents as may be necessary for the holders to either (i) obtain an
interest in the Collateral equivalent to Canpartners' interest in the
Collateral under the Canyon Note or (ii) to have perfected liens on all of
the Collateral, subject in priority only to the liens in favor of the
holders of Senior Debt and other priority liens expressly permitted by the
Senior Debt Agreements.
6. Amendment and Waiver. Except as otherwise expressly provided herein, the
provisions of this Note may be amended and the Company or the Parent may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company or the Parent has
obtained the written consent of the holder of this Note.
7. Definitions. For purposes of this Note, the following capitalized terms
have the following meaning:
"Artisan" means Artisan Home Entertainment Inc.
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"Authorized Officer" shall mean, with respect to any Credit Party, such
Credit Party's Chief Executive Officer, President, Chief Financial Officer
or Chief Operating Officer.
"Canpartners " means Canpartners Investments IV, LLC.
"Canyon Note" means the Note and Stock Purchase Agreement dated as of July
9, 1997, as amended to date.
"Change in Control" shall be defined as set forth in the Senior Debt
Agreements.
"Collateral" means any present or future property or asset of any Credit
Party of any type or nature, whether real or personal, tangible or
intangible, subject to a lien under any Senior Debt Agreements.
"Credit Parties" means the Company and the Guarantors, and each of them,
and any one or more of them.
"Default" means any event that, with the giving of notice or passage of
time, or both, could constitute or give rise to an Event of Default.
"Guarantors" means Artisan Pictures Inc., and each Person (other than the
Company) that is a guarantor of the obligations of Artisan Pictures Inc.
pursuant to the Senior Debt Agreements, and each of them, and any one or
more of them.
"Guaranty" means the General Continuing Guaranty in the form attached
hereto as Exhibit C whereby the Guarantors guaranty to the holder hereof
payment and performance of the obligations of the Company under the Note.
"License Agreement" means that certain License Agreement dated as of
January 17, 2002, between the holder hereof and Artisan Home Entertainment
Inc.
"Person " means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Senior Debt" means all Senior Obligations of the Company as defined in
the Subordination Agreement dated as of January 18, 2002 attached hereto
as Exhibit B.
"Senior Debt Agreements" means any and all documents, instruments and
agreements evidencing or relating to Senior Debt, as such Agreements may
be amended from time to time.
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"Subsidiary" means, with respect to any Person, any corporation, limited
liability company, partnership, association or other business entity of
which (i) if a corporation, a majority of the total voting power of shares
of stock entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person or one or
more of the other Subsidiaries of that Person or a combination thereof, or
(ii) if a limited liability company, partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or
indirectly, by any Person or one or more Subsidiaries of that Person or a
combination thereof. For purposes hereof, a Person or Persons shall be
deemed to have a majority ownership interest in a limited liability
company, partnership, association or other business entity if such Person
or Persons shall be allocated a majority of limited liability company,
partnership, association or other business entity gains or losses or shall
be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.
"Transaction Documents" means this Note, the Guaranty and any documents
evidencing the security interest in the Collateral entered into pursuant
to Paragraph 7 hereof, as they may from time to time be amended, modified,
supplemented, renewed or restated.
8. Cancellation. After all principal and accrued interest at any time owed on
this Note has been paid in full or otherwise converted, this Note shall be
surrendered to the Company for cancellation and shall not be reissued.
9. Payments. All payments to be made to the holder of this Note shall be made
in the lawful money of the United States of America in immediately
available funds.
10. Place of Payment. Payments of principal and interest shall be delivered to
the holder at the following address:
Vialta, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
or to such other address or to the attention of such other person as specified
by prior written notice to the Company.
11. Business Days. If any payment is due, or any time period for giving notice
or taking action expires, on a day which is a Saturday, Sunday or legal
holiday in the State of California, the payment shall be due and payable
on, and the time period shall automatically be extended to, the next
business day immediately following such Saturday, Sunday or legal holiday,
and interest shall continue to accrue at the required rate hereunder until
any such payment is made.
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12. Usury Laws. It is the intention of the Company and the holder of this Note
to conform strictly to all applicable usury laws now or hereafter in
force, and any interest payable under this Note shall be subject to
reduction to the amount not in excess of the maximum legal amount allowed
under the applicable usury laws as now or hereafter construed by the
courts having jurisdiction over such matters. If the maturity of this Note
is accelerated by reason of an election by the holder hereof resulting
from an Event of Default, voluntary prepayment by the Company or
otherwise, then earned interest may never include more than the maximum
amount permitted by law, computed from the date hereof until payment, and
any interest in excess of the maximum amount permitted by law shall be
canceled automatically and, if theretofore paid, shall at the option of
the holder hereof either be rebated to the Company or credited on the
principal amount of this Note, or if this Note has been paid, then the
excess shall be rebated to the Company. The aggregate of all interest
(whether designated as interest, service charges, points or otherwise)
contracted for, chargeable, or receivable under this Note shall under no
circumstances exceed the maximum legal rate upon the unpaid principal
balance of this Note remaining unpaid from time to time. If such interest
does exceed the maximum legal rate, it shall be deemed a mistake and such
excess shall be canceled automatically and, if theretofore paid, rebated
to the Company or credited on the principal amount of this Note, or if
this Note has been repaid, then such excess shall be rebated to the
Company. Reference is made to Section 25118 of the California Corporations
Code, which creates an exemption from California's usury laws. It is the
intention of the Company and of the holder of this Note that this Note be
exempt from California's usury laws by virtue of such Section 25118, and
the Company hereby represents and warrants to the holder of this Note that
the criteria set forth in such Section 25118 for the exemption contained
therein to be applicable are met with respect to the transaction evidenced
by this Note.
13. Severability. Whenever possible, each provision of this Note shall be
interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Note is held to be prohibited by or
invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Note.
14. Counterparts. This Note may be executed simultaneously in two or more
counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together shall constitute
one and the same Note.
15. Descriptive Headings; Interpretation. The descriptive headings of this
Note are inserted for convenience only and do not constitute a substantive
part of this Note. The use of the word "including" in this Note shall be
by way of example rather than by limitation.
16. Governing Law. The corporate law of the State of Delaware shall govern all
issues and questions concerning the relative rights and obligations of the
Company and its
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stockholders. All other issues and questions concerning the construction,
validity, enforcement and interpretation of this Note and the exhibits and
schedules hereto shall be governed by, and construed in accordance with,
the laws of the State of California, without giving effect to any choice
of law or conflict of law rules or provisions (whether of the State of
California or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of California.
17. No Assignment. Without the prior written consent of the Company, this Note
may not be assigned, pledged or otherwise transferred.
18. Withholding. All amounts required to be paid by the Company hereunder, and
all securities required to be issued hereunder, shall be subject to any
required withholding.
19. Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Note shall be in
writing and shall be deemed to have been given when delivered personally
to the recipient, sent to the recipient by reputable overnight courier
service (charges prepaid) or facsimile or mailed to the recipient by
certified or registered mail, return receipt requested and postage
prepaid. Such notices, demands and other communications shall be sent to
each holder of Notes and to the Company at the following addresses:
To Company:
Artisan Entertainment
0000 Xxxxxxxx Xxxxxx
0xx Xxxxx
Xxxxx Xxxxxx, XX 00000
Attn: Legal Department
Fax: (000) 000-0000
To Lender:
Vialta, Inc.
00000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Fax: (000) 000-0000
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With Courtesy Copy to:
Xxxxx Xxxxxxx
Xxxx Xxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxx, XX 00000
(000) 000-0000
20. Obligations Absolute and Unconditional. No reference herein and no
provision of this Note shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Note at the times, place and rate, and in the coin or
currency, as prescribed herein.
21. Costs and Expenses; Delay Not Waiver. The Company promises to pay all
costs and expenses, including reasonable attorneys' fees incurred in the
collection of this Note. The Company and any endorsers of this Note hereby
consent to renewals and extension of time at or after the maturity hereof,
without notice, and hereby waive diligence, presentment, protest, demand
and notice of every kind and, to the full extent permitted by law, the
right to plead any statute of limitations as a defense to any demand
hereunder.
22. WAIVER OF JURY TRIAL. THE COMPANY AND THE HOLDER HEREOF WAIVE THE RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING UNDER THIS NOTE OR ANY ACTION
OR PROCEEDING ARISING OUT OF THE TRANSACTIONS CONTEMPLATED HEREBY,
REGARDLESS OF WHICH PARTY INITIATES ANY SUCH ACTION OR PROCEEDING.
23. Representations and Warranties of the Company. To induce the holder hereof
to make the loan to the Company evidenced hereby, the Company hereby
represents and warrants to the holder hereof as follows:
(a) Corporate Existence and Power. Each of the Credit Parties is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and is in good
standing as a foreign corporation in all jurisdictions where both
the nature of its properties or business so requires. Each of the
Credit Parties has the corporate power and authority to own its
respective properties and carry on its respective businesses as now
being conducted, to execute, deliver and perform, as applicable, its
obligations under this Note and other documents contemplated hereby
to which it is or will be a party as provided.
(b) Corporate Authority and No Violation. The issuance of the Note and,
in the case of each Guarantor, the guaranty of the obligations as
contemplated herein (i) have been duly authorized by all necessary
corporate action on the part of each such Credit Party, (ii) will
not constitute a violation by such Credit Party of any
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provision of Applicable Law or any order of any court or other
agency of the United States or any state thereof applicable to such
Credit Party or any of its properties or assets which violation
would have a material adverse effect upon the financial condition or
the business of the Credit Parties taken as a whole, (iii) will not
violate any provision of the Certificate of Incorporation or By-Laws
of such Credit Party, indenture, agreement, bond, note or other
similar instrument to which such Credit Party is a party or by which
such Credit Party or its properties or assets are bound which
violation would have a material adverse effect upon the financial
condition or the business of the Credit Parties taken as a whole,
and (iv) will not be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default
under or create any right to terminate any such indenture,
agreement, bond, note or other instrument which violation could have
a material adverse effect upon the financial condition or the
business of the Credit Parties taken as a whole.
(c) Governmental Approval. All authorizations, approvals, registrations
or filings with any governmental or public regulatory body or
authority of the United States or any state thereof required for the
issuance of the Notes have been duly obtained or made, or duly
applied for and are in full force and effect, and if any such
further authorizations, approvals, registrations or filings should
hereafter become necessary, the Credit Parties shall obtain or make
all such authorizations, approvals, registrations or filings.
(d) Financial Statements, Etc. The audited Consolidated balance sheets
of the Parent and its Consolidated Subsidiaries at December 31, 2000
and the unaudited Consolidated balance sheet of the Parent and its
Consolidated Subsidiaries at September 30, 2001, together with the
related statements of cash flows and Stockholders' Equity and the
related notes have been prepared in accordance with GAAP, except as
otherwise indicated in the notes to such financial statements. All
of such financial statements fairly present in all material respects
the Consolidated financial condition or the results of operations of
the Parent and its Consolidated Subsidiaries at the dates or for the
periods indicated, subject (in the case of unaudited statements) to
changes resulting from normal year-end and audit adjustments, and
(in the case of balance sheets) reflect (including the notes
thereto) all known liabilities, contingent or otherwise, as of such
dates required in accordance with GAAP to be shown or reserved
against, or disclosed in the notes to the financial statements. As
of the date hereof, Company has no Senior Debt outstanding other
than Senior Debt evidenced by the Canyon Note and Senior Debt
outstanding under the Senior Debt Documents to which Chase Manhattan
Bank is a party referred to in the definition of "Senior Debt."
(e) No Material Adverse Change. There has been no material adverse
change with respect to the business, operations, performance,
assets, properties or condition (financial or otherwise) of the
Credit Parties taken as a whole from
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September 30, 2001, except for changes due to seasonality that are
consistent with the corresponding periods in prior years.
24. Affirmative Covenants of the Credit Parties. From and after the date
hereof and for so long as any obligations of the Credit Parties under the
Note remain outstanding, the Company agrees, and each Guarantor by
executing the Guaranty agrees, that each Credit Party, unless the holder
hereof otherwise consents in writing, shall:
(a) Financial Statements and Reports. Furnish or cause to be furnished
to the holder of the Note:
(i) Within 120 days after the end of the current fiscal year of
the Parent and within 95 days after the end of each subsequent
fiscal year of the Parent the audited consolidated balance
sheet of the Parent and its Consolidated Subsidiaries as at
the end of, and the related statements of income,
Stockholders' Equity and cash flows for, such year, and the
corresponding figures as at the end of, and for, the preceding
fiscal year, accompanied by an unqualified opinion of Price
Waterhouse LLP or such other independent public accountants of
recognized standing as shall be retained by the Parent, which
report and opinion shall be prepared in accordance with
generally accepted auditing standards relating to reporting
and which report and opinion shall contain no material
exceptions or qualifications except for qualifications
relating to accounting changes (with which such independent
public accountants concur) in response to FASB releases or
other authoritative pronouncements;
(ii) Within 50 days after the end of each of the first three fiscal
quarters of each of its fiscal years the unaudited
consolidated balance sheets of the Parent and its Consolidated
Subsidiaries as at the end of, and the related unaudited
consolidated statements of income and cash flow for, such
quarter, and for the portion of the fiscal year through the
end of such quarter, and the corresponding figures as at the
end of such quarter, and for, the corresponding period in the
preceding fiscal year, together with a certificate signed by
an Authorized Officer of the Parent, on behalf of the Parent,
to the effect that such financial statements, while not
examined by independent public accountants, reflect, in the
opinion of the Parent, all adjustments necessary to present
fairly in all material respects the financial position of the
Parent and its Consolidated Subsidiaries as at the end of the
fiscal quarter and the results of its operations for the
quarter then ended in conformity with GAAP, subject to normal
year-end audit adjustments and the absence of footnotes;
(iii) Simultaneously with the delivery of the statements referred to
in paragraphs 24(a)(i) and (ii) above, a certificate of an
Authorized Officer of the Parent, on behalf of the Parent
stating whether or not such Authorized
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Officer has knowledge, after due inquiry, of any condition or
event which would constitute an Event of Default or Default
has occurred and, if so, specifying each such condition or
event and the nature thereof;
(iv) Promptly upon their becoming available, copies of (i) all
registration statements, proxy statements, and all reports
which any Credit Party shall file with the Securities and
Exchange Commission or any successor agency and (ii) all
reports, financial statements, press releases and other
information which any Credit Party shall release, send or make
available to its common stockholders generally;
(b) Corporate Existence. Do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its corporate
existence, rights, material licenses, material permits and material
franchises, and comply with all applicable statutes, regulations and
orders of, and all applicable restrictions imposed by, any
Governmental Authority, except as otherwise permitted under the
Senior Debt Agreements.
(c) Maintenance of Properties. Keep its tangible properties which are
material to its business in good repair, working order and condition
(ordinary wear and tear excepted) and, from time to time (i) make
all necessary and proper repairs, renewals, replacements, additions
and improvements thereto and (ii) comply at all times with the
provisions of all material leases and other material agreements to
which it is a party so as to prevent any loss or forfeiture thereof
or thereunder unless compliance therewith, is being currently
contested in good faith by appropriate proceedings; provided,
however, that nothing shall prevent any Credit Party from
discontinuing the use, operation or maintenance of such properties
or disposing of them if such discontinuance, or disposal is, in the
judgment of its Board of Directors, desirable in the conduct of the
business.
(d) Books and Records. Maintain or cause to be maintained at all times
true and complete books and records of its financial operations.
25. Negative Covenants of the Credit Parties. From and after the date hereof
and for so long as any obligations of the Credit Parties under the Note
remain outstanding, the Company agrees, and each Guarantor by executing
the Guaranty agrees, that each Credit Party, unless the holder hereof
otherwise consents in writing, shall not:
(a) Limitations on Indebtedness. Incur, create, assume or suffer to
exist any preferred stock or Indebtedness or permit any partnership
or joint venture in which any Credit Party is a general partner to
incur create, assume or suffer to exist any Indebtedness other than
Senior Debt and other Indebtedness permitted under the Senior Debt
Agreements.
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(b) Limitations on Liens. Incur, create, assume or suffer to exist any
Lien on its revenue stream, property or assets, whether now owned or
hereafter acquired, except for Liens in connection with Senior Debt
or other Liens permitted under the Senior Debt Agreements.
(c) Restricted Payments. Declare, make or incur any liability to make
any Restricted Payments other than Restricted Payments in connection
with Senior Debt or permitted under the Senior Debt Agreements.
(d) Transactions with Affiliates. Except for transactions permitted
under the Senior Debt Agreements, effect any transaction with an
affiliate other than a Credit Party on a basis less favorable to
such Credit Party than would have been the case if such transaction
had been effected on an arms-length basis (and if involving more
than $100,000, without a resolution approving each such transaction
from the Board of Directors of each Credit Party involved).
(e) Change in Control. Except for transactions permitted under the
Senior Debt Agreements, effect any transaction that results in a
Change in Control of the Parent.
* * * * *
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IN WITNESS WHEREOF, the undersigned have executed and delivered this Note as of
January 17, 2002.
ARTISAN ENTERTAINMENT INC.
By:____________________________
Its:___________________________
Accepted and acknowledged:
VIALTA, INC.
By: ________________________
Its: _______________________
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