STANDARD LOAN AGREEMENT By and Between BANK OF AMERICA, N.A. and NEW 360 (which intends to change its name to Point.360 after the date hereof) Dated as of August 7, 2007
STANDARD
LOAN AGREEMENT
By
and Between
BANK
OF AMERICA, N.A.
and
NEW
360
(which
intends to change its name to Point.360 after the date
hereof)
Dated
as of August 7, 2007
This
Agreement dated as of August 7, 2007, is between Bank of America, N.A. (the
“Bank”) and New 360, a California corporation, which intends to change its name
to Point.360 after the date hereof (the “Borrower”).
RECITALS
A. The
Bank
was a party to a Standard Loan Agreement dated as of March 29, 2006 (the "Prior
Loan Agreement") with Point.360, a California corporation ("Old
Point.360").
B. On
April
16, 2007, Old Point.360 entered into a merger agreement and various related
agreements (collectively, the "DG Merger Documents") with DG FastChannel, Inc.
("DG") pursuant to which Old Point.360 agreed to transfer its spot advertising
(multimedia) business to, and merge with, DG.
C. To
facilitate the transfer of its spot advertising business to DG pursuant to
the
DG Merger Documents, Old Point.360 (i) created the Borrower as a new subsidiary,
(ii) will transfer all of Old Point.360’s assets other than those associated
with its spot advertising business to the Borrower on the Facility Commencement
Date (as defined below), and (iii) will distribute the shares of the Borrower
to
the shareholders of Old Point.360 on the Facility Commencement
Date.
D. The
Borrower intends to carry on all of the businesses formerly conducted by Old
Point.360 other than the Old Point.360 spot advertising business, which will
be
conducted by DG upon completion of the Merger.
E. The
Borrower has requested that the Bank provide the Borrower a secured working
capital revolving credit facility in the amount of $8,000,000 and a sub-line
of
credit of $1,000,000 for the issuance of standby letters of credit, and the
Bank
is willing to provide such credit facilities to the Borrower on the terms and
conditions set forth in this Agreement.
NOW,
THEREFORE, the parties hereby agree as follows:
1. DEFINITIONS
In
addition to the terms which are defined elsewhere in this Agreement, the
following terms have the respective meanings indicated for the purposes of
this
Agreement:
“Acceptable
Receivable”
means
an account receivable which satisfies the following requirements:
| (a) |
The
account has resulted from the sale of goods or the performance of
services
by the Borrower in the ordinary course of the Borrower’s business and
without any further obligation on the part of the Borrower to service,
repair, or maintain any such goods sold other than pursuant to any
applicable warranty.
|
1
| (b) |
There
are no conditions which must be satisfied before the Borrower is
entitled
to receive payment of the account. Accounts arising from COD sales,
consignments or guaranteed sales are not
acceptable.
|
| (c) |
The
debtor upon the account does not claim any defense to payment of
the
account, whether well founded or
otherwise.
|
| (d) |
The
account is not the obligation of an account debtor who has asserted
or may
assert any counterclaims or offsets against the Borrower (including
offsets for any “contra accounts” owned by the Borrower to the account
debtor for goods purchased by the Borrower or for services performed
for
the Borrower).
|
| (e) |
The
account represents a genuine obligation of the debtor for goods sold
to
and accepted by the debtor, or for services performed for and accepted
by
the debtor. To the extent any credit balances exist in favor of the
debtor, such credit balances shall be deducted from the account
balance.
|
| (f) |
The
account balance does not include the amount of any finance or service
charges payable by the account debtor. To the extent any finance
charges
or service charges are included, such amounts shall be deducted from
the
account balance.
|
| (g) |
The
Borrower has sent an invoice to the debtor in the amount of the
account.
|
| (h) |
The
Borrower is not prohibited by the laws of the state where the account
debtor is located from bringing an action in the courts of that state
to
enforce the debtor’s obligation to pay the account. The Borrower has taken
all appropriate actions to ensure access to the courts of the state
where
the account debtor is located, including, where necessary, the filing
of a
Notice of Business Activities Report or other similar filing with
the
applicable state agency or the qualification by the Borrower as a
foreign
corporation authorized to transact business in such
state.
|
| (i) |
The
account is owned by the Borrower free of any title defects or any
liens or
interests of others except the security interest in favor of the
Bank.
|
| (j) |
The
debtor upon the account is not any of the
following:
|
| (i) |
An
employee, affiliate, parent or subsidiary of the Borrower, or an
entity
which has common officers or directors with the
Borrower.
|
| (ii) |
The
U.S. government or any agency of department of the U.S. government
unless
the Bank agrees in writing to accept the obligation, the Borrower
complies
with the procedures in the Federal Assignment of Claims Act of 1940
(41 U.S.C. § 15) with respect to the obligation, and the
underlying contract expressly provides that neither the U.S. government
nor any agency or department thereof shall have the right of set-off
against the Borrower.
|
| (iii) |
Any
state, county, city or town or
municipality.
|
2
| (iv) |
Any
person or entity located in a foreign
country.
|
| (k) |
The
account is not in default. An account will be considered in default
if any
of the following occur:
|
| (l) |
The
account is not paid within 90 days from its invoice date or
60 days from its due date, whichever occurs first, provided
that, so long as NewsCorp maintains a credit rating of not lower
than BBB
by Standard & Poors, accounts in an aggregate amount at any time of up
to Five Hundred Thousand Dollars ($500,000) owed to the Borrower by
20th
Century Fox may be outstanding for up to 120 days from their invoice
date
or 90 days from their due date, whichever occurs
first;
|
| (i) |
the
debtor obligated upon the account suspends business, makes a general
assignment for the benefit of creditors, or fails to pay its debts
generally as they come due; or
|
| (ii) |
any
petition is filed by or against the debtor obligated upon the account
under any bankruptcy law or any other law or laws for the relief
of
debtors.
|
| (iii) |
The
account is not the obligation of a debtor who is in default (as defined
above) on 50% or more of the accounts upon which such debtor is
obligated.
|
| (m) |
The
account does not arise from the sale of goods which remain in the
Borrower’s possession or under the Borrower’s
control.
|
| (n) |
The
account is not evidenced by a promissory note or chattel paper, nor
is the
account debtor obligated to the Borrower under any other obligation
which
is evidenced by a promissory note.
|
| (o) |
The
account is otherwise acceptable to the
Bank.
|
In
addition to the foregoing limitations, the dollar amount of accounts included
as
Acceptable Receivables which are the obligations of a single debtor shall not
exceed the concentration limit established for that debtor. To the extent the
total of such accounts exceed a debtor’s concentration limit, the amount of any
such excess shall be excluded. The concentration limit for each debtor shall
be
equal to 20% of the total amount of the Borrower’s Acceptable Receivables at
that time, provided
that, so
long as NewsCorp maintains a credit rating of not lower than BBB by Standard
& Poors, the concentration limit for 20th
Century
Fox shall be equal to 45% of the total amount of the Borrower’s Acceptable
Receivables at any time.
“Borrowing
Base”
means
80% of the balance due on Acceptable Receivables.
After
calculating the Borrowing Base as provided above, the Bank may deduct such
reserves as the Bank may establish from time to time in its reasonable credit
judgment, including, without limitation, reserves for rent at leased locations
subject to statutory or contractual landlord’s liens, dilution, and the amount
of estimated maximum exposure, as determined by the Bank from time to time,
under any interest rate contracts which the Borrower enters into with the Bank
(including interest rate swaps, caps, floors, options thereon, combinations
thereof, or similar contracts).
3
“Borrowing
Certificate”
means
a
certificate setting forth a calculation of the Acceptable Receivables and the
Borrowing Base, substantially in the form of Exhibit
A
attached
hereto.
“Credit
Limit”
means
the amount of Eight Million Dollars ($8,000,000).
"GECC"
means
General Electric Capital Corporation.
“Guarantor“
means
International Video Conversions, Inc., a California corporation and a
wholly-owned subsidiary of Borrower.
“Merger”
means
the merger of Old Point.360 with DG pursuant to the DG Merger
Documents.
2. THE
FACILITY: LINE OF CREDIT AMOUNT AND TERMS
2.1. Line
of Credit Amount.
| (a) |
During
the availability period described below, the Bank will provide a
line of
credit (the “Facility”) to the Borrower. The amount of the Facility (the
“Facility Commitment”) is equal to the lesser of (i) the Credit Limit
or (ii) the Borrowing Base as determined by the Bank from time to
time in accordance with this
Agreement.
|
| (b) |
The
Facility is a revolving line of credit. During the availability period,
the Borrower may repay principal amounts and reborrow
them.
|
| (c) |
The
Borrower agrees not to permit the principal balance outstanding to
exceed
the Facility Commitment. If the Borrower exceeds this limit, the
Borrower
will immediately pay the excess to the Bank upon the Bank’s
demand.
|
2.2. Availability
Period.
The
Facility is available between the date on which the Merger occurs (the “Facility
Commencement Date”) and the date which is twenty-four (24) months after the
Facility Commencement Date, or such earlier date as the availability may
terminate as provided in this Agreement (as applicable, the “Facility Expiration
Date”).
The
availability period for the Facility will be considered renewed if and only
if
the Bank has sent to the Borrower a written notice of renewal effective as
of
the Facility Expiration Date for the Facility (the “Renewal Notice”). If the
Facility is renewed, it will continue to be subject to all the terms and
conditions set forth in this Agreement except as modified by the Renewal Notice.
If the Facility is renewed, the term “Expiration Date” shall mean the date set
forth in the Renewal Notice as the Expiration Date and the same process for
renewal will apply to any subsequent renewal of the Facility. A renewal fee
may
be charged at the Bank’s option. The amount of the renewal fee will be specified
in the Renewal Notice.
4
2.3. Conditions
to Availability of Credit.
In
addition to the items required to be delivered to the Bank under the paragraph
entitled “Financial Information” in the “Covenants” section of this Agreement,
the Borrower will promptly deliver the following to the Bank at such times
as
may be requested by the Bank:
| (a) |
A
borrowing certificate, in form and detail satisfactory to the Bank,
setting forth the Acceptable Receivables on which the requested extension
of credit is to be based.
|
| (b) |
Copies
of the invoices or the record of invoices from the Borrower’s sales
journal for such Acceptable Receivables and a listing of the names
and
addresses of the debtors obligated
thereunder.
|
| (c) |
Copies
of the delivery receipts, purchase orders, shipping instructions,
bills of
lading and other documentation pertaining to such Acceptable
Receivables.
|
| (d) |
Copies
of the cash receipts journal pertaining to the borrowing
certificate.
|
2.4. Repayment
Terms.
| (a) |
The
Borrower will pay interest on September 1, 2007, and then on the
first day
of each month thereafter until payment in full of any principal
outstanding under the Facility.
|
| (b) |
The
Borrower will repay in full any principal, interest or other charges
outstanding under the Facility no later than the Facility Expiration
Date.
|
| (c) |
Any
interest period for an optional interest rate (as described below)
shall
expire no later than the Facility Expiration
Date.
|
2.5. Interest
Rate.
| (a) |
The
interest rate is a rate per year equal to the Bank’s Prime Rate plus the
Applicable Margin as defined below.
|
| (b) |
The
Prime Rate is the rate of interest publicly announced from time to
time by
the Bank as its Prime Rate. The Prime Rate is set by the Bank based
on
various factors, including the Bank’s costs and desired return, general
economic conditions and other factors, and is used as a reference
point
for pricing some loans. The Bank may price loans to its customers
at,
above, or below the Prime Rate. Any change in the Prime Rate shall
take
effect at the opening of business on the day specified in the public
announcement of a change in the Bank’s Prime
Rate.
|
2.6. Optional
Interest Rates.
Instead
of the interest rate based on the rate stated in the paragraph entitled
“Interest Rate” above, the Borrower may elect the optional interest rate listed
below for the Facility during interest periods agreed to by the Bank and the
Borrower. The optional interest rate shall be subject to the terms and
conditions described later in this Agreement. Any principal amount bearing
interest at the optional rate under this Agreement is referred to as a
“Portion.” The following optional interest rate is available:
5
The
LIBOR
Rate plus the Applicable Margin as defined below.
2.7. Applicable
Margin.
For
the
period commencing on the date of this Agreement and ending on the date the
Bank
receives a compliance certificate and financial statement for the Borrower's
fiscal quarter ending September 30, 2007 (the “Initial Pricing Period”), the
Applicable Margin for advances bearing interest on the basis of the Prime Rate
shall be minus
three-quarters (0.75) percentage point per annum and the Applicable Margin
for
advances bearing interest on the basis of the LIBOR Rate shall be plus
one and
three-quarters (1.75) percentage points per annum. Following the Initial Pricing
Period, the Applicable Margin shall be the following amounts per annum, based
upon the Fixed Charge Coverage Ratio (as defined in the “Covenants” section of
this Agreement), as set forth in the most recent compliance certificate (or,
if
no compliance certificate is required, the Borrower’s most recent financial
statements) received by the Bank as required in the Covenants
section:
|
Applicable
Margin
(in
percentage points per annum)
|
|||
|
Pricing
Level
|
Fixed
Charge Coverage Ratio
|
Prime
Rate +
|
LIBOR
RATE +
|
|
1
|
<
1.15x
|
0.00
|
2.50
|
|
2
|
<
1.25x
|
(0.25)
|
2.25
|
|
3
|
<
1.35x
|
(0.50)
|
2.00
|
|
4
|
<
1.50x
|
(0.75)
|
1.75
|
|
5
|
>
1.50x
|
(1.00)
|
1.50
|
Except
during the Initial Pricing Period, the Applicable Margin shall be in effect
from
the date the most recent compliance certificate or financial statement is
received by the Bank until the date the next compliance certificate or financial
statement is received; provided, however, that if the Borrower fails to timely
deliver the next compliance certificate or financial statement, the Applicable
Margin from the date such compliance certificate or financial statement was
due
until the date such compliance certificate or financial statement is received
by
the Bank shall be the highest pricing level set forth above.
2.8. Standby
Letters of Credit.
| (a) |
During
the availability period, at the request of the Borrower, the Bank
will
issue standby letters of credit with a maximum maturity of 365 days
but
not to extend beyond the Facility Expiration Date. The standby letters
of
credit may include a provision providing that the maturity date will
be
automatically extended each year for an additional year unless the
Bank
gives written notice to the contrary; provided, however, that each
standby
letter of credit must include a final maturity date of not later
than one
hundred eighty (180) days after the Facility Expiration Date and
which
will not be subject to automatic
extension.
|
6
| (b) |
The
amount of the standby letters of credit outstanding at any one time
(including the drawn and unreimbursed amounts of the standby letters
of
credit) may not exceed One Million Dollars
($1,000,000).
|
| (c) |
In
calculating the principal amount outstanding under the Facility
Commitment, the calculation shall include the amount of any
standby letters of credit outstanding, including amounts drawn on
any
standby letters of credit and not yet
reimbursed.
|
| (d) |
The
Borrower agrees:
|
| (i) |
Any
sum drawn under a standby letter of credit may, at the option of
the Bank,
be added to the principal amount outstanding under this Agreement.
The
amount will bear interest and be due as described elsewhere in this
Agreement.
|
| (ii) |
If
there is a default under this Agreement, to immediately prepay and
make
the Bank whole for any outstanding standby letters of
credit.
|
| (iii) |
The
issuance of any standby letter of credit and any amendment to a standby
letter of credit is subject to the Bank’s written approval and must be in
form and content satisfactory to the Bank and in favor of a beneficiary
acceptable to the Bank.
|
| (iv) |
To
sign the Bank’s form Application and Agreement for Standby Letter of
Credit.
|
| (v) |
To
pay any issuance and/or other fees that the Bank notifies the Borrower
will be charged for issuing and processing standby letters of credit
for
the Borrower.
|
| (vi) |
To
allow the Bank to automatically charge its checking account for applicable
fees, discounts, and other charges.
|
| (vii) |
To
pay the Bank a non-refundable fee equal to one and one-half percent
(1.5%)
per annum of the outstanding undrawn amount of each standby letter
of
credit, payable annually in advance, calculated on the basis of the
face
amount outstanding on the day the fee is calculated. If there is
a default
under this Agreement, at the Bank’s option, the amount of the fee shall be
increased to six percent (6%) per annum, effective starting on the
day the
Bank provides notice of the increase to the
Borrower.
|
7
3. OPTIONAL
INTEREST RATE
3.1. Optional
Rates.
The
optional interest rate provided for in Paragraph 1.7 is a rate per year.
Interest will be paid on the first day of the first month following the
commencement of the applicable interest period, and then on the same day of
each
month thereafter
until payment in full of any principal outstanding under this Agreement. No
Portion will be converted to a different interest rate during the applicable
interest period. Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of the optional interest
rate
for interest periods commencing after the default occurs. At the end of any
interest period, the interest rate will revert to the rate stated in the
paragraph(s) entitled “Interest Rate” above, unless the Borrower has designated
another optional interest rate for the Portion.
3.2. LIBOR
Rate.
The
election of the LIBOR Rate shall be subject to the following terms and
requirements:
| (a) |
The
interest period during which the LIBOR Rate will be in effect will
be 30,
60 or 90 days or one year. The first day of the interest period must
be a
day other than a Saturday or a Sunday on which banks are open for
business
in New York and London and dealing in offshore dollars (a “LIBOR Banking
Day”). The last day of the interest period and the actual number of days
during the interest period will be determined by the Bank using the
practices of the London inter-bank
market.
|
| (b) |
Each
LIBOR Rate Portion will be for an amount not less than Five Hundred
Thousand Dollars ($500,000).
|
| (c) |
The
“LIBOR Rate” means the interest rate determined by the following formula.
(All amounts in the calculation will be determined by the Bank as
of the
first day of the interest period.)
|
LIBOR
Rate = London
Inter-Bank Offered Rate
(1.00
- Reserve Percentage)
Where,
| (i) |
“London
Inter-Bank Offered Rate” means, for any applicable interest period, the
rate per annum equal to the British Bankers Association LIBOR Rate
(“BBA
LIBOR”), as published by Reuters (or other commercially available source
providing quotations of BBA LIBOR as selected by the Bank from time
to
time) at approximately 11:00 a.m. London time two (2) London Banking
Days
before the commencement of the interest period, for U.S. Dollar deposits
(for delivery on the first day of such interest period) with a term
equivalent to such interest period. If such rate is not available
at such
time for any reason, then the rate for that interest period will
be
determined by such alternate method as reasonably selected by the
Bank. A
“London Banking Day” is a day on which banks in London are open for
business and dealing in offshore
dollars.
|
8
| (ii) |
“Reserve
Percentage” means the total of the maximum reserve percentages for
determining the reserves to be maintained by member banks of the
Federal
Reserve System for Eurocurrency Liabilities, as defined in Federal
Reserve
Board Regulation D, rounded upward to the nearest 1/100 of one percent.
The percentage will be expressed as a decimal, and will include,
but not
be limited to, marginal, emergency, supplemental, special, and other
reserve percentages.
|
| (d) |
The
Borrower shall irrevocably request a LIBOR Rate Portion no later
than
12:00 noon Pacific time on the LIBOR Banking Day preceding the day
on
which the London Inter-Bank Offered Rate will be set, as specified
above.
For example, if there are no intervening holidays or weekend days
in any
of the relevant locations, the request must be made at least three
days
before the LIBOR Rate takes effect.
|
| (e) |
The
Bank will have no obligation to accept an election for a LIBOR Rate
Portion if any of the following described events has occurred and
is
continuing:
|
| (i) |
Dollar
deposits in the principal amount, and for periods equal to the interest
period, of a LIBOR Rate Portion are not available in the London inter-bank
market; or
|
| (ii) |
the
LIBOR Rate does not accurately reflect the cost of a LIBOR Rate
Portion.
|
| (f) |
Each
prepayment of a LIBOR Rate Portion, whether voluntary, by reason
of
acceleration or otherwise, will be accompanied by the amount of accrued
interest on the amount prepaid and a prepayment fee as described
below. A
“prepayment” is a payment of an amount on a date earlier than the
scheduled payment date for such amount as required by this
Agreement.
|
| (g) |
The
prepayment fee shall be in an amount sufficient to compensate the
Bank for
any loss, cost or expense incurred by it as a result of the prepayment,
including any loss of anticipated profits and any loss or expense
arising
from the liquidation or reemployment of funds obtained by it to maintain
such Portion or from fees payable to terminate the deposits from
which
such funds were obtained. The Borrower shall also pay any customary
administrative fees charged by the Bank in connection with the foregoing.
For purposes of this paragraph, the Bank shall be deemed to have
funded
each Portion by a matching deposit or other borrowing in the applicable
interbank market, whether or not such Portion was in fact so
funded.
|
9
4. FEES
AND
EXPENSES
4.1. Fees.
| (a) |
Closing
Fee.
The Borrower agrees to pay a loan fee in the amount of Thirty-Three
Thousand Dollars ($33,000). This fee is due on the Facility Commencement
Date.
|
| (b) |
Unused
Commitment Fee.
The Borrower agrees to pay a fee on any difference between the Facility
Commitment and the amount of credit it actually uses, determined
by the
average of the daily amount of credit outstanding during the specified
period. The fee will be calculated at 0.25% per year. The calculation
of
credit outstanding shall include the undrawn amount of letters of
credit.
This fee is due in arrears on September 1, 2007, and on the same
day of
each following quarter in
arrears until the expiration of the availability
period.
|
| (c) |
Waiver
Fee.
If the Bank, at its discretion, agrees to waive or amend any terms
of this
Agreement, the Borrower will, at the Bank’s option, pay the Bank a fee for
each waiver or amendment in an amount advised by the Bank at the
time the
Borrower requests the waiver or amendment. Nothing in this paragraph
shall
imply that the Bank is obligated to agree to any waiver or amendment
requested by the Borrower. The Bank may impose additional requirements
as
a condition to any waiver or
amendment.
|
| (d) |
Late
Fee.
To the extent permitted by law, the Borrower agrees to pay a late
fee in
an amount not to exceed four percent (4%) of any payment that is
more than
fifteen (15) days late. The imposition and payment of a late fee
shall not
constitute a waiver of the Bank’s rights with respect to the default,
including Bank’s right to charge interest at the default interest rate
provided for in Section 6.6.
|
4.2. Expenses.
The
Borrower agrees to immediately repay the Bank for expenses that include, but
are
not limited to, filing, recording and search fees, appraisal fees, title report
fees, and documentation fees.
4.3. Reimbursement
Costs.
| (a) |
The
Borrower agrees to reimburse the Bank for any expenses it incurs
in the
preparation of this Agreement and any agreement or instrument required
by
this Agreement. Expenses include, but are not limited to, reasonable
attorneys’ fees, including any allocated costs of the Bank’s in-house
counsel to the extent permitted by applicable
law.
|
| (b) |
The
Borrower agrees to reimburse the Bank for the cost of periodic field
examinations of the Borrower’s books, records and collateral, and
appraisals of the collateral, at such intervals as the Bank may reasonably
require. The actions described in this paragraph may be performed
by
employees of the Bank or by independent
appraisers.
|
10
5. COLLATERAL
The
timely payment and performance of the Borrower’s obligations to the Bank under
this Agreement are secured by a security interest in the Collateral described
in
the Security Agreement, of even date herewith, by and between the Borrower
and
the Bank.
6. DISBURSEMENTS,
PAYMENTS AND COSTS
6.1. Disbursements
and Payments.
| (a) |
Each
payment by the Borrower will be made in U.S. Dollars and immediately
available funds by direct debit to a deposit account as specified
below.
|
| (b) |
Each
disbursement by the Bank and each payment by the Borrower will be
evidenced by records kept by the Bank. In addition, the Bank may,
at its
discretion, require the Borrower to sign one or more promissory
notes.
|
6.2. Telephone
and Telefax Authorization.
| (a) |
The
Bank may honor telephone or telefax instructions for advances or
repayments or
for the designation of optional interest rates and telefax requests
for
the issuance of letters of credit given, or purported to be given,
by any
one of the individuals authorized to sign loan agreements on behalf
of the
Borrower, or any other individual designated by any one of such authorized
signers.
|
| (b) |
Advances
will be deposited in and repayments will be withdrawn from the Borrower’s
designated deposit account with the Bank (the “Designated Bank
Account”).
|
| (c) |
The
Borrower will indemnify and hold the Bank harmless from all liability,
loss, and costs in connection with any act resulting from telephone
or
telefax instructions the Bank reasonably believes are made by any
individual authorized by the Borrower to give such instructions.
This
paragraph will survive this Agreement’s termination, and will benefit the
Bank and its officers, employees, and
agents.
|
6.3. Direct
Debit.
| (a) |
The
Borrower agrees that interest and principal payments and any fees
will be
deducted automatically on the due date from the Designated Deposit
Account.
|
| (b) |
The
Borrower will maintain sufficient funds in the account on the dates
the
Bank enters debits authorized by this Agreement. If there are insufficient
funds in the account on the date the Bank enters any debit authorized
by
this Agreement, the Bank may reverse the
debit.
|
6.4. Banking
Days.
Unless
otherwise provided in this Agreement, a banking day is a day other than a
Saturday, Sunday or other day on which commercial banks are authorized to close,
or are in fact closed, in the state where the Bank’s lending office is located,
and, if such day relates to amounts bearing interest at an offshore rate (if
any), means any such day on which dealings in dollar deposits are conducted
among banks in the offshore dollar interbank market. All payments and
disbursements which would be due on a day which is not a banking day will be
due
on the next banking day. All payments received on a day which is not a banking
day will be applied to the credit on the next banking day.
11
6.5. Interest
Calculation.
Except
as
otherwise stated in this Agreement, all interest and fees, if any, will be
computed on the basis of a 360-day year and the actual number of days elapsed.
This results in more interest or a higher fee than if a 365-day year is used.
Installments of principal which are not paid when due under this Agreement
shall
continue to bear interest until paid.
6.6. Default
Rate.
Upon
the
occurrence of any default or after maturity or after judgment has been rendered
on any obligation under this Agreement, all amounts outstanding under this
Agreement, including any interest, fees, or costs which are not paid when due,
will at the option of the Bank bear interest at a rate which is 2.0 percentage
points higher than the rate of interest otherwise provided under this Agreement.
This may result in compounding of interest. This will not constitute a waiver
of
any default.
6.7. Taxes.
If
any
payments to the Bank under this Agreement are made from outside the United
States, the Borrower will not deduct any foreign taxes from any payments it
makes to the Bank. If any such taxes are imposed on any payments made by the
Borrower (including payments under this paragraph), the Borrower will pay the
taxes and will also pay to the Bank, at the time interest is paid, any
additional amount which the Bank specifies as necessary to preserve the
after-tax yield the Bank would have received if such taxes had not been imposed.
The Borrower will confirm that it has paid the taxes by giving the Bank official
tax receipts (or notarized copies) within thirty (30) days after the due
date.
6.8. Overdrafts.
At
the
Bank’s sole option in each instance, the Bank may do one of the
following:
| (a) |
The
Bank may make advances under this Agreement to prevent or cover an
overdraft on any account of the Borrower with the Bank. Each such
advance
will accrue interest from the date of the advance or the date on
which the
account is overdrawn, whichever occurs first, at the interest rate
described in this Agreement. The Bank may make such advances even
if the
advances may cause any credit limit under this Agreement to be
exceeded.
|
| (b) |
The
Bank may reduce the amount of credit otherwise available under this
Agreement by the amount of any overdraft on any account of the Borrower
with the Bank.
|
12
This
paragraph shall not be deemed to authorize the Borrower to create overdrafts
on
any of the Borrower’s accounts with the Bank.
6.9. Payments
in Kind.
If
the
Bank requires delivery in kind of the proceeds of collection of the Borrower’s
accounts receivable, such proceeds shall be credited to interest, principal,
and
other sums owed to the Bank under this Agreement in the order and proportion
determined by the Bank in its sole discretion. All such credits will be
conditioned upon collection and any returned items may, at the Bank’s option, be
charged to the Borrower.
7. CONDITIONS
Before
the Bank is required to extend any credit to the Borrower under this Agreement,
it must receive any documents and other items it may reasonably require, in
form
and content acceptable to the Bank, including any items specifically listed
below.
7.1. Authorizations.
Evidence
that the execution, delivery and performance by the Borrower and the Guarantor
of this Agreement and/or any instrument or agreement required under this
Agreement to which the Borrower or the Guarantor is a party have been duly
authorized by the Borrower or the Guarantor, as applicable.
7.2. Governing
Documents.
A
copy of
the organizational documents of the Borrower and Guarantor.
7.3. Guaranty.
A
continuing guaranty signed by the Guarantor.
7.4. Security
Agreements.
Signed
original security agreements from each of the Borrower and the
Guarantor.
7.5. Stock
Pledge.
A
signed
stock pledge agreement from the Borrower covering all of the capital stock
of
the Guarantor.
7.6. Perfection
and Evidence of Priority.
Evidence
that the security interests and liens in favor of the Bank are valid,
enforceable, properly perfected in a manner acceptable to the Bank and prior
to
all others’ rights and interests, except those the Bank consents to in
writing.
13
7.7. Payment
of Fees.
Payment
of all fees and other amounts due and owing to the Bank, including without
limitation payment of all accrued and unpaid expenses incurred by the Bank
as
required by the paragraph entitled “Reimbursement Costs.”
7.8. Pay
Down of GECC Term Loans.
Evidence
that the principal balance of Borrower’s existing term loan indebtedness to GECC
has been paid down to not more than Seven Million Dollars ($7,000,000) in
connection with the closing of the transactions contemplated under the DG Merger
Documents.
7.9. Good
Standing.
Certificates
of good standing for the Borrower and the Guarantor from the State of California
and from any other state in which the Borrower or Guarantor is required to
qualify to conduct its business.
7.10. Legal
Opinion.
A
written
opinion from legal counsel to the Borrower and the Guarantor, covering such
matters as the Bank
may
require. The legal counsel and the terms of the opinion must be acceptable
to
the Bank.
7.11. Intercreditor
Agreement.
An
intercreditor agreement in favor of the Bank signed by GECC and acknowledged
by
the Borrower.
7.12. Landlord
Agreements.
A
landlord waiver signed by the lessor of each of the following leased facilities
of the Borrower or the Bank shall have established a reserve against borrowing
availability under the Facility in an amount equal to three (3) months rent
for
each such facility for which the Bank has not received a signed landlord
waiver:
| (a) |
▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇;
and
|
| (b) | ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇. |
7.13. Insurance.
Evidence
of insurance coverage, as required in the “Covenants” section of this
Agreement.
7.14. Other
Required Documentation.
| (a) |
Secretary
Certificates.
Secretary certificates from the secretary of the Borrower and the
Guarantor, attaching the authorizations required by Paragraph 7.1,
the
organizational documents required by Paragraph 7.2, signatures and
incumbency information regarding officers and such other information
as
the Bank may reasonably request.
|
14
| (b) |
Closing
Date Borrowing Certificate.
A
completed borrowing certificate on the Bank’s standard form, demonstrating
the Borrower’s borrowing base on the date of this
Agreement.
|
| (c) |
Closing
Date Compliance Certificate.
A
completed compliance certificate on the Bank’s standard form,
demonstrating that as of the date of this Agreement, the Borrower
is in
compliance with all of the financial covenants required under this
Agreement.
|
| (d) |
Disbursement
Instructions.
A
disbursement instruction letter signed by the Borrower, authorizing
the
Bank to utilize the proceeds of the initial advances to be made on
the
date of this Agreement to pay the closing fee payable to the Bank
on such
date pursuant to Section 3.1(a) above and to pay such other items as
the Borrower may direct.
|
| (e) |
Financial
Statements.
The Bank shall have received and been satisfied with the results
of (i)
the consolidated financial statements of the Borrower and its subsidiaries
for the fiscal year ended December 31, 2006, including balance sheets,
income and cash flow statements audited by independent public accountants
of recognized national standing and prepared in conformity with GAAP,
(ii)
the unaudited consolidated financial statements of the Borrower and
its
subsidiaries for the fiscal quarter ended March 31, 2007, including
balance sheets, income and cash flow statements, prepared in conformity
with GAAP, and (iii) such other financial information relating to
the
Borrower and its subsidiaries as the Bank may reasonably
require.
|
| (f) |
Additional
Information.
The Bank shall have received and been satisfied with its review of
such
additional information relating to litigation, tax, accounting, labor,
insurance, material contracts, contingent liabilities and management
matters affecting the Borrower and the Guarantor as the Bank may
reasonably request.
|
7.15. Other
Conditions.
| (a) |
Satisfactory
Updated Field Examination.
The Bank shall have completed and been satisfied with the results
of an
updated field examination of the Borrower’s assets and books and
records.
|
| (b) |
Satisfactory
Due Diligence Review.
The Bank shall have completed and been satisfied with the results
of its
due diligence review, including a satisfactory review of the terms
and
conditions of all of the Borrower’s related party debt, the Borrower’s
sources of funds.
|
| (c) |
No
Material Adverse Change.
There shall not have occurred a material adverse change in the business,
assets, liabilities (actual or contingent), operations, condition
(financial or otherwise) or prospects of the Borrower and its subsidiaries
taken as a whole or in the facts and information regarding such entities
as indicated on the internally-prepared financial statements for
the
Borrower’s fiscal year ended December 31,
2005.
|
15
| (d) |
No
Material Adverse Litigation.
There shall not be as of the date of this Agreement any action, suit,
investigation or proceeding pending or threatened in any court or
before
any arbitrator or governmental authority that purports (i) to materially
and adversely affect the Borrower or its subsidiaries, or (ii) to
affect
any transaction contemplated hereby or the ability of the Borrower
or its
subsidiaries or any other guarantor to perform their respective
obligations under this Agreement or any of the other loan documents
entered into in connection with this
Agreement.
|
| (e) |
Minimum
Opening Availability.
The Borrower shall have borrowing availability under the Facility
Commitment of not less than $2,000,000 after giving effect to the
payment
of all of the Borrower’s trade payables to within 30 days of written terms
and of any and all book overdrafts.
|
| (f) |
Termination
of Prior Loan Agreement; Release of the Bank’s Liens under Prior Loan
Documents.
The Bank and Old Point.360 shall have terminated the Prior Loan Agreement,
the Bank shall have no further funding obligations to Old Point.360
under
the Prior Loan Agreement, and the Bank shall have released and terminated
all security interests and liens on the assets of Old Point.360 or
the
Guarantor received and held by the Bank in connection with the
indebtedness under the Prior Loan
Agreement.
|
| (g) |
Satisfactory
DG Merger Documents.
The Bank and its counsel shall have been reasonably satisfied with
their
review of the DG Merger Documents and with all aspects of the transactions
contemplated thereunder.
|
|
(h)
|
Transfer
of Assets to the Borrower; Occurrence of Merger.
Old Point.360 shall have transferred to Borrower all of the assets
of all
businesses of Old Point.360 other than the Old Point.360 spot advertising
business, and the Merger shall have
occurred.
|
8. REPRESENTATIONS
AND WARRANTIES
When
the
Borrower signs this Agreement, and until the Bank is repaid in full, the
Borrower makes the following representations and warranties. Each request for
an
extension of credit constitutes a renewal of these representations and
warranties as of the date of the request:
8.1. Formation.
The
Borrower is a corporation organized under the laws of the State of
California.
8.2. Authorization.
This
Agreement, and any instrument or agreement required hereunder, are within the
Borrower’s powers, have been duly authorized, and do not conflict with any of
its organizational papers.
8.3. Enforceable
Agreement.
This
Agreement is a legal, valid and binding agreement of the Borrower, enforceable
against the Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable.
16
8.4. Good
Standing.
In
each
state in which the Borrower does business, it is properly licensed, in good
standing, and, where required, in compliance with fictitious name
statutes.
8.5. No
Conflicts.
This
Agreement does not conflict with any law, agreement, or obligation by which
the
Borrower is bound.
8.6. Financial
Information.
All
financial and other information that has been or will be supplied to the Bank
is
sufficiently complete to give the Bank accurate knowledge of the Borrower’s (and
the Guarantor’s) financial condition, including all material contingent
liabilities. Since the date of the most recent financial statement provided
to
the Bank, there has been no material adverse change in the business condition
(financial or otherwise), operations, properties or prospects of the Borrower
(or the Guarantor). If the Borrower is comprised of the trustees of a trust,
the
foregoing representations shall also pertain to the trustor(s) of the
trust.
8.7. Lawsuits.
There
is
no lawsuit, tax claim or other dispute pending or threatened against the
Borrower which, if lost, would impair the Borrower’s financial condition or
ability to repay the loan, except as have been disclosed in writing to the
Bank.
8.8. Collateral.
All
collateral required in this Agreement is owned by the grantor of the security
interest free of any title defects or any liens or interests of others, except
those which have been approved by the Bank in writing.
8.9. Permits,
Franchises.
The
Borrower possesses all permits, memberships, franchises, contracts and licenses
required and all trademark rights, trade name rights, patent rights, copyrights,
and fictitious name rights necessary to enable it to conduct the business in
which it is now engaged.
8.10. Other
Obligations.
The
Borrower is not in default on any obligation for borrowed money, any purchase
money obligation or any other material lease, commitment, contract, instrument
or obligation, except as have been disclosed in writing to the
Bank.
8.11. Tax
Matters.
The
Borrower has no knowledge of any pending assessments or adjustments of its
income tax for any year and all taxes due have been paid, except as have been
disclosed in writing to the Bank.
17
8.12. No
Event of Default.
There
is
no event which is, or with notice or lapse of time or both would be, a default
under this Agreement.
8.13. Insurance.
The
Borrower has obtained, and maintained in effect, the insurance coverage required
in the “Covenants” section of this Agreement.
8.14. Governmental
Authorization.
No
approval, consent, exemption, authorization, or other action by, or notice
to,
or filing with, any governmental authority (including, without limitation,
any
nation, state or other political subdivision thereof, any central bank, and
any
entity exercising executive, legislative, judicial, regulatory or administrative
functions, and any corporation or other entity owned or controlled by any of
the
foregoing) is necessary or required in connection with the execution, delivery
or performance by, or enforcement against, the Borrower of this Agreement or
any
other instrument or agreement required hereunder.
9. COVENANTS
The
Borrower agrees, so long as credit is available under this Agreement and until
the Bank is repaid in full:
9.1. Use
of
Proceeds.
| (a) |
To
use the proceeds of the Facility only for working capital and general
corporate purposes and for the issuance of standby letters of
credit.
|
| (b) |
The
proceeds of the credit extended under this Loan Agreement may not
be used
directly or indirectly to purchase or carry any “margin stock” as that
term is defined in Regulation U of the Board of Governors of the
Federal
Reserve System, or extend credit to or invest in other parties for
the
purpose of purchasing or carrying any such “margin stock,” or to reduce or
retire any indebtedness incurred for such
purpose.
|
9.2. Financial
Information.
To
provide the following financial information and statements in form and content
acceptable to the Bank, and such additional information as requested by the
Bank
from time to time:
| (a) |
A
Borrowing Certificate as of the last day of each month within ten
(10)
days after month end and, upon the Bank’s request, copies of the invoices
or the record of invoices from the Borrower’s sales journal for the
Borrower’s Acceptable Receivables and a listing of the names and addresses
of the debtors obligated thereunder, copies of the delivery receipts,
purchase orders, shipping instructions, bills of lading and other
documentation pertaining to such Acceptable Receivables, and copies
of the
cash receipts journal pertaining to the Borrowing
Certificate.
|
18
| (b) |
Upon
the Bank's request, a detailed aging of the Borrower’s receivables by
invoice or a summary aging by account debtor, as specified by the
Bank.
|
| (c) |
Upon
the Bank's request, a summary aging by vendor of accounts
payable.
|
| (d) |
If
the Bank requires the Borrower to deliver the proceeds of accounts
receivable to the Bank upon collection by the Borrower, a schedule
of the
amounts so collected and delivered to the
Bank.
|
| (e) |
Upon
the Bank’s request, a listing of the names and addresses of all debtors
obligated upon the Borrower’s accounts
receivable.
|
| (f) |
Copies
of all letters of credit issued in support of the Borrower’s accounts
receivable.
|
| (g) |
Promptly
upon the Bank’s request, such other books, records, statements, lists of
property and accounts, budgets, forecasts or reports as to the Borrower
and the Guarantor as the Bank may
request.
|
| (h) |
Within
90 days after the fiscal year end, the annual financial statements
of the
Borrower. These financial statements must be audited (with an opinion
satisfactory to the Bank) by a Certified Public Accountant acceptable
to
the Bank. The statements shall be prepared on a consolidated
basis.
|
| (i) |
Within
45 days after the period’s end in the case of the first three fiscal
quarters of each fiscal year of the Borrower and within 60 days after
the
end of the fourth fiscal quarter of each such fiscal year, quarterly
financial statements of the Borrower, certified and dated by an authorized
financial officer. These financial statements may be company-prepared.
The
statements shall be prepared on a consolidated
basis.
|
| (j) |
Promptly,
upon sending or receipt, copies of any management letters and
correspondence relating to management letters, sent or received by
the
Borrower to or from the Borrower’s auditor. If no management letter is
prepared, the Bank may, in its discretion, request a letter from
such
auditor stating that no deficiencies were noted that would otherwise
be
addressed in a management letter.
|
| (k) |
Copies
of the Form 10-K Annual Report, Form 10-Q Quarterly Report and Form
8-K
Current Report for the Borrower concurrent with the date of filing
with
the Securities and Exchange
Commission.
|
| (l) |
Financial
projections covering a time period acceptable to the Bank and specifying
the assumptions used in creating the projections. The projections
shall be
provided to the Bank no less often than 45 days after the end of
each
fiscal year.
|
| (m) |
Within
45 days after the end of each fiscal quarter, a
compliance certificate of the Borrower, signed by an authorized financial
officer and setting forth (i) the information and computations (in
sufficient detail) to establish that the Borrower is in compliance
with
all financial covenants at the end of the period covered by the financial
statements then being furnished and (ii) whether there existed as
of the
date of such financial statements and whether there exists as of
the date
of the certificate, any default under this Agreement and, if any
such
default exists, specifying the nature thereof and the action the
Borrower
is taking and proposes to take with respect
thereto.
|
19
9.3. [Intentionally
Omitted.]
9.4. Basic
Fixed Charge Coverage Ratio.
To
maintain on a consolidated basis a Basic Fixed Charge Coverage Ratio of at
least
1.1:1.0..
“Basic
Fixed Charge Coverage Ratio” means the ratio of (a) the sum of EBITDA plus
lease expense and rent expense, minus income tax, minus dividends, withdrawals,
and other distributions, to (b) the sum of interest expense, lease expense,
rent expense, the current portion of long term debt and the current portion
of
capitalized lease obligations and maintenance capital expenditures.
“EBITDA”
means net income, less income or plus loss from discontinued operations and
extraordinary items, plus income taxes, plus interest expense, plus
depreciation, depletion, amortization and other non-cash charges, plus one-time
charges in an aggregate amount not to exceed $500,000 related to the Merger
and
the contribution of assets by Old Point.360 to the Borrower.
This
ratio will be calculated at the end of each reporting period for which the
Bank
requires financial statements, using the results of the twelve-month period
ending with that reporting period, provided
that for
the calculation date of September 30, 2007 only, this ratio shall be calculated
by using (i) the actual nine-month results for the period commencing on January
1, 2007 and ending on September 30, 2007 and (ii) adding the following to such
results:
the
results for the twelve-month period ended December 31, 2006; divided by
twelve
(12); and multiplied by
three
(3). The current portion of long-term liabilities will be measured as of the
last day of the calculation period.
9.5. Dividends
and Distributions.
Not
to
declare or pay any dividends (except dividends paid in capital stock),
redemptions of stock or membership interests, distributions and withdrawals
(as
applicable) to its owners.
9.6. Bank
as Principal Depository.
To
maintain the Bank as its principal depository bank, including for the
maintenance of business, cash management, operating and administrative deposit
accounts.
9.7. Other
Debts.
Not
to
have outstanding or incur any direct or contingent liabilities or lease
obligations (other than those to the Bank), or become liable for the liabilities
of others, without the Bank’s written consent. This does not
prohibit:
| (a) |
Acquiring
goods, supplies, or merchandise on normal trade
credit.
|
20
| (b) |
Endorsing
negotiable instruments received in the usual course of
business.
|
| (c) |
The
Borrower’s term loan indebtedness to GECC, the aggregate original
principal amount of which on a cumulative basis from the date of
this
Agreement shall not exceed Seven Million Dollars
($7,000,000).
|
| (d) |
Obtaining
surety bonds in the usual course of
business.
|
| (e) |
Liabilities,
lines of credit and leases in existence on the date of this Agreement
disclosed in writing to the Bank.
|
| (f) |
Additional
debts and lease obligations for the acquisition of fixed assets,
to the
extent permitted elsewhere in this
Agreement.
|
9.8. Other
Liens.
Not
to
create, assume, or allow any security interest or lien (including judicial
liens) on property the Borrower now or later owns, except:
| (a) |
Liens
and security interests in favor of the
Bank.
|
| (b) |
Liens
for taxes not yet due.
|
| (c) |
Liens
outstanding on the date of this Agreement disclosed in writing to
the
Bank, including liens in favor of GECC, which are subject to the
terms of
the intercreditor agreement required by Paragraph 7.11
hereof.
|
| (d) |
Additional
purchase money security interests in assets acquired after the date
of
this Agreement, if the total principal amount of debts secured by
such
liens does not exceed Five Hundred Thousand Dollars ($500,000) at
any one
time.
|
9.9. Maintenance
of Assets.
| (a) |
Not
to sell, assign, lease, transfer or otherwise dispose of any part
of the
Borrower’s business or the Borrower’s assets except in the ordinary course
of the Borrower’s business.
|
| (b) |
Not
to sell, assign, lease, transfer or otherwise dispose of any assets
for
less than fair market value, or enter into any agreement to do
so.
|
| (c) |
Not
to enter into any sale and leaseback agreement covering any of its
fixed
assets.
|
| (d) |
To
maintain and preserve all rights, privileges, and franchises the
Borrower
now has.
|
| (e) |
To
make any repairs, renewals, or replacements to keep the Borrower’s
properties in good working
condition.
|
21
9.10. Investments.
Not
to
have any existing, or make any new, investments in any individual or entity,
or
make any capital contributions or other transfers of assets to any individual
or
entity, except for:
| (a) |
Existing
investments disclosed to the Bank in
writing.
|
| (b) |
Investments
in the Borrower’s current
subsidiaries.
|
| (c) |
Investments
in any of the following:
|
| (i) |
certificates
of deposit;
|
| (ii) |
U.S.
treasury bills and other obligations of the federal
government;
|
| (iii) |
readily
marketable securities (including commercial paper, but excluding
restricted stock and stock subject to the provisions of Rule 144
of the
Securities and Exchange
Commission).
|
9.11. Loans.
Not
to
make any loans, advances or other extensions of credit to any individual or
entity, except for:
| (a) |
Existing
extensions of credit disclosed to the Bank in
writing.
|
| (b) |
Extensions
of credit to the Borrower’s current
subsidiaries.
|
| (c) |
Extensions
of credit in the nature of accounts receivable or notes receivable
arising
from the sale or lease of goods or services in the ordinary course
of
business to non-affiliated
entities.
|
9.12. Change
of Management.
Not
to
make any substantial change in the present executive or management personnel
of
the Borrower.
9.13. Change
of Control.
Not
to
cause or permit:
| (a) |
▇▇▇▇
▇. Bagerdjian to cease to be the chief executive officer of the Borrower
unless within sixty (60) days after Mr. Bagerdjian ceases to hold
such
office the Borrower secures a replacement chief executive officer
satisfactory to the Bank.
|
| (b) |
▇▇▇▇
▇. Bagerdjian to cease to own directly or indirectly, beneficially
or of
record, at least fifteen (15%) of all shares of voting securities
of the
Borrower (provided that such percentage may be less than fifteen
percent
(15%), but not less than seven and one-half percent (7.5%), if such
reduction is due to the issuance of shares of voting securities of
the
Borrower as consideration for an acquisition permitted under Paragraph
9.14(b) below).
|
22
| (c) |
Individuals
who constituted the Borrower’s board of directors as of the date of this
Agreement (collectively, the “Existing Directors”) to cease to constitute
a majority of the directors then in office (provided that the Existing
Directors may constitute less than a majority if such
reduction
is
due to the appointment of additional directors in connection with
an
acquisition permitted under Paragraph 9.14(b)
below).
|
9.14. Additional
Negative Covenants.
Not
to,
without the Bank’s written consent:
| (a) |
Except
as permitted under Paragraph 9.14(b) below, enter into any consolidation,
merger, or other combination, or become a partner in a partnership,
a
member of a joint venture, or a member of a limited liability
company.
|
| (b) |
Acquire
or purchase a business or its assets for total purchase consideration
of
more than Four Million Dollars ($4,000,000) in any fiscal year or
acquire
or purchase a business or its assets irrespective of the amount of
total
annual purchase consideration if Borrower cannot demonstrate to Bank’s
reasonable satisfaction that Borrower would be in pro forma compliance
with the financial and other covenants set forth in this Agreement
after
giving effect to such acquisition or
purchase.
|
| (c) |
Engage
in any business activities substantially different from the Borrower’s
present business.
|
| (d) |
Liquidate
or dissolve the Borrower’s
business.
|
| (e) |
Voluntarily
suspend its business for more than seven (7) days in any thirty (30)
day
period.
|
9.15. Notices
to Bank.
To
promptly notify the Bank in writing of:
| (a) |
Any
lawsuit over One Million Dollars ($1,000,000) against the Borrower
or the
Guarantor.
|
| (b) |
Any
substantial dispute between any governmental authority and the Borrower
or
the Guarantor.
|
| (c) |
Any
event of default under this Agreement, or any event which, with notice
or
lapse of time or both, would constitute an event of
default.
|
| (d) |
Any
material adverse change in the Borrower’s (or the Guarantor’s) business
condition (financial or otherwise), operations, properties or prospects,
or ability to repay the credit.
|
23
| (e) |
Any
change in the Borrower’s name, legal structure, place of business, or
chief executive office if the Borrower has more than one place of
business.
|
| (f) |
Any
actual contingent liabilities of the Borrower (or the Guarantor),
and any
such contingent liabilities which are reasonably foreseeable, where
such
liabilities are in excess of One Million Dollars ($1,000,000) in
the
aggregate.
|
9.16. Insurance.
| (a) |
General
Business Insurance.
To maintain insurance satisfactory to the Bank as to amount, nature
and
carrier covering property damage (including loss of use and occupancy)
to
any of the Borrower’s properties, business interruption insurance, public
liability insurance including coverage for contractual liability,
product
liability and workers’ compensation, and any other insurance which is
usual for the Borrower’s business. Each policy shall provide for at least
thirty (30) days prior notice to the Bank of any cancellation
thereof.
|
| (b) |
Insurance
Covering Collateral.
If required by the Bank, to maintain all risk property damage insurance
policies covering the tangible property comprising the collateral.
Each
such insurance policy required by the Bank must be for the full
replacement cost of the collateral and include a replacement cost
endorsement. Such insurance (if required by the Bank) must be issued
by an
insurance company acceptable to the Bank and must include a lender’s loss
payable endorsement in favor of the Bank in a form acceptable to
the
Bank.
|
| (c) |
Evidence
of Insurance.
Upon the request of the Bank, to deliver to the Bank a copy of each
insurance policy, or, if permitted by the Bank, a certificate of
insurance
listing all insurance in force.
|
9.17. Compliance
with Laws.
To
comply
with the laws (including any fictitious or trade name statute), regulations,
and
orders of any government body with authority over the Borrower’s business. The
Bank shall have no obligation to make any advance to the Borrower except in
compliance with all applicable laws and regulations and the Borrower shall
fully
cooperate with the Bank in complying with all such applicable laws and
regulations.
9.18. ERISA
Plans.
Promptly
during each year, to pay and cause any subsidiaries to pay contributions
adequate to meet at least the minimum funding standards under ERISA with respect
to each and every Plan; file each annual report required to be filed pursuant to
ERISA in connection with each Plan for each year; and notify the Bank within
ten
(10) days of the occurrence of any Reportable Event that might constitute
grounds for termination of any capital Plan by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States District
Court of a trustee to administer any Plan. “ERISA” means the Employee Retirement
Income Security Act of 1974, as amended from time to time. Capitalized terms
in
this paragraph shall have the meanings defined within ERISA.
24
9.19. Books
and Records.
To
maintain adequate books and records.
9.20. Audits.
To
allow
the Bank and its agents to inspect the Borrower’s properties and examine, audit,
and make copies of books and records at any reasonable time. If any of the
Borrower’s properties, books or records are in the possession of a third party,
the Borrower authorizes that third party to permit the Bank or its agents to
have access to perform inspections or audits and to respond to the Bank’s
requests for information concerning such properties, books and
records.
9.21. Perfection
of Liens.
To
help
the Bank perfect and protect its security interests and liens, and reimburse
it
for related costs it incurs to protect its security interests and
liens.
9.22. Landlord
Waivers.
To
use
its best efforts to cause the lessor of each leased facility of the Borrower
other than those identified in Paragraph 7.12 to execute and deliver to the
Bank
a landlord waiver or subordination in favor of, and in form and substance
reasonably satisfactory to, the Bank within ninety (90) days after the date
of
this Agreement.
9.23. Cooperation.
To
take
any action reasonably requested by the Bank to carry out the intent of this
Agreement.
10. DEFAULT
AND REMEDIES
If
any of
the following events of default occurs, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event which, with notice or the
passage of time, will constitute an event of default has occurred and is
continuing, the Bank has no obligation to make advances or extend additional
credit under this Agreement. In addition, if any event of default occurs, the
Bank shall have all rights, powers and remedies available under any instruments
and agreements required by or executed in connection with this Agreement, as
well as all rights and remedies available at law or in equity. If an event
of
default occurs under the paragraph entitled “Bankruptcy,” below, with respect to
the Borrower, then the entire debt outstanding under this Agreement will
automatically be due immediately.
10.1. Failure
to Pay.
The
Borrower fails to make a payment under this Agreement when due.
25
10.2. Other
Bank Agreements.
Any
default occurs under any other agreement the Borrower (or any Obligor) or any
of
the Borrower’s related entities or affiliates has with the Bank or any affiliate
of the Bank. For purposes of this Agreement, “Obligor” shall mean the Guarantor
or any party pledging collateral to the Bank.
10.3. Cross-default.
Any
default occurs under any agreement in connection with any credit in excess
of
Five Hundred Thousand Dollars ($500,000) the Borrower (or any Obligor) or any
of
the Borrower’s related entities or affiliates has obtained from anyone else or
which the Borrower (or any Obligor) or any of the Borrower’s related entities or
affiliates has guaranteed.
10.4. False
Information.
The
Borrower or any Obligor has given the Bank materially false or misleading
information or representations.
10.5. Bankruptcy.
The
Borrower, any Obligor, or any general partner of the Borrower or of any Obligor
files a bankruptcy petition, a bankruptcy petition is filed against any of
the
foregoing parties, or the Borrower, any Obligor, or any general partner of
the
Borrower or of any Obligor makes a general assignment for the benefit of
creditors. The default will be deemed cured if any bankruptcy petition filed
against the Borrower, any Obligor, or any general partner of the Borrower or
of
any Obligor is dismissed within a period of forty-five (45) days after the
filing; provided, however, that such cure opportunity will be terminated upon
the entry of an order for relief in any bankruptcy case arising from such a
petition.
10.6. Receivers.
A
receiver or similar official is appointed for a substantial portion of the
Borrower’s or any Obligor’s business, or the business is terminated, or, if any
Obligor is anything other than a natural person, such Obligor is liquidated
or
dissolved.
10.7. Lien
Priority.
The
Bank
fails to have an enforceable first lien (except for any prior liens to which
the
Bank has consented in writing) on or security interest in any property given
as
security for this Agreement (or any guaranty).
10.8. Judgments.
Any
judgments or arbitration awards are entered against the Borrower or any Obligor,
or the Borrower or any Obligor enters into any settlement agreements with
respect to any litigation or arbitration, in an aggregate amount of Two Hundred
Fifty Thousand Dollars ($250,000) or more in excess of any insurance coverage
or
in an aggregate amount of Five Hundred Thousand Dollars ($500,000) or more,
irrespective of the amount of insurance coverage.
26
10.9. Material
Adverse Change.
A
material adverse change occurs, or is reasonably likely to occur, in the
Borrower’s (or any Obligor’s) business condition (financial or otherwise),
operations, properties or prospects, or ability to repay the
credit.
10.10. Government
Action.
Any
government authority takes action that the Bank believes materially adversely
affects the Borrower’s or any Obligor’s financial condition or ability to
repay.
10.11. Default
under Related Documents.
Any
default occurs under any guaranty, subordination agreement, security agreement,
deed of trust, mortgage, or other document required by or delivered in
connection with this Agreement or any such document is no longer in effect,
or
any guarantor purports to revoke or disavow the guaranty.
10.12. Other
Breach Under Agreement.
A
default
occurs under any other term or condition of this Agreement not specifically
referred to in this Article. This includes any failure or anticipated failure
by
the Borrower (or any other party named in the Covenants section) to comply
with
any financial covenants set forth in this Agreement, whether such failure is
evidenced by financial statements delivered to the Bank or is otherwise known
to
the Borrower or the Bank. If, in the Bank’s opinion, the breach is capable of
being remedied, the breach will not be considered an event of default under
this
Agreement for a period of thirty (30) days after the date on which the Bank
gives written notice of the breach to the Borrower.
11. ENFORCING
THIS AGREEMENT; MISCELLANEOUS
11.1. Disposition
of Schedules and Reports.
The
Bank
will not be obligated to return any schedules, invoices, statements, budgets,
forecasts, reports or other papers delivered by the Borrower. The Bank will
destroy or otherwise dispose of such materials at such time as the Bank, in
its
discretion, deems appropriate.
11.2. Returned
Merchandise.
Until
the
Bank exercises its rights to collect the accounts receivable as provided under
any security agreement required under this Agreement, the Borrower may continue
its present policies for returned merchandise and adjustments. Credit
adjustments with respect to returned merchandise shall be made immediately
upon
receipt of the merchandise by the Borrower or upon such other disposition of
the
merchandise by the debtor in accordance with the Borrower’s instructions. If a
client adjustment is made with respect to any Acceptable Receivable, the amount
of such adjustment shall no longer be included in the amount of such Acceptable
Receivable in computing the Borrowing Base.
27
11.3. Verification
of Receivables.
The
Bank
may at any time, either orally or in writing, request confirmation from any
debtor of the current amount and status of the accounts receivable upon which
such debtor is obligated.
11.4. Waiver
of Confidentiality.
The
Borrower authorizes the Bank to discuss the Borrower’s financial affairs and
business operations with any accountants, auditors, business consultants, or
other professional advisors employed by the Borrower, and authorizes such
parties to disclose to the Bank such financial and business information or
reports (including management letters) concerning the Borrower as the Bank
may
request.
11.5. GAAP.
Except
as
otherwise stated in this Agreement, all financial information provided to the
Bank and all financial covenants will be made under generally accepted
accounting principles, consistently applied.
11.6. California
Law.
This
Agreement is governed by California law.
11.7. Successors
and Assigns.
This
Agreement is binding on the Borrower’s and the Bank’s successors and assignees.
The Borrower agrees that it may not assign this Agreement without the Bank’s
prior consent. The Bank may sell participations in or assign this loan, and
may
exchange information about the Borrower (including, without limitation, any
information regarding any hazardous substances) with actual or potential
participants or assignees. If a participation is sold or the loan is assigned,
the purchaser will have the right of set-off against the Borrower.
11.8. Arbitration
and Waiver of Jury Trial.
| (a) |
This
paragraph concerns the resolution of any controversies or claims
between
the parties, whether arising in contract, tort or by statute, including
but not limited to controversies or claims that arise out of or relate
to:
(i) this agreement (including any renewals, extensions or
modifications); or (ii) any document related to this agreement
(collectively a “Claim”). For the purposes of this arbitration provision
only, the term “parties” shall include any parent corporation, subsidiary
or affiliate of the Bank involved in the servicing, management or
administration of any obligation described or evidenced by this
agreement.
|
| (b) |
At
the request of any party to this agreement, any Claim shall be resolved
by
binding arbitration in accordance with the Federal Arbitration Act
(Title
9, U.S. Code) (the “Act”). The Act will apply even though this agreement
provides that it is governed by the law of a specified state. The
arbitration will take place on an individual basis without resort
to any
form of class action.
|
28
| (c) |
Arbitration
proceedings will be determined in accordance with the Act, the
then-current rules and procedures for the arbitration of financial
services disputes of the American Arbitration Association or any
successor
thereof (“AAA”), and the terms of this paragraph. In the event of any
inconsistency, the terms of this paragraph shall control. If AAA
is
unwilling or unable to (i) serve as the provider of arbitration or
(ii) enforce any provision of this arbitration clause, the Bank may
designate another arbitration organization with similar procedures
to
serve as the provider of
arbitration.
|
| (d) |
The
arbitration shall be administered by AAA and conducted, unless otherwise
required by law, in any U.S. state where real or tangible personal
property collateral for this credit is located or if there is no
such
collateral, in the state specified in the governing law section of
this
agreement. All Claims shall be determined by one arbitrator; however,
if
Claims exceed Five Million Dollars ($5,000,000), upon the request
of any
party, the Claims shall be decided by three arbitrators. All arbitration
hearings shall commence within ninety (90) days of the demand for
arbitration and close within ninety (90) days of commencement and
the
award of the arbitrator(s) shall be issued within thirty (30) days
of the
close of the hearing. However, the arbitrator(s), upon a showing
of good
cause, may extend the commencement of the hearing for up to an additional
sixty (60) days. The arbitrator(s) shall provide a concise written
statement of reasons for the award. The arbitration award may be
submitted
to any court having jurisdiction to be confirmed, judgment entered
and
enforced.
|
| (e) |
The
arbitrator(s) will give effect to statutes of limitation in determining
any Claim and may dismiss the arbitration on the basis that the Claim
is
barred. For purposes of the application of the statute of limitations,
the
service on AAA under applicable AAA rules of a notice of Claim is
the
equivalent of the filing of a lawsuit. Any dispute concerning this
arbitration provision or whether a Claim is arbitrable shall be determined
by the arbitrator(s). The arbitrator(s) shall have the power to award
legal fees pursuant to the terms of this
agreement.
|
| (f) |
This
paragraph does not limit the right of any party to: (i) exercise
self-help remedies, such as but not limited to, setoff; (ii) initiate
judicial or non-judicial foreclosure against any real or personal
property
collateral; (iii) exercise any judicial or power of sale rights, or
(iv) act in a court of law to obtain an interim remedy, such as but
not limited to, injunctive relief, writ of possession or appointment
of a
receiver, or additional or supplementary
remedies.
|
| (g) |
The
procedure described above will not apply if the Claim, at the time
of the
proposed submission to arbitration, arises from or relates to an
obligation to the Bank secured by real property. In this case, all
of the
parties to this agreement must consent to submission of the Claim
to
arbitration. If both parties do not consent to arbitration, the Claim
will
be resolved as follows: The parties will designate a referee (or
a panel
of referees) selected under the auspices of AAA in the same manner
as
arbitrators are selected in AAA administered proceedings. The designated
referee(s) will be appointed by a court as provided in California
Code of
Civil Procedure Section 638 and the following related sections. The
referee (or presiding referee of the panel) will be an active attorney
or
a retired judge. The award that results from the decision of the
referee(s) will be entered as a judgment in the court that appointed
the
referee, in accordance with the provisions of California Code of
Civil
Procedure Sections 644 and 645.
|
29
| (h) |
The
filing of a court action is not intended to constitute a waiver of
the
right of any party, including the suing party, thereafter to require
submittal of the Claim to
arbitration.
|
| (i) |
By
agreeing to binding arbitration, the parties irrevocably and voluntarily
waive any right they may have to a trial by jury in respect of any
Claim.
Furthermore, without intending in any way to limit this agreement
to
arbitrate, to the extent any Claim is not arbitrated, the parties
irrevocably and voluntarily waive any right they may have to a trial
by
jury in respect of such Claim to the maximum extent they may legally
do so
under applicable California law. This provision is a material inducement
for the parties entering into this
agreement.
|
11.9. Severability;
Waivers.
If
any
part of this Agreement is not enforceable, the rest of the Agreement may be
enforced. The Bank retains all rights, even if it makes a loan after default.
If
the Bank waives a default, it may enforce a later default. Any consent or waiver
under this Agreement must be in writing.
11.10. Attorneys’
Fees.
The
Borrower shall reimburse the Bank for any reasonable costs and attorneys’ fees
incurred by the Bank in connection with the enforcement or preservation of
any
rights or remedies under this Agreement and any other documents executed in
connection with this Agreement, and in connection with any amendment, waiver,
“workout” or restructuring under this Agreement. In the event of a lawsuit or
arbitration proceeding, the prevailing party is entitled to recover costs and
reasonable attorneys’ fees incurred in connection with the lawsuit or
arbitration proceeding, as determined by the court or arbitrator. In the event
that any case is commenced by or against the Borrower under the Bankruptcy
Code
(Title 11, United States Code) or any similar or successor statute, the Bank
is
entitled to recover costs and reasonable attorneys’ fees incurred by the Bank
related to the preservation, protection, or enforcement of any rights of the
Bank in such a case. As used in this paragraph, “attorneys’ fees” includes the
allocated costs of the Bank’s in-house counsel.
11.11. One
Agreement.
This
Agreement and any related security or other agreements required by this
Agreement, collectively:
| (a) |
represent
the sum of the understandings and agreements between the Bank and
the
Borrower concerning this credit;
|
30
| (b) |
replace
any prior oral or written agreements between the Bank and the Borrower
concerning this credit; and
|
| (c) |
are
intended by the Bank and the Borrower as the final, complete and
exclusive
statement of the terms agreed to by
them.
|
In
the
event of any conflict between this Agreement and any other agreements required
by this Agreement, this Agreement will prevail. Any reference in any related
document to a “promissory note” or a “note” executed by the Borrower and dated
as of the date of this Agreement shall be deemed to refer to this Agreement,
as
now in effect or as hereafter amended, renewed, or restated.
11.12. Indemnification.
The
Borrower will indemnify and hold the Bank harmless from any loss, liability,
damages, judgments, and reasonable costs of any kind relating to or arising
directly or indirectly out of (a) this Agreement or any document required
hereunder, (b) any credit extended or committed by the Bank to the Borrower
hereunder, and (c) any litigation or proceeding related to or arising out of
this Agreement, any such document, or any such credit. This indemnity includes
but is not limited to reasonable attorneys’ fees (including the reasonable
allocated cost of in-house counsel). This indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys, and assigns. This indemnity will survive repayment of
the
Borrower’s obligations to the Bank. All sums due to the Bank hereunder shall be
obligations of the Borrower, due and payable immediately without
demand.
11.13. Notices.
Unless
otherwise provided in this Agreement or in another agreement between the Bank
and the Borrower, all notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, or by overnight courier,
to the addresses on the signature page of this Agreement, or sent by facsimile
to the fax numbers listed on the signature page, or to such other addresses
as
the Bank and the Borrower may specify from time to time in writing. Notices
and
other communications shall be effective (i) if mailed, upon the earlier of
receipt or five (5) days after deposit in the U.S. mail, first class, postage
prepaid, (ii) if telecopied, when transmitted, (iii) if sent by
electronic mail, when transmitted, or (iv) if hand-delivered, by courier or
otherwise (including telegram, lettergram or mailgram), when
delivered.
11.14. Headings.
Article
and paragraph headings are for reference only and shall not affect the
interpretation or meaning of any provisions of this Agreement.
11.15. Counterparts.
This
Agreement may be executed in as many counterparts as necessary or convenient,
and by the different parties on separate counterparts each of which, when so
executed, shall be deemed an original but all such counterparts shall constitute
but one and the same agreement.
31
This
Agreement is executed as of the date stated at the top of the first
page.
|
Bank
of America
By___________________________
▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇
Vice
President
|
New
360,
a
California corporation
(which
intends to change its name to Point.360 after the date
hereof)
By_____________________________
▇▇▇▇
▇. Steel
Executive
Vice President,
Finance
and Administration
and
Chief Financial Officer
|
|
|
Address
where notices to
the
Bank are to be sent:
Bank
of America, N.A.
▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇▇.▇▇▇▇▇▇▇@
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
|
Address
where notices to
the
Borrower are to be sent::
Point.360
▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
Chief Financial Officer
Telephone:
(▇▇▇) ▇▇▇-▇▇▇▇
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
|
32
TABLE
OF CONTENTS
|
Page
|
|||||||
|
1.
|
DEFINITIONS
|
1
|
|||||
|
2.
|
THE
FACILITY: LINE OF CREDIT AMOUNT AND TERMS
|
4
|
|||||
|
2.1.
Line of Credit Amount
|
4
|
||||||
|
|
2.2.
Availability Period
|
4
|
|||||
|
2.3.
Conditions to Availability of Credit
|
5
|
||||||
|
2.4.
Repayment Terms
|
5
|
||||||
|
2.5.
Interest Rate
|
5
|
||||||
|
2.6.
Optional Interest Rates
|
5
|
||||||
|
2.7.
Applicable Margin
|
6
|
||||||
|
2.8.
Standby Letters of Credit
|
6
|
||||||
|
3.
|
OPTIONAL
INTEREST RATE
|
8
|
|||||
|
3.1.
Optional Rates
|
8
|
||||||
|
3.2.
LIBOR Rate
|
8
|
||||||
|
4.
|
FEES
AND EXPENSES
|
10
|
|||||
|
4.1.
Fees
|
10
|
||||||
|
4.2.
Expenses
|
10
|
||||||
|
4.3.
Reimbursement Costs
|
10
|
||||||
|
5.
|
COLLATERAL
|
11
|
|||||
|
6.
|
DISBURSEMENTS,
PAYMENTS AND COSTS
|
11
|
|||||
|
6.1.
Disbursements and Payments
|
11
|
||||||
|
6.2.
Telephone and Telefax Authorization
|
11
|
||||||
|
6.3.
Direct Debit
|
11
|
||||||
|
6.4.
Banking Days
|
11
|
||||||
|
6.5.
Interest Calculation
|
12
|
||||||
|
6.6.
Default Rate
|
12
|
||||||
|
6.7.
Taxes
|
12
|
||||||
|
6.8.
Overdrafts
|
12
|
||||||
|
6.9.
Payments in Kind
|
13
|
||||||
|
7.
|
CONDITIONS
|
13
|
|||||
|
7.1.
Authorizations
|
13
|
i
TABLE
OF CONTENTS
(continued)
|
Page
|
|||||||
|
7.2.
Governing Documents
|
13
|
||||||
|
7.3.
Guaranty
|
13
|
||||||
|
7.4.
Security Agreements
|
13
|
||||||
|
7.5.
Stock Pledge
|
13
|
||||||
|
7.6.
Perfection and Evidence of Priority
|
13
|
||||||
|
7.7.
Payment of Fees
|
14
|
||||||
|
7.8.
Pay down of GECC Term Loans
|
14
|
||||||
|
7.9.
Good Standing
|
14
|
||||||
|
7.10.
Legal Opinion
|
14
|
||||||
|
7.11.
Intercreditor Agreement
|
14
|
||||||
|
7.12.
Landlord Agreements
|
14
|
||||||
|
7.13.
Insurance
|
14
|
||||||
|
7.14.
Other Required Documentation
|
14
|
||||||
|
7.15.
Other Conditions
|
15
|
||||||
|
8.
|
REPRESENTATIONS
AND WARRANTIES
|
16
|
|||||
|
8.1.
Formation
|
16
|
||||||
|
8.2.
Authorization
|
16
|
||||||
|
8.3.
Enforceable Agreement
|
16
|
||||||
|
8.4.
Good Standing
|
16
|
||||||
|
8.5.
No Conflicts
|
17
|
||||||
|
8.6.
Financial Information
|
17
|
||||||
|
8.7.
Lawsuits
|
17
|
||||||
|
8.8.
Collateral
|
17
|
||||||
|
8.9.
Permits, Franchises
|
17
|
||||||
|
8.10.
Other Obligations
|
17
|
||||||
|
8.11.
Tax Matters
|
17
|
||||||
|
8.12.
No Event of Default
|
17
|
||||||
|
8.13.
Insurance
|
18
|
||||||
|
8.14.
Governmental Authorization
|
18
|
||||||
|
9.
|
COV
NANTS
|
18
|
ii
TABLE
OF CONTENTS
(continued)
|
Page
|
|||||||
|
9.1.
Use of Proceeds
|
18
|
||||||
|
9.2.
Financial Information
|
18
|
||||||
|
9.3.
[Reserved.]
|
|
20
|
|||||
|
9.4.
Basic Fixed Charge Coverage Ratio
|
20
|
||||||
|
9.5.
Dividends and Distributions
|
20
|
||||||
|
9.6.
Bank as Principal Depository
|
20
|
||||||
|
9.7.
Other Debts
|
20
|
||||||
|
9.8.
Other Liens
|
21
|
||||||
|
9.9.
Maintenance of Assets
|
21
|
||||||
|
9.10.
Investments
|
21
|
||||||
|
9.11.
Loans
|
22
|
||||||
|
9.12.
Change of Management
|
22
|
||||||
|
9.13.
Change of Control
|
22
|
||||||
|
9.14.
Additional Negative Covenants
|
23
|
||||||
|
9.15.
Notices to Bank
|
23
|
||||||
|
9.16.
Insurance
|
24
|
||||||
|
9.17.
Compliance with Laws
|
24
|
||||||
|
9.18.
ERISA Plans
|
24
|
||||||
|
9.19.
Books and Records
|
24
|
||||||
|
9.20.
Audits
|
25
|
||||||
|
9.21.
Perfection of Liens
|
25
|
||||||
|
9.22.
Cooperation
|
25
|
||||||
|
10.
|
DEFAULT
AND REMEDIES
|
25
|
|||||
|
10.1.
Failure to Pay
|
25
|
||||||
|
10.2.
Other Bank Agreements
|
25
|
||||||
|
10.3.
Cross-default
|
25
|
||||||
|
10.4.
False Information
|
26
|
||||||
|
10.5.
Bankruptcy
|
26
|
||||||
|
10.6.
Receivers
|
26
|
||||||
|
10.7.
Lien Priority
|
26
|
iii
TABLE
OF CONTENTS
(continued)
|
Page
|
|||||||
|
10.8.
Judgments
|
26
|
||||||
|
10.9.
Material Adverse Change
|
26
|
||||||
|
10.10.
Government Action
|
26
|
||||||
|
10.11.
Default under Related Documents
|
27
|
||||||
|
10.12.
Other Breach Under Agreement
|
27
|
||||||
|
11.
|
ENFORCING
THIS AGREEMENT; MISCELLANEOUS
|
27
|
|||||
|
11.1.
Disposition of Schedules and Reports
|
27
|
||||||
|
11.2.
Returned Merchandise
|
27
|
||||||
|
11.3.
Verification of Receivables
|
27
|
||||||
|
11.4.
Waiver of Confidentiality
|
27
|
||||||
|
11.5.
GAAP
|
28
|
||||||
|
11.6.
California Law
|
28
|
||||||
|
11.7.
Successors and Assigns
|
28
|
||||||
|
11.8.
Arbitration and Waiver of Jury Trial
|
28
|
||||||
|
11.9.
Severability; Waivers
|
30
|
||||||
|
11.10.
Attorneys’ Fees
|
30
|
||||||
|
11.11.
One Agreement
|
30
|
||||||
|
11.12.
Indemnification
|
31
|
||||||
|
11.13.
Notices
|
31
|
||||||
|
11.14.
Headings
|
31
|
||||||
|
11.15.
Counterparts
|
31
|
iv