LOAN AGREEMENT
THIS LOAN AGREEMENT ("Loan Agreement") is made this 23rd day of
January, 1998, by and between CUTTING EDGE ENTERTAINMENT, INC., a California
corporation, hereinafter referred to as "Borrower" and MEDLEY CREDIT ACCEPTANCE
CORP., a Delaware corporation, hereinafter referred to as "Lender" and XXXXX X.
XXXXXXX, hereinafter referred to as "Guarantor".
WITNESSETH:
WHEREAS, the Borrower is the owner of all rights to a movie to be
produced under the name of "TWO SHADES OF BLUE" ("The Project") including but
not limited to the ownership of the script, all tradenames, trademarks and
copyrights associated therewith and all contract rights in association
therewith including but not limited to talent contracts, and
WHEREAS, Borrower has requested a loan from Lender for the purpose of
obtaining working capital to finance The Project including but not limited to
the payment of funds due and to become due on talent contracts, and
WHEREAS, Lender has agreed to make and Borrower has agreed to accept a
loan in the maximum amount of $600,000.00, subject to the terms, conditions and
covenants set forth herein and in all other loan documents executed in
furtherance of said loan, and
WHEREAS, the Lender and Borrower desire to document their agreements
and understandings into a written instrument.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the Parties agree as follows:
ARTICLE ONE
THE LOAN AND COLLATERAL:
1. Description of Loan: Subject to all of the terms, representations,
warranties, covenants and conditions in this Agreement, Lender agrees to lend
the Borrower and Borrower agrees to borrow from Lender up to the sum of
$600,000.00 to be used by Borrower as working capital for the payment of
expenses incurred in the production of The Project including but not limited to
talent salaries and production expenses. The loan will be disbursed $300,000.00
at the time of closing and the balance on or before January 30, 1998, at 3:00
p.m., provided all conditions precedent to the second funding are satisfied.
2. Evidence of and Security for the Loan:
1.1 The loan shall be evidenced by a Promissory Note ("The
Note"). The Note shall bear interest at ten percent (10%) per annum and shall
be payable interest only,
monthly, commencing thirty (30) days following the execution of The Note and on
the same day each month thereafter. The Note shall mature and be due and
payable in full on or before nine (9) months from the date upon which The Note
is executed. The Borrower shall have the right to extend the maturity date of
The Note for an additional sixty (60) days upon payment to the Lender of an
amount equal to five percent (5%) of the outstanding principal balance on the
date the loan is extended (Extension Fee).
1.2 The Note shall be secured by the following instruments:
(1) Stock Pledge Agreement of Guarantors Stock
in Borrower.
(2) Personal Guaranty of the Shareholder of the
Borrower
(3) Assignment of accounts receivable including
but not limited to presale distribution
contracts and trailing royalties on The
Project and for the movie "From Which it
Stands"
(4) Assignment of Contract Rights
(5) Financing Statements (UCC-1)
ARTICLE TWO
REPRESENTATIONS AND WARRANTIES OF BORROWER:
The Borrower and Guarantor represent and warrant as follows:
(1) The Borrower is a corporation incorporated and organized under the
laws of the State of California, duly licensed and qualified to transact
business and is in good standing.
(2) The Borrower has the corporate power and authority to own and hold
its properties and to carry-on its business as now conducted and to execute,
deliver and perform its obligations under this Loan Agreement.
(3) The delivery and execution of this Agreement and the execution and
delivery of any of the loan documents contemplated by this Agreement has been
duly authorized by all requisite corporate action and will not violate any
provision of law or any order of any court or any agency of government or the
Articles of incorporation or By-Laws of the Borrower.
(4) This Agreement has been duly executed and delivered by the
Borrower and constitutes the legal, valid and binding obligation of the
Borrower, enforceable in accordance with its terms.
(5) The Borrower has furnished to the Lender unaudited financial
statements which have been prepared in accordance with generally accepted
accounting principals consistently applied and said financial statements fairly
present the financial position of the Borrower as of such dates.
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(6) There are no actions, suits, claims, proceedings or investigations
pending or to the best of the Borrowe5r's knowledge, threatened against or
affecting the Borrower at law or in equity or before any federal, state,
municipal or other governmental agency which would have an adverse financial
effect on the borrower.
(7) The Borrower has complied in all material respect with all laws,
rules, regulations and orders which are material and applicable to its
business, operations, properties and assets, and the Borrower maintains all
necessary permits, licenses and authorizations to conduct its business.
(8) The Borrower has good and marketable title to all of its assets
reflected on its balance sheet delivered to Lender and that said assets are
currently owned by the Borrower free and clear of any mortgages, pledges,
security interests, liens, charges or other encumbrances except as described in
the financial statements.
(9) The Borrower has filed all federal, state and local tax returns
required to be filed by and through 12/31/98. The federal income tax returns of
the Borrower have been filed timely and there are no delinquent returns as of
the4 date hereof, nor are there outstanding taxes due with respect to same.
(10) That all contracts furnished by the Borrower to the Lender in
furtherance of the Lender's due diligence of the Borrower and The Project, are
in full force and effect as of the date hereof without default.
(11) The Borrower is the owner of the script for the movie to be known
as TWO SHADES OF BLUE, together with all associated trademarks, tradenames and
copyrights and has the right to produce and make said movie. The Borrower owns
or possesses adequate licenses or other rights to use the script and associated
trademarks and copyrights free and clear of all liens, claims and restrictions
of others.
(12) The Borrower agrees that the proceeds of The Note will only be
used to satisfy obligations of The Project.
(13) The execution, delivery and performance by the Borrower of the
loan documents on its part are within the Borrower's powers and purposes, have
been duly authorized by all requisite action of the Borrower and do not violate
any governmental requirement or other agreement to which the Borrower may be a
part, be in conflict with, or result in a breach of or constitute a default
under, any indenture, agreement or other instrument to which the borrower is a
party.
(14) The Borrower is the owner of the movie "From Which it Stands" and
has the right to assign all future royalties as collateral for this loan.
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ARTICLE THREE
AFFIRMATIVE COVENANTS:
(1) The Borrower will provide Lender with annual financial statements
for both the Borrower and Guarantors not later than thirty (30) days from the
end of each calendar during the term of this loan.
(2) The Borrower shall cause its policy of business interruption
insurance to be pledged to the Lender up to the amount of the Lender's loan.
(3) The Borrower will execute all additional documents required by the
Lender within four (4) days following the closing.
ARTICLE FOUR
CONDITIONS PRECEDENT TO CLOSING:
(1) All corporate and other proceedings to be taken by the Borrower in
connection with the transaction contemplated in this Agreement shall have been
taken.
(2) The Borrower shall have executed all of the loan documents to the
satisfaction of the Lender.
(3) All of the representations and warranties of the Borrower shall be
true and correct on the closing date.
(4) The Lender shall be satisfied with all documentation furnished to
it by the Borrower.
ARTICLE FIVE
CONDITION PRECEDENT TO SECOND FUNDING:
The funding of the second installment of The Note in the sum of
$300,000.00 is subject to the Borrower receiving additional funds from another
source prior to January 30, 1998, in order to satisfy its additional
obligations for The Project to continue.
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ARTICLE SIX
CLOSING DATE:
Provided that all the conditions precedent have been satisfied, this
Loan will close on January 23, 1998.
ARTICLE SEVEN
BROKERAGE COMMISSION:
The Borrower will pay a brokerage commission to Olympus Mortgage
Corporation monthly in an amount equal to .00667 percent of the outstanding
principal of the loan during the preceding month or any portion thereof.
ARTICLE EIGHT
NOTICES:
Any communication, notice of demand to be given hereunder shall be
duly given if in writing and demand, mailed certified mail or telefaxed as
follows:
(1) To the Guarantor:
Xxxxx X. Xxxxxxx
00000 Xxxxxxx Xxxx. Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
______________________
______________________
______________________
(2) To the Borrower:
Cutting Edge Entertainment, Inc.
00000 Xxxxxxx Xxxx., Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
(3) To the Lender:
Medley Credit Acceptance Corp.
0000 Xxxxx xx Xxxx Xxxxxxxxx
Xxxxx Xxxxxx, Xxxxxxx 00000
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MISCELLANEOUS PROVISIONS
1. Construction: This Agreement shall be construed and enforced under
the laws of the State of Florida. In the event any provision of this Agreement
shall be declared invalid by a court of competent jurisdiction, said invalidity
shall not invalidate the Agreement as a whole, but said Agreement shall be
construed as if the invalidated provision was omitted from the Agreement.
2. Entire Agreement: This Agreement supersedes and cancels any and all
other contracts referring to the subject matter herein. No modifications,
alteration or waiver of this Agreement shall be effective unless in writing,
executed by the parties hereto.
3. Assignability: This Agreement shall inure to the benefit of the
Parties, their successors and assigns.
4. Counterparts: This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
counterparts collectively shall constitute one instrument representing the
Agreement between the Parties hereto.
5. Captions: Captions of the various sections contained in this
Agreement are intend4d to be used solely for convenience of the Parties and are
not intended, nor are they deemed to modify, or explain or to be used as an aid
in the construction of any of the provisions of this Agreement.
6. Completion of Documentation: The Borrower and Guarantor acknowledge
that they need to supply to the Lender additional documentation concerning the
collateral and other matters so that the balance of the collateral documents
can be drafted and executed. The Borrower and Guarantor agree to supply said
documentation no later than Tuesday, January 27, 1998, and to complete the
execution of all original documents furnished to them by Friday, January 30,
1998, or they will be considered in default under the terms of this Agreement
and all loan documents executed to date including but not limited to the Pledge
Agreement.
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IN WITNESS WHEREOF, the parties have hereunto set their hands and
seals.
DATED as to the Borrower, this 23 Day of January, 1998.
CUTTING EDGE ENTERTAINMENT, INC.
a California corporation
BY: Xxxxx X. Xxxxxxx
-----------------------------
XXXXX X. XXXXXXX, PRESIDENT
DATED as to the Guarantors, this 23 Day of January, 1998.
Xxxxx X. Xxxxxxx
-----------------------------
XXXXX X. XXXXXXX, GUARANTOR
DATED as to the Lender, this 23 Day of January, 1998.
MEDLEY CREDIT ACCEPTANCE CORP.,
a Delaware corporation
BY: /s/ Xxxxxx Press
----------------------------
XXXXXX PRESS, PRESIDENT
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