Exhibit 10.23
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("this Agreement") is made this 30th day
of September, 1999, by and between the Borrower, Metro Global Media, Inc.
(parent) and Metro, Inc. (sub) (referred to throughout this Agreement as "you",
"your" and "yours"), and the Lender, RESERVOIR CAPITAL CORPORATION (referred to
throughout this Agreement as "we", "us", "our" and "ours").
1. Accounts Receivable Loans.
1.1. Loans against Accounts. From time to time during the term of this
Agreement, we may make such advances (each a "Receivables Loan") against your
Eligible Accounts (as herein defined) as you may from time to time request and
we, in our sole discretion, may elect to make upon the terms, conditions and
provisions of this Agreement. At any one time, the aggregate outstanding amount
of all Receivables Loans shall not be greater than the lesser of (a) the amount
determined by applying the Receivables Advance Rate (as herein defined) to the
Eligible Accounts or (b) $3,000,000.00. Nothing contained in this Agreement
shall be construed as obligating or committing us to make any particular
Receivables Loan.
1.2. Eligible Accounts. The term "Eligible Accounts" as used herein shall
mean, collectively, accounts, contract rights and other forms of obligation
arising in the ordinary course of business from the sale of goods or rendition
of services (with reserves for such items as accounts which have aged more than
90 days from the billing or invoice date, accounts where the Account Debtor (as
herein defined) is bankrupt, insolvent or otherwise unacceptable to us from a
credit risk standpoint, intercompany accounts, contra accounts, foreign
accounts, finance charges and such other items as we may determine from time to
time in our sole discretion; provided, however, that no Account from any given
Account Debtor, shall be an Eligible Account, if fifty percent (50%) or more of
the total of all Accounts due from such Account Debtor remain unpaid 90 days or
more after their date of issue.)
1.3. Receivables Advance Rate. The term "Receivables Advance Rate" as used
herein shall mean seventy percent (70%) of Eligible Accounts, provided that we
may, in our sole discretion, unilaterally decrease the Receivables Advance Rate
in the event of any breach of the representations and warranties set forth in
Paragraph 2.2 below or any other Default (as herein defined) under this
Agreement.
1.4. Interest Rate. The outstanding balance of all Receivables Loans shall
bear interest at the monthly rate of interest as set out in the rate sheet
attached hereto as Exhibit B from the date on which each such Receivables Loan
is made to and including the date on which payment on such Receivables Loan is
received. You also agree to pay to us a .35% monthly service fee on the average
daily loan balance. If the average monthly outstanding loan balance falls below
$2,000,000.00, an unused line fee of .25% will be charged on the differential
between the $2,000,000.00 and the average loan balance for the particular month.
1.5. Repayment of Receivables Loans. Interest on all Receivables Loans
shall be due and payable on demand or, if not previously demanded, on the first
day of each month. The principal balance of all Receivables Loans shall be due
and payable on demand or, if not previously demanded, upon termination of this
Agreement. Notwithstanding the foregoing, (a) you shall repay such portion of
the Receivables Loans as is necessary from time to time to prevent the aggregate
amount of all Receivables Loans from exceeding the maximum amount determined
pursuant to Paragraph 1.1 on demand or, if not previously demanded, within five
(5) business days of the date on which the aggregate amount of all Receivables
Loans exceeds the maximum amount determined pursuant to Paragraph 1.1, and (b)
we shall apply all proceeds of Accounts received by us pursuant to Paragraph 1.6
to the repayment, in whole or in part, of Receivables Loans and Inventory Loans
in such order or manner as we in our sole discretion determine. Subject to the
provisions of Paragraphs 8.3 and 8.5 of this Agreement, you may repay all or any
portion of the Receivables Loans at any time without penalty, [provided that you
may not make more than four (4) partial payments in any calendar month (unless
required to comply with the provisions of subsection (a) of the preceding
sentence)].
1.6. Payments on Accounts. You shall, and we may, immediately notify all
persons obligated to make payments with respect to Accounts (collectively,
"Account Debtors") to make all payments on or with respect to Accounts directly
into a special banking account over which we have exclusive dominion, control,
and power of access and withdrawal (the "Collection Account"). In connection
therewith, you agree to reference our payment instructions on all invoices
submitted to Account Debtors. In addition, if any Account Debtor is an agency,
department, or instrumentality of the United States Government, you shall
execute such forms of notice and assignment, and shall conform to all applicable
procedures (including making any necessary contract modifications), as may be
required pursuant to the Federal Assignment of Claims Act of 1940, as amended,
in order to perfect our rights to directly receive payments with respect to the
Accounts of such Account Debtor. To facilitate our collection and receipt of
payments from Account Debtors, you hereby irrevocably constitute and appoint us,
or any of our agents or employees, as your lawful attorney-in-fact (coupled with
an interest) to exercise at any time any of the following powers: (i) to
receive, endorse and deposit all payments from Account Debtors; (ii) to transmit
to any party notice that you have granted to us a security interest in the
Accounts; (iii) to institute any proceedings deemed by us necessary to effect
collection of Accounts; (iv) to settle, compromise or litigate any dispute
concerning any Account; and (v) to sign your name on any financing statements or
any amendment or continuation statement relating thereto with respect to any
Collateral (as herein defined). You will notify us promptly of and, if requested
by us, will settle all disputes concerning any Account, at your sole cost and
expense. However, you shall not, without our prior written consent, settle,
compromise or adjust any Account or grant any additional discounts, allowances
or credits thereon. We may, but are not required to, attempt to settle,
compromise or litigate the dispute upon such terms as we in our sole discretion
deem advisable, for your account and risk and at your sole expense. Any act of
ours as your lawful attorney-in-fact shall not render us liable for any acts of
omission or commission, nor for any error of judgment or mistake of fact or law.
Alternatively, you hereby authorize us to collect and receive payments from
Account Debtors in our own name. If you receive any payment on any Account, you
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shall promptly remit such payment in the form received (with any necessary
endorsement) directly to us. Until so remitted, you will hold such payment in
trust for us separate and apart from all of your other funds.
1A. Inventory Loans.
1A.1. Loans against Inventory. From time to time during the term of this
Agreement, we may make such advances (each an "Inventory Loan") against your
Eligible Inventory (as herein defined) as you may from time to time request and
we, in our sole discretion, may elect to make upon the terms, conditions and
provisions of this Agreement. [You agree not to request more than four (4)
Inventory Loans in any calendar month.] At any one time, the aggregate
outstanding amount of all Inventory Loans shall not be greater than the lesser
of (a) two (2) months' sales valued at the cost of goods sold based on a rolling
three (3) month average, (b) the amount determined by applying the Inventory
Advance Rate (as herein defined) to the Eligible Inventory (c) 60% of Loans
against Accounts or (d) $1,000,000.00. Nothing contained in this Agreement shall
be construed as obligating or committing us to make any particular Inventory
Loan.
1A.2. Eligible Inventory. The term "Eligible Inventory" as used herein
shall mean raw materials and finished goods inventories (with reserves for such
items as damaged and obsolete items and such other items as we may determine
from time to time in our sole discretion) valued at the lower of cost or market
value of such inventories determined in accordance with generally accepted
accounting principles (or on such other basis to which the parties may agree)
consistently applied.
1A.3. Inventory Advance Rate. The term "Inventory Advance Rate" as used
herein shall mean forty percent (40%) of Eligible Inventory which constitutes
raw materials and forty percent (40%) of Eligible Inventory which constitutes
finished goods up to the $1,000,000.00 cap provided that we may, in our sole
discretion, unilaterally decrease the Inventory Advance Rate in the event of any
breach of the representations and warranties set forth in Paragraph 2.5 below or
any other Default under this Agreement.
1A.4. Interest Rate. The outstanding balance of all Inventory Loans shall
bear interest at the monthly rate of interest as set out in the rate sheet
attached hereto as Exhibit B from the date on which each such Inventory Loan is
made to and including the date on which payment on such Inventory Loan is
received.
1A.5. Repayment of Inventory Loans. Interest on all Inventory Loans shall
be due and payable on demand or, if not previously demanded, on the first day of
each month. The principal balance of all Inventory Loans shall be due and
payable on demand or, if not previously demanded, upon termination of this
Agreement. Notwithstanding the foregoing, (a) you shall repay such portion of
the Inventory Loans as is necessary from time to time to prevent the aggregate
amount of all Inventory Loans from exceeding the maximum amount determined
pursuant to Paragraph 1A.1 above on demand or, if not previously demanded,
within five (5) business days of the date on which the aggregate amount of all
Inventory Loans exceeds the maximum amount determined pursuant to Paragraph
1A.1, (b) you
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shall immediately apply any cash proceeds from the sale of inventory to the
repayment of Inventory Loans, and (c) we shall apply all proceeds of Accounts
received by us pursuant to Paragraph 1.6 to the repayment, in whole or in part,
of Inventory Loans and Receivables Loans in such order or manner as we in our
sole discretion determine. Subject to the provisions of Paragraphs 8.3 and 8.5
of this Agreement, you may repay all or any portion of the Inventory Loans at
any time without penalty, [provided that you may not make more than four (4)
partial payments in any calendar month (unless required to comply with the
provisions of subsections (a) or (b) of the preceding sentence)].
1B. Loan Request and Borrowing Base Certificate. At such time or times as
you request a loan or loans, pursuant to sub-paragraphs 1.1 and 1A.1 above, you
shall make such requests using such a form or forms and we may require.
Initially in making all such requests you shall use a form identical to Exhibit
A.
2. Representations, Warranties and Promises. To induce us to make
Receivables Loans and Inventory Loans from time to time, you make the following
representations, warranties and promises, each of which survives the execution
and delivery of this Agreement and is deemed to be incorporated by reference in
each request for a Receivables Loan or an Inventory Loan:
2.1. Power and Authority. You have all requisite power and authority to
execute, deliver and perform this Agreement and each request for a Receivables
Loan or an Inventory Loan, and such performance does not contravene your
articles of incorporation, by-laws, or partnership agreement, as applicable, or
any other agreement by which you are bound.
2.2. Representations and Warranties with Respect to Accounts. With respect
to each Account: (a) your principal place of business and your books and records
relating to the Accounts are located at the address set forth at the end of this
Agreement; (b) you are the sole owner of each Account and have the right to
grant to us a lien on and security interest in the Accounts, and the Accounts
are free and clear of all liens and encumbrances (including liens and
encumbrances subordinate to our lien and security interest), except for those
created by this Agreement or permitted by us in writing, and you will not
assign, sell, transfer, pledge, grant a security interest in or encumber or
otherwise dispose of or abandon any part or all of the Accounts; (c) you have
made proper entries in your books disclosing the grant of a security interest in
Accounts to us; (d) each of your Account Debtors has legal capacity to contract
and is indebted to you in the amount indicated in your books and records; (e)
each Account is valid, legally enforceable, and represents a bona fide
undisputed indebtedness; (f) no Account is subject to any valid defense, offset,
counterclaim or allowance or is contingent; (g) each Account Debtor is solvent,
and each Account will be paid in full on or before its due date; (h) no
agreement for any deduction or allowance of any kind exists or will be made by
you; (i) all information appearing in your books and records relating to each
Account is true and correct in all respects; and (j) all signatures and
endorsements appearing on the invoices and documents relating to the Accounts
are genuine, and all signatories and endorsers have full capacity and authority
and were fully authorized to contract for the purchase or lease of the goods
and/or services giving rise to the Accounts.
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2.3. Books and Records; Inspections. You will maintain books and records in
accordance with generally accepted accounting principles consistently applied.
We shall have full access to, and the right to audit and make copies from, your
books and records relating to the Collateral or this Agreement. You will furnish
to us such financial statements and other information regarding your business
affairs as we may request.
2.4. Affiliates. You have no subsidiaries or other affiliates other than
those disclosed in writing to us prior to the date of this Agreement, and no
additional subsidiaries or other affiliates shall be created on or after the
date of this Agreement without our prior written consent, which consent may be
withheld in our absolute discretion or conditioned upon any such subsidiary or
other affiliate entering into a financing agreement similar to this Agreement
with us.
2.5. Representations and Warranties with Respect to Collateral Other than
Accounts. You are the sole owner of the Collateral (other than the Accounts,
which are covered by Paragraph 2.2 above) and have the right to grant to us a
lien on and security interest in such Collateral; and the Collateral is, or will
be when acquired by you, free and clear of all liens and encumbrances (including
liens and encumbrances subordinate to our lien and security interest), except
for those created by this Agreement or permitted by us in writing. With respect
to inventory which is included in the Collateral, (a) such inventory is not
located outside the United States or Canada; (b) such inventory is in your
actual possession; (c) such inventory is not in the possession of a bailee,
warehouseman, consignee or similar third party; (d) such inventory does not
constitute goods the sale or other disposition of which has given rise to an
Account; (e) such inventory meets all standards and requirements imposed by any
governmental authority over such goods, their production, storage, use or sale;
(f) such inventory does not constitute work-in-process or supplies; and (g) such
inventory is in good condition and is not defective, unmerchantable,
post-seasonal, slow moving or obsolete.
2.6. Insurance on Collateral Other than Accounts. During the term of this
Agreement, you shall maintain with financially sound, well rated and reputable
insurance companies comprehensive fire and extended coverage insurance on your
inventory against such risks, with such loss deductible amounts and in such
amounts not less than those which may be satisfactory to us but in all events
conforming to prudent business practices and in such minimum amounts that you
will not be deemed a co-insurer under applicable insurance laws, regulations,
policies and practices. Each policy of such insurance covering your inventory
shall contain a provision or endorsement satisfactory to us naming us as loss
payee and providing that (a) such policy may not be canceled or altered and we
may not be removed as loss payee without at least thirty (30) days' prior
written notice to us, and (b) no act or default of you or any other person shall
affect our right to recover under such policy. You will pay, when due, all
premiums on such insurance and will furnish to us, upon request, evidence of
payment of such premiums and other information as to the insurance carried by
you. You hereby irrevocably (x) assign and grant to us a security interest in
any and all proceeds of each such insurance policy covering your inventory, (y)
direct each insurance company to pay all such proceeds directly to us, and (z)
constitute and appoint us, or any of our agents or employees, as your lawful
attorney-in-fact
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(coupled with an interest) with authority and power on your behalf to make,
adjust, settle or compromise all claims under each such insurance policy and to
endorse any check, draft or instrument for such proceeds. Any proceeds of such
insurance received by us (less the amount of any reasonable costs of settlement
of such losses) shall be held and applied, at our option, to the Obligations
(whether matured or unmatured) in such manner and at such times as we may
determine in our sole discretion or to the replacement of the damaged or
destroyed inventory upon terms and conditions reasonably satisfactory in all
material respects to us.
2.7. Collateral Reports. You agree to provide to us (a) at the time you
request each Receivables Loan or Inventory Loan, a Borrowing Base Certificate in
the form of Exhibit C, (b) so long as any Receivables Loans remain outstanding,
by the 15th day of each month (or at such other more frequent interval as we may
require), a report reflecting [a detailed aging of your Accounts], in form and
detail satisfactory to us, together with a Borrowing Base Certificate, and (c)
so long as any Inventory Loans remain outstanding, by the [fifteenth (15th)] day
of each [month] (or at such other more frequent interval as we may require), a
report reflecting the quantities, cost and value of your inventory, in form and
detail satisfactory to us, together with a Borrowing Base Certificate. All such
information shall be true, accurate and complete in all material respects and
shall contain no knowingly false, incomplete or misleading statements or omit
any material information.
2.8. Compliance with Laws, Etc. You are in compliance in all material
respects with all applicable federal, state and local laws, statutes, orders,
rules, regulations and judgments.
2.9. No Material Adverse Change. There has been no material adverse change
in your management, financial condition or business prospects or in the personal
financial condition of any guarantor of your Obligations under this Agreement
from that represented in any application, financial statement or other
information provided to us prior to the date of this Agreement.
2.10. Shareholder Distributions. You will not (a) declare or pay any
dividends on your capital stock, make any distribution in respect thereof or
purchase, redeem or otherwise acquire any of your shares of stock, (b) make any
other payments to shareholders, whether as commissions, salaries, bonuses, loan
payments or otherwise, or (c) make any payments to affiliates or members of the
immediate family of any shareholder, whether as commissions, salaries, bonuses,
loan payments, payments for goods or services or otherwise, in each case without
our prior written consent. Nothing herein shall prohibit you from selling
inventory in the ordinary course of business to Capital Video Corporation.
2.11. Financial Statements. Within forty-five (45) days following the end
of each fiscal quarter, you will provide to us a copy of the 10-Q report filed
with the Securities and Excahnge Commission, complete with a balance sheet,
income statement, and statement of cash flow, prepared in accordance with
generally accepted accounting principles. Within one hundred twenty (120) days
following the end of each fiscal year, you will provide to us financial
statements for such fiscal year prepared by an independent accountant acceptable
to us, which financial statements shall (a) be in a form acceptable to us, (b)
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be prepared in accordance with generally accepted accounting principles, (c)
include a balance sheet, income statement, and a statement of cash flows, and
(d) be certified without qualification by an independent certified public
accountant acceptable to us. A copy of the 10-K report filed with the Securities
and Exchange Commission shall also be provided to us within the 120 day
reporting period.
2.12 Year 2000 Compliance. You warrant and represent that the advent of the
year 2000 shall not adversely affect your operations or the performance of your
information technology or any other technology. Without in any way limiting the
generality of the forgoing, you specifically represent and warrant that: (a)
your hardware and software is designed to be used prior to, during and after the
year 2000 A.D., and such hardware and software will operate during such periods
without error relating to date data, specifically including any error relating
to, or the conduct of date data which represents or references different
centuries or more than one century, (b) the hardware and software you utilize
will not abnormally end their function or functions or provide invalid or
incorrect results as a result of date data, and (c) and the hardware and
software you utilize has been designed to ensure year 2000 A.D. compatibility,
including date data, century recognition, leap year recognition, calculations
which accommodate same century and multi century formulas and date values and
date data interface values that reflect the century.
3. Security Interest in Collateral.
3.1. Grant of Security Interest; Collateral Defined. To secure payment and
performance of all of your obligations under this Agreement, including, without
limitation, Receivables Loans, Inventory Loans, interest, fees, costs and
expenses (collectively, the "Obligations"), you pledge, assign and grant to us a
continuing lien and security interest in the following property, both now owned
and existing and hereafter created, acquired and arising, regardless of where
located (collectively, the "Collateral"):
(1) all of your Accounts (whether arising before or after termination of
this Agreement);
(2) all of your present and future instruments, documents, chattel paper
and general intangibles (as those terms are defined in the Uniform Commercial
Code);
(3) all reserves, balances, deposits, credits, moneys, securities, and
other property at any time owing or belonging to you which are now or hereafter
in the possession of, or in transit to, us, whether for safekeeping, pledge or
otherwise;
(4) all of your inventory, including, without limitation, all goods,
merchandise or other personal property, wherever located and whether or not in
transit, which is or may at any time be held for sale or lease or furnished or
to be furnished under contracts of service and goods, merchandise or other
personal property which are raw materials, work in process or materials used or
consumed in your business, together with a license of all intellectual property
rights under which you manufacture and sell such inventory;
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(5) all of your claims against us at any time existing to the extent of the
Obligations;
(6) all books and records and other property relating to the Collateral and
your Obligations; and
(7) all cash and non-cash proceeds and products of any of the foregoing,
including any claim against third parties in any way related to the foregoing.
You will not create or permit any security interests in or other
encumbrances upon the Collateral, which are junior to ours in priority, without
our prior written consent. We are irrevocably authorized at any time to charge
your account (and any credit balance on our books in your favor) for the amount
of any or all of your Obligations.
3.2. Perfection of Security Interest. You shall execute and deliver to us
such documents and instruments, including, without limitation, Uniform
Commercial Code ("UCC") financing statements, as we may request from time to
time in order to evidence and perfect our security interest in the Collateral.
3.3. Future Advances. The security interest granted by you shall secure all
current and all future advances made by us to the extent such current and future
advances constitute Obligations, and we may advance or readvance upon repayment
by you all or any portion of the sums loaned to you under this Agreement and any
such advancement or readvancement shall be fully secured by the security
interest created by this Agreement.
3.4. Landlords' Waivers. At any time and from time to time, we may require
you, in our sole discretion, to provide to us appropriate landlords' waivers, in
form, content and substance satisfactory to us, in our sole discretion for the
location of any of the Collateral or your chief executive office where your
original entry books of account are maintained, which landlords' waivers shall
acknowledge our priority lien security interest in the Collateral and shall
contain an express subordination of any rights which the landlord might attempt
to assert against such Collateral to our rights.
4. No Agency. Nothing in this Agreement shall be construed to constitute us
as your agent or to obligate us to assume any of your obligations with respect
to any Account. We will not have any liability for any error or omission or
delay occurring in the settlement, collection or payment of any Account.
Notwithstanding the foregoing, if you fail to perform any obligation you are
required to perform in order to maintain the obligation of an Account Debtor to
make payments on an Account, we may (but shall be under no obligation to)
perform, or retain others to perform, such obligation, at your sole expense, and
such expense (together with interest thereon from the date incurred to the date
paid at the rate of ten percent (10%) per annum) shall constitute part of your
Obligations; upon demand by us, you agree to immediately reimburse for any such
expense (and accrued interest thereon) we incur.
5. Costs and Expenses. You shall reimburse us on demand for all fees, costs
and expenses (including reasonable attorneys' fees), of any kind and
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nature, which we may incur in (a) preparing or negotiating this Agreement or
otherwise incurred by us in connection with our entering into or administering
this Agreement, (b) filing financing statements, (c) lock box charges, (d)
making lien or title examinations, (e) protecting, maintaining, preserving or
enforcing Accounts or other Collateral, (f) defending or prosecuting any actions
or proceedings related to this Agreement, or (g) defending or prosecuting any
action, claim or demand arising after the termination of this Agreement but
which relates to or arises out of this Agreement shall be added to and deemed
part of your Obligations. In addition, in the absence of a Default under
Paragraph 6 below, you shall be responsible for the fees, costs and expenses
(not to exceed $2,400 per audit)of up to four such field examinations per
calendar year performed during the term of this Agreement, in addition to the
initial field examination performed prior to the date of this Agreement.
6. Default. All of your Obligations shall, at our option, be and become
immediately due and payable without notice or demand for monetary defaults, and
with ten days notice for non-monetary defaults, upon the occurrence of any one
or more of the following events (each a "Default"): (i) if you fail to pay, when
due and payable, any of your Obligations; (ii) if any of your representations or
warranties are false or misleading in any material respect; (iii) if you fail to
perform or otherwise comply with any promise contained in this Agreement or any
request for a Receivables Loan or an Inventory Loan; (iv) if your present
business operation is discontinued or suspended, or if you become insolvent or
unable to meet your debts as they mature, or if any proceeding is commenced by
or against you for relief under any provision of any federal or state
bankruptcy, insolvency or other similar law, or if any injunction, attachment,
judgment or lien is issued or filed against you or any of your property, or if a
receiver, custodian or trustee of any kind is appointed for you or any of your
property; or (v) if a default occurs under any Guaranty Agreement executed in
conjunction with this Agreement and is not cured within any applicable grace
period. Notwithstanding the foregoing, you acknowledge and agree that all
Receivables Loans and all Inventory Loans which we may make to you are due and
payable on demand, even in the absence of a Default under this Agreement.
7. Remedies.
7.1. Our Rights. Upon the occurrence of any Default, without further notice
to you except tin the case of a non-monetary default where we shall give fifteen
days notice, we shall have the right to (i) decrease the Receivables Advance
Rate and/or the Inventory Advance Rate pursuant to Paragraphs 1.3 and 1A.3
above; (ii) cease making Receivables Loans and Inventory Loans (notwithstanding
the provisions of this clause (ii), you acknowledge that the making of
Receivables Loans and Inventory Loans by us is in our sole discretion, whether
or not a Default shall have occurred); (iii) terminate this Agreement and
enforce the liquidated damages provisions of Paragraph 8.5; (iv) enforce against
you immediate payment of all of your Obligations, including all Receivables
Loans and all Inventory Loans for which payment in full has not previously been
received; (v) collect all amounts due and owing on all Accounts; (vi) require
you to assemble the Collateral and make it available to us at a place designated
by us; (vii) enter upon your premises to take possession of the Collateral; and
(viii) appropriate, set off and apply the Collateral to the payment of your
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Obligations in such order and manner as we in our sole discretion shall
determine, or settle, compromise or release, in whole or in part, any amounts
owing on the Collateral, or prosecute any proceeding with respect to the
Collateral, or extend the time of payment of any or all of the Collateral, or
issue credits regarding the Collateral, or sell, assign and deliver the
Collateral (or any part thereof), at public or private sale and apply the net
cash proceeds resulting from the exercise of any of the foregoing rights or
remedies to the payment of your Obligations in such order as we in our sole
discretion may elect, and you shall remain liable to us for any deficiency. 7.2.
Confession of Judgment. Deleted.
7.3. Application of Collections; Deficiency. All collections we receive
from realizing upon the Collateral, less expenses of collection (including,
without limitation, reasonable attorneys' fees and court costs) incurred by us,
shall be applied to your Obligations. If for any reason collections received by
us exceed your Obligations, we will account to you for the surplus. However, if
the collections we receive are insufficient to pay all of your Obligations, you
shall be liable to us for the deficiency.
7.4. Remedies Cumulative. Each right, power, and remedy provided for herein
or otherwise existing shall be cumulative and concurrent and shall be in
addition to every other right, power and remedy existing hereunder, by law or
otherwise. The exercise by us of any one or more such rights, powers or remedies
shall not preclude the simultaneous or later exercise by us of any or all such
other rights, powers or remedies.
8. Term of Agreement and Termination.
8.1. Initial Term; Renewal. The initial term of this Agreement shall be one
(1) year, commencing with the date of the first Receivables Loan or Inventory
Loan under this Agreement. Unless terminated in accordance with this Paragraph
8, the provisions of this Agreement shall automatically renew for successive one
(1) year periods without any notice or action on the part of either party
hereto. During the term of this Agreement, you shall deal exclusively with us in
the financing of Accounts and inventory.
8.2. Facility Fee. On the date of this Agreement and on each one (1) year
anniversary thereof, you will pay to us a facility fee of one percent (1.0%) of
the $4,000,000.00 maximum aggregate financing arrangement permitted under this
Agreement.
8.3. Termination in Absence of Default. This Agreement may be terminated
(a) by our giving you written notice at any time stating a termination date not
less than ten (10) days after the date such notice is mailed or dispatched, or
(b) by your giving us written notice not less than sixty (60) days prior to the
end of the initial or a renewal term. In the event that you elect to terminate
this Agreement on a date other than the end of the initial or a renewal term,
you shall pay to us a termination fee in an amount equal to $20,000.00 for each
month or portion of a month remaining in the initial or renewal term. However,
if you obtain commercial bank financing after six months from the signing of
this Agreement you may terminate this Agreement without a termination fee. The
parties expressly recognize and agree that the termination
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fee hereunder is a reasonable fee negotiated at arm's length in consideration
for which we will allow you to terminate this Agreement prior to the end of the
applicable term, provided that you fulfill all of your obligations under this
Agreement. The termination fee is not, and shall not be construed to be,
liquidated damages.
8.4. Effect of Termination. Notwithstanding any termination, all of our
rights and interests, all of your Obligations, and all of the terms, conditions,
and provisions hereof shall continue in full force and effect until all
transactions entered into prior to the effective date of termination have been
fully concluded and all of your Obligations have been paid in full. After
termination of this Agreement, you shall pay to us on demand the amount of your
Obligations then outstanding and any of your Obligations arising thereafter.
8.5. Termination After Default; Liquidated Damages. If a Default occurs
hereunder, we shall have the right at our sole option to terminate this
Agreement at any time thereafter without notice to you. If we exercise such
option, in addition to all other rights and remedies we may have, and in
addition to all of your other Obligations, you agree to pay to us upon demand as
liquidated damages for our lost interest and fee earnings, a sum equal to
$20,000.00 for each month or portion of a month remaining in the initial or
renewal term of this Agreement. The liquidated damages contemplated under this
Paragraph 8.5 are expressly recognized by you as being reasonably related to the
damages we would suffer by reason of the termination of this Agreement after a
Default and is the product of a good faith effort of the parties to estimate
actual damages that would ensue as a result of any such termination.
9. Notices. Notices shall be deemed given when sent or dispatched by
certified or registered mail or private overnight express mail, postage or
charges prepaid, or by facsimile copy to the parties at their respective
addresses set forth below.
10. Binding Effect; Complete Agreement. This Agreement will bind you and
your successors and assigns, and will inure to the benefit of us and our
successors and assigns, and sets forth the complete agreement between the
parties.
11. Waiver. No delay or failure by us in exercising any of our rights or
remedies shall operate as a waiver of such or of any other right or remedy, and
no waiver shall be valid unless in writing signed by us and then only to the
extent therein set forth.
12. Tombstone. You authorize us to make appropriate announcements of the
financial arrangement entered into by and between you and us, which
announcements are popularly known as Tombstones, subject to your prior approval
which shall not be unreasonably withheld or delayed. You further authorize us to
issue and publish the Tombstones, in such manner and/or such publications and to
such selected parties as we shall in its sole discretion deem appropriate.
13. Governing Law, Etc. This Agreement shall be governed by and interpreted
according to the laws of the State of Maryland. You consent to and acknowledge
the right of all courts, administrative agencies, boards and/or
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quasi-judicial bodies in the State of Maryland, including without limitation the
District Courts of Maryland, the Circuit Courts of Maryland, the United States
District Court for the District of Maryland and the United States Bankruptcy
Court for the District of Maryland, to exercise personal jurisdiction over you
with respect to any dispute or controversy between you and us relating to this
Agreement or to any transaction in connection herewith, whether arising during
the term of this Agreement or after its termination, except as otherwise
provided in Paragraph 13 below. Further, you waive personal service of the
summons and complaint or other process to be issued and agree that service of
such summons and complaint or other process may be made by registered or
certified mail addressed to you at your address appearing herein, whether
arising during the term of this Agreement or after its termination. You agree
that any action which you initiate against us, whether initiated during the term
of this Agreement or after its termination, will only be filed in the courts of
the State of Maryland or the federal courts located in the State of Maryland,
that is, in the District Courts of Maryland, the Circuit Courts of Maryland, the
United States District Court for the District of Maryland or the United States
Bankruptcy Court for the District of Maryland, consistent with the subject
matter jurisdiction requirements of those courts.
14. Arbitration of Certain Claims. You and we each agree that any claim or
demand arising out of any alleged breach of this Agreement or arising out of any
dispute or controversy under or relating to this Agreement, other than any
confession of judgment proceedings brought pursuant to Paragraph 7.2 above, in
which the amount claimed or demanded is $100,000 or less, will be decided by a
single arbitrator under the Rules of the American Arbitration Association and
the decision of that arbitrator shall be final and binding. You and we further
agree than any dispute as to whether the amount of any claim or demand is
$100,000 or less shall be decided by a single arbitrator under the Rules of the
American Arbitration Association. You and we agree that any arbitration shall
take place in Baltimore City, Maryland, or in some other mutually agreed upon
location. You and we agree that the prevailing party, as determined by the
arbitrator, shall be awarded reasonable attorneys' fees incurred by the
prevailing party in connection with the arbitration and any post-arbitration
proceedings. You and we agree that the prevailing party shall be awarded the
costs of the arbitration, including all arbitration fees and expenses of the
arbitrator and all other expenses reasonably incurred in conducting the
arbitration as determined by the arbitrator.
15. Situs of Contract. You understand and agree, for all purposes, that the
situs of the making and performance of this Agreement is and shall be construed
to be the State of Maryland.
16. Waiver of Jury Trial. You and we each agree that any suit, action or
proceeding, whether claim or counterclaim, brought or instituted by either party
hereto or any successor or assign of any party under or with respect to this
Agreement or which in any way relates, directly or indirectly, to this Agreement
or any event, transaction or occurrence arising out of or in any way connected
with this Agreement, or the dealings of the parties with respect thereto, shall
be tried only by a court and not by a jury. EACH PARTY HEREBY WAIVES ANY RIGHT
TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR PROCEEDING.
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17. Legal Counsel. You have had the opportunity to obtain legal counsel,
and you agree that you fully understand the terms, provisions and legal
consequences of this Agreement.
IN WITNESS WHEREOF, this Agreement is executed and delivered under seal as
of the date first above written.
BORROWER: LENDER:
METRO GLOBAL MEDIA, INC. (parent) RESERVOIR CAPITAL CORPORATION
and METRO, INC. (sub)
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇ By:/s/ ▇▇▇▇ ▇▇▇
------------------------ --------------------------
Title: ▇▇▇▇▇ ▇. ▇▇▇▇, CFO and Treasurer Title: ▇▇▇▇ ▇▇▇, President
Address: One Metro Park Drive Address: ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ Suite 700
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Address of Chief Executive Office,
if different:_________________________
State of (________________)
TO WIT:
County of (______________)
I HEREBY CERTIFY, that on this 30th day of September, 1999, before me, a
Notary Public of said State, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇, known to me (or
satisfactorily proven) to be the person whose name is subscribed to the
foregoing Agreement and acknowledged that she executed the same for the purposes
therein contained.
WITNESS my hand and Notarial Seal.
---------------------------------
Notary Public
My Commission Expires:
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EXHIBIT A
[FORM OF LOAN REQUEST]
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EXHIBIT B
RATE SHEET
------------------------------------
The interest rate payable by Metro Global Media, Inc. (parent) and Metro,
Inc. (sub) (the "Borrower") under the Loan and Security Agreement between the
Borrower and Reservoir Capital Corporation (the "Lender") on all Receivables
Loans shall be calculated at an annual rate equal to the Prime Rate of interest,
as defined below) plus three and one half of one percent (3.5%) from the date on
which each such Receivables Loan is made to and including the date which is five
(5) business days from when payment on such Receivables Loan is received, such
rate to be applied to each Receivables Loan and calculated on the basis of
actual days elapsed and a year of three hundred sixty (360) days. The term
"Prime Rate" shall mean the prime rate of interest as published in The Wall
Street Journal or if The Wall Street Journal should not publish then as
published in a comparable publication on the last business day of the preceding
calendar month, and any change in the Prime Rate shall be effective on the first
business day of the month following the month in which such change was first
published, provided that we may from time to time alternatively elect to have
any change in the Prime Rate effective contemporaneously with the publication of
such change.
The interest rate payable by Assignor under the Loan and Security Agreement
on all Inventory Loans shall be calculated at a monthly rate equal to three and
one half of one percent (3.5%) from the date on which each such Inventory Loan
is made to and including the date on which payment on such Inventory Loan is
received, such rate to be applied to each Inventory Loan and calculated on the
basis of actual days elapsed and a year of 360 days.
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EXHIBIT C
BORROWING BASE CERTIFICATE
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