SECOND AMENDMENT TO STANDARD LOAN AGREEMENT
SECOND
AMENDMENT TO STANDARD LOAN AGREEMENT
THIS
SECOND AMENDMENT
TO STANDARD LOAN AGREEMENT (this “Amendment”), dated as of April __, 2007, is
entered into by and between BANK OF AMERICA, N.A. (the “Bank”) and POINT.360,
INC., a California corporation (the “Borrower”), with reference to the following
facts:
RECITALS
A. The
Bank
and the Borrower are parties to a Standard Loan Agreement, dated as of March
29,
2006, as amended by the First Amendment to Standard Loan Agreement dated as
of
March 15, 2007 (collectively, the “Loan Agreement”), pursuant to which the Bank
has provided a revolving line of credit to the Borrower.
B. The
Borrower breached the provisions of Section
9.2(i)
of the
Loan Agreement (the “Breach”) by failing to deliver its internally-prepared
financial statements for the fourth fiscal quarter of the Borrower’s fiscal year
2006 to the Bank within sixty days after the end of that fiscal quarter. The
Borrower, however, cured the Breach by delivering audited financial statements
to the Bank for the Borrower’s fiscal year 2006 on March 2, 2007, which audited
financial statements contain the financial information for the fourth fiscal
quarter of the Borrower’s fiscal year 2006. The Bank has the discretion under
Section
10.12
of the
Loan Agreement to allow the cure of the Breach and not consider the Breach
an
Event of Default if the Breach is capable of being cured and is in fact cured
within thirty days after its occurrence. As a result of the Borrower’s cure of
the Breach by delivering its audited financial statements for its fiscal year
2006 to the Bank on March 2, 2007, the Bank is willing to confirm in this
Amendment that the Breach did not cause an Event of Default.
C.
The
Borrower has advised the Bank that the Borrower wishes to enter into a tender
offer and merger agreement (the “Merger Agreement”) with DG FastChannel (“DG”)
pursuant to which:
(i)
the
Borrower will form a new corporation (“Newco”) and transfer to Newco all of the
assets and liabilities of the Borrower other than those associated with the
Borrower’s so-called “ADS” business;
(ii)
The
Borrower will distribute shares of Newco to the Borrower’s shareholders other
than DG (the “Newco Spinoff”);
(iii)
DG
will
launch a tender offer conditioned upon completion of the Newco Spinoff to
purchase all of the common shares of the Borrower not already owned by DG;
(iv)
assuming
at least 51% of the common shares of the Borrower not already held by DG are
tendered to DG in response to DG’s tender offer, the Borrower will merge with
and into DG, and the Borrower will cease to exist as an entity.
-1-
(The
transactions referred to in clauses (i) through (iv) above hereinafter are
referred to collectively as the “DG Merger Transactions”.)
D. Pursuant
to the terms of the Loan Agreement, the Borrower may not complete the DG Merger
Transactions without the Bank’s prior written consent.
E. The
Bank
is willing to consent to the Borrower’s consummation of the DG Merger
Transactions as set forth below.
NOW,
THEREFORE, the parties hereby agree as follows:
1. Defined
Terms.
Any and
all initially-capitalized terms used in this Amendment (including, without
limitation, in the recitals hereto) without definition shall have the respective
meanings assigned thereto in the Loan Agreement.
2. Confirmation
of No Default.
The
Bank hereby acknowledges and confirms that the Breach did not cause an Event
of
Default.
3. Consent
to DG Merger Transactions.
Notwithstanding anything to the contrary set forth in the Loan Agreement
(including, without limitation, in Section
9.9
(the
maintenance of assets covenant), Section
9.10
(the
investments covenant), Section
9.13
(the
change in control covenant), or Section 9.14(a) (the merger and other business
combinations covenant)), the Bank hereby agrees that the Borrower may enter
into
the Merger Agreement with DG and consummate each of the DG Merger Transactions,
so long as (a) all of the Borrower’s obligations to the Bank under the Loan
Agreement and (b) all of the Borrower’s term loan obligations to General
Electric Capital Corporation are paid in full prior to the consummation of
the
merger of the Borrower with and into DG.
4. Conditions
Precedent.
The
effectiveness of this Amendment shall be contingent upon the satisfaction of
each of the following conditions:
(a) This
Amendment.
The
Bank shall have received this Amendment, duly executed by an authorized officer
of the Borrower;
(b) DG
Acknowledgment.
The
Acknowledgment of DG attached to the end of this Amendment shall have been
executed by a duly authorized officer of DG; and
(c) The
Guarantor’s Acknowledgment.
The
Acknowledgment of Guarantor attached to the end of this Amendment shall have
been executed by a duly authorized officer of International Video Conversions,
Inc.
5. Reaffirmation
and Ratification.
The
Borrower hereby reaffirms, ratifies and confirms its obligations to the Bank
under the Loan Agreement, acknowledges that all of the terms and conditions
in
the Loan Agreement remain in full force and effect, and further acknowledges
that the security interest granted to the Bank in the Collateral described
in
the Security Agreement dated as of March 29, 2006 by and between the Borrower
and the Bank is valid and perfected.
-2-
6. Integration.
This
Amendment constitutes the entire agreement of the parties in connection with
the
subject matter hereof and cannot be changed or terminated orally. All prior
agreements, understandings, representations, warranties and negotiations
regarding the subject matter hereof, if any, are merged into this
Amendment.
7. Counterparts.
This
Amendment may be executed in multiple counterparts, each of which when so
executed and delivered shall be deemed an original, and all of which, taken
together, shall constitute but one and the same agreement.
8. Governing
Law.
This
Amendment shall be governed by, and construed and enforced in accordance with,
the internal laws (as opposed to the conflicts of law principles) of the State
of California.
IN
WITNESS WHEREOF, the Borrower and the Bank have executed this Amendment by
their
respective duly authorized officers as of the date first above
written.
| BANK OF AMERICA, N.A. | ||
| |
|
|
| By: | ||
|
Xxxxxx
X. Xxxxxxx
Vice
President
|
||
|
POINT.360,
a
California corporation
|
||
| |
|
|
| By: | ||
|
Xxxx
X. Steel
Executive
Vice President, Finance
and
Administration and Chief Financial Officer
|
||
-3-
ACKNOWLEDGMENT
OF DG
The
undersigned hereby acknowledges and agrees to the terms and conditions of the
attached Amendment, including the conditions to the Bank’s consent to the Merger
Transactions set forth in Sections 3 and 4 of the Amendment.
Dated:
As
of April __, 2007
DG
FASTCHANNEL
By:
Xxxxx
Xxxxxxxx
Chairman
and Chief Executive Officer
-1-
ACKNOWLEDGMENT
OF GUARANTOR
The
undersigned (the "Guarantor") hereby acknowledges and agrees to the amendment
of
the Loan Agreement contained in the attached Amendment, acknowledges and
reaffirms its obligations owing to the Bank under its Continuing and
Unconditional Guaranty dated as of March 29, 2006, and agrees that such guaranty
is and shall remain in full force and effect, notwithstanding the Amendment.
Although the Guarantor has been informed of the matter set forth herein and
has
acknowledged and agreed to the same, the Guarantor understands that the Bank
has
no obligation to inform the Guarantor of such matter in the future or to seek
the Guarantor’s acknowledgement or agreement to future amendments to the Loan
Agreement, and nothing herein shall create such a duty.
Dated:
As
of April __, 2007
INTERNATIONAL
VIDEO CONVERSIONS, INC.,
a
California corporation
By:
Xxxx
X.
Steel
Chief
Financial Officer
-2-
