AMENDMENT NUMBER THREE TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDMENT NUMBER THREE TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT ("Amendment"), is entered into as of May 21, 1998, between FOOTHILL
CAPITAL CORPORATION, a California corporation ("Foothill"), with a place of
business located at 00000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxx 0000, Xxx Xxxxxxx,
Xxxxxxxxxx 00000-0000, and CHILDREN'S BROADCASTING CORPORATION, a Minnesota
corporation ("Borrower"), with its chief executive office located at 000 Xxxxx
Xxxxxx, Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000.
WHEREAS, Borrower and Foothill are parties to that certain Amended and
Restated Loan and Security Agreement, dated as of July 1, 1997, as amended by
that certain Amendment Number One to Amended and Restated Loan and Security
Agreement dated as of September 24, 1997, and by that certain Amendment Number
Two to Amended and Restated Loan and Security Agreement dated as of March 13,
1998 (as so amended, the "Loan Agreement");
WHEREAS, Borrower has requested that Foothill make an additional term
loan in the amount of $2,000,000 (the "Supplemental Term Loan No. 3"), and the
proceeds of such Supplemental Term Loan No. 3 will be used in part (a) to
establish the supplemental interest payment reserve described in SECTION 2 of
this Amendment, and (b) to pay Foothill the amendment fee described in SECTION
7(c) of this Amendment. In addition, Borrower will use the balance of the
proceeds of the Supplemental Term Loan No. 3 for general working capital
purposes;
WHEREAS, Borrower and Foothill have agreed to combine the term loans
previously made by Foothill to Borrower and the Supplemental Term Loan No. 3
into a single term loan that will repaid by Borrower in accordance with the
terms of this Amendment; and
WHEREAS, Borrower and Foothill desire to amend the Loan Agreement as
provided in this Amendment, it being understood that no repayment of the
obligations under the Loan Agreement is being effected hereby, but merely an
amendment and restatement in accordance with the terms hereof. All capitalized
terms used herein and not defined herein shall have the meanings ascribed to
them in the Loan Agreement.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, Foothill and Borrower hereby agree as follows:
1. SECTION 1.1 of the Loan Agreement hereby is amended by
(a) deleting the following defined terms in their entireties: "Amendment Date",
"Term Loan" and "Term Loan Commitment", and (b) inserting following defined
terms in alphabetical order:
"AMENDMENT DATE" means the date of the making of the Additional
Supplemental Term Loan No. 3 on or after the first date written above.
"FIFTH WARRANT" means a warrant agreement respecting 200,000 shares of
Borrower's common stock, in form and substance reasonably satisfactory to
Foothill.
"SUPPLEMENTAL TERM LOAN NO. 3" shall have the meaning ascribed to such
term in the recitals of this Amendment.
"TERM LOAN" has the meaning ascribed to such term in SECTION 2.2(a)
hereof.
"TERM LOAN COMMITMENT" means $25,500,000.
2. Paragraph (d) of SECTION 2.1 of the Loan Agreement is hereby
amended and restated in its entirety as follows:
(d) Amounts borrowed pursuant to this SECTION 2.1 shall be
limited to Advances to Borrower's Loan Account for the purpose of the
payment of accrued interest, Foothill Expenses, and any other payment
Obligations of Borrower pursuant to SECTION 2.10, which may be repaid, and,
subject to the terms and conditions of this Agreement, reborrowed at any
time during the term of this Agreement. Anything contained in this
Agreement to the contrary notwithstanding, Foothill shall have no
obligation to make Advances hereunder to the extent they are requested by
Borrower for any purpose other than the payment of accrued interest,
Foothill Expenses, and other payment Obligations of Borrower that have been
charged to Borrower's Loan Account pursuant to SECTION 2.10; PROVIDED,
HOWEVER, that in the event that Borrower's Collections in any month ending
on or after June 30, 1998 and on or before September 30, 1998, together
with proceeds in the amount of $160,000 advanced under Supplemental Term
Loan No. 3 pursuant to SECTION 2.2(c) during such month, are in excess of
the aggregate amount of all accrued interest, Foothill Expenses, and any
other payment Obligations of Borrower charged to Borrower's Loan Account
for such month or otherwise payable to Foothill under the terms of this
Agreement, then, upon Borrower's written request and subject to the prior
written consent of Foothill, an Advance up to the amount of any such excess
Collections shall be permitted hereunder.
2. SECTION 2.2 of the Loan Agreement is hereby amended and restated
in its entirety as follows:
2.2 TERM LOAN.
(a) Foothill previously has made the Term Loan to Borrower. As
of the Amendment Date, Foothill has agreed to make the Supplemental Term
Loan No. 3 to Borrower in accordance with the terms hereof (LESS the
aggregate amount of any reserves to be established in connection therewith
pursuant to the provisions of SECTION 2.2(c)). Collectively, the
Supplemental Term Loan No. 3 and the prior term
2
loans made by Foothill to Borrower shall be known as the "Term Loan."
(b) The outstanding principal balance and all accrued and unpaid
interest under the Term Loan shall be due and payable upon the termination
of this Agreement, whether by its terms, by prepayment, by acceleration, or
otherwise. All amounts outstanding under the Term Loan shall constitute
Obligations. Unless sooner terminated as provided herein, Borrower shall
repay the Term Loan in quarterly installments and such installments shall
be due and payable on the following dates in the following amounts:
DATE INSTALLMENT
-------------------------
4/16/98 -0-
6/30/98 -0-
9/30/98 $8,500,000
12/31/98 $3,000,000
3/31/99 $3,000,000
6/30/99 $2,000,000
9/30/99 $2,000,000
12/31/99 $2,000,000
3/31/00 $2,000,000
6/30/00 $2,000,000
9/30/00 $1,000,000
(c) Anything to the contrary contained in SECTION 2.2(a) above
notwithstanding, it is hereby agreed among the parties hereto that Foothill
shall establish a supplementary interest payment reserve against the Term
Loan in the aggregate amount of $800,000, such reserve to be applied to
reduce the amount of proceeds of Supplemental Term Loan No. 3 otherwise
available on the Amendment Date by $800,000 to provide for the payment of a
portion of the estimated interest payments to be due Foothill on Borrower's
Obligations as of the end of each month from the Amendment Date through
September 30, 1998, such interest payment reserve to be effective and
commence as of the Amendment Date. In each month following the Amendment
Date until all amounts contained in the supplementary interest payment
reserve are exhausted, additional proceeds in the amount of $160,000 shall
be advanced under Supplemental Term Loan No. 3, reducing the amount of the
supplementary interest payment reserve by a corresponding amount, and shall
be applied to the Loan Account as payment of interest due on the
Obligations in excess of the aggregate amount of Collections received and
applied by
3
Foothill with respect to interest due on the Obligations in the
corresponding period.
4. SECTION 2.6(a) of the Loan Agreement is hereby amended and
restated in its entirety as follows:
"Interest Rate. From and after the Amendment Date, all Obligations
shall bear interest at a per annum rate of 5.75 percentage points
above the Reference Rate."
5. SECTION 2.6(c) of the Loan Agreement is hereby amended and
restated in its entirety as follows:
"Default Rate. Upon the occurrence and during the continuation of an
Event of Default, all Obligations shall bear interest at a per annum
rate of 8.75 percentage points above the Reference Rate."
6. SECTION 7.17 of the Loan Agreement is hereby amended to delete
the PROVISO at the end of such Section, and to replace such PROVISO with the
following:
;PROVIDED, HOWEVER, that in no event shall any advance under
the Supplemental Term Loan No. 3 be used to finance, in
whole or in part, directly or indirectly, (1) any Permitted
Unrestricted Subsidiary Acquisition, or (2) to advance, by
way of loan, investment or guaranty, or otherwise, any
monies or credit to or for the benefit, directly or
indirectly, of Harmony, other than the repayment of existing
Indebtedness of Borrower to Harmony in an amount not to
exceed $325,000 in the aggregate.
7. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. The
effectiveness of this Amendment and the obligation of Foothill to make the
Supplemental Term Loan No. 3 is subject to the completion, to the satisfaction
of Foothill and its counsel, of each of the following conditions on or before
the Amendment Date:
(a) Foothill shall have received executed consents and
reaffirmations from each Guarantor, in form and substance satisfactory to
Foothill;
(b) Foothill shall have received the Fifth Warrant and such
Fifth Warrant shall have been duly executed, and be in full force and effect;
and
(c) Foothill shall have received an amendment fee of $200,000
which shall be earned in full and non-refundable as of the date hereof. The
payment of such amendment fee shall be paid on the Amendment Date out of the
proceeds of the Supplemental Term Loan No. 3.
8. FORBEARANCE. Foothill acknowledges receipt of the Borrower's
letters
4
to Mr. Xxxxx Xxxxxxxxx of Foothill dated March 3, 1998 and May 8, 1998 in which
the Borrower acknowledges and enumerates certain Events of Default that have
occurred and are continuing under the Loan Agreement (the "Current Defaults").
Foothill hereby agrees to forebear from taking any action or exercising any of
its remedies under the Loan Agreement with respect to the Current Defaults
during the period from April 17, 1998, through and including September 30, 1998;
PROVIDED, HOWEVER, that such forbearance shall apply only to the Current
Defaults, shall not apply to any other Event of Default continuing as of the
Amendment Date, or to any Event of Default that may occur after the Amendment
Date. Further, this forbearance shall not constitute a waiver by Foothill of
any of its rights or remedies under the Loan Agreement, but shall only
constitute a limited forbearance. Furthermore, nothing contained in this letter
shall diminish, prejudice or waive any of Foothill's rights or remedies under
the Loan Agreement or applicable law, and Foothill hereby reserves all such
rights and remedies.
Anything contained in the foregoing to the contrary
notwithstanding, Foothill's continued forbearance with respect to the Current
Defaults shall be contingent on Borrower's successful achievement of each of the
following on or before the dates set forth below, and Borrower's failure to
achieve any one or more of the following on or before the dates set forth below
shall terminate Foothill's agreement to the forgoing forbearance from and after
the date of any such failure:
(a) Borrower's shall have filed its proxy statement with respect
to the sale of certain of Borrower's radio stations (the "Proxy") to Catholic
Radio Network, LLC ("CRN") and shall have mailed a copy of such proxy to each of
the holders of Borrower's Stock on or before July 30, 1998;
(b) Borrower shall have conducted the meeting of
the holders of Borrower's Stock contemplated in the Proxy with respect to
obtaining all shareholder approvals required with respect to the sale of certain
of Borrower's radio stations to CRN on or before September 15, 1998; and
(c) Borrower shall have consummated the sale of each of
Borrower's radio stations to CRN pursuant to the transactions contemplated in
the Proxy and in accordance with the approvals obtained from the holders of
Borrower's Stock on or before September 30, 1998.
9. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Foothill that (a) the execution, delivery, and performance of this
Amendment, are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any contract or undertaking to which it is a party or by which any
of its properties may be bound or affected, and (b) the Loan Agreement, as
amended by this Amendment, constitute Borrower's legal, valid, and binding
obligation, enforceable against Borrower in accordance with its terms.
5
10. FURTHER ASSURANCES. Borrower shall execute and deliver all
agreements, documents, and instruments, in form and substance satisfactory to
Foothill, and take all actions as Foothill may reasonably request from time to
time, to perfect and maintain the perfection and priority of Foothill's security
interests in the Collateral, and to fully consummate the transactions
contemplated under the Loan Agreement and this Amendment.
11. EFFECT ON LOAN AGREEMENT. The Loan Agreement, as amended hereby,
shall be and remain in full force and effect in accordance with its respective
terms and hereby is ratified and confirmed in all respects. The execution,
delivery, and performance of this Amendment shall not operate as a waiver of or,
except as expressly set forth herein, as an amendment, of any right, power, or
remedy of Foothill under the Loan Agreement, as in effect prior to the date
hereof.
12. MISCELLANEOUS.
a. Upon the effectiveness of this Amendment, each reference in
the Agreement to "this Agreement", "hereunder", "herein", "hereof" or words of
like import referring to the Agreement shall mean and refer to the Loan
Agreement as amended by this Amendment.
b. Upon the effectiveness of this Amendment, each reference in
the Loan Documents to the "Loan Agreement", "thereunder", "therein", "thereof"
or words of like import referring to the Agreement shall mean and refer to the
Loan Agreement as amended by this Amendment.
c. This Amendment shall be governed by and construed in
accordance with the laws of the State of California.
d. This Amendment may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Amendment by signing
any such counterpart. Delivery of an executed counterpart of this Amendment by
telefacsimile shall be equally as effective as delivery of an original executed
counterpart of this Amendment. Any party delivering an executed counterpart of
this Amendment by telefacsimile also shall deliver an original executed
counterpart of this Amendment but the failure to deliver an original executed
counterpart shall not affect the validity, enforceability, and binding effect of
this Amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to
be duly executed as of the date first written above.
6
FOOTHILL CAPITAL CORPORATION,
a California corporation
By /s/ Xxxxx X. Xxxxxxxxx
----------------------------
Title: Vice President
------------------------
CHILDREN'S BROADCASTING CORPORATION, a
Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
7
CONSENT, RATIFICATION, AND REAFFIRMATION BY GUARANTORS
Each of the undersigned Guarantors hereby consents to the execution,
delivery, and performance of the foregoing Amendment Number Three to Amended and
Restated Loan and Security Agreement and agrees, ratifies, and reaffirms that
its obligations as a guarantor with respect to the Loan Documents, as heretofore
amended, and as amended by the foregoing amendment, remain in full force and
effect and are not impaired, diminished, or discharged in any respect.
Dated as of the date first set forth above:
CHILDREN'S RADIO OF LOS ANGELES, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
CHILDREN'S RADIO OF NEW YORK, INC.,
a New Jersey corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
CHILDREN'S RADIO OF MINNEAPOLIS, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
8
CHILDREN'S RADIO OF GOLDEN VALLEY, INC., a
Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
CHILDREN'S RADIO OF MILWAUKEE, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
CHILDREN'S RADIO OF DENVER, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
CHILDREN'S RADIO OF KANSAS CITY, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
9
CHILDREN'S RADIO OF DALLAS, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
CHILDREN'S RADIO OF HOUSTON, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
CHILDREN'S RADIO OF PHILADELPHIA, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
CHILDREN'S RADIO OF DETROIT, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
10
CHILDREN'S RADIO OF CHICAGO, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
CHILDREN'S RADIO OF PHOENIX, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
WWTC-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
KYCR-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
11
WZER-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
KKYD-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
KCNW-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
KAHZ-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
12
KTEK-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
WPWA-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
WCAR-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
WJDM-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
13
KPLS-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
WAUR-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
KIDR-AM, INC.,
a Minnesota corporation
By /s/ Xxxxx X. Xxxxxxxxxx
----------------------------
Title: C.O.O.
------------------------
14
