CREDIT FACILITY AGREEMENT
BETWEEN
2KSOUNDS, INC.
AND
XXXX XXXXXX AND XXXXX XXXXXXXXX
EFFECTIVE AS OF NOVEMBER 1, 2002
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CREDIT FACILITY AGREEMENT
This Credit Facility Agreement (the "Agreement") is effective as of the
1st day of November, 2002 by and between Xxxx Xxxxxx ("Guidon") and Xxxxx
Xxxxxxxxx ("Gladstone"), (the "Lenders") and 2KSounds, Inc., a California
Corporation (the "Borrower"). Lenders and Borrower are collectively referred to
hereinafter as the "Parties".
RECITALS
WHEREAS, Guidon owns 84,568,924 shares of the issued and outstanding
capital stock of Borrower; and,
WHEREAS, Gladstone owns 15,080,173 shares of the issued and outstanding
capital stock of Borrower; and,
WHEREAS, the parties wish to make certain agreements regarding
monies loaned by Lenders to Borrower.
NOW, THEREFORE, in consideration of the mutual covenants and promises
set forth herein, the sufficiency of which is hereby acknowledged, the Parties
agree as follows:
1. Borrowing; Amount.
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Pursuant to this Agreement, the Lenders agree to make loans to Borrower
(a "Borrowing"), at any time and from time to time on and after the date hereof
and until October 31, 2004 (the "Maturity Date") in an aggregate amount not to
exceed $1,000,000.00 ("Lender's Commitment"). The Lender's commitment shall be
at the ratio of 70/30 between Guidon and Gladstone, on a dollar for dollar
basis. Thus, by way of example, Guidon's commitment shall be an amount not to
exceed $700,000 and Gladstone's commitment shall be an amount not to exceed
$300,000. As a further example, if Borrower requests $100,000, Guidon shall
provide $70,000 and Gladstone shall provide $30,000. The Borrower may borrow,
pay or prepay any amount up to the Lender's Commitment prior to the Maturity
Date as set forth herein.
2. Borrowing Procedure.
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In order to request a loan, the Borrower shall hand deliver or telecopy
to the Lenders a written request not later than 10:30 a.m., Pacific time, three
business days prior a proposed Borrowing. If the Borrower does not specify an
interest period for the Borrowing, then the Borrower will have deemed to have
selected an interest period ending immediately prior to the Maturity Date. The
Borrower may not select a Borrowing if the interest period requested in
connection therewith would end after the Maturity Date.
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3. Repayment of Loans; Evidence of Debt.
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The Borrower agrees that the outstanding principal balance of each
Borrowing shall be payable on the Maturity Date. Each Borrowing shall bear
interest on the outstanding principal thereof in accordance with Section 4. The
Lenders may maintain an account or accounts evidencing the indebtedness of the
Borrower and the principal amount and interest due and payable under such loan
and the amount of any sum received from the Borrower in payment therefor. The
entries made in such account by the Lenders shall, to the extent permitted by
applicable law, be prima facie evidence of the amount and existence of a
Borrowing. The Borrower agrees that upon notice by the Lenders, after the
initial Borrowing, to the Borrower to the effect that a promissory note or other
evidence of indebtedness is required, the Borrower shall promptly execute and
deliver to the Lenders a promissory note or notes, payable to the order of the
Lenders.
4. Interest on Loans; Default Interest.
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A Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed) at the annual rate of seven percent (7%). Unless
otherwise specified, interest on each Borrowing shall be due and payable on the
Maturity Date. If the Borrower shall default in the payment of principal of or
any interest on any Borrowing or any other amount becoming due hereunder, the
Borrower shall on demand from time to time from the Lenders pay interest, to the
extent permitted by law, on such defaulted amount up to the date of actual
payment at a rate of ten (10%) percent per annum (computed on the basis of
actual number of days elapsed).
5. Prepayment.
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The Borrower shall have the right at any time and from time to time to
prepay any Borrowing, in whole or in part, upon giving telecopy notice to the
Lenders prior to or on the same business day of prepayment. The Borrower shall
exercise reasonable efforts to repay the Borrowing prior to the maturity date.
Each notice of prepayment from the Borrower shall specify the prepayment date
and the principal amount of each Borrowing to be prepaid. Each notice of
prepayment shall be irrevocable and shall commit the Borrower to prepay such
Borrowing (or portion thereof) by the date stated therein. Prepayment under this
Section 5 need not include accrued interest on the principal amount being
prepaid.
6. Indemnity.
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The Borrower shall indemnify the Lenders against any out-of-pocket loss
or expense which the Lenders may sustain or incur as a consequence of (a) any
default by the Borrower in payment or prepayment of the principal amount of any
Borrowing or any part thereof or interest accrued thereon, as and when due and
payable (at the due date thereof, whether by scheduled maturity, acceleration,
irrevocable notice of prepayment or otherwise) or (b) the occurrence of any
Event of Default.
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7. Taxes.
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Any and all payments by the Borrower hereunder shall be made, free and
clear of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto imposed by the United States or any political subdivision or taxing
authority thereof, excluding taxes imposed on Lender's (or any transferee's or
assignee's, including a participation holder's (any such entity a "Transferee"))
net income and franchise taxes imposed on the Lenders (or Transferee) by the
United States or any political subdivision or taxing authority thereof (all such
nonexcluded taxes, levies, imposts, deductions, charges, withholdings and
liabilities being hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum payable
hereunder to the Lenders (or any Transferee), (i) the sum payable shall be
increased by the amount necessary so that after making all required deductions
such Lenders (or Transferee) (as the case may be) shall receive an amount equal
to the sum it would have received had no such deductions been made, (ii) the
Borrower shall make such deductions and (iii) the Borrower shall pay the full
amount deducted to the relevant taxing authority or other Governmental Authority
in accordance with applicable law. In addition, the Borrower agrees to pay any
present or future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from any payment made hereunder or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement imposed by the United States or any political subdivision or
taxing authority thereof (hereinafter referred to as "Other Taxes").
8. Representations and Warranties.
------------------------------
The Borrower warrants and represents to the Lenders as follows:
8.01 ORGANIZATION; POWERS.The Borrower is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization, (b) has all requisite power and authority to own its property and
assets and to carry on its business as now conducted and as proposed to be
conducted, (c) is qualified to do business in every jurisdiction where such
qualification is required, except where the failure so to qualify would not
result in a material adverse effect, and (d) has the corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and to borrow funds hereunder.
8.02 AUTHORIZATION. The execution, delivery and performance by the
Borrower of this Agreement and the Borrowings by it hereunder (collectively, the
"Transactions") (a) have been duly authorized by all requisite corporate actions
and (b) will not (i) violate (A) any provision of any law, statute, rule or
regulation or of its certificate of incorporation or other constitutive
documents or by-laws, (B) any order of any governmental authority or (C) any
provision of any indenture, agreement or other instrument to which it is a party
or by which it or any of its property is or may be bound, (ii) be in conflict
with, result in a breach of or constitute (alone or with notice or lapse of time
or both) a default under any such indenture, agreement or other instrument or
(iii) result in the creation or imposition of any lien upon any of its property
or assets.
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8.03 ENFORCEABILITY. This Agreement has been duly executed and
delivered by the Borrower and constitutes its legal, valid and binding
obligation enforceable against it in accordance with its terms.
8.04 GOVERNMENTAL APPROVALS. No action, consent or approval of,
registration or filing with or any other action by any governmental authority is
or will be required in connection with the Transactions.
9. Default Provisions.
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The occurrence of one or more of the following events shall constitute
an "Event of Default" of this entire Agreement:
9.01 Failure by the Borrower to pay amounts due, on or before the
Maturity Date as specified herein or in any instrument evidencing the Borrowing,
which failure has not been cured within 30 days of the Borrower's receipt of
written notice thereof.
9.02 The institution by the Borrower of bankruptcy proceedings to be
adjudicated a bankrupt or insolvent or the consent by it to the institution of
bankruptcy or insolvency proceedings against it or the cessation of the primary
business activity of the Company which has not been cured within ten business
days.
9.03 The entry of a decree or order by a court having appropriate
jurisdiction adjudging the Borrower bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization or liquidation of the Borrower
under the Federal Bankruptcy Act or any other applicable federal or state law,
or appointing a receiver, liquidator, assignee or trustee over any substantial
portion of the Borrower's property, or ordering the winding up or liquidation of
the Borrower's affairs, and the continuance of any such decree or order unstayed
and in effect for a period of sixty (60) consecutive days.
9.04 The institution by the Borrower of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of bankruptcy or
insolvency proceedings against it, or the filing by it of a petition or answer
or consent seeking reorganization or relief under the Federal Bankruptcy Act or
any other applicable federal or state law, or the consent by it to the filing of
any such petition or to the appointment of a receiver, liquidator, assignee or
trustee of the Borrower.
9.05 Any default in the obligation of the Borrower for borrowed money,
other than this Agreement, which shall continue for a period of sixty (60) days,
or any event that results in acceleration of the maturity of any indebtedness of
the Borrower under any note, indenture, contract, or agreement.
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9.06 Any representation or statement made or furnished to the Lenders
by the Borrower or on the Borrower's behalf is false or misleading in any
material respect.
10. Dispute Resolution.
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Resolution of any and all disputes arising from or in connection with
this Agreement shall be exclusively governed by and settled in accordance with
the provisions of Section 4.6 of the Separation Agreement.
11. Miscellaneous.
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11.1 COUNTERPARTS. This Agreement, including any attachments hereto and
the other documents referred to herein, may be executed via facsimile or
otherwise in counterparts, each of which shall be deemed to be an original but
all of which shall constitute one and the same agreement.
11.2 EFFECTIVENESS. All covenants and agreements of the parties
contained in this Agreement shall be subject to and conditioned upon the
Distribution becoming effective.
11.3 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. Except as herein
specifically provided to the contrary, neither party may assign this Agreement
or any rights or obligations hereunder, without the prior written consent of the
other party, and any such assignment shall be void; provided, however, either
party (or its permitted successive assignees or transferees hereunder) may
assign or transfer this Agreement as a whole without consent to an entity that
succeeds to all or substantially all of the business or assets of such party to
which this Agreement relates.
11.4 PERFORMANCE. Each party hereto will cause to be performed, and
hereby guarantees the performance of all actions, agreements and obligations set
forth herein to be performed by any subsidiary or any member of such party.
11.5 ADDITIONAL ASSURANCES. Except as may be specifically provided
herein to the contrary, the provisions of this Agreement shall be self-operative
and shall not require further agreement by the parties; provided, however, at
the request of either party, the other party shall execute such additional
instruments and take such additional acts as are reasonable, and as the
requesting party may reasonably deem necessary, to effectuate this Agreement.
11.6 ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
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thereof and shall supersede all prior negotiations, agreements and
understandings of the parties of any nature, whether oral or written, with
respect to such subject matter.
11.7 DESCRIPTIVE HEADINGS. The headings contained in this Agreement, in
any Exhibit or Schedule hereto and in the table of contents to this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. When a reference is made in this Agreement to
an Article or a Section, Exhibit or Schedule, such reference shall be to an
Article or Section of, or an Exhibit or Schedule to, this Agreement unless
otherwise indicated.
11.8 GENDER AND NUMBER. Whenever the context of this Agreement
requires, the gender of all words herein shall include the masculine, feminine
and neuter, and the number of all words herein shall include the singular and
plural.
11.9 SEVERABILITY. The parties hereto have negotiated and prepared the
terms of this Agreement in good faith with the intent that each and every one of
the terms, covenants and conditions herein be binding upon and inure to the
benefit of the respective parties. Accordingly, if any one or more of the terms,
provisions, promises, covenants or conditions of this Agreement or the
application thereof to any person or circumstance shall be adjudged to any
extent invalid, unenforceable, void or voidable for any reason whatsoever by a
court of competent jurisdiction, such provision shall be as narrowly construed
as possible, and each and all of the remaining terms, provisions, promises,
covenants and conditions of this Agreement or their application to other persons
or circumstances shall not be affected thereby and shall be valid and
enforceable to the fullest extent permitted by law. To the extent this Agreement
is in violation of applicable law, then the parties agree to negotiate in good
faith to amend the Agreement, to the extent possible consistent with its
purposes, to conform to law and effect the original intent of the parties.
11.10 SURVIVAL OF AGREEMENTS. Except as otherwise contemplated by this
Agreement, all covenants and agreements of the parties contained in this
Agreement shall remain in full force and effect.
11.11 GOVERNING LAW. This Agreement shall be construed in accordance
with and all Disputes hereunder shall be governed by the laws of the State of
California. The Superior Court of Los Angeles County and/or the United States
District Court for the Southern District of California shall have jurisdiction
and venue over all Disputes between the parties that are permitted to be brought
in a court of law pursuant to Section 10 above.
11.12 NOTICES. Any notice, demand, offer, request or other
communication required or permitted to be given by either party pursuant to the
terms of this Agreement shall be in writing and shall be deemed effectively
given the earlier of (i) when received, (ii) when delivered personally, (iii)
one business day after being delivered by facsimile (with receipt of appropriate
confirmation), (iv) one business bay after being deposited with a nationally
recognized overnight courier service or (v) four days after being deposited in
the U.S. mail, First Class with postage prepaid, and addressed to:
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If to the Lenders:
Lord Xxxx Xxxxxx
0000 Xxxxxxxx Xxxx
Xxxxxxxx Xxxx, XX 00000
Xxxxx Xxxxxxxxx
0000 Xxxxx Xx.
Xxxxxxx Xxxx, XX 00000
If to Borrower:
2KSounds, Inc.
00000 Xxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx Xxxxx, XX 00000
Facsimile (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx, Esq.
General Counsel
With a copy to:
Xxxxxx X. Xxxxxxxx, Esq.
Richman, Mann, Chizever, Philips & Xxxxxx
0000 Xxxxxxxx Xxxx., Xxxxxxxxx Xxxxx
Xxxxxxx Xxxxx, XX 00000
Facsimile: 000 000-0000
The parties may substitute a different address or facsimile number,
from time to time, if such substitute is provided to the intended notice
recipient in writing by notice given in the manner provided in this section.
11.13 WAIVERS; REMEDIES. No failure or delay by any party hereto in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any waiver on the part of any party hereto of any right, power
or privilege hereunder operate as a waiver of any other right, power or
privilege hereunder, nor will any single or partial exercise of any right, power
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies which the parties may otherwise have at law or equity.
11.14 FORCE MAJEURE. Neither party shall be liable or deemed to be in
default for any delay or failure in performance under this Agreement or other
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interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either party's employees, or any other similar cause
beyond the reasonable control of either party unless such delay or failure in
performance is expressly addressed elsewhere in this Agreement.
IN WITNESS WHEREOF, the Parties hereby execute this Agreement as of the
date first written above.
By: /s/ Xxxx Xxxxxx
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Lord Xxxx Xxxxxx
Its: Chief Executive Officer and
Chief Financial Officer
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Title
By: /s/ Xxxxx Xxxxxxxxx
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Xxxxx Xxxxxxxxx
Its: Executive Vice President
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Title
2KSounds, Inc.
By: /s/ Xxxxxxx X. Xxxxxx
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Xxxxxxx X. Xxxxxx
Its: General Counsel, Vice President
of Business Development
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Title
