EXHIBIT 10.2
[CONFORMED COPY]
$250,000,000
CREDIT AGREEMENT
dated as of
July 10, 1997
among
Orion Pictures Corporation,
The Lenders Listed Herein,
The L/C Issuers Named Herein
and
▇▇▇▇▇▇ Guaranty Trust Company of New York,
as Agent
TABLE OF CONTENTS
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Page
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ARTICLE 1
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Definitions
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Section 1.01. Definitions................................................ 1
Section 1.02. Accounting Terms and Determinations........................ 21
Section 1.03. Classes and Types of Loans and Borrowings.................. 22
ARTICLE 2
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The Credits
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Section 2.01. Commitments to Lend........................................ 22
Section 2.02. Method of Borrowing........................................ 23
Section 2.03. Notes...................................................... 24
Section 2.04. Maturity of Loans; Mandatory Prepayments; Certain
Commitment Reductions................................................ 25
Section 2.05. Interest Rates............................................. 28
Section 2.06. Fees....................................................... 30
Section 2.07. Optional Termination or Reduction of Commitments........... 31
Section 2.08. Method of Electing Interest Rates.......................... 31
Section 2.09. Mandatory Termination of Commitments....................... 32
Section 2.10. Optional Prepayments....................................... 33
Section 2.11. General Provisions as to Payments.......................... 33
Section 2.12. Funding Losses............................................. 34
Section 2.13. Computation of Interest and Fees........................... 34
Section 2.14. Letters of Credit.......................................... 34
ARTICLE 3
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Conditions
----------
Section 3.01. Closing.................................................... 38
Section 3.02. Borrowings and Issuances of Letters of Credit.............. 41
ARTICLE 4
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Representations and Warranties
------------------------------
Section 4.01. Corporate Existence and Power.............................. 42
Section 4.02. Corporate and Governmental Authorization; No
Contravention....................................................... 43
Section 4.03. Binding Effect............................................. 43
Section 4.04. Financial Information; Information Memorandum.............. 43
Section 4.05. Litigation................................................. 44
Section 4.06. Compliance with ERISA...................................... 45
Section 4.07. Taxes...................................................... 45
Section 4.08. Subsidiaries............................................... 45
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Page
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Section 4.09. Regulatory Restrictions on Borrowing....................... 46
Section 4.10. Full Disclosure............................................ 46
Section 4.11. Representations in Transaction Documents True and
Correct 46
Section 4.12. Intellectual Property...................................... 46
Section 4.13. Collateral Documents....................................... 47
Section 4.14. Solvency................................................... 47
ARTICLE 5
---------
Covenants
---------
Section 5.01. Information................................................ 47
Section 5.02. Performance of Obligations................................. 51
Section 5.03. Maintenance of Property; Insurance......................... 51
Section 5.04. Conduct of Business and Maintenance of Existence........... 51
Section 5.05. Compliance with Laws....................................... 52
Section 5.06. Inspection of Property, Books and Records.................. 52
Section 5.07. Mergers and Sales of Assets; Licensing Agreements.......... 52
Section 5.08. Use of Proceeds............................................ 54
Section 5.09. Negative Pledge............................................ 54
Section 5.10. Limitation on Debt......................................... 57
Section 5.11. Debt to Net Cash Flow...................................... 58
Section 5.12. Minimum Library Cash Flow.................................. 58
Section 5.13. Maximum Capital Expenditures............................... 59
Section 5.14. Minimum Consolidated Adjusted Net Worth.................... 59
Section 5.15. Restrictions on Film Production Expenditures............... 60
Section 5.16. Maximum Cash Overhead and Administrative Expenses.......... 60
Section 5.17. Restricted Payments........................................ 60
Section 5.18. Investments................................................ 60
Section 5.19. Limitation on Non-Recurring Acquisition Expenditures....... 61
Section 5.20. Transactions with Affiliates............................... 61
Section 5.21. No Modification of Agreements Without Consent.............. 62
Section 5.22. Limitation on Restrictions Affecting Subsidiaries.......... 63
Section 5.23. Hedging Facilities......................................... 63
Section 5.24. Further Assurances......................................... 63
Section 5.25. Limitation on Joint Venture Arrangements................... 66
ARTICLE 6
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Defaults
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Section 6.01. Events of Default.......................................... 66
Section 6.02. Notice of Default.......................................... 70
Section 6.03. Cash Cover................................................. 70
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ARTICLE 7
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The Agent
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Section 7.01. Appointment and Authorization.............................. 70
Section 7.02. Agent and Affiliates....................................... 71
Section 7.03. Action by Agent............................................ 71
Section 7.04. Consultation with Experts.................................. 71
Section 7.05. Liability of Agent......................................... 71
Section 7.06. Indemnification............................................ 72
Section 7.07. Credit Decision............................................ 72
Section 7.08. Successor Agent............................................ 72
Section 7.09. Agent's Fee................................................ 73
Section 7.10. Arranger................................................... 73
ARTICLE 8
---------
Change in Circumstances
-----------------------
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair... 73
Section 8.02. Illegality................................................. 73
Section 8.03. Increased Cost and Reduced Return.......................... 74
Section 8.04. Taxes...................................................... 75
Section 8.05. Base Rate Loans Substituted for Affected Euro-Dollar
Loans................................................................ 77
Section 8.06. Substitution of Lender..................................... 78
ARTICLE 9
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Miscellaneous
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Section 9.01. Notices.................................................... 79
Section 9.02. No Waivers................................................. 79
Section 9.03. Expenses; Indemnification.................................. 79
Section 9.04. Sharing of Set-offs........................................ 80
Section 9.05. Amendments and Waivers; Release of Guarantors or
Collateral.......................................................... 80
Section 9.06. Successors and Assigns..................................... 82
Section 9.07. Collateral................................................. 84
Section 9.08. Governing Law; Submission to Jurisdiction.................. 84
Section 9.09. Counterparts; Integration; Effectiveness................... 85
Section 9.10. Waiver of Jury Trial....................................... 85
Section 9.11. Confidentiality............................................ 85
Pricing Schedule
Commitment Schedule
Schedule 1.01(A) - Library Films
Schedule 1.01(B) - Existing 1997 Films
Schedule 3.01(h)(x) - Investor Agreements
Schedule 3.01(i) - Terminating Debt
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Schedule 4.08 - Subsidiaries
Schedule 5.09 - Existing Liens
Schedule 5.10 - Outstanding Debt
Schedule 5.18 - Existing Investments
Schedule 5.20 - Transactional Agreements with Affiliates
Exhibit A - Note
Exhibit B - Borrower Pledge Agreement
Exhibit D - Guarantor Pledge Agreement
Exhibit E - Borrower and Guarantor Security Agreement
Exhibit F - Subsidiary Guaranty Agreement
Exhibit G - Opinion of ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel for the Obligors
Exhibit H-1 - Opinion of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, special counsel for the Agent
Exhibit H-2 - Opinion of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special counsel for the
Agent
Exhibit I - Assignment and Assumption Agreement
Exhibit L - Section 8.04(d) Certificate
iv
CREDIT AGREEMENT
AGREEMENT dated as of July 10, 1997 among ORION PICTURES CORPORATION, the
LENDERS listed on the signature pages hereof, the L/C ISSUERS named herein and
▇▇▇▇▇▇ GUARANTY TRUST COMPANY OF NEW YORK, as Agent.
The parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Acquisition" means the purchase by Holdings of all of the issued and
outstanding capital stock of the Borrower and all other transactions
contemplated by the Transaction Documents to be consummated on or before the
Closing Date.
"Adjusted London Interbank Offered Rate" has the meaning set forth in
Section 2.05(b).
"Administrative Questionnaire" means, with respect to each Lender, an
administrative questionnaire in the form prepared by the Agent and submitted to
the Agent (with a copy to the Borrower) duly completed by such Lender.
"Affiliate" means (i) any Person that directly, or indirectly through one
or more intermediaries, controls the Borrower (a "Controlling Person") or (ii)
any Person (other than the Borrower or a Subsidiary of the Borrower) which is
controlled by or is under common control with a Controlling Person. As used
herein, the term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise.
"Agent" means ▇▇▇▇▇▇ Guaranty Trust Company of New York in its capacity as
agent for the Lenders under the Loan Documents, and its successors in such
capacity.
"Applicable Lending Office" means, with respect to any Lender, (i) in the
case of its Base Rate Loans, its Domestic Lending Office and (ii) in the case of
its Euro-Dollar Loans, its Euro-Dollar Lending Office.
"Arranger" means ▇.▇. ▇▇▇▇▇▇ Securities Inc. in its capacity as arranger
for the Lenders under the Loan Documents.
"Asset Sale" means any sale, lease, license or other disposition (including
any such transaction effected by way of merger or consolidation) (any of the
foregoing, for purposes of this definition, a "disposition") by the Borrower or
any of its Subsidiaries of any asset, including without limitation any sale-
leaseback transaction, whether or not involving a capital lease, but excluding
(i) dispositions of cash, cash equivalents and other cash management investments
and obsolete, unused or unnecessary equipment and undeveloped real estate, in
each case in the ordinary course of business, (ii) dispositions of any right,
title or interest in any Existing 1997 Film or Film Related Asset in the
ordinary course of business in connection with any Investment permitted under
Section 5.18, (iii) dispositions pursuant to a Sale-Leaseback Transaction, (iv)
dispositions of any right, title or interest in any Existing 1997 Film in the
ordinary course of business in connection with any financing permitted under
5.10(h), (v) dispositions of any right, title or interest in any Existing 1997
Film in the ordinary course of business pursuant to transactions constituting
split-rights deals, coproduction deals or cofinancing deals (as such terms are
generally understood in the movie industry on the date hereof), (vi)
dispositions pursuant to a Licensing Agreement permitted under Section 5.07(d)
or (e), (vii) dispositions of inventory, including Film Related Assets, but
excluding any Film (including without limitation any Library Film), in the
ordinary course of business and (viii) dispositions to the Borrower or any
Guarantor; provided that a disposition of assets not excluded by clauses (i)
through (viii) above during any Fiscal Year shall not constitute an Asset Sale
unless and until (and solely to the extent that) the aggregate Net Cash Proceeds
from such disposition, when combined with all other such dispositions previously
made during such Fiscal Year, exceeds $2,500,000. The description of any
transaction as not constituting an "Asset Sale" does not affect any limitation
on such transaction imposed by Article 5 of this Agreement (other than Section
5.07(b)).
"Assignee" has the meaning set forth in Section 9.06(c).
"Base Rate" means, for any day, a rate per annum equal to the higher of (i)
the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the Federal
Funds Rate for such day.
"Base Rate Loan" means a Loan which bears interest by reference to the Base
Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or the provisions of Article 8.
"Base Rate Margin" means a rate per annum determined in accordance with the
Pricing Schedule.
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"Borrower" means Orion Pictures Corporation, a Delaware corporation, and
its successors.
"Borrower Pledge Agreement" means the pledge agreement substantially in the
form of Exhibit B hereto between the Borrower and the Agent entered into as of
the Closing Date, as amended from time to time.
"Borrowing" has the meaning set forth in Section 1.03.
"Class" has the meaning set forth in Section 1.03.
"Closing Date" means the first date on or after the Effective Date on which
all of the conditions specified in Section 3.01 shall have been satisfied.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute.
"Competitor" means any Person whose primary line of business is the
entertainment industry (any such Person, an "Entertainment Person"), or any
Person controlled by, or under common control with, any Entertainment Person.
"Collateral" means collateral subject to the Collateral Documents.
"Collateral Documents" means the Pledge Agreements, the Security Agreement,
any additional pledge agreements, security agreements or mortgages required to
be delivered pursuant to the Loan Documents and any instruments of assignment,
laboratory access letters or other instruments or agreements executed pursuant
to the foregoing.
"Commitment" means a Term Commitment or a Revolving Commitment and
"Commitments" means any combination of the foregoing.
"Commitment Schedule" means the Schedule attached hereto identified as
such.
"Consolidated Adjusted Net Worth" means at any date (i) the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries as
reflected on the balance sheet of the Borrower at such date (or as the same
would be reflected on such balance sheet if such balance sheet were prepared at
such date) minus (ii) all amounts that are included as assets on such balance
sheet at such date (or as the same would be included on such balance sheet if
such balance sheet were prepared at such date) in respect of any Film produced
or acquired by the Borrower or any of its Consolidated Subsidiaries which Film
has not been
3
released within 18 months following the date of completion of principal
photography thereof or, if later, the date of acquisition thereof.
"Consolidated Capital Expenditures" means for any period the gross
additions to property, plant and equipment and other capital expenditures of the
Borrower and its Consolidated Subsidiaries for such period.
"Consolidated Debt" means at any date the Debt of the Borrower and its
Consolidated Subsidiaries, determined on a consolidated basis.
"Consolidated Net Cash Flow" means for any period "Net Orion cash flows"
for such period determined in a manner consistent with the determination thereof
in the "Summary of Orion Cash Flows" contained in the Information Memorandum
(the "Summary of Orion Cash Flows"), which consists of (i) the sum of "Library
Cash Flows" plus "Acquired Film Slate Cash Flows" for such period minus (ii) the
sum of the amounts set forth opposite "Incremental Overhead" plus "Termination
Costs" plus "Transaction Fees and Expenses" for such period, in each case
determined in a manner consistent with the determination thereof in the Summary
of Orion Cash Flows.
"Consolidated Net Income" means for any period the net income of the
Borrower and its Consolidated Subsidiaries determined on a consolidated basis
for such period.
"Consolidated Net Operating Cash Flow" means for any period the amount set
forth opposite the caption "Net cash provided by operating activities" in the
consolidated statement of cash flows of the Borrower and its Consolidated
Subsidiaries for such period.
"Consolidated Subsidiary" means, with respect to any Person at any date,
any Subsidiary or other entity the accounts of which would be consolidated with
those of such Person in its consolidated financial statements if such statements
were prepared as of such date; unless otherwise specified, "Consolidated
Subsidiary" means a Consolidated Subsidiary of the Borrower.
"Debt" of any Person means at any date, without duplication, (i) all
obligations of such Person for borrowed money, (ii) all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments, (iii)
all obligations of such Person to pay the deferred purchase price of property or
services, except trade accounts payable arising in the ordinary course of
business, (iv) all obligations of such Person as lessee which are capitalized in
accordance with generally accepted accounting principles (including without
limitation any such obligations under Sale-Leaseback Transactions to the extent
that such obligations are capitalized in accordance with generally accepted
accounting
4
principles), (v) all non-contingent obligations (and, for purposes of Section
5.09, all contingent obligations) of such Person to reimburse any Lender or
other Person in respect of amounts paid under a letter of credit or similar
instrument, (vi) all Debt secured by a Lien on any asset of such Person, whether
or not such Debt is otherwise an obligation of such Person and (vii) all Debt of
others Guaranteed by such Person; provided however, that (x) the "Debt" of any
Person does not include any (A) commitments of such Person in connection with
the development, production, acquisition, distribution, exhibition or
exploitation of Films, (B) guaranteed payment obligations of such Person of a
nature customary in the film industry of such Person under license agreements
with respect to the development, production, acquisition, distribution,
exhibition or exploitation of Films, (C) obligations of such Person in respect
of Profit Participations, Residuals and Deferred Payments payable to other
Persons in connection with the development, production, acquisition,
distribution, exhibition, exploitation or financing of Films, (D) obligations of
such Person in the nature of progress or installment payment obligations with
respect to a Film owed to the owner of such Film or cast, crew, writers,
distributors, directors, producers, owners of rights, bond companies or similar
Persons for such Film, in respect of the deferred purchase price of such Film or
rights to such Film, or services in, or in connection with, such Film (to the
extent entered into in the ordinary course of business of such Person and not
otherwise constituting "Debt" of a type referred to in clauses (i) or (ii)
above), (E) obligations of such Person under performance or completion bonds
which have been posted in the ordinary course of business in connection with the
development or production of Films or (F) any Guaranty of any obligation
referred to in clause (A), (B), (C), (D) or (E) and (y) for purposes of Section
5.10 and the determination of Total Borrowed Funds, the amount of "Debt" of the
Borrower or any of its Subsidiaries which constitutes "Debt" solely pursuant to
clause (vii) of this definition because the Borrower or such Subsidiary is a
partner in a partnership, shall be equal to the principal or face amount of such
Debt multiplied by the Borrower's or such Subsidiary's percentage interest in
such partnership, so long as such partnership is solvent and paying and capable
of paying its obligations as they become due.
"Default" means any condition or event which constitutes an Event of
Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Deferred Payments" means deferred payments for services payable to cast,
crew, writers, distributors, directors, producers, owners of rights, bond
companies or similar Persons or payments to producers or investors, in
connection with the development, production, acquisition, distribution or
exploitation of Films or Film Related Assets, the amount or payment of which is
contingent upon the performance of such Films or Film Related Assets or deferred
to a fixed time,
5
tied to the performance of such Film or Film Related Assets or to the
achievements of such Person with respect to such Film or Film Related Asset.
"Derivatives Obligations" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"Domestic Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in New York City or Los Angeles are authorized by
law to close.
"Domestic Lending Office" means, as to each Lender, its office located at
its address set forth in its Administrative Questionnaire (or identified in its
Administrative Questionnaire as its Domestic Lending Office) or such other
office as such Lender may hereafter designate as its Domestic Lending Office by
notice to the Borrower and the Agent.
"Effective Date" means the date this Agreement becomes effective in
accordance with Section 9.09.
"Equity Issuance Reduction Event" means the issuance by the Borrower or any
of its Subsidiaries of any equity securities not constituting Debt (other than
any contribution by the Borrower or any Subsidiary to the capital of a
Subsidiary and any equity securities issued to the Borrower or any of its
Subsidiaries), but only if, and to the extent that, the aggregate Net Cash
Proceeds from such issuance, when combined with the Net Cash Proceeds from all
other issuances (excluding any issuances referred to in the immediately
preceding parenthetical phrase above) consummated on or after the Closing Date
exceeds $25,000,000.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Group" means the Borrower, any Subsidiary and all members of a
controlled group of corporations and all trades or businesses (whether or not
incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
6
"Euro-Dollar Business Day" means any Domestic Business Day on which
commercial banks are open for international business (including dealings in
dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Lender, its office, branch
or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its Euro-
Dollar Lending Office) or such other office, branch or affiliate of such Lender
as it may hereafter designate as its Euro-Dollar Lending Office by notice to the
Borrower and the Agent.
"Euro-Dollar Loan" means (i) a Loan which bears interest at a Euro-Dollar
Rate pursuant to the applicable Notice of Borrowing or Notice of Interest Rate
Election or (ii) an overdue amount which was a Euro-Dollar Loan immediately
before it became overdue.
"Euro-Dollar Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
"Euro-Dollar Rate" means a rate of interest determined pursuant to Section
2.05(b) on the basis of an Adjusted London Interbank Offered Rate.
"Euro-Dollar Reserve Percentage" has the meaning set forth in Section
2.05(b).
"Event of Default" has the meaning set forth in Section 6.01.
"Excess Cash Flow" means, for any Fiscal Year, (a) the sum of (x)
Consolidated Net Operating Cash Flow for such Fiscal Year plus (or minus) (y)
the amount set forth opposite the caption "Net cash provided (used) by investing
activities", as set forth in the consolidated statements of cash flows of the
Borrower and its Consolidated Subsidiaries for such Fiscal Year minus (b) the
aggregate amount of scheduled principal repayments of the Term Loans made
pursuant to Sections 2.04(b) and (c) during such Fiscal Year minus (c) the
aggregate amount of optional repayments of the Term Loans made pursuant to
Section 2.10 minus (d) the aggregate amount of principal repayments of the Loans
made pursuant to Section 2.04(d) with respect to Asset Sales or the receipt of
Major Casualty Proceeds to the extent that the proceeds of any such Asset Sale
or Major Casualty Proceeds were added in determining the amounts referred to in
clauses (a)(x) or (a)(y) above for such Fiscal Year, minus (e) the aggregate
amount of scheduled principal payments of other Debt made during such Fiscal
Year (including the portion of any payments of Debt described in clause (iv) of
the definition thereof that is allocable to principal), but only if and to the
extent that, for such Fiscal Year, the Excess Cash Flow exceeds $7,500,000.
7
"Excess Licensing Proceeds" means, in respect of any Material New Film
Licensing Agreement, the amount by which payments (other than (i) any payment
calculated by reference to the production budget or negative cost of a Film (a
"Production Payment"), (ii) any payment calculated by reference to performance
of a Film (a "Performance Payment") and (iii) any payment which constitutes an
advance with respect to a Production Payment or Performance Payment to be earned
within 12 months after the date such advance is paid) (all such nonexcluded
payments, "Noncontingent Payments") received by the Borrower and its
Subsidiaries in respect of Films in any transaction year under such Material New
Film Licensing Agreement exceeds the sum of (x) the amount of the Noncontingent
Payments that would be received by the Borrower and its Subsidiaries in such
transaction year if such Noncontingent Payments were made reasonably pro-rata
over the period of availability of the Films which are subject to such Material
New Film Licensing Agreement plus (y) the greater of (1) 10% of the aggregate
amount of all Noncontingent Payments to be made under such Material New Film
Licensing Agreement during the term thereof and (2) $2,000,000. As used herein,
"Material New Film Licensing Agreement" means any Licensing Agreement or series
of related Licensing Agreements with respect to Existing 1997 Films or Film
Related Assets (other than any MGM Film Related Asset Disposition) (considered
as a single agreement for purposes hereof) if the aggregate amount of all
payments payable with respect to such Licensing Agreement or series of related
Licensing Agreements during the term thereof (in the case of any Performance
Payments, as estimated by the Borrower in accordance with its customary
practices) exceeds $10,000,000.
"Existing Credit Agreement" means the Credit Agreement dated as of November
1, 1995, as amended and restated as of June 27, 1996, among the Borrower, the
several lenders from time to time party thereto, and Chemical Bank, as agent, as
in effect immediately prior to the Closing Date.
"Existing 1997 Films" means the Films listed on Schedule 1.01(B) hereto, in
each case until the date (if any) on which such Film has completed its initial
theatrical release in the United States.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upward, if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Domestic Business Day
next succeeding such day, provided that (i) if such day is not a Domestic
Business Day, the Federal Funds Rate for such day shall be such rate on such
transactions on the next preceding Domestic Business Day as so published on the
next succeeding Domestic Business Day, and (ii) if no such rate is so published
on such next succeeding Domestic Business Day, the Federal Funds Rate for such
8
day shall be the average rate quoted to ▇▇▇▇▇▇ Guaranty Trust Company of New
York on such day on such transactions as determined by the Agent.
"Film Production Expenditures" means, for any period and for any Film, the
aggregate amount expended or invested (including without limitation capitalized
expenditures, and all negative costs, but excluding in any event all print and
advertising expenses) by the Borrower and its Consolidated Subsidiaries for, in
or with respect to such Film during such period.
"Film Related Asset" means any right in and to any motion picture,
television product, literary work, dramatic work or musical work prior to the
time any such asset becomes a "Film".
"Films" means motion pictures including, without limitation, feature films,
shorts, television programs, animated programs or other similar product, and the
components thereof (whether or not now known or recognized) to which the
Borrower or any of its Subsidiaries owns any right, title or interest including,
without limitation, (i) the Library Films, (ii) Existing 1997 Films, (iii)
underlying rights in and to the literary, musical and dramatic and other
material associated with or related to or necessary to the exploitation of the
works or projects referred to in clauses (i) or (ii) including, without
limitation, copyrights pertaining thereto, (iv) to the extent related to the
works or projects referred to in clauses (i) or (ii), sequel, prequel and remake
rights, all rights to novelization, merchandising, character, serialization,
games and interactive video, (v) all other ancillary and subsidiary rights
throughout the universe related to such works and projects, (vi) all negative
and positive film, soundtracks, optical, audio, video and advertising materials
and supplies associated with any of such works or projects, and (vii) all
contractual and other rights associated with or related to such works or
projects and the related ancillary and subsidiary rights whether in any media
now known or hereafter developed.
"Fiscal Quarter" means a fiscal quarter of the Borrower.
"Fiscal Year" means a fiscal year of the Borrower ending December 31.
"Foreign Subsidiary" means any Subsidiary of the Borrower which is not
incorporated or organized in the United States or in any State thereof.
"Group of Loans" means at any time a group of Loans of the same Class of
Loans consisting of (i) all such Loans which are Base Rate Loans at such time or
(ii) all such Loans that are Euro-Dollar Loans having the same Interest Period
at such time; provided that, if a Loan of any particular Lender is converted to
or made as a Base Rate Loan pursuant to Article 8, such Loan shall be included
in
9
the same Group or Groups of Loans from time to time as it would have been in if
it had not been so converted or made.
"Guarantee" by any Person means any obligation, contingent or otherwise, of
such Person directly or indirectly guaranteeing any Debt or other obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay, or to maintain financial statement conditions or otherwise) or (ii)
entered into for the purpose of assuring in any other manner the holder of such
Debt or other obligation of the payment thereof or to protect such holder
against loss in respect thereof (in whole or in part), provided that the term
Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Guarantor" means each Person who has executed the Subsidiary Guaranty.
"Guarantor Pledge Agreement"means a pledge agreement substantially in the
form of Exhibit D hereto between a Guarantor and the Agent entered into as of
the Closing Date or from time to time after the Closing Date pursuant to Section
5.24, in each case as amended from time to time.
"Holdings" means P & F Acquisition Corp., a Delaware corporation, and its
successors.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Information Memorandum" means the confidential descriptive memorandum
dated June 1997 furnished to the Lenders in connection with the transactions
contemplated by the Loan Documents.
"Insolvency" means, with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent" means pertaining to a condition of Insolvency.
"Interest Period" means, with respect to each Euro-Dollar Loan, the period
commencing on the date of borrowing specified in the applicable Notice of
Borrowing or on the date specified in the applicable Notice of Interest Rate
10
Election and ending one, two, three or six months thereafter, as the Borrower
may elect in the applicable notice; provided that:
(a) any Interest Period which would otherwise end on a day which is not a
Euro-Dollar Business Day shall be extended to the next succeeding Euro-Dollar
Business Day unless such Euro-Dollar Business Day falls in another calendar
month, in which case such Interest Period shall end on the next preceding Euro-
Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar Business Day
of a calendar month (or on a day for which there is no numerically corresponding
day in the calendar month at the end of such Interest Period) shall, subject to
clauses (c) and (d) below, end on the last Euro-Dollar Business Day of the
calendar month at the end of such Interest Period;
(c) if any Interest Period with respect to any Euro-Dollar Term Loan
includes a date on which a scheduled payment of principal of such Term Loans is
required to be made under Sections 2.04(b) or 2.04(c) but does not end on such
date, then (i) the principal amount of each Euro-Dollar Term Loan required to be
repaid on such date shall have an Interest Period ending on such date and (ii)
the remainder (if any) of each such Euro-Dollar Term Loan shall have an Interest
Period determined as set forth above; and
(d) any Interest Period with respect to any Loan which would otherwise end
after the Maturity Date (as in effect on the first day of such Interest Period)
with respect to such Loan shall end on such Maturity Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, or any successor statute.
"Investment" means, with respect to any Person, any investment by such
Person in any other Person (including an Affiliate) in the form of direct or
indirect loans, Guarantees of Debt or other payment obligations, advances or
capital contributions, purchases or other acquisitions for consideration of
Debt, equity interests or other securities or warrants, options or other rights
to acquire equity interests or other securities and all other items that are
classified as investments on the balance sheet of such Person in accordance with
generally accepted accounting principles as in effect from time to time or that
would be so classified on such balance sheet if such balance sheet were prepared
at the relevant time.
"L/C Issuer" means ▇▇▇▇▇▇ Guaranty Trust Company of New York and any other
Revolving Lender that may agree with the Borrower to issue letters of credit
hereunder (and shall have notified the Agent thereof), in each case as issuer of
a letter of credit hereunder.
11
"Lender" means a Term Lender or a Revolving Lender and shall include, as
the context may require, any L/C Issuer in such capacity.
"Letter of Credit" means a letter of credit to be issued hereunder by an
L/C Issuer.
"Letter of Credit Commitment" means, at any time, the lesser of (x)
$10,000,000 and (y) the aggregate Revolving Credit Commitments at such time.
"Letter of Credit Fee Rate" has the meaning set forth in the Pricing
Schedule.
"Letter of Credit Liabilities" means, for any Revolving Lender and at any
time, such Revolving Lender's Revolving Percentage of the sum of (x) the
aggregate unreimbursed amount then owing by the Borrower in respect of amounts
drawn under all Letters of Credit and (y) the aggregate amount then available
for drawing under all Letters of Credit.
"Leverage Ratio" means, on any date, the ratio of (i) Consolidated Debt on
such date to (ii) Consolidated Net Cash Flow for the period of four consecutive
Fiscal Quarters most recently ended on or prior to such date (or (A) solely from
and including the last day of the first Fiscal Quarter of 1998 to but excluding
the last day of the second Fiscal Quarter of 1998, Consolidated Net Cash Flow
for the first Fiscal Quarter of 1998 multiplied by 4, (B) solely from and
including the last day of the second Fiscal Quarter of 1998 to but excluding the
last day of the third Fiscal Quarter of 1998, Consolidated Net Cash Flow for the
first and second Fiscal Quarters of 1998 multiplied by 2, (C) solely from and
including the last day of the third Fiscal Quarter of 1998 to but excluding the
last day of the fourth Fiscal Quarter of 1998, Consolidated Net Cash Flow for
the first, second and third Fiscal Quarters of 1998 multiplied by 1.33).
"Library Cash Flows" means for any period the aggregate amount of cash
received by the Borrower and its Consolidated Subsidiaries during such period
with respect to Library Films other than Films that are Existing 1997 Films on
the date hereof.
"Library Films" means the films listed on Schedule 1.01(A) and all other
Films other than (and only for so long as such Films are) Existing 1997 Films.
"Licensing Agreements" means any licensing agreements now outstanding or
hereafter executed (other than the MGM Licensing Agreement) pursuant to which
the Borrower or any of its Subsidiaries grants or licenses to third parties any
right, title or interest with respect to any Film Related Asset, any Film or any
12
group of Films, as the same may be amended, supplemented or otherwise modified
from time to time.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind, or any other type of
preferential arrangement that has the practical effect of creating a security
interest, in respect of such asset. For the purposes of this Agreement, the
Borrower or any of its Subsidiaries shall be deemed to own subject to a Lien any
asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, capital lease or other title
retention agreement relating to such asset.
"Loan" means a Base Rate Loan or a Euro-Dollar Loan and "Loans" means Base
Rate Loans or Euro-Dollar Loans or any combination of the foregoing.
"Loan Documents" means this Agreement, the Notes, the Subsidiary Guaranty
and the Collateral Documents.
"London Interbank Offered Rate" has the meaning set forth in Section
2.05(b).
"Major Casualty Proceeds" means (i) the aggregate insurance proceeds
received in connection with one or more related events by the Borrower or any of
its Subsidiaries under any insurance policy maintained by the Borrower or any of
its Subsidiaries covering casualty losses with respect to tangible real or
personal property or improvements or (ii) any award or other compensation with
respect to any condemnation of property (or any transfer or disposition of
property in lieu of condemnation) received by the Borrower or any of its
Subsidiaries, in either case only if the amount of such aggregate proceeds or
award or other compensation exceeds $2,000,000.
"Material Adverse Effect" means (i) any material adverse effect upon the
assets or liabilities, or the business, financial condition or results of
operations of the Borrower and its Subsidiaries, taken as a whole; (ii) prior to
the Closing Date, a material adverse effect on the ability of the Borrower or
any other Person to consummate the transactions contemplated hereby to occur on
the Closing Date; (iii) a material adverse effect on the ability of the Obligors
to perform their obligations under this Agreement and the Notes and the other
Loan Documents, taken as a whole, or (iv) an adverse effect on the rights and
remedies of the Agent and the Lenders under this Agreement and the Notes and the
other Loan Documents.
"Material Plan" means, at any time, a Plan or Plans having aggregate
Unfunded Liabilities in excess of $5,000,000.
13
"Material Subsidiary" means (i) each of Goldwyn Entertainment Company,
Heritage Entertainment, Inc., Motion Picture Corporation of America, Orion Home
Entertainment Corporation, Orion Pictures Distribution Corporation, Orion
Productions Inc., Orion TV Productions Inc., American International Pictures,
Inc. or MCEG Sterling Productions and (ii) from and after the date on which
financial statements are required to be delivered pursuant to Section 5.01(a)
for the third Fiscal Quarter of 1997, each other Subsidiary that has (x)
aggregate assets with a fair market value of not less than $1,000,000 or (y)
annual revenues of not less than $1,000,000, in each case calculated on the
basis of the latest financial statements delivered by the Borrower to the
Lenders pursuant to Section 5.01(a) or 5.01(b), as the case may be.
"Maturity Date" means July 10, 2002 or, if such day is not a Euro-Dollar
Business Day, the next succeeding Euro-Dollar Business Day, unless such next
succeeding Euro-Dollar Business Day is in the next calendar month, in which
case, the next preceding Euro-Dollar Business Day.
"MGM" means Metro-▇▇▇▇▇▇▇-▇▇▇▇▇ Inc., a Delaware corporation and its
successors.
" MGM Companies" means MGM and its Subsidiaries (other than Borrower and its
Subsidiaries).
" MGM Film Related Asset Disposition" means any distribution, dividend, or
other disposition of any Film Related Asset after the Closing Date to any MGM
Company.
"MGM Licensing Agreement" means one or more licensing agreements to be
executed by and among the Borrower, certain of its Subsidiaries and MGM,
pursuant to which the Borrower and such Subsidiaries will grant or license to
one or more MGM Companies the right to distribute the Films and pursuant to
which MGM Companies may be paid a distribution fee, reimbursement of its
distribution expenses and such other amounts as are customary in the movie
industry, and all on terms that, in the aggregate, are determined by the
Borrower to be materially as favorable to the Borrower and its Subsidiaries as
would have been obtained from a Person that was not an Affiliate.
"Multiemployer Plan" means, at any time, an employee pension benefit plan
within the meaning of Section 4001(a)(3) of ERISA to which any member of the
ERISA Group is then making or accruing an obligation to make contributions or
has within the preceding five plan years made contributions, including for these
purposes any Person which ceased to be a member of the ERISA Group during such
five year period.
14
"Net Cash Proceeds" means, with respect to any Reduction Event, an amount
equal to the cash proceeds received by the Borrower or any of its Subsidiaries
from or in respect of such Reduction Event (including any cash proceeds received
as income or other proceeds of any noncash proceeds of any Asset Sale), less (x)
any expenses reasonably incurred by such Person in respect of such Reduction
Event (including, without limitation, if such Reduction Event constitutes the
issuance and sale of securities, underwriters' discounts or commissions and
expenses) and (y) if such Reduction Event is an Asset Sale, (i) the amount of
any Debt secured by a Lien on any asset disposed of in such Asset Sale and
discharged from the proceeds thereof and (ii) any taxes actually paid or to be
payable by such Person (as estimated by a senior financial or accounting officer
of the Borrower, giving effect to the overall tax position of the Borrower) in
respect of such Asset Sale.
"Notes" means promissory notes of the Borrower, substantially in the form
of Exhibit A hereto, evidencing the obligation of the Borrower to repay the
Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" has the meaning set forth in Section 2.02(a).
"Notice of Interest Rate Election" has the meaning set forth in Section
2.08(a).
"Notice of Issuance" has the meaning set forth in Section 2.14(b).
"Obligor" means the Borrower and each Guarantor.
"Parent" means, with respect to any Lender, any Person controlling such
Lender.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a limited liability company, a
partnership, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Plan" means, at any time, an employee pension benefit plan (other than a
Multiemployer Plan) which is covered by Title IV of ERISA or subject to the
minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the
15
preceding five years been maintained, or contributed to, by any Person which was
at such time a member of the ERISA Group for employees of any Person which was
at such time a member of the ERISA Group.
"Pledge Agreement" means the Borrower Pledge Agreement or any Guarantor
Pledge Agreement.
"Pricing Schedule" means the Schedule attached hereto identified as such.
"Prime Rate" means the rate of interest publicly announced by ▇▇▇▇▇▇
Guaranty Trust Company of New York in New York City from time to time as its
Prime Rate.
"Proceeds Certificate" a certificate of the chief financial officer or the
chief accounting officer of the Borrower, certifying as to (i) the aggregate
amount of Major Casualty Proceeds received by the Borrower or any of its
Subsidiaries and (ii) the fact that the Borrower shall invest such Major
Casualty Proceeds to repair or replace affected assets with 180 days after
receipt thereof.
"Profit Participation" means the amount, as customarily determined by the
Borrower, of all obligations (other than Residuals and Deferred Payments)
payable by the Borrower and/or its Subsidiaries as compensation for talent or to
producers and for similar services in connection with the development,
acquisition, production, financing, distribution, exhibition or exploitation of
Films or rights with respect thereto, the payment of which is contingent upon or
triggered by and payable only to the extent of the receipt by the Borrower or
any Subsidiary, as the case may be, of revenues from the exploitation of such
Film or such rights.
"Quarterly Dates" means each March 31, June 30, September 30 and December
31.
"Reduction Amount" means, (i) in respect of any Asset Sale, 100% of the Net
Cash Proceeds thereof, (ii) in respect of any incurrence by the Borrower or any
of its Subsidiaries of any Debt that constitutes a Reduction Event or the
receipt of Major Casualty Proceeds that constitutes a Reduction Event, 100% of
the Net Cash Proceeds thereof, (iii) in respect of Excess Cash Flow for any
Fiscal Year, 100% of the amount thereof, (iv) in respect of any Equity Issuance
Reduction Event, 100% of the Net Cash Proceeds thereof, (v) in respect of any
certification as to anticipated reinvestment of Major Casualty Proceeds set
forth in any Proceeds Certificate being no longer true, 100% of the Net Cash
Proceeds from the relevant receipt of Major Casualty Proceeds not invested prior
to such date to repair or replace affected assets and (vi) in respect of receipt
of Excess Licensing Proceeds, 100% of the amount thereof.
16
"Reduction Event" means (i) any Asset Sale, (ii) the incurrence of any Debt
by the Borrower or any of its Subsidiaries (other than Debt permitted under
Section 5.10), (iii) any Equity Issuance Reduction Event, (iv) receipt of Major
Casualty Proceeds, unless, within 5 Domestic Business Days after receipt
thereof, the Borrower shall have delivered to the Agent a Proceeds Certificate,
(v) the first day on which any certification made pursuant to any Proceeds
Certificate shall cease to be true and (vi) receipt of Excess Licensing
Proceeds. The description of any transaction as falling within the above
definition does not affect any limitation on such transaction imposed by Article
5 of this Agreement or any rights of any Lender upon the occurrence of an Event
of Default under Article 6 of this Agreement.
"Reference Lenders" means the principal London offices of Bank of America
National Trust and Savings Association, Societe Generale and ▇▇▇▇▇▇ Guaranty
Trust Company of New York, and "Reference Lender" means any one of such
Reference Lenders.
"Regulation U" means Regulation U of the Board of Governors of the Federal
Reserve System, as in effect from time to time.
"Required Lenders" means at any time Lenders having in the aggregate at
least 51% of the sum of (i) the Revolving Commitments at such time or, if the
Revolving Commitments shall have been terminated, the sum of (x) the aggregate
outstanding principal amount of the Revolving Loans at such time plus (y) the
Letter of Credit Liabilities at such time plus (ii) the aggregate outstanding
principal amount of the Term Loans at such time or, if no Term Loans are then
outstanding, the Term Commitments at such time.
"Residuals" means the amount, as reasonably determined by the Borrower, of
all obligations (other than Profit Participations and Deferred Payments) payable
by the Borrower or a Subsidiary pursuant to guild agreements or other collective
bargaining agreements in connection with the development, acquisition,
production, financing, distribution, exhibition or exploitation of Films or
rights with respect thereto.
"Responsible Officer" means any senior vice president of the Borrower, and
any more senior corporate officer of the Borrower, in any case appointed to such
office by the Board of Directors of the Borrower or any committee thereof.
"Restricted Payment" means (i) any dividend or other distribution on any
shares of the Borrower's capital stock (except dividends payable solely in
shares of its capital stock) or (ii) any payment by the Borrower or any of its
Subsidiaries on account of the purchase, redemption, retirement or acquisition
of (a) any shares of the Borrower's capital stock or (b) any option, warrant or
other right to acquire
17
shares of the Borrower's capital stock (but not including payments of principal,
premium (if any) or interest made pursuant to the terms of convertible debt
securities prior to conversion.
"Revolving Commitment" means, (i) with respect to each Lender listed on the
Commitment Schedule, the amount set forth opposite the name of such Lender on
the Commitment Schedule under the heading "Revolving Commitments" and (ii) with
respect to each Assignee that becomes a Lender pursuant to Section 9.06(c), the
amount of the Revolving Commitment thereby assumed by it, in each case as such
amount may be increased or reduced from time to time pursuant to Section 9.06(c)
or reduced from time to time pursuant to Sections 2.04(d) and 2.07(b).
"Revolving Credit Period" means the period from and including the Closing
Date to and including the Revolving Credit Termination Date.
"Revolving Credit Termination Date" means July 8, 1998 or, if such day is
not a Euro-Dollar Business Day, the next preceding Euro-Dollar Business Day.
"Revolving Exposure" means, with respect to each Revolving Lender, at any
time, an amount equal to the sum of (i) the aggregate principal amount of the
Revolving Loans of such Revolving Lender outstanding at such time, and (ii) such
Revolving Lender's Letter of Credit Liabilities at such time.
"Revolving Lender" means each Lender identified as a Revolving Lender on
the Commitment Schedule, each Assignee which becomes a Revolving Lender pursuant
to Section 9.06(c) , and their respective successors.
"Revolving Loan" means a loan made by a Revolving Lender pursuant to
Section 2.01(b).
"Revolving Percentage" means, with respect to each Revolving Lender, at any
time, the percentage that such Revolving Lender's Revolving Commitment
constitutes of the aggregate amount of the Revolving Commitments at such time.
"Sale-Leaseback Transaction" means the sale by the Borrower or a Subsidiary
of all of its right, title and interest in and to a Film and the retention by,
or concurrent reconveyance to the Borrower or such Subsidiary of distribution
rights to such Film and an option to repurchase such Film for a nominal purchase
price, in consideration of periodic payments by the Borrower or such Subsidiary
of amounts having an aggregate discounted present value that is less than the
purchase price paid by the purchaser thereof; provided that, concurrently with
such reconveyance, the Borrower or such Subsidiary has defeased its obligation
to
18
make the aggregate amount of such periodic payments by depositing in an escrow
account an amount at least equal to the discounted present value of such amount.
"Security Agreement" means the security agreement substantially in the form
of Exhibit E hereto among the Obligors and the Agent entered into as of the
Closing Date, as amended from time to time.
"Seven Network" means Seven Network Limited ("SNL"), an Australian
corporation and, for so long as it is a wholly-owned subsidiary of SNL,
Miltonstar Pty Ltd., an Australian corporation, and their respective successors.
"Stock Purchase Agreement" means the Stock Purchase Agreement dated as of
May 2, 1997 by and among the Borrower, Holdings and Metromedia International
Group, Inc., as amended from time to time in accordance with the terms hereof
and thereof.
"Subsidiary" means, as to any Person, any corporation or other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person; unless
otherwise specified, "Subsidiary" means a Subsidiary of the Borrower.
"Subsidiary Guaranty" means the subsidiary guaranty agreement substantially
in the form of Exhibit F hereto between each Guarantor party thereto and the
Agent entered into as of the Closing Date, as amended from time to time.
"Temporary Cash Investment" means any Investment in (i) direct obligations
of the United States or any agency thereof, or obligations guaranteed by the
United States or any agency thereof, (ii) commercial paper rated at least A-2 by
Standard & Poor's Ratings Services or P-2 by ▇▇▇▇▇'▇ Investors Service, Inc.,
(iii) time deposits with, including certificates of deposit issued by, any
office located in the United States of any bank or trust company which is
organized under the laws of the United States or any state thereof and has
capital, surplus and undivided profits aggregating at least $500,000,000 or (iv)
repurchase agreements with respect to securities described in clause (i) above
entered into with an office of any bank or trust company meeting the criteria
specified in clause (iii) above, provided in each case that such Investment
matures within one year from the date of acquisition thereof by the Borrower or
a Subsidiary.
"Term Commitment" means with respect to each Lender listed on the
Commitment Schedule, the amount set forth opposite the name of such Lender on
the Commitment Schedule under the heading "Term Commitments".
19
"Term Lender" means each Lender identified as a Term Lender on the
Commitment Schedule, each Assignee which becomes a Term Lender pursuant to
Section 9.06(c), and their respective successors.
"Term Loan" means a Loan made pursuant to Section 2.01(a).
"Total Borrowed Funds" means at any date the aggregate amount of Debt of
the Borrower and its Consolidated Subsidiaries described in clauses (i) and (ii)
and (iv) of the definition of Debt (but excluding any obligations under Sale-
Leaseback Transactions which constitute Debt under clause (iv) of the definition
thereof), determined on a consolidated basis at such date.
"Tracinda" means Tracinda Corporation, a Nevada corporation, and its
successors.
"Transaction Documents" means the Stock Purchase Agreement, including the
exhibits and schedules thereto and all agreements, documents and instruments
executed and delivered pursuant thereto or in connection therewith.
"Type" has the meaning set forth in Section 1.03.
"Unfunded Liabilities" means, with respect to any Plan at any time, the
amount (if any) by which (i) the value of all benefit liabilities under such
Plan, determined on a plan termination basis using the assumptions prescribed by
the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the fair market
value of all Plan assets allocable to such liabilities under Title IV of ERISA
(excluding any accrued but unpaid contributions), all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the ERISA Group to the
PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the States
and the District of Columbia, but excluding its territories and possessions.
Section 1.02. Accounting Terms and Determinations. Unless otherwise
specified in the immediately succeeding sentence or otherwise herein, all
accounting terms used herein shall be interpreted, all accounting determinations
hereunder shall be made, and all financial statements required to be delivered
hereunder shall be prepared in accordance with generally accepted accounting
principles as in effect from time to time, applied on a basis consistent (except
for changes concurred in by the Borrower's independent public accountants) with
the most recent audited consolidated financial statements of the Borrower and
its Consolidated Subsidiaries delivered to the Lenders; provided that, if the
Borrower notifies the Agent that the Borrower wishes to amend any covenant in
Article 5 or
20
any related definition to eliminate the effect of any change in generally
accepted accounting principles on the operation of such covenant (or if the
Agent notifies the Borrower that the Required Lenders wish to amend Article 5
any related definition for such purpose), then the Borrower's compliance with
such covenant shall be determined on the basis of generally accepted accounting
principles in effect immediately before the relevant change in generally
accepted accounting principles became effective, until either such notice is
withdrawn or such covenant or definition is amended in a manner satisfactory to
the Borrower and the Required Lenders.
Section 1.03. Classes and Types of Loans and Borrowings. The term
"Borrowing" denotes the aggregation of Loans of one or more Lenders to be made
to the Borrower pursuant to Article 2 on the same date, all of which Loans are
of the same Class and Type (subject to Article 8) and, except in the case of
Base Rate Loans, have the same initial Interest Period. Loans hereunder are
distinguished by "Class" and by "Type". The "Class" of a Loan (or of a
Commitment to make such a Loan or of a Borrowing comprised of such Loans or of a
Group of such Loans) refers to the determination whether such Loan is a Term
Loan or a Revolving Loan, each of which constitutes a Class. The "Type" of a
Loan refers to the determination whether such Loan is a Euro-Dollar Loan or a
Base Rate Loan. Identification of a Loan (or a Borrowing) by both Class and
Type (e.g., a "Term Euro-Dollar Loan") indicates that such Loan is both a Term
Loan and a Euro-Dollar Loan (or that such Borrowing or Group of Loans is
comprised of such Loans).
ARTICLE 2
The Credits
Section 2.01. Commitments to Lend. (a) Term Loans. Each Term Lender
severally agrees, on the terms and conditions set forth in this Agreement, to
make a single loan to the Borrower on the Closing Date in a principal amount not
to exceed the amount of such Lender's Term Commitment. The Borrowing pursuant
to this subsection shall be made from the Lenders ratably in proportion to their
respective Term Commitments; provided, that the failure of any Term Lender to
fulfill its obligation to make a Term Loan on the terms and conditions set forth
in this Agreement shall not excuse any other Term Lender from its obligation to
make a Term Loan in an amount up to the amount of such Lender's Term Commitment.
Loans made pursuant to this subsection are not revolving in nature and amounts
of such loans repaid or prepaid may not be reborrowed.
(b) Revolving Loans. During the Revolving Credit Period, each Revolving
Lender severally agrees, on the terms and conditions set forth in this
21
Agreement, to make revolving loans to the Borrower from time to time in amounts
such that the Revolving Exposure of such Revolving Lender at such time shall not
exceed the amount of its Revolving Commitment at such time. Each Borrowing under
this subsection shall be in an aggregate principal amount of $2,000,000 or any
larger multiple of $1,000,000 and shall be made from the Revolving Lenders
ratably in proportion to their respective Revolving Commitments; provided, that
the failure of any Revolving Lender at any time to fulfill its obligation to
make a Revolving Loan on the terms and conditions set forth in this Agreement
shall not in itself excuse any other Revolving Lender from its obligation to
make a Revolving Loan. Within the foregoing limits, the Borrower may borrow
under this subsection, prepay Revolving Loans to the extent permitted by Section
2.10 and reborrow at any time during the Revolving Credit Period under this
subsection. After the Revolving Credit Period, Loans made pursuant to this
subsection will not be revolving in nature and amounts of such loans repaid or
prepaid after the end of the Revolving Credit Period may not be reborrowed.
Section 2.02. Method of Borrowing. (a) The Borrower shall give the Agent
notice (a "Notice of Borrowing") not later than 12:00 Noon (New York City time)
on (1) the date of each Base Rate Borrowing and (2) the third Euro-Dollar
Business Day before each Euro-Dollar Borrowing, specifying:
(i) the date of such Borrowing, which shall be a Domestic Business
Day in the case of a Base Rate Borrowing or a Euro-Dollar Business Day in
the case of a Euro-Dollar Borrowing;
(ii) the aggregate amount of such Borrowing;
(iii) whether the Loans comprising such Borrowing are to bear
interest initially at a rate based on the Base Rate or at a Euro-Dollar
Rate; and
(iv) in the case of a Euro-Dollar Borrowing, the duration of the
initial Interest Period applicable thereto, subject to the provisions of
the definition of Interest Period.
In no event shall the total number of Groups of Loans at any one time
outstanding exceed 10.
(b) Upon receipt of a Notice of Borrowing, the Agent shall promptly notify
each Lender of the contents thereof and of such Lender's ratable share of such
Borrowing (if any) and such Notice of Borrowing shall not thereafter be
revocable by the Borrower.
22
(c) Not later than 12:00 Noon (New York City time) on the date of each
Borrowing, each Lender shall make available its ratable share of such Borrowing,
in Federal or other funds immediately available in New York City, to the Agent
at its address referred to in Section 9.01. Unless the Agent determines that
any applicable condition specified in Article 3 has not been satisfied, the
Agent will make the funds so received from the Lenders available to the Borrower
by crediting an account of the Borrower maintained with the Agent and specified
by the Borrower prior to the date of such Borrowing or, if no such account has
been specified, at the Agent's aforesaid address.
(d) Unless the Agent shall have received notice from a Lender prior to the
date of any Borrowing that such Lender will not make available to the Agent such
Lender's share of such Borrowing, the Agent may assume that such Lender has made
such share available to the Agent on the date of such Borrowing in accordance
with subsection (c) of this Section and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such share
available to the Agent, such Lender and the Borrower severally agree to repay to
the Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Agent, at (i) in the case
of the Borrower, a rate per annum equal to the higher of the Federal Funds Rate
and the interest rate applicable thereto pursuant to Section 2.05 and (ii) in
the case of such Lender, the Federal Funds Rate. If such Lender shall repay to
the Agent such corresponding amount, such amount so repaid shall constitute such
Lender's Loan included in such Borrowing for purposes of this Agreement.
Section 2.03. Notes. (a) The Loans of each Lender shall be evidenced by a
single Note payable to the order of such Lender for the account of its
Applicable Lending Office in an amount equal to the aggregate unpaid principal
amount of such Lender's Loans.
(b) Each Lender may, by notice to the Borrower and the Agent, request that
its Loans of a particular Type or Class be evidenced by a separate Note in an
amount equal to the aggregate unpaid principal amount of such Loans. Each such
Note shall be in substantially the form of Exhibit A hereto with appropriate
modifications to reflect the fact that it evidences solely Loans of the relevant
Type or Class. Each reference in this Agreement to the "Note" of such Lender
shall be deemed to refer to and include any or all of such Notes, as the context
may require.
(c) Upon receipt of each Lender's Note pursuant to Section 3.01, the Agent
shall forward such Note to such Lender. Each Lender shall record the date,
amount, Type and Class of each Loan made by it and the date and amount of each
23
payment of principal made by the Borrower with respect thereto, and may, if such
Lender so elects in connection with any transfer or enforcement of its Note,
endorse on the schedule forming a part thereof appropriate notations to evidence
the foregoing information with respect to each such Loan then outstanding;
provided that the failure of any Lender to make any such recordation or
endorsement shall not affect the obligations of the Borrower hereunder or under
the Notes or any other Loan Document. Each Lender is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
Section 2.04. Maturity of Loans; Mandatory Prepayments; Certain Commitment
Reductions. (a) Final Maturity. Each Loan of each Class shall mature, and the
outstanding principal amount thereof shall be due and payable (together with
accrued interest thereon), on the Maturity Date.
(b) Term Loans Scheduled Amortization. In addition, the Borrower shall
repay, and there shall become due and payable, on each date set forth below, an
aggregate principal amount of the Term Loans equal to the amount set forth below
opposite such date (as such amount may be reduced pursuant to Section 2.04(e)
and Section 2.10(c):
Date Amount
---- ------
12/31/98 $20,000,000
3/31/99 $15,000,000
6/30/99 $15,000,000
9/30/99 $15,000,000
12/31/99 $15,000,000
3/31/00 $10,000,000
6/30/00 $10,000,000
9/30/00 $10,000,000
12/31/00 $10,000,000
3/31/01 $10,000,000
6/30/01 $10,000,000
9/30/01 $10,000,000
12/31/01 $10,000,000
3/31/02 $10,000,000
6/30/02 $10,000,000
Maturity Date $20,000,000
(c) Revolving Loans Scheduled Amortization. In addition, the Borrower shall
repay, and there shall become due and payable, on each date set forth below an
aggregate principal amount of the Revolving Loans equal to the amount set
24
forth below opposite such date (as such amount may be reduced pursuant to
Section 2.04(e)(iv) and Section 2.10(c)) (determined as a percentage of the
aggregate principal amount of Revolving Loans outstanding on the Revolving
Credit Termination Date):
Date Amount
---- ------
12/31/98 10.0%
3/31/99 7.5%
6/30/99 7.5%
9/30/99 7.5%
12/31/99 7.5%
3/31/00 5.0%
6/30/00 5.0%
9/30/00 5.0%
12/31/00 5.0%
3/31/01 5.0%
6/30/01 5.0%
9/30/01 5.0%
12/31/01 5.0%
3/31/02 5.0%
6/30/02 5.0%
Maturity Date 10.0%
(d) Contingent Amortization and Revolving Commitments Reduction. In
addition, the Term Loans shall be repaid and/or the Revolving Commitments shall
be reduced (and the Revolving Loans shall be repaid to the extent provided in
Section 2.04(e)(ii)) in the following amounts and at the following times:
(A) in the event that any Reduction Event shall occur, an amount equal
to the Reduction Amount with respect thereto; and
(B) an amount, for each Fiscal Year ending after December 31, 1997,
equal to the Reduction Amount of Excess Cash Flow for such Fiscal Year.
The prepayments and reductions required by clause (A) of this subsection shall
be made forthwith upon receipt by the Borrower or any of its Subsidiaries, as
the case may be, of such Net Cash Proceeds; provided that if the Reduction
Amount in respect of any Reduction Event is less than $1,000,000, such
prepayment or reduction shall be made upon receipt of proceeds such that,
together with all other such amounts not previously applied, the Reduction
Amount is equal to at least $1,000,000 and provided further, that, at the
election of the Borrower, if the amount of any such prepayment to be made
exceeds the amount of Base Rate
25
Loans then outstanding, such excess amount shall be deposited in escrow pursuant
to arrangements in form and substance satisfactory to the Agent, and such excess
shall not be required to be prepaid until the last day of the Interest Periods
relating to outstanding Euro-Dollar Loans in an aggregate principal amount equal
to or greater than such excess amount unless an Event of Default has occurred
and is continuing or the Required Lenders otherwise determine in their sole
discretion and so notify the Borrower. The prepayments and reductions required
by clause (B) of this subsection shall be made on or before the 105th day after
the end of the related fiscal year. The Borrower shall give the Agent at least
five Euro-Dollar Business Days' notice of each prepayment required pursuant to
this subsection.
(e) Application of Prepayments, Repayments and Revolving Commitment
Reductions. (i) The prepayments and reductions required pursuant to subsection
(d) shall be effected in the following order: first, the Borrower shall prepay
the Term Loans until the Term Loans have been paid in full, second, the
Revolving Commitments shall be reduced (and outstanding Revolving Loans and
Letters of Credit shall be prepaid and/or cash collateralized in accordance with
clause (ii) below) and third, solely if such prepayment is to be made after the
Revolving Credit Period, the Borrower shall prepay Revolving Loans until the
Revolving Loans have been paid in full.
(ii) If on the date of any reduction of the Revolving Commitments pursuant
to subsection (e)(i) the aggregate Revolving Exposure on such date exceeds the
aggregate Revolving Commitments on such date, the Borrower shall apply an amount
equal to such excess to prepay the Revolving Credit Loans and/or cash
collateralize Letters of Credit so that after giving effect thereto the
Revolving Exposure of each Revolving Lender does not exceed its Revolving Credit
Commitment as then reduced. Amounts to be applied pursuant to the preceding
sentence shall be applied first to repay the principal amount of the Revolving
Credit Loans then outstanding until all such Revolving Credit Loans shall have
been repaid in full and second if any excess then remains such excess shall be
deposited in the Cash Collateral Account established pursuant to Section 6(C) of
the Security Agreement until the Letter of Credit Liabilities on the date of
repayment have been cash collateralized in full to be held, applied or released
for application as provided in the Security Agreement. In determining Revolving
Exposure for purposes of this clause (ii), Letter of Credit Liabilities shall be
reduced to the extent that they are cash collateralized as contemplated by the
previous sentence.
(iii) Subject to clause (i) of this subsection, each repayment or
prepayment of Loans of any Class made by the Borrower pursuant to this Section
shall be applied to such Group or Groups of Loans of such Class as the Borrower
may designate in the applicable Notice of Borrowing or Notice of Interest Rate
Election (or, failing such designation, as determined by the Agent), and shall
be
26
applied to repay ratably the Loans of such Class of the several Lenders included
in such Group or Groups.
(iv) The amount of any prepayment of the Loans made by the Borrower
pursuant to subsection (d) shall be applied to reduce the amount of subsequent
scheduled repayments of the Loans pursuant to subsections (b) or (c) above, as
the case may be, in inverse order of maturity.
Section 2.05. Interest Rates. (a) Each Base Rate Loan shall bear interest
on the outstanding principal amount thereof, for each day from and including the
date such Loan is made to but excluding the date it becomes due or is converted
into a Euro-Dollar Loan, at a rate per annum equal to the sum of (x) the Base
Rate Margin plus (y) the Base Rate for such day. Such interest shall be payable
quarterly in arrears on each Quarterly Date. Any overdue principal of or
interest on any Base Rate Loan shall bear interest, payable on demand, for each
day until paid at a rate per annum equal to the sum of 2% plus the rate
otherwise applicable to Base Rate Loans for such day.
(b) Each Euro-Dollar Loan shall bear interest on the outstanding principal
amount thereof, for each day during each Interest Period applicable thereto,
from and including the first day thereof to but excluding the last day thereof,
at a rate per annum equal to the sum of the Euro-Dollar Margin for such day plus
the Adjusted London Interbank Offered Rate applicable to such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof and, with respect to the principal amount of
any Euro-Dollar Loan converted to a Base Rate Loan, on each date a Euro-Dollar
Loan is so converted.
The "Adjusted London Interbank Offered Rate" applicable to any Interest
Period means a rate per annum equal to the quotient obtained (rounded upward, if
necessary, to the next higher 1/100 of 1%) by dividing (i) the applicable London
Interbank Offered Rate by (ii) 1.00 minus the Euro-Dollar Reserve Percentage.
The Adjusted London Interbank Offered Rate shall be adjusted automatically on
and as of the effective date of any change in the Euro-Dollar Reserve
Percentage.
The "London Interbank Offered Rate" applicable to any Interest Period means
the average (rounded upward, if necessary, to the next higher 1/16 of 1%) of the
respective rates per annum at which deposits in dollars are offered to each of
the Reference Lenders in the London interbank market at approximately 11:00 A.M.
(London time) two Euro-Dollar Business Days before the first day of such
Interest Period in an amount approximately equal to the principal amount of the
Euro-Dollar Loan of such Reference Lender to which such Interest Period is to
apply and for a period of time comparable to such Interest Period.
27
"Euro-Dollar Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement for a member Lender of the Federal
Reserve System in New York City with deposits exceeding five billion dollars in
respect of "Eurocurrency liabilities" (or in respect of any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of any Lender to
United States residents).
(c) Any overdue principal of or interest on any Euro-Dollar Loan shall
bear interest, payable on demand, for each day until paid at a rate per annum
equal to the higher of (i) the sum of 2% plus the Euro-Dollar Margin for such
day plus the quotient obtained (rounded upward, if necessary, to the next higher
1/100 of 1%) by dividing (x) the average (rounded upward, if necessary, to the
next higher 1/16 of 1%) of the respective rates per annum at which one day (or,
if such amount due remains unpaid more than three Euro-Dollar Business Days,
then for such other period of time not longer than three months as the Agent may
select) deposits in dollars in an amount approximately equal to such overdue
payment due to each of the Reference Lenders are offered to such Reference
Lender in the London interbank market for the applicable period determined as
provided above by (y) 1.00 minus the Euro-Dollar Reserve Percentage (or, if the
circumstances described in clause (a) or (b) of Section 8.01 shall exist, at a
rate per annum equal to the sum of 2% plus the rate applicable to Base Rate
Loans for such day) and (ii) the sum of 2% plus the Euro-Dollar Margin for such
day plus the Adjusted London Interbank Offered Rate applicable to such Loan at
the date such payment was due.
(d) The Agent shall determine each interest rate applicable to the Loans
hereunder. The Agent shall give prompt notice to the Borrower and the
participating Lenders of each rate of interest so determined, and its
determination thereof shall be conclusive in the absence of manifest error.
(e) Each Reference Lender agrees to use its best efforts to furnish
quotations to the Agent as contemplated by this Section. If any Reference
Lender does not furnish a timely quotation, the Agent shall determine the
relevant interest rate on the basis of the quotation or quotations furnished by
the remaining Reference Lender or Lenders or, if none of such quotations is
available on a timely basis, the provisions of Section 8.01 shall apply.
Section 2.06. Fees. (a) During the Revolving Credit Period, the Borrower
shall pay to the Agent for the account of each Revolving Lender a commitment fee
at the rate of 0.50% per annum on the daily amount by which
28
such Revolving Lender's Revolving Commitment exceeds the sum of (x) the
aggregate outstanding principal amount of its Revolving Loans and (y) its Letter
of Credit Liabilities. Such commitment fee shall accrue from and including the
Effective Date to but excluding the date of termination of the Revolving
Commitments in their entirety, and shall be payable quarterly in arrears on each
Quarterly Date and on the date of termination of the Revolving Commitments in
their entirety.
(b) The Borrower shall pay to the Agent (i) for the account of the
Revolving Lenders ratably in proportion to their Revolving Commitments a letter
of credit fee accruing daily on the aggregate amount then available for drawing
under all Letters of Credit at the Letter of Credit Fee Rate (determined in
accordance with the Pricing Schedule) and (ii) for the account of each L/C
Issuer a letter of credit fronting fee accruing daily on the aggregate amount
then available for drawing under all Letters of Credit issued by such L/C Issuer
at a rate per annum equal to 1/4 of 1%.
(c) Accrued fees under subsections (a) and (b) above shall be payable
quarterly in arrears on each Quarterly Date and on the date of termination of
the Revolving Commitments in their entirety (and, if later, the date on which
the aggregate Letter of Credit Liabilities shall have been reduced to $0).
Section 2.07. Optional Termination or Reduction of Commitments. (a) Prior
to the Closing Date the Borrower may, upon at least three Domestic Business
Days' notice to the Agent, terminate the Term Commitments or ratably reduce from
time to time by an aggregate amount of $5,000,000 or a larger multiple of
$1,000,000, the aggregate amount of the Term Commitments.
(b) During the Revolving Credit Period the Borrower may, upon at least
three Domestic Business Days' notice to the Agent, (i) terminate the Revolving
Commitments at any time, if no Revolving Loans or Letter of Credit Liabilities
are outstanding at such time or (ii) ratably reduce from time to time by an
aggregate amount of $5,000,000 or a larger multiple of $1,000,000, the aggregate
amount of the Revolving Commitments in excess of the aggregate Revolving
Exposure at such time.
Section 2.08. Method of Electing Interest Rates. (a) The Loans included
in each Borrowing shall initially be of the Type specified by the Borrower in
the applicable Notice of Borrowing, subject to the limitations set forth in
Section 2.02. Thereafter, the Borrower may from time to time elect to change or
continue the Type of Loans in each Group of Loans, subject in each case to the
provisions of Article 8, as follows:
29
(i) if such Loans are Base Rate Loans, the Borrower may elect to
convert such Loans to Euro-Dollar Loans as of any Euro-Dollar Business Day;
provided that no Base Rate Loans shall be converted to Euro-Dollar Loans
(x) at any time prior to the Syndication Date or (y) if at the time such
conversion is to be effective, an Event of Default has occurred and is
continuing; and
(ii) if such Loans are Euro-Dollar Loans, the Borrower may elect to
convert such Loans to Base Rate Loans as of any Domestic Business Day or to
continue such Loans as Euro-Dollar Loans for an additional Interest Period
as of any Euro-Dollar Business Day, subject to Section 2.12 in the case of
any such conversion or continuation effective on any day other than the
last day of the then current Interest Period applicable to such Loans;
provided that no Euro-Dollar Loans shall be continued as Euro-Dollar Loans
if at the time such continuation is to be effective, an Event of Default
has occurred and is continuing.
Each such election shall be made by delivering a notice (a "Notice of Interest
Rate Election") to the Agent not later than 12:00 Noon (New York City time) on
the third Euro-Dollar Business Day before the conversion or continuation
selected in such notice is to be effective. A Notice of Interest Rate Election
may, if it so specifies, apply to only a portion of the aggregate principal
amount of the relevant Group of Loans; provided that (i) such portion is
allocated ratably among the Loans comprising such Group and (ii) the portion to
which such Notice applies, and the remaining portion to which it does not apply,
are each $2,000,000 or any larger multiple of $1,000,000. If no Notice of
Interest Election is timely received prior to the end of an Interest Period for
any Group of Loans, the Borrower shall be deemed to have elected that such Group
of Loans be converted to Base Rate Loans as of the last day of such Interest
Period. In no event shall the total number of Groups of Loans at any time
outstanding exceed 10.
(b) Each Notice of Interest Rate Election shall specify:
(i) the Group of Loans (or portion thereof) to which such notice
applies;
(ii) the date on which the conversion or continuation selected in such
notice is to be effective, subject to the provisos set forth in clauses (i)
and (ii) of subsection (a) above;
(iii) if the Loans comprising such Group are to be converted, the new
Type of Loans and, if the Loans being converted are to be Euro-Dollar
Loans, the duration of the next succeeding Interest Period applicable
thereto; and
30
(iv) if such Loans are to be continued as Euro-Dollar Loans for an
additional Interest Period, the duration of such additional Interest
Period.
Each Interest Period specified in a Notice of Interest Rate Election shall
comply with the provisions of the definition of Interest Period.
(c) Upon receipt of a Notice of Interest Rate Election from the Borrower
pursuant to subsection (a) above, the Agent shall promptly notify each Lender of
the contents thereof and such notice shall not thereafter be revocable by the
Borrower.
(d) An election by the Borrower to change or continue the rate of interest
applicable to any Group of Loans pursuant to this Section shall not constitute a
"Borrowing" subject to the provisions of Section 3.02.
Section 2.09. Mandatory Termination of Commitments. (a) Term Commitments.
The Term Commitments of each Class shall terminate at the close of business on
the Closing Date.
(b) Revolving Commitments. The Revolving Commitments shall terminate on
the Revolving Credit Termination Date.
Section 2.10. Optional Prepayments. (a) Subject, in the case of any
Borrowing of Euro-Dollar Loans to Section 2.12, the Borrower may, upon at least
one Domestic Business Day's notice to the Agent, prepay any Group of Base Rate
Loans or upon at least three Euro-Dollar Business Days' notice to the Agent,
prepay any Group of Euro-Dollar Loans, in each case in whole at any time, or
from time to time in part in amounts aggregating $5,000,000 or any larger
multiple of $1,000,000, by paying the principal amount to be prepaid together
with, in the case of a prepayment of Euro-Dollar Loans, accrued interest thereon
to the date of prepayment. Each such optional prepayment shall be applied to
prepay ratably the Loans of the several Lenders included in such Group.
(b) Upon receipt of a notice of prepayment pursuant to this Section, the
Agent shall promptly notify each Lender of the contents thereof and of such
Lender's ratable share of such prepayment and such notice shall not thereafter
be revocable by the Borrower.
(c) Each prepayment of the Loans of either Class made by the Borrower
pursuant to this Section shall be applied as follows: first, to reduce the
amount of the subsequent scheduled repayments of the Loans (if any) of such
Class to be made within one year of the date such prepayment is made in forward
order until
31
such amount shall have been paid in full and thereafter pro rata among all
subsequent scheduled repayments of the Loans of such Class.
Section 2.11. General Provisions as to Payments. (a) The Borrower shall
make each payment of principal of, and interest on, the Loans and of Letter of
Credit Liabilities and of fees hereunder (other than fees payable directly to
any L/C Issuer), not later than 1:00 P.M. (New York City time) on the date when
due, in Federal or other funds immediately available in New York City, to the
Agent at its address referred to in Section 9.01. The Agent will promptly
distribute to each Lender its ratable share of each such payment received by the
Agent for the account of the Lenders. Whenever any payment of principal of, or
interest on, the Base Rate Loans or of Letter of Credit Liabilities or of fees
shall be due on a day which is not a Domestic Business Day, the date for payment
thereof shall be extended to the next succeeding Domestic Business Day.
Whenever any payment of principal of, or interest on, the Euro-Dollar Loans
shall be due on a day which is not a Euro-Dollar Business Day, the date for
payment thereof shall be extended to the next succeeding Euro-Dollar Business
Day unless such Euro-Dollar Business Day falls in another calendar month, in
which case the date for payment thereof shall be the next preceding Euro-Dollar
Business Day. If the date for any payment of principal is extended by operation
of law or otherwise, interest thereon shall be payable for such extended time.
(b) Unless the Agent shall have received notice from the Borrower prior to
the date on which any payment is due to the Lenders hereunder that the Borrower
will not make such payment in full, the Agent may assume that the Borrower has
made such payment in full to the Agent on such date and the Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent that the Borrower shall not have so made such payment, each Lender shall
repay to the Agent forthwith on demand such amount distributed to such Lender
together with interest thereon, for each day from the date such amount is
distributed to such Lender until the date such Lender repays such amount to the
Agent, at the Federal Funds Rate.
Section 2.12. Funding Losses. If the Borrower makes any payment of
principal with respect to any Euro-Dollar Loan or any Euro-Dollar Loan is
converted (pursuant to Article 2, 6 or 8 or otherwise) on any day other than the
last day of an Interest Period applicable thereto, or the last day of an
applicable period fixed pursuant to Section 2.05(c), or if the Borrower fails to
borrow, prepay, convert or continue any Euro-Dollar Loans after notice has been
given to any Lender in accordance with Section 2.02(a), 2.04(d), 2.08 or 2.10,
the Borrower shall reimburse each Lender within 15 days after demand for any
resulting loss or expense incurred by it (or, without duplication, by an
existing or prospective Participant in the related Loan), including (without
limitation) any
32
loss incurred in obtaining, liquidating or employing deposits from third
parties, but excluding loss of margin for the period after any such payment or
conversion or failure to borrow, prepay, convert or continue, provided that such
Lender shall have delivered to the Borrower a certificate as to the amount of
such loss or expense, which certificate shall be conclusive in the absence of
manifest error.
Section 2.13. Computation of Interest and Fees. Interest based on the
Prime Rate hereunder shall be computed on the basis of a year of 365 days (or
366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
Section 2.14. Letters of Credit. (a) Subject to the terms and conditions
hereof, each L/C Issuer agrees to issue letters of credit hereunder from time to
time before the tenth day before the Revolving Credit Termination Date upon the
request of the Borrower (the "Letters of Credit"); provided that, immediately
after each Letter of Credit is issued, (i) the aggregate amount of the Letter of
Credit Liabilities shall not exceed the Letter of Credit Commitment and (ii) the
aggregate amount of the Revolving Exposures shall not exceed the aggregate
amount of the Revolving Commitments. Upon the date of issuance by an L/C Issuer
of a Letter of Credit, the L/C Issuer shall be deemed, without further action by
any party hereto, to have sold to each Revolving Lender, and each Revolving
Lender shall be deemed, without further action by any party hereto, to have
purchased from the L/C Issuer, a participation in such Letter of Credit and all
of the related Letter of Credit Liabilities pro rata to their respective
Revolving Percentages.
(b) The Borrower shall give the L/C Issuer notice at least three Domestic
Business Days prior to the requested issuance of a Letter of Credit specifying
the date such Letter of Credit is to be issued, and describing the terms of such
Letter of Credit and the nature of the transactions to be supported thereby
(such notice, including any such notice given in connection with the extension
or renewal of a Letter of Credit, a "Notice of Issuance"). Upon receipt of a
Notice of Issuance, the L/C Issuer shall promptly notify the Agent, and the
Agent shall promptly notify each Revolving Lender of the contents thereof and of
the amount of such Revolving Lender's participation in such Letter of Credit.
The issuance by the L/C Issuer of each Letter of Credit shall, in addition to
the conditions precedent set forth in Section 3.02, be subject to the conditions
precedent that such Letter of Credit shall be in such form and contain such
terms as shall be satisfactory to the L/C Issuer and that the Borrower shall
have executed and delivered such other instruments and agreements relating to
such Letter of Credit as the L/C Issuer shall have reasonably requested. The
Borrower shall also pay to the L/C Issuer for its own account issuance, drawing,
amendment and extension charges in the amounts and at the times as agreed
between the Borrower and the L/C Issuer. The
33
extension or renewal of any Letter of Credit shall be deemed to be an issuance
of such Letter of Credit, and if any Letter of Credit contains a provision
pursuant to which it is deemed to be extended unless notice of termination is
given by the L/C Issuer, the L/C Issuer shall timely give such notice of
termination unless it has theretofore timely received a Notice of Issuance and
the other conditions to issuance of a Letter of Credit have also theretofore
been met with respect to such extension. No Letter of Credit shall have a term
extending or be extendible beyond the Revolving Credit Termination Date.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
notice of a drawing under such Letter of Credit, the L/C Issuer shall notify the
Agent and the Agent shall promptly give notice (a "Draw Notice") to the Borrower
and each Revolving Lender as to the amount to be paid as a result of such demand
or drawing and the payment date. Upon receipt of a Draw Notice by the Borrower,
the Borrower shall be irrevocably and unconditionally obligated to reimburse the
L/C Issuer for any amounts paid by the L/C Issuer upon any drawing under any
Letter of Credit, without presentment, demand, protest or other formalities of
any kind on the second Domestic Business Day following the date of receipt.
Regardless of if and when a Draw Notice is given to or received by the Borrower,
all such amounts paid by the L/C Issuer and remaining unpaid by the Borrower
shall bear interest, payable on demand, for each day from and including the date
of payment by the L/C Issuer until paid at a rate per annum equal to (x) to but
not including the due date determined in accordance with the preceding sentence,
the rate applicable to Base Rate Loans for such day and (y) on and after such
due date, the sum of 2% plus the rate applicable to Base Rate Revolving Loans
for such day. In addition, each Revolving Lender will pay to the Agent, for the
account of the L/C Issuer, immediately upon the L/C Issuer's demand at any time
during the period commencing after such drawing until reimbursement therefor in
full by the Borrower, an amount equal to such Lender's ratable share of such
drawing (in proportion to its participation therein), together with interest on
such amount for each day from the date of the L/C Issuer demand for such payment
(or, if such demand is made after 12:00 Noon (New York City time) on such date,
from the next succeeding Domestic Business Day) to the date of payment by such
Lender of such amount at the Federal Funds Rate. The L/C Issuer will pay to
each Revolving Lender ratably all amounts received from the Borrower for
application in payment of its reimbursement obligations in respect of any Letter
of Credit, but only to the extent such Revolving Lender has made payment to the
L/C Issuer in respect of such Letter of Credit pursuant hereto.
(d) The obligations of the Borrower and each Revolving Lender under
subsection (c) above shall be absolute, unconditional and irrevocable, and shall
be performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including without limitation the following
circumstances:
34
(i) any lack of validity or enforceability of this Agreement or any Letter
of Credit or any document related hereto or thereto;
(ii) any amendment or waiver of or any consent to departure from all or
any of the provisions of this Agreement or any Letter of Credit or any document
related hereto or thereto;
(iii) the use which may be made of the Letter of Credit by, or any acts or
omission of, a beneficiary of a Letter of Credit (or any Person for whom the
beneficiary may be acting);
(iv) the existence of any claim, set-off, defense or other rights that the
Borrower may have at any time against a beneficiary of a Letter of Credit (or
any Person for whom the beneficiary may be acting), the Lenders (including the
L/C Issuer) or any other Person, whether in connection with this Agreement or
the Letter of Credit or any document related hereto or thereto or any unrelated
transaction;
(v) any statement or any other document presented under a Letter of Credit
proving to be forged, fraudulent or invalid in any respect or any statement
therein being untrue or inaccurate in any respect whatsoever;
(vi) payment under a Letter of Credit against presentation to the L/C
Issuer of a draft or certificate that does not comply with the terms of the
Letter of Credit; or
(vii) any other act or omission to act or delay of any kind by any Lender
(including the L/C Issuer), the Agent or any other Person, but for the
provisions of this subsection (vii), constitute a legal or equitable discharge
of the Borrower's or the Lender's obligations hereunder.
Nothing in this subsection (d) is intended to limit the right of the
Borrower to make a claim against the L/C Issuer for damages as contemplated by
the proviso to the first sentence of subsection (e).
(e) The Borrower hereby indemnifies and holds harmless each L/C Issuer and
the Agent (and, to the extent any other Lender shall have contributed toward or
indemnified against any such claim, damage, loss, liability, cost or expense,
incurred by an L/C Issuer or the Agent, each such other Lender) from and against
any and all claims, damages, losses, liabilities, costs or expenses which it may
incur (including, without limitation, any claims, damages, losses, liabilities,
costs or expenses which the L/C Issuer may incur by reason of or in connection
with the failure of any other Lender to fulfill or comply with its obligations
to such L/C Issuer hereunder), and none of the Lenders (including an L/C Issuer)
nor the Agent nor any of their officers or directors or employees or agents
shall be liable
35
or responsible, by reason of or in connection with the execution and delivery or
transfer of or payment or failure to pay under any Letter of Credit, including
without limitation any of the circumstances enumerated in subsection (d) above,
as well as (i) any error, omission, interruption or delay in transmission or
delivery of any messages, by mail, cable, telegraph, telex or otherwise, (ii)
any error in interpretation of technical terms, (iii) any loss or delay in the
transmission of any document required in order to make a drawing under a Letter
of Credit, (iv) any consequences arising from causes beyond the control of the
L/C Issuer, including without limitation any government acts, or any other
circumstances whatsoever in making or failing to make payment under such Letter
of Credit; provided that the Borrower shall not be required to indemnify any
Lender for any claims, damages, losses, liabilities, costs or expenses, and the
Borrower shall have a claim against the L/C Issuer for direct (but not
consequential) damage suffered by it, to the extent found by a court of
competent jurisdiction to have been caused by (x) the willful misconduct or
gross negligence of the L/C Issuer in determining whether a request presented
under any Letter of Credit complied with the terms of such Letter of Credit or
(y) the L/C Issuer's failure to pay under any Letter of Credit after the
presentation to it of a request strictly complying with the terms and conditions
of the Letter of Credit. Nothing in this subsection (e) is intended to limit the
obligations of the Borrower under any other provision of this Agreement. To the
extent the Borrower does not indemnify an L/C Issuer as required by this
subsection, the Revolving Lenders agree to do so ratably in accordance with
their Revolving Commitments.
ARTICLE 3
Conditions
Section 3.01. Closing. The closing hereunder shall occur upon satisfaction
of the following conditions, (with each document referred to in this Section
dated the Closing Date unless specified otherwise):
(a) receipt by the Agent of a duly executed Note for the account of
each Lender dated on or before the Closing Date complying with the
provisions of Section 2.03;
(b) receipt by the Agent of an opinion of ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP,
special counsel for the Obligors, substantially in the form of Exhibit G;
(c) receipt by the Agent of an opinion of ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇,
special counsel for the Agent, substantially in the form of
36
Exhibit H-1 hereto and ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, special counsel for
the Agent, substantially in the form of Exhibit H-2 hereto;
(d) receipt by the Agent of duly executed counterparts of each of this
Agreement, the Subsidiary Guaranty and the Collateral Documents (other than
laboratory access letters), together with duly executed financing
statements on Form UCC-1 in form sufficient for filing in all jurisdictions
in which such filing is necessary to perfect Liens created by the
Collateral Documents, and all necessary documents for filing with the U.S.
Patent and Trademark Office and the U.S. Copyright Office, and the delivery
of any promissory notes and stock certificates comprising the Collateral;
(e) receipt by the Agent of a true, complete and correct copy of each
Transaction Document as in effect on the Closing Date, certified as such by
a Responsible Officer;
(f) receipt by the Agent of evidence satisfactory to it of the
satisfaction (without waiver, unless such waiver is approved in writing by
the Agent) of all conditions to the closing of the transactions
contemplated by the Transaction Documents to be consummated on the Closing
Date as set forth in the Transaction Documents, and that all such
transactions will take place prior to or simultaneously with the
transactions contemplated hereby to take place on the Closing Date;
(g) receipt by the Agent of each opinion of counsel required to be
delivered by any Person pursuant to the Transaction Documents on the
Closing Date, with a letter from each Person delivering any such opinion
authorizing reliance thereon by the Agent and the Lenders, all in form and
substance satisfactory to the Agent;
(h) receipt by the Agent of a certificate of the chief financial
officer or chief accounting officer of the Borrower to the effect that
Holdings shall have (x) received net cash proceeds of not less than
$360,000,000 from the issuance of shares of its common stock to Tracinda
and Seven Network and on terms and conditions not materially different in
any material respect from those set forth in the agreements listed on
Schedule 3.01(h)(x) hereto, as amended to the date hereof and substantially
on the terms heretofore disclosed to each of the Lenders, and (y)
contributed such amounts to the Borrower to the extent necessary to pay in
full all obligations of the Borrower under the Existing Credit Agreement;
37
(i) receipt by the Agent of evidence satisfactory to it that all
outstanding obligations of the Borrower and its Subsidiaries under the
agreements and instruments set forth on Schedule 3.01(i) (including without
limitation principal and interest with respect to any loans under the
Existing Credit Agreement and all accrued fees and expenses) shall have
been paid in full or otherwise discharged concurrently with the making of
the Loans to be made hereunder on the Closing Date, all commitments
thereunder have been terminated and all Liens securing such obligations and
all guarantees thereof have been released or provision made for release
thereof that is satisfactory to the Agent (all Lenders hereunder which are
also Lenders under the Existing Credit Agreement hereby agree that
repayment of all outstanding obligations thereunder may be made on the
Closing Date, whether at the end of interest periods under the Existing
Credit Agreement or not);
(j) receipt by the Agent of evidence satisfactory to it that, after
consummation of the transactions contemplated by the Loan Documents and the
Transaction Documents to occur on the Closing Date, the Borrower and its
Subsidiaries shall have no Debt outstanding (other than Debt permitted
pursuant to Section 5.10);
(k) receipt by the Agent of (i) the pro forma balance sheet referred
to in Section 4.04(c) in form and substance satisfactory to the Lenders and
(ii) a certificate of the chief financial officer or the chief accounting
officer of the Borrower setting forth in reasonable detail the calculations
required to establish that after giving effect to the Acquisition and any
related transactions, the Borrower is in compliance with the requirements
of Section 5.14 on the Closing Date;
(l) receipt by the Agent of evidence satisfactory to it of the
insurance coverage required by Section 5.03 and the Collateral Documents;
(m) receipt by the Agent of payment in full of all fees, expenses and
other amounts due and payable hereunder (including fees and expenses
payable pursuant to Section 9.03) or pursuant to any letter agreement
between the Borrower and the Agent or the Arranger relating to the
transactions contemplated by the Loan Documents;
(n) receipt by the Agent of all documents the Agent may reasonably
request relating to the existence of the Obligors and Holdings, the
corporate authority for and the validity of the Loan Documents, and any
other matters relevant hereto, all in form and substance reasonably
satisfactory to the Agent;
38
(o) the fact that the Closing Date shall have occurred on or prior to
September 30, 1997;
(p) the fact that all material governmental and third party approvals
(including approvals under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976 and other consents) necessary in connection with the Acquisition,
all related transactions and Holdings' and its Affiliates' ownership and
operation of the Borrower shall have been obtained and be in full force and
effect, and all applicable waiting periods shall have expired without any
action being taken by any governmental authority which has restrained,
prevented or otherwise imposed materially adverse conditions on the
Acquisition;
(q) the Agent shall not have received notice from Lenders holding at
least 50% of the aggregate amount of the Commitments (which notices so
received shall not have been rescinded) to the effect that (i) such Lenders
have determined in their sole good faith discretion that, since December
31, 1996, there has been a material adverse change in the business,
financial condition, operations, properties or liabilities of the Borrower
and its Subsidiaries, taken as a whole or (ii) there exists pending or
threatened litigation or proceeding against Holdings, the Borrower or any
of its Subsidiaries, or otherwise relating to the Acquisition, which seeks
to enjoin or challenge the Acquisition or the Financing or which the
Lenders have determined in their sole good faith judgment could reasonably
be expected to have a Material Adverse Effect or any material adverse
effect upon the prospects of the Borrower and its Subsidiaries, taken as a
whole; and
(r) receipt by the Agent of evidence satisfactory to it that all
necessary consents, amendments and waivers needed from the Lenders under
the Credit Agreement dated as of October 10, 1996 among MGM, the lenders
and L/C issuers referred to therein and ▇▇▇▇▇▇ Guaranty Trust Company of
New York, as agent, shall have been received to permit the consummation and
performance by the Obligors and Holdings of the Loan Documents and the
Transaction Documents, and the transactions contemplated thereby.
Section 3.02. Borrowings and Issuances of Letters of Credit. The
obligation of any Lender to make a Loan on the occasion of any Borrowing (other
than the obligation of an L/C Issuer to issue (which shall include, for purposes
of this Section, any renewal or extension of the term of) any Letter of Credit
are each subject to the satisfaction of the following conditions:
39
(a) receipt by the Agent of a Notice of Borrowing as required by
Section 2.01 or receipt by the L/C Issuer of a Notice of Issuance as
required by Section 2.14(b);
(b) solely in the case of a Revolving Borrowing or issuance of a
Letter of Credit the fact that, immediately after such Borrowing or the
issuance of such Letter of Credit, as the case may be, the aggregate
Revolving Exposure will not exceed the aggregate amount of the Revolving
Commitments;
(c) the fact that, immediately before and after such Borrowing or
issuance of a Letter of Credit, as the case may be, no Default shall have
occurred and be continuing; and
(d) the fact that the representations and warranties of the Obligors
contained in the Loan Documents shall be true in all material respects on
and as of the date of such Borrowing.
Each Borrowing and issuance of a Letter of Credit hereunder shall be deemed
to be a representation and warranty by the Borrower on the date of such
Borrowing or issuance of a Letter of Credit, as the case may be, as to the facts
specified in clauses (b), (c) and (d) of this Section.
ARTICLE 4
Representations and Warranties
The Borrower represents and warrants that (including, in the case of any
such representation and warranty made or deemed made before the consummation of
the Acquisition, at the time such representation and warranty is made or deemed
made and immediately after giving effect to the consummation of the
Acquisition):
Section 4.01. Corporate Existence and Power. Each Obligor is a corporation
duly incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except to the extent that the failure to have
such licenses, authorizations, consents and approvals could not in the aggregate
reasonably be expected to have a Material Adverse Effect.
Section 4.02. Corporate and Governmental Authorization; No Contravention.
The execution, delivery and performance by each Obligor of the
40
Loan Documents to which it is a party (i) are within the corporate powers of
such Obligor and have been duly authorized by all necessary corporate action,
(ii) require no action by or in respect of, or filing with, any governmental
body, agency or official, other than actions or filings which have been taken or
made on or prior to the Closing Date or, solely with respect to filings
necessary to perfect any security interest created under any of the Collateral
Documents, will be made on or prior to 5 Domestic Business Days after the
Closing Date, (iii) do not contravene, or constitute a default under, any
provision (v) of applicable law or regulation, (w) of the articles or
certificate of incorporation or by-laws of such Obligor, (x) of any agreement or
instrument under which Debt has or may be incurred binding upon the Borrower or
any of its Subsidiaries, (y) of any other agreement or instrument binding upon
the Borrower or any of its Subsidiaries which contravention or default could
reasonably be expected to have a Material Adverse Effect, or (z) of any
judgment, injunction, order or decree binding upon the Borrower or any of its
Subsidiaries or (iv) result in the creation or imposition of any Lien on any
material asset of the Borrower or any of its Subsidiaries.
Section 4.03. Binding Effect. The Loan Documents (other than the Notes) to
which each Obligor is a party constitute valid and binding agreements of such
Obligor and each Note, when executed and delivered in accordance with this
Agreement, will constitute a valid and binding obligation of the Borrower, in
each case enforceable in accordance with its terms except (i) as may be limited
by bankruptcy, insolvency or similar laws affecting creditors' rights generally
and (ii) as may be limited by equitable principles of general applicability.
Section 4.04. Financial Information; Information Memorandum. (a) The
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
of December 31, 1996 and the related consolidated statements of operations,
stockholder's equity (capital deficiency) and cash flows for the fiscal year
then ended, reported on by KPMG Peat Marwick LLP, a copy of which has been
delivered to each of the Lenders, fairly present, in conformity with generally
accepted accounting principles, the consolidated financial position of the
Borrower and its Consolidated Subsidiaries as of such date and their
consolidated results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of March 31, 1997 and the related unaudited
consolidated statements of operations, stockholder's equity (capital deficiency)
and cash flows for the three-month period then ended fairly present, in
conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection (a), the
consolidated financial position of the Borrower and its Consolidated
Subsidiaries as of such date and their consolidated results of operations and
cash flows for such three-month period (subject to normal year-end adjustments).
41
(c) The pro forma balance sheet of the Borrower and its Consolidated
Subsidiaries as of March 31, 1997, copies of which have been delivered to each
of the Lenders prior to the date hereof, fairly presents, in conformity with
generally accepted accounting principles applied on a basis consistent with the
financial statements referred to in subsection (a), the consolidated financial
position of the Borrower and its Consolidated Subsidiaries as of such date,
adjusted to give effect (as if such events had occurred on such date) to (i) the
transactions contemplated by the Loan Documents and the Transaction Documents
to occur on the Closing Date, (ii) the application of the proceeds therefrom as
contemplated by this Agreement and the Transaction Documents and (iii) the
payment of all legal, accounting and other fees related thereto (the "Pro Forma
Transactions"). As of the date of such balance sheet and the Closing Date, the
Borrower and its Subsidiaries had and have no material liabilities, contingent
or otherwise, including liabilities for taxes, long-term leases or forward or
long-term commitments, which are not properly reflected on such balance sheet in
accordance with generally accepted accounting principles or the footnotes
relating thereto.
(d) The projections set forth in the Information Memorandum were prepared
in good faith on assumptions believed to be reasonable at the time of
preparation thereof.
(e) Since December 31, 1996 there has been no material adverse change in
the assets or liabilities or the business, financial condition or results of
operations or prospects of the Borrower and its Consolidated Subsidiaries,
considered as a whole, except for any such change as a result of (x) any change
resulting from general economic, financial or market conditions not specific to
the Borrower and its Subsidiaries or the business in which they operate or (y)
any change resulting from conditions or circumstances generally affecting the
business in which the Borrower and its Subsidiaries operate (including losses
from the release of Films in the ordinary course of business).
Section 4.05. Litigation. There is no action, suit or proceeding pending
against, or to the knowledge of the Borrower threatened against or affecting,
Holdings or any of its Subsidiaries before any court or arbitrator or any
governmental body, agency or official which could reasonably be expected to have
a Material Adverse Effect or which questions the validity or enforceability of
the Loan Documents or the Transaction Documents or the consummation of the
Acquisition.
Section 4.06. Compliance with ERISA. Each member of the ERISA Group has
fulfilled its obligations under the minimum funding standards of ERISA and the
Internal Revenue Code with respect to each Plan and is in
42
compliance in all material respects with the presently applicable provisions of
ERISA and the Internal Revenue Code with respect to each Plan. No member of the
ERISA Group has (i) sought a waiver of the minimum funding standard under
section 412 of the Internal Revenue Code in respect of any Plan, (ii) failed to
make any contribution or payment to any Plan or Multiemployer Plan, or made any
amendment to any Plan, which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Internal
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
Section 4.07. Taxes. The Borrower and its Subsidiaries have filed all
United States Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes due pursuant to
such returns or pursuant to any assessment received by the Borrower or any
Subsidiary (other than any such taxes being contested in good faith by
appropriate proceeding and with respect to which appropriate reserves in
accordance with generally accepted accounting principles have been taken). The
charges, accruals and reserves on the books of the Borrower and its Subsidiaries
in respect of taxes or other governmental charges are, in the opinion of the
Borrower, adequate.
Section 4.08. Subsidiaries. (a) Each of the Borrower's Material
Subsidiaries is a corporation or other business entity duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, and has all corporate or other
powers and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except to the
extent that the failure of such Material Subsidiaries to maintain their
respective good standing or to have such licenses, authorizations, consents and
approvals could not in the aggregate reasonably be expected to have a Material
Adverse Effect (or its existence has been terminated as permitted under Section
5.04 or it has merged or consolidated with another Person as permitted under
Section 5.07(a)).
(b) Schedule 4.08 lists all of the Subsidiaries of the Borrower (including
any Subsidiary the existence of which has been terminated as permitted under
Section 5.04 or which has merged or consolidated with another Person as
permitted under Section 5.07(a)). Each Material Subsidiary of the Borrower
(other than Foreign Subsidiaries) is a Guarantor. Each Guarantor is a direct or
indirect wholly-owned Subsidiary of the Borrower.
Section 4.09. Regulatory Restrictions on Borrowing. The Borrower is not an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended, a "holding company" within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or otherwise subject to any regulatory scheme
which restricts its ability to incur debt.
43
Section 4.10. Full Disclosure. No information heretofore or hereafter
furnished by each Obligor to the Agent or any Lender for purposes of or in
connection with the Loan Documents or any transaction contemplated thereby
contains or, taken together with all information so furnished will contain, any
untrue statement of a material fact or omits or will omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.
Section 4.11. Representations in Transaction Documents True and Correct.
Each of the representations and warranties of Holdings contained in the
Transaction Documents is true and correct in all material respects as of the
Closing Date. The Transaction Documents have not as of the Closing Date been
modified or amended in any respect and no provision or condition contained
therein has been waived, except with the express written consent of the Agent.
Section 4.12. Intellectual Property. The Borrower and each of its
Subsidiaries owns, or is licensed to use, all trademarks, tradenames, copyrights
(including without limitation any copyrights relating to Library Films),
technology, know-how and processes necessary for the conduct of their respective
businesses as currently conducted (the "Intellectual Property"), except to the
extent that the failure to own or be licensed to use any such Intellectual
Property could not in the aggregate reasonably be expected to have a Material
Adverse Effect. No claim has been asserted and is pending by any Person
challenging or questioning the use of any Intellectual Property or the validity
or effectiveness of any such Intellectual Property, nor does the Borrower know
of any valid basis for any such claim, except, in each case, for claims which
could not in the aggregate reasonably be expected to have a Material Adverse
Effect. The use of Intellectual Property by the Borrower and its Subsidiaries
does not infringe on the rights of any Person, except to the extent that such
infringements could not in the aggregate reasonably be expected to have a
Material Adverse Effect.
Section 4.13. Collateral Documents. The representations and warranties
made by the Obligors in the Collateral Documents are true and correct in all
material respects.
Section 4.14. Solvency. As of the Closing Date after giving effect to the
transactions contemplated hereby to occur on the Closing Date, and at all times
thereafter: (i) the aggregate fair market value of the business and/or assets of
the Borrower will exceed its liabilities (including contingent, subordinated,
unmatured and unliquidated liabilities), (ii) the Borrower will have sufficient
cash flow to enable it to pay its debts as they mature and (iii) the Borrower
and its Subsidiaries, taken as a whole, will not have unreasonably small capital
for the business in which the Borrower and its Subsidiaries are engaged.
44
ARTICLE 5
Covenants
The Borrower agrees that, so long as any Lender has any Commitment
hereunder or any amount payable under any Note or any Letter of Credit Liability
remains unpaid:
Section 5.01. Information. The Borrower will deliver to the Agent, with
sufficient copies for all Lenders (and the Agent shall deliver promptly upon
receipt to the Lenders):
(a) as soon as available and in any event within 105 days after the
end of each Fiscal Year, (i) an audited consolidated balance sheet of the
Borrower and its Consolidated Subsidiaries as of the end of such Fiscal
Year and the related audited consolidated statements of operations,
stockholder's equity and cash flows for such Fiscal Year, setting forth in
each case in comparative form the figures for the previous Fiscal Year, all
reported on without material qualification by independent public
accountants of nationally recognized standing and (ii) an unaudited
consolidated statement of cash flows of the Borrower and its Consolidated
Subsidiaries for such Fiscal Year, setting forth (x) in reasonable detail a
calculation of Consolidated Net Cash Flows and consolidated cash flows from
operations of the Borrower and its Consolidated Subsidiaries, in each case
for such Fiscal Year (in each case determined in a manner consistent with
the statements of cash flows included in the Information Memorandum) and
(y) in comparative form the figures for such statements for such Fiscal
Year set forth in the Information Memorandum;
(b) as soon as available and in any event within 45 days after the end
of each of the first three Fiscal Quarters of each Fiscal Year, (i) a
consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such Fiscal Quarter and the related
consolidated statements of operations, stockholder's equity and cash flows
for such Fiscal Quarter and for the portion of the Fiscal Year ended at the
end of such Fiscal Quarter, setting forth in the case of such statements of
operations, stockholder's equity and cash flows, in comparative form the
figures for the corresponding Fiscal Quarter and the corresponding portion
of the previous Fiscal Year, all certified (subject to normal year-end
adjustments) as to fairness of presentation, generally accepted accounting
principles and consistency by the chief financial officer or the chief
accounting officer of the Borrower and (ii) an unaudited consolidated
statement of cash flows of the Borrower and its Consolidated Subsidiaries
for such Fiscal Quarter and the portion of the Fiscal Year ended at the end
of such Fiscal Quarter, setting forth (x) in reasonable detail a
calculation
45
of Consolidated Net Cash Flows and consolidated cash flows from operations
of the Borrower and its Consolidated Subsidiaries, in each case for such
Fiscal Quarter and the portion of the Fiscal Year ended at the end of such
Fiscal Quarter (in each case determined in a manner consistent with the
statements of cash flows included in the Information Memorandum) and (y) in
comparative form the figures for such statements for the corresponding
Fiscal Quarter and the corresponding portion of the previous Fiscal Year
set forth in the Information Memorandum;
(c) simultaneously with the delivery of each set of financial
statements referred to in clauses (a) and (b) above, (A) a certificate of
the chief financial officer or the chief accounting officer of the
Borrower, (i) setting forth in reasonable detail the calculations required
to establish whether the Borrower was in compliance with the requirements
of Sections 5.11 to 5.16, inclusive, and Section 5.19 on the date of such
financial statements, (ii) listing all new Subsidiaries of the Borrower
since the date of the previous certificate delivered pursuant to this
Section 5.01(c), (iii) solely in the case of each set of financial
statements referred to in clause (a) above, setting forth in reasonable
detail the calculations required to determine Excess Cash Flow for the
related Fiscal Year and (iv) stating whether, to his or her knowledge, any
Default exists on the date of such certificate and, if any Default then
exists, setting forth the details thereof and the action which the Borrower
is taking or proposes to take with respect thereto and (B) from the chief
financial officer or the chief accounting officer of the Borrower, a report
setting forth in reasonable detail a discussion and analysis of the
Borrower's financial condition and results of operations for the Fiscal
Quarter then ended;
(d) simultaneously with the delivery of each set of financial
statements referred to in clause (a)(i) above, a statement of the firm of
independent public accountants which reported on such statements (i)
whether anything has come to their attention to cause them to believe that
any Default under Sections 5.11 to 5.16, inclusive, or Section 5.19 existed
on the date of such statements and (ii) confirming the accuracy of the
calculations set forth in the officer's certificate delivered
simultaneously therewith pursuant to clause (c) above (other than the
calculations relating to the determination of Excess Cash Flow);
(e) within five days after any Responsible Officer obtains knowledge
of any Default, if such Default is then continuing, a certificate of the
chief financial officer or the chief accounting officer of the Borrower
setting forth the details thereof and the action which the Borrower is
taking or propose to take with respect thereto;
46
(f) as soon as reasonably practicable after any Responsible Officer
obtains knowledge thereof, notice of any event or condition which has had
or could reasonably be expected to have a Material Adverse Effect and the
nature of such Material Adverse Effect;
(g) as soon as reasonably practicable after any Responsible Officer
obtains knowledge of the commencement of, or of a threat of the
commencement of, an action, suit or proceeding against the Borrower or any
of its Subsidiaries before any court or arbitrator or any governmental
body, agency or official which could reasonably be expected to have a
Material Adverse Effect or which questions the validity or enforceability
of the Loan Documents or the Transaction Documents or the consummation of
the Acquisition, a certificate of a senior financial officer of the
Borrower setting forth the nature of such pending or threatened action,
suit or proceeding and such additional information with respect thereto as
may be reasonably requested by any Lender;
(h) promptly upon the filing thereof, copies of all registration
statements (other than the exhibits thereto and any registration statements
on Form S-8 or its equivalent) and reports on Forms 10-K, 10-Q and 8-K (or
their equivalents) (if any) which the Borrower or Holdings shall have filed
with the Securities and Exchange Commission;
(i) if and when any member of the ERISA Group (i) gives or is required
to give notice to the PBGC of any "reportable event" (as defined in Section
4043 of ERISA) with respect to any Plan which might constitute grounds for
a termination of such Plan under Title IV of ERISA, or knows that the plan
administrator of any Plan has given or is required to give notice of any
such reportable event, a copy of the notice of such reportable event given
or required to be given to the PBGC; (ii) receives notice of complete or
partial withdrawal liability under Title IV of ERISA or notice that any
Multiemployer Plan is in reorganization, is insolvent or has been
terminated, a copy of such notice; (iii) receives notice from the PBGC
under Title IV of ERISA of an intent to terminate, impose liability (other
than for premiums under Section 4007 of ERISA) in respect of, or appoint a
trustee to administer any Plan, a copy of such notice; (iv) applies for a
waiver of the minimum funding standard under Section 412 of the Internal
Revenue Code, a copy of such application; (v) gives notice of intent to
terminate any Plan under Section 4041(c) of ERISA, a copy of such notice
and other information filed with the PBGC; (vi) gives notice of withdrawal
from any Plan pursuant to Section 4063 of ERISA, a copy of such notice; or
(vi) fails to make any payment or contribution to any Plan or Multiemployer
Plan or makes any amendment to any Plan which has resulted or could result
in the imposition of a Lien or the posting of a
47
bond or other security, a certificate of the Borrower's chief financial
officer or chief accounting officer setting forth details as to such
occurrence and the action, if any, which the Borrower or applicable member
of the ERISA Group is required or proposes to take;
(j) from time to time at the request of the Agent (but no more
frequently than once in any 12-month period), an appraisal made by a
qualified independent appraiser selected by the Borrower and reasonably
satisfactory to the Agent, as to value of the Library Films or any portion
thereof, including copyrights pertaining thereto and all contractual and
other rights associated with or related to the Library Films, and as of
such date as shall each be specified in the relevant request made by the
Agent, performed using methods and procedures, and prepared in a form,
reasonably satisfactory to the Required Lenders;
(k) within 30 days prior to the end of each Fiscal Year, the operating
and capital expenditure budgets and cash flow forecasts of the Borrower and
its Consolidated Subsidiaries for the immediately succeeding Fiscal Year,
which budgets and forecasts shall be in format and scope reasonably
consistent with the projections, budgets and forecasts set forth in the
Information Memorandum; and
(l) from time to time such additional information regarding the
financial position or business of the Borrower and its Subsidiaries or any
other Obligor as the Agent, at the request of any Lender, may reasonably
request.
Section 5.02. Performance of Obligations. The Borrower will pay and
discharge, and will cause each Material Subsidiary to pay and discharge, at or
before maturity, all their respective material obligations and liabilities
(including, without limitation, tax liabilities and claims of materialmen,
warehousemen and the like which if unpaid might by law give rise to a Lien), and
will duly observe and perform, and will cause each Material Subsidiary to duly
observe and perform, all material terms and conditions of all material
agreements and, without limitation of the foregoing, all production services
agreements with respect to any Film, all completion guaranties and distribution
agreements except (i) where the same may be contested in good faith by
appropriate proceedings, with respect to which the Borrower and/or such Material
Subsidiary has established, in accordance with generally accepted accounting
principles, appropriate reserves for the accrual of any of the same and (ii)
where the failure to pay or discharge such obligations and liabilities could not
in the aggregate reasonably be expected to have a Material Adverse Effect.
48
Section 5.03. Maintenance of Property; Insurance. (a) The Borrower will
keep, and will cause each Material Subsidiary to keep, all property useful and
necessary in its business in good working order and condition, ordinary wear and
tear excepted.
(b) The Borrower will, and will cause each of its Material Subsidiaries
to, maintain (either in the name of the Borrower or in such Material
Subsidiary's own name) with financially sound and responsible insurance
companies, insurance on all their respective properties in at least such
amounts, against at least such risks and with such risk retention as are usually
maintained, insured against or retained, as the case may be, in the same general
area by companies of established repute engaged in the same or a similar
business (but including in any event public liability insurance and "errors and
omissions" insurance); and will furnish to the Lenders, upon request from the
Agent, information presented in reasonable detail as to the insurance so
carried.
Section 5.04. Conduct of Business and Maintenance of Existence. The
Borrower will continue, and will cause each Material Subsidiary to continue, to
engage in business of the same general type as now conducted by the Borrower and
its Material Subsidiaries and will preserve, renew and keep in full force and
effect, and will cause each Material Subsidiary to preserve, renew and keep in
full force and effect their respective corporate existence and their respective
rights, privileges and franchises necessary or desirable in the normal conduct
of business, except to the extent that the failure to keep in full force and
effect such rights, privileges and franchises could not in the aggregate
reasonably be expected to have a Material Adverse Effect; provided that (i) the
Borrower may liquidate or terminate the corporate existence of any Material
Subsidiary if, prior to or contemporaneously with such liquidation or
termination, substantially all of the assets of such Material Subsidiary are
distributed, contributed or otherwise transferred to the Borrower or a
Guarantor, (ii) except for continuing development, production and release with
respect to Existing 1997 Films, the Borrower and its Subsidiaries shall not be
required to, and shall not, continue to engage in the development, production
and release of new films and (iii) nothing in this Section 5.04 shall prohibit
any transaction explicitly permitted by the proviso set forth in Section
5.07(a).
Section 5.05. Compliance with Laws. The Borrower will comply, and cause
each Material Subsidiary to comply, in all material respects with all applicable
laws, ordinances, rules, regulations, and requirements of governmental
authorities (including, without limitation, ERISA and the rules and regulations
thereunder) except (i) where the necessity of compliance therewith is contested
in good faith by appropriate proceedings or (ii) to the extent that failure to
so comply could not in the aggregate reasonably be expected to have a Material
Adverse Effect.
49
Section 5.06. Inspection of Property, Books and Records. The Borrower will
keep, and will cause each Subsidiary to keep, proper books of record and account
in which full, true and correct entries shall be made of all dealings and
transactions in relation to its business and activities; and will permit, and
will cause each Subsidiary to permit, representatives of the Agent, at the
Agent's or any Lender's expense, to visit and inspect any of their respective
properties, to examine and make abstracts from any of their respective books and
records and to discuss their respective affairs, finances and accounts with
their respective officers, employees and independent public accountants, all at
such reasonable times during normal business hours and upon reasonable prior
notice, and as often as may reasonably be desired.
Section 5.07. Mergers and Sales of Assets; Licensing Agreements. (a) The
Borrower will not, and will not permit any Material Subsidiary to, consolidate
or merge with or into any other Person; provided that (i) the Borrower may merge
with another Person if the Borrower is the corporation surviving such merger and
immediately after giving effect to such merger, no Default shall have occurred
and be continuing and (ii) any Material Subsidiary may merge with any other
Person if the corporation surviving the merger is the Borrower or a Guarantor
and immediately after giving effect to such merger, no Default shall have
occurred and be continuing.
(b) The Borrower will not, and will not permit any of its Subsidiaries to,
make any Asset Sale in any Fiscal Year, other than (i) Asset Sales the fair
market value of which, when combined with all other such Asset Sales previously
made during such Fiscal Year, does not exceed $1,000,000, (ii) MGM Film Related
Asset Dispositions to the extent permitted by clause (viii) of Section 5.20 and
(iii) any Asset Sale in which (x) the consideration therefor is not less than
the fair market value of the related asset (as determined in good faith by the
chief financial officer or chief accounting officer of the Borrower), (y) the
consideration received therefor consists solely of cash payable at the closing
thereof and (z) after giving effect to such Asset Sale, the aggregate fair
market value of the assets disposed of in all Asset Sales in such Fiscal Year
does not exceed $5,000,000. Notwithstanding the foregoing, the Borrower will
not, and will not permit any of its Subsidiaries to, enter into any receivables
securitization program or other type of accounts receivable financing
transaction.
(c) Without limitation of the foregoing, the Borrower will not, and will
not permit its Subsidiaries to, sell, lease or otherwise transfer, directly or
indirectly, all or substantially all of the assets of the Borrower and its
Subsidiaries, taken as a whole, to any other Person; provided that nothing in
this subsection (c) shall prohibit any Subsidiary from distributing,
contributing or otherwise transferring its assets to the Borrower or a
Guarantor.
50
(d) Without limitation of the foregoing, the Borrower will not, and will
not permit its Subsidiaries to, enter into any Licensing Agreement or series of
related Licensing Agreements with respect to any Library Films if:
(i) the aggregate amount of payments payable for the account of or
allocable to the Borrower and/or its Subsidiaries under such Licensing
Agreement or series of related Licensing Agreements exceeds $75,000,000; or
(ii) the Borrower or such Subsidiary conveys, sells, assigns,
transfers or otherwise disposes of, with or without recourse, its rights to
receive payments under any such Licensing Agreement or series of related
Licensing Agreements; or
(iii) the aggregate amount of payments for the account of or allocable
to the Borrower and/or its Subsidiaries under such Licensing Agreement or
series of related Licensing Agreements exceeds $7,500,000 and the aggregate
amount of payments under all such Licensing Agreement or series of related
Licensing Agreements that are not to be made reasonably pro rata over the
period of availability of the Films which are the subject of such Licensing
Agreement or series of related Licensing Agreements would exceed the
greater of (x) 10% of the aggregate amount of all payments under such
Licensing Agreement or series of related Licensing Agreements and (y)
$7,500,000.
(e) Without limitation of the foregoing, the Borrower will not, and will
not permit its Subsidiaries to, enter into any Licensing Agreement or series of
related Licensing Agreements with respect to any Films (other than Library
Films) or Film Related Assets if the Borrower or such Subsidiary conveys, sells,
assigns, transfers or otherwise disposes of, with or without recourse, its
rights to receive payments under any such Licensing Agreement or series of
related Licensing Agreements.
Section 5.08. Use of Proceeds. The proceeds of the Term Loans and the
Revolving Loans made on the Closing Date will be used by the Borrower to repay
Debt and other obligations outstanding under the agreements and instruments
listed on Schedule 3.01(i) and to pay for transaction costs incurred in
connection with the Acquisition and the financing thereof. The Letters of
Credit and the proceeds of the Revolving Loans made after the Closing Date will
be used for ongoing production costs in connection with any Existing 1997 Film,
non-recurring expenses associated with the Acquisition and general corporate
purposes. None of such proceeds and none of the Letters of Credit will be used,
directly or indirectly, for the purpose, whether immediate, incidental or
ultimate, of buying or carrying any "margin stock" within the meaning of
Regulation U.
51
Section 5.09. Negative Pledge. Neither the Borrower nor any Subsidiary
will create, assume or suffer to exist any Lien on any asset now owned or
hereafter acquired by it, except:
(a) any Lien existing on any asset of any Person at the time such
Person becomes a Subsidiary and not created in contemplation of such event;
(b) any Lien on any fixed or capital asset securing Debt incurred or
assumed for the purpose of financing all or any part of the cost of
acquiring such asset; provided that such Lien attaches to such asset
concurrently with or within 90 days after the acquisition thereof;
(c) any Lien on any asset of any Person existing at the time such
Person is merged or consolidated with or into the Borrower or a Subsidiary
and not created in contemplation of such event;
(d) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or a Subsidiary and not created in contemplation of such
acquisition;
(e) any Lien on assets of a Foreign Subsidiary securing Debt permitted
under Section 5.10(f);
(f) any Lien arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses of this Section, provided that such Debt is not increased and is
not secured by any additional assets;
(g) any Lien securing Profit Participations, Residuals and Deferred
Payments and other obligations that do not constitute Debt by operation of
clause (x) of the proviso in the definition of "Debt"; provided that such
Lien attaches solely to cash deposits and the Film or Films or Film Related
Assets that are the subject of such arrangements;
(h) Liens (other than Liens securing Debt) consisting of rights of
licensees under access agreements pursuant to which such licensees have
access to duplicating material for the purpose of making prints of Films
licensed to them, and rights of distributors, exhibitors, licensees and
other Persons in Films created in connection with the distribution and
exploitation of such Films in the ordinary course of business;
(i) Liens on cash and cash equivalents arising under the escrow
arrangements referred to in the proviso to the definition of Sale-Leaseback
52
Transactions and Liens consisting of the rights and interests of the lessor
with respect to Films subject to Sale-Leaseback Transactions permitted
under Section 5.10(d) hereof;
(j) Liens arising out of Licensing Agreements or security agreements
entered into pursuant to such Licensing Agreements in respect of Films or
Film Related Assets permitted under Section 5.07(d) or Section 5.07(e)
hereof, consisting of such licensed rights and attaching solely to the Film
or Films or Film Related Assets so licensed;
(k) Liens in existence on the Closing Date and reflected in Schedule
5.09 hereto;
(l) Liens for taxes not yet due or which are being contested in good
faith by appropriate proceedings, provided that adequate reserves with
respect thereto are maintained on the books of the Borrower or its
Subsidiaries, as the case may be, in conformity with generally accepted
accounting principles (or, in the case of Foreign Subsidiaries, generally
accepted accounting principles in effect from time to time in their
respective jurisdictions of incorporation);
(m) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business which are
not overdue for a period of more than 60 days or which are being contested
in good faith by appropriate proceedings;
(n) pledges or deposits in connection with workers' compensation,
unemployment insurance or other social security legislation and deposits
securing liability to insurance carriers under insurance or self-insurance
arrangements;
(o) Liens on deposits to secure obligations to acquire Films or Film
Related Assets or the performance of bids, trade contracts (other than
contracts under which Debt may be incurred), leases, performance or
completion bonds and other obligations of a like nature incurred in the
ordinary course of business; provided that any such Liens securing the
obligation of the Borrower or any of its Subsidiaries to acquire Films or
Film Related Assets shall encumber only cash;
(p) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and which do not in any case
materially detract from the value of the property subject thereto or
53
materially interfere with the ordinary conduct of the business of the
Borrower or such Subsidiary;
(q) Liens securing Debt permitted by Sections 5.10(h) provided that
(x) the agreement to grant such Liens shall be created substantially
simultaneously with the acquisition, development, production or
postproduction of such Existing 1997 Films and (y) such Liens do not at any
time encumber any property other than the Existing 1997 Films being
produced, developed or acquired;
(r) Liens (other than Liens securing Debt) incurred in the ordinary
course of business on any Existing 1997 Film constituting negotiation
rights with respect to such Existing 1997 Film, options to develop such
Existing 1997 Film or similar rights with respect to such Existing 1997
Film;
(s) Liens (other than Liens permitted by any of the foregoing clauses)
arising in the ordinary course of its business which (i) do not secure Debt
or Derivatives Obligations, (ii) do not secure any obligation in an amount
exceeding $1,000,000 and (iii) do not in the aggregate materially detract
from the value of its assets or materially impair the use thereof in the
operation of its business; and
(t) Liens created by the Collateral Documents.
Section 5.10. Limitation on Debt. The Borrower will not, and will not
permit any of its Subsidiaries to, incur or at any time be liable with respect
to any Debt except:
(a) Debt under this Agreement;
(b) Debt secured by Liens permitted by Section 5.09(a), (b), (c), (d) or
(f);
(c) Debt of the Borrower or any of its Subsidiaries incurred to finance any
acquisition of fixed or capital assets permitted pursuant to Section 5.14 and
any Debt of the relevant obligor refinancing such Debt; provided that the
principal amount thereof is not increased;
(d) Debt in respect of Sale-Leaseback Transactions;
(e) Debt outstanding on the Closing Date and listed on Schedule 5.10;
54
(f) Debt of any Foreign Subsidiary owed to a person other than the
Borrower, any Guarantor or any other Foreign Subsidiary incurred for working
capital purposes in an aggregate principal amount not in excess of $1,000,000 at
any time;
(g) (i) Debt of the Borrower owed to a Guarantor, or Debt of a Guarantor
owed to the Borrower or another Guarantor, or Debt of a Foreign Subsidiary owed
to another Foreign Subsidiary or (ii) Debt of a Foreign Subsidiary owed to the
Borrower or a Guarantor and incurred in the ordinary course of business to
finance operating expenditures of such Foreign Subsidiary and evidenced by a
note (which may be a grid note) constituting Collateral under a Pledge
Agreement;
(h) Debt incurred in connection with the financing or refinancing of the
development, production, acquisition, distribution, exhibition or exploitation
of any Existing 1997 Film, but solely to the extent that under the terms of such
Debt the obligations of the Borrower and its Subsidiaries with respect to such
Debt may be satisfied by recourse only to such Existing 1997 Film and rights
pertaining thereto and, in each case, to the proceeds thereof; and
(i) Debt not otherwise permitted by the foregoing clauses of this Section
in an aggregate principal or face amount not in excess of $5,000,000 at any
time.
Section 5.11. Debt to Net Cash Flow. At no time during any Fiscal Quarter
set forth below shall the Leverage Ratio be greater than the ratio set forth
below opposite such Fiscal Quarter:
Fiscal Quarter
Ending Ratio
-------------- -----
3/31/98 5.0:1
6/30/98 5.0:1
9/30/98 3.25:1
12/31/98 2.75:1
3/31/99 2.50:1
6/30/99 2.25:1
9/30/99 2.00:1
12/31/99 1.75:1
3/31/00 1.75:1
6/30/00 1.75:1
9/30/00 1.75:1
12/31/00 1.50:1
3/31/01 1.50:1
6/30/01 1.25:1
55
9/30/01 1.25:1
Thereafter 1.00:1
Section 5.12. Minimum Library Cash Flow. At the last day of each Fiscal
Quarter, Library Cash Flows for the four consecutive Fiscal Quarters then most
recently ended (or (A) solely at the last day of the fourth Fiscal Quarter of
1997, Library Cash Flows for the two Fiscal Quarters then most recently ended
multiplied by two, and (B) solely at the last day of the first Fiscal Quarter of
1998, Library Cash Flows for the three Fiscal Quarters then most recently ended
multiplied by 1.33) will not be less than the amount set forth opposite such
Fiscal Quarter:
Fiscal Quarter
Ending Amount
-------------- -----------
12/31/97 $40,000,000
3/31/98 $45,000,000
6/30/98 $50,000,000
9/30/98 $50,000,000
12/31/98 $55,000,000
3/31/99 $55,000,000
6/30/99 $55,000,000
9/30/99 $55,000,000
12/31/99 $55,000,000
3/31/00 $50,000,000
6/30/00 $47,500,000
9/30/00 $47,500,000
12/31/00 $45,000,000
3/31/01 $40,000,000
6/30/01 $37,500,000
9/30/01 $37,500,000
Thereafter $35,000,000
Section 5.13. Maximum Capital Expenditures. Consolidated Capital
Expenditures for any Fiscal Year will not exceed $250,000.
Section 5.14. Minimum Consolidated Adjusted Net Worth. Consolidated
Adjusted Net Worth will at no time be less than an amount equal to the sum of
(i) $300,000,000 plus (ii) an amount equal to 50% of Consolidated Net Income for
each Fiscal Quarter ending after June 30, 1997 but prior to the date of
determination, in each case, for which such Consolidated Net Income is positive
(but with no deduction on account of negative Consolidated Net Income for any
Fiscal Quarter), plus (iii) 100% of the aggregate net proceeds, including the
fair
56
market value of property other than cash (as determined in good faith by the
Board of Directors of the Borrower) received by the Borrower from the issuance
and sale after the date hereof of any capital stock of the Borrower (other than
the proceeds of any issuance and sale of any capital stock (x) to a Subsidiary
or (y) which is required to be redeemed, or is redeemable at the option of the
holder, if certain events or conditions occur or exist or otherwise) or in
connection with the conversion or exchange of any Debt of the Borrower into
capital stock of the Borrower after the closing of the Acquisition.
Section 5.15. Restrictions on Film Production Expenditures. (a) The
Borrower will not, and will not permit any of its Subsidiaries, to make any Film
Production Expenditures for any Films other than Existing 1997 Films.
(b) At the last day of each Fiscal Quarter ended on or before June 30,
1998, the aggregate Film Production Expenditures for the Existing 1997 Films for
the period from July 1, 1997 through such date, considered as a single
accounting period, shall not exceed $20,000,000.
Section 5.16. Maximum Cash Overhead and Administrative Expenses.
Consolidated overhead and administrative expenditures (including amounts
capitalized in accordance with generally accepted accounting principles)
expended in cash by the Borrower and its Consolidated Subsidiaries will not
exceed (i) $3,000,000 for the first Fiscal Quarter of 1998, (ii) $2,250,000 for
the second Fiscal Quarter of 1998, (iii) $1,500,000 for the third Fiscal Quarter
of 1998, (iv) $1,000,000 for each of the fourth Fiscal Quarter of 1998 and the
first and second Fiscal Quarters of 1999 and (iv) $750,000 for any Fiscal
Quarter thereafter.
Section 5.17. Restricted Payments. Neither the Borrower nor any Subsidiary
will declare or make any Restricted Payment, provided that the Borrower or any
Subsidiary may make MGM Film Related Asset Dispositions for consideration
received by the Borrower or such Subsidiary not less than the greater of cost or
book value of the Film Related Asset so disposed of, to the extent that the
aggregate value (determined at the greater of cost and book value) for all such
transactions after the Closing Date does not exceed $5,000,000.
Section 5.18. Investments. Neither the Borrower nor any Subsidiary will
hold, make or acquire any Investment in any Person other than:
(a) Investments by the Borrower in the form of equity interests of Persons
which are Guarantors or which, within 30 days after consummation of such
Investment, become Guarantors;
57
(b) Investments (other than Investments permitted by any of the foregoing
clauses) in existence on the date hereof and listed on Schedule 5.18;
(c) Investments made after the date hereof pursuant to a commitment to make
such Investments in existence on the date hereof and listed on Schedule 5.18;
(d) Temporary Cash Investments;
(e) Investments constituting intercompany loans permitted under Section
5.10(g);
(f) Investments made by the Borrower or any Subsidiary in the ordinary
course of business pursuant to arm's length transactions in Persons (other than
the Borrower or any Subsidiary) for the development, production, acquisition,
distribution, exhibition or exploitation of Existing 1997 Film, copyrights or
trademarks in connection with co-production deals, split-▇▇▇▇▇▇ ▇▇▇▇, overhead
deals or similar arrangements (as such terms are generally understood in the
movie industry on the date hereof), provided that such Investments for the
development, production, acquisition, distribution, exhibition or exploitation
involving payment obligations owing to the Borrower or such Subsidiary (other
than advances against contractual rights to payment or other compensation made
to talent in the ordinary course of business) of Existing 1997 Films will be
secured, if such Existing 1997 Films are to be in the United States, by Liens on
such Existing 1997 Films in favor of the Borrower or such Subsidiary;
(g) Investments (other than Investments permitted by any of the foregoing
clauses) by the Borrower or any Subsidiary in the form of equity interests of
Persons which are not Guarantors; provided that the aggregate net book value of
all Investments permitted by this clause (g) does not exceed $5,000,000; and
(h) any Investment not otherwise permitted by the foregoing clauses of this
Section if, immediately after such Investment is made or acquired, the aggregate
net book value of all Investments permitted by this clause (h) does not exceed
$5,000,000.
Section 5.19. Limitation on Non-Recurring Acquisition Expenditures. The
aggregate amount of all non-recurring charges taken by the Borrower in
connection with the Acquisition (including without limitation, legal and other
transaction related fees, severance, termination expenses in connection with
leases and other commitments and other related expenses) shall not exceed
$45,000,000.
58
Section 5.20. Transactions with Affiliates. The Borrower will not, and
will not permit any Subsidiary to, directly or indirectly, pay any funds to or
for the account of, make any investment (whether by acquisition of stock or
indebtedness, by loan, advance, transfer of property, guarantee or other
agreement to pay, purchase or service, directly or indirectly, any Debt, or
otherwise) in, lease, sell, transfer or otherwise dispose of any assets,
tangible or intangible, to, or participate in, or effect, any transaction with,
any Affiliate except on an arms-length basis on terms at least as favorable to
the Borrower or such Subsidiary than could have been obtained from a third party
who was not an Affiliate; provided that the foregoing provisions of this Section
shall not prohibit (i) any such Person from declaring or paying any lawful
dividend or other payment ratably in respect of all of its capital stock of the
relevant class so long as, after giving effect thereto, no Default shall have
occurred and be continuing, (ii) the consummation of the transactions
contemplated by the agreements set forth on Schedule 5.20, as amended to the
date hereof and substantially in the forms heretofore distributed to each of the
Lenders, (iii) customary indemnification arrangements between the Borrower and
the directors and officers of Holdings, the Borrower, and each Subsidiary, (iv)
customary tax sharing arrangements between or among Holdings, the Borrower, and
the Subsidiaries, (v) payment of a ratable portion of the cost of "D&O",
"keyman" and similar insurance by the Borrower or Holdings, including with
respect to directors and officers of Holdings, the Borrower and its
Subsidiaries, (vi) services arrangements between Holdings or one or more of the
MGM Companies and the Borrower or one or more of its Subsidiaries relating to
the provision of development, production, operational, administrative or other
services by employees of one of the parties to other parties; (viii)
arrangements between the MGM Companies and the Borrower or one or more of its
Subsidiaries relating to the use by the MGM Companies of any trademarks, service
marks, trade names or logos of the Borrower or such Subsidiary in connection
with the production, distribution or other exploitation of motion pictures,
(vii) payment of a ratable portion of shared overhead and other administrative
costs of Holdings, the MGM Companies and the Borrower and its Subsidiaries and
(viii) any MGM Film Related Asset Disposition for consideration received by the
Borrower or the Subsidiary disposing of such Film Related Asset of not less than
the greater of cost or book value of such Film Related Asset, to the extent that
the aggregate value (determined at the greater of cost and book value) for all
such Film Related Assets so disposed of pursuant to this clause (viii) after the
Closing Date does not exceed $5,000,000.
Section 5.21. No Modification of Agreements Without Consent. The Borrower
will not, and will not permit any of its Subsidiaries to, consent to or solicit
any amendment or supplement to, or any waiver or other modification of any
Transaction Document or any of the ancillary agreements referred to therein in
any manner which could reasonably be expected to adversely affect the rights
59
of the Agent or the Lenders under this Agreement or the Notes or the other Loan
Documents or their ability to enforce the same.
Section 5.22. Limitation on Restrictions Affecting Subsidiaries. Neither
the Borrower nor any of its Subsidiaries will enter into, or suffer to exist,
any agreement with any Person, other than this Agreement, which prohibits or
limits the ability of any Subsidiary to (a) pay dividends or make other
distributions or pay any Debt owed to the Borrower or any Subsidiary, (b) make
loans or advances to the Borrower or any Subsidiary, (c) transfer any of its
properties or assets to Borrower or any Subsidiary or (d) create, incur, assume
or suffer to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired (other than with respect to assets
subject to consensual liens permitted under Section 5.09); provided that the
foregoing shall not apply to (i) provisions restricting assignment of any lease
or other contract, (ii) restrictions imposed by applicable law, (iii)
restrictions under any agreement relating to any property, asset or business
acquired by the Borrower or any of its Subsidiaries, which restrictions existed
at the time of acquisition, (iv) restrictions with respect solely to a
Subsidiary or the Borrower imposed pursuant to a binding agreement (subject only
to customary closing conditions and termination provisions) that has been
entered into for the sale or disposition of all or substantially all of the
capital stock or assets to be sold of such Subsidiary, provided that such sale
is permitted under Section 5.07(b) hereof, (v) customary restrictions on
transfer of Collateral imposed on such Collateral in connection with Liens on
such Collateral securing Debt, to the extent such Liens are permitted under
Section 5.09 hereof, (vi) restrictions in effect on the date of this Agreement
contained in agreements governing Debt of Foreign Subsidiaries outstanding on
the date of this Agreement, and (vii) restrictions ("New Restrictions") set
forth in replacements of agreements or instruments ("Replaced Agreements")
containing restrictions described in clauses (iii) or (vi); provided that such
New Restrictions are no more restrictive in any material respect than the
restrictions set forth in the relevant Replaced Agreement and do not apply to
any additional property or assets.
Section 5.23. Hedging Facilities. Not later than 180 days after the
Closing Date the Borrower will have entered into and thereafter maintain in full
force and effect interest rate agreements in such amounts and on such terms as
shall result in effectively limiting the interest cost to the Borrower on not
less than 50% of Total Borrowed Funds for a period of three years beginning on
such date, all on terms and conditions reasonably satisfactory to the Required
Lenders.
Section 5.24. Further Assurances. (a) The Borrower will, and will cause
each Guarantor to, at the Borrower's sole cost and expense, do, execute,
acknowledge and deliver all such further acts, deeds, conveyances, mortgages,
assignments, notices of assignment and transfers as the Agent shall from time to
time request, which may be necessary in the reasonable judgment of the Agent
60
from time to time to assure, perfect, convey, assign and transfer to the Agent
the property and rights conveyed or assigned pursuant to the Collateral
Documents.
(b) All costs and expenses in connection with the grant of any security
interests under the Collateral Documents, including without limitation
reasonable legal fees and other reasonable costs and expenses in connection with
the granting, perfecting and maintenance of any security interests under the
Collateral Documents or the preparation, execution, delivery, recordation or
filing of documents and any other acts as the Agent may reasonably request in
connection with the grant of such security interests shall be paid by the
Borrower promptly upon demand.
(c) The Borrower will not, and will not permit any of its Subsidiaries to,
enter into or become subject to any agreement which would impair their ability
to comply, or which would purport to prohibit them from complying, with the
provisions of this Section.
(d) The Borrower will cause each Subsidiary acquired after the Closing
Date and each Subsidiary which becomes a Subsidiary after the Closing Date (in
each case, other than a Foreign Subsidiary) (i) to become a party to the
Subsidiary Guaranty as guarantor by executing a supplement thereof in form and
substance satisfactory to the Agent and (ii) to enter into a Security Agreement
and any other agreements as may be necessary or desirable in order to grant
perfected first priority security interests upon all of its assets to secure its
obligations under the Subsidiary Guaranty. In addition, the Borrower will
pledge, or cause to be pledged, pursuant to a Pledge Agreement, all of the
capital stock or other equity interests of such Subsidiary owned directly or
indirectly by the Borrower (or, if such Subsidiary is a Foreign Subsidiary, 66%
of the capital stock or equity interests of such Subsidiary). The Borrower
shall cause each such Subsidiary to take such actions as may be necessary or
desirable to effect the foregoing within 30 days after such Subsidiary is
acquired or becomes a Subsidiary, as the case may be, including without
limitation causing such Subsidiary to (x) execute and deliver to the Agent such
number of copies as the Agent may specify of such supplements and Security
Agreement and other documents creating security interests and (y) deliver such
certificates, evidences of corporate action or other documents as the Agent may
reasonably request, all in form and substance satisfactory to the Agent,
relating to the satisfaction of the Borrower's obligations under this Section.
Upon compliance by the Borrower with the provisions of this subsection (d),
Schedule 4.08 shall be deemed to have been amended to reflect that such
Subsidiary is a Guarantor.
(e) The Borrower will, and will cause each of its Subsidiaries to, take
all action necessary in accordance with good business practices to (i) maintain
in full force and effect (x) all trademarks, service marks, trade names and
licenses and all
61
material rights with respect to the foregoing, necessary for the conduct of its
business as now conducted (collectively, the "Trademarks") and (y) all
copyrights (including without limitation any copyrights relating to Library
Films) and all material rights with respect thereto, necessary for the conduct
of its business as now conducted (collectively, the "Copyrights"), other than
such Trademarks and Copyrights which the Borrower reasonably determines are, in
the aggregate, of insignificant or non-material economic value, or where the
failure to maintain such Trademarks or Copyrights could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect, and (ii) protect all
Trademarks and all Copyrights against infringement by third parties, other than
such Trademarks and Copyrights which the Borrower reasonably determines are, in
the aggregate, of insignificant or non-material economic value or where the
failure to maintain such Trademarks or Copyrights could not, in the aggregate,
reasonably be expected to have a Material Adverse Effect.
(f) The Borrower will, and will cause each of its Subsidiaries to, submit
to the United States Copyright Office or other applicable United States
Governmental Authority (with a copy to the Agent) as soon as reasonably
practicable but in any event, with respect to any Film, no later than 90
Domestic Business Days after the date of release of such Film and, with respect
to any screenplay, within 30 Domestic Business Days after commencement of
principal photography of the relevant Film (i) with respect to each screenplay
or Film which is unregistered and to which the Borrower or any Subsidiary owns
the copyright, a completed application for copyright registration and (ii) with
respect to each screenplay and Film which is registered in the name of a Person
other than the Borrower or any of its Subsidiaries, and in which the Borrower or
any Subsidiary acquires the copyright or any rights in the copyright, an
assignment to the Borrower or such Subsidiary of the interest owned by it.
(g) The Borrower will, and will cause each other Obligor party to a
Security Agreement to, provide a Laboratory Pledgeholder Agreement (as defined
in a Security Agreement) with each laboratory which holds any material film
and/or sound materials, cause such Laboratory Pledgeholder Agreements to remain
in full force and effect during all times when such laboratory is in possession
of such elements, and, pursuant to the Laboratory Pledgeholder Agreements, with
respect to each Film, deliver to the Agent a laboratory access letter,
substantially in the form of Exhibit B thereto, to each laboratory holding any
material film and/or sound materials.
Section 5.25. Limitation on Joint Venture Arrangements. The Borrower will
not, and will not permit any of its Subsidiaries, to enter into any joint
venture or similar agreement (other than any such agreement in connection with
the development, production, acquisition, distribution, exhibition or
exploitation of Films).
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ARTICLE 6
Defaults
Section 6.01. Events of Default. If one or more of the following events
("Events of Default") shall have occurred and be continuing:
(a) the Borrower (i) shall fail to pay when due any principal of any
Loan, (ii) shall fail to reimburse when due any drawing under any Letter of
Credit or (iii) shall fail to pay within 5 days after the due date thereof
any interest, any fees or any other amount payable hereunder;
(b) (i) the Borrower shall fail to observe or perform any covenant
contained in Article 5 (other than those contained in Sections 5.01 through
5.06, inclusive and Sections 5.24(a), (b), (c), (e), (f) and (g)) or (ii)
any Obligor shall fail to observe or perform any covenant contained in
Sections 4(A), (E) or (H) of the Security Agreement or (iii) the Borrower
shall fail to observe or perform any covenant contained in Section 3(B) of
the Borrower Pledge Agreement or any other Obligor shall fail to observe or
perform any covenant contained in the Pledge Agreement to which such
Obligor is a party containing provisions substantially similar to those set
forth in Section 3(B) of the Borrower Pledge Agreement;
(c) any Obligor shall fail to observe or perform any covenant or
agreement contained in the Loan Documents (other than those covered by
clause (a) or (b) above) for 30 days after notice thereof has been given to
the Borrower by the Agent;
(d) (i) any representation, warranty or certification made by any
Obligor in any Loan Document or in any certificate or other document
delivered pursuant to any Loan Document shall prove to have been incorrect
in any material respect when made (or deemed made);
(e) the Borrower or any Subsidiary or Holdings or any of its
Subsidiaries (including without limitation the MGM Companies) shall fail to
make any payment in respect of any Debt and/or payment or collateralization
obligations in respect of Derivatives Obligations of the Borrower or any of
its Subsidiaries or Holdings or any of its Subsidiaries (including without
limitation the MGM Companies), as the case may be, when due or within any
applicable grace period, if the aggregate principal or face amount of Debt
and/or payment or collateralization obligations (regardless of whether such
Debt and/or payment or collateralization obligations arise in one or more
related or unrelated transactions) with respect to which such failure or
failures shall have occurred exceeds $5,000,000;
63
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Debt (other than the Notes) of the
Borrower or any of its Subsidiaries or of Holdings any of its Subsidiaries
(including without limitation the MGM Companies) or enables the holder of
such Debt or any Person acting on such holder's behalf to accelerate the
maturity thereof, if the aggregate principal amount of Debt (regardless of
whether such Debt arises in one or more related or unrelated transactions)
with respect to which such events or conditions shall have occurred exceeds
$5,000,000;
(g) Holdings, MGM, the Borrower or any Material Subsidiary shall
commence a voluntary case or other proceeding seeking liquidation,
reorganization or other relief with respect to itself or its debts under
any domestic or foreign bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, or shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary
case or other proceeding commenced against it, or shall make a general
assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action to authorize
any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced against
Holdings, MGM, the Borrower or any Material Subsidiary seeking liquidation,
reorganization or other relief with respect to it or its debts under any
domestic or foreign bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial
part of its property, and such involuntary case or other proceeding shall
remain undismissed and unstayed for a period of 90 days; or an order for
relief shall be entered against Holdings, MGM, the Borrower or any Material
Subsidiary under any domestic or foreign bankruptcy laws as now or
hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an amount
or amounts aggregating in excess of $5,000,000 which it shall have become
liable to pay under Title IV of ERISA; or notice of intent to terminate a
Material Plan shall be filed under Title IV of ERISA by any member of the
ERISA Group, any plan administrator or any combination of the foregoing; or
the PBGC shall institute proceedings under Title IV of ERISA to terminate,
to impose liability (other than for premiums under Section 4007 of ERISA)
in respect of, or to cause a trustee to be appointed to administer, any
Material Plan; or a condition shall exist by reason of
64
which the PBGC would be entitled to obtain a decree adjudicating that any
Material Plan must be terminated; or there shall occur a complete or
partial withdrawal from, or a default, within the meaning of Section
4219(c)(5) of ERISA, with respect to, one or more Multiemployer Plans which
could cause one or more members of the ERISA Group to incur a current
payment obligation in excess of $5,000,000;
(j) judgments or orders for the payment of money in excess of
$5,000,000 (net of any amount (x) covered by insurance and with respect to
which the relevant insurance carrier has acknowledged coverage or (y)
covered by a third-party indemnity from a solvent third party financially
capable of making such payments (as determined by the Required Lenders on
the basis of information provided by the Borrower) and with respect to
which such third party has acknowledged a contractual obligation to make
payment thereunder) shall be rendered and properly entered against the
Borrower or any Subsidiary and such judgments or orders shall continue
unsatisfied and unstayed for a period of 60 days;
(k) any Lien created by any of the Collateral Documents in respect of
a substantial portion of the Collateral shall at any time fail to
constitute a valid and (to the extent required by the Collateral Documents)
perfected Lien securing the obligations purported to be secured thereby,
with the priority required by the Loan Documents, or any Obligor shall so
assert in writing;
(l) the Subsidiary Guaranty shall at any time fail to constitute a
valid and binding agreement of each Obligor party thereto, or any Obligor
shall so assert in writing; or
(m) (i) Holdings shall cease to be the record and beneficial owner,
directly or indirectly, of 100% of the issued and outstanding capital stock
of the Borrower; (ii) Holdings shall cease to be the record and beneficial
owner of 100% of the issued and outstanding capital stock of MGM, or (iii)
at any date, any person or group of Persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended) (other than
Tracinda and Seven Network) shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and
Exchange Commission under said Act) of 20% or more of the outstanding
shares of common stock of Holdings and if such date occurs prior to the
completion of a Significant Initial Public Offering (as defined in the
Management Stock Incentive Plan) of the common stock of Holdings, on such
date Tracinda and Seven Network fail to beneficially own in the aggregate
stock representing at least 51% of the Voting Power; or (iv) ▇▇▇▇▇ ▇▇▇▇▇▇▇
shall cease to be chief executive officer of the
65
Borrower or MGM and a successor shall not have been appointed by the
Borrower or MGM (as applicable) which successor is of reasonably comparable
stature in the entertainment industry; or (v), during any period of 12
consecutive calendar months which period begins on or after the completion
of a Significant Public Offering (as defined in the Management Stock
Incentive Plan), individuals who were either (x) directors of Holdings on
the first day of such period or (y) elected to fill vacancies caused by the
ordinary course resignation (including without limitation any such
resignation effected by such director declining to stand for reelection),
retirement, death or disability of any other director and whose nomination
or election was approved by a vote of at least a majority of the directors
then still in office who were directors of Holdings on the first day of
such period, shall cease to constitute a majority of the board of directors
of Holdings; (as used herein, "Voting Power" means, with respect to any
outstanding capital stock of Holdings, the power (expressed as a
percentage) represented by such capital stock of the aggregate voting power
of all outstanding shares of any class of capital stock of Holdings having
ordinary voting power, including the power to vote for election of the
members of the board of directors of Holdings (or, if any class thereof has
power to designate members of the board of directors of Holdings or any
special committee thereof, the power to so designate));
then, and in every such event, the Agent shall (i) if requested by Lenders
having more than 50% in aggregate amount of the Commitments, by notice to the
Borrower terminate the Commitments and they shall thereupon terminate, and (ii)
if requested by Lenders holding more than 50% of the sum of (x) the aggregate
principal amount of the Loans then outstanding and (y) the Letter of Credit
Liabilities then outstanding, by notice to the Borrower declare the Loans and
the Letter of Credit Liabilities (in each case together with accrued interest
thereon) to be, and the Loans and the Letter of Credit Liabilities shall
thereupon become, immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Borrower; provided that in the case of any of the Events of Default specified in
clause (g) or (h) above with respect to the Borrower, without any notice to the
Borrower or any other act by the Agent or the Lenders, the Commitments shall
thereupon terminate and the Loans and the Letter of Credit Liabilities (in each
case together with accrued interest thereon) shall become immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower.
Section 6.02. Notice of Default. The Agent shall give notice to the
Borrower under Section 6.01(c) promptly upon being requested to do so by the
Required Lenders and shall thereupon notify all the Lenders thereof.
66
Section 6.03. Cash Cover. The Borrower agrees, in addition to the
provisions of Section 6.01 hereof, that upon the occurrence and during the
continuance of any Event of Default, it shall, if requested by the Agent upon
the instruction of the Lenders having more than 50% in aggregate amount of the
Revolving Exposure, pay to the Agent an amount in immediately available funds
(which funds shall be held as collateral and applied pursuant to the Security
Agreement) equal to the aggregate amount available for drawing under all Letters
of Credit then outstanding at such time, provided that, upon the occurrence of
any Event of Default specified in Section 6.01(g) or 6.01(h) with respect to the
Borrower, the Borrower shall pay such amount forthwith without any notice or
demand or any other act by the Agent or the Lenders.
ARTICLE 7
The Agent
Section 7.01. Appointment and Authorization. Each Lender irrevocably
appoints and authorizes the Agent to enter into and act as its agent in
connection with the Collateral Documents and to take such action as agent on its
behalf and to exercise such powers under the Loan Documents as are delegated to
the Agent by the terms hereof or thereof, together with all such powers as are
reasonably incidental thereto.
Section 7.02. Agent and Affiliates. ▇▇▇▇▇▇ Guaranty Trust Company of New
York shall have the same rights and powers under the Loan Documents as any other
Lender and may exercise or refrain from exercising the same as though it were
not the Agent, and ▇▇▇▇▇▇ Guaranty Trust Company of New York and its affiliates
may accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower as if
it were not the Agent.
Section 7.03. Action by Agent. The obligations of the Agent hereunder are
only those expressly set forth herein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action with respect to
any Default, except as expressly provided in Article 6.
Section 7.04. Consultation with Experts. The Agent may consult with legal
counsel (who may be counsel for any Obligor), independent public accountants and
other experts selected by it and shall not be liable for any action taken or
omitted to be taken by it in good faith in accordance with the advice of such
counsel, accountants or experts.
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Section 7.05. Liability of Agent. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be liable for any action taken or not taken by it in connection herewith
(i) with the consent or at the request of the Required Lenders (or, when
expressly required hereby, such different number of Lenders required to consent
to or to request such action or inaction) or (ii) in the absence of its own
gross negligence or willful misconduct. Neither the Agent nor any of its
affiliates nor any of their respective directors, officers, agents or employees
shall be responsible for or have any duty to ascertain, inquire into or verify
(i) any statement, warranty or representation made in connection with the Loan
Documents or any borrowing hereunder; (ii) the performance or observance of any
of the covenants or agreements of any Obligor; (iii) the satisfaction of any
condition specified in Article 3, except receipt of items required to be
delivered to the Agent; (iv) the validity, effectiveness or genuineness of the
Loan Documents or any other instrument or writing furnished in connection
herewith or (v) the existence or the value of any of the Collateral. The Agent
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, telex,
facsimile transmission or similar writing) believed by it to be genuine or to be
signed by the proper party or parties. Without limiting the generality of the
foregoing, the use of the term "agent" in the Loan Documents with reference to
the Agent is not intended to connote any fiduciary or other implied (or express)
obligations arising under agency doctrine or any applicable law. Instead, such
term is used merely as a matter of market custom and is intended to create or
reflect only an administrative relationship between independent contracting
parties.
Section 7.06. Indemnification. Each Lender shall, ratably in accordance
with its Commitment (or, if the Commitments of the relevant Class shall have
terminated, with the aggregate outstanding principal amount of the Loans of such
Class held by such Lender) indemnify the Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with the Loan Documents or any
action taken or omitted by such indemnitees thereunder.
Section 7.07. Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender, and based on such documents and information as it shall deem
68
appropriate at the time, continue to make its own credit decisions in taking or
not taking any action under the Loan Documents.
Section 7.08. Successor Agent. The Agent may resign at any time by giving
notice thereof to the Lenders and the Borrower. Upon any such resignation, the
Required Lenders shall have the right to appoint a successor Agent with, so long
as no Default has occurred and is continuing, the consent of the Borrower (which
consent shall not be unreasonably withheld). If no successor Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent gives notice of
resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent, which shall be a commercial Lender organized or licensed under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $100,000,000. Upon the acceptance of
its appointment as Agent hereunder by a successor Agent, such successor Agent
shall thereupon succeed to and become vested with all the rights and duties of
the retiring Agent, and the retiring Agent shall be discharged from its duties
and obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
Section 7.09. Agent's Fee. The Borrower shall pay to the Agent for its own
account fees in the amounts and at the times previously agreed upon between the
Borrower and the Agent.
Section 7.10. Arranger. The Arranger, in its capacity as such, shall have
no duties or obligations under the Loan Documents and shall not have a fiduciary
relationship with any Lender.
ARTICLE 8
Change in Circumstances
Section 8.01. Basis for Determining Interest Rate Inadequate or Unfair. If
on or prior to the first day of any Interest Period for any Euro-Dollar Loan:
(a) the Agent is advised by the Reference Lenders that deposits in
dollars (in the applicable amounts) are not being offered to the Reference
Lenders in the London interbank market for such Interest Period, or
(b) Lenders having 50% or more of the aggregate principal amount of
the affected Loans advise the Agent that the Adjusted London Interbank
Offered Rate as determined by the Agent will not adequately
69
and fairly reflect the cost to such Lenders of funding their Euro-Dollar
Loans for such Interest Period,
the Agent shall forthwith give notice thereof to the Borrower and the Lenders,
whereupon until the Agent notifies the Borrower that the circumstances giving
rise to such suspension no longer exist, (i) the obligations of the Lenders to
make Euro-Dollar Loans or to continue or convert outstanding Loans as or into
Euro-Dollar Loans shall be suspended and (ii) each outstanding Euro-Dollar Loan
shall be converted into a Base Rate Loan on the last day of the then current
Interest Period applicable thereto. Unless the Borrower notifies the Agent at
least two Domestic Business Days before the date of any Euro-Dollar Borrowing
for which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, such Borrowing shall instead be made as a Base Rate
Borrowing.
Section 8.02. Illegality. If, on or after the date of this Agreement, the
adoption of any applicable law, rule or regulation, or any change in any
applicable law, rule or regulation, or any change in the interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Euro-Dollar Lending Office) with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall make it unlawful or impossible for any Lender (or its
Euro-Dollar Lending Office) to make, maintain or fund its Euro-Dollar Loans and
such Lender shall so notify the Agent, the Agent shall forthwith give notice
thereof to the other Lenders and the Borrower, whereupon until such Lender
notifies the Borrower and the Agent that the circumstances giving rise to such
suspension no longer exist, the obligation of such Lender to make Euro-Dollar
Loans, or to convert outstanding Loans into Euro-Dollar Loans, shall be
suspended. Before giving any notice to the Agent pursuant to this Section, such
Lender shall designate a different Euro-Dollar Lending Office if such
designation will avoid the need for giving such notice and will not, in the
judgment of such Lender, be otherwise disadvantageous to such Lender. If such
notice is given, each Euro-Dollar Loan of such Lender then outstanding shall be
converted to a Base Rate Loan either (a) on the last day of the then current
Interest Period applicable to such Euro-Dollar Loan if such Lender may lawfully
continue to maintain and fund such Loan to such day or (b) immediately if such
Lender shall determine that it may not lawfully continue to maintain and fund
such Loan to such day.
Section 8.03. Increased Cost and Reduced Return. (a) If on or after the
date hereof, the adoption of any applicable law, rule or regulation, or any
change in any applicable law, rule or regulation, or any change in the
interpretation or administration thereof by any governmental authority, central
bank or comparable agency charged with the interpretation or administration
thereof, or compliance by any Lender (or its Applicable Lending Office) with any
request or directive
70
(whether or not having the force of law) of any such authority, central bank or
comparable agency shall impose, modify or deem applicable any reserve
(including, without limitation, any such requirement imposed by the Board of
Governors of the Federal Reserve System, but excluding any such requirement
included in an applicable Euro-Dollar Reserve Percentage), special deposit,
insurance assessment or similar requirement against assets of, deposits with or
for the account of, or credit extended by, any Lender (or its Applicable Lending
Office) or shall impose on any Lender (or its Applicable Lending Office) or the
London interbank market any other condition affecting its Euro-Dollar Loans, its
Note or its obligation to make Euro-Dollar Loans or its obligations hereunder
with respect to Letters of Credit and the result of any of the foregoing is to
increase the cost to such Lender (or its Applicable Lending Office) of making or
maintaining any Euro-Dollar Loan or of issuing or participating in any Letter of
Credit, or to reduce the amount of any sum received or receivable by such Lender
(or its Applicable Lending Office) under this Agreement or under its Note with
respect thereto, by an amount deemed by such Lender to be material, then, within
15 days after demand by such Lender (with a copy to the Agent), the Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender for such increased cost or reduction.
(b) If any Lender shall have determined that, after the date hereof,
the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change
in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or any request or directive
regarding capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on capital of such Lender (or its
Parent) as a consequence of such Lender's obligations hereunder to a level
below that which such Lender (or its Parent) could have achieved but for
such adoption, change, request or directive (taking into consideration its
policies with respect to capital adequacy) by an amount deemed by such
Lender to be material, then from time to time, within 15 days after demand
by such Lender (with a copy to the Agent), the Borrower shall pay to such
Lender such additional amount or amounts as will compensate such Lender (or
its Parent) for such reduction.
(c) Each Lender will promptly notify the Borrower and the Agent of any
event of which it has knowledge, occurring after the date hereof, which
will entitle such Lender to compensation pursuant to this Section and will
designate a different Lending Office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the
judgment of such Lender, be otherwise disadvantageous to such Lender. A
certificate of any Lender claiming compensation under this Section and
setting forth in reasonable detail the additional amount or amounts to be
paid to it hereunder and the method of
71
calculation thereof shall be conclusive in the absence of manifest error.
In determining such amount, such Lender may use any reasonable averaging
and attribution methods.
Section 8.04. Taxes. (a) For the purposes of this Section 8.04, the
following terms have the following meanings:
"Taxes" means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings with respect to any payment by
any Obligor pursuant to this Agreement or under any Note, and all
liabilities with respect thereto, excluding (i) in the case of each Lender
and the Agent, taxes imposed on its income, and franchise or similar taxes
imposed on it, by a jurisdiction under the laws of which such Lender or the
Agent (as the case may be) is organized or in which its principal executive
office is located or, in the case of each Lender, in which its Applicable
Lending Office is located and (ii) in the case of each Lender, any United
States withholding tax imposed on such payments but only to the extent that
such Lender is subject to United States withholding tax at the time such
Lender first becomes a party to this Agreement.
"Other Taxes" means any present or future stamp or documentary taxes
and any other excise or property taxes, or similar charges or levies, which
arise from any payment made pursuant to this Agreement or under any Note or
from the execution or delivery of, or otherwise with respect to, any Loan
Document.
(b) Any and all payments by any Obligor to or for the account of any
Lender or the Agent hereunder or under any Note shall be made without deduction
for any Taxes or Other Taxes; provided that, if any Obligor shall be required by
law to deduct any Taxes or Other Taxes from any such payments, (i) the sum
payable shall be increased as necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section) such Lender or the Agent (as the case may be) receives an amount
equal to the sum it would have received had no such deductions been made, (ii)
such Obligor shall make such deductions, (iii) such Obligor shall pay the full
amount deducted to the relevant taxation authority or other authority in
accordance with applicable law and (iv) such Obligor shall furnish to the Agent,
at its address referred to in Section 9.01, the original or a certified copy of
a receipt evidencing payment thereof.
(c) The Borrower agrees to indemnify each Lender and the Agent for the
full amount of Taxes or Other Taxes (including, without limitation, any Taxes or
Other Taxes imposed or asserted by any jurisdiction on amounts payable under
this Section) paid by such Lender or the Agent (as the case may be) and any
72
liability (including penalties, interest and expenses) arising therefrom or with
respect thereto. This indemnification shall be paid within 15 days after such
Lender or the Agent (as the case may be) makes demand therefor.
(d) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Lender listed on the signature pages hereof and on
or prior to the date on which it becomes a Lender in the case of each other
Lender, and from time to time thereafter if requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
the Borrower and the Agent with either (i) Internal Revenue Service Form 1001 or
4224, as appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an income tax
treaty to which the United States is a party which exempts the Lender from
United States withholding tax or reduces the rate of withholding tax on payments
of interest for the account of such Lender or certifying that the income
receivable pursuant to this Agreement is effectively connected with the conduct
of a trade or business in the United States or (ii) if such Lender is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot deliver
either Internal Revenue Service Form 1001 or 4224 pursuant to clause (i) above,
(x) a certificate substantially in the form of Exhibit L and (y) two accurate
and complete original signed copies of Internal Revenue Service Form W-8 or any
successor form prescribed by the Internal Revenue Service) certifying to such
Lender's entitlement to a complete exemption from United States withholding tax
with respect to payments of interest and fees (if applicable) made under this
Agreement and under any Note.
(e) For any period with respect to which a Lender has failed to provide
the Borrower or the Agent with the appropriate form pursuant to Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which such form originally was required to be
provided), such Lender shall not be entitled to indemnification under Section
8.04(b) or (c) with respect to Taxes imposed by the United States. In addition,
for any period with respect to which a Lender described in clause (ii) of
Section 8.4(d) above has delivered Internal Revenue Service Form W-8 (or any
successor form prescribed by the Internal Revenue Service) pursuant to such
Section but such form does not establish a complete exemption from deduction of
withholding or similar taxes imposed by the United States, such Lender shall not
be entitled to indemnification under Section 8.4(b) or (c) with respect to Taxes
imposed by the United States with respect to payments made under this Agreement
or any Note (other than with respect to any such payments constituting payments
of interest). If a Lender which is otherwise exempt from or subject to a reduced
rate of withholding tax, becomes subject to Taxes because of its failure to
deliver a form required hereunder, the Borrower shall take, at the cost of such
Lender, such steps
73
as such Lender shall reasonably request to assist such Lender to recover such
Taxes.
(f) If any Obligor is required to pay additional amounts to or for the
account of any Lender pursuant to this Section, then such Lender will change the
jurisdiction of its Applicable Lending Office if, in the judgment of such
Lender, such change (i) will eliminate or reduce any such additional payment
which may thereafter accrue and (ii) is not otherwise disadvantageous to such
Lender.
Section 8.05. Base Rate Loans Substituted for Affected Euro-Dollar Loans.
If (i) the obligation of any Lender to make, or convert outstanding Loans to,
Euro-Dollar Loans has been suspended pursuant to Section 8.02 or (ii) any
Lender has demanded compensation under Section 8.03 or 8.04 with respect to its
Euro-Dollar Loans and the Borrower shall, by at least five Euro-Dollar Business
Days' prior notice to such Lender through the Agent, have elected that the
provisions of this Section shall apply to such Lender, then, unless and until
such Lender notifies the Borrower that the circumstances giving rise to such
suspension or demand for compensation no longer exist:
(a) all Loans which would otherwise be made by such Lender as (or
continued as or converted into) Euro-Dollar Loans shall instead be Base
Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Lenders);
and
(b) after each of its Euro-Dollar Loans has been repaid (or converted
to a Base Rate Loan), all payments of principal which would otherwise be
applied to repay such Euro-Dollar Loans shall be applied to repay its Base
Rate Loans instead.
If such Lender notifies the Borrower that the circumstances giving rise to such
notice no longer apply, the principal amount of each such Base Rate Loan shall
be converted into a Euro-Dollar Loan on the first day of the next succeeding
Interest Period applicable to the related Euro-Dollar Loans of the other
Lenders.
Section 8.06. Substitution of Lender. If (i) the obligation of any Lender
to make or convert Euro-Dollar Loans has been suspended pursuant to Section 8.02
or (ii) any Lender has demanded compensation under Section 8.03 or 8.04, the
Borrower shall have the right, with the assistance of the Agent, to seek a
mutually satisfactory substitute lender or lenders (which may be one or more of
the Lenders) to purchase the Note and assume the outstanding Loans, the
Commitment (if any) and the Letter of Credit Liabilities (if any) of such
Lender. Each such Lender agrees to assign all of its outstanding Loans, its
Commitment (if any), its Note or Notes and its Letter of Credit Liabilities (if
any) to any such
74
substitute lender, without recourse or warranty other than title and outstanding
amount; provided that such substitute lender shall have paid to such Lender in
immediately available funds the principal of and accrued interest to the date of
such payment on its outstanding Loans and Letter of Credit Liabilities (if any)
and all fees owed to it hereunder.
ARTICLE 9
Miscellaneous
Section 9.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including bank wire, telex, facsimile
transmission (with a copy by United States mail) or similar writing) and shall
be given to such party: (w) in the case of the Borrower or the Agent, at its
address, facsimile number or telex number set forth on the signature pages
hereof, (x) in the case of any Guarantor, in care of the Borrower, (y) in the
case of any Lender, at its address, facsimile number or telex number set forth
in its Administrative Questionnaire or (z) in the case of any party, such other
address, facsimile number or telex number as such party may hereafter specify
for the purpose by notice to the Agent and the Borrower. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Agent under
Article 2 or Article 8 shall not be effective until received.
Section 9.02. No Waivers. No failure or delay by the Agent or any Lender
in exercising any right, power or privilege hereunder or under any other Loan
Document shall operate as a waiver thereof nor shall any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
Section 9.03. Expenses; Indemnification. (a) The Borrower shall pay (i)
all out-of-pocket expenses of the Agent, including reasonable fees and
disbursements of each special counsel for the Agent, in connection with the
preparation and administration of the Loan Documents, any waiver or consent
thereunder or any amendment thereof or any Default or alleged Default
thereunder, (ii) the reasonable fees and expenses of consultants and other
experts
75
retained by the Agent or the Required Lenders with the consent of the Borrower
(which consent shall not be unreasonably withheld); provided that, if such
consultants or other experts shall have been retained in connection with any
Default under the Loan Documents, no such consent shall be required and (iii) if
an Event of Default occurs, all out-of-pocket expenses incurred by the Agent and
each Lender, including (without duplication) the reasonable fees and
disbursements of outside counsel and the allocated cost of inside counsel, in
connection with such Event of Default and collection, bankruptcy, insolvency and
other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify the Agent and each Lender, their
respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of the Loan Documents or any actual or proposed use
of proceeds of Loans hereunder; provided that no Indemnitee shall have the right
to be indemnified hereunder for such Indemnitee's own gross negligence or
willful misconduct as determined by a court of competent jurisdiction.
Section 9.04. Sharing of Set-offs. Each Lender agrees that if it shall, by
exercising any right of set-off or counterclaim or otherwise, receive payment of
a proportion of the aggregate amount of principal and interest then due with
respect to any Note and any Letter of Credit Liabilities held by it which is
greater than the proportion received by any other Lender in respect of the
aggregate amount of principal and interest then due with respect to any Note and
Letter of Credit Liabilities held by such other Lender, the Lender receiving
such proportionately greater payment shall purchase such participations in the
Notes held by the other Lenders, and such other adjustments shall be made, as
may be required so that all such payments of principal and interest then due
with respect to the Notes and Letter of Credit Liabilities held by the Lenders
shall be shared by the Lenders pro rata; provided that nothing in this Section
shall impair the right of any Lender to exercise any right of set-off or
counterclaim it may have and to apply the amount subject to such exercise to the
payment of indebtedness of any Obligor other than its indebtedness hereunder.
Each Obligor agrees, to the fullest extent it may effectively do so under
applicable law, that any holder of a participation in a Note or Letter of Credit
Liabilities, whether or not acquired pursuant to the foregoing arrangements, may
exercise rights of set-off or counterclaim and other rights with respect to such
participation as fully as if such holder of a participation were a direct
creditor of such Obligor in the amount of such participation.
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Section 9.05. Amendments and Waivers; Release of Guarantors or Collateral.
Any provision of this Agreement or the Notes may be amended or waived if, but
only if, such amendment or waiver is in writing and is signed by the Borrower
and the Required Lenders (and, if the rights or duties of the Agent or any L/C
Issuer are affected thereby, by the Agent or such L/C Issuer, as relevant);
provided that no such amendment or waiver shall:
(a) unless signed by all the Lenders with a Commitment of any Class,
increase or decrease the Commitments of such Class (except for a ratable
decrease in all the Commitments of such Class), subject any such Lender to
any additional obligation, or postpone the date fixed for the scheduled
termination of any Commitment of such Class;
(b) unless signed by all Lenders holding Loans of any Class, reduce
the principal of or rate of interest on any Loans of, or fees with respect
to, such Class, postpone the date fixed for any scheduled payment of such
fees or the principal of or interest on any such Loans, or decrease the
aggregate amount by which such Loans are required to be repaid on any date
scheduled pursuant to Section 2.04 or postpone any date for such repayment;
(c) unless signed by all Revolving Lenders, reduce the amount to be
reimbursed in respect of any Letter of Credit or of any interest with
respect to any Letter of Credit Liabilities or any fees payable by
reference to the Letters of Credit hereunder, postpone the date fixed for
any payment of the amount to be reimbursed in respect of any Letter of
Credit or any interest thereon or any fees payable by reference to the
Letters of Credit hereunder or (except as expressly provided in Section
2.14) expiry date of any Letter of Credit;
(d) unless signed by all the Lenders, postpone the date fixed for any
payment of any fees hereunder, change the percentage of the Commitments or
of the aggregate unpaid principal amount of the Notes or the Letter of
Credit Liabilities or the number of Lenders, which shall be required for
the Lenders or any of them to take any action under this Section or any
other provision of this Agreement.
Any provision of the Loan Documents (other than this Agreement and the Notes)
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed by the relevant Obligor and the Agent with the consent of the
Required Lenders; provided that no such amendment or waiver shall, unless signed
by all the Lenders, effect or permit (i) a release of all or substantially all
of the Collateral or (ii) a release of all or substantially all of the
Guarantors from their obligations under the Subsidiary Guaranty.
Notwithstanding the foregoing,
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Collateral shall be released from the Lien of the Collateral Documents from time
to time as necessary to effect any sale or pledge of assets permitted by the
Loan Documents, and the Agent shall execute and deliver all release documents
reasonably requested to evidence such release.
Section 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that no Obligor may assign
or otherwise transfer any of its rights under this Agreement and the other Loan
Documents without the prior written consent of all Lenders.
(b) Any Lender may at any time grant to one or more Lenders or other
institutions (other than a Competitor) (each a "Participant") participating
interests in its Commitment or any or all of its Loans or Letter of Credit
Liabilities. In the event of any such grant by a Lender of a participating
interest to a Participant, whether or not upon notice to the Borrower and the
Agent, such Lender shall remain responsible for the performance of its
obligations hereunder, and the Borrower and the Agent shall continue to deal
solely and directly with such Lender in connection with such Lender's rights and
obligations under this Agreement. Any agreement pursuant to which any Lender
may grant such a participating interest shall provide that such Lender shall
retain the sole right and responsibility to enforce the obligations of the
Borrower hereunder including, without limitation, the right to approve any
amendment, modification or waiver of any provision of this Agreement; provided
that such participation agreement may provide that such Lender will not agree to
any modification, amendment or waiver of this Agreement described in clause (a),
(b), (c), or (d) of, or in the proviso in the penultimate sentence of, Section
9.05 without the consent of the Participant. The Borrower agrees that, without
duplication of amounts payable to the relevant Lender, each Participant shall,
to the extent provided in its participation agreement, be entitled to the
benefits of Article 8 with respect to its participating interest. An
assignment or other transfer which is not permitted by subsection (c) or (d)
below shall be given effect for purposes of this Agreement only to the extent of
a participating interest granted in accordance with this subsection (b).
(c) Any Lender may at any time assign to one or more Lenders or other
institutions (including any fund that regularly engages in making, purchasing or
investing in loans) (each an "Assignee") all, or a proportionate part of all,
of its rights and obligations under this Agreement and the Notes with respect to
its Commitment of any Class or its outstanding Loans of any Class or its Letter
of Credit Liabilities, and such Assignee shall assume such rights and
obligations, pursuant to an Assignment and Assumption Agreement in substantially
the form of Exhibit I hereto executed by such Assignee and such transferor
Lender, with (and subject to) the subscribed consent of the Borrower, which
shall not be unreasonably withheld, the Agent and, solely with respect to any
assignment of
78
the Revolving Commitments, Revolving Loans or Letter of Credit Liabilities and
the L/C Issuers; provided that (i) if an Assignee is an affiliate of such
transferor Lender or was a Lender immediately prior to such assignment, no such
consent shall be required, (ii) if such transferor Lender pursuant to such
assignment assigns to an Assignee a part (but not all) of its Commitment or
Loans of any Class or its Letter of Credit Liabilities, then the sum of (x) the
aggregate amount of the Commitments of all Classes (if any), (y) the aggregate
outstanding principal amount of the Loans of all Classes (if any) and (z) the
aggregate Letter of Credit Liabilities (if any) held by such Assignee
immediately after giving effect to such assignment and retained by the
transferor Lender immediately after giving effect to such assignment shall each
be at least $5,000,000 and (iii) no Lender shall enter into any assignment with
a Competitor. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Lender of an amount equal to the purchase price
agreed between such transferor Lender and such Assignee, such Assignee shall be
a Lender party to this Agreement and shall have all the rights and obligations
of a Lender with a Commitment as set forth in such instrument of assumption, and
the transferor Lender shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Lender, the Agent and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Lender shall pay to the
Agent an administrative fee for processing such assignment in the amount of
$3,500. If the Assignee is not incorporated under the laws of the United States
of America or a state thereof, it shall deliver to the Borrower and the Agent
certification as to exemption from deduction or withholding of any United States
federal income taxes in accordance with Section 8.04.
(d) Any Lender may at any time assign all or any portion of its rights
under this Agreement and its Note to a Federal Reserve Bank. No such assignment
shall release the transferor Lender from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Lender's rights
shall be entitled to receive any greater payment under Section 8.03 or 8.04 than
such Lender would have been entitled to receive with respect to the rights
transferred, unless such transfer is made (x) with the Borrower's prior written
consent or (y) by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Lender to designate a different Applicable Lending Office under
certain circumstances or (z) at a time when the circumstances giving rise to
such greater payment did not exist.
(f) The Borrower hereby designates the Agent to serve as the Borrower's
agent, solely for purposes of this subsection 9.06(f), to maintain a register
(the "Register") on which the Agent will record the Commitments from time to
time of
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each Lender, the Loans made by each Lender and each repayment in respect of the
principal amount of the Loans of each Lender and to retain a copy of each
Assignment and Assumption Agreement delivered to the Agent pursuant to this
Section. Failure to make any such recordation, or any error in such recordation,
shall not affect the Borrower's obligation in respect of such Loans. The entries
in the Register shall be conclusive, in the absence of manifest error, and the
Borrower, the Agent and the Lenders shall treat each Person in whose name a Loan
and the Note evidencing the same is registered as the owner thereof for all
purposes of this Agreement, notwithstanding notice or any provision herein to
the contrary. With respect to any Lender, the assignment or other transfer of
the Commitments of such Lender and the rights to the principal of, and interest
on, any Loan made and Note issued pursuant to this Agreement shall not be
effective until such assignment or other transfer is recorded on the Register
and, except to the extent provided in this subsection 9.06(f), otherwise
complies with Section 9.06, and prior to such recordation all amounts owing to
the transferor Lender with respect to such Commitments, Loans and Notes shall
remain owing to the transferor Lender. The registration of assignment or other
transfer of all or part of any Commitments, Loans and Notes for a Lender shall
be recorded by the Agent on the Register only upon the acceptance by the Agent
of a properly executed and delivered Assignment and Assumption Agreement. The
Register shall be available at the offices where kept by the Agent for
inspection by the Borrower and any Lender at any reasonable time upon reasonable
prior notice to the Agent. The Borrower may not replace any Lender pursuant to
Section 8.06, unless, with respect to any Notes held by such Lender, the
requirements of subsection 9.06(c) have been satisfied.
Section 9.07. Collateral. Each of the Lenders represents to the Agent and
each of the other Lenders that it in good faith is not relying upon any "margin
stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
Section 9.08. Governing Law; Submission to Jurisdiction. This Agreement
and each Note shall be governed by and construed in accordance with the laws of
the State of New York. Each Obligor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of any New York State court sitting in New York City for purposes
of all legal proceedings arising out of or relating to this Agreement or the
transactions contemplated hereby. Each Obligor irrevocably waives, to the
fullest extent permitted by law, any objection which it may now or hereafter
have to the laying of the venue of any such proceeding brought in such a court
and any claim that any such proceeding brought in such a court has been brought
in an inconvenient forum.
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Section 9.09. Counterparts; Integration; Effectiveness. This Agreement may
be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof. This
Agreement shall become effective upon receipt by the Agent of counterparts
hereof signed by each of the parties hereto (or, in the case of any party as to
which an executed counterpart shall not have been received, receipt by the Agent
in form satisfactory to it of telegraphic, telex, facsimile or other written
confirmation from such party of execution of a counterpart hereof by such
party).
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE AGENT AND
THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.11. Confidentiality. The Agent and each Lender agrees to keep
any information delivered or made available by any Obligor pursuant to the Loan
Documents confidential from anyone other than persons employed or retained by
such Lender who are engaged in evaluating, approving, structuring or
administering the credit facility contemplated hereby; provided that nothing
herein shall prevent the Agent or any Lender from disclosing such information
(a) to any other Lender or to the Agent, (b) to any other Person if reasonably
incidental to the administration of the credit facility contemplated hereby, (c)
upon the order of any court or administrative agency, (d) upon the request or
demand of any regulatory agency or authority, (e) which had been publicly
disclosed other than as a result of a disclosure by the Agent or any Lender
prohibited by this Agreement, (f) in connection with any litigation to which the
Agent, any Lender or its subsidiaries or Parent may be a party, (g) to the
extent necessary in connection with the exercise of any remedy hereunder, (h) to
such Lender's or Agent's legal counsel and independent auditors and (i) subject
to provisions substantially similar to those contained in this Section, to any
actual or proposed Participant or Assignee.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
ORION PICTURES CORPORATION
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Executive Vice President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
82
▇▇▇▇▇▇ GUARANTY TRUST
COMPANY OF NEW YORK
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
BANK OF AMERICA NATIONAL
TRUST AND SAVINGS
ASSOCIATION
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
ML CBO IV (CAYMAN) LTD.
By PROTECTIVE ASSET
MANAGEMENT, L.L.C., as Collateral
Manager
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President, Protective Asset
Management, L.L.C.
CONTINENTAL ASSURANCE COMPANY
SEPARATE ACCOUNT (E)
By PROTECTIVE ASSET
MANAGEMENT, L.L.C., as its Attorney-in-Fact
By /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President, Protective Asset
Management, L.L.C.
SOCIETE GENERALE
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
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▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Title: Relationship Manager
FLEET NATIONAL BANK
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Senior Vice President
▇▇▇ ▇▇▇▇▇▇ AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President -
Portfolio Manager
▇▇▇▇▇▇ GUARANTY TRUST
COMPANY OF NEW YORK, as Agent
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President
Address: ▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile number: ▇▇▇-▇▇▇-▇▇▇▇
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