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EXHIBIT 10.52
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CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT
DATED AS OF NOVEMBER 4, 1997
AMONG
DOVE ENTERTAINMENT, INC.
AS BORROWER,
THE GUARANTORS NAMED HEREIN
AND
THE CHASE MANHATTAN BANK, AS LENDER
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TABLE OF CONTENTS
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1. DEFINITIONS..............................................................................2
2. THE LOANS...............................................................................24
SECTION 2.1. Loans.....................................................................24
SECTION 2.2. Making of Loans...........................................................25
SECTION 2.4. Interest on Note..........................................................26
SECTION 2.5. Commitment Fees and Other Fees............................................27
SECTION 2.6. Optional and Mandatory Termination or Reduction of Commitment............27
SECTION 2.7. Default Interest; Alternate Rate of Interest..............................28
SECTION 2.8. Continuation and Conversion of Loans......................................28
SECTION 2.9. Prepayment of Loans; Reimbursement of Lender..............................29
SECTION 2.10. Change in Circumstances..................................................31
SECTION 2.11. Change in Legality.......................................................34
SECTION 2.12. Manner of Payments.......................................................34
SECTION 2.13. Interest Adjustments.....................................................34
SECTION 2.14. Letters of Credit........................................................35
3. REPRESENTATIONS AND WARRANTIES OF CREDIT PARTIES........................................38
SECTION 3.1. Corporate Existence and Power.............................................39
SECTION 3.2. Corporate Authority and No Violation. (a) ..............................39
SECTION 3.3. Governmental Approval.....................................................40
SECTION 3.4. Binding Agreements........................................................40
SECTION 3.5. Financial Statements......................................................40
SECTION 3.6. No Material Adverse Change (a) .........................................40
SECTION 3.7. Ownership of Pledged Securities, etc......................................41
SECTION 3.8. Copyrights and Other Rights...............................................41
SECTION 3.9. Fictitious Names..........................................................42
SECTION 3.10. Title to Properties......................................................42
SECTION 3.11. Places of Business.......................................................42
SECTION 3.12. Litigation...............................................................42
SECTION 3.13. Federal Reserve Regulations..............................................43
SECTION 3.14. Investment Company Act...................................................43
SECTION 3.15. Taxes....................................................................43
SECTION 3.16. Compliance with ERISA....................................................43
SECTION 3.17. Agreements...............................................................44
SECTION 3.18. Security Interest; Other Security........................................44
SECTION 3.19. Disclosure...............................................................44
SECTION 3.20. Distribution Rights......................................................45
SECTION 3.21. Environmental Liabilities................................................45
SECTION 3.22. Pledged Securities.......................................................46
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SECTION 3.23. Compliance with Laws.....................................................46
SECTION 3.24. Projected Financial Information..........................................46
4. CONDITIONS OF LENDING...................................................................46
SECTION 4.1. Conditions Precedent to Initial Loans or Letter of Credit.................46
SECTION 4.2. Conditions Precedent to Each Loan and Letter of Credit....................51
5. AFFIRMATIVE COVENANTS...................................................................51
SECTION 5.1. Financial Statements and Reports..........................................51
SECTION 5.2. Corporate Existence.......................................................54
SECTION 5.3. Maintenance of Properties.................................................54
SECTION 5.4. Notice of Material Events.................................................54
SECTION 5.5. Insurance.................................................................55
SECTION 5.6. Production................................................................56
SECTION 5.7. Music.....................................................................56
SECTION 5.8. Copyright.................................................................56
SECTION 5.9. Books and Records. ......................................................57
SECTION 5.10. Third Party Audit Rights.................................................57
SECTION 5.11. Observance of Agreements.................................................58
SECTION 5.12. Film Properties and Rights; Credit Parties to Act as Pledgeholder........58
SECTION 5.13. Laboratories; No Removal.................................................58
SECTION 5.14. Taxes and Charges; Indebtedness in Ordinary Course of Business...........58
SECTION 5.15. Liens....................................................................59
SECTION 5.16. Further Assurances; Security Interests...................................59
SECTION 5.17. ERISA Compliance and Reports.............................................59
SECTION 5.18. Environmental Laws.......................................................60
SECTION 5.19. Use of Proceeds..........................................................61
SECTION 5.20. Security Agreements with the Guilds......................................61
SECTION 5.21. Uncompleted Product......................................................61
6. NEGATIVE COVENANTS......................................................................62
SECTION 6.1. Limitations on Indebtedness...............................................62
SECTION 6.2. Limitations on Liens......................................................63
SECTION 6.3. Limitation on Guarantees..................................................65
SECTION 6.4. Limitations on Investments................................................65
SECTION 6.5. Restricted Payments.......................................................65
SECTION 6.6. Limitations on Leases.....................................................65
SECTION 6.7. Consolidation, Merger, Sale or Purchase of Assets, etc....................65
SECTION 6.8. Receivables...............................................................66
SECTION 6.9. Sale and Leaseback........................................................66
SECTION 6.10. Places of Business; Change of Name.......................................66
SECTION 6.11. Limitations on Capital Expenditures......................................66
SECTION 6.12. Transactions with Affiliates. ..........................................66
SECTION 6.13. Prohibition of Amendments or Waivers.....................................66
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SECTION 6.14. Development Costs........................................................67
SECTION 6.15. Overhead Expense.........................................................67
SECTION 6.16. Consolidated Capital Base................................................67
SECTION 6.17. EBIT Ratio...............................................................67
SECTION 6.18. Liquidity Ratio.........................................................67
SECTION 6.19. No Change in Business....................................................68
SECTION 6.20. ERISA Compliance.........................................................68
SECTION 6.21. Additional Limitations on Production and Acquisition of Product..........68
SECTION 6.22. Subsidiaries.............................................................69
SECTION 6.23. Bank Accounts............................................................69
SECTION 6.24. Hazardous Materials......................................................69
SECTION 6.25. Use of Proceeds of Loans and Requests for Letters of Credit..............69
SECTION 6.26. Interest Rate Protection Agreements, etc.................................69
SECTION 6.27. Amortization Method......................................................69
7. EVENTS OF DEFAULT.......................................................................69
8. GRANT OF SECURITY INTEREST; REMEDIES....................................................72
SECTION 8.1. Security Interests. .....................................................72
SECTION 8.2. Use of Collateral.........................................................72
SECTION 8.3. Collection Accounts.......................................................72
SECTION 8.4. Credit Parties to Hold in Trust...........................................75
SECTION 8.5. Collections, etc. .......................................................75
SECTION 8.6. Possession, Sale of Collateral, etc.......................................76
SECTION 8.7. Application of Proceeds on Default........................................77
SECTION 8.8. Power of Attorney.........................................................77
SECTION 8.9. Financing Statements, Direct Payments.....................................78
SECTION 8.10. Further Assurances.......................................................78
SECTION 8.11. Termination..............................................................78
SECTION 8.12. Remedies Not Exclusive...................................................78
SECTION 8.13. Quiet Enjoyment..........................................................78
SECTION 8.14. Continuation and Reinstatement...........................................79
9. GUARANTY................................................................................79
SECTION 9.1. Guaranty..................................................................79
SECTION 9.2. No Impairment of Guaranty, etc............................................80
SECTION 9.3. Continuation and Reinstatement, etc.......................................81
SECTION 9.4. Limitation on Guaranteed Amount etc.......................................81
10. PLEDGE..................................................................................81
SECTION 10.1. Pledge....................................................................82
SECTION 10.2. Covenant.................................................................82
SECTION 10.3. Registration in Nominee Name; Denominations..............................82
SECTION 10.4. Voting Rights; Dividends; etc............................................82
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SECTION 10.5. Remedies Upon Default....................................................83
SECTION 10.6. Application of Proceeds of Sale and Cash.................................84
SECTION 10.7. Securities Act, etc.......................................................85
SECTION 10.8. Continuation and Reinstatement...........................................85
SECTION 10.9. Termination..............................................................85
11. [RESERVED]..............................................................................86
12. MISCELLANEOUS...........................................................................86
SECTION 12.1. Notices..................................................................86
SECTION 12.2. Survival of Agreement, Representations and Warranties, etc...............86
SECTION 12.3. Successors and Assigns; Loan Sales; Participations.....................86
SECTION 12.4. Expenses; Documentary Taxes..............................................88
SECTION 12.5. Indemnification of the Lender............................................89
SECTION 12.6. CHOICE OF LAW............................................................90
SECTION 12.7. WAIVER OF JURY TRIAL.....................................................90
SECTION 12.8. No Waiver................................................................90
SECTION 12.9. Extension of Payment Date................................................90
SECTION 12.10. Amendments, etc.........................................................91
SECTION 12.11. Severability............................................................91
SECTION 12.12. SERVICE OF PROCESS......................................................91
SECTION 12.13. Headings................................................................92
SECTION 12.14. Execution in Counterparts...............................................92
SECTION 12.15. Subordination of Intercompany Advances..................................92
SECTION 12.16. Confidentiality.........................................................93
SECTION 12.17. Entire Agreement........................................................93
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Schedules
1 MEI Ownership Interest
3.7(a) Corporate Guarantors/Pledged Securities
3.7(b) Beneficial Interests
3.8 Items of Product; Copyrights
3.9 Fictitious Names
3.11 Principal Executive Office/Location of Collateral/Filing Offices
3.12 Litigation
3.17 Existing Indebtedness/Material Agreements
3.21 Environmental Liabilities
3.22 Outstanding Rights Re Pledged Securities
6.2 Existing Liens
6.3 Guarantees
6.4 Scheduled Investments
6.23 Bank Accounts
Exhibits
A Form of Note
B-1 Form of Opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇, special counsel to the Credit
Parties
B-2 Form of Opinion of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, general counsel of the Borrower
C Form of Borrowing Base Certificate
D-1 Form of Pledgeholder Agreement (Uncompleted Product)
D-2 Form of Pledgeholder Agreement (Completed Product)
E-1 Form of Copyright Security Agreement
E-2 Form of Copyright Security Agreement Supplement
F Form of Laboratory Access Letter
G Form of Notice of Assignment and Irrevocable Instructions
H Form of Borrowing Certificate
I Form of Instrument of Assumption and Joinder
J Form of Contribution Agreement
K-1 Form of Individual Guaranty Agreement by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
K-2 Form of Individual Guaranty Agreement by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
K-3 Form of Individual Guaranty Agreement by ▇▇▇▇▇ ▇▇▇▇▇▇
K-4 Form of Individual Guaranty Agreement by ▇▇▇▇ ▇. ▇▇▇▇▇
K-5 Form of Individual Guaranty Agreement by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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CREDIT, SECURITY, GUARANTY AND PLEDGE AGREEMENT, dated as of
November 4, 1997 (as amended, supplemented or otherwise
modified, renewed or replaced from time to time, the "Credit
Agreement") among DOVE ENTERTAINMENT, INC., a California
corporation (the "Borrower"), the Corporate Guarantors named
herein and THE CHASE MANHATTAN BANK, a New York banking
corporation, as Lender (together with any permitted assignees of
all or part of the Commitment in accordance with the terms
hereof, the "Lender").
INTRODUCTORY STATEMENT
All terms not otherwise defined above or in this Introductory Statement
are as defined in Article 1 hereof, or as defined elsewhere herein.
The Borrower has requested that the Lender make available an $8,000,000
three-year secured revolving credit facility which will be used (i) to refinance
outstanding obligations as of the Closing Date under the Sanwa Credit Agreement
and the MEI Line of Credit; (ii) to finance the development, production,
distribution or acquisition of audio books, books and television product and
film product (other than the production and distribution of motion pictures in
theaters) and the production and distribution expenses of the motion picture
entitled "Wilde" and (iii) for other general corporate purposes.
To provide assurance for the repayment of the Loans and other
Obligations of the Borrower and the Corporate Guarantors hereunder, the Borrower
and the Corporate Guarantors will provide or will cause to be provided to the
Lender, the following (each as more fully described herein):
(i) a security interest in the Collateral pursuant to Article 8
hereof;
(ii) a guaranty of the Obligations pursuant to Article 9 hereof; and
(iii) a pledge of the Pledged Securities pursuant to Article 10
hereof.
A principal shareholder of the Borrower is Media Equities International,
L.L.C. ("MEI") which is directly and indirectly owned by ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
(collectively referred to herein as the "Individual Guarantors"). To provide
further assurance and in order to induce the Lender to enter into this Credit
Agreement, as security for the repayment of the Loans and the other Obligations
of the Borrower hereunder, the Individual Guarantors will provide to the Lender,
pursuant to the Guaranty Agreement, an unconditional guaranty of payment of the
Obligations in an amount equal to the lesser of (x) $2,000,000 and (y) the
amount by which the actual borrowings by the Borrower in accordance with the
terms of this Credit Agreement and Guaranty Agreement exceeds the Borrowing
Base, subject to the limitations set forth therein (the "Maximum Guaranty
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Amount"); provided, that in the case of any Individual Guarantor, such
guarantor's guaranty obligation shall not exceed the product of 110% of such
Individual Guarantor's ownership interest in MEI as of the date hereof (as
indicated in Schedule 1 hereto) mutliplied by the Maximum Guaranty Amount (such
amount to be reduced in accordance with the terms thereof).
Subject to the terms and conditions set forth herein, the Lender is
willing to make Loans to the Borrower and issue Letters of Credit in amounts in
the aggregate at any one time outstanding not in excess of its Commitment
hereunder.
Accordingly, the parties hereto hereby agree as follows:
1. DEFINITIONS
For the purposes hereof unless the context otherwise requires, all
Section references herein shall be deemed to correspond with Sections herein,
the following terms shall have the meanings indicated, all accounting terms not
otherwise defined herein shall have the respective meanings accorded to them
under GAAP and all terms defined in the UCC and not otherwise defined herein
shall have the respective meanings accorded to them therein. Unless the context
otherwise requires, any of the following terms may be used in the singular or
the plural, depending on the reference:
"Acceptable L/C" shall mean an irrevocable letter of credit which (i) is
in form and on terms reasonably acceptable to the Lender, (ii) is payable in
Dollars at an office of the issuing or confirming bank in New York City (or
another city acceptable to the Lender in its sole discretion), (iii) is issued
or confirmed by (a) the Lender; (b) any commercial bank that has (or which is
the principal operating subsidiary of a holding company which has) as of the
time such letter of credit is issued, public debt outstanding with a rating of
at least "A" (or the equivalent of an "A") from one of the nationally recognized
debt rating agencies; or (c) by any other bank which the Lender may in its sole
discretion determine to be of acceptable credit quality and (iv) with respect to
letters of credit delivered in connection with an uncompleted item of Product
for which a Completion Guarantee is required pursuant to the terms hereof, has
an expiration date no earlier than three (3) months after the "Outside Delivery
Date" for an item of Product (as set forth in the Completion Guarantee for such
item of Product) to which the letter of credit relates.
"Affiliate" shall mean any Person which, directly or indirectly, is in
control of, is controlled by or is under common control with, another Person.
For purposes of this definition, a Person shall be deemed to be "controlled by"
another Person if such latter Person possesses, directly or indirectly, power
either to (i) vote 20% or more of the securities having ordinary voting power
for election of directors of such Person or (ii) direct or cause the direction
of the management and policies of such controlled Person whether by contract or
otherwise.
"Alternate Base Rate" shall mean, for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of (a) the
Prime Rate in effect on such
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day, (b) the Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect for such day plus 1/2 of 1%. For purposes hereof,
"Prime Rate" shall mean the rate of interest per annum publicly announced from
time to time by the Lender as its prime rate in effect at its principal office
in New York City. "Base CD Rate" shall mean the sum of (a) the product of (i)
the Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate. "Three-Month Secondary CD Rate" shall mean, for any day, the
secondary market rate for three-month certificates of deposit reported as being
in effect on such day (or, if such day is not a Business Day, the next preceding
Business Day) by the Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under current practices of
the Board, be published in Federal Reserve Statistical Release H.15(519) during
the week following such day), or, if such rate shall not be so reported on such
day or such next preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major money center banks
in New York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day shall not be a Business Day, on the next preceding
Business Day) by the Lender from three New York City negotiable certificate of
deposit dealers of recognized standing selected by it. "Statutory Reserves"
shall mean a fraction (expressed as a decimal), the numerator of which is the
number one and the denominator of which is the number one minus the aggregate of
the maximum reserve percentages (including any marginal, special, emergency or
supplemental reserves) expressed as a decimal established by the Board and any
other banking authority to which the Lender is subject for new negotiable
nonpersonal time deposits in dollars of over $100,000 with maturities
approximately equal to three months. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage. "Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a Business Day, the average
of the quotations for the day of such transactions received by the Lender from
three Federal funds brokers of recognized standing selected by it. If for any
reason the Lender shall have determined (which determination shall be conclusive
absent manifest error) that it is unable to ascertain the Base CD Rate or the
Federal Funds Effective Rate or both for any reason, including the inability or
failure of the Lender to obtain sufficient quotations in accordance with the
terms hereof, the Alternate Base Rate shall be determined without regard to
clause (b) or (c), or both, of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such inability no longer
exist. Any change in the Alternate Base Rate due to a change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate, the
Three-Month Secondary CD Rate or the Federal Funds Effective Rate, respectively.
"Alternate Base Rate Loan" shall mean a Loan based on the Alternate Base
Rate in accordance with the provisions of Article 2 hereof.
"Applicable Law" shall mean all provisions of statutes, rules,
regulations and orders of the United States or foreign governmental bodies or
regulatory agencies applicable to the Person
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in question, and all orders and decrees of all U.S. federal or state courts and
arbitrators in proceedings or actions in which the Person in question is a
party.
"Applicable Margin" shall mean in the case of Alternate Base Rate Loans,
2% per annum, or in the case of Eurodollar Loans, 3% per annum.
"Approved Completion Guarantor" shall mean a financially sound and
reputable completion guarantor approved by the Lender. The Lender hereby
pre-approves as a completion guarantor (i) Fireman's Fund Insurance Company,
acting through its agent, International Film Guarantors L.P. (the general
partner of which is International Film Guarantors, Inc.), (ii) Cinema
Completions International Inc./Continental Casualty Company, (iii) The Motion
Picture Bond Company Inc. (to the extent a completion guarantee is accompanied
by a London Guarantee Insurance Company "cut-through") and (iv) Film Finances,
Inc. and its Affiliates that are insured under the same Lloyds of London
insurance policies as Film Finances, Inc. (only for items of Product with a
Budgeted Negative Cost of $7,500,000 or less and only to the extent the
completion guarantee is accompanied by a Lloyd's of London "cut-through");
provided, however, that any such pre-approval may be revoked by the Lender if
deemed appropriate in its sole discretion at any time upon 5 days prior written
notice to the Borrower; but further, provided, that such pre-approval may not be
revoked with regard to an item of Product if a Completion Guarantee has already
been issued for such item of Product.
"Assessment Rate" shall mean, for any day, the net annual assessment
rate (rounded upwards, if necessary, to the next higher 1/100 of 1%) as most
recently estimated by the Lender for determining the then current annual
assessment payable by the Lender to the Federal Deposit Insurance Corporation
(or any successor) for insurance by such Corporation (or such successor) of time
deposits made in Dollars at the Lender's domestic offices.
"Authorized Officer" shall mean, with respect to any Credit Party, such
Credit Party's Chief Executive Officer or Chief Financial Officer.
"Bankruptcy Code" shall mean the Bankruptcy Reform Act of 1978, as
heretofore and hereafter amended, as codified at 11 U.S.C. Section 101 et seq.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States of America.
"Borrowing" shall mean a group of Loans of a single interest rate type
and as to which a single Interest Period is in effect on a single day.
"Borrowing Base" shall mean, at any date for which the amount thereof is
to be determined, an amount equal to the aggregate (without double counting) of
the following:
(i) one hundred percent (100%) of Eligible L/C Receivables; plus
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(ii) eighty-five percent (85%) of Eligible Receivables; plus
(iii) thirty-five percent (35%) of Eligible Library Amount; plus
(iv) thirty percent (30%) of the book value of physical audio
cassettes and printed books; minus
(v) to the extent not already deducted in computing the Borrowing
Base, all amounts payable to third parties from or with regard
to the amounts otherwise included in the Borrowing Base (not to
exceed with respect to any item of Product, the amount included
in the Borrowing Base attributable to such item of Product),
including without limitation remaining acquisition payments, set
offs, current profit participations, deferments, residuals,
commissions and royalties not yet paid; minus
(vi) to the extent not otherwise deducted in computing the Borrowing
Base, the aggregate amount of all accrued but unpaid residuals
(not to exceed with respect to any item of Product, the amount
included in the Borrowing Base attributable to such item of
Product) owed to any trade guild, to the extent that the
obligation of any Credit Party to pay such residuals is secured
by a security interest in any Eligible Receivable included in
the Borrowing Base, which security interest is not subordinated
to the security interests of the Lender;
provided, however, that credit in the Borrowing Base attributable to any
Eligible Receivable may not exceed 20% of the total Borrowing Base, except as
may be approved in writing by the Lender.
"Borrowing Base Certificate" shall have the meaning given such term in
Section 5.1(e) hereof.
"Borrowing Certificate" shall mean a borrowing certificate,
substantially in the form of Exhibit H hereto, to be delivered by the Borrower
to the Lender in connection with each Borrowing.
"Budgeted Negative Cost" shall mean, with respect to any item of
Product, the amount of the cash budget (stated in Dollars) for such item of
Product including all costs customarily included in connection with the
acquisition of all underlying literary and musical rights with respect to such
item of Product and in connection with the preparation, production and
completion of such item of Product, including costs of materials, equipment,
physical properties, personnel and services utilized in connection with such
item of Product, both "above-the-line" and "below-the-line", any Completion
Guarantee fee (if applicable), and all other items customarily included in
negative costs, including finance charges and interest expense, but excluding
production fees and overhead charges payable to a Credit Party.
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"Business Day" shall mean any day other than a Saturday, Sunday or other
day on which banks are required or permitted to close in the States of
California and New York; provided, however, that when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude any day on which
banks are not open for dealings in Dollar deposits on the London Interbank
Market.
"Capital Expenditures" shall mean, with respect to any Person for any
period, the sum of (i) the aggregate of all expenditures (whether paid in cash
or accrued as a liability) by such Person during that period which, in
accordance with GAAP, are or should be included in "additions to property, plant
or equipment" or similar items included in cash flows (including Capital Leases)
and (ii) to the extent not covered by clause (i) hereof, the aggregate of all
expenditures properly capitalized in accordance with GAAP by such Person to
acquire, by purchase or otherwise, in whole or in part, the business, property
or fixed assets of, or stock or other evidence of beneficial ownership of any
other Person (other than the portion of such expenditures allocable in
accordance with GAAP to net current assets).
"Capital Lease" shall mean any lease of any property (whether real,
personal or mixed) by that Person as lessee which, in accordance with GAAP, is
or should be accounted for as a capital lease on the balance sheet of that
Person.
"Cash Equivalents" shall mean (i) marketable securities issued or
directly and fully guaranteed or insured by the United States of America or any
agency or instrumentality thereof (provided that the full faith and credit of
the United States of America is pledged in support thereof) having maturities of
not more than twelve months from the date of acquisition, (ii) time deposits,
certificates of deposit, acceptances or prime commercial paper or repurchase
obligations for underlying securities of the types described in clause (i)
entered into with the Lender or any commercial bank having a short-term deposit
rating of at least A-2 or the equivalent thereof by Standard & Poor's
Corporation or at least P-2 or the equivalent thereof by ▇▇▇▇▇'▇ Investors
Service, Inc. or (iii) commercial paper with a rating of A-1 or A-2 or the
equivalent thereof by Standard & Poor's Corporation or P-1 or P-2 or the
equivalent thereof by ▇▇▇▇▇'▇ Investors Service, Inc. and in each case maturing
within twelve months after the date of acquisition.
"Change in Control" shall mean either (i) any Person or group (such term
being used as defined in Section 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended) acquires ownership or control of voting stock of the
Borrower having voting power greater than the voting power at the time
controlled by MEI or (ii) if at any time, individuals who at the Closing Date
constituted the Board of Directors of the Borrower (together with any new
directors whose election by such Board of Directors or whose nomination for
election by the shareholders of the Borrower was approved by a vote of the
majority of the directors then still in office who were either directors at the
Closing Date or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Borrower.
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"Change in Management" shall mean that either ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ or ▇▇▇▇
▇▇▇▇▇▇ shall cease to perform executive functions for the Borrower; provided
that a Change in Management shall not be deemed to have occurred if such Person
has been replaced by a Person reasonably acceptable to the Lender within 180
days of such discontinuance.
"Closing Date" shall mean the earliest date on which all conditions
precedent to the making of the initial Loans as set forth in Section 4.1 have
been satisfied or waived. The closing shall take place in New York, New York.
"Code" shall mean the Internal Revenue Code of 1986 and the rules and
regulations issued thereunder, as heretofore amended, as codified at 26 U.S.C.
Section 1 et seq or any successor provision thereto.
"Collateral" shall mean with respect to each Credit Party, all of such
Credit Party's right, title and interest in personal property, tangible and
intangible, wherever located or situated and whether now owned or hereafter
acquired or created, including but not limited to goods, accounts, intercompany
obligations, partnership and joint venture interests, contract rights,
documents, chattel paper, general intangibles, goodwill, equipment, inventory,
investment property, instruments, copyrights, trademarks, trade names, insurance
proceeds, cash and deposit accounts and any proceeds thereon, products thereof
or income therefrom, further including but not limited to all of such Credit
Party's right, title and interest in and to each and every item and type of
Product and Recorded Product, the scenario, screenplay or script upon which an
item of Product is based, all of the properties thereof, tangible and
intangible, and all domestic and foreign copyrights and all other rights therein
and thereto, of every kind and character, whether now in existence or hereafter
to be made or produced, and whether or not in possession of such Credit Party,
including with respect to each and every item of Product and/or Recorded Product
and without limiting the foregoing language, each and all of the following
particular rights and properties (to the extent they are owned or hereafter
created or acquired by such Credit Party):
(i) all scenarios, screenplays and/or scripts at every stage
thereof;
(ii) all common law and/or statutory copyright and other rights in
all literary and other properties (hereinafter called "said
literary properties") which form the basis of each item of
Product and/or Recorded Product and/or which are and/or will be
incorporated into each item of Product and/or Recorded Product,
all component parts of each item of Product and/or Recorded
Product consisting of said literary properties, all rights in
and to the story, all treatments of said story and said literary
properties, together with all preliminary and final screenplays
used and to be used in connection with the item of Product
and/or Recorded Product, and all other literary material upon
which the item of Product and/or Recorded Product is based or
from which it is adapted;
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(iii) all rights in and to all music and musical compositions used and
to be used in each item of Product and/or Recorded Product,
including, each without limitation, all rights to record,
rerecord, produce, reproduce or synchronize all of said music
and musical compositions in and in connection therewith;
(iv) all tangible personal property relating to each item of Product
and/or Recorded Product, including, without limitation, all
exposed film, developed film, positives, negatives, prints,
positive prints, answer prints, special effects, preparing
materials (including interpositives, duplicate negatives,
internegatives, color reversals, intermediates, lavenders, fine
grain master prints and matrices, and all other forms of
pre-print elements), sound tracks, cutouts, trims and any and
all other physical properties of every kind and nature relating
to such item of Product and/or Recorded Product, whether in
completed form or in some state of completion, and all masters,
duplicates, drafts, versions, variations and copies of each
thereof, in all formats whether on film, videotape, disk or
otherwise and all music sheets and promotional materials
relating to such item of Product and/or Recorded Product
(collectively, the "Physical Materials");
(v) all collateral, allied, subsidiary and merchandising rights
appurtenant or related to each item of Product and/or Recorded
Product including, without limitation, the following rights: all
rights to produce remakes or sequels or prequels to each item of
Product and/or Recorded Product based upon each item of Product
and/or Recorded Product, said literary properties or the theme
of each item of Product and/or Recorded Product and/or the text
or any part of said literary properties; all rights throughout
the world to broadcast, transmit and/or reproduce by means of
television (including commercially sponsored, sustaining and
subscription or "pay" television) or by any process analogous
thereto, now known or hereafter devised, each item of Product
and/or Recorded Product or any remake or sequel or prequel to
the item of Product and/or Recorded Product; all rights to
produce primarily for television or similar use a motion picture
or series of motion pictures, by use of film or any other
recording device or medium now known or hereafter devised, based
upon each item of Product and/or Recorded Product, said literary
properties or any part thereof, including, without limitation,
based upon any script, scenario or the like used in each item of
Product and/or Recorded Product; all merchandising rights
including, without limitation, all rights to use, exploit and
license others to use and exploit any and all commercial tie-
ups of any kind arising out of or connected with said literary
properties, each item of Product and/or Recorded Product, the
title or titles of each item of Product and/or Recorded Product,
the characters of each item of
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Product and/or Recorded Product or said literary properties
and/or the names or characteristics of said characters and
including further, without limitation, any and all commercial
exploitation in connection with or related to each item of
Product and/or Recorded Product, any remake or sequel thereof
and/or said literary properties;
(vi) all statutory copyrights, domestic and foreign, obtained or to
be obtained on each item of Product and/or Recorded Product,
together with any and all copyrights obtained or to be obtained
in connection with each item of Product and/or Recorded Product
or any underlying or component elements of each item of Product
and/or Recorded Product, including, in each case without
limitation, all copyrights on the property described in
subparagraphs (i) through (v) inclusive, of this paragraph,
together with the right to copyright (and all rights to renew or
extend such copyrights) and the right to ▇▇▇ in the name of any
of the Credit Parties for past, present and future infringements
of copyright;
(vii) all insurance policies and completion bonds connected with each
item of Product and/or Recorded Product and all proceeds which
may be derived therefrom;
(viii) all rights to distribute, sell, rent, license the exhibition of
and otherwise exploit and turn to account each item of Product
and/or Recorded Product, the Physical Materials and rights in
and to said story, other literary material upon which each item
of Product and/or Recorded Product is based or from which it is
adapted, and said music and musical compositions used or to be
used in each item of Product and/or Recorded Product;
(ix) any and all sums, proceeds, money, products, profits or
increases, including money profits or increases (as those terms
are used in the UCC or otherwise) or other property obtained or
to be obtained from the distribution, exhibition, sale or other
uses or dispositions of each item of Product and/or Recorded
Product or any part of each item of Product and/or Recorded
Product, including, without limitation, all proceeds, profits,
products and increases, whether in money or otherwise, from the
sale, rental or licensing of each item of Product and/or
Recorded Product and/or any of the elements of each item of
Product and/or Recorded Product including from collateral,
allied, subsidiary and merchandising rights;
(x) the dramatic, nondramatic, stage, television, radio and
publishing rights, title and interest in and to each item of
Product and/or Recorded Product, and the right to obtain
copyrights and renewals of copyrights therein;
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(xi) the name or title of each item of Product and/or Recorded
Product and all rights of such Credit Party to the use thereof,
including, without limitation, rights protected pursuant to
trademark, service ▇▇▇▇, unfair competition and/or the rules and
principles of law and of any other applicable statutory, common
law, or other applicable statutes, common law, or other rule or
principle of law;
(xii) any and all contract rights and/or chattel paper which may arise
in connection with each item of Product and/or Recorded Product;
(xiii) all accounts and/or other rights to payment which such Credit
Party presently owns or which may arise in favor of such Credit
Party in the future, including, without limitation, any refund
under a completion guaranty, all accounts and/or rights to
payment due from exhibitors in connection with the distribution
of each item of Product and/or Recorded Product, and from
exploitation of any and all of the collateral, allied,
subsidiary, merchandising and other rights in connection with
each item of Product and/or Recorded Product;
(xiv) any and all "general intangibles" (as that term is defined in
the UCC) not elsewhere included in this definition, including,
without limitation, any and all general intangibles consisting
of any right to payment which may arise in the distribution or
exploitation of any of the rights set out herein, and any and
all general intangible rights in favor of such Credit Party for
services or other performances by any third parties, including
actors, writers, directors, individual producers and/or any and
all other performing or nonperforming artists in any way
connected with each item of Product and/or Recorded Product, any
and all general intangible rights in favor of such Credit Party
relating to licenses of sound or other equipment, licenses for
any photograph or photographic process, and all general
intangibles related to the distribution or exploitation of each
item of Product and/or Recorded Product including general
intangibles related to or which grow out of the exhibition of
each item of Product and/or Recorded Product and the
exploitation of any and all other rights in each item of Product
and/or Recorded Product set out in this definition;
(xv) any and all goods including inventory (as that term is defined
in the UCC) which may arise in connection with the creation,
production or delivery of each item of Product and/or Recorded
Product and which goods pursuant to any production or
distribution agreement or otherwise are owned by such Credit
Party;
(xvi) all and each of the rights, regardless of denomination, which
arise in connection with the creation, production, completion of
production,
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delivery, distribution, or other exploitation of each item of
Product and/or Recorded Product, including, without limitation,
any and all rights in favor of such Credit Party, the ownership
or control of which are or may become necessary or desirable, in
the opinion of the Lender, in order to complete production of
each item of Product and/or Recorded Product in the event that
the Lender exercises any rights it may have to take over and
complete production of each item of Product and/or Recorded
Product;
(xvii) any and all documents issued by any pledgeholder or bailee with
respect to the item of Product and/or Recorded Product or any
Physical Materials (whether or not in completed form) with
respect thereto;
(xviii) any and all production accounts or other bank accounts
established by such Credit Party with respect to such item of
Product and/or Recorded Product;
(xix) any and all rights of such Credit Party under contracts relating
to the production or acquisition of such item of Product and/or
Recorded Product; and
(xx) any and all rights of such Credit Party under Distribution
Agreements relating to each item of Product and/or Recorded
Product;
provided, that, notwithstanding anything to the contrary contained above,
"Collateral" shall not include the "Real Property" described in the Deed of
Trust dated April 24, 1996 among the Borrower, Asahi Bank of California and
North American Title Company, as trustee, and the "Rents" described in the
Assignment of Rents dated April 24, 1996 between the Borrower and Asahi Bank of
California.
"Collection Account" shall have the meaning of given such term in
Section 8.3 hereof.
"Commitment" shall mean the commitment of the Lender to make Loans to
the Borrower and issue Letters of Credit from the Closing Date through the
Commitment Termination Date up to an aggregate principal amount, at any one
time, not in excess of $8,000,000, as such amount may be reduced from time to
time in accordance with the terms of this Credit Agreement.
"Commitment Fee" shall have the meaning given such term in Section 2.5
hereof.
"Commitment Termination Date" shall mean the earlier to occur of (i)
November 4, 2000 or (ii) such earlier date on which the Commitments shall
terminate in accordance with Section 2.6 or Article 7 hereof.
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"Completed" and "Completion" shall mean with respect to any item of
Product that (A) either (i) sufficient elements have been delivered by the
Borrower to, and accepted by, a Person (other than the Borrower or Affiliate
thereof) to permit such Person to exhibit the item of Product in the medium for
which the item of Product is intended for initial exploitation in the United
States or (ii) the Borrower has certified to the Lender that an independent
laboratory has in its possession a complete final 35 mm or 70 mm (or other size
which has become standard in the industry) composite positive print, video
master or other equivalent master copy of the item of Product as finally cut,
main and end titled, edited, scored and assembled with sound track printed
thereon in perfect synchronization with the photographic action and fit and
ready for exhibition and distribution in the medium for which the item of
Product is intended for initial exploitation, provided that if such
certification shall not be verified to the Lender by such independent laboratory
within 20 business days thereafter, such item of Product shall revert to being
uncompleted until the Lender receives such verification, and (B) if such item of
Product was acquired from a third party, the entire acquisition price or minimum
advance shall have been paid to the extent then due and there is no condition or
event (other than the payment of money not yet due) the occurrence of which
might result in the Borrower losing any of its rights in such item of Product.
"Completion Guarantee" shall mean a completion guarantee, in the
customary form accepted by the Lender or otherwise in form and substance
satisfactory to the Lender, issued by an Approved Completion Guarantor which
names the Lender as a beneficiary thereof to the extent of the applicable Credit
Party's financial interest in an item of Product.
"Consolidated Capital Base" shall mean the sum of the principal amount
of Subordinated Debt outstanding (net of unamortized debt discount) plus the
amount of Shareholders' Equity of the Borrower and its Consolidated
Subsidiaries, all determined in accordance with GAAP.
"Consolidated Net Income" shall mean, for any period for which such
amount is being determined, the net income (or loss) of the Borrower and its
Consolidated Subsidiaries during such period, determined on a consolidated basis
for such period taken as a single accounting period in accordance with GAAP,
provided that there shall be excluded (i) income (or loss) of any Person (other
than a Consolidated Subsidiary) in which the Borrower or any of its Consolidated
Subsidiaries has an equity investment or comparable interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Borrower or any of its Consolidated Subsidiaries by such Person during such
period, (ii) the income (or loss) of any Person accrued prior to the date it
becomes a Consolidated Subsidiary of the Borrower or is merged into or
consolidated with the Borrower or any of its Consolidated Subsidiaries or the
Person's assets are acquired by the Borrower or any of its Consolidated
Subsidiaries and (iii) the income of any Consolidated Subsidiary to the extent
that the declaration or payment of dividends or similar distributions by that
Consolidated Subsidiary of its income is not at the time permitted by operation
of the terms of its charter or any agreement, instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to that Consolidated
Subsidiary.
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"Consolidated Subsidiaries" shall mean all Subsidiaries of a Person
which are required or permitted to be Consolidated with such Person for
financial reporting purposes in accordance with GAAP.
"Contribution Agreement" shall mean a Contribution Agreement executed by
the Credit Parties substantially in the form of Exhibit J hereto, as the same
may be amended, supplemented or otherwise modified from time to time.
"Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with any Credit Party, are treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code.
"Copyright Security Agreement" shall mean the Copyright Security
Agreement, substantially in the form of Exhibit E-1 hereto as the same may be
amended or supplemented from time to time by delivery of a Copyright Security
Agreement Supplement or otherwise.
"Copyright Security Agreement Supplement" shall mean a Supplement to the
Copyright Security Agreement substantially in the form of Exhibit E-2 hereto.
"Corporate Guarantors" shall mean all of the direct and indirect
Subsidiaries of the Borrower, now existing or hereafter acquired or created.
"Credit Party" shall mean the Borrower or any of the Corporate
Guarantors.
"Currency Agreement" shall mean any foreign exchange contract, currency
swap agreement, futures contract, option contract or other similar agreement
designed to protect any Credit Party against fluctuations in currency values.
"Default" shall mean any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
"Distribution Agreements" shall mean (i) any and all agreements entered
into by a Credit Party pursuant to which such Credit Party has sold, leased,
licensed or assigned distribution rights or other exploitation rights to any
item of Product to an un-Affiliated Person and (ii) any agreement hereafter
entered into by a Credit Party pursuant to which such Credit Party sells,
leases, licenses or assigns distribution rights to an item of Product to an
un-Affiliated Person.
"Dollars" and "$" shall mean lawful money of the United States of
America.
"EBIT" shall mean, for any period, for the Borrower and its Subsidiaries
on a Consolidated basis, the sum for such period of (i) Consolidated Net Income,
(ii) Total Interest,
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and (iii) provision for income taxes during such period, all as determined for
such period in conformity with GAAP.
"Eligible L/C Receivable" shall have the same definition as an Eligible
Receivable except that an Acceptable L/C shall have been delivered to the Lender
for the full amount of the receivable.
"Eligible Library Amount" shall initially be equal to $10,000,000 and
shall be redetermined on a bi-annual basis by ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ or an
independent consultant selected by the Lender in its reasonable discretion
exercised in good faith using methodology consistent with the initial valuation
without double counting for items of Product that are receiving the credit in
the Borrowing Base; provided, however, that there will be interim reductions to
the Eligible Library Amount to reflect decreases, if any, in the remaining value
of unsold library rights resulting from major library deals (e.g., any single
agreement or series of related agreements pertaining to the licensing,
distribution or sale of library product providing for aggregate payments
(including reasonably estimated contingent payments) to a Credit Party in excess
of $250,000) during such interim period.
"Eligible Receivables" shall mean, at any date at which the amount
thereof is to be determined, an amount equal to the sum of the present values
(discounted, in the case of amounts which are not due and payable within 12
months following the date of determination, on a quarterly basis by a rate of
interest equal to the interest rate in effect on the Note on the date of
computation) of (a) all net amounts which pursuant to a binding agreement are
contractually obligated to be paid to any Credit Party either unconditionally or
subject only to normal delivery requirements, and which are reasonably expected
by the Borrower to be payable and collected from obligors (including, without
limitation, amounts which a distributor has reported to a Credit Party in
writing (and such report has been forwarded to the Lender) will be paid to such
Credit Party following receipt by the distributor of sums contractually required
to be paid to the distributor from third parties) minus (b) the sum, without
double counting and computed on a receivable by receivable basis and never in
excess of the amount of the corresponding receivable, of (i) in the case of
audio and book receivables, a reserve in respect of estimated returns for items
of Product sold on a returnable basis, allowances and doubtful payments of
accounts for each such receivable, in an amount which shall not be less than 30%
of the amount of the corresponding receivable, (ii) the following items (based
on the Borrower's then best estimates): third party profit participations,
residuals, collection/ distribution expenses, commissions, video fulfillment
costs, foreign withholding, remittance and similar taxes chargeable in respect
of such accounts receivable, and any other projected expenses of such Credit
Party arising in connection with such amounts and (iii) the outstanding amount
of unrecouped advances made by a distributor to the extent subject to repayment
by a Credit Party or adjustment pursuant to approved Distribution Agreements,
but Eligible Receivables shall not include amounts:
(i) which in the reasonable discretion of the Lender (acting in good
faith) are subject to material conditions precedent to payment
(including a material performance obligation or a material
executory aspect on the part of the
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Credit Parties or any other party or obligations contingent upon
future events not within a Credit Party's direct control within
the ordinary course of business);
(ii) to the extent such receivables are more than 90 days past due;
(iii) in excess of $50,000 that are to be paid in a currency other
than Dollars unless hedged in a manner satisfactory to the
Lender;
(iv) to the extent included in the Borrower's estimated bad debts;
(v) due from any obligor which has 20% or more of the total
receivable amount from such obligor 120 or more days past due
(exclusive of amounts that are being disputed or contested in
good faith);
(vi) for which there is a bona fide request for a material credit,
adjustment, compromise, offset, counterclaim or dispute;
provided, however, that only the amount in question shall be
excluded from such receivable;
(vii) which are attributable to an item of Product in which a Credit
Party cannot warrant sufficient title to the underlying rights
to justify such receivable;
(viii) in which the Lender does not have a first perfected security
interest under the UCC and applicable copyright law; provided
that, such receivable may be subject to permitted liens
subordinate to the security interest of the Lender;
(ix) which are determined by the Lender in its reasonable discretion,
acting in good faith, upon written notice from the Lender to the
Borrower and effective 10 days subsequent to the Borrower's
receipt of such notice, to be unacceptable (it being understood
that certain unacceptable receivables may be made acceptable and
may be included in the Borrowing Base if secured by an
Acceptable L/C);
(x) which relate to items of Product as to which the Lender has not
received a fully executed Laboratory Access Letter or
Pledgeholder Agreement for each laboratory holding Physical
Materials sufficient to fully exploit the rights held by the
Borrower in such item of Product;
(xi) which will be subject to reduction or repayment to the extent
not earned by performance;
(xii) which are attributable to items of Product as described in
Section 5.21 unless the Borrower is in compliance with Section
5.21;
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(xiii) which are attributable to items of Product which have not been
Completed (except that (1) if a Letter of Credit is issued in
order to support the Borrower's minimum payment obligation to
acquire distribution rights in such item of Product, amounts
attributable to such rights may be treated as Eligible
Receivables (even though the item of Product has not yet been
Completed), provided that (A) proof of Completion of such item
of Product must be presented in order to draw under the Letter
of Credit, (B) the portion of the Borrowing Base attributable to
such Eligible Receivables for such item of Product does not
exceed the amount of such Letter of Credit for such item of
Product, and (C) such amounts otherwise meet all of the
applicable criteria for inclusion as Eligible Receivables except
clause (x); or (2) if a Completion Guarantee has been issued for
such item of Product or the Borrower is otherwise in compliance
with Section 5.21, amounts attributable to such item of Product
may be treated as Eligible Receivables (even though the item of
Product has not yet been Completed), provided that (A) the
portion of the Borrowing Base attributable to such Eligible
Receivables for such item of Product shall not exceed the
amounts which would be paid to the Borrower or a Corporate
Guarantor under such Completion Guarantee if such item of
Product were abandoned as of the date of computation of the
Borrowing Base and (B) such amounts otherwise meet all of the
applicable criteria for inclusion as Eligible Receivables except
clause (x); or
(xiv) which will not become due and payable until one year or more
after the scheduled final maturity of the Credit Agreement.
The Lender from time to time by written notice to the Borrower (which
notice shall be prospective only, i.e., to the extent that giving effect to such
notice would otherwise result in a mandatory prepayment by the Borrower under
Section 2.9, such notice shall not be given effect for purposes of such
mandatory prepayment, but shall nevertheless be effective for all other purposes
under this Credit Agreement immediately upon the Borrower's receipt of such
notice) may determine that any amounts due under any Distribution Agreement are
unacceptable and shall no longer constitute an Eligible Receivable as it may,
acting in good faith, in its discretion deem appropriate.
"Environmental Laws" shall mean any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any Governmental Authority regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Material or
environmental protection or health and safety, as now or may at any time
hereafter be in effect, including without limitation, the Clean Water Act also
known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. Section
1251 et seq., the Clean Air Act ("CAA"), 42 U.S.C. Sections 7401 et seq., the
Federal Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. Sections
136 et seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30 U.S.C.
Sections 1201 et seq., the Comprehensive Environmental
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Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Section 9601 et
seq., the Superfund Amendments and Reauthorization Act of 1986 ("▇▇▇▇"), Public
Law 99-499, 100 Stat. 1613, the Emergency Planning and Community Right to Know
Act ("ECPCRKA"), 42 U.S.C. Section 11001 et seq., the Resource Conservation and
Recovery Act ("RCRA"), 42 U.S.C. Section 6901 et seq., the Occupational Safety
and Health Act as amended ("OSHA"), 29 U.S.C. Section 655 and Section 657,
together, in each case, with any amendment thereto, and the regulations adopted
pursuant thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as heretofore and hereafter amended, as codified at 29 U.S.C. Section 1001 et
seq. and the regulations promulgated thereunder.
"Eurodollar Loan" shall mean a Loan based on the LIBO Rate in accordance
with the provisions of Article 2 hereof.
"Event of Default" shall have the meaning given such term in Article 7
hereof.
"Fundamental Documents" shall mean this Credit Agreement, the Note, the
Guaranty Agreement, the Pledgeholder Agreements, the Laboratory Access Letters,
the Copyright Security Agreement, the Copyright Security Agreement Supplements,
the Instruments of Assumption and Joinder, the Notices of Assignment and
Irrevocable Instruction, UCC financing statements, and any other ancillary
documentation which is required to be or is otherwise executed by any of the
Credit Parties and delivered to the Lender in connection with this Credit
Agreement or any other Fundamental Document.
"GAAP" shall mean generally accepted accounting principles in the United
States of America consistently applied (except for accounting changes in
response to FASB releases, or other authoritative pronouncements).
"Governmental Authority" shall mean any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, or any court, in each case whether of the United States or a
foreign jurisdiction.
"Guaranty" shall mean, as to any Person, any direct or indirect
obligation of such Person guaranteeing or intended to guaranty any Indebtedness,
Capital Lease, dividend or other monetary obligation ("primary obligation") of
any other Person (the "primary obligor") in any manner, whether directly or
indirectly, including, without limitation, any obligation of such Person,
whether or not contingent, (i) to purchase any such primary obligation or any
property constituting direct or indirect security therefor, (ii) to advance or
supply funds (a) for the purchase or payment of any such primary obligation or
(b) to maintain working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency of the primary obligor, or (iii)
to purchase property, securities or services, in each case, primarily for the
purpose of assuring the performance of the obligor of any such primary
obligation; provided, however, that the term Guaranty shall not include
endorsements for collection or collections for deposit, in either case in the
ordinary course of business. The amount of any Guaranty shall be deemed to
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be an amount equal to the stated or determinable amount of the primary
obligation in respect of which such Guaranty is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof
(assuming such Person is required to perform thereunder).
"Guaranty Agreement" shall mean, collectively, the Individual Guaranty
Agreements dated the date hereof, each between an Individual Guarantor and the
Lender substantially in the form of Exhibits K-1 through K-5 hereto, as the same
may be amended, supplemented or otherwise modified from time to time.
"Hazardous Materials" shall mean any flammable materials, explosives,
radioactive materials, hazardous materials, hazardous wastes, hazardous or toxic
substances, or similar materials defined in any Environmental Law.
"Indebtedness" shall mean (without double counting), at any time and
with respect to any Person, (i) indebtedness of such Person for borrowed money
(whether by loan or the issuance and sale of debt securities) or for the
deferred purchase price of property or services purchased (other than amounts
constituting trade payables (payable within 90 days) arising in the ordinary
course of business); (ii) obligations of such Person in respect of letters of
credit, acceptance facilities, or drafts or similar instruments issued or
accepted by banks and other financial institutions for the account of such
Person; (iii) obligations of such Person under Capital Leases; (iv) deferred
payment obligations of such Person resulting from the adjudication or settlement
of any claim or litigation and (v) Indebtedness of others of the type described
in clauses (i), (ii), (iii) and (iv) hereof which such Person has (a) directly
or indirectly assumed or guaranteed in connection with a Guaranty or (b) secured
by a Lien on the assets of such Person, whether or not such Person has assumed
such indebtedness. Indebtedness shall not include non-refundable advances made
by a third-party distributor to "cash-flow" the production of an item of
Product.
"Individual Guarantors" shall be as defined in the Introductory
Statement hereof.
"Instruments of Assumption and Joinder" shall mean the Instruments of
Assumption and Joinder substantially in the form of Exhibit I pursuant to which
Subsidiaries of the Borrower become parties to this Credit Agreement as
contemplated by Section 6.22.
"Interest Payment Date" shall mean (i) as to any Eurodollar Loan having
an Interest Period of one, two or three months, the last day of such Interest
Period, (ii) as to any Eurodollar Loan having an Interest Period of more than
three months, the last day of such Interest Period and, in addition, each date
during such Interest Period that would be the last day of an Interest Period
commencing on the same day as the first day of such Interest Period but having a
duration of three months or any integral multiple thereof and (iii) with respect
to Alternate Base Rate Loans, the last Business Day of each March, June,
September and December (commencing the last Business Day of December 1997).
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"Interest Period" shall mean as to any Eurodollar Loan, the period
commencing on the date such Loan is made, continued or converted or the last day
of the preceding Interest Period and ending on the numerically corresponding day
(or if there is no corresponding day, the last day) in the calendar month that
is one, two, three or six months thereafter as the Borrower may elect; provided,
however, that (i) if any Interest Period would end on a day which shall not be a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day, unless such next succeeding Business Day would fall in the next
calendar month, in which case, such Interest Period shall end on the next
preceding Business Day and (ii) no Interest Period may be selected which would
end later than the Commitment Termination Date.
"Interest Rate Protection Agreement" shall mean any interest rate swap
agreement, interest rate cap agreement, synthetic caps, collars and floors or
other financial agreement or arrangement designed to protect any Credit Party
against fluctuations in interest rates.
"Investment" shall mean any stock, evidence of indebtedness or other
securities of any Person, any loan, advance, contribution of capital, extension
of credit or commitment therefor, including without limitation the guarantee of
loans made to others (except for current trade and customer accounts receivable
for goods or services provided or rendered in the ordinary course of business
and payable in accordance with customary trading terms in the ordinary course of
business), and any purchase of (i) any securities of another Person or (ii) any
business or undertaking of any Person or any commitment or option to make any
such purchase.
"L/C Exposure" shall mean, at any time, the amount expressed in Dollars
of the aggregate face amount of all drafts which may then or thereafter be
presented by beneficiaries under all Letters of Credit then outstanding plus
(without duplication) the face amount of all drafts which have been presented or
accepted under all Letters of Credit but have not yet been paid or have been
paid but not reimbursed.
"Laboratory" shall mean any laboratory reasonably acceptable to the
Lender which is located in the United States and is a party to a Pledgeholder
Agreement or a Laboratory Access Letter.
"Laboratory Access Letter" shall mean a letter agreement among (i) a
Laboratory holding any elements of any item of Product to which a Credit Party
has the right of access, (ii) such Credit Party and (iii) the Lender,
substantially in the form of Exhibit F hereto or a form otherwise acceptable to
the Lender.
"Lender" shall be as defined in the Introductory Statement hereof.
"Lending Office" shall mean, with respect to the Lender, the branch or
branches (or affiliate or affiliates) from which the Lender's Eurodollar Loans
or Alternate Base Rate Loans, as the case may be, are made or maintained and for
the account of which all payments of
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principal of, and interest on, the Lender's Eurodollar Loans or Alternate Base
Rate Loans are made.
"Letter of Credit" shall mean a letter of credit issued by the Lender
pursuant to Section 2.14.
"LIBO Rate" shall mean, with respect to the Interest Period for a
Eurodollar Loan, an interest rate per annum equal to the quotient (rounded
upwards to the next 1/100 of 1%) of (A) the average of the rates at which Dollar
deposits approximately equal in principal amount to such Eurodollar Loan and for
a maturity equal to the applicable Interest Period are offered to the Lending
Office of the Lender in immediately available funds in the London Interbank
Market for Eurodollars at approximately 11:00 a.m., London time, two Business
Days prior to the commencement of such Interest Period divided by (B) one minus
the applicable statutory reserve requirements of the Lender, expressed as a
decimal (including without duplication or limitation, basic, supplemental,
marginal and emergency reserves), from time to time in effect under Regulation D
or similar regulations of the Board. It is agreed that for purposes of this
definition, Eurodollar Loans made hereunder shall be deemed to constitute
Eurocurrency Liabilities as defined in Regulation D and to be subject to the
reserve requirements of Regulation D.
"Lien" shall mean any mortgage, copyright mortgage, pledge, security
interest, encumbrance, lien or charge of any kind whatsoever (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction or the agreement to grant a
security interest at a future date).
"Loans" shall mean the loans made hereunder in accordance with the
provisions of Section 2.2, whether made as a Eurodollar Loan or an Alternate
Base Rate Loan, as permitted hereby.
"Margin Stock" shall be as defined in Regulation U of the Board.
"Material Agreement" shall mean any agreement set forth on Schedule 3.17
hereto.
"Maximum Guaranty Amount" shall be as defined in the Introductory
Statement hereof.
"MEI Line of Credit" shall mean the loan made to the Borrower and
certain of the Corporate Guarantors by MEI on September 26, 1997 in the
principal amount of $550,000.
"Multiemployer Plan" shall mean a plan described in Section 4001(a)(3)
of ERISA.
"Notice of Assignment and Irrevocable Instructions" shall mean the
Notice of Assignment and Irrevocable Instructions substantially in the form of
Exhibit G or in such other
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form as shall be acceptable to the Lender, including without limitation the
inclusion of such notice and instructions in a Distribution Agreement.
"Obligations" shall mean the obligation of the Borrower to make due and
punctual payment of principal of and interest on the Loans, the Commitment Fee,
reimbursement obligations in respect of Letters of Credit and all other monetary
obligations of the Borrower owed to the Lender under this Credit Agreement, the
Note, the Commitment Letter or any other Fundamental Document and all amounts
payable by the Borrower to the Lender under any Interest Rate Protection
Agreement or Currency Agreement, provided that the Lender shall have received
written notice within 10 days after execution of each such Interest Rate
Protection Agreement or Currency Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
successor thereto.
"Permitted Encumbrances" shall mean Liens permitted under Section 6.2
hereof.
"Person" shall mean any natural person, corporation, partnership, trust,
joint venture, association, company, estate, unincorporated organization or
government or any agency or political subdivision thereof.
"Physical Materials" shall have the meaning given such term in the
definition of "Collateral" herein.
"Plan" shall mean an employee benefit plan within the meaning of Section
3(2) of ERISA, other than a Multiemployer Plan, maintained by the Borrower or
any member of the Controlled Group, or to which the Borrower or any member of
the Controlled Group contributes or is required to contribute or any other plan
covered by Title IV of ERISA that cover any employees of the Borrower or any
member of the Controlled Group.
"Pledged Securities" shall mean 100% of the issued and outstanding
capital stock of each of the Corporate Guarantors.
"Pledgeholder Agreement" shall mean a Laboratory Pledgeholder Agreement
among a Credit Party, the Lender, a third party completion guarantor (if there
is one), and one or more Laboratories, substantially in the form of Exhibit D-1
or Exhibit D-2 hereto, or in such other form as shall be acceptable to the
Lender.
"Pledgors" shall mean those Credit Parties identified as such on
Schedule 3.7(a).
"Product" shall mean any motion picture, film or video tape produced for
television release or for release in any other medium, in each case whether
recorded on film, videotape, cassette, cartridge, disc or on or by any other
means, method, process or device whether now known or hereafter developed, with
respect to which a Credit Party (i) is the initial
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copyright owner or (ii) acquires an equity interest or distribution rights. The
term "item of Product" shall include, without limitation, the scenario,
screenplay or script upon which such Product is based, all of the properties
thereof, tangible and intangible, and whether now in existence or hereafter to
be made or produced, whether or not in possession of the Credit Parties, and all
rights therein and thereto, of every kind and character.
"Production Account(s)" shall mean individually or collectively, as the
context so requires, each demand deposit account(s) established by a Credit
Party at a commercial bank located in the United States or otherwise acceptable
to the Lender, for the sole purpose of paying the production costs of a
particular item of Product and, if a Completion Guaranty is required for such
item of Product pursuant to the terms hereof, as to which the Approved
Completion Guarantor for such item of Product has agreed in writing that amounts
deposited in such account shall be deemed available for production of such item
of Product for purposes of the Completion Guarantee for such item of Product.
"Production Exposure" for an item of Product shall mean the Budgeted
Negative Cost or acquisition price paid or to be paid by a Credit Party (net of
amounts being cash-flowed by a third party unrelated to a Credit Party pursuant
to contractual arrangements reasonably acceptable to the Lender).
"Recorded Product" shall mean any audio embodiment or musical, spoken or
other sound based upon literary or other works regardless of the nature of the
material object, such as discs, tapes or other phonorecords, in which such
sounds are embodied, including without limitation audio books.
"Reportable Event" shall mean any reportable event as defined in Section
4043(c) of ERISA, other than a reportable event as to which provision for 30-day
notice to the PBGC would be waived under applicable regulations had the
regulations in effect on the Closing Date been in effect on the date of
occurrence of such reportable event.
"Restricted Payment" shall mean (i) any distribution, dividend or other
direct or indirect payment on account of shares of any class of stock of,
partnership interest in, or any other equity interest of, a Credit Party, other
than a dividend, distribution or other payment payable solely in shares of
common stock, (ii) any redemption or other acquisition, re-acquisition or
retirement by a Credit Party of any class of its own stock or other equity
interest of a Credit Party or an Affiliate, now or hereafter outstanding, (iii)
any payment made to retire, or obtain the surrender of any outstanding warrants,
puts or options or other rights to purchase or acquire shares of any class of
stock of, or any equity interest in, a Credit Party, now or hereafter
outstanding and (iv) any payment by a Credit Party of principal of, premium, if
any, or interest on, or any redemption, purchase, retirement, defeasance,
sinking fund or similar payment with respect to, any Subordinated Debt now or
hereafter outstanding.
"Sanwa Credit Agreement" shall mean the Term Loan Agreement dated as of
August 16, 1996, between Sanwa Bank California and the Borrower.
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"Shareholders' Equity" shall mean the consolidated capital, surplus and
retained earnings and deficits of the Borrower and its Subsidiaries, subject to
intercompany eliminations and reduced by the outstanding amount of any note held
by the Borrower in payment for capital stock, all as determined in accordance
with GAAP.
"Strike Price" shall mean, with respect to any item of Product, the
amount of funds required to be provided under the relevant Completion Guarantee,
if applicable.
"Subordinated Debt" shall mean all Indebtedness of any of the Credit
Parties that is subordinated to the Obligations pursuant to written agreements,
containing interest rates, payment terms, maturities, amortization schedules,
covenants, defaults, remedies, subordination provisions and other material terms
in form and substance satisfactory to the Lender.
"Subsidiary" shall mean with respect to any Person, any corporation,
association, joint venture, partnership or other business entity (whether now
existing or hereafter organized) of which at least a majority of the Voting
Stock or other ownership interests having ordinary voting power for the election
of directors (or the equivalent) is, at the time as of which any determination
is being made, owned or controlled by such Person or one or more subsidiaries of
such Person or by such Person and one or more subsidiaries of such Person.
"Total Interest" shall mean the sum of (i) all cash interest expenses
(net of interest income) calculated on an accrual basis of the Borrower and its
Consolidated Subsidiaries computed in accordance with GAAP (whether indicated on
the consolidated statement of earnings under the caption "Interest Expense" or
netted out under the amount appearing under the caption "Interest and Investment
Income") plus (ii) any cash interest expense calculated on an accrual basis that
has been capitalized (other than as part of film costs) during the relevant
period.
"UCC" shall mean the Uniform Commercial Code as in effect in the State
of New York on the date of execution of this Credit Agreement.
"Voting Stock" shall mean the capital stock of an entity having ordinary
voting power under ordinary circumstances to vote in the election of directors
of such entity.
"Weighted Average Life to Maturity" shall mean, when applied to any
Indebtedness at any date, the number of years obtained by dividing (a) the then
outstanding principal amount of such Indebtedness into (b) the sum of the
products obtained by (x) the amount of each then remaining installment, sinking
fund, serial maturity or other required payments of principal, including payment
at final maturity, in respect thereof by (y) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment.
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2. THE LOANS
SECTION 2.1. Loans. (a) The Lender agrees, upon the terms and subject to
the conditions hereof, to make loans to the Borrower, on any Business Day and
from time to time from the Closing Date to but excluding the Commitment
Termination Date, each in an aggregate principal amount which when added to the
aggregate principal amount of all Loans then outstanding to the Borrower from
the Lender plus the then current L/C Exposure, does not exceed the Lender's
Commitment (after giving effect to all Loans repaid and all reimbursements of
Letters of Credit made concurrently with the making of any Loans).
(b) Subject to Section 2.2, the Loans shall be made at such times as
the Borrower shall request.
(c) Subject to the terms and conditions of this Credit Agreement,
the Borrower may borrow, repay and re-borrow amounts constituting the
Commitment.
(d) Notwithstanding anything to the contrary above, the Lender shall
not be obligated to make Loans or to incur any incremental L/C Exposure if, as a
result thereof, the aggregate principal amount of all Loans then outstanding
plus the then current L/C Exposure exceeds the lesser of (x) the sum of (A) the
Maximum Guaranty Amount plus (B) amounts currently held in the Collection
Account plus (C) the Borrowing Base or (y) the Commitment.
SECTION 2.2. Making of Loans. (a) Each Loan shall be an Alternate Base
Rate Loan or a Eurodollar Loan as the Borrower may request subject to and in
accordance with this Section 2.2.
(b) The Borrower shall give the Lender at least three Business Days'
prior written, facsimile or telephonic (promptly confirmed in writing) notice of
each Borrowing which is to consist of Eurodollar Loans, and at least one
Business Day's prior written, facsimile or telephonic (promptly confirmed in
writing) notice of each Borrowing which is to consist of Alternate Base Rate
Loans. Each such notice in order to be effective must be received by the Lender
not later than 2:00 p.m., New York City time, on the day required and shall
specify the date (which shall be a Business Day) on which such Loan is to be
made, the aggregate principal amount of the requested Loan. Each such notice
shall be irrevocable and shall specify whether the Borrowing then being
requested is to consist of Alternate Base Rate Loans or Eurodollar Loans and in
the case of Eurodollar Loans, the Interest Period or Interest Periods with
respect thereto; provided, that in the event the Lender shall have determined
that Eurodollar Loans are not available pursuant to Section 2.7(b), the Borrower
may rescind such Borrowing request by providing the Lender notice thereof no
later than 5:00 p.m. (New York City time) on the day the Borrower received
notice of such unavailability. If no election of an Interest Period is specified
in such notice in the case of a Borrowing consisting of Eurodollar Loans, such
notice shall be deemed to be a request for an Interest Period of one month. If
no election is made as to the type of Loan, such notice shall be deemed a
request for a Borrowing consisting of Alternate Base Rate Loans. No Borrowing
shall consist of Eurodollar Loans if after giving effect thereto an aggregate
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of more than six (6) separate Eurodollar Loans would be outstanding hereunder
(determined in accordance with Section 2.9(c) hereof).
(c) Each Loan requested by the Borrower shall be as specified on the
applicable Borrowing Certificate delivered to the Lender in connection with such
Loan; provided, that with respect to any request for a Loan in excess of the
Borrowing Base (which amount shall be subject to the guaranty obligations of the
Individual Guarantors under the Guaranty Agreement), the Borrower shall obtain
the written approval of MEI in accordance with the terms of the Guaranty
Agreement. The Lender shall disburse such funds by depositing the requested
amounts into an account designated by the Borrower.
(d) The Lender may at its option fulfill its obligation to make
Eurodollar Loans by causing a foreign branch or affiliate to fund such
Eurodollar Loans, provided that any exercise of such option shall not affect the
obligation of the Borrower to repay Loans in accordance with the terms hereof.
Subject to the other provisions of this Section 2.2, Loans of more than one
interest rate type may be outstanding at the same time.
(e) The amount of any Borrowing of new funds shall be in an
aggregate principal amount of $125,000 (or such lesser amount as shall equal the
available but unused portion of the Commitment) or such greater amount which is
an integral multiple of $100,000; provided, however that the amount of any
Borrowing of new funds which shall be a Eurodollar Loan shall be in an aggregate
principal amount of $500,000 or such greater amount which is an integral
multiple of $100,000.
(f) Notwithstanding the provisions of clause (b) above and/or the
absence of a request from the Borrower that the Lender make a Loan, the Lender
may make Loans and apply the proceeds thereof as follows:
(i) if the Approved Completion Guarantor for an item of
Product being produced by the Borrower or for which
receivables are included in the Borrowing Base shall
take over production of such item of Product pursuant to
the Completion Guarantee with respect to such item of
Product, to make Loans up to the Strike Price with
respect to the production of such item of Product and
pay the proceeds thereof directly to the Approved
Completion Guarantor to be used to finance the
production and delivery of such item of Product pursuant
to the terms of the Completion Guarantee; and
(ii) if an Event of Default shall have occurred and be
continuing, to make Loans with respect to any item of
Product being produced by the Borrower or for which
receivables are included in the Borrowing Base and pay
the proceeds thereof directly to Persons providing
services in connection with the production, delivery and
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distribution of such Product so as to ensure Completion
of such item of Product and/or the collection of
Eligible Receivables.
SECTION 2.3. Note. (a) The Loans made by the Lender hereunder shall be
evidenced by a single promissory note substantially in the form of Exhibit A
hereto (the "Note") in the face amount of the Lender's Commitment, payable to
the order of the Lender, duly executed by the Borrower and dated the date
hereof.
(b) The Note shall bear interest on the outstanding principal
balance thereof as set forth in Section 2.4 hereof. The Lender is hereby
authorized by the Borrower, but not obligated, to enter the amount of each Loan
and the amount of each payment or prepayment of principal or interest thereon in
the appropriate spaces on the reverse of or on an attachment to the Note;
provided, however, that the failure of the Lender to set forth such Loans,
principal payments or other information shall not in any manner affect the
obligations of the Borrower to repay such Loans.
SECTION 2.4. Interest on Note. (a) In the case of a Eurodollar Loan,
interest shall be payable at a rate per annum (computed on the basis of the
actual number of days elapsed over a year of 360 days) equal to the LIBO Rate
plus the Applicable Margin. Interest shall be payable on each Eurodollar Loan on
each applicable Interest Payment Date, at maturity and on the date of a
conversion of such Eurodollar Loan to an Alternate Base Rate Loan. The Lender
shall determine the applicable LIBO Rate for each Interest Period as soon as
practicable on the date when such determination is to be made in respect of such
Interest Period and shall notify the Borrower of the applicable interest rate so
determined. Such determination shall be conclusive absent manifest error.
(b) In the case of an Alternate Base Rate Loan, interest shall be
payable at a rate per annum (computed on the basis of the actual number of days
elapsed over a year of 365/366 days, as the case may be, during such times as
the Alternate Base Rate is based upon the Prime Rate, and over a year of 360
days at all other times) equal to the Alternate Base Rate plus the Applicable
Margin. Interest shall be payable on each Alternate Base Rate Loan on each
applicable Interest Payment Date and at maturity.
(c) Anything in this Credit Agreement or the Note to the contrary
notwithstanding, the interest rate on the Loans shall in no event be in excess
of the maximum permitted by Applicable Law.
SECTION 2.5. Commitment Fees and Other Fees. (a) The Borrower agrees to
pay to the Lender on the last Business Day of each March, June, September and
December in each year (commencing on the last Business Day of December 1997)
prior to the Commitment Termination Date and on the Commitment Termination Date,
an aggregate fee (the "Commitment Fee") of 1/2 of 1% per annum, computed on the
basis of the actual number of days elapsed during the preceding period or
quarter over a year of 360 days, on the average daily amount by which the
Lender's Commitment, as such Commitment may be reduced in accordance
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with the provisions of this Credit Agreement, exceeds the sum of the principal
balance of the Lender's outstanding Loans plus its L/C Exposure during the
preceding period or quarter.
(b) The Commitment Fee shall commence to accrue from the Closing
Date.
(c) In addition, the Borrower agrees to pay to the Lender on the
Closing Date a one-time fee in an amount equal to 2% of the Lender's Commitment.
SECTION 2.6. Optional and Mandatory Termination or Reduction of
Commitment. (a) Upon at least three Business Days' prior written, facsimile or
telephonic notice (provided that such telephonic notice is immediately followed
by written confirmation) to the Lender, the Borrower may at any time in whole
permanently terminate, or from time to time in part permanently reduce, the
Commitment. In the case of a partial reduction, each such reduction of the
Commitment shall be in a minimum aggregate principal amount of $500,000 or an
integral multiple thereof; provided, however, that the Commitment may not be
reduced by more than the amount of the then unused Commitment and may not be
reduced to an amount less than the aggregate principal amount of the Loans
outstanding, plus the then current L/C Exposure.
(b) Simultaneously with each such termination or reduction of the
Commitment, the Borrower shall pay to the Lender all accrued and unpaid
Commitment Fees on the amount of the Commitment so terminated or reduced through
the date of such termination or reduction.
SECTION 2.7. Default Interest; Alternate Rate of Interest. (a) If the
Borrower shall default in the payment of the principal of, or interest on any
Loan becoming due hereunder, whether at stated maturity, by acceleration or
otherwise, or the payment of any other amount becoming due hereunder after
written notification from the Lender to the Borrower of such amount, the
Borrower shall on demand from time to time pay interest, to the extent permitted
by law, on all Loans and overdue amounts outstanding up to the date of actual
payment of such defaulted amount (after as well as before judgment) (i) for the
remainder of the then current Interest Period for each Eurodollar Loan, at 2% in
excess of the rate then in effect for each such Eurodollar Loan and (ii) for all
periods subsequent to the then current Interest Period for each Eurodollar Loan,
for all Alternate Base Rate Loans and for all other overdue amounts hereunder,
at 2% in excess of the rate then in effect for Alternate Base Rate Loans.
(b) In the event, and on each occasion, that on the day two Business
Days prior to the commencement of any Interest Period for a Eurodollar Loan, (i)
the Lender shall have determined (which determination, absent manifest error,
shall be conclusive) that Dollar deposits in the amount of the principal amount
of such Eurodollar Loan are not generally available in the London Interbank
Market or that the rate at which such Dollar deposits are being offered will not
adequately and fairly reflect the cost to the Lender of making or maintaining
the principal amount of such Eurodollar Loan during such Interest Period or (ii)
the Lender shall have determined that reasonable means do not exist for
ascertaining the applicable LIBO Rate, the Lender shall, as
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soon as practicable thereafter, give written or facsimile notice of such
determination to the Borrower, and any request by the Borrower for a Eurodollar
Loan (or conversion to or continuation as a Eurodollar Loan pursuant to Section
2.8 hereof), made after receipt of such notice, shall be deemed a request for an
Alternate Base Rate Loan (unless such borrowing request has been rescinded
pursuant to Section 2.2 (b)). After such notice shall have been given and until
the circumstances giving rise to such notice no longer exist, each request (or
portion thereof, as the case may be) for a Eurodollar Loan shall be deemed to be
a request for an Alternate Base Rate Loan.
SECTION 2.8. Continuation and Conversion of Loans. The Borrower shall
have the right, at any time, (i) to convert any Eurodollar Loan or portion
thereof to an Alternate Base Rate Loan or to continue such Eurodollar Loan or a
portion thereof for a successive Interest Period, or (ii) to convert any
Alternate Base Rate Loan or a portion thereof to a Eurodollar Loan, subject to
the following:
(a) the Borrower shall give the Lender prior written, facsimile or
telephonic (promptly confirmed in writing) notice of each continuation or
conversion hereunder of at least three Business Days for continuation as or
conversion to a Eurodollar Loan; such notice shall be irrevocable and to be
effective, must be received by the Lender on the day required not later than
2:00 p.m., New York City time;
(b) no Event of Default or Default shall have occurred and be
continuing at the time of any conversion to a Eurodollar Loan or continuation of
any such Eurodollar Loan into a subsequent Interest Period;
(c) no Alternate Base Rate Loan may be converted to a Eurodollar
Loan and no Eurodollar Loan may be continued as a Eurodollar Loan if, after such
conversion or continuance, and after giving effect to any concurrent prepayment
of Loans, an aggregate of more than six separate Eurodollar Loans would be
outstanding hereunder (for purposes of determining the number of such Loans
outstanding, Loans with different Interest Periods shall be counted as different
Loans even if made on the same date);
(d) the aggregate principal amount of Loans continued as or
converted to Eurodollar Loans as part of the same Borrowing shall be $500,000 or
such greater amount which is an integral multiple of $100,000;
(e) accrued interest on the Eurodollar Loans (or portion thereof)
being continued shall be paid by the Borrower at the time of continuation;
(f) the Interest Period with respect to a new Eurodollar Loan
effected by a continuation or conversion shall commence on the date of such
continuation or conversion;
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(g) if a Eurodollar Loan is converted to another type of Loan prior
to the last day of the Interest Period with respect thereto, the amounts
required by Section 2.9(b) shall be paid upon such conversion; and
(h) each request for a continuation as or conversion to a Eurodollar
Loan which fails to state an applicable Interest Period shall be deemed to be a
request for an Interest Period of one month.
In the event that the Borrower shall not give notice to continue or convert any
Eurodollar Loan as provided above, such Loan (unless repaid) shall automatically
be continued as a Eurodollar Loan having an Interest Period of one month at the
expiration of the then current Interest Period.
SECTION 2.9. Prepayment of Loans; Reimbursement of Lender. (a) Subject
to the terms of paragraph (b) of this Section 2.9, the Borrower shall have the
right at its option at any time and from time to time to prepay (i) any
Alternate Base Rate Loan, in whole or in part, upon at least one Business Day's
prior written, telephonic (promptly confirmed in writing) or facsimile notice to
the Lender, in the principal amount of $125,000 or such greater amount which is
an integral multiple of $100,000 or the remaining balance of such Loan if
prepaid in full and (ii) any Eurodollar Loan, in whole or in part, upon at least
three Business Days' prior written, telephonic (promptly confirmed in writing)
or facsimile notice, in the principal amount of $500,000 or such greater amount
which is an integral multiple of $100,000 if prepaid in part, or the remaining
balance of such Loan if prepaid in full. Each notice of prepayment shall specify
the prepayment date, each Loan to be prepaid and the principal amount thereof,
shall be irrevocable and shall commit the Borrower to prepay such Loan in the
amount and on the date stated therein. All prepayments under this Section 2.9(a)
shall be accompanied by accrued but unpaid interest on the principal amount
being prepaid to (but not including) the date of prepayment.
(b) The Borrower shall reimburse the Lender on demand for any loss
incurred or to be incurred by the Lender in the reemployment of the funds
released (i) by any prepayment (for any reason) of any Eurodollar Loan if such
Loan is repaid other than on the last day of the Interest Period for such Loan
or (ii) in the event that after the Borrower delivers a notice of borrowing
under Section 2.2(b) or Section 2.8(a) in respect of Eurodollar Loans, such Loan
is not made, converted to or continued as a Eurodollar Loan on the first day of
the Interest Period specified in such notice of borrowing for any reason other
than (A) a suspension or limitation under Section 2.7(b) of the right of the
Borrower to select a Eurodollar Loan, (B) a breach by the Lender of its
obligation to fund such borrowing when it is otherwise required to do so
hereunder or (C) a repayment resulting from a conversion required by the Lender
pursuant to Section 2.11(a). Such loss shall be the amount as reasonably
determined by the Lender as the excess, if any, of (I) the amount of interest
which would have accrued to the Lender on the amount so paid or not borrowed,
continued or converted at a rate of interest equal to the interest rate
applicable to such Loan pursuant to Section 2.4 hereof, for the period from the
date of such payment or failure to borrow, continue or convert to the last day
(x) in the case of a payment prior to the last day of the Interest Period for
such Loan, of the then current Interest Period for such Loan or (y) in
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the case of such failure to borrow, continue or convert, of the Interest Period
for such Loan which would have commenced on the date of such failure to borrow,
continue or convert, over (II) the amount realized or to be realized by the
Lender in reemploying the funds not advanced or the funds received in prepayment
or realized from the Loan not so continued or converted during the period
referred to above. The Lender shall deliver to the Borrower from time to time
one or more certificates setting forth the amount of such loss (and in
reasonable detail the manner of computation thereof) as determined by the
Lender, which certificates shall be conclusive absent manifest error. The
Borrower shall pay the Lender the amounts shown on such certificate within ten
days of the Borrower's receipt of such certificate.
(c) In the event the Borrower fails to prepay any Loan on the date
specified in any prepayment notice delivered pursuant to Section 2.9(a), the
Borrower shall pay to the Lender any amounts required to compensate the Lender
for any actual loss incurred by the Lender as a result of such failure to
prepay, including, without limitation, any loss, cost or expenses incurred by
reason of the acquisition of deposits or other funds by the Lender to fulfill
deposit obligations incurred in anticipation of such prepayment. The Lender
shall deliver to the Borrower from time to time one or more certificates setting
forth the amount of such loss (and in reasonable detail the manner of
computation thereof) as determined by the Lender, which certificates shall be
conclusive absent manifest error. The Borrower shall pay the Lender the amounts
shown on such certificate within ten days of the Borrower's receipt of such
certificate.
(d) If at any time the sum of the Loans outstanding plus the L/C
Exposure exceeds the sum of (x) the Maximum Guaranty Amount, (y) the Borrowing
Base and (z) the amounts currently held in the Collection Account, as set forth
on the most recent Borrowing Base Certificate, the Borrower shall immediately
pay down the Loans outstanding or otherwise eliminate such excess.
(e) Simultaneously with each termination and/or mandatory or
optional reduction of the Commitment pursuant to Section 2.6, the Borrower shall
pay to the Lender an amount equal to the excess of the sum of aggregate
outstanding principal amount of the Loans plus the L/C Exposure, over the
reduced Commitment.
(f) Unless otherwise designated in writing by the Borrower, all
prepayments shall be applied to the applicable principal payment set forth in
this Section 2.9, first to that amount of such applicable principal payment then
maintained as Alternate Base Rate Loans by the Borrower, and then, to that
amount of such applicable principal payment maintained as Eurodollar Loans by
the Borrower in order of the scheduled expiry of Interest Periods with respect
thereto.
(g) All prepayments shall be accompanied by accrued but unpaid
interest on the principal amount being prepaid to but not including the date of
prepayment.
SECTION 2.10. Change in Circumstances. (a) In the event that after the
Closing Date any change in Applicable Law or in the official interpretation or
administration thereof
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(including, without limitation, any request, guideline or policy not having the
force of law) by any Governmental Authority charged with the administration or
interpretation thereof or, with respect to clause (ii), (iii) or (iv) below any
change in conditions, shall occur which shall:
(i) subject the Lender to, or increase the net tax, levy,
impost, duty, charge, fee, deduction or withholding with
respect to any Eurodollar Loan (other than withholding
tax imposed by the United States of America or any
political subdivision or taxing authority thereof or any
other tax, levy, impost, duty, charge, fee, deduction or
withholding (A) that is measured with respect to the
overall net income of the Lender or of a Lending Office
of the Lender, and that is imposed by the United States
of America, or by the jurisdiction in which the Lender
or Lending Office is incorporated, in which the Lending
Office is located, managed or controlled or in which the
Lender has its principal office (or any political
subdivision or taxing authority thereof or therein), or
(B) that is imposed solely by reason of the Lender
failing to make a declaration of, or otherwise to
establish, non-residence, or to make any other claim for
exemption, or otherwise to comply with any
certification, identification, information,
documentation or reporting requirements prescribed under
the laws of the relevant jurisdiction, in those cases
where the Lender may properly make such declaration or
claim or so establish non-residence or otherwise
comply); or
(ii) change the basis of taxation of any payment to the
Lender of principal or any interest on any Eurodollar
Loan or other fees and amounts payable to the Lender
hereunder, or any combination of the foregoing; other
than withholding tax imposed by the United States of
America or any political subdivision or taxing authority
thereof or any other tax, levy, impost, duty, charge,
fee, deduction or withholding that is measured with
respect to the overall net income of the Lender or of a
Lending Office of the Lender, and that is imposed by the
United States of America, or by the jurisdiction in
which the Lender or Lending Office is incorporated, in
which such Lending Office is located, managed or
controlled or in which the Lender has its principal
office (or any political subdivision or taxing authority
thereof or therein); or
(iii) impose, modify or deem applicable any reserve, deposit
or similar requirement against any assets held by,
deposits with or for the account of or loans or
commitments by an office of the Lender with respect to
any Eurodollar Loan; or
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(iv) impose upon the Lender or the London Interbank Market
any other condition with respect to the Eurodollar Loans
or this Credit Agreement;
and the result of any of the foregoing shall be to increase the actual cost to
the Lender of making or maintaining any Eurodollar Loan hereunder or to reduce
the amount of any payment (whether of principal, interest or otherwise) received
or receivable by the Lender in connection with any Eurodollar Loan hereunder, or
to require the Lender to make any payment in connection with any Eurodollar Loan
hereunder, in each case by or in an amount which the Lender in its sole judgment
shall deem material, then and in each case the Borrower shall pay to the Lender,
as provided in paragraph (c) below, such amounts as shall be necessary to
compensate the Lender for such cost, reduction or payment.
(b) If at any time and from time to time after the Closing Date the
Lender shall have determined that the applicability of any law, rule, regulation
or guideline adopted after the Closing Date regarding capital adequacy, or any
change in any of the foregoing or in the interpretation or administration of any
of the foregoing by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by the Lender (or any Lending Office of the Lender) or the Lender's holding
company with any request or directive regarding capital adequacy (whether or not
having the force of law) of the authority, central bank or comparable agency,
would actually reduce the rate of return on the Lender's capital or on the
capital of the Lender's holding company, if any, as a consequence of this Credit
Agreement or the Loans made or Letters of Credit issued by the Lender pursuant
hereto to a level below that which the Lender or the Lender's holding company
could have achieved but for such applicability, adoption, change or compliance
(taking into consideration the Lender's policies and the policies of the
Lender's holding company with respect to capital adequacy) by an amount deemed
by the Lender to be material, then from time to time the Borrower shall pay to
the Lender such additional amount or amounts as will compensate the Lender or
the Lender's holding company for any such actual reduction suffered with respect
to Loans made by the Lender hereunder.
(c) The Lender shall deliver to the Borrower from time to time, one
or more certificates setting forth the amounts due to the Lender under
paragraphs (a) and (b) above within six months after incurring such additional
costs or suffering such reductions, the changes as a result of which such
amounts are due, the manner of computing such amounts and the manner of
computing the amounts allocable to Loans hereunder pursuant to paragraphs (a)
and (b) above. Each such certificate shall be conclusive in the absence of
manifest error. The Borrower shall pay to the Lender the amounts shown as due on
any such certificate within ten Business Days after its receipt of the same. No
failure on the part of the Lender to demand compensation under paragraph (a) or
(b) above on any one occasion shall constitute a waiver of its rights to demand
compensation on any other occasion. The protection of this Section 2.10(c) shall
be available to the Lender regardless of any possible contention of the
invalidity or inapplicability of any law, regulation or other condition which
shall give rise to any demand by the Lender for compensation thereunder.
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(d) The Lender agrees that after it becomes aware of the occurrence
of an event or the existence of a condition that (i) would cause it to incur any
increased cost hereunder or render it unable to perform its agreements hereunder
for the reasons specifically set forth in Section 2.7(b), this Section 2.10 or
Section 2.14(g) or (ii) would require the Borrower to pay an increased amount
under Section 2.7(b), this Section 2.10 or Section 2.14(g), it will use
reasonable efforts to notify the Borrower of such event or condition and, to the
extent not inconsistent with the Lender's internal policies, will use its
reasonable efforts to make, fund or maintain the affected Loans of the Lender,
or, if applicable, to issue Letters of Credit as required under Section 2.14,
through another Lending Office of the Lender if as a result thereof the
additional monies which would otherwise be required to be paid or the reduction
of amounts receivable by the Lender thereunder in respect of such Loans would be
materially reduced, or such inability to perform would cease to exist, or the
increased costs which would otherwise be required to be paid in respect of such
Loans pursuant to Section 2.7(b), this Section 2.10 or Section 2.14(f) would be
materially reduced or the taxes or other amounts otherwise payable under Section
2.7(b), this Section 2.10 or Section 2.14(f) would be materially reduced, and
if, as determined by the Lender, in its discretion, the making, funding or
maintaining of such Loans through such other Lending Office would not otherwise
materially adversely affect such Loans or the Lender.
SECTION 2.11. Change in Legality. (a) Notwithstanding anything to the
contrary contained elsewhere in this Credit Agreement, if any change after the
Closing Date in Applicable Law, guideline or order, or in the interpretation
thereof by any Governmental Authority charged with the administration thereof,
shall make it unlawful for the Lender to make or maintain any Eurodollar Loan or
to give effect to its obligations as contemplated hereby with respect to a
Eurodollar Loan, then, by written notice to the Borrower, the Lender may (i)
declare that Eurodollar Loans will not thereafter be made by the Lender
hereunder and/or (ii) require that, subject to Section 2.9(b), all outstanding
Eurodollar Loans made by it be converted to Alternate Base Rate Loans, whereupon
all of such Eurodollar Loans shall automatically be converted to Alternate Base
Rate Loans, as of the effective date of such notice as provided in paragraph (b)
below. Any subsequent Eurodollar Loan shall, instead, be an Alternate Base Rate
Loan unless such declaration is subsequently withdrawn.
(b) A notice to the Borrower by the Lender pursuant to paragraph (a)
above shall be effective for purposes of clause (ii) thereof, if lawful, on the
last day of the current Interest Period for each outstanding Eurodollar Loan;
and in all other cases, on the date of receipt of such notice by the Borrower.
SECTION 2.12. Manner of Payments. All payments by the Borrower hereunder
and under the Note shall be made in Dollars in Federal or other immediately
available funds at the office of The Chase Manhattan Bank, Loan and Agency
Services Group, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇,▇▇▇ credit to the "Dove
Entertainment Inc. Collection Account," Account No. ▇▇▇-▇▇▇-▇▇▇, no later than
2:00 p.m., New York City time, on the date on which such payment shall be due.
Interest in respect of any Loan hereunder shall accrue from and including
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the date of such Loan to but excluding the date on which such Loan is paid or
converted to a Loan of a different type.
SECTION 2.13. Interest Adjustments. (a) If the provisions of this Credit
Agreement or Note would at any time require payment by the Borrower to the
Lender of any amount of interest in excess of the maximum amount then permitted
by the law applicable to any Loan, the interest payments to the Lender shall be
reduced to the extent necessary so that the Lender shall not receive interest in
excess of such maximum amount. If, as a result of the foregoing, the Lender
shall receive interest payments hereunder or under the Note in an amount less
than the amount otherwise provided hereunder, such deficit (hereinafter called
the "Interest Deficit") will, to the fullest extent permitted by Applicable Law,
cumulate and will be carried forward (without interest) until the termination of
this Credit Agreement. Interest otherwise payable to the Lender hereunder and
under the Note for any subsequent period shall be increased by the maximum
amount of the Interest Deficit that may be so added without causing the Lender
to receive interest in excess of the maximum amount then permitted by the law
applicable to the Loans.
(b) The amount of any Interest Deficit relating to a particular Loan
and the Note shall be treated as a prepayment penalty and shall, to the fullest
extent permitted by Applicable Law, be paid in full at the time of any optional
prepayment by the Borrower to the Lender of all the Loans at that time
outstanding pursuant to Section 2.9(a) hereof and upon termination or reduction
of the Commitment pursuant to Section 2.6 hereof. The amount of any Interest
Deficit relating to a particular Loan and the Note at the time of any complete
payment of the Loans at that time outstanding (other than an optional prepayment
thereof pursuant to Section 2.9(a) hereof) shall be canceled and not paid.
SECTION 2.14. Letters of Credit. (a) (i) Subject to the terms and
conditions hereof and of Applicable Law, the Lender agrees to issue Letters of
Credit payable in Dollars from time to time after the Closing Date and prior to
the Commitment Termination Date upon the request of the Borrower, provided,
however, that (A) the Borrower shall not request that any Letter of Credit be
issued if, after giving effect thereto, the sum of the then current L/C
Exposure, plus the aggregate Loans then outstanding, would exceed the lesser of
(x) the sum of (I) the Maximum Guaranty Amount, (II) the then current amount of
the Borrowing Base and (III) the then current amount held in the Collection
Account or (y) the Commitment and (B) in no event shall the Lender issue any
Letter of Credit having an expiration date after the Commitment Termination Date
or pursuant to which drafts drawn thereunder would be payable after the
Commitment Termination Date.
(ii) Each Letter of Credit may, at the option of the Lender,
provide that the Lender may (but shall not be required to) pay all or any part
of the maximum amount which may at any time be available for drawing thereunder
to the beneficiary thereof upon the occurrence and continuation of an Event of
Default and the acceleration of the maturity of the Loans, provided that, if
payment is not then due to the beneficiary, the Lender may deposit the funds in
question in a segregated account with the Lender to secure payment to the
beneficiary
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and any funds so deposited shall be paid to the beneficiary of the Letter of
Credit if conditions to such payment are satisfied or returned to the Lender
(or, if all Obligations shall have been paid in full in cash, to the Borrower)
if no payment to the beneficiary has been made and the final date available for
drawings under the Letter of Credit has passed. Each payment or deposit of funds
by the Lender as provided in this paragraph shall be treated for all purposes of
this Credit Agreement as a drawing duly honored by the Lender under the related
Letter of Credit.
(b) Whenever the Borrower desires the issuance of a Letter of
Credit, it shall deliver to the Lender a written notice no later than 2:00 p.m.,
New York City time, at least five Business Days prior to the proposed date of
issuance. Such notice shall specify (i) the proposed date of issuance (which
shall be a Business Day), (ii) the face amount of the Letter of Credit, (iii)
the expiration date of the Letter of Credit and (iv) the name and address of the
beneficiary. Such notice shall be accompanied by a brief description of the
underlying transaction and upon request of the Lender, the Borrower shall
provide additional details regarding the underlying transaction. Concurrently
with the giving of written notice of a request for the issuance of a Letter of
Credit, the Borrower shall specify a precise description of the documents and
the verbatim text of any certificate to be presented by the beneficiary of such
Letter of Credit which, if presented by such beneficiary prior to the expiration
date of the Letter of Credit, would require the Lender to make payment under the
Letter of Credit; provided, however, that the Lender, in its reasonable
discretion, may require customary changes in any such documents and
certificates.
(c) The payment of drafts under any Letter of Credit shall be made
in accordance with the terms of such Letter of Credit and the Uniform Customs
and Practice for documentary Credits of the International Chamber of Commerce
No. 500, as adopted or amended from time to time. The Lender shall be entitled
to honor any drafts and accept any documents presented to it by the beneficiary
of such Letter of Credit in accordance with the terms of such Letter of Credit
and believed by the Lender in good faith to be genuine. The Lender shall not
have any duty to inquire as to the accuracy or authenticity of any draft or
other drawing documents which may be presented to it, but shall be responsible
only to determine in accordance with customary commercial practices that the
documents which are required to be presented before payment or acceptance of a
draft under any Letter of Credit have been delivered and that they comply on
their face with the requirements of that Letter of Credit.
(d) Subject to provisions of Section 2.14(c), the Borrower is
absolutely, unconditionally and irrevocably obligated to reimburse all amounts
drawn under each Letter of Credit. If any draft is presented under a Letter of
Credit, payment of which is required to be made after the Commitment Termination
Date (it being understood that no Letter of Credit shall be issued which would
expire after the Commitment Termination Date), then the Borrower will, upon
demand by the Lender, pay to the Lender, in immediately available funds, the
full amount of such draft.
(e) (i) The Borrower agrees to pay to the Lender with respect to
Letters of Credit issued by it hereunder in connection with the issuance,
amendment, transfer or any other transaction related to each Letter of Credit
and each drawing made thereunder, documentary and
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processing charges in accordance with the Lender's standard schedule for such
charges in effect at the time of such issuance, amendment, transfer or drawing,
as the case may be.
(ii) The Borrower agrees to pay to the Lender a commission
calculated at a rate per annum equal to the Applicable Margin for Eurodollar
Loans (calculated in the same manner as interest) of the daily average L/C
Exposure. Such commission shall be payable in arrears on and through the last
Business Day of each fiscal quarter prior to the Commitment Termination Date and
on the Commitment Termination Date.
(f) If by reason of (i) any change in Applicable Law after the
Closing Date, or in the interpretation or administration thereof (including,
without limitation, any request, guide line or policy not having the force of
law) by any Governmental Authority charged with the administration or
interpretation thereof, or (ii) compliance by the Lender with any direction,
request or requirement (whether or not having the force of law) issued after the
Closing Date by any Governmental Authority or monetary authority (including any
change whether or not proposed or published prior to the Closing Date),
including, without limitation, any modifications to Regulation D occurring after
the Closing Date:
(A) the Lender shall be subject to an increase in any tax,
levy, impost, duty, charge, fee, deduction or withholding with respect
to any Letter of Credit (other than withholding tax imposed by the
United States of America or any political subdivision or taxing
authority thereof or any other tax, levy, impost, duty, charge, fee,
deduction or withholding (I) that is measured with respect to the
overall net income of the Lender or of a Lending Office of the Lender,
and that is imposed by the United States of America, or by the
jurisdiction in which the Lender or Lending Office is incorporated, or
in which such Lending Office is located, managed or controlled or in
which the Lender has its principal office (or any political subdivision
or taxing authority thereof or therein) or (II) that is imposed solely
by reason of the Lender failing to make a declaration of, or otherwise
to establish, non-residence or to make any other claim for exemption, or
otherwise to comply with any certification, identification, information,
documentation or reporting requirements prescribed under the laws of the
relevant jurisdiction, in those cases where the Lender may properly make
such declaration or claim or so establish non-residence or otherwise
comply);
(B) the basis of taxation of any fee or amount payable
hereunder with respect to any Letter of Credit shall be changed (except
as described in clause (A) above);
(C) any reserve, deposit or similar requirement is or shall
be applicable, imposed or modified in respect of any Letter of Credit
issued by the Lender; or
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(D) there shall be imposed on the Lender any other condition
regarding this Section 2.14 or any Letter of Credit;
and the result of the foregoing is to increase from the conditions that exist on
the Closing Date the actual cost to the Lender of issuing, making or maintaining
any Letter of Credit or to reduce the amount receivable in respect thereof by
the Lender, in each case by or in an amount which the Lender shall reasonably
deem material, then and in any such case the Lender may, at any time, notify the
Borrower, and the Borrower shall pay on demand such amounts as the Lender may
specify to be necessary to compensate the Lender for such additional cost or
reduced receipt. Section 2.10(b), (c), (d) and Section 2.11 shall in all
instances apply to the Lender with respect to Letters of Credit issued
hereunder. The determination by the Lender of any amount due pursuant to this
Section 2.14 as set forth in a certificate setting forth the calculation thereof
in reasonable detail shall, in the absence of manifest error, be final,
conclusive and binding on all of the parties hereto.
(g) If at any time when an Event of Default shall have occurred and
be continuing, any Letters of Credit shall remain outstanding, then the Lender
may, at its option, require the Borrower to deliver to the Lender cash or Cash
Equivalents in an amount equal to the full amount of the L/C Exposure or to
furnish other security acceptable to the Lender. Any amounts so delivered
pursuant to the preceding sentence shall be applied to reimburse the Lender for
the amount of any drawings honored under Letters of Credit; provided, however,
that if prior to the Commitment Termination Date, no Default or Event of Default
is then continuing, the Lender shall return all of such collateral relating to
such deposit to the Borrower upon request.
(h) If at any time that any Letter of Credit is outstanding, the L/C
Exposure, plus Loans outstanding, exceeds the sum of (i) the Maximum Guaranty
Amount, plus (ii) the Borrowing Base, plus (iii) the amount of cash and Cash
Equivalents currently held in the Collection Account, then the Lender may, at
its option, require (x) a prepayment of the Loans in accordance with Section
2.9(d) or (y) the Borrower to deliver cash or Cash Equivalents to the Lender in
an amount sufficient to eliminate such excess or to furnish other security for
such excess acceptable to the Lender. Any amounts so delivered pursuant to the
preceding sentence shall be applied to reimburse the Lender for the amount of
any drawings honored under Letters of Credit; provided, however, that if
subsequent to any such deposit such excess is reduced to an amount less than the
amount of such deposited amounts and no Default or Event of Default is then
continuing, the Borrower shall be entitled to receive such excess collateral if
requested by it.
(i) Notwithstanding the termination of the Commitment and the
payment of the Loans, the obligations of the Borrower under this Section 2.14
shall remain in full force and effect until the Lender shall have been
irrevocably released from its obligations with regard to any and all Letters of
Credit.
(j) On the Closing Date, the parties hereto agree that that certain
Irrevocable Letter of Credit, L/C No. P-397200, issued by the Lender on
September 24, 1997 at the request of the Borrower for the benefit of Amwest
Surety Insurance Company, shall be deemed to have
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been issued under this Credit Agreement, and such Letter of Credit shall, as of
the Closing Date, be subject to and governed by the terms and conditions set
forth herein.
3. REPRESENTATIONS AND WARRANTIES OF CREDIT PARTIES
In order to induce the Lender to enter into this Credit Agreement and to
make the Loans and issue Letters of Credit provided for herein, the Credit
Parties, jointly and severally, make the following representations and
warranties to, and agreements with, the Lender, all of which shall survive the
execution and delivery of this Credit Agreement, the issuance of the Note, the
making of the Loans and the issuance of the Letters of Credit:
SECTION 3.1. Corporate Existence and Power. Each of the Credit Parties
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation, is in good standing as a foreign
corporation in all jurisdictions where the failure to be in good standing as a
foreign corporation would render Eligible Receivables which are included in the
Borrowing Base unenforceable or would give rise to a material liability of any
Credit Party. Each of the Credit Parties has the corporate power and authority
to own its respective properties and carry on its respective businesses as now
being conducted, to execute, deliver and perform, as applicable, its obligations
under this Credit Agreement, the Note and the other Fundamental Documents and
other documents contemplated hereby to which it is or will be a party as
provided herein and to grant to the Lender a security interest in the Collateral
as contemplated by Article 8 hereof and in the Pledged Securities as
contemplated by Article 10 hereof and in the case of each Corporate Guarantor to
guaranty the Obligations as contemplated by Article 9 hereof.
SECTION 3.2. Corporate Authority and No Violation. (a) The execution,
delivery and performance of this Credit Agreement and the other Fundamental
Documents to which it is a party, by each Credit Party and, in the case of the
Borrower, the Borrowings hereunder and the execution and delivery of the Note
and, in the case of each Credit Party, the grant to the Lender of the security
interest in the Collateral and the Pledged Securities as contemplated herein and
by the other Fundamental Documents and, in the case of each Corporate Guarantor,
the guaranty of the Obligations as contemplated in Article 9 hereof (i) have
been duly authorized by all necessary corporate action on the part of each such
Credit Party, (ii) will not constitute a violation by such Credit Party in any
material respect of any provision of Applicable Law or any order of any court or
other agency of the United States or any state thereof applicable to such Credit
Party or any of its properties or assets, (iii) will not violate any provision
of the Certificate or Articles of Incorporation or By-Laws of such Credit Party,
or any material provision of any Material Agreement or any other material
indenture, agreement, bond, note or other similar instrument to which such
Credit Party is a party or by which such Credit Party or its properties or
assets are bound, (iv) will not be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under or create
any right to terminate any Material Agreement, or any other material indenture,
agreement, bond, note or other instrument, and (v) will not result in the
creation or imposition of any Lien, charge or encumbrance of any
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nature whatsoever upon any of the properties or assets of any of the Credit
Parties other than pursuant to this Credit Agreement or the other Fundamental
Documents to which it is a party.
(b) There are no restrictions on the transfer of any of the Pledged
Securities other than as a result of this Credit Agreement or applicable
securities laws and the regulations promulgated thereunder.
SECTION 3.3. Governmental Approval. All authorizations, approvals,
registrations or filings with any governmental or public regulatory body or
authority of the United States or any state thereof (other than UCC financing
statements and the Copyright Security Agreement which will be delivered to the
Lender prior to the making of the initial Loan hereunder, in form suitable for
recording or filing with the appropriate filing office) required for the
execution, delivery and performance by any Credit Party of this Credit Agreement
and the other Fundamental Documents to which it is a party, and the execution
and delivery by the Borrower of the Note, have been duly obtained or made, or
duly applied for and are in full force and effect.
SECTION 3.4. Binding Agreements. This Credit Agreement and the other
Fundamental Documents when executed will constitute the legal, valid and binding
obligations of the respective Credit Parties, enforceable in accordance with
their respective terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors' rights and general principles of equity.
SECTION 3.5. Financial Statements. The audited consolidated balance
sheets of the Borrower and its Consolidated Subsidiaries at December 31, 1996,
and the unaudited consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries at June 30, 1997, together with the related statements
of income, cash flows and Shareholders' Equity and the related notes and
supplemental information for the reviewed statements, in the forms which have
previously been provided to the Lender, have been prepared in accordance with
GAAP, except as otherwise indicated in the notes to such financial statements.
All of such financial statements fairly present the consolidated financial
condition or the results of operations of the Borrower and its Consolidated
Subsidiaries at the dates or for the periods indicated, subject (in the case of
unaudited statements) to changes resulting from normal year-end and audit
adjustments, and, in the case of balance sheets (including the notes thereto),
reflect all known liabilities, contingent or otherwise, as of such dates
required in accordance with GAAP to be shown or reserved against, or disclosed
in the notes to the financial statements.
SECTION 3.6. No Material Adverse Change (a) There has been no material
adverse change with respect to the business, operations, performance, assets,
properties, condition or prospects (financial or otherwise) of the Credit
Parties taken as a whole from June 30, 1997, except for changes due to
seasonality that are consistent with the corresponding periods in prior years.
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(b) No Credit Party has entered or is entering into the arrangements
contemplated hereby and by the other Fundamental Documents, or intends to make
any transfer or incur any obligations hereunder or thereunder, with actual
intent to hinder, delay or defraud either present or future creditors. On and as
of the Closing Date, on a pro forma basis after giving effect to all
Indebtedness (including the Loans) (i) each Credit Party expects the cash
available to such Credit Party, after taking into account all other anticipated
uses of the cash of such Credit Party (including the payments on or in respect
of debt referred to in clause (iii) of this Section 3.6(b)), will be sufficient
to satisfy all final judgments for money damages which have been docketed
against such Credit Party or which may be rendered against such Credit Party in
any action in which such Credit Party is a defendant (taking into account the
reasonably anticipated maximum amount of any such judgment and the earliest time
at which such judgment might be entered); (ii) the sum of the present fair
saleable value of the assets of each Credit Party will exceed the probable
liability of such Credit Party on its debts (including its Guaranties); (iii) no
Credit Party will have incurred or intends to, or believes that it will, incur
debts beyond its ability to pay such debts as such debts mature (taking into
account the timing and amounts of cash to be received by such Credit Party from
any source, and of amounts to be payable on or in respect of debts of such
Credit Party and the amounts referred to in clause (ii)); and (iv) each Credit
Party believes it will have sufficient capital with which to conduct its present
and proposed business and the property of such Credit Party does not constitute
unreasonably small capital with which to conduct its present or proposed
business. For purposes of this Section 3.6, "debt" means any liability or a
claim, and "claim" means (x) any right to payment whether or not such right is
reduced to judgment, liquidated, unliquidated, fixed, contingent, matured,
unmatured, disputed, undisputed, legal, equitable, secured or unsecured, or (y)
any right to an equitable remedy for breach of performance if such breach gives
rise to a payment, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured or unsecured.
SECTION 3.7. Ownership of Pledged Securities, etc. (a) Annexed hereto as
Schedule 3.7(a) is a correct and complete list as of the date hereof, of each
corporate Subsidiary of the Borrower showing, as to each such Subsidiary, its
name, the jurisdiction of incorporation, its authorized capitalization, the
number of shares of its capital stock outstanding and the ownership of the
capital stock of each such Credit Party; and
(b) Except as noted on Schedule 3.7(b), no Credit Party owns any
Voting Stock or beneficial interest, directly or indirectly, in any Person other
than in the Subsidiaries of the Borrower.
(c) All of the outstanding shares of capital stock of each
Subsidiary of the Borrower have been validly issued and are fully paid and
non-assessable and, with respect to shares which are owned by a Credit Party
(set forth on Schedule 3.7(a)), are free and clear of all liens, charges or
encumbrances except as contemplated herein.
SECTION 3.8. Copyrights and Other Rights. On the date hereof, the items
of Product listed on Schedule 3.8 comprise all of the Product in which any
Credit Party has any
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right, title or interest (either directly or through a joint venture or
partnership). The copyright registration number and the character of the
interests held by the Credit Party for such items of Product for which filing in
the United States Copyright Office is applicable are set forth across from the
description of such item of Product and as to each item listed on Schedule 3.8
hereto and, to the extent applicable, the Credit Party holding such interests
has duly recorded its interests in the United States Copyright Office and has
delivered copies of all such recordation to the Lender. Schedule 3.8 shall
identify the location of the best available Physical Materials related to each
item of Product owned by the Credit Parties. To the best of each Credit Party's
knowledge, all items of Product and all component parts thereof do not and will
not violate or infringe upon any copyright, right of privacy, trademark, patent,
trade name, performing right or any literary, dramatic, musical, artistic,
personal, private, contract or copyright right or any other similar right of any
Person or contain any libelous or slanderous material other than to an extent
which is either not material or for which coverage is provided in existing
insurance policies. Except as set forth on Schedule 3.12, there is no claim,
suit, action or, to the best of each Credit Party's knowledge, proceeding
pending or threatened against any Credit Party that involves a claim of
infringement of any copyright with respect to any item of Product listed on
Schedule 3.8 and no Credit Party has knowledge of any existing infringement by
any other Person of any copyright held by any Credit Party with respect to any
item of Product listed on Schedule 3.8.
SECTION 3.9. Fictitious Names. Except as disclosed on Schedule 3.9, none
of the Credit Parties are doing business or intend to do business other than
under its full corporate name, including, without limitation, under any trade
name or other doing business name.
SECTION 3.10. Title to Properties. As of the Closing Date, the Credit
Parties have good title to each of the properties and assets reflected on the
latest balance sheets referred to in Section 3.5 (other than such properties or
assets disposed of in the ordinary course of business since the date of such
balance sheets) and all such properties and assets are free and clear of Liens,
except Permitted Encumbrances.
SECTION 3.11. Places of Business. The chief executive office of each
Credit Party is, on the Closing Date, as set forth on Schedule 3.11 hereto,
which offices in the United States are the places where each Credit Party is
"located" for the purpose of the UCC and the Uniform Commercial Code in effect
in any state in which any Credit Party is so located. All of the places where
each Credit Party keeps the records concerning the Collateral on the date hereof
or regularly keeps any goods included in the Collateral on the date hereof are
also listed on Schedule 3.11 hereto.
SECTION 3.12. Litigation. Except as set forth on Schedule 3.12 hereto,
there are no actions, suits or other proceedings at law or in equity by or
before any arbitrator or arbitration panel, or any Governmental Authority
(including, but not limited to, matters relating to environmental liability) or,
to the knowledge of any Credit Party, any investigation by any Governmental
Authority of the affairs of, or threatened action, suit or other proceedings
against or affecting, any Credit Party or of any of their respective properties
or rights which either (A) would have a significant likelihood of materially and
adversely affecting (i) the ability of any
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Credit Party to perform its obligations under the Fundamental Documents to which
it is a party, (ii) the ability of any Credit Party to carry on its business,
(iii) the security interests granted to the Lender under the Fundamental
Documents, (iv) the financial condition or business of the Credit Parties taken
as a whole or (v) the Collateral, or (B) involve this Credit Agreement or any of
the transactions contemplated hereby. No Credit Party is in default with respect
to any order, writ, injunction, decree, rule or regulation of any Governmental
Authority binding upon such Person, which default would have a material adverse
effect upon the financial condition or the business of the Credit Parties taken
as a whole.
SECTION 3.13. Federal Reserve Regulations. No Credit Party is engaged
principally or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any Margin Stock. No part of
the proceeds of the Loans will be used, directly or indirectly, whether
immediately, incidentally or ultimately (i) to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or carrying
any Margin Stock, or (ii) for any other purpose, in each case, violative of or
inconsistent with any of the provisions of any regulation of the Board,
including, without limitation, Regulations G, T, U and X thereto.
SECTION 3.14. Investment Company Act. No Credit Party is, or will during
the term of this Credit Agreement be, (i) an "investment company", within the
meaning of the Investment Company Act of 1940, as amended, or (ii) subject to
regulation under the Public Utility Holding Company Act of 1935, the Federal
Power Act or, to the best of each Credit Party's knowledge, any foreign, federal
or local statute or any other Applicable Law of the United States of America or,
to the best of each Credit Party's knowledge, any other jurisdiction, in each
case limiting its ability to incur indebtedness for money borrowed as
contemplated hereby or by any other Fundamental Document.
SECTION 3.15. Taxes. Each Credit Party has filed or caused to be filed
all federal, state, local and foreign tax returns which are required to be filed
with any Governmental Authority after giving effect to applicable extensions,
and has paid or has caused to be paid all taxes as shown on said returns or on
any assessment received by them in writing, to the extent that such taxes have
become due, except as permitted by Section 5.14 hereof. No Credit Party knows of
any material additional assessments or any basis therefor. The Credit Parties
reasonably believe that the charges, accrual and reserves on its books in
respect of taxes or other governmental charges are adequate.
SECTION 3.16. Compliance with ERISA. Each Credit Party is in compliance
in all material respects with the provisions of ERISA and the Code applicable to
Plans, and the regulations and published interpretations thereunder, if any,
which are applicable to it. As of the date hereof, no Credit Party has, with
respect to any Plan established or maintained by it, engaged in a prohibited
transaction which would subject it to a material tax or penalty on prohibited
transactions imposed by ERISA or Section 4975 of the Code. No material liability
to the PBGC has been or is expected to be incurred with respect to the Plans
(other than for premiums not yet due) and there has been no Reportable Event and
no other event or condition that presents a
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material risk of termination of a Plan by the PBGC. No Credit Party has engaged
in a transaction which would result in the incurrence by such Credit Party of
any liability under Section 4069 of ERISA. No Credit Party has taken any action
and no event has occurred with respect to any Multiemployer Plan which would
subject any Credit Party to material liability under either Section 4201 or 4204
of ERISA.
SECTION 3.17. Agreements. (a) No Credit Party is in default in the
performance, observance or fulfillment of any of the obligations, covenants or
conditions contained in any Material Agreement or any other material indenture,
agreement, bond, note or other instrument to which it is a party which would
reasonably be expected to result in any material adverse change in the business,
properties, assets, operations or condition (financial or otherwise) of the
Credit Parties taken as a whole.
(b) Schedule 3.17 is a true and complete listing as of the date on
which this Credit Agreement is executed by the Borrower of (i) all credit
agreements, indentures, and other agreements related to any Indebtedness for
borrowed money of the Credit Parties, (ii) all material joint venture agreements
to which the Credit Parties are a party (iii) all material Distribution
Agreements and (iv) all other contractual arrangements which are material to any
Credit Party, including but not limited to, guarantees and employment
agreements. The Credit Parties have delivered or made available to the Lender a
true and complete copy of each agreement described on Schedule 3.17, including
all exhibits and schedules. For purposes of this Section 3.17, a Distribution
Agreement or other contract or agreement shall be deemed "material" if the
Credit Parties reasonably expect that any Credit Party would, pursuant to the
terms thereof, (A) recognize future revenues in excess of $500,000, (B) incur
liabilities or obligations in excess of $500,000 or (C) suffer damages or losses
in excess of $250,000 by reason of the breach or termination thereof.
SECTION 3.18. Security Interest; Other Security. This Credit Agreement
and the other Fundamental Documents, when executed and delivered and, upon the
making of the initial Loan hereunder and upon (i) the filing of the appropriate
UCC-1 financing statements, with the Secretary of State of the States of
California, Florida and Tennessee, (ii) the filing of the Copyright Security
Agreement with the U.S. Copyright Office and (iii) the delivery of the Pledged
Securities, together with appropriate stock powers, to the Lender, will create
and grant to the Lender a valid and first priority perfected security interests
in the Collateral and the Pledged Securities in existence on the Closing Date as
to which security interests may be perfected by such filings or delivery,
subject only to Permitted Encumbrances.
SECTION 3.19. Disclosure. Neither this Credit Agreement nor any other
Fundamental Document nor any agreement, document, certificate or statement
furnished to the Lender by any Credit Party in connection with the transactions
contemplated hereby, at the time it was furnished or delivered contained any
untrue statement of a material fact regarding the Credit Parties or, when taken
together with such other agreements, documents, certificates and statements
omitted to state a material fact necessary under the circumstances under which
it was made in order to make the statements contained herein or therein not
misleading. There is no
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fact known to any Credit Party not constituting general industry conditions or
not disclosed in such agreements, documents, certificates and statements which
materially and adversely affects, or could reasonably be expected in the future
to materially and adversely affect, the business, assets or condition, financial
or otherwise of the Credit Parties taken as a whole.
SECTION 3.20. Distribution Rights. Each Credit Party has sufficient
right, title and interest in each item of Product to enable it (i) to enter into
and perform all of the material Distribution Agreements to which it is a party
and other agreements generating Eligible Receivables and accounts receivable
reflected on the most recent balance sheet and the most recent Borrowing Base
Certificate delivered to the Lender pursuant hereto, and (ii) to charge, earn,
realize and retain all fees and profits to which such Credit Party is entitled
thereunder, and is not in breach of any of its obligations under such
agreements, nor does any Credit Party have any knowledge of any breach or
anticipated breach by any other parties thereto, which breach in either case
either individually or when aggregated with all other such breaches would have a
material adverse effect on the Credit Parties taken as a whole.
SECTION 3.21. Environmental Liabilities. (a) Except as set forth on
Schedule 3.21 hereto, no Credit Party has used, stored, treated, transported,
manufactured, refined, handled, produced or disposed of any Hazardous Materials
on, under, at or from any of its properties or assets owned or leased by a
Credit Party, in any manner which at the time of the action in question violated
any Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous Materials
and which violation would have a material adverse effect on the business or
financial condition of the Credit Parties taken as a whole and to the best of
the Credit Parties' knowledge, no prior owner of such property or asset or any
tenant, subtenant, prior tenant or prior subtenant thereof has used Hazardous
Materials on or affecting such property or asset, or otherwise, in any manner
which at the time of the action in question violated any Environmental Law
governing the use, storage, treatment, transportation, manufacture, refinement,
handling, production or disposal of Hazardous Materials.
(b) To the best of each Credit Party's knowledge (i) no Credit Party
has any obligations or liabilities, known or unknown, matured or not matured,
absolute or contingent, assessed or unassessed, which would reasonably be
expected to have a materially adverse effect on the business or condition
(financial or otherwise) of the Credit Parties taken as a whole and (ii) no
claims have been made against any of the Credit Parties during the past five
years and no presently outstanding citations or notices have been issued against
any of the Credit Parties, which could reasonably be expected to have a
materially adverse effect on the business or condition (financial or otherwise)
of the Credit Parties taken as a whole which in either case have been or are
imposed by reason of or based upon any provision of any Environmental Law,
including, without limitation, any such obligations or liabilities relating to
or arising out of or attributable, in whole or in part, to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation or
handling of any Hazardous Materials by any Credit Party, or any of its employees
or predecessors in interest in connection with or in any way arising from or
relating to any of the Credit Parties or any of their respective owned or leased
properties, or
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relating to or arising from or attributable, in whole or in part, to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any such substance, by any other Person at or on
or under any of the real properties owned or used by any of the Credit Parties
or any other location where such could have a materially adverse effect on the
business or condition (financial or otherwise) of the Credit Parties taken as a
whole.
SECTION 3.22. Pledged Securities. All of the Pledged Securities are duly
authorized, validly issued, fully paid and non-assessable, and are owned and
held by the Pledgors, free and clear of any liens, encumbrances, or security
interests whatsoever other than those created pursuant to this Credit Agreement
or Permitted Encumbrances and there are no restrictions on the transfer of the
Pledged Securities other than as a result of this Credit Agreement or applicable
securities laws. Except as set forth on Schedule 3.22, there are no outstanding
rights, warrants, options, or agreements to purchase or otherwise acquire any
shares of the stock or securities or obligations of any kind convertible into
any shares of capital stock of the issuers of the Pledged Securities. The
Pledged Securities are owned by the Persons specified on Schedule 3.7(a).
SECTION 3.23. Compliance with Laws. No Credit Party is in violation of
any Applicable Law except for such violations in the aggregate which would not
have a material adverse effect on the business condition (financial or
otherwise) of the Credit Parties taken as a whole. The Borrowings hereunder, the
intended use of the proceeds of the Loans as described in the preamble hereto
and as contemplated by Section 5.19 and any other transactions contemplated
hereby will not violate any Applicable Law.
SECTION 3.24. Projected Financial Information. The Borrower has
delivered to the Lender certain projections relating to the Borrower and its
Consolidated Subsidiaries consisting of statements of income, cash flows,
balance sheets and an initial projected borrowing base. Such projected
statements cover a period commencing on the Closing Date and ending at fiscal
year end 2002 and prepared on a basis consistent with Borrower's past practices.
All of the foregoing shall have been prepared in good faith and shall represent
the good faith opinion of the senior management of the Borrower of the likely
course of its business as of the date of delivery of such projections to the
Lender, it being recognized by the Lender that such projections as to future
events are not to be viewed as facts and that actual results during the period
or periods covered by any such other projections may differ from the projected
results.
4. CONDITIONS OF LENDING
SECTION 4.1. Conditions Precedent to Initial Loans or Letter of Credit.
The obligation of the Lender to issue the initial Letter of Credit and to make
the initial Loan is subject to the following conditions precedent:
(a) Corporate Documents. At the time of the making of the initial
Loan, the Lender shall have received:
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(i) a copy of the articles or certificate of incorporation
of each Credit Party, certified as of a recent date by
the Secretary of State of such Credit Party's
jurisdiction of incorporation or organization, as the
case may be;
(ii) a certificate of such Secretary of State and of the
franchise tax entity of such jurisdiction of
incorporation, if applicable, dated as of a recent date
as to the good standing of and payment of taxes by each
Credit Party which lists the charter documents on file
in the office of such Secretary of State;
(iii) a certificate dated as of a recent date as to the good
standing of each Credit Party issued by the Secretary of
State of each jurisdiction in which each Credit Party is
qualified as a foreign corporation; and
(iv) a certificate of the Secretary of each Credit Party
dated the date of the initial Loan and certifying (A)
that attached thereto is a true and complete copy of the
By-Laws of such party as in effect on the date of such
certification, (B) that attached thereto is a true and
complete copy of resolutions adopted by the Board of
Directors of such party authorizing (to the extent
applicable) the Borrowings hereunder, the execution,
delivery and performance in accordance with its
respective terms of this Credit Agreement, the Note (if
any) to be executed by it, and any other documents
required or contemplated hereunder or thereunder and
that such resolutions have not been amended, rescinded
or supplemented and are currently in effect, (C) that
the certificate of incorporation of such party has not
been amended since the date of the last amendment
thereto indicated on the certificate of the Secretary of
State furnished pursuant to clause (i) above except to
the extent specified in such Secretary's certificate and
(D) as to the incumbency and specimen signature of each
officer of such party executing (as applicable) this
Credit Agreement, the Note or any other document
delivered by it in connection herewith or therewith
(such certificate to contain a certification by another
officer of such party as to the incumbency and signature
of the officer signing the certificate referred to in
this clause (iv)); and
(v) such additional supporting documents as the Lender or
its counsel may reasonably request.
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(b) Credit Agreement; Note. On or before the date of the making of
the initial Loans, the Lender shall have received the Credit Agreement executed
by the Credit Parties and the Note executed by the Borrower.
(c) Opinion of Counsel. The Lender shall have received the written
opinions of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇, special counsel to the Credit Parties, and
▇▇▇▇▇▇ ▇▇▇▇▇▇, general counsel of the Borrower, each dated the Closing Date and
addressed to the Lender substantially in the form attached hereto as Exhibits
B-1 and B-2 respectively and in form and substance satisfactory to ▇▇▇▇▇▇, ▇▇▇▇▇
& ▇▇▇▇▇▇▇ LLP.
(d) No Material Adverse Change. No material adverse change shall
have occurred with respect to the business, operations, performance, assets,
properties, condition (financial or otherwise) or prospects of the Credit
Parties taken as a whole from June 30, 1997.
(e) Insurance. The Borrower shall have furnished the Lender with (i)
a summary of all existing insurance coverage, (ii) evidence acceptable to the
Lender that the insurance policies required by Section 5.5 have been obtained
and are in full force and effect and (iii) Certificates of Insurance with
respect to all existing insurance coverage which certificates shall name The
Chase Manhattan Bank, as the Certificate holder and shall evidence the
Borrower's compliance with Section 5.5(f) with respect to all insurance coverage
existing as of the Closing Date.
(f) Borrowing Base Certificate. The Lender shall have received an
initial Borrowing Base Certificate substantially in the form of Exhibit C
hereto, signed by an Authorized Officer of the Borrower.
(g) Security and Other Documentation. On or prior to the Closing
Date, the Lender shall have received fully executed copies of (i) a Pledgeholder
Agreement for each item of Product for which a Credit Party has control over any
physical elements thereof as listed on Schedule 3.8 hereto; (ii) a Copyright
Security Agreement listing each item of Product in which any Credit Party has a
copyrightable interest (as listed on Schedule 3.8 hereto) executed by such
Credit Parties; (iii) a Laboratory Access Letter addressed to each Laboratory
where a Credit Party has access rights to any physical elements of Product; (iv)
appropriate UCC-1 financing statements relating to the Collateral; and (v) the
Pledged Securities with appropriate undated stock powers executed in blank.
(h) Security Interests in Copyrights and other Collateral. On or
prior to the Closing Date, the Lender shall have received evidence satisfactory
to it that each Credit Party has sufficient right, title and interest in and to
the Collateral and other assets which it purports to own (including appropriate
licenses under copyright), as set forth in its financial statements and in the
other documents presented to the Lender to enable each such Credit Party to
perform the Distribution Agreements to which each such Credit Party is a party
and as to each Credit Party to grant to the Lender the security interests
contemplated by the Fundamental Documents, and that all financing statements,
copyright filings and other filings under Applicable Law necessary to
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provide the Lender with a first priority perfected security interest in the
Pledged Securities and Collateral (subject, as to the Collateral, to Permitted
Encumbrances) have been filed or delivered to the Lender in satisfactory form
for filing.
(i) Payment of Fees. All fees and expenses then due and payable by
any Credit Party in connection with the transactions contemplated hereby shall
have been paid.
(j) Certificate from the Borrower. The Lender shall have received a
certificate, signed by an Authorized Officer on behalf of Borrower, confirming
that the Borrower has determined that the projected availability of the Loans as
determined by the Borrowing Base, together with funds from internally generated
sources and other available sources that are acceptable to the Lender, is
sufficient to finance the Borrower in a manner compatible with the forecasted
financial statements previously delivered to the Lender.
(k) Litigation. Except as set forth on Schedule 3.12, no litigation,
inquiry, injunction or restraining order shall be pending, entered or threatened
which in the Lender's good faith judgment could reasonably be expected to
materially and adversely affect (i) the assets, operations, business, condition
or prospects (financial or otherwise) of the Borrower and its Subsidiaries taken
as a whole, (ii) the ability of the Borrower and its Subsidiaries to perform
their respective Obligations hereunder or (iii) the rights and remedies of the
Lender.
(l) Existing Indebtedness. Simultaneously with the making of the
initial Loans, all Indebtedness of the Borrower under the Sanwa Credit Agreement
and all other Indebtedness identified on Schedule 3.17 as to be paid at Closing
shall have been paid in full, the commitments of the lenders thereunder shall
have been terminated and all security interests, liens and other encumbrances
granted thereunder shall have been released.
(m) UCC Searches. The Lender shall have received UCC searches
satisfactory to it indicating that no other filings (other than in connection
with Permitted Encumbrances) with regard to the Collateral are of record in any
jurisdiction in which it shall be necessary or desirable for the Lender to make
a UCC filing in order to provide the Lender with a perfected security interest
in the Collateral.
(n) Financial Statements. The Lender shall have received and be
satisfied with the true and complete copies of all of the financial statements
referred to in Section 3.5.
(o) ERISA. The Lender shall have received copies of all Plans of the
Credit Parties that are in existence on the Closing Date, and descriptions of
those that are committed to on the Closing Date.
(p) Delivery of Agreements. The Lender shall have received and be
satisfied with the terms and provisions of (i) the Borrower's standard form of
Distribution Agreement and all significant existing Distribution Agreements
listed on Schedule 3.17 which are not on such
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standard form, (ii) all joint venture or partnership agreements to which any
Credit Party is a party and (iii) all other agreements listed on Schedule 3.17
to the extent requested by the Lender.
(q) Contribution Agreement. The Lender shall have received a fully
executed Contribution Agreement duly executed by all parties thereto.
(r) Compliance with Laws. The Lender shall be satisfied that the
transactions contemplated hereby will not violate any provision of Applicable
Law.
(s) Required Consents and Approvals. The Lender shall be satisfied
that all required consents and approvals have been obtained with respect to the
transactions contemplated hereby from all Governmental Authorities with
jurisdiction over the business and activities of any Credit Party as of the date
hereof, and from any other entity, foreign or domestic, whose consent or
approval the Lender in its reasonable discretion deems necessary to effect the
transactions contemplated hereby.
(t) Federal Reserve Regulations. The Lender shall be satisfied that
the provisions of Regulations G, T, U and X of the Board will not be violated by
the transactions contemplated hereby.
(u) Pro-forma Compliance. The Lender shall have received a pro-forma
compliance report dated the Closing Date or on the date on which the most recent
data was available confirming that the Borrower and its Subsidiaries are in
pro-forma compliance with all covenants set forth in Article 5 and Article 6
hereof and in the other Fundamental Documents.
(v) Subordination Agreements. The Lender shall have received from
each Affiliate who has made advances to a Credit Party which will not be
required to be repaid on or before the Closing Date, a subordination agreement
in form and substance acceptable to the Lender, pursuant to which the
obligations of such Credit Party to such Affiliate is subordinated to the
repayment in full of the Obligations.
(w) Guaranty Agreement. The Lender shall have received a copy of the
Guaranty Agreement duly executed by all parties thereto.
(x) Notices of Assignment and Irrevocable Instructions. The Lender
shall have received, with respect to each material Eligible Receivable included
in the initial Borrowing Base Certificate, fully executed copies of the Notice
of Assignment and Irrevocable Instructions.
(y) Approval of Counsel to the Lender. All legal matters incident to
this Credit Agreement and the transactions contemplated hereby shall be
reasonably satisfactory to ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to the Lender.
(z) Other Documents. The Lender shall have received such other
documentation as the Lender may reasonably request.
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SECTION 4.2. Conditions Precedent to Each Loan and Letter of Credit. The
obligations of the Lender to issue each Letter of Credit and make each Loan
(including the initial Loans and Letter of Credit) are subject to the following
conditions precedent:
(a) Notice. The Lender shall have received a notice with respect to
such Borrowing or with respect to such Letter of Credit as required by Article 2
hereof.
(b) Borrowing Certificate. The Lender shall have received a
Borrowing Certificate with respect to such Borrowing, duly executed by an
Authorized Officer of the Borrower.
(c) Representations and Warranties. The representations and
warranties set forth in Article 3 hereof and in the other Fundamental Documents
shall be true and correct in all material respects on and as of the date of each
Borrowing and issuance of a Letter of Credit hereunder (except to the extent
that such representations and warranties expressly relate to an earlier date)
with the same effect as if made on and as of such date.
(d) No Event of Default. On the date of each Borrowing or the
issuance of each Letter of Credit hereunder, each Credit Party shall be in
compliance with all of the terms and provisions set forth herein to be observed
or performed and no Event of Default or Default shall have occurred and be
continuing.
(e) Additional Documents. The Lender shall have received from the
Borrower on the date of each Borrowing and issuance of each Letter of Credit
such documents and information as they may reasonably request relating to the
satisfaction of the conditions in this Section 4.2.
Each request for a Borrowing or for issuance of a Letter of Credit shall be
deemed to be a representation and warranty by the Borrower on the date of such
Borrowing or issuance of such Letter of Credit as to the matters specified in
paragraphs (c) and (d) of this Section.
5. AFFIRMATIVE COVENANTS
From the Closing Date and for so long as the Commitment shall be in
effect or any amount remains outstanding under the Note or any Letter of Credit
shall remain outstanding or any Obligations remain unpaid or unsatisfied, each
Credit Party agrees that, unless the Lender shall otherwise consent in writing,
each of them will:
SECTION 5.1. Financial Statements and Reports. Furnish or cause to be
furnished to the Lender:
(a) Within 120 days after the end of each fiscal year of the
Borrower, commencing with the fiscal year ending December 31, 1997, the audited
consolidated balance sheet of the Borrower and its Consolidated Subsidiaries as
at the end of, and the related
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statements of income, Shareholders' Equity and cash flows (along with the
related notes and supplemental information) for such year, and the corresponding
figures as at the end of, and for, the preceding fiscal year, accompanied by an
auditor's report and opinion of KPMG Peat Marwick LLP or such other independent
public accountants of nationally recognized standing as shall be retained by the
Borrower and be reasonably satisfactory to the Lender, which report and opinion
shall be prepared in accordance with generally accepted auditing standards
relating to reporting and which report and opinion shall contain no material
exceptions or qualifications except for qualifications relating to accounting
changes (with which such independent public accountants concur) in response to
FASB releases or other authoritative pronouncements;
(b) Within 60 days after the end of each of the first three fiscal
quarters of each of its fiscal years the unaudited consolidated balance sheets
of the Borrower and its Consolidated Subsidiaries as at the end of, and the
related unaudited consolidated statements of income, cash flow and shareholders'
equity for, such quarter, and the corresponding figures as at the end of, and
for, the corresponding period in the preceding fiscal year, together with a
certificate signed by an Authorized Officer of the Borrower, on behalf of the
Borrower, to the effect that such financial statements, while not examined by
independent public accountants, reflect, in the opinion of the Borrower, all
adjustments necessary to present fairly the financial position of the Borrower
and its Consolidated Subsidiaries as at the end of the fiscal quarter and the
results of its operations for the quarter then ended are in conformity with
GAAP, subject to normal year-end audit adjustments;
(c) Simultaneously with the delivery of the statements referred to
in paragraphs (a) and (b) of this Section 5.1, a certificate of an Authorized
Officer of the Borrower, on behalf of the Borrower, in form and substance
satisfactory to the Lender (i) stating whether or not such Authorized Officer
has knowledge, after due inquiry, of any condition or event which would
constitute an Event of Default or Default has occurred and, if so, specifying
each such condition or event and the nature thereof, (ii) demonstrating in
reasonable detail compliance with the provisions of Sections 6.14 through 6.18
and 6.21 hereof and (iii) certifying that all filings required under Section 5.8
hereof have been made and listing each such filing that has been made since the
date of the last certificate delivered in accordance with this Section 5.1(c);
(d) Together with each set of audited financial statements required
by paragraph (a) above, a report from the independent public accountants
rendering the report thereon (i) stating that such Person has made such
examination or investigation as is necessary to enable it to express an informed
opinion as to the matters referred to in clause (ii) of this Section 5.1(d), it
being understood that no special audit procedures are required hereby and (ii)
stating whether, in connection with their audit examination, any condition or
event, at any time during or at the end of the accounting period covered by such
financial statements, which constitutes an Event of Default under covenants
relating to accounting matters has come to their attention, and if such a
condition or event has come to their attention, specifying the nature and
period, if known, of existence thereof;
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(e) On or prior to the twentieth day of each month, a certificate
("Borrowing Base Certificate") in the form of Exhibit C hereto, setting forth
the amount of each component included in the Borrowing Base as of the last
Business Day of the preceding month, attached to which shall be detailed
information including the calculation of each such component (the Borrower, at
its option, may furnish additional Borrowing Base Certificates setting forth
such information as of such other dates as it may deem appropriate), together
with an aging report of the Eligible Receivables included in the Borrowing Base;
(f) Promptly upon their becoming available, copies of (i) all
management projections, studies or evaluations prepared by consultants for or
presented to any Credit Party's Board of Directors and (ii) all audits, studies,
reports or evaluations prepared for or submitted to any of the Credit Parties by
any outside professional firm or service, including, without limitation, the
final comment letter submitted by the Credit Parties' accountants to the Board
of Directors or the audit committee of the Board of Directors of the Borrower in
connection with their annual audit;
(g) Within 10 days of the Borrower's receipt thereof, copies of all
management letters issued to the Borrower by its auditors;
(h) Promptly upon their becoming available, copies of (i) all
registration statements, proxy statements, and all reports which the Borrower or
any other Credit Party shall file with any securities exchange or with the
Securities and Exchange Commission or any successor agency and (ii) all reports,
financial statements, press releases and other information which the Borrower or
any other Credit Party shall release, send or make available to its common
stockholders generally;
(i) Notice of (i) any substantive action taken by any Credit Party
in connection with the proposed issuance of any additional debt or equity
securities other than the issuance of securities to employees in connection with
the exercise of options and (ii) the date on which such Credit Party expects to
receive the net cash proceeds from the issuance of such additional debt or
equity securities;
(j) Simultaneously with the delivery of the statements referred to
in paragraph (a) of this Section 5.1, the calculation of the Eligible Library
Amount computed as of the last Business Day of the prior fiscal year as
contemplated by the definition of "Eligible Library Amount"; and
(k) From time to time such additional information regarding the
financial condition or business of the Credit Parties or otherwise regarding the
Collateral, as the Lender may reasonably request for the purpose of assuring
itself as to compliance by the Credit Parties with the terms hereof.
SECTION 5.2. Corporate Existence. Do or cause to be done all things
necessary to preserve, renew and keep in full force and effect its corporate
existence, rights, material
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licenses, material permits and material franchises, and comply with all
applicable statutes, regulations and orders of, and all applicable restrictions
imposed by, any Governmental Authority, except as otherwise permitted under
Section 6.7 and except that any Subsidiary of the Borrower may be liquidated or
dissolved if in the reasonable judgment of the Board of Directors of the
Borrower such Subsidiary is no longer necessary for the proper conduct of the
business of the Borrower.
SECTION 5.3. Maintenance of Properties. Keep its tangible properties
which are material to its business in good repair, working order and condition
(ordinary wear and tear excepted) and, from time to time (i) make all necessary
and proper repairs, renewals, replacements, additions and improvements thereto
and (ii) comply at all times with the provisions of all material leases and
other material agreements to which it is a party so as to prevent any loss or
forfeiture thereof or thereunder unless compliance therewith is being currently
contested in good faith by appropriate proceedings; provided, however, that
nothing in this Section 5.3 shall prevent any Credit Party from discontinuing
the use, operation or maintenance of such properties or disposing of them if
such discontinuance or disposal is, in the judgment of its Board of Directors,
desirable in the conduct of the business.
SECTION 5.4. Notice of Material Events. (a) Promptly upon any Authorized
Officer of any Credit Party obtaining knowledge of (i) any Default or Event of
Default, (ii) any material adverse change in the condition or operations of the
Borrower and its Subsidiaries taken as a whole, financial or otherwise, (other
than changes due to seasonality that are consistent with the corresponding
periods in prior years), (iii) any action or event which could reasonably be
expected to materially and adversely affect the performance of the Credit
Parties' obligations under this Credit Agreement, the repayment of the Note, or
the security interests granted to the Lender under this Credit Agreement or any
other Fundamental Document, (iv) the opening of any office of any Credit Party
or the change of the executive office or the principal place of business of any
Credit Party or of the location of any Credit Party's books and records with
respect to the Collateral, (v) any change in the name of any Credit Party, (vi)
any other event which could reasonably be expected to materially and adversely
impact upon the amount or collectibility of accounts receivable of the Credit
Parties or otherwise materially decrease the value of the Collateral or (vii)
any Person giving any notice to any Credit Party or taking any other action to
enforce remedies with respect to a claimed default or event or condition of the
type referred to in paragraph (d) of Article 7, such Credit Party shall promptly
give written notice thereof to the Lender specifying the nature and period of
existence of any such condition or event, or specifying the notice given or
action taken and the nature of such claimed Event of Default or condition and
what action such Credit Party has taken, is taking and proposes to take with
respect thereto.
(b) Promptly upon any Authorized Officer of any Credit Party
obtaining knowledge of (i) the institution of, or threat of, any action, suit,
proceeding, investigation or arbitration by any Governmental Authority or other
Person against or affecting any Credit Party or any of its assets, or (ii) any
material development in any such action, suit, proceeding, investigation or
arbitration (whether or not previously disclosed to the Lender), which, in the
case of (i) or (ii), could reasonably be expected to materially and adversely
affect the Borrower and its Subsidiaries taken as a whole, such Credit Party
shall promptly give notice thereof to the Lender
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and provide such other information as may be available to it to enable the
Lender to evaluate such matters; and, in addition to the requirements set forth
in clauses (i) and (ii) of this subsection (b), such Credit Party upon request
shall promptly give notice of the status of any action, suit, proceeding,
investigation or arbitration covered by a report delivered to the Lender
pursuant to clause (i) and (ii) above to the Lender and provide such other
information as may be reasonably available to it to enable the Lender to
evaluate such matters.
SECTION 5.5. Insurance. (a) Keep its assets which are of an insurable
character insured (to the extent and for the time periods consistent with normal
industry practices) by financially sound and reputable insurers against loss or
damage by fire, explosion, theft or other hazards which are included under
extended coverage in amounts not less than the insurable value of the property
insured or such lesser amounts, and with such self-insured retention or
deductible levels, as are consistent with normal industry practices.
(b) Maintain with financially sound and reputable insurers,
insurance against other hazards and risks and liability to Persons and property
to the extent and in the manner customary for companies in similar businesses.
(c) Maintain, or cause to be maintained, in effect during the period
from the commencement of principal photography of each item of Product produced
by any Credit Party, through the third anniversary of the date on which such
item of Product is Completed and/or as otherwise required by applicable
contracts, a so-called "Errors and Omissions" policy with respect to all items
of Product for which principal photography has commenced, and cause such Errors
and Omissions policy to provide coverage to the extent and in such manner as is
customary for items of Product of like type but, at minimum, to the extent and
in such manner as is required under all applicable contracts relating thereto.
(d) Maintain, or cause to be maintained, in effect during the period
from the commencement of principal photography of each item of Product produced
by any Credit Party, or from the date of acquisition of each item of Product
acquired by any Credit Party (i) until such time as the Lender shall have been
provided with satisfactory evidence of the existence of one negative or master
tape in one location and an interpositive or internegative or duplicate master
tape in another location of the final version of the Completed Product,
insurance on the negatives and sound tracks or master tapes of such item of
Product in an amount not less than the cost of re-shooting the principal
photography of the item of Product, and (ii) until principal photography of such
item of Product has been concluded, a cast insurance policy with respect to such
item of Product, which provides coverage to the extent and in such manner as is
customary for a like type of Product, but at minimum, to the extent required
under all applicable contracts relating thereto.
(e) Maintain, or cause to be maintained, in effect distributor's
and/or publisher's "Errors and Omissions" insurance to the extent and in amounts
customary for companies in similar businesses.
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(f) Cause all such above-described insurance (excluding worker's
compensation insurance) to (i) provide for the benefit of the Lender that 30
days' prior written notice of suspension, cancellation, termination,
modification, non-renewal or lapse or material change of coverage shall be given
to the Lender; (ii) name the Lender as the loss payee as its interests may
appear (except for "Errors and Omissions" insurance and other third party
liability insurance), provided, however, that production insurance recoveries
received prior to Completion or abandonment of an item of Product may be
utilized to finance the production of such item of Product and property
insurance proceeds may be used to repair damage in respect of which such
proceeds were received; and (iii) to the extent that the Lender shall not be
liable for premiums or calls, name the Lender as an additional insured
including, without limitation, under any "Errors and Omissions" policy.
(g) Upon the request of the Lender, the Borrower will render to the
Lender a statement in such detail as the Lender may request as to all such
insurance coverage.
SECTION 5.6. Production. Cause each item of Product being produced by
any Credit Party to be produced in all material respects in accordance with the
standards set forth in, and within the time period established in, all
agreements with respect to such item of Product to which such Credit Party is a
party, subject to the terms and conditions of such agreements.
SECTION 5.7. Music. When an item of Product has been scored, if
requested by the Lender, deliver to the Lender within a reasonable period of
time after such request (a) written evidence of the music synchronization rights
obtained from the composer or the licensor of the music and (b) copies of all
music cue sheets with respect to such item of Product.
SECTION 5.8. Copyright. (a) Within 90 days after the initial release or
broadcast of each item of Product, to the extent any Credit Party is or becomes
the copyright proprietor thereof or to the extent such interest is obtained by
any Credit Party, or any Credit Party otherwise acquires a copyrightable
interest, take any and all actions necessary to register the copyright for such
item in the name of such Credit Party (subject to a Lien in favor of the Lender
pursuant to the Copyright Security Agreement) in conformity with the laws of the
United States and such other jurisdictions as the Lender may reasonably specify,
and immediately deliver to the Lender (i) written evidence of the registration
of any and all such copyrights for inclusion in the Collateral under this Credit
Agreement and (ii) a Copyright Security Agreement Supplement relating to such
item executed by such Credit Party.
(b) Obtain instruments of transfer or other documents evidencing the
interest of any Credit Party with respect to the copyright relating to items of
Product in which such Credit Party is not entitled to be the initial copyright
proprietor, and promptly record such instruments of transfer on the United
States Copyright Register and such other jurisdictions as the Lender may
specify.
SECTION 5.9. Books and Records. (a) Maintain or cause to be maintained
at all times true and complete books and records of its financial operations and
provide the Lender and
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its representatives access to such books and records and to any of its
properties or assets upon reasonable notice and during regular business hours in
order that the Lender may make such audits and examinations and make abstracts
from such books, accounts, records and other papers pertaining to the Collateral
(including, but not limited to, Eligible Receivables included in the Borrowing
Base) and upon notification to the Borrower may discuss the affairs, finances
and accounts with, and be advised as to the same by, officers and independent
accountants, all as the Lender may deem appropriate for the purpose of verifying
the accuracy of the Borrowing Base Certificate and the various other reports
delivered by any Credit Party to the Lender pursuant to this Credit Agreement or
for otherwise ascertaining compliance with this Credit Agreement or any other
Fundamental Document.
(b) If, prior to an Event of Default, the Lender wishes to confirm
with account debtors and other payors the amounts and terms of any or all
Eligible Receivables included in the Borrowing Base, the Lender will so notify
the Borrower; provided, that so long as an Event of Default has not occurred and
is continuing, the Lender shall be entitled to exercise such right no more than
once per year. Within 10 days after receipt of such notice from the Lender, the
Borrower may, upon written notice to the Lender, elect to have such confirmation
made through the Credit Parties' auditors. If the Borrower fails to timely make
such election, the Lender may proceed to make such confirmations directly with
account debtors and other payors. Each of the Credit Parties hereby agrees that,
upon the occurrence and during the continuance of an Event of Default, the
Lender shall be entitled to confirm directly with account debtors the amounts
and terms of all accounts receivable.
SECTION 5.10. Third Party Audit Rights. Promptly notify the Lender of,
and allow the Lender access to the results of, all audits conducted by any
Credit Party of any third party licensee, partnership and joint venture under
any agreement with respect to any item of Product included in the Collateral.
The Credit Parties will exercise their audit rights with respect to any third
party licensees, partnerships and joint ventures under any agreement with
respect to an item of Product included in the Collateral upon the reasonable
written request of the Lender, to the extent such rights are available to the
Credit Parties; provided, that so long as an Event of Default has not occurred
and is continuing, the Lender shall be entitled to cause the Credit Parties to
exercise such audit rights no more than once per year. After an Event of Default
has occurred and is continuing, the Lender shall have the right to exercise
through any Credit Party such Credit Party's right to audit any obligor under an
agreement with respect to any item of Product included in the Collateral.
SECTION 5.11. Observance of Agreements. Duly observe and perform all
material terms and conditions of all material agreements with respect to the
exploitation of items of Product and diligently protect and enforce the rights
of the Credit Parties under all such agreements in a manner consistent with
prudent business judgment and subject to the terms and conditions of such
agreements.
SECTION 5.12. Film Properties and Rights; Credit Parties to Act as
Pledgeholder. Act as pledgeholder for the Lender with the same effect as if the
Lender were a
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pledgee in possession of all property relating to items of Product which are now
or hereafter in the (actual or constructive) possession of any Credit Party,
subject to such access as shall be necessary to distribute such items of
Product.
SECTION 5.13. Laboratories; No Removal. (a) To the extent any Credit
Party has control over or rights to receive any of the Physical Materials
relating to any item of Product, deliver or cause to be delivered to a
Laboratory or Laboratories all negative and preprint material, master tapes and
all sound track materials with respect to each such item of Product and deliver
to the Lender a fully executed Pledgeholder Agreement with respect to such
materials. To the extent that any Credit Party has only rights of access to
preprint material or master tapes then the Credit Parties will deliver to the
Lender a fully executed Laboratory Access Letter covering such materials. Prior
to requesting any such Laboratory to deliver such negative or other preprint or
sound track material or master tapes to another laboratory, any such Credit
Party shall provide the Lender with a Pledgeholder Agreement or Laboratory
Access Letter, as appropriate, executed by such other laboratory and all other
parties to such Pledgeholder Agreement (including the Lender). Each Credit Party
hereby agrees not to remove or cause the removal of the original negative and
film or sound materials with respect to any item of Product owned by such Credit
Party or in which such Credit Party has an interest (i) to a location outside
the United States or (ii) to any state or jurisdiction where UCC-1 financing
statements (or in the case of jurisdictions outside the United States,
documentation similar in purpose and effect satisfactory to the Lender) have not
been filed against such Credit Party holding any rights to such item of Product.
(b) During production of any item of Product produced by any Credit
Party, such Credit Party shall promptly deliver the daily rushes for such item
of Product to the appropriate Laboratory.
(c) With respect to items of Product completed after the Closing
Date, as soon as practicable after completion, deliver to the Lender and the
Laboratories which are signatories to Pledgeholder Agreements a revised schedule
of Product on deposit with such Laboratories.
SECTION 5.14. Taxes and Charges; Indebtedness in Ordinary Course of
Business. Duly pay and discharge, or cause to be paid and discharged, before the
same shall become in arrears (after giving effect to applicable extensions), all
taxes, assessments, levies and other governmental charges, imposed upon any
Credit Party or its properties, sales and activities, or any part thereof, or
upon the income or profits therefrom, as well as all claims for labor,
materials, or supplies which if unpaid might by law become a Lien upon any
property of any Credit Party; provided, however, that any such tax, assessment,
charge, levy or claim need not be paid if the validity or amount thereof shall
currently be contested in good faith by appropriate proceedings and if such
Credit Party shall have set aside on its books reserves (the presentation of
which is segregated to the extent required by GAAP) adequate with respect
thereto if reserves shall be deemed necessary; and provided, further, that such
Credit Party will pay all such taxes, assessments, levies or other governmental
charges forthwith upon the commencement of proceedings to foreclose any Lien
which may have attached as security therefor. The Credit Parties will promptly
pay when due, or in conformance with customary trade terms, all other
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indebtedness incident to its operations in a manner consistent with such Credit
Party's past business practices.
SECTION 5.15. Liens. Defend the Collateral against any and all Liens
howsoever arising, other than Permitted Encumbrances, and in any event defend
against any attempted foreclosure.
SECTION 5.16. Further Assurances; Security Interests. (a) Upon the
request of the Lender, duly execute and deliver, or cause to be duly executed
and delivered, at the cost and expense of the Credit Parties, such further
instruments as may be appropriate in the reasonable judgment of the Lender to
carry out the provisions and purposes of this Credit Agreement and the other
Fundamental Documents.
(b) Upon the request of the Lender, promptly execute and deliver or
cause to be executed and delivered, at the cost and expense of the Credit
Parties, such further instruments as may be appropriate in the reasonable
judgment of the Lender, to provide the Lender a first perfected Lien in the
Collateral and any and all documents (including, without limitation, the
execution, amendment or supplementation of any financing statement and
continuation statement or other statement) for filing under the provisions of
the UCC and the rules and regulations thereunder, or any other statute, rule or
regulation of any applicable foreign, federal, state or local jurisdiction, and
perform or cause to be performed such other ministerial acts which are necessary
or advisable, from time to time, in order to grant and maintain in favor of the
Lender the security interest in the Collateral contemplated hereunder and under
the other Fundamental Documents, subject only to Permitted Encumbrances.
(c) Promptly undertake to deliver or cause to be delivered to the
Lender from time to time such other documentation, consents, authorizations and
approvals in form and substance reasonably satisfactory to the Lender, as the
Lender shall deem reasonably necessary or advisable to perfect or maintain the
Liens of the Lender.
SECTION 5.17. ERISA Compliance and Reports. Furnish to the Lender (a) as
soon as possible, and in any event within 30 days after any Credit Party knows
that (i) any Reportable Event with respect to any Plan has occurred, a statement
of an executive officer of the Credit Party, setting forth on behalf of such
Credit Party details as to such Reportable Event and the action which it
proposes to take with respect thereto, together with a copy of the notice, if
any, required to be filed by the applicable Credit Party of such Reportable
Event given to the PBGC or (ii) an accumulated funding deficiency has been
incurred or an application has been made to the Secretary of the Treasury for a
waiver or modification of the minimum funding standard or an extension of any
amortization period under Section 412 of the Code with respect to a Plan, a Plan
or Multiemployer Plan has been or is proposed to be terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA, proceedings have been
instituted to terminate a Plan, a proceeding has been instituted pursuant to
Section 515 of ERISA to collect a delinquent contribution to a Multiemployer
Plan, or the Borrower or such Credit Party will incur any liability (including
any contingent or secondary liability) to or on account of the termination
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of or withdrawal from a Plan or Multiemployer Plan under Sections 4062, 4063,
4201 or 4204 of ERISA, if the occurrence of any of the foregoing events would
result in a liability which is materially adverse to the financial condition of
the Borrower and its Subsidiaries taken as a whole or would materially and
adversely affect the ability of the Borrower to perform its obligations under
this Credit Agreement or the Note, a statement of an executive officer of the
Borrower, setting forth details as to such event and the action the applicable
Credit Party proposes to take with respect thereto, (b) promptly upon reasonable
request of the Lender, copies of each annual and other report with respect to
each Plan and (c) promptly after receipt thereof, a copy of any notice any
Credit Party may receive from the PBGC relating to the PBGC's intention to
terminate any Plan or to appoint a trustee to administer any Plan.
SECTION 5.18. Environmental Laws. (a) Promptly notify the Lender upon
any Credit Party becoming aware of any violation or, to the best of each Credit
Party's knowledge, potential violation, or non-compliance with, or liability or,
to the best of each Credit Party's knowledge, potential liability, under any
Environmental Laws which, when taken together with all other pending violations
would reasonably be expected to have a materially adverse effect on the Borrower
and its Subsidiaries taken as a whole, and promptly furnish to the Lender all
notices of any nature which any Credit Party may receive from any Governmental
Authority or other Person with respect to any violation, or potential violation
or non-compliance with, or liability or potential liability under any
Environmental Laws which, in any case or when taken together with all such other
notices, could reasonably be expected to have a materially adverse effect on the
Borrower and its Subsidiaries taken as a whole.
(b) Comply with and use reasonable efforts to ensure compliance by
all tenants and subtenants with all Environmental Laws, and obtain and comply in
all material respects with and maintain and use reasonable efforts to ensure
that all tenants and subtenants obtain and comply in all material respects with
and maintain any and all licenses, approvals, registrations or permits required
by Environmental Laws, except where failure to do so would not have a materially
adverse effect on the Borrower and its Subsidiaries taken as a whole.
(c) Conduct and complete all investigations, studies, sampling and
testing, and all remedial, removal and other actions required under all
Environmental Laws and promptly comply in all material respects with all lawful
orders and directives of all Governmental Authorities, except where failure to
do so would not have a materially adverse effect on the Borrower and its
Subsidiaries taken as a whole. Any order or directive whose lawfulness is being
contested in good faith by appropriate proceedings shall be considered a lawful
order or directive when such proceedings, including any judicial review of such
proceedings, have been finally concluded by the issuance of a final
non-appealable order; provided, however, that the appropriate Credit Party shall
have set aside on its books reserves (the presentation of which is segregated to
the extent required by GAAP) adequate with respect thereto if reserves shall be
deemed necessary.
(d) Defend, indemnify and hold harmless the Lender and its
employees, agents, officers and directors, from and against any claims, demands,
penalties, fines, liabilities,
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settlements, damages, costs and expenses of whatever kind or nature, known or
unknown, contingent or otherwise, arising out of, or in any way related to the
violation of or noncompliance by any Credit Party with any Environmental Laws,
or any orders, requirements or demands of Governmental Authorities related
thereto, including, without limitation, reasonable attorney and consultant fees,
investigation and laboratory fees, court costs and litigation expenses, but
excluding therefrom all claims, demands, penalties, fines, liabilities,
settlements, damages, costs and expenses arising out of or resulting from (i)
the gross negligence or willful misconduct of any indemnified party or (ii) any
acts or omissions of any indemnified party occurring after any indemnified party
is in possession of, or controls the operation of, any property or asset.
SECTION 5.19. Use of Proceeds. Use the proceeds of the Loans solely for
the Borrower (i) to finance the development, production, distribution or
acquisition of audio books, books, television product and film product (other
than the production and distribution of motion pictures in theaters) and
production and distribution expenses of the motion picture entitled "Wilde";
(ii) to refinance the Sanwa Credit Agreement and the MEI Line of Credit; and
(iii) for other general corporate purposes.
SECTION 5.20. Security Agreements with the Guilds. Furnish to the Lender
duly executed copies of (i) each security agreement relating to an item of
Product entered into by a Credit Party with any guild and (ii) a subordination
agreement (in form and substance satisfactory to the Lender) from the applicable
guild with respect to the security interest and other rights granted to it
pursuant to each such security agreement delivered to the Lender pursuant to
clause (i) above.
SECTION 5.21. Uncompleted Product. With respect to all items of Product
(other than audio books and books) for which any Credit Party is the producer
(but not a producer-for-hire) or has a financial interest which is subject to a
completion risk (i.e. payment by a Credit Party is not conditioned upon
delivery), deliver to the Lender, not later than (A) five (5) days prior to the
commencement of principal photography of such item of Product and (B) five (5)
days prior to payment of the acquisition cost for a negative pick-up, each of
the following to the extent applicable (it being understood that for purposes of
clause B clauses (viii) and (ix) below shall not be applicable), (i) the budget
for such item of Product, (ii) a schedule identifying all agreements executed by
a Credit Party in connection with such item of Product which provide for
deferments of compensation or a gross or net profit participation, (iii) copies
of such of the foregoing agreements as the Lender may reasonably request, (iv)
certificates or binders of insurance with respect to such item of Product (and
policies of insurance if requested by the Lender), including all forms of
insurance coverage required by Section 5.5 hereof, (v) copies of all instruments
of transfer or other instruments (in recordable form) ("Chain of Title"
documents) necessary to establish, to the reasonable satisfaction of the Lender,
in the appropriate Credit Party ownership of sufficient copyright rights in the
literary properties upon which such item of Product is to be based to enable
such Credit Party to produce and/or distribute such item of Product and to grant
the Lender the security interests therein which are contemplated by this Credit
Agreement which documents shall evidence to the Lender's satisfaction the Credit
Party's rights in, and with respect to, such item of Product, (vi) an executed
Copyright Security
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Agreement Supplement with respect to such item of Product, (vii) executed
Pledgeholder Agreements with respect to such item of Product, (viii) a schedule
of sources and uses demonstrating in detail that all cash necessary to complete
and deliver such item of Product will be available as and when needed from
sources acceptable to the Lender, and (ix) a Completion Guarantee with respect
to such item of Product in form and substance satisfactory to the Lender naming
the Lender as a beneficiary thereof; provided, however, that subclause (ix)
shall not be applicable to items of Product for which a major television network
has committed to provide financing in an amount equal to at least 70% of the
Budgeted Negative Cost for such item of Product.
SECTION 5.22. Governmental Approval. If any further authorizations,
approvals, registrations or filings with any governmental or public regulatory
body or authority of the United States or any state thereof required for the
execution, delivery and performance by any Credit Party of this Credit Agreement
and the other Fundamental Documents to which it is a party should hereafter
become necessary, the Credit Parties shall obtain or make all such
authorizations, approvals, registrations or filings.
6. NEGATIVE COVENANTS
From the date hereof and for so long as the Commitment shall be in
effect or any amount remains outstanding under the Note or any Letter of Credit
shall remain outstanding or any Obligations remain unpaid or unsatisfied, each
Credit Party agrees that, unless the Lender shall otherwise consent in writing,
it will not and will not allow any of its Subsidiaries to:
SECTION 6.1. Limitations on Indebtedness. Incur, create, assume or
suffer to exist any preferred stock or Indebtedness or permit any partnership or
joint venture in which any Credit Party is a general partner to incur create,
assume or suffer to exist any Indebtedness other than:
(a) the Indebtedness represented by the Note and the other
Obligations;
(b) Indebtedness in respect of secured purchase money financing,
including Capital Leases, to the extent permitted by Section 6.2(b) and not to
exceed $250,000 in the aggregate at any one time outstanding;
(c) unsecured liabilities for acquisitions of rights or product
incurred in the ordinary course of business and not otherwise prohibited
hereunder;
(d) liabilities relating to net or gross profit participations,
deferments and guild residuals with respect to the production or acquisition of
items of Product;
(e) existing Indebtedness listed on Schedule 3.17 hereto but no
increases, extensions or renewals thereof unless otherwise noted on Schedule
3.17;
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(f) in the case of the Corporate Guarantors, the guarantees of the
Obligations pursuant to Article 9 hereof;
(g) Indebtedness incurred in connection with inter-company advances
permitted under Section 6.4(v) hereof;
(h) Subordinated Debt that does not require any cash payments at any
time prior to six months after the Commitment Termination Date;
(i) Indebtedness incurred in connection with the refinancing of the
Borrower's existing loan in connection with the acquisition of its office
building referenced in Note 6 of the Borrower's quarterly report for the period
ended June 30, 1997, provided that (i) the principal amount then outstanding and
being refinanced is not increased to an amount greater than $3,300,000, (ii) the
Lien(s) provided therefor are not extended to cover any additional property or
assets of the Borrower, and (iii) the Weighted Average Life to Maturity of such
Indebtedness is not decreased;
(j) Indebtedness incurred in connection with the financing of
television programming for which the Lender has previously provided written
consent; and
(k) preferred stock without any mandatory redemption provisions.
SECTION 6.2. Limitations on Liens. Incur, create, assume or suffer to
exist any Lien on its revenue stream, property or assets, whether now owned or
hereafter acquired, except:
(a) Liens pursuant to written security agreements (in form and
substance reasonably acceptable to the Lender) in favor of guilds required
pursuant to terms of collective bargaining agreements; provided, that such
guilds have entered into an intercreditor agreement with the Lender reasonably
satisfactory in all respects to the Lender;
(b) Liens granted to the Person financing the acquisition of
property, plant or equipment if (i) limited to the particular assets acquired;
(ii) the debt secured by the Lien does not exceed the acquisition cost of a
particular asset for which the Lien is granted; (iii) such transaction does not
otherwise violate this Credit Agreement and (iv) the aggregate amount of all
Indebtedness secured by Liens permitted under this paragraph (excluding the
Indebtedness incurred in connection with the refinancing of the Borrower's
office building permitted by Section 6.1(i)) does not exceed $250,000 at any one
time outstanding;
(c) Liens to secure distribution, exhibition and/or exploitation
rights of licensees pursuant to Distribution Agreements on terms satisfactory to
the Lender;
(d) deposits under worker's compensation, unemployment insurance,
old-age pensions and other Social Security laws or to secure the performance of
bids, tenders, contracts (other than for the repayment of borrowed money) or
leases or to secure statutory obligations or
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surety or appeal bonds or performance or other similar bonds incurred in the
ordinary course of business (other than Completion Guarantees);
(e) Liens for taxes, assessments or other governmental charges or
levies due and payable, the validity or amount of which is currently being
contested in good faith by appropriate proceedings pursuant to the terms of
Section 5.14 hereof;
(f) Liens incurred in the ordinary course of business with regard to
services rendered by laboratories and post-production houses, and suppliers of
materials and equipment which secure trade payables in amounts not exceeding
$500,000 in the aggregate;
(g) Liens arising out of attachments, judgments or awards as to
which an appeal or other appropriate proceedings for contest or review are
promptly commenced (and as to which foreclosure and other enforcement
proceedings shall not have been commenced (unless fully bonded or otherwise
effectively stayed)) and as to which appropriate reserves have been established
in accordance with GAAP;
(h) the Liens of the Lender under this Credit Agreement, the other
Fundamental Documents and other documents contemplated hereby;
(i) existing Liens set forth on Schedule 6.2 hereto;
(j) customary Liens in favor of Approved Completion Guarantors in
connection with Completion Guarantees;
(k) possessory Liens (other than those of Laboratories and
production houses) which (i) occur in the ordinary course of business, (ii)
secure normal trade debt which is not yet due and payable and (iii) do not
secure Indebtedness for borrowed money;
(l) Liens arising by virtue of any statutory or common law provision
relating to banker's liens, rights of setoff or similar rights with respect to
deposit accounts of the Credit Parties;
(m) statutory Liens of landlords and other Liens imposed by law,
such as carriers', warehouseman's or mechanic's Liens, incurred in good faith in
the ordinary course of business and deposits made or bonds filed in the ordinary
course of business to obtain the release of such Liens in amounts not exceeding
$250,000 in the aggregate;
(n) Liens granted to third parties securing Indebtedness permitted
to be incurred under Section 6.1(j); and
(o) Liens in favor of third-party lenders in respect of particular
items of Product pursuant to production financing arrangements approved by the
Lender; provided, that
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each such third-party lender shall have entered into an intercreditor agreement
with the Lender in form and substance satisfactory to the Lender.
SECTION 6.3. Limitation on Guarantees. Provide any Guaranty, either
directly or indirectly, except (i) negative pickup agreements and minimum
guarantees to acquire items of Product in the ordinary course of business to the
extent otherwise permitted under Section 6.21 and the other provisions hereof,
(ii) guarantees to the Lender in accordance with Article 9 hereof and (iii)
existing Guarantees listed on Schedule 6.3 hereto.
SECTION 6.4. Limitations on Investments. Create, make or incur any
Investment other than (i) to acquire Product in the ordinary course of business
to the extent otherwise permitted under Section 6.21 and the other provisions
hereof, (ii) purchase of Cash Equivalents, (iii) inter-company advances among
Credit Parties, (iv) Investments as of the Closing Date set forth on Schedule
6.4, (v) Guarantees permitted pursuant to Section 6.3, (vi) the acquisition or
creation of new Subsidiaries in accordance with Section 6.22 hereof, and (vii)
additional investments in Empire Burbank in an aggregate amount not to exceed
$100,000 per annum.
SECTION 6.5. Restricted Payments. Declare, make or incur any liability
to make any Restricted Payments; provided that the Borrower may declare cash
dividends to its stockholders if, and only if, the EBIT Ratio calculated
pursuant to Section 6.17 is at least 20 to 1.
SECTION 6.6. Limitations on Leases. Create, incur or assume combined
lease expense (but specifically excluding amounts included in the Budgeted
Negative Cost of an item of Product) for any twelve consecutive calendar months
in excess of $100,000.
SECTION 6.7. Consolidation, Merger, Sale or Purchase of Assets, etc.
Whether in one transaction or a series of transactions, (i) wind up, liquidate
or dissolve its affairs, or enter into any transaction of merger or
consolidation, (ii) sell or otherwise dispose of all or substantially all of its
property, stock or assets, (iii) except to the extent permitted by Sections 6.4
and 6.22 hereof, acquire all or substantially all of the stock or assets of any
other Person in amounts exceeding $500,000 in the aggregate, or (iv) agree to do
or suffer any of the foregoing, except that any Subsidiary of the Borrower may
merge with and into, or transfer assets to, another Subsidiary of the Borrower
or with and into, or transfer assets to, the Borrower; provided that if any such
transaction involves the Borrower, then the Borrower must be the surviving
entity in each such transaction.
SECTION 6.8. Receivables. Sell, discount or otherwise dispose of notes,
accounts receivable or other obligations owing to any Credit Party except for
the purpose of collection in the ordinary course of business.
SECTION 6.9. Sale and Leaseback. Enter into any arrangement with any
Person or Persons, whereby in contemporaneous transactions any Credit Party
sells essentially all of its right, title and interest in an item of Product and
acquires or licenses the right to distribute or
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exploit such item of Product in media and markets accounting for substantially
all the value of such item of Product, unless such arrangement does not impair
the collateral position of the Lender and is evidenced by documentation
acceptable to the Lender.
SECTION 6.10. Places of Business; Change of Name. Change the location of
its chief executive office or principal place of business or any of the
locations where it keeps any material portion of the Collateral or its books and
records with respect to the Collateral or change its name without in each case
(i) giving the Lender 30 days' prior written notice of such change and (ii)
filing any additional Uniform Commercial Code financing statements, and such
other documents requested by the Lender or which are otherwise necessary or
desirable to maintain perfection of the security interest of the Lender in the
Collateral.
SECTION 6.11. Limitations on Capital Expenditures. Make or incur on a
consolidated basis any obligation to make Capital Expenditures (other than
amounts included in the Budgeted Negative Cost of an item of Product) for any
fiscal year in excess of $250,000.
SECTION 6.12. Transactions with Affiliates. Effect any transaction with
an Affiliate other than a Credit Party on a basis less favorable to such Credit
Party than would have been the case if such transaction had been effected on an
arms-length basis (and if involving more than $100,000, without a resolution
approving each such transaction from the Board of Directors of each Credit Party
involved).
SECTION 6.13. Prohibition of Amendments or Waivers. Amend, alter,
modify, terminate or waive, or consent to any amendment, alteration,
modification or waiver of (x) any material agreement to which any Credit Party
is a party, including, without limitation, the Material Agreements, or the terms
thereof in any manner which would change, alter or waive any material term
thereof and which could reasonably be expected to (i) materially and adversely
affect the collectibility of accounts receivable that form part of the Borrowing
Base, (ii) materially and adversely affect the financial condition of any Credit
Party, (iii) materially and adversely affect the rights of the Lender under this
Credit Agreement, the other Fundamental Documents and any other agreements
contemplated hereby, (iv) materially decrease the value of the Collateral, or
(v) decrease the amount of the sum of (i) the Borrowing Base plus (ii) the
Maximum Guaranty Amount plus (iii) amounts currently held in the Collection
Account, to less than the sum of then outstanding principal amount of the Loans
and the then current L/C Exposure, or (y) any indenture or note purchase
agreement governing any Subordinated Debt in any manner whatsoever.
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SECTION 6.14. Development Costs. Permit unfunded development costs
(which have not been sold, written off or allocated to an item of Product for
which active preproduction has commenced) to exceed $100,000 for any item of
Product.
SECTION 6.15. Overhead Expense. Permit aggregate allocated and
unallocated overhead expenses to exceed $1,100,000 in the fourth quarter of
fiscal year 1997, $3,750,000 in fiscal 1998 or to exceed in any subsequent
fiscal year 110% of the maximum amount permitted for the immediately preceding
fiscal year.
SECTION 6.16. Consolidated Capital Base. Permit Consolidated Capital
Base at the end of any quarter to be less than the sum of $8,000,000 plus 80% of
all net new equity invested plus 80% of accumulated net earnings, if any, for
each fiscal quarter ending after the Closing Date and prior to the date at which
compliance is being determined.
SECTION 6.17. EBIT Ratio. Permit the ratio of (i) the sum of EBIT on the
last day of each fiscal quarter plus amortization of goodwill and capitalized
financing costs on the last day of each fiscal quarter to (ii) Total Interest on
the last day of each fiscal quarter to be less than 1.5 to 1 as of fiscal year
end 1998 and 2.0 to 1 for for any rolling four quarter period thereafter.
SECTION 6.18. Liquidity Ratio. Permit the ratio of (i) all projected
known cash sources (including cash on hand, borrowing under the Credit Agreement
(taking into account projected Borrowing Base availability plus the Maximum
Guaranty Amount), cash receipts from operations, overhead reimbursements, and
cash received from permitted Subordinated Debt and third party investors) to
(ii) all projected known cash uses (including debt service, amounts to be spent
to acquire film inventory, overhead, and all other cash expenditures), all as
determined as of each quarter end and as projected in good faith by the Borrower
for the ensuing 24 months, to be less than 1.0 to 1.
SECTION 6.19. No Change in Business. Engage in any business activities
other than production, distribution and other exploitation of audio books,
books, television product and film product (other than the production and
distribution of motion pictures in theaters) and the production and distribution
of the motion picture entitled "Wilde", in each case including ancillary rights
(e.g., music publishing, soundtrack album, merchandising and publishing).
SECTION 6.20. ERISA Compliance. Engage in a "prohibited transaction", as
defined in Section 406 of ERISA or Section 4975 of the Code, with respect to any
Plan or Multiemployer Plan or knowingly consent to any other "party in interest"
or any "disqualified person", as such terms are defined in Section 3(14) or
ERISA and Section 4975(e)(2) of the Code, respectively, engaging in any
"prohibited transaction", with respect to any Plan or
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Multiemployer Plan maintained or contributed to by any Credit Party; or permit
any Plan maintained by any Credit Party to incur any "accumulated funding
deficiency", as defined in Section 302 of ERISA or Section 412 of the Code,
unless such incurrence shall have been waived in advance by the Internal Revenue
Service; or terminate any Plan in a manner which could result in the imposition
of a Lien on any property of any Credit Party pursuant to Section 4068 of ERISA;
or breach or knowingly permit any employee or officer or any trustee or
administrator of any Plan maintained by any Credit Party to breach any fiduciary
responsibility imposed under Title I of ERISA with respect to any Plan; engage
in any transaction which would result in the incurrence of a liability under
Section 4069 of ERISA; or fail to make contributions to a Plan or Multiemployer
Plan which results in the imposition of a Lien on any property of any Credit
Party pursuant to Section 302(f) of ERISA or Section 412(n) of the Code, if the
occurrence of any of the foregoing events (alone or in the aggregate) would
result in a liability which is materially adverse to the financial condition of
the Credit Parties taken as a whole or would materially and adversely affect the
ability of the Borrower to perform its obligations under this Credit Agreement
or the Note.
SECTION 6.21. Additional Limitations on Production and Acquisition of
Product. (a) Permit production and acquisition deficits (net of pre-sale
guarantees and completed pre-sales payable within 1 year after delivery) to
exceed: $5,000,000 in the aggregate at any time outstanding for all (i)
television series in production or acquired, which shall not exceed $300,000 for
any single episode of any television series; and (ii) for all movies-of-the-
week or mini-series, which shall not exceed $600,000 for any single
movie-of-the-week and $1,200,000 for any mini-series.
(b) Begin production on (i) any television series with a pattern
budget in excess of $1,200,000 per episode; (ii) any movie-of-the-week having a
budget in excess of $3,500,000; provided, however, that with respect to
movies-of-the-week, no more than $10,500,000 in the aggregate shall be
outstanding at any one time; or (iii) any television miniseries which would
result in the aggregate amount outstanding at any one time in respect of all
mini-series currently in production to exceed $7,000,000; in each case where a
Credit Party is the producer or has a financial interest which is subject to a
completion risk (i.e. payment by a Credit Party is not conditioned upon
delivery).
SECTION 6.22. Subsidiaries. Acquire or create any new direct or indirect
Subsidiary; provided however that a Credit Party may acquire or create
additional Subsidiaries if (i) each such Subsidiary executes an Instrument of
Assumption and Joinder in the form attached hereto as Exhibit I whereby such
Subsidiary becomes a Credit Party hereunder and the certificates representing
100% of the shares of capital stock of such Subsidiary held by such Credit Party
becomes part of the Pledged Securities hereunder and are delivered to the Lender
together with stock powers for each such certificate executed in blank, and/or
(ii) such Credit Party takes such other action in connection with the stock of
such Subsidiary as is deemed appropriate by the Lender to protect the Lender's
security interest therein.
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SECTION 6.23. Bank Accounts. After the date hereof, open or maintain any
bank account other than (a) at the office of the Lender as contemplated by
Section 8.3 hereof, (b) those accounts listed on Schedule 6.23 or as to which
the Lender shall have received notice, or (c) one or more Production Accounts,
as to which the Lender shall have received notice.
SECTION 6.24. Hazardous Materials. Except as set forth on Schedule 3.21,
cause or permit any of its properties or assets to be used to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer, produce
or process Hazardous Materials, except in compliance in all material respects
with all applicable Environmental Laws, nor release, discharge, dispose or of
permit or suffer any release or disposal as a result of any intentional act or
omission on its part of Hazardous Materials onto any such property or asset in
material violation of any Environmental Law.
SECTION 6.25. Use of Proceeds of Loans and Requests for Letters of
Credit. Use the proceeds of Loans or request any Letter of Credit hereunder
other than for the purposes set forth in, and as required by, Section 5.19
hereof.
SECTION 6.26. Interest Rate Protection Agreements, etc. Enter into any
Interest Rate Protection Agreement or Currency Agreement for other than bona
fide hedging purposes.
SECTION 6.27. Amortization Method. Change the method of amortization of
film/television inventory used by any of the Credit Parties, unless required to
do so under GAAP.
7. EVENTS OF DEFAULT
In the case of the happening and during the continuance of any of the
following events (herein called "Events of Default"):
(a) any representation or warranty made by any Credit Party in this
Credit Agreement or any other Fundamental Document or in connection with this
Credit Agreement or with the execution and delivery of the Note or the
Borrowings hereunder, or any statement or representation made in any report,
financial statement, certificate or other document furnished by or on behalf of
any Credit Party to the Lender under or in connection with this Credit Agreement
or any Fundamental Document shall prove to have been false or misleading in any
material respect when made, deemed to be made or delivered;
(b) default shall be made in the payment of any principal of or
interest on the Note or of any fees or other amounts payable by the Borrower
hereunder, when and as the same shall become due and payable, whether at the due
date thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise and, in the case of payments of any amounts other than
principal, such default shall continue unremedied for three (3) Business Days
after receipt by the Borrower of an invoice therefor;
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(c) default shall be made by any Credit Party in the due observance
or performance of any covenant, condition or agreement contained in Section 5.4
or Article 6 of this Credit Agreement;
(d) default shall be made with respect to any payment of any
Indebtedness of any Credit Party in excess of $250,000 when due or the
performance of any other obligation incurred in connection with any such
Indebtedness, if the effect of such default is to accelerate the maturity of
such Indebtedness or to permit the holder thereof to cause such Indebtedness to
become due prior to its stated maturity and such default shall not be remedied,
cured, waived or consented to within the period of grace with respect thereto;
(e) any Credit Party shall generally not pay its debts as they
become due or shall admit in writing its inability to pay its debts, or shall
make a general assignment for the benefit of creditors; or any Credit Party
shall commence any case, proceeding or other action seeking to have an order for
relief entered on its behalf as debtor or to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors or seeking
appointment of a receiver, trustee, custodian or other similar official for it
or for all or any substantial part of its property or shall file an answer or
other pleading in any such case, proceeding or other action admitting the
material allegations of any petition, complaint or similar pleading filed
against it or consenting to the relief sought therein; or any Credit Party shall
take any action to authorize any of the foregoing;
(f) any involuntary case, proceeding or other action against any
Credit Party shall be commenced seeking to have an order for relief entered
against it as debtor or to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to bankruptcy, insolvency,
reorganization or relief of debtors, or seeking appointment of a receiver,
trustee, custodian or other similar official for it or for all or any
substantial part of its property, and such case, proceeding or other action (i)
results in the entry of any order for relief against it or (ii) shall remain
undismissed for a period of thirty (30) days;
(g) final judgment(s) for the payment of money in excess of $250,000
shall be rendered against any Credit Party which within thirty (30) days from
the entry of such judgment shall not have been discharged or stayed pending
appeal or which shall not have been discharged or bonded in full within thirty
(30) days from the entry of a final order of affirmance on appeal;
(h) failure to deliver a Borrowing Base Certificate to the Lender
within 10 Business Days of the date such Certificate was due pursuant to Section
5.1(e) hereof, provided, however, that any failure to deliver a Borrowing Base
Certificate shall not give rise to an Event of Default under this clause (h) in
the event there are no outstanding Loans and Letters of Credit;
(i) a Change in Control or a Change in Management shall occur;
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(j) the Guaranty Agreement shall for any reason, not be or shall
cease to be in full force and effect, or shall be declared null and void, or
become unenforceable, or it shall be terminated, or disaffirmed by any
Individual Guarantor thereunder;
(k) default shall be made by any Credit Party in the due observance
or performance of any other covenant, condition or agreement to be observed or
performed pursuant to the terms of this Credit Agreement, or any other
Fundamental Document, and such default shall continue unremedied for thirty (30)
consecutive days after any Credit Party obtains knowledge of such occurrence;
(l) a Reportable Event relating to a failure to meet minimum funding
standards or an inability to pay benefits when due shall have occurred with
respect to any Plan under the control of any Credit Party and shall not have
been remedied within thirty (30) days after the occurrence of such Reportable
Event; or a trustee shall be appointed by a United States District Court to
administer such Plan, or the PBGC shall institute proceedings to terminate such
Plan, and the Lender shall have notified the Borrower that the Lender has
determined that on the basis of such Reportable Event, appointment of trustee or
commencement of proceedings, there are reasonable grounds to believe that such
occurrence would have a material adverse effect to the financial condition of
the Credit Parties taken as a whole or would materially and adversely affect the
ability of the Borrower to perform its obligations under this Credit Agreement
or the Note; or
(m) any Fundamental Document shall, for any reason, not be or shall
cease to be in full force and effect except as provided herein or therein or
shall be declared null and void or any of the Fundamental Documents shall not
give or shall cease to give the Lender the Liens, rights, powers and privileges
purported to be created thereby in favor of the Lender superior to and prior to
the rights of all third Persons (except to the extent expressly permitted herein
or therein) and subject to no other Liens (except to the extent expressly
permitted herein or therein) other than by actions of the Lender, provided that
no such defect in the Fundamental Documents shall give rise to an Event of
Default under this paragraph (m) unless such defect or such failure shall affect
Collateral that is or should be subject to a Lien in favor of the Lender having
an aggregate value in excess of $250,000;
then, in every such event and at any time thereafter during the continuance of
such event, the Lender may take either or both of the following actions, at the
same or different times: terminate forthwith the Commitment and/or declare the
principal of and the interest on the Loans and the Note and all other amounts
payable hereunder or thereunder to be forthwith due and payable, whereupon the
same shall become and be forthwith due and payable, without presentment, demand,
protest, or other notice of any kind, all of which are hereby expressly waived,
anything in this Credit Agreement or in the Note to the contrary
notwithstanding. If an Event of Default specified in paragraphs (e) or (f) above
shall have occurred, the Commitment shall automatically terminate and the Loans
and the Note shall automatically become due and payable, both as to interest and
principal, without presentment, demand, protest, or other notice of any kind,
all of which are hereby expressly waived, anything in this Credit Agreement or
the Note to the contrary
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notwithstanding. Such remedies shall be in addition to any other remedy
available to the Lender pursuant to Applicable Law or otherwise.
8. GRANT OF SECURITY INTEREST; REMEDIES
SECTION 8.1. Security Interests. The Borrower, as security for the due
and punctual payment of the Obligations, and the Corporate Guarantors, as
security for their obligations under Article 9 hereof, hereby mortgage, pledge,
assign, transfer, set over, convey and deliver to the Lender and grant to the
Lender a security interest in the Collateral.
SECTION 8.2. Use of Collateral. So long as no Event of Default shall
have occurred and be continuing, and subject to the various provisions of this
Credit Agreement and the other Fundamental Documents, a Credit Party may use the
Collateral in any lawful manner permitted hereunder.
SECTION 8.3. Collection Accounts. (a) The Borrower will establish a
lockbox arrangement and related collection bank accounts (each, a "Collection
Account") and will direct all Persons who become licensees, buyers or account
debtors under receivables with respect to any item included in the Collateral
(other than de minimis amounts and proceeds of particular items of Product which
are assigned by a Credit Party to third-party lenders as collateral for its
obligations to make certain payments upon Completion and delivery of such items
of Product pursuant to production financing arrangements permitted hereunder;
provided that such third-party lender shall have entered into an intercreditor
agreement with the Lender in form and in substance satisfactory to the Lender;
and provided further that the Borrower may only assign proceeds of Distribution
Agreements which relate solely to the particular item of Product whose
production is being financed by such third-party lender) to make payments under
or in connection with the license agreements, sales agreements or receivables
directly to the appropriate lockbox or Collection Account. To the extent
practicable, the Credit Parties, will amend existing agreements to direct all
Persons who are licensees, buyers or account debtors under receivables with
respect to any item included in the Collateral, to make payments under or in
connection with the license agreements, sales agreements or receivables directly
to the appropriate lockbox or Collection Account.
(b) The Credit Parties will execute such documentation as may be
reasonably required by the Lender in order to provide for the deposit into the
Collection Accounts of all items received in the lockbox and to otherwise
effectuate the provisions of this Section 8.3.
(c) In the event a Credit Party receives payment from any Person or
proceeds under an Acceptable L/C, which payment should have been remitted
directly to a Collection Account, such Credit Party shall promptly remit such
payment or proceeds to a Collection Account to be applied in accordance with the
terms of this Credit Agreement.
(d) All such lockboxes and Collection Accounts shall be maintained
with the Lender or with such other financial institutions as may be approved by
the Lender, subject to the
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right of the Lender to at any time withdraw such approval and transfer any such
lockboxes and/or Collection Account(s) to the Lender or another approved
financial institution.
(e) The Lender is hereby authorized and directed to invest and
reinvest the funds from time to time deposited in the Collection Accounts, so
long as no Event of Default has occurred and is continuing, on the instructions
of the Borrower (provided that such notice may be given verbally to be confirmed
promptly in writing) or, if the Borrower shall fail to give such instruction
upon delivery of any such funds, in the sole discretion of the Lender, provided
that in no event may the Borrower give instructions to the Lender to, or may the
Lender in its discretion, invest or reinvest funds in the Collection Accounts in
other than Cash Equivalents described in clause (i) of the definition of Cash
Equivalents, or described in clauses (ii) and (iii) of the definition of Cash
Equivalents to the extent issued by The Chase Manhattan Bank.
(f) Any net income or gain on the investment of funds from time to
time held in the Collection Accounts, shall be promptly reinvested by the Lender
at the direction of the Borrower as a part of the Collection Accounts and any
net loss on any such investment shall be charged against the Collection
Accounts.
(g) The Lender shall not be a trustee for the Credit Parties, or
shall have any obligations or responsibilities, or shall be liable for anything
done or not done, in connection with the Collection Accounts, except as
expressly provided herein and except that the Lender shall have the obligations
of a secured party under the UCC. The Lender shall not have any obligation or
responsibilities and shall not be liable in any way for any investment decision
made pursuant to this Section 8.3(g) or for any decrease in the value of the
investments held in the Collection Accounts except for the gross negligence or
wilful misconduct of Lender in carrying out the written instructions of
Borrower.
(h) For value received and to induce the Lender to issue Letters of
Credit and to make Loans from time to time to the Borrower as provided for in
this Credit Agreement, as security for the payment of all of the Obligations,
the Credit Parties hereby assign to the Lender and grant to the Lender, a first
and prior Lien upon all the Credit Parties' rights in and to the Collection
Accounts, all cash, documents, instruments and securities from time to time held
therein, and all rights pertaining to investments of funds in the Collection
Accounts and all products and proceeds of any of the foregoing. All cash,
documents, instruments and securities from time to time on deposit in the
Collection Accounts, and all rights pertaining to investments of funds in the
Collection Accounts shall immediately and without any need for any further
action on the part of any of the Credit Parties or the Lender, become subject to
the Lien set forth in this Section 8.3(h), be deemed Collateral for all purposes
hereof and be subject to the provisions of this Credit Agreement.
(i) At any time after the Loans have been accelerated in accordance
with Article 7 hereof, the Lender may sell any documents, instruments and
securities held in the Collection Accounts and may immediately apply the
proceeds thereof and any other cash held in the Collection Accounts in
accordance with Section 10.5 hereof.
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SECTION 8.4. Credit Parties to Hold in Trust. Upon the occurrence and
during the continuance of an Event of Default, the Credit Parties will, upon
receipt by them of any revenue, income, profits or other sums in which a
security interest is granted by this Article 8, payable pursuant to any
agreement or otherwise, or of any check, draft, note, trade acceptance or other
instrument evidencing an obligation to pay any such sum, hold the sum in trust
for the Lender, and forthwith, without any notice or demand whatsoever (all
notices, demands, or other actions on the part of the Lender being expressly
waived), endorse, transfer and deliver any such sums or instruments or both, to
the Lender to be applied to the repayment of the Obligations in accordance with
the provisions of Section 8.7 hereof.
SECTION 8.5. Collections, etc. Upon the occurrence and during the
continuance of an Event of Default, the Lender may, in its sole discretion, in
its name or in the name of any Credit Party or otherwise, demand, ▇▇▇ for,
collect or receive any money or property at any time payable or receivable on
account of or in exchange for, or make any compromise or settlement deemed
desirable with respect to, any of the Collateral, but shall be under no
obligation so to do, or the Lender may extend the time of payment, arrange for
payment in installments, or otherwise modify the terms of, or release, any of
the Collateral, without thereby incurring responsibility to, or discharging or
otherwise affecting any liability of, any Credit Party. The Lender will not be
required to take any steps to preserve any rights against prior parties to the
Collateral. If any Credit Party fails to make any payment or take any action
required hereunder, the Lender may make such payments and take all such actions
as the Lender reasonably deems necessary to protect the Lender's security
interests in the Collateral and/or the value thereof, and the Lender is hereby
authorized (without limiting the general nature of the authority herein above
conferred) to pay, purchase, contest or compromise any Liens that in the
judgment of the Lender appear to be equal to, prior to or superior to the
security interests of the Lender in the Collateral and any Liens not expressly
permitted by this Credit Agreement.
SECTION 8.6. Possession, Sale of Collateral, etc. Upon the acceleration
of the Loans in accordance with Article 7 hereof, the Lender may enter upon the
premises of any Credit Party or wherever the Collateral may be, and take
possession of the Collateral, and may demand and receive such possession from
any Person who has possession thereof, and the Lender may take such measures as
it may deem necessary or proper for the care or protection thereof, including
the right to remove all or any portion of the Collateral, and with or without
taking such possession may sell or cause to be sold, whenever the Lender shall
decide, in one or more sales or parcels, at such prices as the Lender may deem
best, and for cash or on credit or for future delivery, without assumption of
any credit risk, all or any portion of the Collateral, at any broker's board or
at public or private sale, without demand of performance or notice of intention
to sell or of time or place of sale (except the Lender shall provide 15 days'
written notice to the Credit Parties of the time and place of any such public
sale or sales and such other notices as may be required by Applicable Law and
cannot be waived), and the Lender or any other Person may be the purchaser of
all or any portion of the Collateral so sold and thereafter hold the same
absolutely, free (to the fullest extent permitted by Applicable Law) from any
claim or right of whatever kind, including any equity of redemption, of any
Credit Party, any such demand, notice, claim, right or equity being hereby
expressly waived and released. At any sale or sales made
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pursuant to this Article 8, the Lender may bid for or purchase, free (to the
fullest extent permitted by Applicable Law) from any claim or right of whatever
kind, including any equity of redemption, of any Credit Party, any such demand,
notice, claim, right or equity being hereby expressly waived and released, any
part of or all of the Collateral offered for sale, and may make any payment on
account thereof by using any claim for moneys then due and payable to the Lender
by any Credit Party hereunder as a credit against the purchase price. The Lender
shall in any such sale make no representations or warranties with respect to the
Collateral or any part thereof, and the Lender shall not be chargeable with any
of the obligations or liabilities of any Credit Party. Each Credit Party hereby
agrees (i) that it will indemnify and hold the Lender harmless from and against
any and all claims with respect to the Collateral asserted before the taking of
actual possession or control of the relevant Collateral by the Lender pursuant
to this Article 8, or arising out of any act of, or omission to act on the part
of, any party (other than the Lender) prior to such taking of actual possession
or control by the Lender (whether asserted before or after such taking of
possession or control), or arising out of any act on the part of any Credit
Party, or its agents before or after the commencement of such actual possession
or control by the Lender except for claims arising out of Lender's gross
negligence or willful misconduct; and (ii) the Lender shall not have liability
or obligation to any Credit Party arising out of any such claim except for acts
of willful misconduct or gross negligence or not taken in good faith. Subject
only to the lawful rights of third parties, any Laboratory which has possession
of any of the Collateral is hereby constituted and appointed by the Credit
Parties as pledgeholder for the Lender and, upon the acceleration of the Loans
in accordance with Article 7 hereof, each such pledgeholder is hereby authorized
(to the fullest extent permitted by Applicable Law) to sell all or any portion
of the Collateral upon the order and direction of the Lender, and each Credit
Party hereby waives any and all claims, for damages or otherwise, for any action
taken by such pledgeholder in accordance with the terms of the UCC not otherwise
waived hereunder. In any action hereunder, the Lender shall be entitled if
permitted by Applicable Law to the appointment of a receiver without notice, to
take possession of all or any portion of the Collateral and to exercise such
powers as the court shall confer upon the receiver. Notwithstanding the
foregoing, upon the occurrence of an Event of Default, and during the
continuation of such Event of Default, the Lender shall be entitled to apply,
without prior notice to the Credit Parties, any cash or cash items constituting
Collateral in the possession of the Lender to payment of the Obligations.
SECTION 8.7. Application of Proceeds on Default. During the continuance
of an Event of Default, the balances in the Collection Account(s), or in any
account of any Credit Party with the Lender, all other income on the Collateral,
and all proceeds from any sale of the Collateral pursuant hereto shall be
applied first toward payment of the reasonable out-of-pocket costs and expenses
paid or incurred by the Lender in enforcing this Credit Agreement, in realizing
on or protecting any Collateral and in enforcing or collecting any Obligations
or any Guaranty thereof, including, without limitation, court costs and the
reasonable attorney's fees and expenses incurred by the Lender, and then to the
payment in full of the Obligations in such order as determined by the Lender,
provided, however, that, the Lender may in its discretion apply funds comprising
the Collateral to pay the cost (i) of completing any item of Product owned in
whole or in part by any Credit Party in any stage of production and (ii) of
making delivery to the
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distributors of such item of Product. Any amounts remaining after such
indefeasible payment in full shall be remitted to the appropriate Credit Party
or as a court of competent jurisdiction may otherwise direct.
SECTION 8.8. Power of Attorney. Each Credit Party does hereby
irrevocably make, constitute and appoint the Lender or any of its officers or
designees its true and lawful attorney-in-fact with full power in the name of
the Lender or any Credit Party, (a) after the acceleration of the Loans in
accordance with Article 7 hereof, to receive, open and dispose of all mail
addressed to any Credit Party, and to endorse any notes, checks, drafts, money
orders or other evidences of payment relating to the Collateral that may come
into the possession of the Lender with full power and right to cause the mail of
such Persons to be transferred to the Lender's own offices or otherwise, and to
do any and all other acts necessary or proper to carry out the intent of this
Credit Agreement and the grant of the security interests hereunder and under the
Fundamental Documents, and each Credit Party hereby ratifies and confirms all
that the Lender or its substitutes shall properly do by virtue hereof; (b) upon
the occurrence of an Event of Default which is not waived in writing by the
Lender, (i) to enforce all of each Credit Party's rights under and pursuant to
all agreements with respect to the Collateral, all for the sole benefit of the
Lender and to enter into such other agreements as may be necessary or
appropriate in the judgment of the Lender to complete the production,
distribution or exploitation of any item of Product which is included in the
Collateral, (ii) to enter into and perform such agreements as may be necessary
in order to carry out the terms, covenants and conditions of the Fundamental
Documents that are required to be observed or performed by any Credit Party,
(iii) to execute such other and further mortgages, pledges and assignments of
the Collateral, and related instruments or agreements, as the Lender may
reasonably require for the purpose of perfecting, protecting, maintaining or
enforcing the security interests granted to the Lender hereunder, and (iv) to do
any and all other things necessary or proper to carry out the intention of this
Credit Agreement and the grant of the security interests hereunder and under the
other Fundamental Documents. The Credit Parties hereby ratify and confirm in
advance all that the Lender as such attorney-in-fact or its substitutes shall
properly do by virtue of this power of attorney. In the event the Lender
exercises the power of attorney granted herein, the Lender shall, concurrently
with such exercise, provide written notice to the Borrower and the Lender in
accordance with Section 12.1.
SECTION 8.9. Financing Statements, Direct Payments. Each Credit Party
hereby authorizes the Lender to file UCC financing statements and any amendments
thereto or continuations thereof, any Copyright Security Agreement, any
Copyright Security Agreement Supplement, and any other appropriate security
documents or instruments and to give any notices necessary or desirable to
perfect the Lien of the Lender on the Collateral, in all cases without the
signatures of any Credit Party or to execute such items as attorney-in-fact for
any Credit Party. Each Credit Party further authorizes the Lender upon the
occurrence of an Event of Default, and during the continuation of such Event of
Default, to notify any account debtors that all sums payable to any Credit Party
relating to the Collateral shall be paid directly to the Lender.
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SECTION 8.10. Further Assurances. Upon the reasonable request of the
Lender, each Credit Party hereby agrees to duly and promptly execute and
deliver, or cause to be duly executed and delivered, at the cost and expense of
the Credit Parties, such further instruments as may be necessary or proper, in
the judgment of the Lender, to carry out the provisions and purposes of this
Article 8, necessary, in the judgment of the Lender, to perfect and preserve the
Liens of the Lender hereunder and under the Fundamental Documents, and in the
Collateral or any portion thereof.
SECTION 8.11. Termination. The security interests granted under this
Article 8 shall terminate when all the Obligations have been paid in full and
performed and the Commitment shall have terminated and all Letters of Credit
shall have expired or been terminated or canceled. Upon request by the Credit
Parties (and at the sole expense of the Credit Parties) after such termination,
the Lender will take all reasonable action and do all things reasonably
necessary, including executing UCC terminations, Pledgeholder Agreement
terminations, termination letters to account debtors and copyright
reassignments, to release the security interest granted to it hereunder.
SECTION 8.12. Remedies Not Exclusive. The remedies conferred upon or
reserved to the Lender in this Article 8 are intended to be in addition to, and
not in limitation of, any other remedy or remedies available to the Lender.
Without limiting the generality of the foregoing, the Lender shall have all
rights and remedies of a secured creditor under Article 9 of the UCC.
SECTION 8.13. Quiet Enjoyment. The Lender acknowledges that its security
interest hereunder is subject to the rights of Quiet Enjoyment of parties to
Distribution Agreements, license agreements and other similar agreements,
whether existing on the date hereof or hereafter executed. For the purpose
hereof, "Quiet Enjoyment" shall mean in connection with the rights of licensees
under license agreements and distributors under Distribution Agreements, the
Lender's agreement that its rights under this Credit Agreement and the
Fundamental Documents and in the Collateral are subject to the rights of such
parties to distribute, exhibit and/or to exploit the item of Product licensed to
them, and to receive prints or tapes or have access to preprint material or
master tapes in connection therewith and that even if the Lender shall become
the owner of the Collateral in case of an Event of Default, the Lender's
ownership rights shall be subject to the rights of said parties under such
agreements, provided, however, that such licensee or such distributor shall not
be in default under the relevant license agreement or Distribution Agreement
and, provided, further that the Lender shall not be responsible for any
liability or obligation of any Credit Party under any license agreement.
SECTION 8.14. Continuation and Reinstatement. Each Credit Party further
agrees that the security interest granted hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment or any
part thereof, of principal or interest on any Obligation is rescinded or must
otherwise be restored by the Lender upon the bankruptcy or reorganization of any
Credit Party or otherwise.
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9. GUARANTY
SECTION 9.1. Guaranty. (a) Each Corporate Guarantor unconditionally and
irrevocably guarantees to the Lender the due and punctual payment by, and
performance of, the Obligations (including interest accruing on and after the
filing of any petition in bankruptcy or of reorganization of the obligor whether
or not post filing interest is allowed in such proceeding). Each Corporate
Guarantor further agrees that the Obligations may be extended or renewed, in
whole or in part, without notice or further assent from it (except as may be
otherwise required herein), and it will remain bound upon this guaranty
notwithstanding any extension or renewal of any Obligation.
(b) Each Corporate Guarantor waives presentation to, demand for
payment from and protest to, as the case may be, the Credit Parties or any other
Corporate Guarantor of any of the Obligations, and also waives notice of protest
for nonpayment. The obligations of each Corporate Guarantor hereunder shall not
be affected by (i) the failure of the Lender to assert any claim or demand or to
enforce any right or remedy against the Borrower, Corporate Guarantor, any
Individual Guarantor or any other guarantor under the provisions of this Credit
Agreement or any other agreement or otherwise; (ii) any extension or renewal of
any provision hereof or thereof; (iii) the failure of the Lender to obtain the
consent of the Corporate Guarantor with respect to any rescission, waiver,
compromise, acceleration, amendment or modification of any of the terms or
provisions of this Credit Agreement, the Note or of any other agreement; (iv)
the release, exchange, waiver or foreclosure of any security held by the Lender
for the Obligations or any of them; (v) the failure of the Lender to exercise
any right or remedy against any other Corporate Guarantor, any Individual
Guarantor or any other guarantor of the Obligations; or (vi) the release or
substitution of any Corporate Guarantor, any Individual Guarantor or other
guarantor of the Obligations. Without limiting the generality of the foregoing
or any other provision hereof, to the extent permitted by applicable law, each
Corporate Guarantor hereby expressly waives any and all benefits which might
otherwise be available to it under California Civil Code Sections 2799, 2809,
2810, 2815, 2819, 2820, 2821, 2822, 2838, 2839, 2845, 2848, 2849, 2850, 2899 and
3433.
(c) Each Corporate Guarantor further agrees that this Guaranty
constitutes a guaranty of performance and of payment when due and not just of
collection, and waives any right to require that any resort be had by the Lender
to any security held for payment of the Obligations or to any balance of any
deposit, account or credit on the books of the Lender in favor of the Borrower,
any other Corporate Guarantor, any Individual Guarantor or to any other Person.
(d) Each Corporate Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower,
the Corporate Guarantors, the Individual Guarantors and any other guarantors and
any circumstances affecting the ability of the Borrower to perform under this
Credit Agreement.
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(e) Each Corporate Guarantor's obligations under the guaranty shall
not be affected by the genuineness, validity, regularity or enforceability of
the Obligations, the Note or any other instrument evidencing any Obligations, or
by the existence, validity, enforceability, perfection, or extent of any
collateral therefor or by any other circumstance relating to the Obligations
which might otherwise constitute a defense to this Guaranty. The Lender makes no
representation or warranty with respect to any such circumstances and has no
duty or responsibility whatsoever to each Corporate Guarantor in respect to the
management and maintenance of the Obligations or any collateral security for the
Obligations.
SECTION 9.2. No Impairment of Guaranty, etc. The obligations of each
Corporate Guarantor hereunder shall not be subject to any reduction, limitation,
impairment or termination for any reason (except payment of the Obligations),
including, without limitation, any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Obligations. Without limiting the
generality of the foregoing, the obligations of each Corporate Guarantor
hereunder shall not be discharged or impaired or otherwise affected by the
failure of the Lender to assert any claim or demand or to enforce any remedy
under this Credit Agreement or any other agreement, by any waiver or
modification of any provision thereof, by any default, failure or delay, willful
or otherwise, in the performance of the Obligations, or by any other act or
thing or omission or delay to do any other act or thing which may or might in
any manner or to any extent vary the risk of such Corporate Guarantor or would
otherwise operate as a discharge of such Corporate Guarantor as a matter of law,
unless and until the Obligations are paid in full, the Commitments have
terminated and each outstanding Letter of Credit has expired or otherwise been
terminated.
SECTION 9.3. Continuation and Reinstatement, etc. (a) Each Corporate
Guarantor further agrees that its guaranty hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of any Obligation is rescinded or must otherwise be restored by
the Lender upon the bankruptcy or reorganization of Borrower or a Corporate
Guarantor, or otherwise. In furtherance of the provisions of this Article 9, and
not in limitation of any other right which the Lender may have at law or in
equity against the Borrower or a Corporate Guarantor by virtue hereof, upon
failure of the Borrower to pay any Obligation when and as the same shall become
due, whether at maturity, by acceleration, after notice or otherwise, each
Corporate Guarantor hereby promises to and will, upon receipt of written demand
by the Lender, forthwith pay or cause to be paid to the Lender in cash an amount
equal to the unpaid amount of all the Obligations with interest thereon at a
rate of interest equal to the rate specified in Section 2.7(a) hereof, and
thereupon the Lender shall assign such Obligation, together with all security
interests, if any, then held by the Lender in respect of such Obligation, to the
Corporate Guarantors making such payment; such assignment to be subordinate and
junior to the rights of the Lender with regard to amounts payable by the
Borrower in connection with the remaining unpaid Obligations and to be pro tanto
to the extent to which the Obligation in question was discharged by the
Corporate Guarantor or Corporate Guarantors making such payments.
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(b) All rights of the Corporate Guarantors against the Borrower,
arising as a result of the payment by any Corporate Guarantor of any sums to the
Lender or directly to the Lender hereunder by way of right of subrogation or
otherwise shall in all respects be subordinated and junior in right of payment
to, and shall not be exercised by such Corporate Guarantor until and unless, the
prior final and indefeasible payment in full of all the Obligations. If any
amount shall be paid to such Corporate Guarantor for the account of the
Borrower, such amount shall be held in trust for the benefit of the Lender,
segregated from such Corporate Guarantor's own assets, and shall forthwith be
paid to the Lender to be credited and applied to the Obligations, whether
matured or unmatured.
SECTION 9.4. Limitation on Guaranteed Amount etc. Notwithstanding any
other provision of this Article 9, the amount guaranteed by each Corporate
Guarantor hereunder shall be limited to the extent, if any, required so that its
obligations under this Article 9 shall not be subject to avoidance under Section
548 of the Bankruptcy Code or to being set aside or annulled under any
applicable state law relating to fraud on creditors. In determining the
limitations, if any, on the amount of any Corporate Guarantor's obligations
hereunder pursuant to the preceding sentence, it is the intention of the parties
hereto that any rights of subrogation or contribution which such Corporate
Guarantor may have under this Article 9 (or as a result of the operation of
Article 8 with regard to assets of other Credit Parties) or any other agreement
or under Applicable Law shall be taken into account.
10. PLEDGE
SECTION 10.1. Pledge. As security for the Obligations, each Pledgor
hereby pledges, hypothecates, assigns, transfers, sets over and delivers unto
the Lender, a security interest in all Pledged Securities now owned or hereafter
acquired by it. On the Closing Date, the Pledgors shall deliver to the Lender
the definitive instruments representing all Pledged Securities, accompanied by
executed undated stock powers, duly endorsed or executed in blank by the
appropriate Pledgor, and such other instruments or documents as the Lender or
its counsel shall reasonably request.
SECTION 10.2. Covenant. Each Pledgor covenants that as stockholder of
each of its respective Subsidiaries it will not take any action to allow any
additional shares of common stock, preferred stock or other equity securities of
any of its respective Subsidiaries or any securities convertible or exchangeable
into common or preferred stock of such Subsidiaries to be issued, or grant any
options or warrants, unless such securities are pledged to the Lender as
security for the Obligations.
SECTION 10.3. Registration in Nominee Name; Denominations. Upon the
occurrence and during the continuation of an Event of Default, the Lender shall
have the right (in its sole and absolute discretion) to hold the certificates
representing any Pledged Securities (a) in its own name or in the name of its
nominee or (b) in the name of the appropriate Pledgor, endorsed or assigned in
blank or in favor of the Lender. The Lender shall have the right to
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exchange the certificates representing Pledged Securities for certificates of
smaller or larger denominations for any purpose consistent with this Credit
Agreement.
SECTION 10.4. Voting Rights; Dividends; etc. (a) The appropriate Pledgor
shall be entitled to exercise any and all voting and/or consensual rights and
powers accruing to owners of the Pledged Securities or any part thereof for any
purpose not inconsistent with the terms hereof, at all times, except as
expressly provided in (c) below.
(b) Any dividends or distributions of any kind whatsoever (other, so
long as an Event of Default is not continuing, than cash) received by a Pledgor,
whether resulting from a subdivision, combination, or reclassification of the
outstanding capital stock of the issuer or received in exchange for Pledged
Securities or any part thereof or as a result of any merger, consolidation,
acquisition, or other exchange of assets to which the issuer may be a party, or
otherwise, shall be and become part of the Pledged Securities pledged hereunder
and shall immediately be delivered to the Lender to be held subject to the terms
hereof.
(c) Upon the occurrence and during the continuance of an Event of
Default and notice from the Lender of the transfer of such rights to the Lender,
all rights of the Pledgors to exercise the voting and/or consensual rights and
powers and to receive dividends or distributions which it is entitled to
pursuant to this Section 10.4 shall cease, and all such rights shall thereupon
become vested in the Lender, which shall have the sole and exclusive right and
authority to exercise such voting and/or consensual rights and/or receive such
dividends or distributions until such time as such Event of Default has been
cured. All dividends and distributions which are received contrary to the
provisions of this subsection (c) shall be received in trust for the benefit of
the Lender and shall be delivered.
(d) If the Lender shall receive any cash pursuant to Section 10.4(c)
which but for the occurrence of an Event of Default the relevant Pledgor would
be entitled to retain for its own account under Section 10.4(b), then after and
so long as all Events of Default have been cured and only if the Obligations
have not been accelerated, the Lender shall pay over to such Pledgor any such
cash retained by it during the continuance of such Event of Default which has
not been applied to the Obligations pursuant to the terms hereof.
SECTION 10.5. Remedies Upon Default. If the Loans shall have been
accelerated in accordance with Article 7 hereof, the Lender may sell the Pledged
Securities, or any part thereof, at public or private sale or at any broker's
board or on any securities exchange, for cash, upon credit or for future
delivery as the Lender shall deem appropriate subject to the terms hereof or as
otherwise provided in the UCC. The Lender shall be authorized at any such sale
(if it deems it advisable to do so) to restrict to the full extent permitted by
Applicable Law the prospective bidders or purchasers to Persons who will
represent and agree that they are purchasing the Pledged Securities for their
own account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Lender shall have the right
to assign, transfer, and deliver to the purchaser or purchasers thereof the
Pledged Securities so sold. Each such purchaser at any such sale shall hold the
property sold absolutely, free from
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any claim or right on the part of the Pledgors. The Lender shall give ten (10)
days' written notice of its intention to make any such public or private sale,
or sale at any broker's board or on any such securities exchange, or of any
other disposition of the Pledged Securities. Such notice, in the case of public
sale, shall state the time and place for such sale and, in the case of sale at a
broker's board or on a securities exchange, shall state the board or exchange at
which such sale is to be made and the day on which the Pledged Securities, or
portion thereof, will first be offered for sale at such board or exchange. Any
such public sale shall be held at such time or times within ordinary business
hours and at such place or places as the Lender may fix and shall state in the
notice of such sale. At any such sale, the Pledged Securities, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Lender may (in its sole and absolute discretion) determine. The
Lender shall not be obligated to make any sale of the Pledged Securities if it
shall determine not to do so, regardless of the fact that notice of sale of the
Pledged Securities may have been given. The Lender may, without notice or
publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. In case the sale of all or any part of the
Pledged Securities is made on credit or for future delivery, the Pledged
Securities so sold shall be retained by the Lender until the sale price is paid
by the purchaser or purchasers thereof, but the Lender shall not incur any
liability in case any such purchaser or purchasers shall fail to take up and pay
for the Pledged Securities so sold and, in case of any such failure, such
Pledged Securities may be sold again upon like notice. At any sale or sales made
pursuant to this Section 10.5, the Lender may bid for or purchase, free from any
claim or right of whatever kind, including any equity of redemption, of the
Pledgors, any such demand, notice, claim, right or equity being hereby expressly
waived and released, any or all of the Pledged Securities offered for sale, and
may make any payment on the account thereof by using any claim for moneys then
due and payable to the Lender by any Credit Party as a credit against the
purchase price; and the Lender, upon compliance with the terms of sale, may
hold, retain and dispose of the Pledged Securities without further
accountability therefor to the Pledgors or any third party (other than the
Lender). The Lender shall in any such sale make no representations or warranties
with respect to the Pledged Securities or any part thereof, and shall not be
chargeable with any of the obligations or liabilities of the Pledgors with
respect thereto. Each Pledgor hereby agrees (i) it will indemnify and hold the
Lender harmless from and against any and all claims with respect to the Pledged
Securities asserted before the taking of actual possession or control of the
Pledged Securities by the Lender pursuant to this Credit Agreement or arising
out of any act of, or omission to act on the part of, any party prior to such
taking of actual possession or control by the Lender (whether asserted before or
after such taking of possession or control), or arising out of any act on the
part of any Pledgor or Affiliates before or after the commencement of such
actual possession or control by the Lender unless due to Lender's gross
negligence or wilful misconduct and (ii) the Lender shall have no liability or
obligation arising out of any such claim unless due to Lender's gross negligence
or wilful misconduct. As an alternative to exercising the power of sale herein
conferred upon it, the Lender may proceed by a suit or suits at law or in equity
to foreclose upon the Collateral and Pledged Securities under this Credit
Agreement and to sell the Pledged Securities, or any portion thereof, pursuant
to a judgment or decree of a court or courts having competent jurisdiction.
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SECTION 10.6. Application of Proceeds of Sale and Cash. The proceeds of
sale of the Pledged Securities sold pursuant to Section 10.5 hereof shall be
applied by the Lender as follows:
(i) to the payment of all reasonable out-of-pocket costs and
expenses paid or incurred by the Lender in connection with such sale, including,
without limitation, all court costs and the reasonable fees and expenses of
counsel for the Lender in connection therewith, and the payment of all
reasonable out-of-pocket costs and expenses paid or incurred by the Lender in
enforcing this Credit Agreement, in realizing or protecting any Collateral and
in enforcing or collecting any Obligations or any Guaranty thereof, including,
without limitation, court costs and the reasonable attorney's fees and expenses
incurred by the Lender in connection therewith; and
(ii) to the payment in full of the Obligations in such order
as determined by the Lender;
provided, however, that the Lender may in its discretion apply funds comprising
the Collateral to pay the cost (i) of completing any item of Product owned in
whole or in part by any Credit Party in any stage of production and (ii) of
making delivery to the distributors of such item of Product. Any amounts
remaining after such indefeasible payment in full shall be remitted to the
appropriate Pledgor, or as a court of competent jurisdiction may otherwise
direct.
SECTION 10.7. Securities Act, etc. In view of the position of each
Pledgor in relation to the Pledged Securities pledged by it, or because of other
present or future circumstances, a question may arise under the Securities Act
of 1933, as amended, as now or hereafter in effect, or any similar statute
hereafter enacted analogous in purpose or effect (such Act and any such similar
statute as from time to time in effect being hereinafter called the "Federal
Securities Laws"), with respect to any disposition of the Pledged Securities
permitted hereunder, each Pledgor understands that compliance with the Federal
Securities Laws may very strictly limit the course of conduct of the Lender if
the Lender were to attempt to dispose of all or any part of the Pledged
Securities, and may also limit the extent to which or the manner in which any
subsequent transferee of any Pledged Securities may dispose of the same.
Similarly, there may be other legal restrictions or limitations affecting the
Lender in any attempt to dispose of all or any part of the Pledged Securities
under applicable Blue Sky or other state securities laws, or similar laws
analogous in purpose or effect. Under Applicable Law, in the absence of an
Agreement to the contrary, the Lender may perhaps be held to have certain
general duties and obligations to the Pledgors to make some effort towards
obtaining a fair price even though the Obligations may be discharged or reduced
by the proceeds of a sale at a lesser price. Each Pledgor waives to the fullest
extent permitted by Applicable Law any such general duty or obligation to it,
and the Pledgors and/or the Credit Parties will not attempt to hold the Lender
responsible for selling all or any part of the Pledged Securities at an
inadequate price; provided that the Lender, in good faith, shall have obtained
three bids for the purchase of all or part of the Pledged Securities and the
Lender shall have accepted the highest offer of such three bids.
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SECTION 10.8. Continuation and Reinstatement. Each Pledgor further
agrees that its pledge hereunder shall continue to be effective or be
reinstated, as the case may be, if at any time payment, or any part thereof, of
principal of or interest on any Obligation is rescinded or must otherwise be
restored by the Lender upon the bankruptcy or reorganization of any Pledgor or
otherwise.
SECTION 10.9. Termination. The pledge referenced herein shall terminate
when all of the Obligations shall have been paid in full and the Commitment
shall have terminated, and all Letters of Credit shall have expired or been
terminated or cancelled, at which time the Lender shall assign and deliver to
the appropriate Pledgor, or to such Person or Persons as such Pledgor shall
designate, against receipt, such of the Pledged Securities (if any) as shall not
have been sold or otherwise applied by the Lender pursuant to the terms hereof
and shall still be held by it hereunder, together with appropriate instruments
of reassignment and release. Any such reassignment shall be free and clear of
all Liens, arising by, under or through the Lender but shall otherwise be
without recourse upon or warranty by the Lender and at the expense of the
Pledgors.
11. [RESERVED]
12. MISCELLANEOUS
SECTION 12.1. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered or mailed (or in the case of
facsimile communication, if by telegram, delivered to the telegraph company and,
if by telex, graphic scanning or other telegraphic or facsimile communications
equipment of the sending party hereto, delivered by such equipment) addressed,
if to the Lender to it at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇ III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase
Securities Inc., ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ or if to any
Credit Party at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn:
▇▇▇▇▇▇ ▇▇▇▇▇▇, Esq. and ▇▇▇▇▇▇ Lighstone, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ or such
other address as such party may from time to time designate by giving written
notice to the other parties hereunder. Any failure of the Lender giving notice
pursuant to this Section 12.1, to provide a courtesy copy to a party as provided
herein, shall not affect the validity of such notice. All notices and other
communications given to any party hereto in accordance with the provisions of
this Credit Agreement shall be deemed to have been given on the fifth Business
Day after the date when sent by registered or certified mail, postage prepaid,
return receipt requested, if by mail, or when delivered to the telegraph
company, charges prepaid, if by telegram, or upon receipt by such party, if by
any telegraphic or facsimile communications equipment, in each case addressed to
such party as provided in this Section 12.1 or in accordance with the latest
unrevoked written direction from such party.
SECTION 12.2. Survival of Agreement, Representations and Warranties,
etc. All warranties, representations and covenants made by any of the Credit
Parties herein or in any certificate or other instrument delivered by it or on
its behalf in connection with this Credit
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Agreement shall be considered to have been relied upon by the Lender and, except
for any terminations, amendments, modifications or waivers thereof in accordance
with the terms hereof, shall survive the making of the Loans and issuance of the
Letters of Credit herein contemplated and the execution and delivery to the
Lender of the Note regardless of any investigation made by the Lender and shall
continue in full force and effect so long as any amount due or to become due
hereunder is outstanding and unpaid and so long as any Letter of Credit remains
outstanding and so long as the Commitment has not been terminated. All
statements in any such certificate or other instrument shall constitute
representations and warranties by the Credit Parties hereunder.
SECTION 12.3. Successors and Assigns; Loan Sales; Participations. (a)
Whenever in this Credit Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns of such party;
provided, however, that the Borrower may not assign its rights hereunder without
the prior written consent of the Lender, and all covenants, promises and
agreements by or on behalf of the Borrower which are contained in this Credit
Agreement shall bind and inure to the benefit of the successors and assigns of
all such parties.
(b) The Lender may, with the consent of the Borrower (such consent
not to be unreasonably withheld), assign to one or more banks or other entities,
all or a portion of its interests, rights and obligations under this Credit
Agreement (including, without limitation, all or a portion of its Commitment and
the same portion of the Loans at the time owing to it and the Note held by it).
The Lender and such assignee shall execute appropriate documentation (i)
evidencing such assignment, which documentation shall set forth the respective
rights and obligations of the Lender and such assignee and (ii) to the extent
The Chase Manhattan Bank shall retain a portion of the Commitment, appointing
The Chase Manhattan Bank as agent for the Lender and such assignee(s). Upon the
effectiveness of such assignment, the assignee thereunder shall become a party
to this Credit Agreement.
(c) Once there has been an assignment by the Lender pursuant to this
Section 12.3, the Lender shall maintain at its address at which notices are to
be given to it pursuant to Section 12.1 hereof, a register for the recordation
of the names and addresses of the assignees of the Lender hereunder and the
commitments of, and principal amount of the Loans owing to, each such assignee
from time to time (the "Register"). The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower and any such
assignee may treat each Person whose name is recorded in the Register as an
assignee of the Lender hereunder for all purposes of the Fundamental Documents.
The Register shall be available for inspection by the Borrower or any such
assignee at any reasonable time and from time to time upon reasonable prior
notice.
(d) The Lender shall give prompt written notice to the Borrower of
each assignment made hereunder. Within five (5) Business Days after receipt of
any such notice, the Borrower, at its own expense, shall execute and deliver to
the Lender in exchange for the Note surrendered by the Lender to the Borrower,
new Notes to the order of the assignee of the Lender and the Lender in amounts
equal to the respective Commitments held by each of them after giving effect to
the applicable assignment. Such new Notes shall be in an aggregate principal
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amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the date of the surrendered Notes and shall otherwise be in
substantially the form of Exhibit A hereto. In addition the Borrower will
promptly, at its own expense, execute such amendments to the Fundamental
Documents to which it is a party and such additional documents, and take such
other actions as the Lender or the assignee of the Lender may reasonably request
in order to give such assignee of the Lender the full benefit of the Liens
contemplated by the Fundamental Documents.
(e) The Lender may, without the consent of the Borrower, sell
participations to one or more banks or other entities in all or a portion of its
rights and obligations under this Credit Agreement (including, without
limitation, all or a portion of its Commitment, the Loans owing to it and the
Note held by it); provided, however, that (i) the Lender's obligations under
this Credit Agreement shall remain unchanged, (ii) such participant shall not be
granted any voting rights under this Credit Agreement, except with respect to
proposed changes to interest rates, amounts of Commitments, maturity of any
Loans, release of all or substantially all the Collateral and fees (as
applicable to such participant), (iii) the Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iv) the participating banks or other entities shall be entitled to the cost
protection provisions contained in Sections 2.9(b), 2.10 and 2.14 hereof;
provided, that the aggregate amount that the Borrower shall be obligated to pay
to the Lender (for the benefit of itself and any participants) pursuant to such
provisions shall be limited to the amount to which the Lender shall be entitled
to receive pursuant to such provisions and (v) the Borrower shall continue to
deal solely and directly with the Lender in connection with the Lender's rights
and obligations under this Credit Agreement.
(f) The Lender may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
12.3, disclose to the assignee or participant or proposed assignee or
participant, any information relating to the Borrower furnished to the Lender by
or on behalf of the Borrower; provided that prior to any such disclosure, each
such assignee or participant or proposed assignee or participant shall agree (by
executing a confidentiality letter) to preserve the confidentiality of any
confidential information relating to the Borrower received from the Lender to
the same extent as the Lender as set forth in Section 12.16 hereof.
(g) The Borrower consents that the Lender may at any time and from
time to time pledge or otherwise grant a security interest in any Loan or in any
Note evidencing any Loan (or any part thereof) to any Federal Reserve Bank.
SECTION 12.4. Expenses; Documentary Taxes. Whether or not the
transactions hereby contemplated shall be consummated, the Borrower agrees to
pay all reasonable out-of-pocket expenses incurred by the Lender in connection
with performance of due diligence by the Lender in connection with the
transactions hereby contemplated and the preparation, execution, delivery,
waiver or modification and administration of this Credit Agreement and any other
documentation contemplated hereby, the Note and the making of the Loans and the
Letters of Credit, including but not limited to any internally allocated audit
costs, the reasonable fees and
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disbursements of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel for the Lender and any
other counsel that the Lender shall retain, reasonable fees and expenses of
technical or other consultants engaged by the Lender. Such payments shall be
made on the date of execution of this Credit Agreement and thereafter on demand.
In addition, the Borrower agrees to pay all reasonable out-of-pocket expenses
incurred by the Lender in the enforcement or protection of the rights of the
Lender in connection with this Credit Agreement, the Note or the Letters of
Credit, and with respect to any action which may be instituted by any Person
other than the Credit Parties against the Lender in respect of the foregoing, or
as a result of any transaction, action or non-action arising from the foregoing,
including but not limited to the reasonable fees and disbursements of any
counsel for the Lender (but excluding any such expenses to the extent incurred
by reason of the gross negligence or wilful misconduct of the Lender). Such
payments shall be made on demand after the date of execution of this Credit
Agreement. The Borrower agrees that it shall indemnify the Lender from and hold
it harmless against any documentary taxes, assessments or charges made by any
Governmental Authority by reason of the execution and delivery of this Credit
Agreement, the Note or the issuance of Letters of Credit. The obligations of the
Borrower under this Section 12.4 shall survive the termination of this Credit
Agreement and/or the payment of the Loans and/or the expiration of the Letters
of Credit.
SECTION 12.5. Indemnification of the Lender. The Borrower agrees (a) to
indemnify and hold harmless the Lender and its directors, officers, employees,
trustees and agents (to the full extent permitted by law) from and against any
and all claims, demands, losses, judgments and liabilities (including
liabilities for penalties) of whatsoever nature, and (b) to pay to the Lender an
amount equal to the amount of all costs and expenses, including reasonable legal
fees and disbursements, in each case arising out of or resulting from any
litigation, investigation or other proceedings relating to the Collateral, this
Credit Agreement, the Copyright Security Agreement, the Pledgeholder Agreements
and the Letters of Credit, the making of the Loans, any attempt to audit,
inspect, protect or sell the Collateral, or the administration and enforcement
or exercise of any right or remedy granted to the Lender hereunder or thereunder
but excluding therefrom all claims, demands, losses, judgments, liabilities,
costs and expenses arising out of or resulting from (i) the gross negligence or
willful misconduct of the Lender and (ii) litigation between the Borrower and
the Lender in connection with the Fundamental Documents or in any way relating
to the transactions contemplated hereby if, after final non-appealable judgment,
the Lender is not the prevailing party in such litigation. The foregoing
indemnity agreement includes any reasonable costs incurred by the Lender in
connection with any action or proceeding which may be instituted in respect of
the foregoing by the Lender or by any other Person either against the Lender or
in connection with which any officer, director, agent or employee of the Lender
is called as a witness or deponent, including, but not limited to, the
reasonable fees and disbursements of ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP, counsel to the
Lender and any out-of-pocket costs incurred by the Lender in appearing as a
witness or in otherwise complying with legal process served upon them. In no
event shall the Lender be liable to the Borrower for any matter or thing in
connection with this Credit Agreement other than to make Loans and account for
moneys actually received by them in accordance with the terms hereof.
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Whenever the provisions of this Credit Agreement or any other
Fundamental Document provide that, if any Credit Party shall fail to do any act
or thing which it has covenanted to do hereunder or any representation or
warranty of any of the Credit Parties shall be breached, the Lender may (but
shall not be obligated to) do the same or cause it to be done or remedy any such
breach and if the Lender does the same or causes it to be done, there shall be
added to the Obligations hereunder the cost or expense incurred by the Lender in
so doing, and any and all amounts expended by the Lender in taking any such
action shall be repayable to it upon its demand therefor and shall bear interest
at 2% in excess of the Alternate Base Rate from time to time in effect from the
date advanced to the date of repayment.
All indemnities contained in this Section 12.5 shall survive the
expiration or earlier termination of this Credit Agreement and shall inure to
the benefit of any Person who was a Lender notwithstanding such Person's
assignment of all its Loans and Commitment.
SECTION 12.6. CHOICE OF LAW. THIS CREDIT AGREEMENT AND THE NOTES SHALL
IN ALL RESPECTS BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WHICH ARE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED
WHOLLY WITHIN SUCH STATE AND, IN THE CASE OF PROVISIONS RELATING TO INTEREST
RATES, ANY APPLICABLE LAW OF THE UNITED STATES OF AMERICA. EACH LETTER OF CREDIT
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR
RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICES FOR DOCUMENTARY CREDITS
(1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 500 (THE
"UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM CUSTOMS, THE
LAWS OF THE STATE OF NEW YORK.
SECTION 12.7. WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, EACH CREDIT PARTY HEREBY WAIVES, AND
COVENANTS THAT IT WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
CREDIT AGREEMENT OR THE SUBJECT MATTER HEREOF OR ANY FUNDAMENTAL DOCUMENT, IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR
TORT OR OTHERWISE. EACH CREDIT PARTY ACKNOWLEDGES THAT IT HAS BEEN INFORMED BY
THE LENDER THAT THE PROVISIONS OF THIS SECTION CONSTITUTE A MATERIAL INDUCEMENT
UPON WHICH THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN ENTERING INTO THIS
CREDIT AGREEMENT AND ANY OTHER FUNDAMENTAL DOCUMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 12.7 WITH ANY
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COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE CREDIT PARTIES TO THE WAIVER OF
THEIR RIGHTS TO TRIAL BY JURY.
SECTION 12.8. No Waiver. No failure on the part of the Lender to
exercise, and no delay in exercising, any right, power or remedy hereunder,
under the Note or any other Fundamental Document or with regards to Letters of
Credit shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law.
SECTION 12.9. Extension of Payment Date. Should any payment of principal
of or interest on the Note or any other amount due hereunder become due and
payable on a day other than a Business Day, the due date of such payment thereof
shall be extended to the next succeeding Business Day and, in the case of
principal, interest shall be payable thereon at the rate herein specified during
such extension.
SECTION 12.10. Amendments, etc. No modification, amendment or waiver of
any provision of this Credit Agreement, and no consent to any departure by the
Credit Parties herefrom, shall in any event be effective unless the same shall
be in writing and signed by the Lender and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on any of the Credit Parties shall entitle such Credit Party
to any other or further notice or demand in the same, similar or other
circumstances. Each holder of a Note shall be bound by any amendment,
modification, waiver or consent authorized as provided herein, whether or not a
Note shall have been marked to indicate such amendment, modification, waiver or
consent and any consent by any holder of a Note shall bind any Person
subsequently acquiring a Note, whether or not a Note is so marked.
SECTION 12.11. Severability. Any provision of this Credit Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
SECTION 12.12. SERVICE OF PROCESS. EACH CREDIT PARTY (EACH A "SUBMITTING
PARTY") HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF
THE STATE OF NEW YORK AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSES OF ANY SUIT, ACTION
OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS CREDIT AGREEMENT
(INCLUDING, BUT NOT LIMITED TO THE LETTERS OF CREDIT) OR THE SUBJECT MATTER
HEREOF BROUGHT BY THE LENDER OR ANY OF ITS SUCCESSORS OR ASSIGNS IN EITHER OF
THE ABOVE-REFERENCED FORUMS AT THE SOLE OPTION OF THE LENDER. EACH SUBMITTING
PARTY TO THE EXTENT PERMITTED BY APPLICABLE LAW (A)
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HEREBY WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE, OR
OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH COURTS, ANY
CLAIM THAT IT IS NOT SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED
COURTS, THAT ITS PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT
THE SUIT, ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE
VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER OR THAT THIS CREDIT
AGREEMENT OR THE SUBJECT MATTER HEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT,
(B) HEREBY WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING
INSTITUTED BY THE LENDER IN STATE COURT TO FEDERAL COURT AND (C) HEREBY WAIVES
THE RIGHT TO ASSERT IN ANY SUCH ACTION, SUIT OR PROCEEDING ANY OFFSETS OR
COUNTERCLAIMS EXCEPT COUNTERCLAIMS THAT ARE COMPULSORY OR OTHERWISE ARISE FROM
THE SAME SUBJECT MATTER. THE SUBMITTING PARTY HEREBY CONSENTS TO SERVICE OF
PROCESS BY MAIL AT ITS ADDRESS TO WHICH NOTICES ARE TO BE GIVEN PURSUANT TO
SECTION 12.1 HEREOF. THE SUBMITTING PARTY AGREES THAT ITS SUBMISSION TO
JURISDICTION AND CONSENT TO SERVICE OF PROCESS BY MAIL IS MADE FOR THE EXPRESS
BENEFIT OF THE LENDER. FINAL JUDGMENT AGAINST THE SUBMITTING PARTY IN ANY SUCH
ACTION, SUIT OR PROCEEDING SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER
JURISDICTION (A) BY SUIT, ACTION OR PROCEEDING ON THE JUDGMENT, A CERTIFIED OR
TRUE COPY OF WHICH SHALL BE CONCLUSIVE EVIDENCE OF THE FACT AND THE AMOUNT OF
INDEBTEDNESS OR LIABILITY OF THE SUBMITTING PARTY THEREIN DESCRIBED OR (B) IN
ANY OTHER MANNER PROVIDED BY OR PURSUANT TO THE LAWS OF SUCH OTHER JURISDICTION,
PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT, OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST THE SUBMITTING PARTY OR ANY OF ITS ASSETS IN
ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE WHERE
THE SUBMITTING PARTY OR SUCH ASSETS MAY BE FOUND.
SECTION 12.13. Headings. Section headings used herein and the Table of
Contents are for convenience only and are not to affect the construction of or
be taken into consideration in interpreting this Credit Agreement.
SECTION 12.14. Execution in Counterparts. This Credit Agreement may be
executed in any number of counterparts, each of which shall constitute an
original, but all of which taken together shall constitute one and the same
instrument.
SECTION 12.15. Subordination of Intercompany Advances. (a) Each Credit
Party hereby agrees that any Indebtedness or other intercompany receivables or
advances of any other Credit Party, directly or indirectly, in favor of such
Credit Party of whatever nature at any time outstanding shall be completely
subordinate in right of payment to the prior payment in full
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of the Obligations, and that no payment on any such Indebtedness shall be made
(i) except intercompany receivables and advances permitted pursuant to the terms
hereof may be repaid in the ordinary course of business so long as no Default or
Event of Default, shall have occurred and be continuing and (ii) except as
specifically consented to by the Lender in writing, until the prior payment in
full all Obligations and termination of the Commitment.
(b) In the event that any payment on any such Indebtedness shall be
received by such Credit Party other than as permitted by Section 12.15(a) before
payment in full of all Obligations and termination of the Commitment, such
Credit Party shall receive such payments and hold the same in trust for,
segregate the same from its own assets and shall immediately pay over to, the
Lender all such sums to the extent necessary so that the Lender shall have been
paid all Obligations owed or which may become owing.
SECTION 12.16. Confidentiality. The Lender understands that certain
information furnished to it pursuant to this Agreement will be received by it
prior to the time that such information shall have been made public, and the
Lender hereby agrees that it will keep, and will direct its officers and
employees to keep, all the information provided to it pursuant to this Credit
Agreement confidential prior to its becoming public except that the Lender shall
be permitted to disclose such information (i) to officers, directors, employees,
representatives, agents, auditors, accountants, consultants, advisors, lawyers
and affiliates of the Lender necessary for the administration of this Credit
Agreement, in the ordinary course of business who have been made aware of the
confidential nature of the information; (ii) to prospective assignees or
participants and their respective officers, directors, employees, agents and
representatives in accordance with Section 12.3(h) herein; (iii) as required by
Applicable Law, or pursuant to subpoenas or other legal process, or as requested
by governmental agencies and examiners; (iv) in proceedings to enforce the
Lender's rights and remedies hereunder or under any other Fundamental Document
or in any proceeding against the Lender in connection with this Credit Agreement
or under any other Fundamental Document or the transactions contemplated
hereunder; (v) to the extent such information (A) becomes publicly available
other than as a result of a breach of this Credit Agreement or (B) becomes
available to the Lender or a participant on a non-confidential basis, not in
breach of any agreement or other obligation to Borrower, from a source other
than Borrower; or (vi) to the extent Borrower shall have consented to such
disclosure in writing.
SECTION 12.17. Entire Agreement. This Credit Agreement represents the
entire agreement of the parties with regard to the subject matter hereof, and
the terms of any letters and other documentation entered into between any of the
parties hereto (other than the Commitment Letter) prior to the execution of this
Credit Agreement which relate to Loans to be made hereunder shall be replaced by
the terms of this Credit Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Credit Agreement
to be duly executed as of the day and the year first written.
BORROWER:
DOVE ENTERTAINMENT, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President & Chief
Financial Officer
CORPORATE GUARANTORS:
DOVE INTERNATIONAL, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President & Treasurer
DOVE FOUR POINT, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
LENDER:
THE CHASE MANHATTAN BANK
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
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SCHEDULE 1
MEI OWNERSHIP INTEREST
Individual Guarantor Interest
-------------------- --------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 33.57%
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 33.57%
▇▇▇▇▇ ▇▇▇▇▇▇ 14.11%
▇▇▇▇ ▇▇▇▇▇ 7.05%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 11.70%
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SCHEDULE 3.7(a)
CORPORATE GUARANTORS/PLEDGED SECURITIES
NUMBER OF
SHARES OF
JURISDICTION OF AUTHORIZED OUTSTANDING
NAME INCORPORATION CAPITALIZATION CAPITAL STOCK OWNERSHIP OF CAPITAL STOCK
---- --------------- -------------- ------------- --------------------------
Dove Four Point, Inc. Florida 10,000 shares 100 shares 100% by Dove Entertainment, Inc.
common stock common stock
10,000 shares
preferred stock
Dove International, Inc. Calfornia 1,000 shares 100 shares 100% by Dove Entertainment, Inc.
common stock common stock
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SCHEDULE 3.7(b)
BENEFICIAL INTERESTS
NAME OWNERSHIP BY CREDIT PARTY
---- -------------------------
Empire Burbank Studios, Inc. 33% by Dove Four Point, Inc.
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SCHEDULE 3.9
FICTITIOUS NAMES
Dove*
Dove Entertainment*
Dove Four Point*
Dove International*
Four Point
Dove Books*
Dove Audio*
Dove Television*
Dove Frontlist
Audio Select
Dove Books on Tape
Dove Kids
Olive Branch
Dove Pictures, Inc.
*Names with an asterisk are names currently used by the Credit Parties.
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SCHEDULE 3.11
PRINCIPAL EXECUTIVE OFFICE/
LOCATION OF COLLATERAL/FILING OFFICES
Chief Executive Office and office ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
where "located" for purposes of UCC: ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dove Four Point, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dove International, Inc. ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Places where records of Collateral ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
are regularly kept: ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Places where goods included in the ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Collateral are regularly kept: ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
International Cine Service, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Bonded Archives
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Penguin USA Returns
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Laser Pacific Media Corp.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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American Direct Mail
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
GES Exposition Services
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇ Productions Services, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Keep It Self Storage
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Select Storage
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
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SCHEDULE 3.12
LITIGATION
1. In August 1993, the trial court confirmed an arbitration award in favor of
the Borrower, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ and against ▇▇▇▇▇▇ ▇▇▇▇▇ and
Sharmhill Productions in the approximate amount of $4.5 million (plus
interest accruing thereon from September 1992 and attorney's fees)
relating to the film "Morning Glory." In March 1995, defendants appealed
the judgment to the California Court of Appeals. In June 1995, the Court
of Appeals affirmed the judgment, and that judgment is now final. In a
related matter, the Borrower sought to restore certain fraudulent
conveyances that ▇▇. ▇▇▇▇▇ had made. In August 1995, ▇▇. ▇▇▇▇▇ filed for
bankruptcy protection. The United States Trustee is pursuing the
fraudulent conveyance action on behalf of the bankruptcy estate, of which
the Borrower comprises approximately 80%, and the Borrower, ▇▇. ▇▇▇▇▇ and
▇▇. ▇▇▇▇▇▇ are separately pursuing their own adversary proceeding for
conspiracy against ▇▇. ▇▇▇▇▇ and others in the bankruptcy case. The
Borrower is also objecting to ▇▇. ▇▇▇▇▇'▇ discharge in bankruptcy.
2. In February 1993, ▇▇. ▇▇▇▇▇ filed a complaint against the Borrower, ▇▇.
▇▇▇▇▇ and ▇▇. ▇▇▇▇▇▇ entitled ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇ as
assignee of the claims of Sharmhill Productions (B.C.), Inc., a bankrupt
company ▇. ▇▇▇▇ Audio, Inc. et al. (British Columbia Supreme Court,
Vancouver Registry No. C930935) (the "Canadian ▇▇▇▇▇ Action") claiming
that he had been fraudulently induced to enter into the agreement
underlying the arbitration award and seeking as damages the amount of the
judgment.
3. In February 1996, the Borrower was served with a complaint in an action
entitled ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Audio, Inc. etc. et al. (Los Angeles
Superior Court Case No. SC040739) (the "Tourtelot Action"). ▇▇. ▇▇▇▇▇▇▇▇▇
seeks in excess of a million dollars in damages claiming that he had an
oral agreement with the Company to write a book that the Company would
publish, and that information he provided to the Company was used in
another book published by the Company, "Legacy of Deception." ▇▇.
▇▇▇▇▇▇▇▇▇ alleged causes of action for breach or oral contract, fraud,
suppression of fact, breach of the implied covenant of good faith and fair
dealing, breach of fiduciary duty, infringement of common law copyright,
conversion, conspiracy and accounting. The Company successfully removed
the action to the United States District Court for the Central District of
California, and successfully moved to have the claims for infringement of
common law copyright, breach of fiduciary duty, conversion, conspiracy and
accounting dismissed. The Tourtelot Action was then remanded to the Los
Angeles Superior Court, which has permitted ▇▇. ▇▇▇▇▇▇▇▇▇ to pursue claims
for breach of oral contract, fraud, suppression of fact, breach of the
implied covenant of good faith and fair dealing, breach of fiduciary duty,
conversion, conspiracy and quantum merit.
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4. In March 1996, the Company was served with a complaint in an action
entitled ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ▇. ▇▇▇▇ Audio, et al. (Los Angeles Superior
Court Case No. BC145501) (the "Datig Action"). The Datig Action was
brought by a contributor to, and relates to, the book "You'll Never Make
Love In This Town Again." The Datig complaint sought in excess of a
million dollars in monetary damages. In October 1996, the Company obtained
a judgment of dismissal of the entire Datig Action, which judgment also
awarded the Company its attorney's fees and costs in defending the matter.
Thereafter, the Company sued ▇▇. ▇▇▇▇▇ for malicious prosecution. ▇▇.
▇▇▇▇▇, however, has appealed the judgment.
5. In June 1996, the Company was served with a complaint in an action
entitled ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ etc. et al. (Los Angeles Superior Court
Cast No. BC152129) (the "Ghalayini Action"). The complaint alleges among
other things: (i) breach of employment contract against Four Point
Entertainment, Inc. ("Four Point") due to termination of ▇▇. ▇▇▇▇▇▇▇▇▇'▇
employment without good cause, adequate notice or opportunity to cure any
alleged breaches and (ii) fraud in the defendants allegedly never intended
to honor the terms of the employment agreement. The complaint seeks
damages under the employment agreement of not less than $900,000, loss of
future earnings estimated at $20,000,000 and damage to his reputation,
mental and emotional distress, punitive damages and attorney's fees.
On the same day, the Company filed an action against ▇▇. ▇▇▇▇▇▇▇▇▇ in the Los
Angeles Superior Court alleging, among other things, that (i) Ghalayini breached
his fiduciary duty to the Company by diverting corporate assets to pay his
personal expenses, (ii) that in order to induce the Company into closing the
Four Point acquisition, ▇▇. ▇▇▇▇▇▇▇▇▇ made false representations, including
misrepresenting the tangible shareholder's equity of Four Point as of the
closing, diverted production and other funds and held checks previously drawn to
pay accounts payable in order to meet a closing condition that outstanding bank
debt be below a specified level, and that ▇▇. ▇▇▇▇▇▇▇▇▇ made false
representations to induce Dove Four Point to enter into his employment
agreement.
In May 1997, the Company was served with a complaint in a related action
entitled ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Audio, Inc., et al. (Los Angeles Superior
Court Case No. BC170340) (the "Ghalayini Defamation Action"). The Complaint
alleges that ▇▇. ▇▇▇▇▇▇▇▇▇ was defamed at a Company shareholders meeting and
seeks damages accorded to proof.
In September 1997, the Company entered into an agreement with ▇▇. ▇▇▇▇▇▇▇▇▇
providing for settlement of all claims by the Company against ▇▇. ▇▇▇▇▇▇▇▇▇ and
settlement of all claims by ▇▇. ▇▇▇▇▇▇▇▇▇ against the Company. The settlement
agreement provides for the Company to issue 66,667 shares of common stock to ▇▇.
▇▇▇▇▇▇▇▇▇.
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6. In July 1996, the Company was served with a complaint in an action
entitled ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Audio
(U.S. District Court, Central District of California Cast No. 96-4073
RSWL) (the "▇▇▇▇▇▇▇ Action"). The Frankles claim to be the authors of
"You'll Never Make Love In This Town Again," and have alleged claims for
copyright infringement and fraud. The Frankles' application for a
preliminary injunction was denied because they could not demonstrate a
likelihood of success on the merits of their claims.
7. In January 1997, the Company was served with a complaint in an action
entitled ▇▇▇▇▇ ▇. ▇▇▇▇ (Los Angeles Superior Court Case No. BC160871) (the
"Greer Action"). ▇▇. ▇▇▇▇▇ is another contributor to the book "You'll
Never Make Love In This Town Again" and has sought damages in excess of
one million dollars alleging causes of action for breach of contract,
breach of the implied covenant of good faith and fair dealing, breach of
fiduciary duty, fraud, imposition of constructive trust and an accounting
recession, declamatory relief, conspiracy, unfair competition, and false
advertising.
8. In May 1997, the Company was served with a complaint in an action entitled
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ (Los Angeles Superior Court Case No. BC171355)
(the "Raskoff Action"). ▇▇. ▇▇▇▇▇▇▇ is a former employee of Dove Four
Point. The complaint seeks unspecified damages and other relief for breach
of ▇▇. ▇▇▇▇▇▇▇'▇ alleged employment contract, breach of the implied
covenant of good faith and fair dealing, breach of implied-in-fact
contract, promissory estoppel, and fraudulent inducement. The complaint
also seeks an injunction requiring that ▇▇. ▇▇▇▇▇▇▇ receive producer
credit with respect to the television program entitled "Unwed Father" and
other unnamed projects.
9. In June 1997, the Company was served with a complaint in an action
entitled ▇▇▇▇▇▇▇ ▇▇▇▇ v. Penguin USA Inc., et al. (New York Superior Court
Case No. 97-11143) (the "Bass Action"). The complaint alleges among other
things that ▇▇. ▇▇▇▇▇'▇ contribution to the book "You'll Never Make Love
In This Town Again" defames ▇▇. ▇▇▇▇ and violates his rights of publicity
under New York statutes. The complaint seeks damages of $70,000 for
defamation and $20,000,000 for violation of the New York right of
publicity statutes and an injunction taking the book out of circulation
and prohibiting the use of ▇▇. ▇▇▇▇' name. As a result of the Bass Action,
the Company has brought a cross-complaint against ▇▇. ▇▇▇▇▇ in the Greer
Action.
10. In July 1997, the ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ (the "Former
Principals") commenced an arbitration against the Company. In their
arbitration demand, the Former Principals claim that they are owed in
excess of $1 million by the Company relating to the motion picture
entitled "Morning Glory." The Former Principals claim that they are also
entitled to the repayment of certain deferred amounts for producing and
acting services rendered by them in connection with "Morning Glory" and to
50% of the profits. They claim that a director of the Company, ▇▇▇▇▇▇
▇▇▇▇▇▇, is entitled to
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the other 50% of the profits (although ▇▇. ▇▇▇▇▇▇'▇ claim is not the
subject of any present proceeding). The Former Principals have also
asserted that from any recovery of a judgment confirming an arbitration
award against ▇▇▇▇▇▇ ▇▇▇▇▇ and/or Sharmhill Productions relating to
"Morning Glory" (the "▇▇▇▇▇ Judgment") they are entitled to receive $1
million, as well as the deferred amounts and 50% of the profits. Present
management believes it has good and sufficient defenses to the claims,
including, but not limited to the Former Principals' waiver of their
claims that any amounts are owed to them as debt, as profit
participation's or as deferred compensation and that the Company has not
yet recouped its investment in the Picture. The Company has also asked the
arbitrator to determine that the Former Principals are not entitled to any
monies or rights with respect to "Morning Glory," including from the
proceeds of the ▇▇▇▇▇ Judgment.
11. In July 1997, the Former Principals advised the Company that they intend
to refer certain matters arising from the Securities Purchase Agreement
and Termination Agreement to arbitration. The Former Principals have
identified in writing their intention to arbitrate a variety of
miscellaneous claims, including the Company's alleged failure to reimburse
charitable contributions, business expenses, medical expenses, to return
certain personal property, to account for sales with respect to certain
titles, and other matters. They have also suggested to the arbitrator
their intention to seek unpaid consulting fees under the Termination
Agreement. On October 16, 1997, however, the Former Principals filed an
action in the Los Angeles Superior Court (Case No BC179639) for "Breach of
Written Contract; Specific Performance; Temporary Restraining Order,
Preliminary and Permanent Injunctive Relief" which appears to seek damages
for the same claims identified (either in writing or orally) as the Former
Principals' claims in arbitration, as well as for Producer and Executive
Producer fees on "Unwed Father." In this action the Former Principals
claim that, in addition to other damages, they are entitled to accelerate
all payments to become due under the Termination Agreement, in the
aggregate amount of $1,511,823.79 and to the rights to certain titles.
This action appears to have been filed for purposes of obtaining an
attachment.
12. In July 1997, the Company was served with a complaint in an action
entitled ▇▇▇▇ ▇▇▇▇▇▇ ▇. ▇▇▇▇ Entertainment, Inc., et al. (Los Angeles
Superior Court No. BC 174659) (the "Fields Action"). The Fields Action was
brought by an alleged purchaser of Common Stock against the Company and
the Former Principals as a putative class action on behalf of all persons
who acquired Common Stock between July 25, 1995 and August 20, 1996. The
complaint alleges a cause of action for violation of Section 25400(d) of
the California Corporations Code based on the alleged dissemination of
false and misleading statements about, among other things, the success of
the Company's printed book operations, financial results, business
condition and future prospects. The plaintiff seeks unspecified damages
and other relief. The Company has not yet filed a response to the
complaint. While the Company believes it has good and meritorious defenses
against the claim, the
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Company has taken a charge of $150,000 in the quarter ended September 30,
1997 in respect of potential costs associated with the claim. In July
1997, the Company was served with a complaint in an action entitled ▇▇▇▇
▇▇▇▇▇▇ ▇. ▇▇▇▇ Entertainment, Inc., et al. (Los Angeles Superior Court No.
BC174659) (the "Fields Action"). The Fields Action was brought by an
alleged purchaser of Common Stock against the Company and the Former
Principals as a putative class action on behalf of all persons who
acquired Common Stock between July 25, 1995 and August 20, 1996. The
complaint alleges a cause of action for violation of Section 25400(d) of
the California Corporations Code based on the alleged dissemination of
false and misleading statements about, among other things, the success of
the Company's printed book operations, financial results, business
condition and future prospect. The plaintiff seeks unspecified damages and
other relief. In August 1997, an action entitled Global Asset Allocation
Consultants, L.L.C. ▇. ▇▇▇▇ Entertainment, Inc., et al. (Civil Action NO.
97-6253-WDK) (the "Global Asset Action"), was commenced against the
Company and the Former Principals in the United States District Court for
the Central District of California. The Global Asset Action was brought by
an alleged purchaser of Common Stock as a putative class action on behalf
of all persons who acquired Common Stock between July 25, 1995 and August
20, 1996. The complaint alleges a cause of action for violation of Section
10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5
promulgated thereunder based on the conduct at issue in the Fields Action.
The plaintiff seeks unspecified damages and other relief. The Company has
learned that another putative federal securities class action was filed in
the United States District Court for the Central District of California by
an alleged purchase of Common Stock represented by the law firm of ▇▇▇▇▇▇,
DeValerio & ▇▇▇▇▇ LLP (the "▇▇▇▇▇▇ Action"; and collectively with the
Fields Action and the Global Asset Action, the "Securities Actions"). The
complaint is reported be brought on behalf of all persons who acquired
Common Stock between April 15, 1996 and October 10, 1996 and to allege a
cause of action against the Company and certain of its officers for
violation of Section 10(b) of the Securities Exchange Act of 1934 and SEC
Rule 10b-5 promulgated thereunder. To date, the Company has not been
served with the complaints in the Global Asset Action or the ▇▇▇▇▇▇
Action. The Company has not yet filed a response to the complaints in the
Securities Actions. While the Company believes it has good and meritorious
defenses against the claims, the Company took a charge of $150,000 in the
quarter ended June 30, 1997 in respect of potential costs associated with
the claims.
13. In July 1997, the Company was served with a complaint in an action
entitled ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇ Entertainment, Inc., etc. et al. (Los
Angeles Superior Court Case No. BC 175516) (the "▇▇▇▇▇▇▇ Action"). ▇▇.
▇▇▇▇▇▇▇ is a former director and employee of the Company and has sought
damages of approximately $350,000 for breach of contract. ▇▇. ▇▇▇▇▇▇▇
claims that as a result of the Securities Purchase Agreement he was
entitled to declare his employment agreement terminated without cause and
to receive his base salary through September 1999. In September 1997, ▇▇.
▇▇▇▇▇▇▇ obtained a writ of attachment for approximately $350,000 in
respect of
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his claims, for which the Borrower has substituted an undertaking for the
amount of the attachment. The Borrower has filed a cross-complaint against
▇▇. ▇▇▇▇▇▇▇ for breach of fiduciary duty and legal malpractice.
THREATENED LITIGATION
1. ▇▇▇▇▇ ▇▇▇▇▇▇, a director and former officer of the Borrower, has informed
the Borrower that he intends to commence litigation in connection with a
dispute between the Borrower and ▇▇. ▇▇▇▇▇▇ over a purported key
executives severance agreement. The amount of the dispute is currently
approximately $250,000.
2. A ▇▇. ▇.▇. ▇▇▇▇▇▇▇ has informed the Borrower that he may commence
litigation in connection with alleged defamatory statements in the book
"Worse Than He Says He Is."
The Company is a party to various other routine legal proceedings and claims
incidental to its business. The Company believes that the ultimate resolution of
these matters, individually and in the aggregate, will not have a material
adverse effect upon the Company's financial position.
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SCHEDULE 3.17
EXISTING INDEBTEDNESS/MATERIAL AGREEMENTS
(i) Existing Indebtedness
1. Line of Credit pursuant to Loan Agreement, dated as of September 26,
1997, between Dove Entertainment, Inc. and Dove Four Point, Inc., as
Borrowers, and Media Equities International, LLC. TO BE REPAID AT
CLOSING.
2. Loan pursuant to Term Loan Agreement, dated as of August 16, 1996,
between Dove Entertainment, Inc. and Sanwa Bank California. TO BE
REPAID AT CLOSING.
3. Mortgage Note in the amount of $1,800,000 to Asahi Bank of
California (8% interest per annum, maturing on April 2001). This
mortgage note may be extended, renewed or increased to an amount not
to exceed $3.2 million.
4. Auto loan on Mercedes 500 SL.
(ii) Material Joint Venture Agreements
None
(iii) Material Distribution Agreements
1. Letter Agreement, dated July 1, 1994, between Penguin Books USA,
Inc. and Dove Audio, Inc.
2. Letter Agreement, dated as of February 15, 1995 between Buena Vista
Television and Four Point Entertainment re: "Make Me Laugh."
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3. Letter Agreement, dated October 21, 1996, between Discovery
Communications, Inc. and Dove Four Point Entertainment, re:
"Unnatural History."
(iv) Material Contractual Arrangements
1. Stock Purchase Agreement, dated as of March 27, 1997, among Dove
Entertainment, Inc., and the Purchasers named therein and the
following related agreements:
a. Warrant to Purchase Shares of Common Stock of Dove
Entertainment, in favor of Media Equities International, LLC
(1,500,000 shares).
b. Warrant to Purchase Shares of Common Stock of Dove
Entertainment, in favor of Media Equities International LLC
(500,000 shares).
c. Warrant to Purchase Shares of Common Sock of Dove
Entertainment, Inc., in favor of MEI (500,000 shares).
d. Warrant to Purchase Shares of Common Sock of Dove
Entertainment, Inc., in favor of MEI (500,000 shares).
e. Registration Rights Agreement, dated as of March 27, 1997, by
and among Dove Entertainment, Inc., Media Equities
International, LLC, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
f. Pledge Agreement, dated as of March 27, 1997, among ▇▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, Media Equities International, LLC and
Dove Entertainment, Inc.
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g. Shareholders Voting Agreement, dated as of March 27, 1997, by
and between ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, on the one hand,
and Media Equities International, LLC, on the other hand.
h. Escrow Agreement, dated June 10, 1997, by and between Dove
Entertainment, Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
2. Employment Termination Agreement, dated June 10, 1997 among Dove
Entertainment, Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
3. Key Executive Severence Agreement between Dove Entertainment, Inc.
and ▇▇▇▇▇▇ ▇▇▇▇▇▇, dated September 4, 1996.
4. Employment Agreement between Dove Entertainment, Inc. and ▇▇▇ ▇▇▇▇▇▇
dated April 29, 1996.
5. Employment Agreement between Dove Entertainment, Inc. and ▇▇▇▇▇▇
▇▇▇▇▇▇▇, dated September 4, 1996.
6. Dove Four Point, Inc. is a signatory with the Directors Guild of
America.
7. Registration Rights Agreements, between the various purchasers in
the private placement conducted through Whale Securities Co., L.P.
and Dove Audio, Inc. The agreements provide for piggyback
registration rights beginning January 1, 1996 and an automatic
registration on or prior to June 14, 1996.
8. Registration provisions in the Warrant Agreements between Dove
Audio, Inc. and Whale Securities Co., L.P.
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9. Registration Rights Agreement, dated as of April ____, 1996, between
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ Audio, Inc.
10. Registration Rights Agreement, dated as of April ____, 1996, between
▇▇▇▇▇▇ ▇▇▇▇▇▇ and Dove Audio, Inc.
11. Warrant Certificates of Dove Audio, Inc. to ▇▇▇▇▇▇ ▇▇▇▇▇▇ Capital
Group, LLC and others, each dated October 1, 1996.
12. Employment Agreement with ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇.
13. Employment Agreement with ▇▇▇▇ ▇▇▇▇▇▇.
14. Insurance Policies.
15. Agreement and Plan of Merger, made and entered into as of April 12,
1996, by and among Dove Audio, Inc., Dove Four Point, Inc. and Four
Point Entertainment Inc.
16. Stock Option Award Agreement, dated April 1996, by and between Dove
Audio, Inc. and ▇▇▇ ▇▇▇▇▇▇, as amended.
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SCHEDULE 3.21
ENVIRONMENTAL LIABILITIES
Nothing is to be reported on this Schedule 3.21
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SCHEDULE 3.22
OUTSTANDING RIGHTS RE: PLEDGED SECURITIES
Nothing is to be reported on this Schedule 3.22
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SCHEDULE 6.2
EXISTING LIENS
1. First Deed of Trust on ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ in
favor of Asahi Bank of California
2. Mercedes Benz Credit Corporation - security interest in Mercedes Benz 500
SL
3. Lien in favor of Guinness ▇▇▇▇▇ in connection with the film
"Wilde"securing an obligation in the amount of $15,000.
4. Operating Leases:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Motorcars, Inc. - Mercedes 94 C280W
▇▇▇▇▇▇ Infinity - Infinity QX4 Truck
Various operating leases for Apple Computers, photocopiers and telephone
systems.
5. Liens in favor of Individual Guarantors securing amounts paid pursuant to
the Guaranty. Such Liens will be subordinate to the Liens of the Lender.
6. UCC-1 naming Dove International as Debtor and BWE Distribution, Inc.,
covering a security interest in Debtor's rights under the motion picture
"Unwed Father," to be filed.
7. Liens evidenced by the following UCC-1 financing statements:
(a) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Paramount Pictures Corporation
File No.: 9617660715
(b) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Paramount Pictures Corporation
File No.: ▇▇▇▇▇▇▇▇▇▇
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(c) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Paramount Pictures Corporation
File No.: 9625060583
(d) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: ▇▇▇▇▇▇▇ ▇▇▇▇▇
File No.: 9631061125
(e) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Paramount Pictures Corporation
File No.: 9635360269
(f) Where Filed: California Secretary of State
Debtor: Dove International, Inc.
Secured Party: Guinness ▇▇▇▇▇ & Co. Limited
File No.: 9635360521
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SCHEDULE 6.3
GUARANTEES
Nothing is to be reported on this Schedule 6.3
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SCHEDULE 6.4
Dove Four Point, Inc. has a 33% ownership interest in Empire Burbank Studios.
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SCHEDULE 6.23
BANK ACCOUNTS
Nothing is to be reported on this Schedule 6.23
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EXHIBIT B-1
November 10, 1997
The Chase Manhattan Bank, as Lender
under the Credit Agreement referred to below
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Re: Credit, Security, Guaranty and Pledge Agreement, dated as of November 4,
1997 (the "Credit Agreement") among DOVE ENTERTAINMENT, INC., a
California corporation ("Borrower"), the Corporate Guarantors named
therein and THE CHASE MANHATTAN BANK, a New York banking corporation, as
Lender ("Lender)
Ladies and Gentlemen:
We have acted as special counsel to (i) Borrower and (ii) Dove International,
Inc., a California corporation ("DII"), and Dove Foup Point, Inc. a Florida
corporation ("DFP" and, together with DII, the "Corporate Guarantors"), in
connection with the Credit Agreement and the transactions contemplated thereby
(the "Transactions"). This opinion letter is given at the request of Borrower
and the Corporate Guarantors pursuant to Section 4.1(c) of the Credit Agreement.
Capitalized terms not otherwise defined in this opinion letter shall have the
meanings ascribed to them in the Credit Agreement. The term "Collateral", as
used herein shall include the "Pledged Stock", the "copyrights" and the
"collateral", as each such term is hereinafter defined.
We have delivered this opinion letter as counsel admitted to practice in the
States of California, Florida and New York, and we shall not be understood to
have expressed any opinion herein under or with respect to the laws of any
jurisdiction other than the State of New York, the State of California (with
respect to paragraphs 2 (other than the first sentence thereof), 5 and 6 of this
opinion letter), the State of Florida (with respect to paragraph 6 of this
opinion letter) and the Federal laws of the United States of America (with
respect to paragraph 5 of this opinion letter). In addition, except as
specifically set forth in this opinion letter, we are not rendering any opinion
herein as to any legal issue that would be excluded by Section 19 of the Legal
Opinion Accord of the ABA Section of Business Law (1991) were it to govern this
opinion letter.
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In connection with this opinion letter, we have reviewed executed
copies of the following documents:
(i) the Credit Agreement;
(ii) the Note;
(iii) the agreement dated as November 4, 1997 made by Borrower
and the Corporate Guarantors in favor of Lender (the "Copyright Security
Agreement");
(iv) the Uniform Commercial Code Form UCC-1 Financing
Statement to be filed with the Secretary of State of California, naming Borrower
as debtor and Lender as secured party ("Borrower Financing Statement");
(v) the Uniform Commercial Code Form UCC-1 Financing Statement
to be filed with the Secretary of State of California, naming DII as debtor and
Lender as secured party (the "DII Financing Statement");
(vi) the Uniform Commercial Code Form UCC-1 Financing
Statement to be filed with the Secretary of State of California, naming DFP as
debtor and Lender as secured party (the "DFP Financing Statement" and, together
with the Borrower Financing Statement and the DII Financing Statement, the
"Financing Statements");
(vii) the Articles of Incorporation and Bylaws of DFP;
(viii) a good standing certificate issued on October 31, 1997
by the Office of the Secretary of State of the State of Florida with respect to
DFP (the "DFP Florida Good Standing Certificate); and
(ix) a good standing certificate issued on October 31, 1997 by
the Office of the Secretary of State of the State of California with respect to
DFP (the "DFP California Good Standing Certificate and, together with the DFP
Florida Good Standing Certificate, the "DFP Good Standing Certificates").
The documents listed in subparagraphs (i) through (iii) above are hereinafter
sometimes referred to collectively as the "Documents."
We have not participated in the negotiations relating to the Documents
or the Transactions and have undertaken no review or investigation in connection
with the opinions expressed herein other than to read each of the Documents. As
to factual matters relevant to such opinions, we have relied with your
permission solely upon the representations and warranties contained in the
Documents and have not made any
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independent verification thereof. We have made such examinations of law as we
have deemed appropriate in order to render such opinions.
In rendering the opinions set forth herein, we have assumed (a) the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity to authentic originals of all documents
submitted to us as copies; (b) that the Financing Statements have been properly
filed with the California Secretary of State, and that the Copyright Security
Agreement has been properly filed in the United States copyright office within
thirty days after its execution; (c) the legal capacity of each natural person;
(d) that each of Lender and each Credit Party (other than DFP) is a corporation
duly organized and validly existing in good standing under applicable law; (e)
that each Person has all requisite power and authority to execute, deliver and
perform each document executed and delivered by such Person and to do each other
act done or to be done by such Person; (f) the due execution and delivery by
each Person of each document executed and delivered or to be executed and
delivered by such Person; (g) except as specifically set forth in paragraph 1 of
this opinion letter with respect to the Credit Parties, the legality, validity,
binding effect and enforceability against each party thereto of each document
executed and delivered or to be executed and delivered in connection with the
Transactions; (h) that the execution and delivery of each such document do not
breach the certificate or articles of incorporation, by-laws and other
constituent documents of each such party and, except as specifically set forth
in paragraph 3 of this opinion letter, do not violate any law, rule or
regulation applicable to such party or breach any instrument or agreement to
which such party is a party; (i) that all conditions precedent set forth in
Article 4 of the Credit Agreement required as of the Closing Date have been
fully complied with or waived; (j) that Lender has given value, has acted in
good faith without notice of adverse claims or defenses against enforcement of
any rights created by the Documents, has complied with all laws applicable to it
that affect the Transactions or the Documents and has paid all taxes and fees
required to be paid by it in connection therewith; (k) that all statutes,
judicial and administrative decisions and rules and regulations of governmental
agencies constituting the law with respect to which we are rendering opinions
herein are published or otherwise generally accessible; (l) that, with respect
to the Documents or the Transactions, there has been no mutual mistake of fact,
fraud or duress; (m) the constitutionality and validity of all relevant laws,
regulations and governmental actions; (n) that routine procedural matters such
as service of process will be satisfied by the parties seeking to enforce any
right created by the Documents; (o) that the Credit Parties own, free and clear
of any liens or options, the Collateral that they purport to own; and (p) that
the DFP Good Standing Certificates have remained accurate through and including
the date of this opinion letter.
Various issues are addressed in the opinion letter of ▇▇▇▇▇▇ ▇▇▇▇▇▇,
Esq., general counsel of Borrower, a copy of which is attached hereto as Exhibit
A, and we express no opinion with respect to the matters which are addressed in
such opinion letter. To the
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extent any of the opinions expressed therein are relevant to this opinion
letter, we have, with your permission, relied thereon together with and subject
to any and all assumptions, qualifications and limitations expressed therein and
herein which are relevant to those opinions upon which we have relied.
Based upon the foregoing and subject to the exceptions, qualifications,
limitations and other statements contained herein, it is our opinion that:
1. Under New York law, each of the Documents to which a Credit Party is
a party constitutes the legal, valid and binding obligation of such Credit Party
and is enforceable against such Credit Party in accordance with its terms.
2. The Credit Agreement creates in favor of Lender a valid security
interest in that portion of the collateral in which the creation and attachment
of security interests or liens are governed by Article 9 of the New York Uniform
Commercial Code (the "NYUCC"), as security for the obligations of the Credit
Parties under the Credit Agreement. Upon the filing of the Financing Statements
with the California Secretary of State (the "Filing Office"), Lender will have a
perfected security interest (to the extent that perfection may be accomplished
by filing the Financing Statement in the Filing Office) in that portion of the
collateral described in the Financing Statement other than fixtures (the "UCC
Property") in which the perfection of security interests is governed by Division
9 of the California Uniform Commercial Code ("CAUCC"). Whenever used in this
opinion letter, the term "collateral" shall be limited to "accounts", "general
intangibles", "inventory", "equipment" and "goods" as each of such terms is
defined in Article 9 of the NYUCC and Division 9 of the CAUCC. The Financing
Statements are in appropriate form for filing in the Filing Office.
3. The execution and delivery of the Documents by each Credit Party
that is a party thereto and the performance by such Credit Party of its
obligations thereunder, the grant to Lender of the security interests as
provided in the Credit Agreement and the pledge to Lender of the Pledged Stock
(as hereinafter defined) as provided in the Credit Agreement do not violate any
New York law, statute, rule or regulation applicable to such Credit Party, and
no governmental authorizations, consents, approvals, registrations or filings by
or in the State of New York are required in connection with the execution,
delivery and performance of the Documents by such Credit Party.
4. The delivery in the State of New York to Lender of the certificates
evidencing the shares of stock described in Exhibit B hereto (the "Pledged
Stock"), duly endorsed in the name of Lender or in blank (or accompanied by
stock powers or separate documents of assignment duly executed in favor of
Lender or in blank), together with the execution and delivery by the Credit
Parties of the Credit Agreement, creates in favor of Lender a valid and
perfected security interest in such Pledged Stock
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as security for the obligations of the Credit Parties under the Credit
Agreement, which security interest will remain perfected for as long as
possession of the Pledged Stock is continuously maintained by Lender in the
State of New York.
5. The Copyright Security Agreement creates in favor of Lender a valid
and enforceable security interest in that portion of the collateral (the
"copyrights") in which the creation and attachment of security interests or
liens are governed by 17 U.S.C. Section 205 and Article 9 of the NYUCC, and such
security interest will become effective against third parties at the later of
the execution and delivery of the Copyright Security Agreement and the filing of
the Financing Statements in the Filing Office.
6. DFP is a corporation duly organized, validly existing and, based
solely on the DFP Good Standing Certificates, in good standing under the laws of
the State of Florida and as a foreign corporation under the laws of the State of
California.
The opinions set forth above in this opinion letter are subject, in all
respects, to the following exceptions, qualifications and limitations:
(a) Our opinion concerning the legality, validity, binding effect and
enforceability of the Documents in accordance with their terms does not mean
that (1) any particular remedy is available upon a material default or (2) every
provision of the Documents will be upheld or enforced in any or each
circumstance by a court. Certain provisions of the Documents may be or are
unenforceable in whole or in part, but in each case the inclusion of such
provisions does not affect the validity of each such Documents taken as whole,
and each such Document taken as a whole contains adequate provisions for the
practical realization of the benefits purported to be created thereby (subject
to the consequences of any judicial, administrative or other delay which may be
imposed by, be related to or arise from applicable laws or equitable
principles). Furthermore, the validity, binding effect and enforceability of the
Documents may be limited or otherwise affected by bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar laws, rules
or regulations affecting the enforcement of creditors' rights and remedies
generally and the unavailability of, or limitation of the availability of, a
particular right or remedy (whether in a proceeding in equity or at law) because
of an equitable principle or a requirement as to commercial reasonableness,
conscionability or good faith. The provisions of any Document which permit any
Person to take action or make determinations (and/or to have such determinations
be binding on other parties to any degree), or to benefit from indemnities,
contributions or similar undertakings, or waivers, exculpatory provisions or
similar provisions, may be subject to limitations imposed by law or by public
policy considerations, including, without limitation, a requirement that such
action be taken or such determination be made, or that any action or inaction by
any Person in respect of which such an indemnity, right of contribution or
similar undertaking, or such a
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waiver, exculpatory provision or similar provision, be called upon or raised, or
be taken or not taken, as the case may be, on a reasonable and lawful basis and
in good faith.
(b) The use of the term "enforceable" shall not imply any opinion as to
the availability of equitable remedies, including, without limitation, the
remedies of specific performance or injunctive relief, nor is any opinion
regarding the same intended to be expressed herein, and no opinion is expressed
that any particular provision of any of the Documents may not be limited by
defenses such as estoppel, waiver and other equitable considerations.
(c) Under certain circumstances the requirement that the provision of a
Document may be modified or waived only in writing or only in a specific
instance and the provision that failure or delay in exercising any power, right,
privilege or remedy will not impair or waive such power, right, privilege or
remedy may be unenforceable to the extent that an oral agreement has been
effected or a course of dealing has occurred modifying such provisions.
(d) With respect to any Document creating a security interest in UCC
Property, we express no opinion as to the enforceability of the rights and
remedies under such Documents against property located in the State of
California unless the procedural requirements under the CAUCC are followed.
(e) We express no opinion with respect to any security interest in any
Collateral described in the Financing Statements to which the provisions of
Article 9 of the NYUCC or Division 9 of the CAUCC do not apply.
(f) The continuation and perfection of security interests in proceeds
is limited to the extent set forth in Sections 9-306 through 9-309 of the NYUCC
and Sections 9306 through 9309 of the CAUCC.
(g) We express no opinion with respect to the creation, attachment,
validity, perfection or priority of any security interest, except as
specifically set forth in paragraphs 2, 4 and 5 of this opinion letter.
(h) We express no opinion as to (1) the impact of any laws regulating
the type of investments that can be made by, or the legal lending limits of,
Lender or (2) the effect of the laws of any jurisdiction in which Lender or any
Credit Party is located (other than the State of New York) that limit the
interest, fees or other charges Lender may impose.
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(i) We express no opinion with respect to the enforceability of any
provision of the Documents which provides for (1) acceleration of future amounts
due (other than principal) without appropriate discount to present value, (2)
late charges or (3) increased interest rates upon default, to the extent that
any such provision is determined to be penalty, or which purports to bind a
Person not a party or signatory thereto.
(j) We expressed no opinion as to any Credit Party's rights in, or
title to, any Collateral, the value thereof or the interest of Lender in any
after-acquired property. We call to your attention the fact that Section 552 of
the Federal Bankruptcy Code limits the extent to which property acquired by a
debtor after the commencement of a case under the Federal Bankruptcy Code may be
subject to a security interest arising from a security agreement entered into by
such debtor before the commencement of such case. Our opinions are subject to
the provisions of Sections 9-203 and 9-204 of the NYUCC relating to the time of
attachment of a security interest in an item of Collateral in which the Person
granting the security interest does not presently have rights.
(k) We express no opinion with respect to any provisions in the
Documents (1) authorizing the unilateral appointment of a receiver or (2) which
provide that Lender is appointed as any Credit Party's attorney-in-fact or that
Lender may otherwise act on behalf of in the name of a Credit Party.
(l) We express no opinion as to any Document provision contrary to
Section 9-311 or Part V of Article 9 of the NYUCC or Section 9311 or Chapter 5
of Division 9 of the CAUCC.
(m) We express no opinion as to the enforceability or perfection of any
interest of any Person other than Lender in any property included in the UCC
Property. Our opinion as to the enforceability of an governing law provision
contained in any Document is qualified by the effects of subsection (2) of
Section 1-105 of the NYUCC.
(n) We express no opinion regarding any items of Collateral which are
(1) accessioned to, or commingled or processed with, other goods to the extent
the security interest of Lender is limited by Section 9-314 or 9-315 of the
NYUCC or Section 9314 or 9315 of the CAUCC or (2) subject to or represented by a
certificate of title or a document of title.
(o) Except as specifically set forth in paragraph 5 of this opinion
letter, we express no opinion regarding any items of Collateral which are
subject to a statute, regulation or treaty of the United States which provides
for a national or international registration or a national or international
certificate of title for the perfection of a security interest therein or which
specifies a place of filing different from the place specified in the CAUCC.
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128
(p) We express no opinion regarding any Collateral consisting of claims
against any government or governmental agency (including, without limitation,
the United States or any state thereof or any agency or department of the United
States or any state thereof).
(q) In the case of any chattel paper, account or general intangible
which is itself secured by other property, we express no opinion with respect to
Lender's rights in and to such other property.
(r) We express no opinion with respect to Collateral consisting of
mobile goods, goods in possession of a third party, equipment used in farming
operations, farm products, consumer goods, crops growing or to be grown, timber
to be cut or minerals or the like (including oil and gas), accounts subject to
Section 9-103(5) of the NYUCC of Section 9103(5) of the CAUCC, goods which are
or are to become fixtures, an ownership interest in a corporation or partnership
formed for the purpose of cooperative ownership of real estate, policies of
insurance, beneficial interests in a trust or decedent's estate, letters of
credit, instruments, money, cash, deposit accounts (and any items of property in
such accounts), collection accounts (and any items of property in such
accounts), lockboxes, intellectual property (except as specifically set forth in
paragraph 5 of this opinion letter) or securities (except as specifically set
forth in paragraph 4 of this opinion letter).
(s) We have assumed that the collateral, other than accounts and
general intangibles, is located in the State of California and that any part of
such collateral that was brought into the State of California within the last
four months is not subject to a security interest perfected under the law of the
jurisdiction from which such part of the collateral was removed.
(t) We call to your attention that the security interest of Lender in
the collateral and the copyrights may be subject to the rights of lessees,
licensees, assignees or other account debtors, the claims and defenses of such
lessees, licensees, assignees and account debtors and the terms of any leases or
other agreements with such lessees, licensees, assignees and account debtors.
(u) We call to your attention that the perfection and the effect of
perfection and non-perfection of the security interest of Lender may be governed
by laws other than those of the State of California to the extent either the
collateral or a Credit Party is or becomes located in a jurisdiction other than
the State of California.
(v) We call to your attention that the perfection of the security
interest in any UCC Property may be terminated as to any UCC Property acquired
more than four months subsequent to a change in the nature, corporate structure
or identity of a Credit
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Party and that a continuation statement is required to be filed under the CAUCC
within six months prior to the expiration of five-years from the date of filing
of a financing statement and within six months prior to each fifth anniversary
of the expiration of such five-year period in order to maintain the continuous
perfection of the security interests referred to therein.
(w) We call to your attention that provisions of the Documents which
provide that a guaranty by a party thereto or the grant of a lien or security
interest by a party thereto to secure the obligations of a third party shall not
be affected by changes in or amendments to the Documents or other relevant
documents might be enforceable only to the extent such changes or amendments are
not so material as to constitute a new agreement among the parties to such
documents.
(x) We call to your attention that a court may modify or limit
contractual awards of attorneys' fees.
(y) We express no opinion with respect to any provision contained in
the Documents concerning waiver of inconvenient forum, venue, forum non
conveniens or subject matter jurisdiction, in each case with respect to Federal
courts.
(z) We express no opinion as to the enforceability of any provision of
any Document that purports to establish (or may be construed to establish)
evidentiary standards.
(aa) We express no opinion as to the last sentence of Section 9.1(b) of
the Credit Agreement, the last sentence of the first paragraph of Section 12.5
of the Credit Agreement, the last sentence of Section 12.6 of the Credit
Agreement, Sections 12.7 and 12.11 of the Credit Agreement, the third sentence
of Section 12.12 of the Credit Agreement (unless a reasonable time for
appearance is allowed in connection with any such service of process) or the
fifth sentence of Section 12.12 of the Credit Agreement.
(bb) We express no opinion herein as to the legality, validity or
enforceability of any provisions of the Documents precluding oral waivers or
modifications of provisions of the Documents, precluding waivers of equitable
rights and defenses by the Credit Parties or precluding the Credit Parties from
asserting certain claims or defenses or from obtaining certain rights and
remedies.
The opinions set forth herein are based upon those statutes, rules and
regulations that, in our experience, are normally applicable to transactions of
the type provided for in the Documents, but without our having made any
independent investigation of any other statute, rule or regulation.
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This opinion is issued as of the date hereof, and we disclaim any
obligation to advise you of changes of law or fact that occur after the date
hereof. This opinion is solely for your benefit in connection with the
Transactions and may not be relied upon for any other purpose or furnished,
circulated or quoted to, or used or referred to by, any other Person without our
prior written consent in each instance.
Very truly yours,
131
EXHIBIT A
November 10, ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
I am Vice President and General Counsel of Dove Entertainment, Inc. (the
"Company"), a California corporation. I am providing this opinion to you
pursuant to Section 4.1(c) of the Credit, Security, Guaranty and Pledge
Agreement (the "Credit Agreement"), dated as of November 4, 1997, among the
Company, the Corporate Guarantors named therein and The Chase Manhattan Bank
(the "Lender"). Except as otherwise indicated, capitalized terms used in this
opinion and defined in the Credit Agreement will have the meanings given in the
Credit Agreement.
In my capacity as General Counsel, I have examined originals or copies of those
corporate and other records and documents I considered appropriate. I have
obtained and relied upon those certificates of public officials I considered
appropriate. I have assumed the genuineness of all signatures (other than with
respect to the Credit Parties), the authenticity of all documents submitted as
originals and the conformity with originals of all documents submitted as
copies. To the extent any Credit Parties' obligations depend on the due
authorization, execution and delivery of any Fundamental Document by any other
person, I have assumed that such Fundamental Document has been so authorized,
executed and delivered by such other person.
The "Individual Guaranty Agreements" are the guaranty agreements, each dated as
of November 4, 1997, between ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and the Lender.
On the basis of such examination, my reliance upon the assumptions in this
opinion and my consideration of those questions of law I considered relevant,
and subject to the limitations and qualifications in this opinion, I am of the
opinion that:
-1-
132
1. The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.
2. Dove International, Inc. ("Dove International") is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California.
3. The Borrower has the power and authority (i) to own and
operate its assets and properties and to carry on its business as now being
conducted, (ii) to execute, deliver and perform its obligations under the Credit
Agreement and other Fundamental Documents to which it is a party and any other
documents contemplated thereby to which it is a party, (iii) to borrow under the
Credit Agreement, (iv) to grant to the Lender the security interests
contemplated by the Fundamental Documents and (v) to pledge to the Lender the
Pledged Securities as contemplated by the Credit Agreement.
4. Each of Dove International and Dove Four Point, Inc. ("Dove
Four Point") has the corporate power and authority (i) to own and operate its
assets and properties and to carry on its business as now being conducted, (ii)
to execute, deliver and perform its obligations under the Fundamental Documents
to which it is a party, (iii) to guarantee the obligations of the Borrower and
(iv) to grant to the Lender the security interests contemplated by the
Fundamental Documents.
5. The execution, delivery and performance of the Fundamental
Documents to which it is a party by each Credit Party, the grant to the Lender
of the security interest as contemplated by the Credit Agreement and the pledge
to the Lender of the Pledged Securities as contemplated by the Credit Agreement:
(a) have been duly authorized by all requisite corporate action on the part of
each Credit Party, (b) will not violate any provision of any State of California
or United States federal law, statute, governmental rule or regulation, or
treaty that I, in the exercise of customary professional diligence, recognized
as applicable to the Credit Parties or to transactions of the type contemplated
in the Fundamental Documents, (c) will not violate any provision of the Articles
of Incorporation or By-laws of any Credit Party, (d) will not violate any
provision of any material indenture, agreement, bond, note or other instrument
to which any Credit Party or by which any Credit Party or any of their
respective properties or assets are bound, or be in conflict with, result in a
breach or termination of, or constitute (with due notice or lapse of time or
both) a default under, or accelerate any performance required by, any such
indenture, agreement, bond, note or other instrument and (e) will not result in
the creation or imposition of (or the obligation to create or impose) any lien,
charge or encumbrance of any nature whatsoever upon any of the properties or
assets of any of any Credit Party, other than pursuant to of the Fundamental
Documents to which such Credit Party is a party.
-2-
133
6. Each Credit Party has duly executed and delivered to the
Lender all of the Fundamental Documents to which it is a party.
7. No authorizations, consents, approvals, registrations or
filings from or with any California or United States federal governmental
authority that I have, in the exercise of customary professional diligence,
recognized as applicable to the Credit Parties or to transactions of the type
contemplated by the Fundamental Documents, is required in connection with the
execution, delivery and performance by any Credit Party of the Fundamental
Documents to which it is a party.
8. There is no judgment, order, action, suit or other proceeding
at law or in equity, or before any arbitrator or arbitration panel, of any
California state or United States federal governmental authority (and, to my
knowledge, any other Governmental Authority), or, to my knowledge, any
investigation of the affairs of, any Credit Party, or any of their respective
properties or rights which (i) if adversely determined, could reasonably be
expected to materially affect (a) the ability of any Credit Party to carry on
its business, (b) the ability of any Credit Party to perform its respective
obligations under the Fundamental Documents to which it is a party or any other
material contract to which it is a party, (c) the validity or enforceability or
priority of the security interests, rights, remedies or benefits available to
the Lender under any of the Fundamental Documents, or (d) the Collateral or the
Pledged Securities; or (ii) involves any of the transactions contemplated by the
Fundamental Documents.
9. The authorized, issued and outstanding capital stock of Dove
Four Point and Dove International is as set forth on Schedule 3.7(a) to the
Credit Agreement (the "Pledged Securities") and such issued and outstanding
capital stock has been duly authorized, validly issued, is fully paid and
nonassessable and is owned of record by the Borrower.
10. There are no restrictions on the transfer of any Pledged
Securities other than under the Credit Agreement. There are no outstanding
rights, warrants, options or agreements to purchase or otherwise acquire any
shares of stock or securities or obligations of any kind convertible into any
shares of capital stock of Dove International or Dove Four Point.
11. None of the Credit Parties is (a) and "investment company",
within the meaning of the Investment Company Act of 1940, as amended or (b)
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act or any federal statute or regulation limiting such
corporation's ability to incur indebtedness for money borrowed as contemplated
by the Credit Agreement or by any other Fundamental Document. The making of the
Loans and the application of the proceeds thereof as contemplated by the
Fundamental Documents do not violate any of
-3-
134
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System, as amended.
12. Assuming that New York law is identical to California law,
each Individual Guaranty Agreement constitutes the legal, valid and binding
obligation of the Individual Guarantor party thereto and is enforceable against
such Individual Guarantor in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or affecting creditors rights generally (including, without limitation,
fraudulent conveyance laws) and by general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity or at law.
13. You have received an opinion letter of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇
(a copy of which is attached hereto) (the "HHR Opinion") with respect to the
creation and perfection of a security interest in the Pledged Stock (as defined
therein). Assuming that New York law is identical with California law, and in
reliance on the HHR Opinion and subject to any and all assumptions,
qualifications and limitations expressed therein, the perfected security
interest of the Lender in the Pledged Stock will be prior to any other security
interest in such Pledged Stock that may be created by the Company under the
Uniform Commercial Code.
I express no opinion as to the effect of non-compliance by the Lender with any
state or federal laws or regulations applicable to the transactions contemplated
by any of the Fundamental Documents because of the nature of its business.
The law covered by this opinion is limited to the present federal law of the
United States and the present law of the State of California. I express no
opinion as to the laws of any other jurisdiction and no opinion regarding the
statutes, administrative decisions, rules, regulations or requirements of any
county, municipality, subdivision or local authority of any jurisdiction.
This opinion is issued as of the date hereof, and I disclaim any obligation to
advise you of changes in law or fact that occur after the date hereof.
This opinion may be relied upon by you only in connection with the execution and
delivery of the Credit Agreement and the other Fundamental Documents. It may not
be used or relied upon by you for any other purpose or by any other person, nor
may copies be delivered to any other person, without in each instance my prior
written consent. You may, however, deliver a copy of this opinion to your
accountants, attorneys, and other professional advisors, to governmental
regulatory agencies having jurisdiction over you and to successors and permitted
transferees under the Credit
-4-
135
Agreement, and such successors and transferees may rely on this opinion as if it
were addressed and had been delivered to them on the date of this opinion.
Very truly yours,
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
RCM:kms
-5-
136
EXHIBIT B
NAME OF ISSUER NUMBER OF SHARES
-------------- ----------------
Dove International, Inc. ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Inc. 100
137
EXHIBIT B-2
November 10, ▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Bank
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
I am Vice President and General Counsel of Dove Entertainment, Inc. (the
"Company"), a California corporation. I am providing this opinion to you
pursuant to Section 4.1(c) of the Credit, Security, Guaranty and Pledge
Agreement (the "Credit Agreement"), dated as of November 4, 1997, among the
Company, the Corporate Guarantors named therein and The Chase Manhattan Bank
(the "Lender"). Except as otherwise indicated, capitalized terms used in this
opinion and defined in the Credit Agreement will have the meanings given in the
Credit Agreement.
In my capacity as General Counsel, I have examined originals or copies of those
corporate and other records and documents I considered appropriate. I have
obtained and relied upon those certificates of public officials I considered
appropriate. I have assumed the genuineness of all signatures (other than with
respect to the Credit Parties), the authenticity of all documents submitted as
originals and the conformity with originals of all documents submitted as
copies. To the extent any Credit Parties' obligations depend on the due
authorization, execution and delivery of any Fundamental Document by any other
person, I have assumed that such Fundamental Document has been so authorized,
executed and delivered by such other person.
The "Individual Guaranty Agreements" are the guaranty agreements, each dated as
of November 4, 1997, between ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and the Lender.
On the basis of such examination, my reliance upon the assumptions in this
opinion and my consideration of those questions of law I considered relevant,
and subject to the limitations and qualifications in this opinion, I am of the
opinion that:
-1-
138
1. The Borrower is a corporation duly organized, validly existing
and in good standing under the laws of the State of California.
2. Dove International, Inc. ("Dove International") is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California.
3. The Borrower has the power and authority (i) to own and
operate its assets and properties and to carry on its business as now being
conducted, (ii) to execute, deliver and perform its obligations under the Credit
Agreement and other Fundamental Documents to which it is a party and any other
documents contemplated thereby to which it is a party, (iii) to borrow under the
Credit Agreement, (iv) to grant to the Lender the security interests
contemplated by the Fundamental Documents and (v) to pledge to the Lender the
Pledged Securities as contemplated by the Credit Agreement.
4. Each of Dove International and Dove Four Point, Inc. ("Dove
Four Point") has the corporate power and authority (i) to own and operate its
assets and properties and to carry on its business as now being conducted, (ii)
to execute, deliver and perform its obligations under the Fundamental Documents
to which it is a party, (iii) to guarantee the obligations of the Borrower and
(iv) to grant to the Lender the security interests contemplated by the
Fundamental Documents.
5. The execution, delivery and performance of the Fundamental
Documents to which it is a party by each Credit Party, the grant to the Lender
of the security interest as contemplated by the Credit Agreement and the pledge
to the Lender of the Pledged Securities as contemplated by the Credit Agreement:
(a) have been duly authorized by all requisite corporate action on the part of
each Credit Party, (b) will not violate any provision of any State of California
or United States federal law, statute, governmental rule or regulation, or
treaty that I, in the exercise of customary professional diligence, recognized
as applicable to the Credit Parties or to transactions of the type contemplated
in the Fundamental Documents, (c) will not violate any provision of the Articles
of Incorporation or By-laws of any Credit Party, (d) will not violate any
provision of any material indenture, agreement, bond, note or other instrument
to which any Credit Party or by which any Credit Party or any of their
respective properties or assets are bound, or be in conflict with, result in a
breach or termination of, or constitute (with due notice or lapse of time or
both) a default under, or accelerate any performance required by, any such
indenture, agreement, bond, note or other instrument and (e) will not result in
the creation or imposition of (or the obligation to create or impose) any lien,
charge or encumbrance of any nature whatsoever upon any of the properties or
assets of any of any Credit Party, other than pursuant to of the Fundamental
Documents to which such Credit Party is a party.
-2-
139
6. Each Credit Party has duly executed and delivered to the
Lender all of the Fundamental Documents to which it is a party.
7. No authorizations, consents, approvals, registrations or
filings from or with any California or United States federal governmental
authority that I have, in the exercise of customary professional diligence,
recognized as applicable to the Credit Parties or to transactions of the type
contemplated by the Fundamental Documents, is required in connection with the
execution, delivery and performance by any Credit Party of the Fundamental
Documents to which it is a party.
8. There is no judgment, order, action, suit or other proceeding
at law or in equity, or before any arbitrator or arbitration panel, of any
California state or United States federal governmental authority (and, to my
knowledge, any other Governmental Authority), or, to my knowledge, any
investigation of the affairs of, any Credit Party, or any of their respective
properties or rights which (i) if adversely determined, could reasonably be
expected to materially affect (a) the ability of any Credit Party to carry on
its business, (b) the ability of any Credit Party to perform its respective
obligations under the Fundamental Documents to which it is a party or any other
material contract to which it is a party, (c) the validity or enforceability or
priority of the security interests, rights, remedies or benefits available to
the Lender under any of the Fundamental Documents, or (d) the Collateral or the
Pledged Securities; or (ii) involves any of the transactions contemplated by the
Fundamental Documents.
9. The authorized, issued and outstanding capital stock of Dove
Four Point and Dove International is as set forth on Schedule 3.7(a) to the
Credit Agreement (the "Pledged Securities") and such issued and outstanding
capital stock has been duly authorized, validly issued, is fully paid and
nonassessable and is owned of record by the Borrower.
10. There are no restrictions on the transfer of any Pledged
Securities other than under the Credit Agreement. There are no outstanding
rights, warrants, options or agreements to purchase or otherwise acquire any
shares of stock or securities or obligations of any kind convertible into any
shares of capital stock of Dove International or Dove Four Point.
11. None of the Credit Parties is (a) and "investment company",
within the meaning of the Investment Company Act of 1940, as amended or (b)
subject to regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act or any federal statute or regulation limiting such
corporation's ability to incur indebtedness for money borrowed as contemplated
by the Credit Agreement or by any other Fundamental Document. The making of the
Loans and the application of the proceeds thereof as contemplated by the
Fundamental Documents do not violate any of
-3-
140
Regulations G, T, U or X of the Board of Governors of the Federal Reserve
System, as amended.
12. Assuming that New York law is identical to California law,
each Individual Guaranty Agreement constitutes the legal, valid and binding
obligation of the Individual Guarantor party thereto and is enforceable against
such Individual Guarantor in accordance with its terms, except as may be limited
by bankruptcy, insolvency, reorganization, moratorium or similar laws relating
to or affecting creditors rights generally (including, without limitation,
fraudulent conveyance laws) and by general principles of equity, including,
without limitation, concepts of materiality, reasonableness, good faith and fair
dealing and the possible unavailability of specific performance or injunctive
relief, regardless of whether considered in a proceeding in equity or at law.
13. You have received an opinion letter of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇
(a copy of which is attached hereto) (the "HHR Opinion") with respect to the
creation and perfection of a security interest in the Pledged Stock (as defined
therein). Assuming that New York law is identical with California law, and in
reliance on the HHR Opinion and subject to any and all assumptions,
qualifications and limitations expressed therein, the perfected security
interest of the Lender in the Pledged Stock will be prior to any other security
interest in such Pledged Stock that may be created by the Company under the
Uniform Commercial Code.
I express no opinion as to the effect of non-compliance by the Lender with any
state or federal laws or regulations applicable to the transactions contemplated
by any of the Fundamental Documents because of the nature of its business.
The law covered by this opinion is limited to the present federal law of the
United States and the present law of the State of California. I express no
opinion as to the laws of any other jurisdiction and no opinion regarding the
statutes, administrative decisions, rules, regulations or requirements of any
county, municipality, subdivision or local authority of any jurisdiction.
This opinion is issued as of the date hereof, and I disclaim any obligation to
advise you of changes in law or fact that occur after the date hereof.
This opinion may be relied upon by you only in connection with the execution and
delivery of the Credit Agreement and the other Fundamental Documents. It may not
be used or relied upon by you for any other purpose or by any other person, nor
may copies be delivered to any other person, without in each instance my prior
written consent. You may, however, deliver a copy of this opinion to your
accountants, attorneys, and other professional advisors, to governmental
regulatory agencies having jurisdiction over you and to successors and permitted
transferees under the Credit
-4-
141
Agreement, and such successors and transferees may rely on this opinion as if it
were addressed and had been delivered to them on the date of this opinion.
Very truly yours,
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
RCM:kms
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EXHIBIT C
FORM OF BORROWING BASE CERTIFICATE
as of ___________
The undersigned (the "Borrower") HEREBY CERTIFIES the following
information as of __________, pursuant to the Credit, Security, Guaranty and
Pledge Agreement dated as of November 4, 1997, among Dove Entertainment, Inc. as
Borrower, the Corporate Guarantors named therein and The Chase Manhattan Bank,
as the same may be amended, supplemented or otherwise modified, renewed or
replaced from time to time (herein called the "Credit Agreement"), the defined
terms therein being herein used with the same meanings:
(from detailed schedules Amount Advance Borrowing
attached) $000's Rate Base
------ ------- ---------
a. Eligible L/C Receivables x 100% =
------- ---------
b. Eligible Receivables x 85% =
------- ---------
c. Eligible Library Amount x 35% =
------- ---------
d. Inventory of physical audio
cassettes and printed books x 30% =
------- ---------
e. Less Amounts Payable to
Third Parties not Already
Deducted(1) ( )
--------
f. Less Amounts of accrued but
unpaid residuals owed to any
trade guilds with respect to
each item of Product included
in the Borrowing Base ( )
--------
TOTAL BORROWING BASE
==========
--------
(1) To the extent not already deducted in computing the Total Borrowing Base,
the sum of all amounts payable to third parties from or with regard to the
amounts otherwise included in the Borrowing Base pursuant to items (a)
through (d), including without limitation remaining acquisition payments,
set offs, current profit participations, deferments, commissions and
royalties must be subtracted from the Total Borrowing Base.
143
COMMITMENT AVAILABILITY
a. Outstanding Loans
----------
b. L/C Exposure
----------
Total outstanding
----------
Availability
----------
The Borrower has no reason to believe that the aggregate
principal amount of all Loans to the Borrower outstanding as of the date of this
certificate would exceed the Borrowing Base if such Borrowing Base was computed
as of the date of this certificate.
IN WITNESS WHEREOF, the undersigned has caused this certificate
to be executed this ____ day of _____________.
DOVE ENTERTAINMENT, INC.
By:
-------------------------------------
Name:
Title:
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144
EXHIBIT D-1
FORM OF PLEDGEHOLDER AGREEMENT
(ONLY APPLICABLE WITH RESPECT TO UNCOMPLETED PRODUCT
FOR WHICH A COMPLETION GUARANTEE IS REQUIRED)
AGREEMENT dated as of [INSERT DATE]
(the "Agreement") among (i) [INSERT NAME OF
LABORATORY] (the "Laboratory"), (ii) [INSERT
NAME OF EACH CREDIT PARTY WHO HAS CONTROL
OVER THE PHYSICAL ELEMENTS OF THE
COLLATERAL] (collectively referred to herein
as the "Company"), (iii) [INSERT NAME OF
COMPLETION GUARANTOR] (the "Completion
Guarantor") and (iv) The Chase Manhattan
Bank (the "Lender").
Pursuant to the Credit, Security, Guaranty and Pledge Agreement
dated as of November 4, 1997 (as the same may be amended, supplemented or
otherwise modified, renewed or replaced from time to time, the "Credit
Agreement"), among Dove Entertainment, Inc., (the "Borrower"), the Corporate
Guarantors named therein and the Lender, the Lender has agreed, subject to the
terms and conditions set forth in the Credit Agreement, to make loans to the
Borrower in connection with, among other things, the acquisition, production and
distribution of the Product (as hereinafter defined).
The Company has granted to the Lender a security interest in,
among other things, all of its right, title and interest in and to the [DESCRIBE
NATURE OF PRODUCT, I.E. MOVIE-OF-THE-WEEK, TELEVISION PROGRAMS, AUDIOBOOKS,
ETC.] listed on Schedule 1 hereto (hereinafter called the "Product") as security
for various obligations of the Company to the Lender. Such security interest
covers, among other things, all physical properties of every kind or nature of,
or relating to, the Product and all versions thereof, including, without
limitation, exposed film, developed film, positives, negatives, prints, positive
prints, answer prints, special effects, preparing materials (including
interpositives, duplicate negatives, internegatives, color reversals,
intermediates, lavenders, fine grain master prints and matrices, and all other
forms of pre-print elements), sound tracks, cutouts, trims and any and all other
physical properties of every kind and nature of, or relating to, the Product,
whether in completed form or in some state of completion, and all audio and
video masters, duplicates, drafts, versions, variations and copies of each
thereof, in all formats whether on film, videotape, disk, cassette, phonorecord
or otherwise and
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145
all music sheets and promotional materials relating to the Product all of the
foregoing items being hereinafter collectively called the "Collateral".
Pursuant to the Completion Guaranty dated as of [INSERT DATE],
among the Completion Guarantor, the Company and the Lender (the "Completion
Guaranty"), the Completion Guarantor has agreed to guaranty the completion and
delivery of the Product. In connection therewith, the Company has granted to the
Completion Guarantor, a security interest in certain assets that are included in
the Collateral, all as specified in, and subject to the terms and conditions of,
the Company's Completion Agreement dated as of [INSERT DATE], between the
Company and the Completion Guarantor (the "Company's Agreement").
From time to time, the Laboratory will have in its possession
certain items of the Collateral.
Accordingly, the parties hereto hereby agree as follows:
1. Each of the Company, the Completion Guarantor, and the Lender
hereby appoints the Laboratory as the pledgeholder of all items of Collateral
that may from time to time come into the possession or control of the
Laboratory. The Laboratory agrees to hold all such items of Collateral as
pledgeholder for the Lender subject to the following terms and conditions:
a. Except as permitted by Section 1(b) below, the
Laboratory will keep all items of Collateral at the laboratories
or storage facilities listed on Schedule 2 hereto, and will not
deliver such property to anyone.
b. Subject to the provisions of Sections 1(c) and 1(d)
below, the Laboratory will permit the Company and/or Completion
Guarantor (and their respective designated affiliates,
sublicensees or designees):
i) to have access to the negatives and other
pre-print material of the Product (but not remove them
from the possession of the Laboratory) for purposes of
inspecting, cutting, scoring or similar purposes;
ii) to obtain a reasonable number of positive
prints including without limitation, dailies, for the
purposes of editing and previewing the Product;
iii) to direct the making of pre-print material,
positive prints and video masters of the Product and
trailers thereof and the delivery thereof to the Company
or distributors, licensees or other parties as the Company
may direct;
-2-
146
iv) to remove reasonable amounts of material for
processing by optical and/or sound houses which agree in
writing to be bound by the terms hereof or enter into a
separate laboratory pledgeholder agreement substantially
in the form hereof, and to return such materials when
processed to the Laboratory;
v) with the prior written consent of the Lender, to
forward any item of Collateral to another laboratory. The
Lender's consent contained in this clause (v) may be
revoked at any time by written notice to the Laboratory,
the Completion Guarantor and the Company from the Lender.
In addition, such consent shall be deemed to be revoked at
any time upon receipt by the Laboratory of written notice
from the Lender, that an Event of Default has occurred
under the Credit Agreement; and
vi) to forward any of the above-mentioned property
to another laboratory, approved by the Lender, if the
Lender has previously received a Pledgeholder Agreement
executed by such laboratory.
c. If and when the Laboratory shall receive written notice
from the Lender that an Event of Default shall have occurred and
is continuing under the Credit Agreement, the Laboratory shall
take no further orders from the Company and will hold all items
of Collateral within its possession or under its control as
pledgeholder hereunder, subject only (i) to the order and
instruction of the Lender; and (ii) to the rights of the Lender
and/or the Completion Guarantor to have access to and/or delivery
of items referred to in Section 6 below.
d. If and when the Laboratory shall receive written notice
from the Completion Guarantor that the Completion Guarantor has
exercised its right to take over the production of the Product
under the Company's Agreement and, unless and until the
Laboratory shall have received written notice from the Lender to
the contrary, the Laboratory shall allow the Completion Guarantor
to exercise the rights set forth in clauses (i), (ii), (iii) and
(iv) of Section 1(b) hereof. Following such notice from the
Completion Guarantor, the Laboratory will not permit the Company
to have any further access to, or direct any further actions to
be taken with respect to, the Collateral in the Laboratory's
possession or under its control or to obtain any prints thereof.
e. If the Completion Guarantor takes over the production
of the Product and requests that the Collateral be moved to a
different laboratory, the Lender agrees to consent to such move
so long as a laboratory pledgeholder agreement is executed by the
various parties hereto (other than the Laboratory)
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and by the replacement laboratory, substantially in the form
hereof and so as long as the replacement laboratory is reasonably
satisfactory to the Lender.
2. The Company agrees with the Lender that during production of
the Product it will deliver the daily rushes for the Product to the Laboratory
as soon as practicable and will use their best efforts to deliver the daily
rushes on a weekly basis.
3. The Laboratory shall keep the original negatives of the
Product in film vaults separate from and at a reasonable distance from
protective duplicating materials (whether protective masters, fine grains,
duplicate negatives or otherwise) to afford protection against any loss or
damage, whether by fire or other disaster or otherwise. The Laboratory shall
keep the Lender and the Completion Guarantor advised in writing of the actual
location of the film vaults where all items of the Collateral are kept,
including information as to the separate film vaults utilized for the original
negatives and protective materials as aforesaid.
4. Subject to the rights of the Completion Guarantor, the
Laboratory agrees that in its capacity as pledgeholder it is holding and has
possession of the Collateral and the physical properties thereof constructively
for the Lender and, until such time that the Lender notifies the Laboratory that
the Lender no longer has any rights in the Collateral, upon written notice to
the Laboratory indicating that an Event of Default has occurred and is
continuing under the Credit Agreement (a copy of which will be sent to the
Completion Guarantor unless its rights hereunder have terminated as contemplated
by Section 8 hereof), will hold a sale or sales of the Collateral or any part
thereof in accordance with the direction and instruction of the Lender, at the
expense of the Lender, or in the alternative will cause to be delivered or made
available to the Lender or its nominee (in all cases, pursuant to written
instructions from the Lender) the Collateral and all physical properties thereof
in the possession of the Laboratory or under its control for the purpose of
enabling the Lender to deal with the same pursuant to the Credit Agreement.
Nothing herein contained shall be construed to waive any rights of the
Laboratory as specified under Section 9 hereof.
5. Each of the Completion Guarantor and the Company hereby waives
any claim for damages or otherwise which it may have against the Laboratory for
any acts which the Laboratory may take as pledgeholder, pursuant to the written
direction of the Lender made in accordance with the terms of this Agreement.
6. Subject to Section 9 hereof, the Laboratory agrees that,
despite the existence of any other claim which the Laboratory may have against
the Company and/or the Completion Guarantor and/or any third-party distributor
of the Product, the Laboratory shall accept and fulfill orders for laboratory
work and any other material which may be required by the Lender or any other
third-party distributor of the Product, subject to satisfactory credit
arrangements being made with the Laboratory with respect to any charges incurred
on behalf of the Lender or any such third-party distributor, and the Laboratory
will not assert any claim or
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lien, statutory or otherwise, against the Lender or against the Product (except
as set forth in Section 9 hereof) with respect to any charges for laboratory
services or materials ordered by the Company, the designees of the Company, any
third-party distributor of the Product or the Completion Guarantor.
7. The parties hereto agree that the Lender and its respective
designees, successors and assigns shall each be entitled to unilaterally remove
from the Laboratory materials made pursuant to an order contemplated by Section
6 hereof, which materials shall not be subject to this Agreement.
8. The rights granted hereunder to the Completion Guarantor shall
(i) at all times be junior and subordinate to the rights hereunder of the Lender
and (ii) terminate upon the completion and delivery of the Product, unless prior
to such completion and delivery of the Product, the Completion Guarantor has
notified the Lender and the Laboratory in writing that it has or anticipates
that it will have to advance its own funds to complete the Product.
Notwithstanding anything to the contrary in this Agreement, the Completion
Guarantor shall have no rights under this Agreement if the Lender gives written
notice to the Laboratory and the Completion Guarantor that the Product has been
completed and delivered without the requirement that the Completion Guarantor
advance any of its own funds pursuant to the Completion Guaranty. The Completion
Guarantor hereby agrees that in the event that the Completion Guarantor shall
have been released in writing from all of its obligations under the Completion
Guaranty for the Product, any amendment or termination of this Agreement
thereafter shall not require the Completion Guarantor's consent.
9. The Laboratory shall hold and/or process the Collateral under
its standard terms of business as set forth in Schedule 3 hereto, except that
any liens arising in favor of the Laboratory shall be limited to an aggregate
amount of $50,000 at any one time outstanding for processing and/or storing the
Collateral and/or materials delivered therefrom for the Company, any of their
designees and/or the Completion Guarantor. Except as provided in the prior
sentence, the rights of the Laboratory in the Collateral shall be subordinate
and junior to the rights of the Lender and the Completion Guarantor in respect
of the Collateral.
10. The Lender shall promptly give written notice to the
Laboratory when the Lender's security interests in the Collateral has
terminated. Upon receipt of such written notice, the Laboratory's obligations
hereunder as pledgeholder for the Lender shall terminate.
11. This Agreement shall be binding on and inure to the benefit
of the parties hereto and the successors and assigns of each of the parties.
12. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
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APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW
YORK.
13. No amendment to this Agreement shall be effective unless in
writing and signed by the Company, the Lender and the Laboratory and if the
Laboratory has not received the notice from the Lender contemplated by Section 8
hereof, then also the Completion Guarantor. This Agreement may be executed in
two or more counterparts, each of which shall constitute an original, but all of
which when taken together, shall constitute but one instrument, and shall become
effective on the date on which each of the Completion Guarantor and the Lender
shall have received a fully-executed copy of this Agreement. Promptly
thereafter, the Company shall deliver or mail counterparts of this Agreement
bearing the signature of each of the parties hereto to each party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first written above.
[LABORATORY]
By
-----------------------------------------
Name:
Title:
Address:
Attn:
[LIST APPLICABLE CREDIT PARTY(IES)]
By
-----------------------------------------
Name:
Title:
Address:
Attn:
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[COMPLETION GUARANTOR]
By
-----------------------------------------
Name:
Title:
Address:
Attn:
THE CHASE MANHATTAN BANK
By
-----------------------------------------
Name:
Title:
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, III
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Schedule 1
List of items of Product
152
Schedule 2
List of Laboratory and Storage Facilities
153
Schedule 3
[Attach Laboratory's Standard Terms of Business]
154
EXHIBIT D-2
FORM OF PLEDGEHOLDER AGREEMENT (COMPLETED PRODUCT)
AGREEMENT dated as of __________,
1997 (the "Agreement") among (i) [INSERT
NAME OF LABORATORY] (the "Laboratory"), (ii)
[INSERT NAME OF EACH CREDIT PARTY WHO HAS
CONTROL OVER THE PHYSICAL ELEMENTS OF THE
COLLATERAL] (collectively referred to herein
as the "Company") and (iii) The Chase
Manhattan Bank (the "Lender").
Pursuant to the Credit, Security, Guaranty and Pledge Agreement
dated as of November 4, 1997 (as the same may be amended, supplemented or
otherwise modified, renewed or replaced from time to time, the "Credit
Agreement"), among Dove Entertainment, Inc., (the "Borrower"), the Corporate
Guarantors named therein and the Lender, the Lender has agreed, subject to the
terms and conditions set forth in the Credit Agreement, to make loans to the
Borrower in connection with, among other things, the acquisition, production and
distribution of the Product (as hereinafter defined).
The Company has granted to the Lender a security interest in,
among other things, all of its right, title and interest in and to the [DESCRIBE
NATURE OF PRODUCT, I.E. MOVIE-OF-THE-WEEK, TELEVISION PROGRAMS, AUDIOBOOKS,
ETC.] listed on Schedule 1 hereto (hereinafter called the "Product") as security
for various obligations of the Company to the Lender. Such security interest
covers, among other things, all physical properties of every kind or nature of,
or relating to, the Product and all versions thereof, including, without
limitation, exposed film, developed film, positives, negatives, prints, positive
prints, answer prints, special effects, preparing materials (including
interpositives, duplicate negatives, internegatives, color reversals,
intermediates, lavenders, fine grain master prints and matrices, and all other
forms of pre-print elements), sound tracks, cutouts, trims and any and all other
physical properties of every kind and nature of, or relating to, the Product,
whether in completed form or in some state of completion, and all audio and
video masters, duplicates, drafts, versions, variations and copies of each
thereof, in all formats whether on film, videotape, disk, cassette, phonorecord
or otherwise and all music sheets and promotional materials relating to the
Product all of the foregoing items being hereinafter collectively called the
"Collateral".
From time to time, the Laboratory will have in its possession
certain items of the Collateral.
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Accordingly, the parties hereto hereby agree as follows:
1. Each of the Company and the Lender hereby appoints the
Laboratory as the pledgeholder of all items of Collateral that may from time to
time come into the possession or control of the Laboratory. The Laboratory
agrees to hold all such items of Collateral as pledgeholder for the Lender
subject to the following terms and conditions:
a. Except as permitted by Section 1(b) below, the
Laboratory will keep all items of Collateral at the laboratories
or storage facilities listed on Schedule 2 hereto, and will not
deliver such property to anyone.
b. Subject to the provisions of Sections 1(c) below, the
Laboratory will permit the Company and its designated affiliates,
sublicensees and designees:
i) to have access to the negatives and other
pre-print material of the Product (but not remove them
from the possession of the Laboratory) for purposes of
inspecting, cutting, scoring or similar purposes;
ii) to obtain a reasonable number of positive
prints including without limitation, dailies, for the
purposes of editing and previewing the Product;
iii) to direct the making of pre-print material,
positive prints and video masters of the Product and
trailers thereof and the delivery thereof to the Company
or distributors, licensees or other parties as the Company
may direct;
iv) to remove reasonable amounts of material for
processing by optical and/or sound houses which agree in
writing to be bound by the terms hereof or enter into a
separate laboratory pledgeholder agreement substantially
in the form hereof, and to return such materials when
processed to the Laboratory;
v) with the prior written consent of the Lender, to
forward any item of Collateral to another laboratory. The
Lender hereby consents to the Laboratory's forwarding
original material or elements constituting Collateral, if
requested to do so by the Company, to any of the
laboratories listed on Schedule 4 hereto. The Lender's
consent contained in this clause (v) may be revoked at any
time by written notice to the Laboratory and the Company
from the Lender. In addition, such consent shall be deemed
to be revoked at any time upon receipt by the Laboratory
of written notice
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from the Lender, that an Event of Default has occurred
under the Credit Agreement; and
vi) to forward any of the above-mentioned property
to another laboratory, approved by the Lender, if the
Lender has previously received a Pledgeholder Agreement
executed by such laboratory.
c. If and when the Laboratory shall receive written notice
from the Lender that an Event of Default shall have occurred and
is continuing under the Credit Agreement, the Laboratory shall
take no further orders from the Company and will hold all items
of Collateral within its possession or under its control as
pledgeholder hereunder, subject only (i) to the order and
instruction of the Lender; and (ii) to the rights of the Lender
to have access to and/or delivery of items referred to in Section
5 below.
2. The Laboratory shall keep the original negatives of the
Product in film vaults separate from and at a reasonable distance from
protective duplicating materials (whether protective masters, fine grains,
duplicate negatives or otherwise) to afford protection against any loss or
damage, whether by fire or other disaster or otherwise. The Laboratory shall
keep the Lender advised in writing of the actual location of the film vaults
where all items of the Collateral are kept, including information as to the
separate film vaults utilized for the original negatives and protective
materials as aforesaid.
3. The Laboratory agrees that in its capacity as pledgeholder it
is holding and has possession of the Collateral and the physical properties
thereof constructively for the Lender and, until such time that the Lender
notifies the Laboratory that the Lender no longer has any rights in the
Collateral, upon written notice to the Laboratory indicating that an Event of
Default has occurred and is continuing under the Credit Agreement, will hold a
sale or sales of the Collateral or any part thereof in accordance with the
direction and instruction of the Lender, at the expense of the Lender, or in the
alternative will cause to be delivered or made available to the Lender or its
nominee (in all cases, pursuant to written instructions from the Lender) the
Collateral and all physical properties thereof in the possession of the
Laboratory or under its control for the purpose of enabling the Lender to deal
with the same pursuant to the Credit Agreement. Nothing herein contained shall
be construed to waive any rights of the Laboratory as specified under Section 7
hereof.
4. The Company hereby waives any claim for damages or otherwise
which it may have against the Laboratory for any acts which the Laboratory may
take as pledgeholder, pursuant to the written direction of the Lender made in
accordance with the terms of this Agreement.
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5. Subject to Section 7 hereof, the Laboratory agrees that,
despite the existence of any other claim which the Laboratory may have against
the Company and/or any third-party distributor of the Product, the Laboratory
shall accept and fulfill orders for laboratory work and any other material which
may be required by the Lender or any other third-party distributor of the
Product, subject to satisfactory credit arrangements being made with the
Laboratory with respect to any charges incurred on behalf of the Lender or any
such third-party distributor, and the Laboratory will not assert any claim or
lien, statutory or otherwise, against the Lender or against the Product (except
as set forth in Section 7 hereof) with respect to any charges for laboratory
services or materials ordered by the Company, the designees of the Company or
any third-party distributor of the Product.
6. The parties hereto agree that the Lender and its respective
designees, successors and assigns shall each be entitled to unilaterally remove
from the Laboratory materials made pursuant to an order contemplated by Section
5 hereof, which materials shall not be subject to this Agreement.
7. The Laboratory shall hold and/or process the Collateral under
its standard terms of business as set forth in Schedule 3 hereto, except that
any liens arising in favor of the Laboratory shall be limited to an aggregate
amount of $50,000 at any one time outstanding for processing and/or storing the
Collateral and/or materials delivered therefrom for the Company and/or any of
their designees. Except as provided in the prior sentence, the rights of the
Laboratory in the Collateral shall be subordinate and junior to the rights of
the Lender in respect of the Collateral.
8. The Lender shall promptly give written notice to the
Laboratory when the Lender's security interests in the Collateral has
terminated. Upon receipt of such written notice, the Laboratory's obligations
hereunder as pledgeholder for the Lender shall terminate.
9. This Agreement shall be binding on and inure to the benefit of
the parties hereto and the successors and assigns of each of the parties.
10. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND
TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.
11. No amendment to this Agreement shall be effective unless in
writing and signed by the Company, the Lender and the Laboratory. This Agreement
may be executed in two or more counterparts, each of which shall constitute an
original, but all of which when taken together, shall constitute but one
instrument, and shall become effective on the date on which the Lender shall
have received a fully-executed copy of this Agreement. Promptly thereafter, the
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Company shall deliver or mail counterparts of this Agreement bearing the
signature of each of the parties hereto to each party hereto.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed as of the day and year first written above.
[LABORATORY]
By
-------------------------------------
Name:
Title:
Address:
Attn:
DOVE ENTERTAINMENT, INC.
By
-------------------------------------
Name:
Title:
Address:
Attn:
DOVE INTERNATIONAL, INC.
By
-------------------------------------
Name:
Title:
Address:
Attn:
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DOVE FOUR POINT, INC.
By
-------------------------------------
Name:
Title:
Address:
Attn:
THE CHASE MANHATTAN BANK
By
-------------------------------------
Name:
Title:
Address: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇, III
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Schedule 1
List of Items of Product
161
Schedule 2
List of Laboratory and Storage Facilities
162
Schedule 3
[Attach Laboratory's Standard Terms of Business]
163
Schedule 4
Other Laboratories
164
EXHIBIT E-1
FORM OF COPYRIGHT SECURITY AGREEMENT
WHEREAS, Dove Entertainment, Inc., a California corporation
("Borrower"), and each Subsidiary of Borrower whose name appears at the foot
hereof (collectively the "Grantors") now own or hold and may hereafter acquire
or hold certain copyrights and rights under copyright with respect to certain
movies-of-the-week, television programs, films, videotapes or other programs
produced for television release or for release in any other medium, shown on
network, free and cable, pay and/or other television medium (including, without
limitation, first-run syndication), certain written works, books and other
published material, and sound recordings and audiobooks, in each case whether
recorded on film, videotape, cassette, cartridge, disc, audio cassette or on or
by any other means, method, process or device whether now owned or hereafter
developed, including, without limitation, those United States copyright
registrations listed on Schedule 1 hereto (the "Product") as such Schedule may
be amended from time to time by the addition of copyrights subsequently arising
or acquired;
WHEREAS, pursuant to that certain Credit, Security, Guaranty and
Pledge Agreement, dated as of November 4, 1997, (as the same may be amended,
modified or otherwise supplemented from time to time, the "Credit Agreement"),
among the Borrower, the Corporate Guarantors named therein and The Chase
Manhattan Bank (the "Lender"), the Lender has agreed to make loans to the
Borrower;
WHEREAS, pursuant to the terms of the Credit Agreement, the
Grantors granted to the Lender a security interest in all of the personal
property of the Grantors including all right, title and interest of the Grantors
in, to and under any copyright or copyright license whether now existing or
hereafter arising or acquired, and all proceeds thereof to secure the payment of
the Obligations (as such term is defined in the Credit Agreement);
NOW THEREFORE, for good and valuable consideration the receipt
and sufficiency of which is hereby acknowledged, Grantors do, as security for
the Obligations, hereby grant to the Lender a continuing security interest in
all the Grantors' right, title and interest in and to each and every item of
Product, the scenario, screenplay or script upon which an item of Product is
based, all of the properties thereof, tangible and intangible, and all domestic
and foreign copyrights and all other rights therein and thereto, of every kind
and character, whether now in existence or hereafter to be made or produced, and
whether or not in possession of such Grantors, including with respect to each
and every item of Product and without limiting the foregoing language, each and
all of the following particular rights and properties (to the extent they are
owned or hereafter created or acquired by Grantors):
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(i) all scenarios, screenplays and/or scripts at every stage
thereof;
(ii) all common law and/or statutory copyright and other rights
in all literary and other properties (hereinafter called "said literary
properties") which form the basis of each item of Product and/or which
are and/or will be incorporated into each item of Product, all component
parts of each item of Product consisting of said literary properties,
all rights in and to the story, all treatments of said story and said
literary properties, together with all preliminary and final screenplays
used and to be used in connection with the item of Product, and all
other literary material upon which the item of Product is based or from
which it is adapted;
(iii) all rights in and to all music and musical compositions
used and to be used in each item of Product, including, each without
limitation, all rights to record, rerecord, produce, reproduce or
synchronize all of said music and musical compositions in and in
connection therewith;
(iv) without limitation, all exposed film, developed film,
positives, negatives, prints, positive prints, answer prints, special
effects, preparing materials (including interpositives, duplicate
negatives, internegatives, color reversals, intermediates, lavenders,
fine grain master prints and matrices, and all other forms of pre-print
elements), sound tracks, cutouts, trims and any and all other physical
properties of every kind and nature relating to such item of Product,
whether in completed form or in some state of completion, and all
masters, duplicates, drafts, versions, variations and copies of each
thereof, in all formats whether on film, videotape, disk or otherwise
and all music sheets and promotional materials relating to such item of
Product (collectively, the "Physical Materials");
(v) all collateral, allied, subsidiary and merchandising rights
appurtenant or related to each item of Product including, without
limitation, the following rights: all rights to produce remakes or
sequels or prequels to each item of Product based upon each item of
Product, said literary properties or the theme of each item of Product
and/or the text or any part of said literary properties; all rights
throughout the world to broadcast, transmit and/or reproduce by means of
television (including commercially sponsored, sustaining and
subscription or "pay" television) or by any process analogous thereto,
now known or hereafter devised, each item of Product or any remake or
sequel or prequel to the item of Product; all rights to produce
primarily for television or similar use a motion picture or series of
motion pictures, by use of film or any other recording device or medium
now known or hereafter devised, based upon each item of Product, said
literary properties or any part thereof, including, without limitation,
based upon any script, scenario or the like used in each item of
Product; all merchandising rights including, without limitation, all
rights to use, exploit and license others to use and exploit any and all
commercial tieups of any kind arising out of or connected with said
literary properties, each item of Product, the title or titles of each
item of Product, the characters of each item
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of Product or said literary properties and/or the names or
characteristics of said characters and including further, without
limitation, any and all commercial exploitation in connection with or
related to each item of Product, any remake or sequel thereof and/or
said literary properties;
(vi) all statutory copyrights, domestic and foreign, obtained or
to be obtained on items of Product, together with any and all copyrights
obtained or to be obtained in connection with each item of Product or
any underlying or component elements of each item of Product, including,
in each case without limitation, all copyrights on the property
described in subparagraphs (i) through (v) inclusive, of this paragraph,
together with the right to copyright (and all rights to renew or extend
such copyrights) and the right to ▇▇▇ in the name of any of the
Grantors' names for past, present and future infringements of copyright;
(vii) all insurance policies and completion bonds connected with
each item of Product and all proceeds which may be derived therefrom;
(viii) all rights to distribute, sell, rent, license the
exhibition of and otherwise exploit and turn to account each item of
Product, the Physical Materials and rights in and to said story, other
literary material upon which each item of Product is based or from which
it is adapted, and said music and musical compositions used or to be
used in each item of Product;
(ix) any and all sums, proceeds, money, products, profits or
increases, including money profits or increases (as those terms are used
in the New York Uniform Commercial Code (the "UCC") or otherwise) or
other property obtained or to be obtained from the distribution,
exhibition, sale or other uses or dispositions of each item of Product
or any part of each item of Product, including, without limitation, all
proceeds, profits, products and increases, whether in money or
otherwise, from the sale, rental or licensing of each item of Product
and/or any of the elements of each item of Product including from
collateral, allied, subsidiary and merchandising rights;
(x) the dramatic, nondramatic, stage, television, radio and
publishing rights, title and interest in and to each item of Product,
and the right to obtain copyrights and renewals of copyrights therein;
(xi) the name or title of each item of Product and all rights of
such Grantor to the use thereof, including, without limitation, rights
protected pursuant to trademark, service ▇▇▇▇, unfair competition and/or
the rules and principles of any other applicable statutes, common law,
or other rule or principle of law;
(xii) any and all contract rights and/or chattel paper which may
arise in connection with each item of Product;
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167
(xiii) all accounts and/or other rights to payment which such
Grantor presently owns or which may arise in favor of such Grantor in
the future, including, without limitation, any refund under a completion
guaranty, all accounts and/or rights to payment due from exhibitors in
connection with the distribution of each item of Product, and from
exploitation of any and all of the collateral, allied, subsidiary,
merchandising and other rights in connection with each item of Product;
(xiv) any and all "general intangibles" (as that term is
defined in the UCC) not elsewhere included in this definition,
including, without limitation, any and all general intangibles
consisting of any right to payment which may arise in the distribution
or exploitation of any of the rights set out herein, and any and all
general intangible rights in favor of such Grantor for services or other
performances by any third parties, including actors, writers, directors,
individual producers and/or any and all other performing or
nonperforming artists in any way connected with each item of Product,
any and all general intangible rights in favor of such Grantor relating
to licenses of sound or other equipment, licenses for any photograph or
photographic process, and all general intangibles related to the
distribution or exploitation of each item of Product including general
intangibles related to or which grow out of the exhibition of each item
of Product and the exploitation of any and all other rights in each item
of Product set out in this definition;
(xv) any and all goods, including inventory (as that term is
defined in the UCC), which may arise in connection with the creation,
production or delivery of each item of Product and which goods pursuant
to any production or distribution agreement or otherwise are owned by
such Grantor;
(xvi) all and each of the rights, regardless of denomination,
which arise in connection with the creation, production, completion of
production, delivery, distribution, or other exploitation of each item
of Product, including, without limitation, any and all rights in favor
of such Grantor, the ownership or control of which are or may become
necessary or desirable, in the opinion of the Lender, in order to
complete production of each item of Product in the event that the Agent
exercises any rights it may have to take over and complete production of
each item of Product;
(xvii) any and all documents issued by any pledgeholder or
bailee with respect to the item of Product, or any Physical Materials
(whether or not in completed form) with respect thereto;
(xviii) any and all production accounts or other bank accounts
established by such Grantor with respect to such item of Product;
(xix) any and all rights of such Grantor under contracts
relating to the production or acquisition of each item of Product; and
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168
(xx) any and all rights of such Grantor under any agreement
entered into by such Grantor pursuant to which such Grantor has sold,
leased, licensed or assigned distribution rights or other exploitation
rights to any item of Product to an unaffiliated person;
(all of the foregoing items or types of property, whether presently existing or
hereafter arising or acquired, shall be referred to herein collectively as the
"Collateral").
Each of the Grantors agrees that if any person, firm, corporation
or other entity shall do or perform any acts which the Lender believes
constitute a copyright infringement of the photoplay or of any of the literary,
dramatic or musical material contained in the Product, or constitute a
plagiarism, or violate or infringe any right of any Grantor or the Lender
therein or if any person, firm, corporation or other entity shall do or perform
any acts which the Lender believes constitute an unauthorized or unlawful
distribution, exhibition, or use thereof, then and in any such event, upon 30
days' prior written notice to such Grantor, while an Event of Default under the
Credit Agreement is continuing, the Lender may and shall have the right to take
such steps and institute such suits or proceedings as the Lender may deem
advisable or necessary to prevent such acts and conduct and to secure damages
and other relief by reason thereof, and to generally take such steps as may be
advisable or necessary or proper for the full protection of the rights of the
parties. The Lender may take such steps or institute such suits or proceedings
in its own name or in the name of such Grantor or in the names of the parties
jointly. The Lender hereby agrees to give the applicable Grantor notice of any
steps taken, or any suits or proceedings instituted, by the Lender pursuant to
this paragraph.
This security interest is granted in conjunction with the
security interests granted to the Lender pursuant to the Credit Agreement. Each
Grantor does hereby further acknowledge and affirm that the rights and remedies
of the Lender with respect to the security interest in the Collateral made and
granted hereby are subject to, and more fully set forth in, the Credit
Agreement, the terms and provisions of which are incorporated by reference
herein as if fully set forth herein.
This Copyright Security Agreement is made for collateral purposes
only. At such time as all of the Loans under the Credit Agreement shall have
been repaid in full, the Commitments (including any commitment to issue any
Letter of Credit) shall have terminated and all Letters of Credit shall have
expired or been terminated or cancelled, the Lender shall execute and deliver to
such Grantors, at the Borrower's or the applicable Grantor's expense, without
representation, warranty or recourse, all releases and reassignments,
termination statements and other instruments as may be necessary or proper to
terminate the security interest of the Lender in the Collateral, subject to any
disposition thereof which may have been made by the Lender pursuant to the terms
hereof or of the Credit Agreement.
The Lender agrees that there will be no assignment of the
Collateral, other than the security interest described herein, unless and until
there shall occur an Event of Default under
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the Credit Agreement and the Lender gives written notice to the applicable
Grantor of its intention to enforce its rights against any of the Collateral.
So long as no Event of Default under the Credit Agreement shall
have occurred and be continuing, and subject to the various provisions of the
Credit Agreement and the other Fundamental Documents to which it is a party,
each Grantor may use, license and exploit the Collateral in any lawful manner.
THIS COPYRIGHT SECURITY AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.
Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed thereto in the Credit Agreement.
IN WITNESS WHEREOF, the Grantors have caused this Copyright
Security Agreement to be duly executed by its officer thereunto duly authorized
as of November 4, 1997.
DOVE ENTERTAINMENT, INC.
By
------------------------------------------
Name:
Title:
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DOVE INTERNATIONAL, INC.
By
------------------------------------------
Name:
Title:
DOVE FOUR POINT, INC.
By
------------------------------------------
Name:
Title:
Accepted:
THE CHASE MANHATTAN BANK
By
------------------------------------------
Name:
Title:
-7-
▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇▇▇▇ )
: ss.:
COUNTY OF LOS ANGELES)
On the ____ day of __________, in the year 1997, before me personally
came _____________________, to me known, who, being by me sworn, did say that
s/he is an ____________ of Dove Entertainment, Inc. which corporation is
described in, and which corporation executed the above instrument, and that s/he
signed his/her name by order of the Board of Directors of said corporation.
-----------------------------------
Notary Public
172
STATE OF )
: ss.:
COUNTY OF )
On the ____ day of __________, in the year 1997, before me personally
came _____________________, to me known, who, being by me sworn, did say that
s/he is an ____________ of Dove International, Inc., which corporation is
described in, and which corporation executed the above instrument, and that s/he
signed his/her name by order of the Board of Directors of said corporation.
-----------------------------------
Notary Public
173
STATE OF )
: ss.:
COUNTY OF )
On the ____ day of __________, in the year 1997, before me personally
came _____________________, to me known, who, being by me sworn, did say that
s/he is an ____________ of Dove Four Point, Inc., which corporation is
described in, and which corporation executed the above instrument, and that s/he
signed his/her name by order of the Board of Directors of said corporation.
-----------------------------------
Notary Public
174
SCHEDULE 1
to Copyright Security Agreement
Title Registration No. Date of Registration
----- ---------------- --------------------
175
EXHIBIT E-2
FORM OF
SUPPLEMENT NO. __ TO THE COPYRIGHT SECURITY
AGREEMENT DATED AS OF NOVEMBER 4, 1997
WHEREAS, [INSERT NAME OF GRANTOR], a __________ corporation (the
"Grantor") is party to that certain Credit, Security, Guaranty and Pledge
Agreement, dated as of November 4, 1997, (as the same may be amended, modified
or otherwise supplemented from time to time, the "Credit Agreement"), among Dove
Entertainment, Inc. (the "Borrower"), the Corporate Guarantors named therein
(the "Guarantors") and The Chase Manhattan Bank, as Lender (the "Lender");
WHEREAS, pursuant to the terms of the Credit Agreement, the
Grantor has granted to the Lender a security interest in all right, title and
interest of the Grantor in and to all personal property, whether now owned,
presently existing or hereafter acquired or created, including, without
limitation, all right, title and interest of the Grantor in, to and under any
item of Product (such term being used herein as defined in the Copyright
Security Agreement referred to below) and any copyright or copyright license,
whether now existing or hereafter arising, acquired or created, and all proceeds
thereof or income therefrom, to secure the payment and performance of the
Obligations (such term being used herein as defined in the Credit Agreement)
pursuant to the Credit Agreement;
WHEREAS, the Grantor is a party to a Copyright Security
Agreement, dated as of November 4, 1997 (as the same has been, or may hereafter
be, amended or supplemented from time to time, the "Copyright Security
Agreement"), pursuant to which the Grantor has granted to the Lender, as
security for the Obligations, a continuing security interest in all of the
Grantor's right, title and interest in and to each and every item of Product,
the scenario, screenplay or script upon which an item of Product is based, all
of the properties thereof, tangible and intangible, and all domestic and foreign
copyrights and all other rights therein and thereto, of every kind and
character, whether now in existence or hereafter to be made or produced, and
whether or not in possession of the Grantor, all as more fully set forth in the
Copyright Security Agreement;
WHEREAS, the Grantor has acquired or created additional items of
Product since the date of execution of the Copyright Security Agreement and the
most recent Supplement thereto and holds certain additional copyrights and
rights under copyright with respect to items of Product;
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WHEREAS, Schedule 1 to the Copyright Security Agreement does not
reflect (i) item(s) of Product acquired or created by the Grantor since the date
of execution of the Copyright Security Agreement and the most recent Supplement
thereto or (ii) all the copyrights and rights under copyright held by the
Grantor;
THEREFORE,
A. The Grantor does hereby grant to the Lender, as security, a
continuing security interest in and to all of the Grantor's right, title
and interest in and to each and every item of Product being added to
Schedule 1 to the Copyright Security Agreement pursuant to paragraph (b)
below, the scenario, screenplay or script upon which such item of
Product is based, all of the properties thereof, tangible and
intangible, and all domestic and foreign copyrights and all other rights
therein and thereto, of every kind and character, whether now in
existence or hereafter to be made or produced, and whether or not in
possession of the Grantor, all as contemplated by, and as more fully set
forth in, the Copyright Security Agreement.
B. Schedule 1 to the Copyright Security Agreement is hereby
supplemented, effective as of the date hereof, so as to reflect all of
the copyrights and rights under copyright with respect to the item(s) of
Product in and to which the Grantor has granted a continuing security
interest to the Lender pursuant to the terms of the Copyright Security
Agreement and the Credit Agreement. The following item(s) of Product and
copyright information are hereby added to Schedule 1 to the Copyright
Security Agreement:
Date of
Title Registration No. Registration
----- ---------------- ------------
Except as expressly supplemented hereby, the Copyright Security
Agreement shall continue in full force and effect in accordance with the
provisions thereof on the date hereof. As used in the Copyright Security
Agreement, the terms "Agreement", "this Agreement", "this Copyright Security
Agreement", "herein", "hereafter", "hereto", "hereof" and words of similar
import, shall, unless the context otherwise requires, mean the Copyright
Security Agreement as supplemented by this Supplement.
Except as expressly supplemented hereby, the Copyright Security
Agreement, all documents contemplated thereby and any previously executed
Supplements thereto, are each hereby confirmed and ratified by the Grantor.
The execution and filing of this Supplement, and the addition of
the item(s) of Product set forth herein to Schedule 1 to the Copyright Security
Agreement are not intended by
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the parties to derogate from, or extinguish, any of the Lender's rights or
remedies under (i) the Copyright Security Agreement and/or any agreement,
amendment or supplement thereto or any other instrument executed by the Grantor
and heretofore recorded or submitted for recording in the U.S. Copyright Office
or (ii) any financing statement, continuation statement, deed or charge or other
instrument executed by the Grantor and heretofore filed in any state or country
in the United States of America or elsewhere.
IN WITNESS WHEREOF, the Grantor has caused this Supplement No.
___ to the Copyright Security Agreement to be duly executed by its duly
authorized officer as of [INSERT DATE OF EXECUTION].
[NAME OF GRANTOR]
By:
----------------------------------------
Name:
Title:
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178
STATE OF _____________)
: ss.:
COUNTY OF ____________)
On this the ___ day of __________, ____, before me,
________________________________, the undersigned Notary Public, personally
appeared ________________________________,
[ ] personally known to me,
[ ] proved to me on the basis of satisfactory evidence, to be the
_________________________ of the corporation known as ______________________ who
executed the foregoing instrument on behalf of the corporation, and acknowledged
that such corporation executed it pursuant to a resolution of its Board of
Directors.
WITNESS my hand and official seal.
______________________________
Notary Public
6
179
EXHIBIT F
FORM OF LABORATORY ACCESS LETTER
[DATE]
[ADDRESS TO LABORATORY]
Dear Sir or Madam:
This letter will confirm the terms of an agreement among you (the
"Laboratory"), Dove Entertainment, Inc. ("Borrower") and the affiliates of
Borrower listed on the signature pages hereto (collectively, the "Company") and
The Chase Manhattan Bank (the "Lender") relating to the items of Product (the
"Product") listed on Schedule 1 hereto.
Reference is hereby made to that certain Credit, Security,
Guaranty and Pledge Agreement dated as of November 4, 1997 (as the same may be
amended, supplemented or otherwise modified, renewed or replaced from time to
time, the "Credit Agreement") among the Borrower, the Corporate Guarantors named
therein and the Lender;
The Laboratory now has or may have in its possession or under its
control certain of the exposed film, developed film, positives, negatives,
prints, positive prints, answer prints, special effects, preparing material
(including interpositives, duplicate negatives, internegatives, color reversals,
intermediates, lavenders, fine grain master prints and matrices, and all other
forms of pre-print elements), sound tracks, cutouts, trims and any and all other
physical properties of every kind and nature, of or relating to, the Product,
whether in completed form or in some state of completion, and all audio and
video masters, duplicates, drafts, versions, variations and copies of each
thereof, in all formats whether on film, videotape, disk, cassette, phonorecord
or otherwise and all materials relating to the Product (all of the foregoing
physical properties now or hereafter in the Laboratory's possession or control
are herein collectively referred to as the "Physical Materials"). The Company
now possesses certain rights in connection with the Product and the Physical
Materials, including, without limitation, non-exclusive rights of access with
respect to the Physical Materials (the "Access Rights").
For good and valuable consideration, the receipt of which is
hereby acknowledged, the parties hereto hereby agree as follows:
1. The Laboratory hereby agrees and confirms to the Lender that
the Company is entitled to exercise the Access Rights with respect to the
Physical Materials. The Company and the Lender hereby confirm to the Laboratory,
and the Laboratory hereby acknowledges, that in
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order to secure certain obligations under the Credit Agreement, the Company has
pursuant to the Credit Agreement, inter alia, granted to the Lender a security
interest in and to the Company's right, title and interest in and to the Access
Rights.
2. The parties hereby agree that, upon written notice from the
Lender to the Laboratory that an Event of Default (as such term is defined in
the Credit Agreement) has occurred and is continuing, and the Lender has
exercised its security interest with respect to Access Rights, the Laboratory
shall accord to the Lender (or the Lender's successors or assigns) instead of
the Company, the non-exclusive right to exercise the Access Rights including,
without limitation, the non-exclusive right to have access to the Physical
Materials and to order and receive from the Laboratory on the Laboratory's
normal and customary terms all materials and services customarily rendered or
furnished by the Laboratory in connection with the Physical Materials.
3. The Laboratory and the other parties hereto hereby agree that
the rights of any party hereunder (including, without limitation, the Lender's
non-exclusive right to exercise the Access Rights) shall not be affected,
diminished, impeded or interfered with by reason of any failure of any other
person or entity to pay for any charges which have heretofore been incurred or
which may hereinafter be incurred in connection with the Product or the Physical
Materials, that the Laboratory will not look to any party hereunder for payment
of any charges incurred by any other person or entity with respect to the
Product or the Physical Materials (it being understood and agreed that all
services or materials ordered by any party shall be at the sole cost and expense
of the party ordering the same) and that any claim or lien which the Laboratory
may assert against any party hereto with respect to services or materials
furnished or rendered by the Laboratory at the request of such party with
respect to the Product or the Physical Materials will not interfere with any
other party's rights of access with respect to the Physical Materials or other
rights referred to hereunder.
4. The parties hereto hereby agree that the Access Rights may not
be terminated without the prior written consent of the Lender or unless the
Laboratory shall have received notice that the Lender's security interest in and
to the Company's right, title and interest in and to the Access Rights has
terminated, and that the Physical Materials may not be released to any other
entity (including another laboratory) without the Lender's prior written consent
(which consent shall not be unreasonably withheld), except that unless and until
the Laboratory shall have received written notice to the contrary, the
Laboratory will permit the Company to remove Physical Materials from its
premises in the ordinary course of business and in a manner consistent with the
Access Rights.
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Kindly confirm your agreement to and acceptance of the foregoing
by signing in the space provided below.
Very truly yours,
DOVE ENTERTAINMENT, INC.
By
------------------------------------------
Name:
Title:
DOVE INTERNATIONAL, INC.
By
------------------------------------------
Name:
Title:
DOVE FOUR POINT, INC.
By
------------------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK
By
------------------------------------------
Name:
Title:
AGREED AND ACCEPTED BY:
[LABORATORY]
By:
------------------------------------
Name:
Title:
182
Schedule 1
THE PRODUCT
[LIST TITLES OF PRODUCT]
183
EXHIBIT G
FORM OF NOTICE OF ASSIGNMENT
AND IRREVOCABLE INSTRUCTIONS
[INSERT NAME AND ADDRESS OF APPLICABLE CREDIT PARTY]
As of __________
[INSERT NAME AND ADDRESS OF ACCOUNT DEBTOR]
Re: [DESCRIBE AGREEMENT BETWEEN THE APPLICABLE CREDIT PARTY (THE
"COMPANY") AND ACCOUNT DEBTOR (THE "AGREEMENT")]
Dear Sir or Madam:
The undersigned has created a security interest in its benefits and
rights to receive payments under the Agreement referred to above, for the
benefit of The Chase Manhattan Bank (the "Lender") pursuant to that certain
Credit, Security, Guaranty and Pledge Agreement dated as of November 4, 1997 (as
the same may be amended, supplemented or otherwise modified, renewed or replaced
from time to time, the "Credit Agreement") among Dove Entertainment, Inc., the
Corporate Guarantors named therein and the Lender.
The Company hereby irrevocably instructs and authorizes you to pay
all monies from time to time owing or to become due from you to us pursuant to
the Agreement (the "Assigned Payments") as follows:
If by wire transfer, to:
The Chase Manhattan Bank
for credit to Dove Entertainment, Inc. Collection Account
Account No. ▇▇▇-▇▇▇-▇▇▇
ABA No. ▇▇▇▇▇▇▇▇▇
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If by mail or hand delivery, to:
The Chase Manhattan Bank
▇.▇. ▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
for credit to Dove Entertainment, Inc. Collection Account
This authority and instruction is coupled with an interest and may
not be modified, terminated or revoked without the prior written consent of the
Lender.
Upon the occurrence of an Event of Default (as such term is defined
in the Credit Agreement), the Lender shall have the right to modify this
authority and instruction by written notice to the parties hereto.
This Notice of Assignment and Irrevocable Instruction rescinds,
supersedes and replaces in its entirety any prior or previous notice and/or
directions to pay that you may have received with regard to the payment of all
or any portion of the Assigned Payments.
Please signify your acknowledgment hereof by signing and returning
to the Lender at the address below the acknowledgment and confirmation as set
out below.
Very truly yours,
[INSERT NAME OF APPLICABLE CREDIT PARTY]
By:___________________________
Name:
Title:
To: The Chase Manhattan Bank
c/o ▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
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185
WE ACKNOWLEDGE RECEIPT, of the foregoing notice of irrevocable authority and
instruction and undertake to comply with it. We hereby confirm and agree that
all monies owing under the Agreement shall be paid immediately when they are due
subject only to the Agreement between us and the Company.
Dated this ______ day of ______
[NAME OF ACCOUNT DEBTOR]
By:_________________________
Name:
Title:
[THE UNDERSIGNED ACKNOWLEDGES THAT
THE NOTICE OF ASSIGNMENT, DATED
AS OF ______, IN FAVOR OF
THE UNDERSIGNED HAS BEEN TERMINATED.
[NAME OF OLD LENDER]
BY:_________________________
NAME:
TITLE:(1)
--------
(1) Applicable only to receivables previously assigned to another lender.
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186
EXHIBIT H
FORM OF BORROWING CERTIFICATE
The undersigned HEREBY CERTIFIES with respect to the Borrowing to be
made on the date indicated below pursuant to the Credit, Security, Guaranty and
Pledge Agreement dated as of November 4, 1997, among Dove Entertainment, Inc.
(the "Borrower"), the Corporate Guarantors named therein and The Chase Manhattan
Bank (the "Lender") (as the same may be amended, supplemented or otherwise
modified, renewed or replaced from time to time, the "Credit Agreement";
capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Credit Agreement) that:
(a) the representations and warranties contained in the Credit
Agreement are true and correct in all material respects on and as of the
date hereof as if such representations and warranties had been made on and
as of the date hereof except to the extent that such representations and
warranties expressly relate to an earlier date and except to the extent
that changes have occurred without breach or default under any of the
terms or conditions of the Credit Agreement;
(b) no Default or Event of Default has occurred or is continuing,
nor shall any such event occur by reason of the making of the Loan(s)
requested herein;
(c) the Borrower requests [A] Loan(s) on the terms and conditions
as stated in the Credit Agreement and the Note:
(i) the requested Business Day of the Loan is [INSERT DATE];
(ii) the type of [INSERT WHETHER AN ALTERNATE BASE RATE OR
EURODOLLAR LOAN] requested, the amounts thereof and the Interest
Period(s) [IF A EURODOLLAR LOAN IS REQUESTED] are as follows:
Type Interest Period Amount
---- --------------- ------
(iii) $_______ of the Loan requested above shall be subject to
the guaranty obligations of the Individual Guarantors pursuant to
the Guaranty Agreements(1);
(d) the Borrowing Base on [INSERT DATE] was $__________ as
indicated on the most recent Borrowing Base Certificate delivered to the
Lender pursuant to the Credit
--------
(1) Applicable for Loans subject to the guaranty obligations of the Individual
Guarantors under the Guaranty Agreements.
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Agreement and the undersigned has no reason to believe that the sum of (x)
the Borrowing Base, (y) Maximum Guaranty Amount and (z) amounts currently
held in the Collection Account, if currently computed would be less than
the outstanding principal amount of all Loans under the Credit Agreement
(after giving effect to the Loan requested hereby).
IN WITNESS WHEREOF, the undersigned has caused this certificate to
be executed this ___ day of ___________.
DOVE ENTERTAINMENT, INC.
By____________________________
Name:
Title:
APPROVED BY:
MEDIA EQUITIES INTERNATIONAL, L.L.C.
By____________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title:
By____________________________
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title:
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188
EXHIBIT I
FORM OF INSTRUMENT OF ASSUMPTION AND JOINDER
Instrument of ASSUMPTION AND JOINDER AGREEMENT dated as of
___________ (the "Assumption Agreement") made by [INSERT NAME OF NEW CREDIT
PARTY], a [INSERT STATE OF INCORPORATION] corporation (the "Company") in favor
of The Chase Manhattan Bank, as Lender (the "Lender"), under that certain
Credit, Security, Guaranty and Pledge Agreement dated as of November 4, 1997 (as
the same may be amended, supplemented or otherwise modified, renewed or replaced
from time to time, the "Credit Agreement") among Dove Entertainment, Inc., a
California corporation, the Corporate Guarantors referred to therein and the
Lender.
W I T N E S S E T H
The Company is a [INSERT STATE OF INCORPORATION] corporation and is
a Subsidiary of [INSERT NAME OF CREDIT PARTY]. Pursuant to Section 6.22 of the
Credit Agreement, the Company is required to execute this document (as a newly
[FORMED OR ACQUIRED] Subsidiary of [INSERT NAME OF CREDIT PARTY]).
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt of which is hereby acknowledged, the Company
hereby agrees as follows:
1. Assumption and Joinder.
(a) The Company hereby expressly confirms that it has
assumed, and hereby agrees to perform and observe, each and every one of the
covenants, rights, promises, agreements, terms, conditions, obligations,
appointments, duties and liabilities of (i) a Corporate Guarantor under the
Credit Agreement and all the other Fundamental Documents applicable to it as a
Corporate Guarantor, (ii) a Contributor (as such term is defined in the
Contribution Agreement) under the Contribution Agreement and (iii) a Grantor (as
such term is defined in the Copyright Security agreement) under the Copyright
Security Agreement. By virtue of the foregoing, the Company hereby accepts and
assumes any liability of (x) a Corporate Guarantor and/or a Credit Party related
to each representation or warranty, covenant or obligation made by a Corporate
Guarantor and/or a Credit Party in the Credit Agreement or any other document
and hereby expressly affirms, on the date hereof, for the benefit of the Lender,
each of such representations, warranties, covenants and obligations, (y) a
Contributor related to each covenant or obligation made by a Contributor in the
Contribution Agreement and hereby expressly affirms,
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189
on the date hereof, each of such covenants and obligations and (z) a Grantor
related to each covenant or obligation made by a Grantor in the Copyright
Security Agreement and hereby expressly affirms, on the date hereof, each of
such covenants and obligations.
(b) All references to the term "Corporate Guarantor" or
"Credit Party" in the Credit Agreement or any other Fundamental Document, or in
any document or instrument executed and delivered or furnished, or to be
executed and delivered or furnished, in connection therewith shall be deemed to
be references to, and shall include, the Company.
(c) All references to the term "Contributor" in the
Contribution Agreement, or in any document or instrument executed and delivered
or furnished, or to be executed and delivered or furnished, in connection
therewith shall be deemed to be references to, and shall include, the Company.
(d) All references to the term "Grantor" in the Copyright
Security Agreement, or in any document or instrument executed and delivered or
furnished, or to be executed and delivered or furnished, in connection therewith
shall be deemed to be references to, and shall include, the Company.
2. Representations and Warranties. The Company hereby represents
and warrants to the Lender as follows:
(a) The Company has the requisite corporate power and
authority to enter into this Assumption Agreement and to perform its obligations
hereunder and under the Credit Agreement, the Contribution Agreement, the
Copyright Security Agreement and the other Fundamental Documents to which it is
a party. The execution, delivery and performance of this Assumption Agreement by
the Company and the performance of its obligations under the Credit Agreement
and the other Fundamental Documents have been duly authorized by the Board of
Directors of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize the execution, delivery or performance of
this Assumption Agreement, the transactions contemplated hereby or the
performance of its obligations under the Credit Agreement or any other
Fundamental Document. This Assumption Agreement has been duly executed and
delivered by the Company. This Assumption Agreement and the Credit Agreement
each constitutes a legal, valid and binding obligation of the Company
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors rights generally and
to general principles of equity.
(b) The representations and warranties set forth in Article
3 of the Credit Agreement are true and correct on and as of the date hereof
(except to the extent that such representations and warranties expressly relate
to an earlier date) with the same effect as if made on and as of the date
hereof.
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190
(c) The authorized capitalization of the Company, the number
of shares of its capital stock outstanding on the date hereof, and the ownership
of the outstanding shares of its capital stock is set forth on Schedule 1
hereto.
(d) On the date hereof the Company has not done business, is
not doing business and does not intend to do business other than under its full
corporate name, including, without limitation, under any trade name or other
doing business name except as set forth on Schedule 1 hereto, and is in good
standing in all jurisdictions where the failure to be in good standing as a
foreign jurisdiction would give rise to a material liability of the Company.
(e) The chief executive office of the Company is located at
________________________. Such office is the place where the Company keeps the
records concerning the Collateral attributable to it on the date hereof. The
only places at which the Company regularly keeps any goods included in the
Collateral attributable to it on the date hereof are the places listed on
Schedule 2 hereto.
3. Further Assurances. At any time and from time to time, upon
the Lender?s request and at the sole expense of the Company, the Company will
promptly and duly execute and deliver any and all further instruments and
documents and take such further action as the Lender reasonably deems necessary
to effect the purposes of this Assumption Agreement.
4. Binding Effect; Assignment. This Assumption Agreement shall be
binding upon the Company and shall inure to the benefit of the Lender and its
successors and assigns.
5. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS
MADE AND TO BE PERFORMED WHOLLY WITHIN THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the undersigned has caused this Assumption
Agreement to be duly executed and delivered by its duly authorized officer as of
the date first above written.
[NAME OF COMPANY]
By: ______________________
Name:
Title:
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191
SCHEDULE 1
Capital Stock of [NAME OF COMPANY]
Authorized capitalization:
Number of shares of capital stock outstanding:
Ownership of the outstanding capital stock:
192
SCHEDULE 2
Location of Collateral
193
EXHIBIT J
FORM OF CONTRIBUTION AGREEMENT
This CONTRIBUTION AGREEMENT ("Agreement") is entered into as of
November 4, 1997 by and among Dove Entertainment, Inc., a California corporation
(the "Company" or the "Borrower") and each Subsidiary of the Borrower whose name
appears at the foot hereof (collectively, the "Contributors", individually each
a "Contributor"), for the purpose of establishing the respective rights and
obligations of contribution among the Contributors and the Borrower in
connection with the Credit Agreement (as hereinafter defined). Capitalized terms
used herein and not otherwise defined shall have the meanings set forth in the
Credit Agreement.
WHEREAS, the Borrower and the Contributors are parties to a Credit,
Security, Guaranty and Pledge Agreement dated as of November 4, 1997 among the
Borrower, the Contributors and The Chase Manhattan Bank (the "Lender") (said
agreement, as it may hereafter be amended, supplemented or otherwise modified,
renewed or replaced from time to time in accordance with its terms being the
"Credit Agreement"), pursuant to which the Lender has made certain commitments,
subject to the terms and conditions set forth therein, to extend a credit
facility to the Borrower;
WHEREAS, pursuant to the Credit Agreement, the Contributors have
guaranteed the Obligations (such term being used herein as defined in the Credit
Agreement) of the Borrower;
WHEREAS, pursuant to the terms of the Credit Agreement, each of the
Borrower and Contributors has granted to the Lender a security interest in the
Collateral (as defined in the Credit Agreement) for their respective obligations
thereunder;
WHEREAS, as a result of the transactions contemplated by the Credit
Agreement, the Borrower and the Contributors will benefit, directly and
indirectly, from the Obligations and in consideration thereof desire to enter
into this Agreement to allocate such benefits among themselves and to provide a
fair and equitable arrangement to make contributions in the event any payments
are made by the Contributors under the Credit Agreement or the Lender exercises
recourse against any of the Collateral owned by the Contributors (such payment
or recourse being referred to herein as a "Contribution");
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the Contributors and the Borrower hereby agree as follows:
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SECTION 1. Contribution. In order to provide for just and equitable
contribution among the Contributors and the Borrower in the event any
Contribution is made by a Contributor (a "Funding Contributor") under the Credit
Agreement, that Funding Contributor shall be entitled to a contribution from
certain other Contributors and from the Borrower for all payments, damages and
expenses incurred by that Funding Contributor in discharging any of the
Obligations, in the manner and to the extent set forth in this Agreement. The
amount of any Contribution under this Agreement shall be equal to the payment
made pursuant to the Credit Agreement or the fair saleable value of the Funding
Contributor's portion of the Collateral against which recourse is exercised, and
shall be determined as of the date on which such payment is made or recourse is
exercised, as the case may be.
SECTION 2. Benefit Amount Defined. For purposes of this Agreement,
the "Benefit Amount" of any Contributor as of any date of determination shall be
the net value of the benefits to such Contributor from extensions of credit made
by the Lender to the Borrower under the Credit Agreement. Such benefits shall
include benefits of funds constituting proceeds of Loans which are deposited
into the account of the Borrower by the Lender which are in turn advanced or
contributed by the Borrower to such Contributor (collectively, the "Benefits").
In the case of any proceeds of Loans or Benefits advanced or contributed to a
Person (an "Owned Entity") any of the equity interests of which are owned
directly or indirectly by a Contributor, the Benefit Amount of a Contributor
with respect thereto shall be that portion of the net value of the benefits
attributable to Loans or Benefits advanced or contributed to the Owned Entity
equal to the direct or indirect percentage ownership of such Contributor in its
Owned Entity.
SECTION 3. Contribution Obligation. Each Contributor and the
Borrower shall be liable to a Funding Contributor in an amount equal to the
greater of (A) the product of (i) a fraction the numerator of which is (x) the
Benefit Amount of such Contributor or Borrower, and the denominator of which is
(y) the total amount of Obligations and (ii) the amount of Obligations paid by
such Funding Contributor and (B) 95% of the excess of the fair saleable value of
the property of such Contributor over the total liabilities of such Contributor
(including the maximum amount reasonably expected to become due in respect of
contingent liabilities), as the case may be, determined as of the date on which
the payment made by a Funding Contributor is deemed made for purposes of this
Agreement or any recourse is exercised against any Contributor's portion of the
Collateral, as the case may be (giving effect to all payments made by other
Funding Contributors and to the exercise of recourse against any other Funding
Contributor's portion of the Collateral as of such date in a manner to maximize
the amount of such contributions).
SECTION 4. Allocation. In the event that at any time there exists
more than one Funding Contributor with respect to any Contribution (in any such
case, the "Applicable Contribution"), then payment from other Contributors and
from the Borrower pursuant to this Agreement shall be allocated among such
Funding Contributors in proportion to the total amount of the Contribution made
for or on account of the Borrower by each such Funding Contributor pursuant to
the Applicable Contribution. In the event that at any time any Contributor pays
an
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amount under this Agreement in excess of the amount calculated pursuant to
clause (A) of Section 3, that Contributor shall be deemed to be a Funding
Contributor to the extent of such excess and shall be entitled to contribution
from the other Contributors and from the Borrower in accordance with the
provisions of this Agreement.
SECTION 5. Subrogation. Any payments made hereunder by the Borrower
shall be credited against amounts payable by the Borrower pursuant to any
subrogation rights of the Contributors which received the payments under this
Agreement.
SECTION 6. Preservation of Rights. This Agreement shall not limit
any right which any Contributor may have against any other Person which is not a
party hereto.
SECTION 7. Subsidiary Payment. The amount of contribution payable
under this Agreement by any Contributor shall be reduced by the amount of any
contribution paid hereunder by a Subsidiary of such Contributor.
SECTION 8. Equitable Allocation. If as a result of any
reorganization, recapitalization, or other corporate change in the Company or
any Affiliates or Subsidiaries thereof, or as a result of any amendment, waiver
or modification of the terms and conditions governing the Credit Agreement or
the Obligations, or for any other reason, the Contributions under this Agreement
become inequitable, the parties hereto shall promptly modify and amend this
Agreement to provide for an equitable allocation of the Contributions. Any of
the foregoing modifications and amendments to this Agreement shall be in writing
and signed by all parties hereto.
SECTION 9. Asset of Party to Which Contribution is Owing. The
parties hereto acknowledge that the right to contribution hereunder shall
constitute an asset in favor of the party to which such contribution is owing.
SECTION 10. Subordination. No payments payable by a Contributor or
by the Borrower pursuant to the terms hereof shall be paid until all amounts
then due and payable by the Borrower to the Lender, pursuant to the terms of the
Fundamental Documents, are paid in full in cash. Nothing contained in this
Agreement shall affect the obligations of any party hereto to the Lender under
the Credit Agreement or any other Fundamental Documents.
SECTION 11. Successors and Assigns; Amendments. This Agreement shall
be binding upon each party hereto and its respective successors and assigns and
shall inure to the benefit of the parties hereto and their respective successors
and assigns, and in the event of any transfer or assignment of rights by a
Contributor or by the Borrower, the rights and privileges herein conferred upon
that Contributor shall automatically extend to and be vested in such transferee
or assignee, all subject to the terms and condition hereof. Except as
specifically required under Section 8, this Agreement shall not be amended
without the prior written consent of the Lender.
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SECTION 12. Termination. This Agreement, as it may be modified or
amended from time to time, shall remain in effect, and shall not be terminated
until the Credit Agreement has been discharged or otherwise satisfied in
accordance with its terms.
SECTION 13. Choice of Law. This Agreement, and any instrument or
agreement required hereunder, shall be deemed to be made under, shall be
governed by, and shall be construed and enforced in accordance with, the laws of
the State of New York without regard to principles of conflict of laws.
SECTION 14. Counterparts. This Agreement, and any modifications or
amendments hereto may be executed in any number of counterparts, each of which
when so executed and delivered shall be deemed to be an original for all
purposes, but all such counterparts shall constitute but one and the same
instrument.
SECTION 15. Effectiveness. This Agreement shall become effective on
the date on which all of the parties hereto shall have executed this Agreement.
The Company shall deliver counterparts hereof bearing the signatures of each of
the parties hereto to the Lender.
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed as of the day and year first written above.
DOVE ENTERTAINMENT, INC.
By_______________________________
Name:
Title:
DOVE INTERNATIONAL, INC.
DOVE FOUR POINT, INC.
By_____________________________
Name:
Title:
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EXHIBIT K-1
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of November
4, 1997 (as the same may be further
supplemented, amended or otherwise
modified, renewed or replaced from time
to time, the "Guaranty Agreement")
between (i) ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, an
individual residing in Westchester
County, New York (the "Individual
Guarantor") and (ii) THE CHASE MANHATTAN
BANK, a New York banking corporation (the
"Lender").
Pursuant to the Credit, Security, Guaranty and Pledge Agreement
dated as of November 4, 1997 (as the same may be further amended, supplemented,
or otherwise modified, renewed or replaced from time to time, the "Credit
Agreement") among Dove Entertainment, Inc., a California corporation (the
"Borrower"), the Corporate Guarantors referred to therein and the Lender, the
Lender has agreed to make Loans to the Borrower and issue Letters of Credit in
an amount outstanding at any one time not in excess of $8,000,000. Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Guarantors") are the direct and
indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue Letters
of Credit to the Borrower, each of the Guarantors has agreed to guaranty such
obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the outstanding principal of and any interest on all Loans
made and to be made by the Lender to the Borrower in excess of the Borrowing
Base (as defined in the Credit Agreement) on the terms and conditions set forth
in the Credit Agreement (the "Maximum Guaranty Amount").
The Individual Guarantor individually has agreed to guaranty such
obligations of the Borrower to the extent and in accordance with the terms
hereof.
Therefore, for good and valuable consideration, the receipt of which
is hereby acknowledged by the Individual Guarantor, the parties hereto agree as
follows:
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1. GUARANTY
SECTION 1.1 Guaranty. (a) The Individual Guarantor unconditionally
and irrevocably guarantees the due and punctual payment by the Borrower, subject
to Section 1.1(g) and the limitations set forth in Section 3.1 hereof, in an
amount not to exceed the product of 110% of the Individual Guarantor's ownership
interest in MEI as of the date hereof (as set forth on Schedule 1 hereto)
multiplied by the Maximum Guaranty Amount (the "Guaranteed Obligations"), as and
when such amounts shall become due and payable whether by scheduled maturity,
acceleration or otherwise and any extensions or renewals thereof, reimbursement
obligations in respect of Letters of Credit, related costs and attorney's fees,
and all other monetary obligations of the Borrower to the Lender under the
Credit Agreement.
(b) In furtherance of the provisions of this Guaranty Agreement,
and not in limitation of any other right which the Lender may have at law or in
equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable, subject always to
the limitations set forth in Section 3.1 hereof.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty is
a continuing guaranty and constitutes a guaranty of performance and of payment
when due and not just of collection, and waives, to the extent permitted by
applicable law, any right to require that any resort be had by the Lender to any
security held for payment of the Guaranteed Obligations or to any balance of any
deposit, account or credit on the books of the Lender in favor of the Borrower
or any other guarantor or to any other person.
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the
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Guaranteed Obligations and any circumstances affecting the Collateral or the
ability of the Borrower to perform under the Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) Notwithstanding anything to the contrary contained herein, as
a condition precedent to any Borrowing in excess of the Borrowing Base being
included within the scope of this Guaranty, MEI shall have provided its prior
written approval to Borrower's request for the extension of such credit. The
Individual Guarantor agrees that the written approval by both ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇ on behalf of MEI shall be binding upon and enforceable against
the Individual Guarantor.
SECTION 1.2 No Impairment of Guaranty. Except as provided in
Sections 1.1(g) and 3.1 hereof, the obligations of the Individual Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including, without limitation, any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense (other than payment of the Guaranteed Obligations) or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Guaranteed Obligations or otherwise.
Without limiting the generality of the foregoing, the obligations of the
Individual Guarantor hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Lender to assert any claim or demand or to
enforce any remedy hereunder or under the Credit Agreement or any other
agreement, by any waiver or modification of any provision thereof, by any
default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
SECTION 1.3 Continuation and Reinstatement, etc. The Individual
Guarantor further agrees that his guaranty hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be restored by the Lender upon the bankruptcy or other reorganization
of the Borrower or any other guarantor of the Guaranteed Obligations or
otherwise.
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SECTION 1.4 Subrogation. Subject to the prior final and indefeasible
payment in full of all Obligations and to the extent of payments received by the
Lender from the Individual Guarantor on the Guaranteed Obligations, the
Individual Guarantor shall be subrogated to the rights of the Lender to receive
payments or distributions of cash, property or securities of the Borrower
applicable to the Obligations; provided, that all such rights of subrogation
shall be subordinated and junior in right of payment to the prior payment in
full of the Obligations to the Lender.
SECTION 1.5 Application of Guaranteed Amounts. In the event the
Lender receives an amount in excess of the Maximum Guaranty Amount then due and
payable from the Individual Guarantor, the other Guarantors pursuant to the
terms of this Guaranty Agreement and the respective guaranty agreements of other
Guarantors or otherwise, the Lender shall remit such excess to MEI for
disbursement to the Guarantors in such amounts as the Guarantors shall
determine.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations and
warranties to the Lender, all of which shall survive the execution and delivery
of the Note and this Guaranty Agreement and the making of the loans evidenced
and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation of,
any provision of applicable law or any order of any governmental authority
or any judgment of any court applicable to the Individual Guarantor or his
property, (b) will not violate any indenture, any agreement for borrowed
money, any bond, note or other similar instrument or any other material
agreement to which the Individual Guarantor is a party or by which the
Individual Guarantor or any of his property is bound, (c) will not be in
conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under, any such indenture, agreement,
bond, note, instrument or other material agreement to which the Individual
Guarantor is a party and (d) will not result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any
property or assets of the Individual Guarantor other than pursuant to this
Guaranty Agreement.
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in accordance
with its terms, subject (a) as to the enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency and other laws affecting
creditors' rights generally and to moratorium laws from time to time in
effect, (b) to general equitable principles which may limit the right to
obtain the remedy of specific performance and (c) to the qualification
that the enforceability of indemnification provisions may be limited by
applicable federal and state securities laws, rules and regulations.
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(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. REDUCTION OF GUARANTEED OBLIGATIONS
SECTION 3.1 Reduction of Guaranteed Obligations. The maximum
liability of the Guarantors pursuant to Section 1.1 hereof shall be reduced on a
dollar-for-dollar basis by (i) the amount, if any, by which the refinancing of
the Borrower's office building exceeds $1,800,000 and (ii) any net proceeds
received by the Credit Parties in connection with the exploitation of the motion
picture entitled "Wilde".
4. MISCELLANEOUS
SECTION 4.1 Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at c/o Apollo Partners, LLC, ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, or such other address as such party may from time to time designate by
giving written notice to the other party hereunder. All notices and other
communications given to any party hereto in accordance with the provisions of
this Guaranty Agreement shall be deemed to have been given on the fifth Business
Day after the date when sent by registered or certified mail, postage prepaid
return receipt requested, if by mail, or when receipt is acknowledged, if by
telecopier, in each case addressed to such party as provided in this Section 4.1
or in accordance with the latest unrevoked written direction from such party.
SECTION 4.2 Successors. Each reference herein to a party hereto
shall be deemed to include its respective successors, assigns, heirs, executors,
administrators and legal representatives including but not by way of limitation,
any party in whose favor the provisions of the Note shall inure, all of whom
shall be bound by the provisions of this Guaranty Agreement.
SECTION 4.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW
YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY SUIT, ACTION
OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY AGREEMENT, OR THE
SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS OR ASSIGNS. THE
INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY
WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE,
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OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT HIS
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION
OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY AGREEMENT OR THE SUBJECT
MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY
WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH
ACTION, SUIT OR PROCEEDING. THE INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE
OF PROCESS BY CERTIFIED MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN,
AND AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT
AGAINST THE INDIVIDUAL GUARANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR
LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER
MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF SUCH OTHER JURISDICTION;
PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL GUARANTOR OR ANY OF HIS ASSETS
IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE
WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS MAY BE FOUND.
SECTION 4.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.5 No Waiver, etc. Neither a failure nor a delay on the
part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
SECTION 4.6 Modification, etc. No modification, amendment or waiver
of any provision of this Guaranty Agreement, nor the consent to any departure by
the Individual
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Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Individual Guarantor in any case shall entitle the
Individual Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 4.7 Severability. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 4.8 Headings. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 4.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY WAIVES,
AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 4.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
IN WITNESS WHEREOF, the Individual Guarantor and the Lender have
caused this Guaranty Agreement to be executed by its duly authorized officer,
all as of the date first written above.
-----------------------------------------
▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By:______________________________________
Name:
Title:
ACKNOWLEDGED AND AGREED
with respect to Section 1.1(g)
MEDIA EQUITIES INTERNATIONAL, L.L.C.
By:____________________________________
Name:
Title:
205
EXHIBIT K-2
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of
November 4, 1997 (as the same may be
further supplemented, amended or
otherwise modified, renewed or
replaced from time to time, the
"Guaranty Agreement") between (i)
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, an individual
residing in Nassau County, New York
(the "Individual Guarantor") and
(ii) THE CHASE MANHATTAN BANK, a New
York banking corporation (the
"Lender").
Pursuant to the Credit, Security, Guaranty and Pledge Agreement
dated as of November 4, 1997 (as the same may be further amended, supplemented,
or otherwise modified, renewed or replaced from time to time, the "Credit
Agreement") among Dove Entertainment, Inc., a California corporation (the
"Borrower"), the Corporate Guarantors referred to therein and the Lender, the
Lender has agreed to make Loans to the Borrower and issue Letters of Credit in
an amount outstanding at any one time not in excess of $8,000,000. Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Guarantors") are the direct
and indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue
Letters of Credit to the Borrower, each of the Guarantors has agreed to guaranty
such obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the outstanding principal of and any interest on all Loans
made and to be made by the Lender to the Borrower in excess of the Borrowing
Base (as defined in the Credit Agreement) on the terms and conditions set forth
in the Credit Agreement (the "Maximum Guaranty Amount").
The Individual Guarantor individually has agreed to guaranty such
obligations of the Borrower to the extent and in accordance with the terms
hereof.
Therefore, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Individual Guarantor, the parties hereto
agree as follows:
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1. GUARANTY
SECTION 1.1 Guaranty. (a) The Individual Guarantor
unconditionally and irrevocably guarantees the due and punctual payment by the
Borrower, subject to Section 1.1(g) and the limitations set forth in Section 3.1
hereof, in an amount not to exceed the product of 110% of the Individual
Guarantor's ownership interest in MEI as of the date hereof (as set forth on
Schedule 1 hereto) multiplied by the Maximum Guaranty Amount (the "Guaranteed
Obligations"), as and when such amounts shall become due and payable whether by
scheduled maturity, acceleration or otherwise and any extensions or renewals
thereof, reimbursement obligations in respect of Letters of Credit, related
costs and attorney's fees, and all other monetary obligations of the Borrower to
the Lender under the Credit Agreement.
(b) In furtherance of the provisions of this Guaranty Agreement,
and not in limitation of any other right which the Lender may have at law or in
equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable, subject always to
the limitations set forth in Section 3.1 hereof.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty is
a continuing guaranty and constitutes a guaranty of performance and of payment
when due and not just of collection, and waives, to the extent permitted by
applicable law, any right to require that any resort be had by the Lender to any
security held for payment of the Guaranteed Obligations or to any balance of any
deposit, account or credit on the books of the Lender in favor of the Borrower
or any other guarantor or to any other person.
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the
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Guaranteed Obligations and any circumstances affecting the Collateral or the
ability of the Borrower to perform under the Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) Notwithstanding anything to the contrary contained herein, as
a condition precedent to any Borrowing in excess of the Borrowing Base being
included within the scope of this Guaranty, MEI shall have provided its prior
written approval to Borrower's request for the extension of such credit. The
Individual Guarantor agrees that the written approval by both ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇ on behalf of MEI shall be binding upon and enforceable against
the Individual Guarantor.
SECTION 1.2 No Impairment of Guaranty. Except as provided in
Sections 1.1(g) and 3.1 hereof, the obligations of the Individual Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including, without limitation, any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense (other than payment of the Guaranteed Obligations) or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Guaranteed Obligations or otherwise.
Without limiting the generality of the foregoing, the obligations of the
Individual Guarantor hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Lender to assert any claim or demand or to
enforce any remedy hereunder or under the Credit Agreement or any other
agreement, by any waiver or modification of any provision thereof, by any
default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
SECTION 1.3 Continuation and Reinstatement, etc. The Individual
Guarantor further agrees that his guaranty hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be restored by the Lender upon the bankruptcy or other reorganization
of the Borrower or any other guarantor of the Guaranteed Obligations or
otherwise.
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SECTION 1.4 Subrogation. Subject to the prior final and
indefeasible payment in full of all Obligations and to the extent of payments
received by the Lender from the Individual Guarantor on the Guaranteed
Obligations, the Individual Guarantor shall be subrogated to the rights of the
Lender to receive payments or distributions of cash, property or securities of
the Borrower applicable to the Obligations; provided, that all such rights of
subrogation shall be subordinated and junior in right of payment to the prior
payment in full of the Obligations to the Lender.
SECTION 1.5 Application of Guaranteed Amounts. In the event the
Lender receives an amount in excess of the Maximum Guaranty Amount then due and
payable from the Individual Guarantor, the other Guarantors pursuant to the
terms of this Guaranty Agreement and the respective guaranty agreements of other
Guarantors or otherwise, the Lender shall remit such excess to MEI for
disbursement to the Guarantors in such amounts as the Guarantors shall
determine.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations and
warranties to the Lender, all of which shall survive the execution and delivery
of the Note and this Guaranty Agreement and the making of the loans evidenced
and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation of,
any provision of applicable law or any order of any governmental
authority or any judgment of any court applicable to the Individual
Guarantor or his property, (b) will not violate any indenture, any
agreement for borrowed money, any bond, note or other similar instrument
or any other material agreement to which the Individual Guarantor is a
party or by which the Individual Guarantor or any of his property is
bound, (c) will not be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under,
any such indenture, agreement, bond, note, instrument or other material
agreement to which the Individual Guarantor is a party and (d) will not
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any property or assets of the Individual
Guarantor other than pursuant to this Guaranty Agreement.
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in
accordance with its terms, subject (a) as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and other
laws affecting creditors' rights generally and to moratorium laws from
time to time in effect, (b) to general equitable principles which may
limit the right to obtain the remedy of specific performance and (c) to
the qualification that the enforceability of indemnification provisions
may be limited by applicable federal and state securities laws, rules
and regulations.
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(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. REDUCTION OF GUARANTEED OBLIGATIONS
SECTION 3.1 Reduction of Guaranteed Obligations. The maximum
liability of the Guarantors pursuant to Section 1.1 hereof shall be reduced on a
dollar-for-dollar basis by (i) the amount, if any, by which the refinancing of
the Borrower's office building exceeds $1,800,000 and (ii) any net proceeds
received by the Credit Parties in connection with the exploitation of the motion
picture entitled "Wilde".
4. MISCELLANEOUS
SECTION 4.1 Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at c/o Apollo Partners, LLC, ▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, or such other address as such party may from time to time designate by
giving written notice to the other party hereunder. All notices and other
communications given to any party hereto in accordance with the provisions of
this Guaranty Agreement shall be deemed to have been given on the fifth Business
Day after the date when sent by registered or certified mail, postage prepaid
return receipt requested, if by mail, or when receipt is acknowledged, if by
telecopier, in each case addressed to such party as provided in this Section 4.1
or in accordance with the latest unrevoked written direction from such party.
SECTION 4.2 Successors. Each reference herein to a party hereto
shall be deemed to include its respective successors, assigns, heirs, executors,
administrators and legal representatives including but not by way of limitation,
any party in whose favor the provisions of the Note shall inure, all of whom
shall be bound by the provisions of this Guaranty Agreement.
SECTION 4.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW
YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY SUIT, ACTION
OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY AGREEMENT, OR THE
SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS OR ASSIGNS. THE
INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY
WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE,
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OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT HIS
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION
OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY AGREEMENT OR THE SUBJECT
MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY
WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH
ACTION, SUIT OR PROCEEDING. THE INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE
OF PROCESS BY CERTIFIED MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN,
AND AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT
AGAINST THE INDIVIDUAL GUARANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR
LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER
MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF SUCH OTHER JURISDICTION;
PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL GUARANTOR OR ANY OF HIS ASSETS
IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE
WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS MAY BE FOUND.
SECTION 4.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.5 No Waiver, etc. Neither a failure nor a delay on the
part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
SECTION 4.6 Modification, etc. No modification, amendment or
waiver of any provision of this Guaranty Agreement, nor the consent to any
departure by the Individual
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Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Individual Guarantor in any case shall entitle the
Individual Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 4.7 Severability. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 4.8 Headings. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 4.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY WAIVES,
AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 4.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
IN WITNESS WHEREOF, the Individual Guarantor and the Lender have
caused this Guaranty Agreement to be executed by its duly authorized officer,
all as of the date first written above.
------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By:
----------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED
with respect to Section 1.1(g)
MEDIA EQUITIES INTERNATIONAL, L.L.C.
By:
-----------------------------------
Name:
Title:
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EXHIBIT K-3
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of
November 4, 1997 (as the same may be
further supplemented, amended or
otherwise modified, renewed or
replaced from time to time, the
"Guaranty Agreement") between (i)
▇▇▇▇▇ ▇▇▇▇▇▇, an individual residing
in Westchester County, New York (the
"Individual Guarantor") and (ii) THE
CHASE MANHATTAN BANK, a New York
banking corporation (the "Lender").
Pursuant to the Credit, Security, Guaranty and Pledge Agreement
dated as of November 4, 1997 (as the same may be further amended, supplemented,
or otherwise modified, renewed or replaced from time to time, the "Credit
Agreement") among Dove Entertainment, Inc., a California corporation (the
"Borrower"), the Corporate Guarantors referred to therein and the Lender, the
Lender has agreed to make Loans to the Borrower and issue Letters of Credit in
an amount outstanding at any one time not in excess of $8,000,000. Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇. ▇▇▇▇▇ (collectively, the "Guarantors") are the
direct and indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue
Letters of Credit to the Borrower, each of the Guarantors has agreed to guaranty
such obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the outstanding principal of and any interest on all Loans
made and to be made by the Lender to the Borrower in excess of the Borrowing
Base (as defined in the Credit Agreement) on the terms and conditions set forth
in the Credit Agreement (the "Maximum Guaranty Amount").
The Individual Guarantor individually has agreed to guaranty such
obligations of the Borrower to the extent and in accordance with the terms
hereof.
Therefore, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Individual Guarantor, the parties hereto
agree as follows:
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1. GUARANTY
SECTION 1.1 Guaranty. (a) The Individual Guarantor
unconditionally and irrevocably guarantees the due and punctual payment by the
Borrower, subject to Section 1.1(g) and the limitations set forth in Section 3.1
hereof, in an amount not to exceed the product of 110% of the Individual
Guarantor's ownership interest in MEI as of the date hereof (as set forth on
Schedule 1 hereto) multiplied by the Maximum Guaranty Amount (the "Guaranteed
Obligations"), as and when such amounts shall become due and payable whether by
scheduled maturity, acceleration or otherwise and any extensions or renewals
thereof, reimbursement obligations in respect of Letters of Credit, related
costs and attorney's fees, and all other monetary obligations of the Borrower to
the Lender under the Credit Agreement.
(b) In furtherance of the provisions of this Guaranty Agreement,
and not in limitation of any other right which the Lender may have at law or in
equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable, subject always to
the limitations set forth in Section 3.1 hereof.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty is
a continuing guaranty and constitutes a guaranty of performance and of payment
when due and not just of collection, and waives, to the extent permitted by
applicable law, any right to require that any resort be had by the Lender to any
security held for payment of the Guaranteed Obligations or to any balance of any
deposit, account or credit on the books of the Lender in favor of the Borrower
or any other guarantor or to any other person.
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the
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Guaranteed Obligations and any circumstances affecting the Collateral or the
ability of the Borrower to perform under the Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) Notwithstanding anything to the contrary contained herein, as
a condition precedent to any Borrowing in excess of the Borrowing Base being
included within the scope of this Guaranty, MEI shall have provided its prior
written approval to Borrower's request for the extension of such credit. The
Individual Guarantor agrees that the written approval by both ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇ on behalf of MEI shall be binding upon and enforceable against
the Individual Guarantor.
SECTION 1.2 No Impairment of Guaranty. Except as provided in
Sections 1.1(g) and 3.1 hereof, the obligations of the Individual Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including, without limitation, any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense (other than payment of the Guaranteed Obligations) or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Guaranteed Obligations or otherwise.
Without limiting the generality of the foregoing, the obligations of the
Individual Guarantor hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Lender to assert any claim or demand or to
enforce any remedy hereunder or under the Credit Agreement or any other
agreement, by any waiver or modification of any provision thereof, by any
default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
SECTION 1.3 Continuation and Reinstatement, etc. The Individual
Guarantor further agrees that his guaranty hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be restored by the Lender upon the bankruptcy or other reorganization
of the Borrower or any other guarantor of the Guaranteed Obligations or
otherwise.
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SECTION 1.4 Subrogation. Subject to the prior final and
indefeasible payment in full of all Obligations and to the extent of payments
received by the Lender from the Individual Guarantor on the Guaranteed
Obligations, the Individual Guarantor shall be subrogated to the rights of the
Lender to receive payments or distributions of cash, property or securities of
the Borrower applicable to the Obligations; provided, that all such rights of
subrogation shall be subordinated and junior in right of payment to the prior
payment in full of the Obligations to the Lender.
SECTION 1.5 Application of Guaranteed Amounts. In the event the
Lender receives an amount in excess of the Maximum Guaranty Amount then due and
payable from the Individual Guarantor, the other Guarantors pursuant to the
terms of this Guaranty Agreement and the respective guaranty agreements of other
Guarantors or otherwise, the Lender shall remit such excess to MEI for
disbursement to the Guarantors in such amounts as the Guarantors shall
determine.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations and
warranties to the Lender, all of which shall survive the execution and delivery
of the Note and this Guaranty Agreement and the making of the loans evidenced
and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation of,
any provision of applicable law or any order of any governmental
authority or any judgment of any court applicable to the Individual
Guarantor or his property, (b) will not violate any indenture, any
agreement for borrowed money, any bond, note or other similar instrument
or any other material agreement to which the Individual Guarantor is a
party or by which the Individual Guarantor or any of his property is
bound, (c) will not be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under,
any such indenture, agreement, bond, note, instrument or other material
agreement to which the Individual Guarantor is a party and (d) will not
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any property or assets of the Individual
Guarantor other than pursuant to this Guaranty Agreement.
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in
accordance with its terms, subject (a) as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and other
laws affecting creditors' rights generally and to moratorium laws from
time to time in effect, (b) to general equitable principles which may
limit the right to obtain the remedy of specific performance and (c) to
the qualification that the enforceability of indemnification provisions
may be limited by applicable federal and state securities laws, rules
and regulations.
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(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. REDUCTION OF GUARANTEED OBLIGATIONS
SECTION 3.1 Reduction of Guaranteed Obligations. The maximum
liability of the Guarantors pursuant to Section 1.1 hereof shall be reduced on a
dollar-for-dollar basis by (i) the amount, if any, by which the refinancing of
the Borrower's office building exceeds $1,800,000 and (ii) any net proceeds
received by the Credit Parties in connection with the exploitation of the motion
picture entitled "Wilde".
4. MISCELLANEOUS
SECTION 4.1 Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at c/o H.A.M Media Group LLC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, or such other address as such party may from time to time designate by
giving written notice to the other party hereunder. All notices and other
communications given to any party hereto in accordance with the provisions of
this Guaranty Agreement shall be deemed to have been given on the fifth Business
Day after the date when sent by registered or certified mail, postage prepaid
return receipt requested, if by mail, or when receipt is acknowledged, if by
telecopier, in each case addressed to such party as provided in this Section 4.1
or in accordance with the latest unrevoked written direction from such party.
SECTION 4.2 Successors. Each reference herein to a party hereto
shall be deemed to include its respective successors, assigns, heirs, executors,
administrators and legal representatives including but not by way of limitation,
any party in whose favor the provisions of the Note shall inure, all of whom
shall be bound by the provisions of this Guaranty Agreement.
SECTION 4.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW
YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY SUIT, ACTION
OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY AGREEMENT, OR THE
SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS OR ASSIGNS. THE
INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY
WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE,
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OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT HIS
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION
OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY AGREEMENT OR THE SUBJECT
MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY
WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH
ACTION, SUIT OR PROCEEDING. THE INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE
OF PROCESS BY CERTIFIED MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN,
AND AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT
AGAINST THE INDIVIDUAL GUARANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR
LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER
MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF SUCH OTHER JURISDICTION;
PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL GUARANTOR OR ANY OF HIS ASSETS
IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE
WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS MAY BE FOUND.
SECTION 4.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.5 No Waiver, etc. Neither a failure nor a delay on the
part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
SECTION 4.6 Modification, etc. No modification, amendment or
waiver of any provision of this Guaranty Agreement, nor the consent to any
departure by the Individual
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Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Individual Guarantor in any case shall entitle the
Individual Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 4.7 Severability. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 4.8 Headings. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 4.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY WAIVES,
AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 4.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
IN WITNESS WHEREOF, the Individual Guarantor and the Lender have
caused this Guaranty Agreement to be executed by its duly authorized officer,
all as of the date first written above.
------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇
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Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By:
----------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED
with respect to Section 1.1(g)
MEDIA EQUITIES INTERNATIONAL, L.L.C.
By:
---------------------------------
Name:
Title:
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Schedule 1
Equity Interests in Media Equities International, L.L.C.
--------------------------------------------------------------------------------
Guarantor Equity Interest
--------------------------------------------------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ 14.11% (through Maggin's 66 2/3% interest
in H.A.M. Media Group LLC, which holds
21.16% of MEI)
--------------------------------------------------------------------------------
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EXHIBIT K-4
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of
November 4, 1997 (as the same may be
further supplemented, amended or
otherwise modified, renewed or
replaced from time to time, the
"Guaranty Agreement") between (i)
▇▇▇▇ ▇. ▇▇▇▇▇, an individual
residing in New York County, New
York (the "Individual Guarantor")
and (ii) THE CHASE MANHATTAN BANK, a
New York banking corporation (the
"Lender").
Pursuant to the Credit, Security, Guaranty and Pledge Agreement
dated as of November 4, 1997 (as the same may be further amended, supplemented,
or otherwise modified, renewed or replaced from time to time, the "Credit
Agreement") among Dove Entertainment, Inc., a California corporation (the
"Borrower"), the Corporate Guarantors referred to therein and the Lender, the
Lender has agreed to make Loans to the Borrower and issue Letters of Credit in
an amount outstanding at any one time not in excess of $8,000,000. Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Guarantors") are the
direct and indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue
Letters of Credit to the Borrower, each of the Guarantors has agreed to guaranty
such obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the outstanding principal of and any interest on all Loans
made and to be made by the Lender to the Borrower in excess of the Borrowing
Base (as defined in the Credit Agreement) on the terms and conditions set forth
in the Credit Agreement (the "Maximum Guaranty Amount").
The Individual Guarantor individually has agreed to guaranty such
obligations of the Borrower to the extent and in accordance with the terms
hereof.
Therefore, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Individual Guarantor, the parties hereto
agree as follows:
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1. GUARANTY
SECTION 1.1 Guaranty. (a) The Individual Guarantor
unconditionally and irrevocably guarantees the due and punctual payment by the
Borrower, subject to Section 1.1(g) and the limitations set forth in Section 3.1
hereof, in an amount not to exceed the product of 110% of the Individual
Guarantor's ownership interest in MEI as of the date hereof (as set forth on
Schedule 1 hereto) multiplied by the Maximum Guaranty Amount (the "Guaranteed
Obligations"), as and when such amounts shall become due and payable whether by
scheduled maturity, acceleration or otherwise and any extensions or renewals
thereof, reimbursement obligations in respect of Letters of Credit, related
costs and attorney's fees, and all other monetary obligations of the Borrower to
the Lender under the Credit Agreement.
(b) In furtherance of the provisions of this Guaranty Agreement,
and not in limitation of any other right which the Lender may have at law or in
equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable, subject always to
the limitations set forth in Section 3.1 hereof.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty is
a continuing guaranty and constitutes a guaranty of performance and of payment
when due and not just of collection, and waives, to the extent permitted by
applicable law, any right to require that any resort be had by the Lender to any
security held for payment of the Guaranteed Obligations or to any balance of any
deposit, account or credit on the books of the Lender in favor of the Borrower
or any other guarantor or to any other person.
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the
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Guaranteed Obligations and any circumstances affecting the Collateral or the
ability of the Borrower to perform under the Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) Notwithstanding anything to the contrary contained herein, as
a condition precedent to any Borrowing in excess of the Borrowing Base being
included within the scope of this Guaranty, MEI shall have provided its prior
written approval to Borrower's request for the extension of such credit. The
Individual Guarantor agrees that the written approval by both ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇ on behalf of MEI shall be binding upon and enforceable against
the Individual Guarantor.
SECTION 1.2 No Impairment of Guaranty. Except as provided in
Sections 1.1(g) and 3.1 hereof, the obligations of the Individual Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including, without limitation, any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense (other than payment of the Guaranteed Obligations) or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Guaranteed Obligations or otherwise.
Without limiting the generality of the foregoing, the obligations of the
Individual Guarantor hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Lender to assert any claim or demand or to
enforce any remedy hereunder or under the Credit Agreement or any other
agreement, by any waiver or modification of any provision thereof, by any
default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
SECTION 1.3 Continuation and Reinstatement, etc. The Individual
Guarantor further agrees that his guaranty hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be restored by the Lender upon the bankruptcy or other reorganization
of the Borrower or any other guarantor of the Guaranteed Obligations or
otherwise.
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SECTION 1.4 Subrogation. Subject to the prior final and
indefeasible payment in full of all Obligations and to the extent of payments
received by the Lender from the Individual Guarantor on the Guaranteed
Obligations, the Individual Guarantor shall be subrogated to the rights of the
Lender to receive payments or distributions of cash, property or securities of
the Borrower applicable to the Obligations; provided, that all such rights of
subrogation shall be subordinated and junior in right of payment to the prior
payment in full of the Obligations to the Lender.
SECTION 1.5 Application of Guaranteed Amounts. In the event the
Lender receives an amount in excess of the Maximum Guaranty Amount then due and
payable from the Individual Guarantor, the other Guarantors pursuant to the
terms of this Guaranty Agreement and the respective guaranty agreements of other
Guarantors or otherwise, the Lender shall remit such excess to MEI for
disbursement to the Guarantors in such amounts as the Guarantors shall
determine.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations and
warranties to the Lender, all of which shall survive the execution and delivery
of the Note and this Guaranty Agreement and the making of the loans evidenced
and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation of,
any provision of applicable law or any order of any governmental
authority or any judgment of any court applicable to the Individual
Guarantor or his property, (b) will not violate any indenture, any
agreement for borrowed money, any bond, note or other similar instrument
or any other material agreement to which the Individual Guarantor is a
party or by which the Individual Guarantor or any of his property is
bound, (c) will not be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under,
any such indenture, agreement, bond, note, instrument or other material
agreement to which the Individual Guarantor is a party and (d) will not
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any property or assets of the Individual
Guarantor other than pursuant to this Guaranty Agreement.
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in
accordance with its terms, subject (a) as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and other
laws affecting creditors' rights generally and to moratorium laws from
time to time in effect, (b) to general equitable principles which may
limit the right to obtain the remedy of specific performance and (c) to
the qualification that the enforceability of indemnification provisions
may be limited by applicable federal and state securities laws, rules
and regulations.
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(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. REDUCTION OF GUARANTEED OBLIGATIONS
SECTION 3.1 Reduction of Guaranteed Obligations. The maximum
liability of the Guarantors pursuant to Section 1.1 hereof shall be reduced on a
dollar-for-dollar basis by (i) the amount, if any, by which the refinancing of
the Borrower's office building exceeds $1,800,000 and (ii) any net proceeds
received by the Credit Parties in connection with the exploitation of the motion
picture entitled "Wilde".
4. MISCELLANEOUS
SECTION 4.1 Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at c/o H.A.M Media Group LLC, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇
▇▇▇▇▇, or such other address as such party may from time to time designate by
giving written notice to the other party hereunder. All notices and other
communications given to any party hereto in accordance with the provisions of
this Guaranty Agreement shall be deemed to have been given on the fifth Business
Day after the date when sent by registered or certified mail, postage prepaid
return receipt requested, if by mail, or when receipt is acknowledged, if by
telecopier, in each case addressed to such party as provided in this Section 4.1
or in accordance with the latest unrevoked written direction from such party.
SECTION 4.2 Successors. Each reference herein to a party hereto
shall be deemed to include its respective successors, assigns, heirs, executors,
administrators and legal representatives including but not by way of limitation,
any party in whose favor the provisions of the Note shall inure, all of whom
shall be bound by the provisions of this Guaranty Agreement.
SECTION 4.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW
YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY SUIT, ACTION
OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY AGREEMENT, OR THE
SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS OR ASSIGNS. THE
INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY
WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE,
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OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT HIS
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION
OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY AGREEMENT OR THE SUBJECT
MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY
WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH
ACTION, SUIT OR PROCEEDING. THE INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE
OF PROCESS BY CERTIFIED MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN,
AND AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT
AGAINST THE INDIVIDUAL GUARANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR
LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER
MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF SUCH OTHER JURISDICTION;
PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL GUARANTOR OR ANY OF HIS ASSETS
IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE
WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS MAY BE FOUND.
SECTION 4.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.5 No Waiver, etc. Neither a failure nor a delay on the
part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
SECTION 4.6 Modification, etc. No modification, amendment or
waiver of any provision of this Guaranty Agreement, nor the consent to any
departure by the Individual
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Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Individual Guarantor in any case shall entitle the
Individual Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 4.7 Severability. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 4.8 Headings. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 4.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY WAIVES,
AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 4.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
IN WITNESS WHEREOF, the Individual Guarantor and the Lender have
caused this Guaranty Agreement to be executed by its duly authorized officer,
all as of the date first written above.
------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇
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Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By:
----------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED
with respect to Section 1.1(g)
MEDIA EQUITIES INTERNATIONAL, L.L.C.
By:
-----------------------------------------
Name:
Title:
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Schedule 1
Equity Interests in Media Equities International, L.L.C.
--------------------------------------------------------------------------------
Guarantor Equity Interest
--------------------------------------------------------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇ 7.05% (through ▇▇▇▇▇'▇ 33 1/3% interest in
H.A.M. Media Group LLC, which holds
21.16% of MEI)
--------------------------------------------------------------------------------
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EXHIBIT K-5
FORM OF GUARANTY AGREEMENT
GUARANTY AGREEMENT, dated as of
November 4, 1997 (as the same may be
further supplemented, amended or
otherwise modified, renewed or
replaced from time to time, the
"Guaranty Agreement") between (i)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, an individual
residing in Los Angeles County,
California (the "Individual
Guarantor") and (ii) THE CHASE
MANHATTAN BANK, a New York banking
corporation (the "Lender").
Pursuant to the Credit, Security, Guaranty and Pledge Agreement
dated as of November 4, 1997 (as the same may be further amended, supplemented,
or otherwise modified, renewed or replaced from time to time, the "Credit
Agreement") among Dove Entertainment, Inc., a California corporation (the
"Borrower"), the Corporate Guarantors referred to therein and the Lender, the
Lender has agreed to make Loans to the Borrower and issue Letters of Credit in
an amount outstanding at any one time not in excess of $8,000,000. Capitalized
terms used herein and not otherwise defined shall have the meanings set forth in
the Credit Agreement.
The Individual Guarantor, ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ (collectively, the "Guarantors") are the direct
and indirect owners of Media Equities International, L.L.C.
As an inducement to the Lender to make the Loans and issue
Letters of Credit to the Borrower, each of the Guarantors has agreed to guaranty
such obligations of the Borrower in an amount not to exceed the lesser of (x)
$2,000,000 and (y) the outstanding principal of and any interest on all Loans
made and to be made by the Lender to the Borrower in excess of the Borrowing
Base (as defined in the Credit Agreement) on the terms and conditions set forth
in the Credit Agreement (the "Maximum Guaranty Amount").
The Individual Guarantor individually has agreed to guaranty such
obligations of the Borrower to the extent and in accordance with the terms
hereof.
Therefore, for good and valuable consideration, the receipt of
which is hereby acknowledged by the Individual Guarantor, the parties hereto
agree as follows:
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1. GUARANTY
SECTION 1.1 Guaranty. (a) The Individual Guarantor
unconditionally and irrevocably guarantees the due and punctual payment by the
Borrower, subject to Section 1.1(g) and the limitations set forth in Section 3.1
hereof, in an amount not to exceed the product of 110% of the Individual
Guarantor's ownership interest in MEI as of the date hereof (as set forth on
Schedule 1 hereto) multiplied by the Maximum Guaranty Amount (the "Guaranteed
Obligations"), as and when such amounts shall become due and payable whether by
scheduled maturity, acceleration or otherwise and any extensions or renewals
thereof, reimbursement obligations in respect of Letters of Credit, related
costs and attorney's fees, and all other monetary obligations of the Borrower to
the Lender under the Credit Agreement.
(b) In furtherance of the provisions of this Guaranty Agreement,
and not in limitation of any other right which the Lender may have at law or in
equity against the Borrower or any other guarantor of the Guaranteed
Obligations, upon failure of the Borrower to pay any of the Guaranteed
Obligations when and as the same shall become due, whether at maturity, by
acceleration, after notice or otherwise, the Individual Guarantor hereby
promises to and will, upon receipt of written demand by the Lender, forthwith
pay or cause to be paid to the Lender in cash an amount equal to the unpaid
balance of the Guaranteed Obligations then due and payable, subject always to
the limitations set forth in Section 3.1 hereof.
(c) The Individual Guarantor, to the extent permitted by
applicable law, waives presentation to, demand for payment from and protest to
the Borrower and also waives notice of protest for nonpayment, notice of
acceleration and notice of intent to accelerate. The obligations of the
Individual Guarantor hereunder shall not be affected by (i) the failure of the
Lender to assert any claim or demand or to enforce any right or remedy against
the Borrower or any other guarantor of the Guaranteed Obligations under the
provisions of the Credit Agreement or any other agreement or otherwise; (ii) any
extension or renewal of any provision hereof or thereof; (iii) any rescission,
waiver, compromise, acceleration, amendment or modification of any of the terms
or provisions of the Credit Agreement, the Note or any other agreement; (iv) the
release, exchange, waiver or foreclosure of any security held by the Lender for
the Guaranteed Obligations or any of them or (v) the failure of the Lender to
exercise any right or remedy against any other guarantor of the Guaranteed
Obligations.
(d) The Individual Guarantor further agrees that this guaranty is
a continuing guaranty and constitutes a guaranty of performance and of payment
when due and not just of collection, and waives, to the extent permitted by
applicable law, any right to require that any resort be had by the Lender to any
security held for payment of the Guaranteed Obligations or to any balance of any
deposit, account or credit on the books of the Lender in favor of the Borrower
or any other guarantor or to any other person.
(e) The Individual Guarantor hereby expressly assumes all
responsibilities to remain informed of the financial condition of the Borrower
and each other guarantor of the
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Guaranteed Obligations and any circumstances affecting the Collateral or the
ability of the Borrower to perform under the Credit Agreement.
(f) This guaranty shall not be affected by the genuineness,
validity, regularity or enforceability of the Guaranteed Obligations, the Note
or any other instrument evidencing any of the Guaranteed Obligations, or by the
existence, validity, enforceability, perfection or extent of any collateral
therefor or by any other circumstance relating to the Guaranteed Obligations
which might otherwise constitute a defense to the guaranty under this Guaranty
Agreement. The Lender makes no representation or warranty in respect to any such
circumstances nor has any duty or responsibility whatsoever to the Individual
Guarantor in respect to the management and maintenance of the Guaranteed
Obligations or the Collateral.
(g) Notwithstanding anything to the contrary contained herein, as
a condition precedent to any Borrowing in excess of the Borrowing Base being
included within the scope of this Guaranty, MEI shall have provided its prior
written approval to Borrower's request for the extension of such credit. The
Individual Guarantor agrees that the written approval by both ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
and ▇▇▇▇▇ ▇▇▇▇▇▇ on behalf of MEI shall be binding upon and enforceable against
the Individual Guarantor.
SECTION 1.2 No Impairment of Guaranty. Except as provided in
Sections 1.1(g) and 3.1 hereof, the obligations of the Individual Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including, without limitation, any claim of waiver,
release, surrender, alteration or compromise, and shall not be subject to any
defense (other than payment of the Guaranteed Obligations) or set-off,
counterclaim, recoupment or termination whatsoever by reason of the invalidity,
illegality or unenforceability of the Guaranteed Obligations or otherwise.
Without limiting the generality of the foregoing, the obligations of the
Individual Guarantor hereunder shall not be discharged or impaired or otherwise
affected by the failure of the Lender to assert any claim or demand or to
enforce any remedy hereunder or under the Credit Agreement or any other
agreement, by any waiver or modification of any provision thereof, by any
default, failure, or delay, willful or otherwise, in the performance of the
Guaranteed Obligations, or by any other act or thing, or omission or delay to do
any other act or thing, which may or might in any manner or to any extent vary
the risk of the Individual Guarantor or would otherwise operate as a discharge
of the Individual Guarantor as a matter of law, unless and until the Guaranteed
Obligations are paid in full.
SECTION 1.3 Continuation and Reinstatement, etc. The Individual
Guarantor further agrees that his guaranty hereunder shall continue to be
effective or be reinstated, as the case may be, if at any time payment, or any
part thereof, of principal of or interest on any Obligation is rescinded or must
otherwise be restored by the Lender upon the bankruptcy or other reorganization
of the Borrower or any other guarantor of the Guaranteed Obligations or
otherwise.
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SECTION 1.4 Subrogation. Subject to the prior final and
indefeasible payment in full of all Obligations and to the extent of payments
received by the Lender from the Individual Guarantor on the Guaranteed
Obligations, the Individual Guarantor shall be subrogated to the rights of the
Lender to receive payments or distributions of cash, property or securities of
the Borrower applicable to the Obligations; provided, that all such rights of
subrogation shall be subordinated and junior in right of payment to the prior
payment in full of the Obligations to the Lender.
SECTION 1.5 Application of Guaranteed Amounts. In the event the
Lender receives an amount in excess of the Maximum Guaranty Amount then due and
payable from the Individual Guarantor, the other Guarantors pursuant to the
terms of this Guaranty Agreement and the respective guaranty agreements of other
Guarantors or otherwise, the Lender shall remit such excess to MEI for
disbursement to the Guarantors in such amounts as the Guarantors shall
determine.
2. REPRESENTATIONS AND WARRANTIES
The Individual Guarantor makes the following representations and
warranties to the Lender, all of which shall survive the execution and delivery
of the Note and this Guaranty Agreement and the making of the loans evidenced
and to be evidenced by the Note:
(i) The execution, delivery and performance of this Guaranty
Agreement (a) will not violate, or involve the Lender in a violation of,
any provision of applicable law or any order of any governmental
authority or any judgment of any court applicable to the Individual
Guarantor or his property, (b) will not violate any indenture, any
agreement for borrowed money, any bond, note or other similar instrument
or any other material agreement to which the Individual Guarantor is a
party or by which the Individual Guarantor or any of his property is
bound, (c) will not be in conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under,
any such indenture, agreement, bond, note, instrument or other material
agreement to which the Individual Guarantor is a party and (d) will not
result in the creation or imposition of any lien, charge or encumbrance
of any nature whatsoever upon any property or assets of the Individual
Guarantor other than pursuant to this Guaranty Agreement.
(ii) This Guaranty Agreement constitutes the legal, valid and
binding obligation of the Individual Guarantor, enforceable in
accordance with its terms, subject (a) as to the enforcement of
remedies, to applicable bankruptcy, reorganization, insolvency and other
laws affecting creditors' rights generally and to moratorium laws from
time to time in effect, (b) to general equitable principles which may
limit the right to obtain the remedy of specific performance and (c) to
the qualification that the enforceability of indemnification provisions
may be limited by applicable federal and state securities laws, rules
and regulations.
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(iii) The Individual Guarantor will realize a direct economic
benefit as a result of the Loans being made to the Borrower pursuant to
the Credit Agreement.
3. REDUCTION OF GUARANTEED OBLIGATIONS
SECTION 3.1 Reduction of Guaranteed Obligations. The maximum
liability of the Guarantors pursuant to Section 1.1 hereof shall be reduced on a
dollar-for-dollar basis by (i) the amount, if any, by which the refinancing of
the Borrower's office building exceeds $1,800,000 and (ii) any net proceeds
received by the Credit Parties in connection with the exploitation of the motion
picture entitled "Wilde".
4. MISCELLANEOUS
SECTION 4.1 Notices. Notices and other communications provided
for herein shall be in writing and shall be delivered or mailed (or if by
telecopier, delivered by such equipment) addressed (i) if to the Lender, to it
at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇ ▇. ▇▇▇▇▇,
III, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy to Chase Securities Inc., ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇, (ii) if to the Individual Guarantor, to
him at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇, or such other
address as such party may from time to time designate by giving written notice
to the other party hereunder. All notices and other communications given to any
party hereto in accordance with the provisions of this Guaranty Agreement shall
be deemed to have been given on the fifth Business Day after the date when sent
by registered or certified mail, postage prepaid return receipt requested, if by
mail, or when receipt is acknowledged, if by telecopier, in each case addressed
to such party as provided in this Section 4.1 or in accordance with the latest
unrevoked written direction from such party.
SECTION 4.2 Successors. Each reference herein to a party hereto
shall be deemed to include its respective successors, assigns, heirs, executors,
administrators and legal representatives including but not by way of limitation,
any party in whose favor the provisions of the Note shall inure, all of whom
shall be bound by the provisions of this Guaranty Agreement.
SECTION 4.3 SERVICE OF PROCESS. THE INDIVIDUAL GUARANTOR HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE STATE COURTS OF THE STATE OF NEW
YORK IN NEW YORK COUNTY AND TO THE JURISDICTION OF THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, FOR THE PURPOSE OF ANY SUIT, ACTION
OR OTHER PROCEEDING ARISING OUT OF OR BASED UPON THIS GUARANTY AGREEMENT, OR THE
SUBJECT MATTER HEREOF BROUGHT BY THE LENDER OR ITS SUCCESSORS OR ASSIGNS. THE
INDIVIDUAL GUARANTOR TO THE EXTENT PERMITTED BY APPLICABLE LAW (A) HEREBY
WAIVES, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A DEFENSE,
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OR OTHERWISE, IN ANY SUCH SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT HE IS NOT
SUBJECT PERSONALLY TO THE JURISDICTION OF THE ABOVE-NAMED COURTS, THAT HIS
PROPERTY IS EXEMPT OR IMMUNE FROM ATTACHMENT OR EXECUTION, THAT THE SUIT, ACTION
OR PROCEEDING IS BROUGHT IN AN INCONVENIENT FORUM, THAT THE VENUE OF THE SUIT,
ACTION OR PROCEEDING IS IMPROPER, OR THAT THIS GUARANTY AGREEMENT OR THE SUBJECT
MATTER HEREOF OR THEREOF MAY NOT BE ENFORCED IN OR BY SUCH COURT, (B) HEREBY
WAIVES THE RIGHT TO REMOVE ANY SUCH ACTION, SUIT OR PROCEEDING INSTITUTED BY THE
LENDER IN STATE COURT TO FEDERAL COURT, AND (C) HEREBY AGREES NOT TO ASSERT ANY
OFFSETS OR COUNTERCLAIMS (OTHER THAN COMPULSORY COUNTERCLAIMS) IN ANY SUCH
ACTION, SUIT OR PROCEEDING. THE INDIVIDUAL GUARANTOR HEREBY CONSENTS TO SERVICE
OF PROCESS BY CERTIFIED MAIL AT THE ADDRESS TO WHICH NOTICES ARE TO BE GIVEN,
AND AGREES THAT THE SUBMISSION TO JURISDICTION AND THE CONSENT TO SERVICE OF
PROCESS BY MAIL IS MADE FOR THE EXPRESS BENEFIT OF THE LENDER. FINAL JUDGMENT
AGAINST THE INDIVIDUAL GUARANTOR IN ANY SUCH ACTION, SUIT OR PROCEEDING SHALL BE
CONCLUSIVE, AND MAY BE ENFORCED IN OTHER JURISDICTIONS (X) BY SUIT, ACTION OR
PROCEEDING ON THE JUDGMENT, A CERTIFIED OR TRUE COPY OF WHICH SHALL BE
CONCLUSIVE EVIDENCE OF THE FACT AND OF THE AMOUNT OF ANY INDEBTEDNESS OR
LIABILITY OF THE INDIVIDUAL GUARANTOR THEREIN DESCRIBED OR (Y) IN ANY OTHER
MANNER PROVIDED BY, OR PURSUANT TO, THE LAWS OF SUCH OTHER JURISDICTION;
PROVIDED, HOWEVER, THAT THE LENDER MAY AT ITS OPTION BRING SUIT OR INSTITUTE
OTHER JUDICIAL PROCEEDINGS AGAINST THE INDIVIDUAL GUARANTOR OR ANY OF HIS ASSETS
IN ANY ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ OR OF ANY COUNTRY OR PLACE
WHERE THE INDIVIDUAL GUARANTOR OR SUCH ASSETS MAY BE FOUND.
SECTION 4.4 GOVERNING LAW. THIS GUARANTY AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 4.5 No Waiver, etc. Neither a failure nor a delay on the
part of the Lender in exercising any right, power or privilege under this
Guaranty Agreement shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Lender herein
expressly specified are cumulative and not exclusive of any other rights,
remedies or benefits which it may have under this Guaranty Agreement, at law, in
equity, by statute, or otherwise.
SECTION 4.6 Modification, etc. No modification, amendment or
waiver of any provision of this Guaranty Agreement, nor the consent to any
departure by the Individual
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Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Lender, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to or demand on the Individual Guarantor in any case shall entitle the
Individual Guarantor to any other or further notice or demand in the same,
similar or other circumstances.
SECTION 4.7 Severability. If any one or more of the provisions
contained in this Guaranty Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall in no way be affected or impaired thereby.
SECTION 4.8 Headings. Section headings used herein are for
convenience of reference only and are not to affect the construction of, or be
taken into consideration in interpreting, this Guaranty Agreement.
SECTION 4.9 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW WHICH CANNOT BE WAIVED, THE INDIVIDUAL GUARANTOR HEREBY WAIVES,
AND COVENANTS THAT HE WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR
OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE,
CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS
GUARANTY AGREEMENT OR THE SUBJECT MATTER HEREOF, IN EACH CASE WHETHER NOW
EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR TORT OR OTHERWISE. THE
INDIVIDUAL GUARANTOR ACKNOWLEDGES THAT HE HAS BEEN INFORMED BY THE LENDER THAT
THE PROVISIONS OF THIS SECTION 4.9 CONSTITUTE A MATERIAL INDUCEMENT UPON WHICH
THE LENDER HAS RELIED, IS RELYING AND WILL RELY IN MAKING THE LOANS EVIDENCED BY
THE NOTE AND ENTERING INTO THIS GUARANTY AGREEMENT. THE LENDER MAY FILE AN
ORIGINAL COUNTERPART OR A COPY OF THIS SECTION 4.9 WITH ANY COURT AS WRITTEN
EVIDENCE OF THE CONSENT OF THE INDIVIDUAL GUARANTOR TO THE WAIVER OF HIS RIGHTS
TO TRIAL BY JURY.
IN WITNESS WHEREOF, the Individual Guarantor and the Lender have
caused this Guaranty Agreement to be executed by its duly authorized officer,
all as of the date first written above.
---------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Executed by the Lender THE CHASE MANHATTAN BANK
in New York, New York
By:
-----------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED
with respect to Section 1.1(g)
MEDIA EQUITIES INTERNATIONAL, L.L.C.
By:
----------------------------------
Name:
Title:
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GUARANTY AGREEMENT
SPOUSAL CONSENT
The undersigned acknowledges that she has read the foregoing
Guaranty Agreement (the "Guaranty Agreement") and that she knows its content.
The undersigned is aware that by its provisions her spouse agrees to guarantee
certain obligations owed by Dove Entertainment, Inc. to The Chase Manhattan Bank
(the "Lender") under that certain Credit, Security, Guaranty and Pledge
Agreement, dated as of November 4, 1997 among Dove Entertainment, Inc., as
borrower, the Corporate Guarantors referred to therein and the Lender (as the
same may be amended, supplemented or otherwise modified, renewed or replaced
from time to time, the "Credit Agreement"). The undersigned hereby consents to
the Guaranty Agreement and accepts all of the provisions of such Guaranty
Agreement to the extent of her community property interests in whatever property
is subject to the Guaranty Agreement, and further agrees that the undersigned
will take no action at any time to hinder the enforcement of the Guaranty
Agreement, the Credit Agreement, or any related document or instrument, or any
provision contained therein.
Dated: As of November ___, 1997
---------------------------------
240
Schedule 1
Equity Interests in Media Equities International, L.L.C.
--------------------------------------------------------------------------------
Guarantor Equity Interest
--------------------------------------------------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ 11.70% in MEI
--------------------------------------------------------------------------------
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